6. Pub. Util. Code § 1002

As stated above, under Pub. Util. Code § 1002, the Commission must consider the following factors in determining whether to grant a CPCN:

(1) Community values;

(2) Recreational and park areas;

(3) Historical and aesthetic values; and

(4) Influence on the environment.

The obligation to consider the factors listed in § 1002 is independent of the Commission's CEQA obligation. In addition to its CEQA obligations, Pub. Util. Code § 1002 provides the Commission "with responsibility independent of CEQA to include environmental influences and community values in our consideration of a request for a CPCN." (See Re Southern California Edison Company, D.90-09-059, 37 CPUC2d at p. 453.)

Neither the scoping memo in this case, nor the Commission's decision in Re Sierra Pacific Power Company, D.96-01-012, 64 CPUC2d 442, is incompatible with our holding in the Edison decision. The scoping memo, which set the scope of issues and whether parties could address these issues procedurally in the environmental or non-environmental portion of the case, stated that "influence on the environment, another factor under § 1002, is considered in the EIR process." This does not mean that the EIR would determine the outcome of this issue, but rather, that the appropriate place for the parties to address this issue was in the EIR, so that the parties would not duplicate their efforts in both portions of this proceeding. Furthermore, Sierra Pacific recognizes and cites with approval the Edison decision (see 64 CPUC 2d at 449), and states that the Commission has independent but overlapping (with CEQA) obligation to consider the factors set out in § 1002. That means that the Commission may consider the EIR and its conclusions in addressing Pub. Util. Code § 1002's criteria "influence on the environment." However, the Commission still has the responsibility, independent of CEQA, under Pub. Util. Code § 1002 "to include environmental influences and community values in our consideration of a request for a CPCN." (Re Southern California Edison Company, 37 CPUC2d at p. 453.)

In addressing whether the proposed project is compatible with community values as set forth in Pub. Util. Code § 1002, we give considerable weight to the views of the local community. In addition, we acknowledge the positions of the elected representatives of the area because we believe they are also speaking on behalf of their constituents. At the time of the issuance of the ALJ's proposed decision in this proceeding on March 2, 2000, State Assemblyman Pescetti, was on record at the public participation hearing as opposing this project. However, since the publication of the proposed decision, State Senator Johnston, who also has constituents in the project area, has sent a letter to all Commissioners in favor or the project.

The position of the San Joaquin Board of Supervisors is less conclusive. An April 22, 1999 letter from the Board states that the project has merit if many of its proposed mitigation measures are adopted. An individual member of the Board subsequently appeared at the October 19, 1999 public participation hearing and stated that he was very much opposed to LGS obtaining the power of eminent domain. This member also had serious concerns about the impact of the project on the area's winegrape growing industry and in locating the project near the airport.

Since the publication of the proposed decision, Pacific Realty, a landowner who opposed the project and participated in all aspects of this proceeding, has settled with LGS and now supports the project. The majority of the speakers at the two public participation hearings held on October 19, 1999, opposed the project.

A group of six grape growing representatives has signed a memorandum of understanding with LGS, in which they agreed not to oppose the project in return for LGS' agreeing to certain changes in the project's design or construction. However, one of the signatories to the memorandum of understanding appeared at the public participation hearing and indicated that his support for the memorandum of understanding was lukewarm at best. He urged the Commission not to give his position any more weight than that of the other community members who opposed the project. Many other Lodi residents have also written letters voicing opposition to the project. However, the record demonstrates a divided community.

Some local residents oppose the project, in part, because they believe it may frustrate the community goal of continued development of the Lodi area wine industry. The Lodi area has been a major agricultural and winegrape growing region since the 1850s. The winegrape business contributes a farm gate value of about $300 million a year, with additional community benefits generated by associated jobs and tax revenues. The general community, and particularly the Lodi-Woodbridge Winegrape Commission, has spent about $5 million dollars over the last several years on developing the Lodi Wine Grape Appellation, establishing a scenic wine tour, and facilitating wine tourism in the area. LGS' proposed facility would lie in close vicinity to the tour area and according to local residents, could potentially jeopardize it, and the area's winegrape growing reputation. A witness at the evidentiary hearings and speakers at the public participation hearings were very concerned that the mere existence of this project in close vicinity with their emerging wine tourism could damage the area's winegrape growing reputation by associating the area with gas storage, as opposed to world-class grapegrowing.

We cannot conclude based upon this record that it is reasonable that the existence of this project in close vicinity with the area's emerging wine tourism will damage the public's perception of the area's winegrape growing reputation. Moreover, many of the impacts of the project are shorter-term construction-related, and the EIR concludes that many can be mitigated. For example, the EIR requires LGS to develop a landscape and site design plan, and requires LGS to place the pipeline deeper than the minimum federal requirements to allow certain agricultural practices to continue. Moreover, LGS states that it will appropriately compensate the landowners for the project's short-term, as well as long-term effects, and that it is willing to provide appropriate mitigation measures to lessen the potential impact upon the industry. The EIR also states that the project's long-term impacts can be mitigated to less than significant levels.

