11. Motion to Set Aside Submission
On July 8, 2002, Roseville Land filed a petition to set aside submission in order to convene a PHC to consider reopening the record on market power. The petition requests that the Commission take official notice of the exhibits attached to the petition as support for the relief requested (Ex. A through H). A July 9 ALJ Ruling shortened time to respond to the petition to July 11. Wild Goose filed a timely opposition. The opposition askes the Commission to take official notice of the exhibits attached (Ex. A through E).15
The petition argues that during the spring of 2002, after the parties had filed Phase I briefs, AEC and PanCanadian consummated their announced merger and that recent transcripts in the civil action between Roseville Land and Wild Goose show that EnCana, the new corporate parent, now owns and controls Wild Goose. The petition posits that the market power evidence in this proceeding must be reexamined in light of this development and urges the Commission to order a new market power study and further evidentialy hearings. As additional grounds for setting aside submission, the petition points to alleged indicia of poor corporate behavior: several ALJ rulings in an earlier Commission proceeding, A.00-08-050, which caused Wild Goose to amend that application;16 Wild Goose's negotiation on an easement with a Butte County landowner in advance of approval of the expansion project; and bank financing obtained without Commission approval for moveable equipment that Wild Goose leased at its existing facility.
We deny the petition. Rosevilled Land has not raised facts sufficient for us to reopen the record in this proceeding. The evidence on market power is sufficient for us to approve the expansion project as conditioned by the broad reporting requirements discussed herein and by prohibition Wild Goose from entering into storage transactions with its affiliates. Should we determine, in a future proceeding, that the EnCana merger requires other market power mitigations, we can require them at that time. With one exception, which we address below, Roseville Land's other assertions appear to lack merit when the underlying documents are considered fully. None of them warrant reopening the record.
The most troublesome allegation among those Roseville Land has put before us is the assertion that the EnCana merger has proceeded quickly from announcement to actuality though Wild Goose as yet has not sought the approval of this Commission. Section 851 et seq. require Commission approval before a change of control, or indirect change of control, of a public utility may occur. Section 854 provides that any change of control without Commission approval "shall be void and of no effect". We direct Wild Goose to file, within 45 days of the date of this decision, an appropriate application for our review and determination.
1. The Wild Goose expansion project includes development of two additional reservoirs in Butte County to increase working inventory by 15 Bcf (to 29 Bcf) in order to increase the facility's injection peak injection capacity to 450 MMcf/d and increase its peak withdrawal capacity to 700 MMcf/d.
2. The primary components of the expansion project include: expansion of the existing Well Pad Site to allow the drilling of up to 16 new wells for injection, withdrawal and observation; construction in the existing right-of-way of a second 18-inch diameter bi-directional Storage Loop Pipeline and fiber optic cable to move gas from the reservoir to the Remote Facility; expansion of the existing Remote Facility Site, which is the operational base, or hub, for the Wild Goose storage facility; and construction of the new Line 400/401 Connection Pipeline and the new Delevan Interconnect Facility, to enable the proposed interconnection with PG&E's Line 400/401.
3. In the last decade, the California Legislature stated its policy support for independent gas storage by Assembly Bill (AB) 2744 (Stats. 1992, ch. 1337, uncodified). The Commission laid the groundwork for the development of independent gas storage in 1993 in the Gas Storage Decision (D.93-02-013, 1993 Cal. PUC LEXIS 66) and subsequent decisions.
4. Gas storage can exert downward pressure on border price increases attributable to upstream interstate and intrastate transmission constraints (e.g. at Malin and Topock) and likewise, can serve as a substitute for interstate gas during times of high demand.
5. The failure of large customers to inject sufficient gas into storage in California is one factor that contributed to the large price increases for natural gas during the winter of 2000/2001.
6. An undetermined amount of new electric generation in California and the Pacific Northwest will increase the demand for natural gas and related services beginning in 2002.
7. Customer interest in Wild Goose's storage services is demonstrated by the following: the existing facility is fully contracted through March 2005, with some contracts continuing into 2006 and an open season for expansion capacity has resulted in five binding precedent agreements.
8. The letters of support from various persons and local entities and the resolutions of support from the Boards of Supervisors of Butte and Colusa Counties indicate broad community support for the expansion project. Roseville Land, which is involved in civil litigation with Wild Goose, is the sole "community" opponent of the project.
