II. Background
A. The Application
PPS owns two crude oil pipelines in California. The first pipeline, the Pacific System, extends 120 miles from Kern County in Southern California to the Los Angeles basin. This Commission approved the Pacific System tariff and the certification of Environmental Impact Statement/Supplemental Environmental Impact Report (EIS/SEIR) on April 10, 1996.1 The second pipeline, the Line 63 System, extends from the San Joaquin Valley to refineries and delivery points in Los Angeles County. Only the work on the Pacific System (the Project) is at issue in this proceeding.
In addition to carrying oil, the Pacific System pipeline contains fiber optic cable that is used for communications purposes. PPS has excess fiber capacity and seeks to grant access to this excess capacity to third-party governmental entities, and to its own holding company, PPS Holding. The governmental entities will use the fiber for their own communications needs. PPS Holding will grant "telecommunications companies" access to the excess fiber capacity. While PPS did not disclose the name of these telecommunications companies in its initial application, PPS' subsequent submissions reveal that the fiber optic cable will form part of a network owned and operated by Qwest Communications International, Inc. (Qwest).
In a January 26, 2000 ruling, the assigned Administrative Law Judge (ALJ) directed PPS to submit additional information in support of its application. 2 The ruling called for PPS to identify any environmental effects of PPS' proposal. It was not clear from PPS' Application whether the parties using the excess fiber capacity would have to do any trenching or other construction to facilitate such use.
The assigned ALJ was concerned that the Application sought more than a simple paper transaction to lease fiber space to third parties. If construction activity were to occur, the ALJ inquired "whether the California Environmental Quality Act (CEQA)3 and/or [Commission Rule 17.1] relating to CEQA appl[ied]" to this proceeding.
On February 7, 2000, PPS responded to the ALJ ruling. PPS stated that most of the conduit, cable and other facilities were already installed. However, PPS revealed that certain new construction activities would be necessary in the Angeles National Forest near Los Angeles:
[PPS] is now prepared to pull fiber optic cable through some or all of the existing unoccupied ducts on that portion of the Pacific Pipeline system that is located within the boundaries of the Angeles National Forest.4 No trenching will be required, as the conduit is already in place. However, approximately sixty additional pullboxes will be installed along the existing, disturbed right of way. A pullbox is a utility manhole that is approximately four feet square that is located immediately over the fiber conduits adjacent to the pipeline and within the right of way . . . . The top of the pullbox is flush with the surface. All of the work will be performed on federal lands under the jurisdiction of the United States Forest Service, Angeles National Forest.5
PPS contended that CEQA did not apply because all of its construction activity:
[would] occur on federal land under the jurisdiction of the Angeles National Forest and have minimal environmental impacts that are covered by the [Environmental Impact Statement/Subsequent Environmental Impact Report] EIS/SEIR [jointly prepared by the United States Department of Agriculture, Forest Service and this Commission in satisfaction of the requirements of the National Environmental Policy Act (NEPA)6 and CEQA. The Commission certified the EIS/SEIR in D.96-04-056]. No additional action is required under CEQA.7
As it turned out, PPS' representation was inaccurate; some of the affected land in the National Forest is private land, and there is also affected private land at the south end of the National Forest. Moreover, it was clear from the ALJ's questions that environmental impact and the applicability of CEQA were of concern. Nor do we agree with PPS' premise that CEQA never applies to projects on federal land.
Rather than wait for a determination of whether its interpretation of CEQA was correct, PPS commenced and completed all of the construction during 2000. As we discuss below, PPS' actions violated Commission Rule 17.1 and Pub. Util. Code § 702, and merit penalties pursuant to Pub. Util. Code § 2107.
In response to PPS' February 7, 2000 filing, the assigned ALJ directed PPS to submit to the Commission information that PPS had furnished to the United States Forest Service (USFS), and the USFS response. PPS complied on March 7, 2000, March 17, 2000 and April 13, 2000.
