2. Background

A. The Parties

PG&E is a public utility corporation that provides gas and electric service in California and is subject to Commission regulation.

CPN is a Delaware limited liability company corporation and a subsidiary of Calpine Natural Gas Company (Calpine).

B. The Project

In February 2000, the California Energy Commission (CEC) granted final approval of the DEC facility. On March 20, 2001, Delta Energy filed a petition with the CEC seeking approval of amendments of its license for the DEC to permit two additional natural gas interconnections, in order to increase plant reliability and gas procurement flexibility for both DEC and Los Medanos. This amendment included provision for a mobile pig receiver/launcher skid, which consists of a 4-inch valve and approximately 14 feet of pipe at the interconnection with the SRGS pipeline. CEC approved the amendment in May 2001.

PG&E now seeks Commission authorization under Section 851 to grant CPN an easement necessary to install, operate, and maintain the pigging station and to create an additional interconnection with the SRGS pipeline.

The proposed easement would permit CPN to install two 10-inch underground pipelines on PG&E property. These two pipelines would turn the SRGS pipeline to the east, through the PG&E property and into the pigging station on the adjacent property to the east of the PG&E property, and would then come back out of the pigging station and reattach to the existing SRGS pipeline, thereby creating a loop. The proposed easement would also grant CPN permanent surface access across the affected PG&E property to the pigging station.

PG&E represents that the proposed easement will not interfere with the operation of PG&E's gas or electric transmission systems or with the provision of service to customers.

C. The Proposed Agreement between PG&E and CPN

PG&E has filed a proposed easement agreement with CPN to be executed if the Commission approves this application. In the agreement, PG&E grants a non-exclusive easement to CPN to excavate for, install, replace, maintain and use two 10-inch pipelines for conveying gas and a related right of surface access. CPN has agreed to comply with all legal and governmental requirements related to the easement and acknowledges that the easement is granted subject to the provisions of Commission General Order (G.O.) 95, G.O. 112-E, G.O. 128, and the requirements of this decision. CPN will pay PG&E $10,025.00 for the easement. PG&E has reserved the right to utilize the easement area for purposes that will not materially interfere with CPN's use and maintenance of the pipelines.

In the agreement, CPN has acknowledged the presence of potential environmental hazards⁵ in the easement area and has indemnified PG&E for related liability, except that PG&E shall remain responsible for claims that do not arise from hazardous substances or materials introduced by CPN, the negligence or intentional misconduct of CPN, or the exacerbation of any environmental conditions in the easement area by CPN.⁶

The proposed easement agreement would permit CPN to assign, transfer, convey or mortgage the easement without the prior consent of the Commission, or of PG&E if the proposed assignment, transfer, conveyance or mortgage would not result in costs to PG&E.

D. Environmental Review

The California Environmental Quality Act (Public Resources Code Section 21000, et seq., hereafter "CEQA") applies to discretionary projects to be carried out or approved by public agencies. A basic purpose of CEQA is to "inform governmental decision-makers and the public about the potential, significant environmental effects of the proposed activities." (Title 14 of the California Code of Regulations, hereinafter "CEQA Guidelines," Section 15002.)

Since the proposed project is subject to CEQA and the Commission must issue a discretionary decision without which the project cannot proceed (i.e., the Commission must act on the Section 851 application), this Commission must act as either a Lead or a Responsible Agency under CEQA. The Lead Agency is the public agency with the greatest responsibility for supervising or approving the project as a whole (CEQA Guidelines Section 15051(b)).

In this instance, the California Energy Commission (CEC) is the Lead Agency for the DEC project. On February 9, 2000, the CEC issued a final decision (final decision) certifying Delta Energy's application to construct and operate the DEC project. The final decision contains site-specific environmental impact analyses, required mitigation measures and enforceable conditions of certification to address environmental issues. In October 2001, Delta Energy filed a petition seeking CEC approval to amend its license for the DEC project to permit two additional natural gas interconnections, including the SRGS interconnection and components of the pigging station addressed in this application. The CEC subsequently approved Delta Energy's amendment and issued a Notice of Insignificant Project Change (NOI). The NOI, adopted on April 27, 2001, includes a CEC finding that there is no possibility that the project change will have a significant environmental effect.

In this case, the Commission is a Responsible Agency under CEQA. The Commission's role is therefore limited to reviewing the environmental consequences of PG&E's proposed conveyance of the easement to CPN as part of its discretionary approval of this application. In general, the Commission must consider the Lead Agency's Environmental Impact Report or Negative Declaration prior to acting upon or approving the project (CEQA Guideline 15050(b)). However, here, since the CEC siting process is a "certified regulatory program" pursuant to Section 21080.5 of the Public Resources Code, the Commission must treat the final decision and NOI as equivalent to an environmental impact report (EIR) and negative declaration respectively.

We have reviewed and considered the final decision and NOI prepared by CEC and find that these documents are adequate for our decisionmaking purposes under CEQA. We find that the Lead Agency reasonably concluded in the NOI that the conveyance of the proposed easements by PG&E to CPN will have no significant environmental effect and that no mitigation measures or consideration of alternatives were required. A copy of the NOI is attached as Appendix A.

E. Ratemaking Considerations

The PG&E land involved in the proposed easement is part of PG&E's electric transmission property that is subject to Federal Energy Regulatory Commission (FERC) jurisdiction for ratemaking purposes. PG&E therefore proposes to treat the revenues from the easement according to applicable FERC accounting and ratemaking requirements. This treatment of revenues from the proposed easement is unopposed.