9. Wild Goose's market power assessment (Ex. 9) shows a highly concentrated market for storage injection and withdrawal and significant market share for Wild Goose.
10. After expansion, Wild Goose would have a higher market share.
11. Taken together, the other, "mitigating" factors discussed in Ex. 9 are inconclusive as to whether Wild Goose can exercise market power.
12. To ensure Wild Goose does not exercise market power in the storage market, Wild Goose should be authorized to offer expansion services at market-based rates only if it is prohibited from entering into storage and hub services transactions with its parent company or affiliates controlled by its parent company, and if it complies with the reporting requirements described in this decision.
13. The Commission should revise, in R.01-01-001 (a proceeding to which Wild Goose is a respondent) its 1997 Affiliates Transactions Rules to address issues relevant to independent storage owners and operators. Wild Goose is currently exempt from those Rules and should remain so, subject to further consideration by the Commission in R.01-01-001.
14. Wild Goose is a Delaware corporation; in 1996 it obtained authorization from the California Secretary of State to transact intrastate business in California in conformance with the law of this state.
15. Wild Goose's storage, whether provided to noncore customers or core aggregators, is the functional equivalent of storage owned by PG&E or by SoCalGas and its underground storage reservoir and associated pipelines, compressors, and equipment are "gas plant". Wild Goose is a "gas corporation" owing and operating such "gas plant" for compensation.
16. The Commission has interpreted §§ 454 and 489 to authorize market-based rate authority, under certain situations.
17. Wild Goose has expertise, and access to expertise, in natural gas system design and development. PG&E should allow Wild Goose to participate in developing the details of the interconnection and to undertake the construction, or portions of it, consistent with safe operation of the gas system network.
18. The proposed Line 400/401 interconnect will be a second service connection for the Wild Goose facility, and thus, its components constitute special facilities for which Wild Goose should pay.
19. Wild Goose should provide the Director of the Commission's Energy Division a list of interconnection facilities once they have been determined and serve that list on the service list for this proceeding.
20. Wild Goose and PG&E may determine whether to draft a new, separate operating and balancing agreement or to amend the one that governs the existing facility's operations. The agreement must be in place before the expansion project commences operations. Wild Goose should provide the Director of the Commission's Energy Division with a copy of the agreement and serve it on the service list for this proceeding.
21. It appears that adequate backbone capacity exists to accommodate all storage injections; however, the backbone may be unable to accommodate full withdrawals from both the Wild Goose facility and the Lodi facility during periods of peak demand.
22. Lodi's proposal for pro rata allocation of as-available transportation capacity among all customers, including storage customers, during times when capacity is constrained, provides the most competitively neutral approach advanced on this record.
23. PG&E should submit by advice letter, within 45 days of the effective date of this decision, proposed tariffs, or amendments to existing tariffs, that address pro ration of as-available capacity among all customers during times when insufficient as-available capacity exists to serve all requests for it. The tariff proposal should comply with the principles discussed herein.
24. The complexity of the issues related to the need for expansion of the backbone, and alternatives to expansion, requires a focused but more generic inquiry than that presented by this proceeding; we will not order a Phase III in this proceeding.
25. Staff of the Environmental Projects Unit of the Commission's Energy Division, after review of Wild Goose's application/PEA, determined that an EIR was required under CEQA, and caused a Draft and Final EIR to be prepared. MHA Environmental Consulting, Inc., under contract to the Commission, assisted staff in the EIR's preparation.
26. As described in this decision, staff prepared the EIR in accordance with the substantive and procedural requirements of CEQA.
27. Since the Well Pad Site, the Remote Facility Site and the interconnection with Line 400/401 have fixed locations, the principle project alternatives concern two alternative alignments of the new pipeline linking the Butte County facility with Line 400/401.
28. The Central Crossing is the pipeline route preferred over the alternatives analyzed because it minimizes impacts to wetlands and minimizes potential impacts associated with hazards, noise and aesthetics in the area by avoiding residential land uses.
29. Under the EIR's preferred alternative, all significant environmental impacts can be mitigated to a less than significant level except one, the permanent loss of a minimum of 5.8 acres of prime farmland to non-agricultural uses, which is unavoidable.