In the March 7, 2000 submission, PPS clarified that a small portion of work on private land adjacent to the Angeles National Forest would be required "to tie the work being performed on federal lands into the remainder of [PPS'] fiber optic system."8 In addition, maps PPS submitted to the USFS show planned construction on a private "inholding" within the boundaries of the National Forest.9 Ultimately, PPS installed 56 pullboxes on USFS land and 4 on private land.10
PPS also furnished a copy of a report it had provided to the USFS in September 1999 describing the project. That report revealed that the Pacific Pipeline fiber optic cable ultimately would form part of Qwest's 18,815-mile, 150-city nationwide network platform. The Angeles National Forest installation would be part of a central California backbone line expanding Qwest's 1,680-mile western route connecting several western states to a worldwide telecommunications system. The backbone line then only ran from Sacramento to the northern border of the Angeles National Forest, and from the southern boundary of the Forest to Los Angeles.11 The report mapped and described in detail the proposed construction activities.
PPS' March 17, 2000 submission to this Commission attached a supplemental report PPS had provided the USFS on March 15, 2000. In that report, PPS provided additional maps and project detail. It estimated that it would install 62 handholes/pullboxes of 15 square feet each in size, along approximately 19.1 miles of Angeles National Forest land. PPS projected that the work would begin in mid- to late-March 2000, last for 10 weeks, and conclude by the end of May 2000.12
Finally, on April 13, 2000, PPS submitted the USFS' Special Use Permit (Permit) approving the work. The USFS found that the project was "adequately covered by a previous [environmental] survey."13 The Permit authorized installation of two conduits and up to sixty 3' x 5' fiberglass pullboxes.14 However, the "Project Stipulations" attached to the Permit, which contained several conditions on USFS approval, were unsigned.15 On April 19, the assigned ALJ requested from PPS' counsel a signed copy of the Project Stipulations. PPS' counsel complied on April 28, 2000.
The Commission did not, at that time, agree that CEQA was inapplicable, or otherwise authorize PPS to commence construction.
B. Consideration of Penalties
During July 2000, counsel for PPS informed the assigned ALJ for the first time that the work was already completed. Thereafter, the ALJ issued a ruling to PPS seeking input on whether PPS had violated the law in completing the work without Commission approval.16 The ruling asked PPS to address the following issues:
1. Why PPS constructed fiber optic facilities in and near the [Angeles National Forest] prior to obtaining Commission authorization or environmental review.
2. Whether PPS violated CEQA,17 Commission Rules 118 or 17.1 et seq.,19 Pub. Util. Code §§ 701 or 2107 et seq., or any other legal requirement, by constructing fiber optic facilities in and near the [Angeles National Forest] prior to obtaining Commission authorization or environmental review.
3. If PPS violated the law or Commission Rules, whether it should be fined, penalized or otherwise sanctioned for such violation, and the amount of such penalty, pursuant to the criteria set forth in Commission Decision (D.) 98-12-075. Those criteria are:
Physical Harm: The most severe violations are those that cause physical harm to people or property, with violations that threaten such harm closely following.
Economic Harm: The severity of a violation increases with (1) the level of costs imposed upon the victims of the violation, and (2) the unlawful benefits gained by the Applicant. Generally, the greater of these two amounts will be used in setting the fine. The fact that economic harm may be hard to quantify does not diminish the severity of the offense or the need for sanctions.
Harm to the Regulatory Process: A high level of severity will be accorded to violations of statutory or Commission directives, including violations of reporting or compliance requirements.
The Number and Scope of the Violations: A single violation is less severe than multiple offenses. A widespread violation that affects a large number of consumers is a more severe offense than one that is limited in scope.
The Applicant's Actions to Prevent a Violation: Applicants are expected to take reasonable steps to ensure compliance with applicable laws and regulations. The Applicant's past record of compliance may be considered in assessing any penalty.
The Applicant's Actions to Detect a Violation: Applicants are expected to diligently monitor their activities. Deliberate, as opposed to inadvertent wrongdoing, will be considered an aggravating factor. The level and extent of management's involvement in, or tolerance of, the offense will be considered in determining the amount of any penalty.
The Applicant's Actions to Disclose and Rectify a Violation: Applicants are expected to promptly bring a violation to the Commission's attention. What constitutes "prompt" will depend on circumstances. Steps taken by an Applicant to promptly and cooperatively report and correct violations may be considered in assessing any penalty.
Need for Deterrence: Fines should be set at a level that deters future violations. Effective deterrence requires that the Commission recognize the financial resources of the Applicant in setting a fine.
Constitutional Limitations on Excessive Fines: The Commission will adjust the size of fines to achieve the objective of deterrence, without becoming excessive, based on each Applicant's financial resources.