LGS argues that the project will benefit the local community because it will bring needed tax revenues into the community and will provide for construction-related and long-term jobs for the area. Some members are concerned that the project may jeopardize revenues generated by the local wine industry and result in additional public safety costs for the community.

At both the evidentiary and public participation hearings, many community members raised safety and environmental concerns, which are addressed in more detail in the EIR discussed more fully below. According to the EIR, most, if not all, of these concerns can be mitigated. Therefore, the EIR does not recommend that the Commission reject the project from an environmental perspective.

We cannot totally mitigate all community concerns to the level that we can find that this project is entirely compatible with community values. However, these concerns can be substantially mitigated with the following conditions so that, in balancing the community values with the other criteria set forth in Pub. Util. Code § 1002, the general need for and benefits of competitive gas storage facilities in California, and the outcome of the EIR, we can approve the application as conditioned herein.

In reaching our determination to approve the application, we have given considerable weight to the concerns of local community and their local officials. In approving the application, we add additional conditions to address certain community member concerns. The first condition regards LGS' financial ability to compensate those injured in the event of an accident and to follow through on the commitments made to the community during the course of this application. As stated above, LGS is a limited liability company with the gas storage project constituting the major asset of the company. LGS presently, before the operation of the project, has approximately $100,000 in its bank account. LGS states in its brief that it receives additional equity calls pursuant to its investors' commitments. When construction begins, LGS anticipates a debt/equity ratio of approximately 50/50. Because LGS estimates the project costs to be in the $60 to $80 million dollar range,¹³ LGS states that there will be approximately $30 to $40 million equity in the project. LGS also testified that it presently holds a $5 million general liability policy, and once construction begins through operation, the general liability policy will be reduced to $1 million, and LGS will obtain an umbrella policy in the amount of $20 to $25 million per occurrence. LGS testified that LGS will be wholly responsible for all of its liabilities and that the shareholders will not guarantee any of those liabilities, although LGS' witness expected that the investors would voluntarily fund the amount necessary to fulfill LGS' project obligations.

The Williams recommend that, if the Commission approves this project, it should require LGS to obtain liability insurance in the amount of $50,000,000 and to post a bond to cover its future obligations to landowners along the project. The Farm Bureau also argues that the Commission should require LGS to set up a fund to pay for ongoing maintenance landscaping and indemnification commitments as well as future post-closure and abandonment activities. LGS argues that it is adequately financed, that it has adequate liability insurance and there is no need to condition the project further on this issue.¹⁴

The EIR addresses safety issues and concludes that although the Commission "cannot state that there is absolutely no risk from natural gas facilities, the draft EIR documents that the risk is extremely small and that required prevention and protection measures would be in place to protect the public. With all the required safety measures in place, the CPUC believes that this facility could be operated safely and that no additional measures are warranted." (Final EIR at p. 1-3.)

Although the EIR finds the safety risks of this project to be extremely small, we believe that the community concerns can be mitigated to some extent if it is clear that LGS will have adequate liability insurance as well as a bond to ensure that LGS meets its project obligations. LGS testified that LGS will be wholly responsible for all of its liabilities and that the shareholders will not guarantee any of those liabilities. Therefore, we require as a condition of issuance of the CPCN that, before construction begins until one year following the termination of the project operations, LGS maintain a general liability policy of $1 million, as well as an umbrella policy in the amount of $50 million per occurrence. Furthermore, LGS is also required to provide a surety or performance bond in the amount of $20 million to cover the costs of meeting its obligations under this CPCN. These costs include, but are not limited to, reburial of the pipeline in the event of subsidence of the soil covering the pipeline, costs of restoring the area in the event of abandonment or bankruptcy, etc. The surety or performance bond shall remain in effect until one year following the termination of project operations.¹⁵ This condition is not unusual, and other applicants have voluntarily agreed to liability insurance and a surety bond to cover the events which might not be covered by the insurance policy. (See e.g. Re Pacific Pipeline System, Inc., 65 CPUC2d 613, 630.) Moreover, as noted in the preceeding footnote, the EIR requires that LGS provide a surety bond to guarantee that ongoing landscaping will occur.

In addition, community members have raised safety issues regarding locating the compressor facility near the airport and drilling under the levees. The EIR addresses both of these issues. However, in addition, we will require that LGS shall not begin construction on any aspect of the project until LGS first obtains: (1) a determination from the Airport Land Use Commission that the project is consistent with the local land use plan, or if not, until LGS has obtained an amendment to the plan to allow the project; and (2) all necessary permits from the California State Lands Commission.

Also, in order to ensure that the community is aware of the construction progress, we direct the Commission's Energy Division to continue outreach efforts during the construction phase of the project such as sending periodic newsletters to those persons served with notices regarding the EIR, and posting the monitoring reports on the Commission's web page at frequent intervals.

According to the EIR, the Energy Division should review certain plans by LGS, such as LGS' plans prior to issuing a request for bids, within a specified period (i.e., within two weeks). To the extent that Energy Division requires a reasonable extension of the time stated in the EIR to conduct its review and monitoring activities, it has the authority to reasonably extend this period of time.