30. The Mitigation, Monitoring and Reporting Program (Attachment B as modified by Attachment C) substantially conforms to the recommendations in the EIR for measures required to avoid or mitigate the significant environmental effects of the project that can be avoided or mitigated.
31. The EIR reflects the Commission's independent judgment and analysis on the issues addressed in the EIR, and the Commission has reviewed and considered the information in the EIR before issuing this decision on the project.
32. With the exception of Ex. B to Rosevile Land's petition to set aside submission, we may take official notice of all exhibits attached to the petition and Wild Goose's opposition.
33. Roseville Land's petition to set aside submission has not raised facts sufficient to warrant reopening the record in this proceeding.
1. Wild Goose has provided the showing required by §§ l001 and 1002.
2. Wild Goose has complied with § 704.
3. Wild Goose meets the definitions of §§ 221 and 222.
4. Wild Goose, as a public utility, may exercise the public utility right of eminent domain, consistent with law.
5. The Gas Storage Decision provides that PG&E's Gas Rule 2 is a reasonable model for distinguishing between standard and special facilities and we should rely upon that rule in deciding the nature of the expansion project facilities.
6. The as-available transmission allocation that PG&E proposes we adopt when capacity constraints exist would require amendment of the Gas Storage Rules discussed in this decision to authorize storage withdrawals to receive a lower priority than other transportation customers.
7. The as-available transmission allocation that Wild Goose proposes we adopt when capacity constraints exist could require amendment of the Gas Storage Rules discussed in this decision to authorize storage withdrawals to receive a higher priority than other transportation customers.
8. Lodi's proposal for allocation of constrained as-available transportation capacity is fair and consistent with the Gas Storage Rules.
9. Because Wild Goose does not have captive customers who are financing the expansion project, we should waive the cost cap requirement of Pub. Util. Code § 1005.5 for this application.
10. The EIR, which consists of two separate documents, the Draft EIR and the Final EIR, should be certified.
11. The EIR assumes Wild Goose will operate its facilities within the parameters of the required permits and Wild Goose should do so.
12. The EIR assumes that operations in excess of permitted levels will require Wild Goose to obtain new discretionary permits and additional environmental review, and Wild Goose should comply.
13. According to the EIR, one effect of the project, the permanent loss of a minimum of 5.8 acres of prime farmland to non-agricultural uses, cannot be mitigated to a less than significant level and requires a statement of overriding consideration for the Commission to approve the project. The Boards of Supervisors of both counties have issued resolutions in support of the project, and the project is generally consistent with the counties' zoning and land use policies, and advances the policy goals of the state by providing additional natural gas storage capacity.
14. Because the statewide benefits of competitive gas storage facilities outweigh the one environmental impact of the project that cannot be mitigated to a less than significant level, we adopt a statement of overriding consideration on this one issue.
15. With respect to each significant impact of the project that the EIR identifies as a significant impact that can be reduced to a level that is not significant, the mitigation, changes, or alterations proposed should be incorporated into the project to mitigate or avoid the significant impacts on the environment as a condition of this CPCN.
16. With respect to the mitigations, changes or alterations referred to in Conclusion of Law 15 that are within the responsibility and jurisdiction of another public agency, each such mitigation, change or alteration has been, or can and should be adopted by that other agency.
17. The Mitigation, Monitoring and Reporting Program in the FEIR (Mitigation Program), appended to this decision as Attachment B and amended by Attachment C, should be adopted in satisfaction of the requirements of Pub. Res. Code § 21081.6.
18. The Executive Director, or his designated staff or outside staff representative, should supervise and oversee construction of the project insofar as it relates to implementation and enforcement of the Mitigation Program.
19. The CPCN granted herein should be conditioned upon the adoption, implementation and enforcement of the environmental mitigation measures set forth in the EIR and summarized in the Mitigation Program.
20. If Wild Goose makes any changes to the proposed route or other project components, Wild Goose should apply to the Executive Director or his designated staff for approval of a variance.
21. Wild Goose should reimburse the Commission for the amount expended by the Commission for its expenses, including but not limited to special studies, staff, or Commission staff costs (including allocable indirect costs) directly attributable to monitoring and enforcement of the implementation of the Mitigation Program.