The Degree of Wrongdoing: The Commission will review facts that tend to mitigate the degree of wrongdoing as well as facts that exacerbate the wrongdoing.
The Public Interest: In all cases, the harm will be evaluated from the perspective of the public interest.
The Role of Precedent: The Commission will consider (1) previous decisions that involve reasonably comparable factual circumstances, and (2) any substantial differences in outcome.
PPS was offered the opportunity for a full evidentiary hearing on these issues, but voluntarily waived such hearing.20 PPS also filed a brief addressing each of the foregoing penalty-related issues. PPS made several arguments against penalties. First, it claimed it had always believed the pulling of additional cable and installation of pullboxes - the work at issue here - was covered by a preexisting environmental review carried out by the USFS. Second, it claimed it kept the Commission advised of its plans, and thus should not be penalized for carrying through with those plans. Finally, it contended that if it had erred, it did so in good faith with no intent to mislead the Commission or to avoid its authority. PPS therefore asked that the Commission impose no penalty.
C. Motion for Protective Order
Concurrently with its Application, PPS filed a Motion for Limited Protective Order (Motion) seeking confidential treatment of the Indivisible Right to Use Agreement, as amended (Right to Use Agreement), between PPS and PPS Holding and attached as Exhibit G to the Application. The assigned ALJ granted the unopposed Motion on January 26, 2000. We affirm the ALJ's ruling.
1 D.96-04-056 (April 10, 1996), reh. denied, mod'd, D.96-07-061 (July 17, 1996). 2 Ruling Requiring Applicants to Provide Additional Information and Granting Motion for Protective Order (Information Ruling), filed January 26, 2000, at 2. 3 Cal. Pub. Res. Code § 21000 et seq. 4 As shown below, not all of the affected property was within the National Forest. 5 Response of Pacific Pipeline System LLC to Ruling Requiring Applicant to Provide Additional Information (Original Response), filed February 7, 2000, at 1-2 (emphasis added). 6 42 U.S.C. § 4321 et seq. 7 Id. at 2-3. 8 Supplemental Response of Pacific Pipeline System LLC to ALJ's Ruling Requiring Additional Information, filed March 7, 2000, at 2 n.6. 9 Id., Figure 3E (showing construction through private Paradise Ranch property within National Forest). 10 Pacific Pipeline System LLC's Brief Re Issues for Determination in Penalty Phase (Brief), filed March 28, 2001, at 7, citing Declaration of Dean Shauers, ¶ 13. 11 Id., Attachment 1, at 9. 12 Second Supplemental Response of Pacific Pipeline System LLC to ALJ's Ruling Requiring Additional Information, filed March 17, 2000, at 1. 13 The USFS referenced the survey entitled "Cultural Resources Investigation Pacific Pipeline Emidio Route including West Liebre Gulch Ridge Alignment and Mojave Alternatives Los Angeles and Kern Counties, California (SAIC 1995) (ARR #05-01-00302, USFS951219A)." 14 Third Supplemental Response of Pacific Pipeline System LLC to ALJ's Ruling Requiring Additional Information, filed April 13, 2000, at 1. 15 Id., Exhibit E. 16 Administrative Law Judge's Ruling Commencing Penalty Phase, dated February 26, 2001. Between July 2000 and the issuance of the ALJ ruling, the ALJ issued a draft decision addressing only PPS' application, and not the issue of penalties. Draft Decision of ALJ Thomas, mailed November 7, 2000. That draft decision has since been withdrawn, and this decision deals both with the underlying application and penalties. 17 Cal. Pub. Res. Code § 21000 et seq.18 Rule 1 provides that any person who signs a pleading or brief, enters an appearance at a hearing, or transacts business with the Commission, by such act represents that he or she is authorized to do so and agrees to comply with the laws of this State; to maintain the respect due to the Commission, members of the Commission and its Administrative Law Judges; and never to mislead the Commission or its staff by an artifice or false statement of fact or law.
19 Because Rule 17.1 et seq. is lengthy, we do not reproduce it here. However, the Rule in its entirety is available on the Commission's web site athttp://www.cpuc.ca.gov/PUBLISHED/RULES_PRAC_PROC/1590-06.htm#P920_100428. 20 Pacific Pipeline System LLC's Waiver of Hearing in Penalty Phase, filed March 28, 2001.