22. In monitoring the implementation of the environmental mitigation measures described in the EIR and summarized the Mitigation Program, the Executive Director should attribute the acts and omissions of Wild Goose's employees, contractors, subcontractors, or other agents to Wild Goose.
23. Wild Goose's application for a CPCN authorizing it to develop, construct, and operate the expansion project, as set forth in its application and the EIR, with the with the Line 400/401 Connection to follow the preferred route identified in the EIR as the Central Crossing, and to provide firm and interruptible storage services at market based rates, should be granted as conditioned by this decision.
24. Roseville Land's petition to set aside submission should be denied.
IT IS ORDERED that:
1. The Environmental Impact Report (EIR), which consists of two separate documents, the Draft EIR and the Final EIR, is certified.
2. Wild Goose Storage Inc. (Wild Goose) is granted an amendment to its certificate of public convenience and necessity (CPCN) authorizing it to develop, construct and operate an expansion of its existing natural gas storage facility, as set forth in its application and the EIR, with the Line 400/401 Connection to follow the preferred route identified in the EIR as the Central Crossing, and to provide firm and interruptible storage services at market-based rates (the expansion project), subject to the terms and conditions set forth below.
3. The authority granted in Ordering Paragraph 2 is conditioned upon Wild Goose's compliance with the following rules and reporting conditions:
(a) Wild Goose shall not engage in any storage or hub services transactions with its parent company or any affiliated entity owned or controlled by its parent company;
(b) Wild Goose shall fully comply with the Commission's General Order (GO) 65-A, GO 77-K, and GO 104-A and may no longer file a simplified report on affiliate activities in compliance with Public Utilities Code 587.
(c) Wild Goose shall promptly advise the California Public Utilities Commission (Commission) of the following changes in status that reflect a departure from the characteristics the Commission has relied upon in approving market-based pricing: (i) Wild Goose's own purchase of natural gas facilities, transmission facilities, or substitutes for natural gas, like liquefied natural gas facilities; (ii) an increase in the storage capacity or in the interstate or intrastate transmission capacity held by affiliates of its parent, Alberta Energy Company Ltd. (Alberta Energy, or a successor); or (iii) merger or other acquisition involving affiliates of Alberta Energy or a successor and another entity that owns gas storage or transmission facilities or facilities that use natural gas as an input, such as electric generation.
(d) Wild Goose shall provide the Commission with true copies of all service agreements for short-term transactions (one year or less) within 30 days of the date of commencement of short-term service, to be followed by quarterly transaction summaries of specific sales. If Wild Goose enters into multiple service agreements within a 30-day period, Wild Goose may file these service agreements together so as to conserve the resources both of Wild Goose and the Commission. The quarterly transactions summaries shall list, for all tariffed services, the purchaser, the transaction period, the type of service (e.g. firm, interruptible, balancing, etc.), the rate, the applicable volume, whether there is an affiliate relationship between Wild Goose and the customer, and the total charge to the customer.
(e) Wild Goose shall provide the Commission with true copies of all service agreements for long-term transactions (longer than one year), within 30 days of the date of commencement of service. To ensure the clear identification of filings, and in order to facilitate the orderly maintenance of the Commission's records, long-term transaction service agreements shall not be filed together with short-term transaction summaries.
4. All reports and documents required by Ordering Paragraph 3 shall be provided to the Director of the Commission's Energy Division within 60 days of the effective date of this decision on an initial basis and thereafter, as specified above or by the applicable statute, GO, rule, or other Commission decision.
5. Wild Goose shall provide the Director of the Commission's Energy Division with a list of interconnection facilities, once they have been determined, and serve the list on the service list for this proceeding.
6. Before commencing expansion project service to customers, Wild Goose shall:
(a) file with the Commission an advice letter and accompanying tariff schedules which amend its tariffs as necessary to offer authorized storage services via the Line 400/401 interconnect, and
(b) enter into an operation and balancing agreement with Pacific Gas and Electric Company (PG&E) for the expansion project, or amend the existing operation and balancing agreement to include the expansion project. Wild Goose shall provide the Director of the Commission's Energy Division with a copy of the agreement and serve it on the service list for this proceeding.
7. We adopt a statement of overriding consideration for one significant environmental impact of the expansion project, the permanent removal from production of a minimum of 5.8 acres of prime farmland, which cannot be mitigated to a less than significant level, because we conclude that the expansion of the Wild Goose natural gas storage facility advances the policy goals of the state by providing additional natural gas storage capacity and outweighs the environment cost.
8. The authority granted in Ordering Paragraph 2, is conditioned upon the adoption and implementation of the environmental mitigation measures set forth in the EIR, including the Mitigation, Monitoring and Reporting Program (Mitigation Program) appended to this decision as Attachment B and modified by Attachment C, and Wild Goose shall fully implement the Mitigation Program.
9. The Mitigation Program described in Ordering Paragraph 8 is adopted in satisfaction of the requirements of Pub. Res. Code § 21081.6.
10. With the exception of the significant environmental impact identified in Ordering Paragraph 7, the EIR finds that all other significant environmental impacts of the expansion project can be reduced to a level that is not significant, and as a condition of this amended CPCN, all mitigations, changes, or alterations identified in the EIR shall be made a part of the expansion project to mitigate or avoid the significant impacts on the environment.
11. With respect to those mitigations, changes, or alterations referred to in Ordering Paragraph 8 that are within the responsibility and jurisdiction of another public agency, each mitigation, change, or alteration has been, or can and should be adopted by that other agency.
12. Wild Goose shall operate its facilities within the parameters of the required permits, and operations in excess of permitted levels require Wild Goose to obtain new discretionary permits and additional environmental review.
13. The Executive Director, or his designated staff or outside staff representative, shall supervise and oversee construction of the expansion project insofar as it relates to monitoring and enforcement of the mitigation measures. The Executive Director shall track and record direct expenses and time devoted to ascertain the costs to the Commission of monitoring the mitigation measures. The Executive Director is authorized to employ staff independent of the Commission staff to carry out such functions, including, without limitation, the on-site environmental inspection, environmental monitoring, and environmental mitigation supervision of the construction of the expansion project. Such staff may be individually qualified professional environmental monitors or may be employed by one or more firms or organizations. No person or organization shall be so employed who beneficially owns any security of, or has received during the past five years or is presently entitled to receive at any time in the future more than a de minimus amount of compensation for consulting services from Wild Goose, Alberta Energy or its successor, or other affiliates of Alberta Energy or its successor.
14. In monitoring implementation of the mitigation measures, the Executive Director should attribute the acts and omissions of Wild Goose's employees, contractors, subcontractors, or other agents to Wild Goose. Wild Goose shall comply with all orders and directives of the Executive Director concerning implementation of the mitigation measures.
15. Wild Goose shall not commence actual construction of the expansion project until it has entered into a cost reimbursement agreement with the Commission for the recovery from Wild Goose of the costs of monitoring implementation of the mitigation measures, including but not limited to special studies, staff, or Commission staff costs (including allocable indirect costs) directly attributable to such monitoring. The Executive Director is authorized to enter into an agreement with Wild Goose that provides for such reimbursement on terms and conditions consistent with this decision in form satisfactory to the Executive Director. The Executive Director shall evidence his approval of such agreement by his Resolution. The terms and conditions of such agreement shall be deemed conditions of approval of the application to the same extent as if they were set forth in full in this decision.
16. Disputes concerning directives of the Executive Director to Wild Goose during the course of actual construction of the expansion project shall be determined by the Executive Director, as evidenced by his Resolution. Any person aggrieved by any such Resolution may appeal to the Commission, pursuant to Rule 9(a) of the Commission's Rules of Practice and Procedure. The Executive Director's Resolution shall remain in full force and effect until affirmed, modified or vacated by the Commission.
17. The Executive Director shall file a Notice of Determination for the expansion project as required by the California Environmental Quality Act and the regulations promulgated pursuant thereto.
18. If Wild Goose makes any changes to the proposed route or other project components, Wild Goose shall apply to the Executive Director or his designated staff for approval of a variance.
19. If Wild Goose seeks to expand or modify its physical facilities to the extent that discretionary approval by a public agency is required, it shall consult with the Commission prior to filing an application for such approval, so that the Commission may ensure that the appropriate environmental analysis of the impacts of Wild Goose's specific proposal may be performed.
20. Within 60 days of the effective date of this order, Wild Goose shall file a written acceptance of the amended CPCN granted in Ordering Paragraph 2.
21. The tariff proposal should comply with the following:
a) Pro-rationing should compare the as-available transportation nominations on the backbone system from independent storage customers to the total non-storage as-available transportation nominations;
b) Pro-rationing should occur at each nomination cycle during the day based on the backbone system capacity available at that time;
c) The non-bumping rule (PG&E's Gas Rule 21.B.3) should be honored;
d) Pro-rationing between storage withdrawals and other as-available transportation capacity should be based on the volumes nominated, not on the price bid for that capacity.
22. Within 45 days of the effective date of this decision, PG&E shall file by advice letter, proposed tariffs, or amendments to existing tariffs, that address, consistent with this decision, pro ration of as-available transportation capacity among all customers, during times when insufficient as-available capacity exists to serve all requests for it.
23. The stay of R.01-01-001 is lifted in order to consider revision to the 1997 Affiliates Transactions Rules, as they apply to independent storage facilities.
24. The petition to set aside submission filed on July 8, 2002 by Roseville Land Development Corporation is denied.
25. Within 45 days of the date of this order, Wild Goose shall file an appropriate application under Pub. Util. Code §§ 851 et seq. for review by this Commission of the impact on Wild Goose of the merger of AEC and PanCanadian Energy Company, forming EnCana Corporation, and for any and all Commission authority required under those statutes.
26. This proceeding is closed.
This order is effective today.
Dated July 17, 2002, at San Francisco, California.
HENRY M. DUQUE
GEOFFREY F. BROWN
MICHAEL R. PEEVEY
Commissioners
We will file a joint dissent.
/s/ LORETTA M. LYNCH
President
/s/ CARL W. WOOD
Commissioner
I will file a concurrence.
/s/ GEOFFREY F. BROWN
Commissioner
ATTACHMENT A
(List of Appearances)
Page 1
************ APPEARANCES ************ |
John Leslie |
Lindsey How-Downing |
Matthew V. Brady |
Dan L. Carroll |
David W. Anderson |
Jeanne M. Bennett |
Joshua Bar-Lev |
Norman A. Pedersen |
Marion Peleo |
ATTACHMENT A
(List of Appearances)
Page 2
Gayatri Schilberg |
Todd J. Cahill |
Mark Fogelman |
Marcel Hawiger |
Patricia I. Towne |
(END OF ATTACHMENT A)
ATTACHMENT B
(Mitigation, Monitoring and Reporting Program)
ATTACHMENT C
(ERRATA for WGSI Expansion Project FEIR MMRP)
A.01-06-029
D.02-07-036
Commissioner Geoffrey F. Brown, Concurring:
I support Commissioner Peevey's alternate authorizing Wild Goose Storage's expansion project for additional storage capacity and related services at its storage facility in Butte County. I believe gas storage is essential if we are to meet California's need for natural gas. The expansion of the Wild Goose Facility will contribute importantly to ensuring such supplies for California's future.
Although I am mindful of the danger of affiliate favoritism, I believe that the restrictions set forth in this decision between Wild Goose and its parent are sufficient. Moreover I believe we can thoroughly address affiliate relationships in the rulemaking proceeding mentioned in this decision.
While it is important to protect against affiliate abuses, we cannot predict that it will occur in this case. If we find that Wild Goose or any utility has exercised anti-competitive behavior, this Commission reserves the authority to penalize such actions. However, delaying this project, so vital to California's energy needs, based on a hypothetical possibility of affiliate abuse is not in the public interest.
/s/ GEOFFREY F. BROWN
GEOFFREY F. BROWN
Commissioner
San Francisco, California
July 17, 2002
15 Rule 73 of the Commission's Rules of Practice and Procedure provides: "Official notice may be taken of such matters as may be judicially noticed by the courts of the State of California." None of the attachments qualify for mandatory judicial notice under Evid. Code §452, except that we decline to take official notice of Ex. B to the petition, which is a newspaper article. Having taken official notice of the other documents, we apply our own discretion to determine what inferences, in any, should be drawn from them and what weight they should be given. 16 A.00-08-050 sought authority to transfer control of Wild Goose from one entity to another within the same corporate family. The ALJ rulings inquired about the timing of the several aspects of the transaction relative to the request for approval, among other things. The Commission approved the transfer of control in D.01-05-029.
