6. California Environmental Quality Act (CEQA)

Since the project, the proposed sale, is subject to CEQA, the issue here is whether the proposed sale of the FOP Facilities meets CEQA guidelines, and if not what mitigation measures are necessary.

6.1. Applicants' Position

Applicants state in the Joint Application they only propose a sale and transfer of ownership, and do not propose any construction or other physical changes. They believe the transfer of ownership of the FOP Facilities to Pacific Terminals will not itself produce any environmental impacts that might require mitigation. As noted previously, it is Pacific Terminals' intention to operate the FOP Facilities in much the same manner as the EPTC System Facilities were operated by EPTC. Applicants state that any changes to the FOP Facilities that Pacific Terminals may make at a future date would be permitted in due course and in a manner similar to that which would be undertaken by EPTC. Applicants claim a change in ownership does not alter the regulatory status of the FOP Facilities; they will remain Commission-regulated facilities.

6.2. CUE's Position

CUE notes that because the Commission is reviewing the environmental impacts of the sale on a separate track, CUE did not submit into the record for this phase for the proceeding evidence concerning what it believe are detrimental environmental impacts that would result as a result if the sale was approved. However, CUE states that it submitted expert opinion and other evidence regarding the significant environmental impacts of the sale in a letter to the Commission's Energy Division that was filed and served on all parties. CUE believes that the Commission should allow the parties to submit additional briefing on this issue after the Commission completes its CEQA review of the sale.

6.3. Discussion

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 joint application seeking transfer of assets from Southern California Edison to Pacific Terminals), 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)).

Here, the South Coast Air Quality Management District (SCAQMD) is the Lead Agency for the project under CEQA. The Commission is a Responsible Agency for this proposed project under CEQA. CEQA requires that the Commission consider the environmental consequences of a project that is subject to its discretionary approval. In particular, the Commission must consider the Lead Agency's environmental documents before acting upon or approving the project (CEQA guidelines 15050(b)). The specific activities which must be conducted by a Responsible Agency are contained in CEQA guidelines Section 15096.

The project before the Commission is the joint application of Southern California Edison (SCE) and Pacific Terminals (PT) requesting authority to sell and transfer pipeline facilities to PT and authorizing PT to operate them as a public utility. As described in the joint Application, Southern California Edison Company will transfer to Pacific Terminals a group of facilities (EPTC) that were previously operated by SCE/EPTC for third-party terminalling and bulk transfer operations. This group of facilities, its operation as a system, and three phases of contemplated operation, including facility upgrades and conversions, were previously subject to an environmental review and resultant Mitigated Negative Declaration (MND) in 1994 by the South Coast Air Quality Management District, including required mitigation measures applicable to facility operations, upgrades, and conversions for each of the three phases. Two modifications to the facilities in the 1994 MND are contemplated within the facilities proposed for transfer from SCE/ETPC to PT: (1) four tanks at Los Alamitos and two tanks at Long Beach will be added to the inventory of facilities subject to the transfer; and (2) a small number of facilities previously covered in the 1994 MND have been decommissioned and removed from the SCE/EPTC inventory, and are therefore not a part of the subject transfer.

Subsequent to the filing of the application in March of 2002, SCE and Pacific Terminals submitted the following documents in support of their application:

1. Proponent's Environmental Assessment (PEA): "Sale of Edison Pipeline and Terminal Company and Oil Pipeline Facilities Assets," June 21, 2002,

2. Appendix A to the PEA: "South Coast Air Quality Management District, Final Negative Declaration: Edison Fuel Oil Pipeline and Storage System Expanded Utilization Proposal," SCH No.94061041, August, 1994, and

3. Supplement to PEA: "Summary of Existing Air Quality Permits for Various Facilities Subject to the Joint Application," October 17, 2002.

The Applicants (Southern California Edison and Pacific Terminals) have applied to transfer by sale, with slight modifications, a system of facilities the operation of which were the subject of an MND previously adopted by the Commission. Upon review of the application and related submittals, the Commission has prepared an Addendum to amend the SCAQMD MND to include the additional facilities at Los Alamitos and Long Beach and further to impose the requirement that those facilities be both subject to the existing mitigation measures applicable to the existing project facilities and subject to the applicant-proposed conditions further outlined and recommended in the Addendum. Subject to the conditions outlined in the Addendum (attached to this decision), this transfer and associated modifications were reviewed by the agency and found not to result in either any new, previously undisclosed impacts or any previously disclosed impacts of greater severity, and therefore the proposed transfer and project modifications will have no significant impact on the environment. Therefore, the agency finds that the preparation of an Addendum pursuant to CEQA Guidelines Section 15164 is appropriate for the transfer of the subject facilities, as modified. An Addendum to the Mitigated Negative Declaration published by the South Coast Air Quality Management District, and previously adopted by this Commission in Decision 94-10-044, is attached to this decision.

6.4. Discussion of Environmental Issues Raised by CUE

We take note of the August 27, 2002, letter from the Coalition of California Utility Employees ("CUE") to the Energy Division staff raising concerns regarding the potential environmental effects of the transfer. CUE raises essentially three concerns: using the station tanks for black oil services is a new and different activity in the EPTC system; there is new information raising questions about the condition of the existing pipeline system; and reductions in staff or the use of less-qualified staff may result in significant environmental impacts. Each of these points is discussed below.

On the first point, CUE asserts that the 1994 SCAQMD MND does not consider the use of the six station tanks and that the tanks have not been in recent use. In a letter to the Energy Division staff dated September 16, 2002, SCE responds that the 1994 SCAQMD MND contemplated a flexible operational regime consisting of several phases wherein a broad array of facilities could be converted and/or brought on-line for third party service as dictated by market conditions. The 1994 MND contemplated conversions of tanks similar in type and function to the six station tanks and provided for mitigation measures to address the potential impacts of those conversions and bringing those facilities on-line. The six tanks can and will be made subject to the operational and mitigation regime outlined in the 1994 SCAQMD MND, and this Commission will do so by this decision. Indeed, PT has represented, and their witness Mr. Toole has testified, that they intend to keep the six station tanks in service with products that are consistent with both historical use and current permits. The tanks are not idle: SCE has represented in its letter to the Energy Division that, with the exception of Los Alamitos Tank No. 8, the station tanks are in service for black oil use, currently store or have recently been in service with black oil, and are permitted by the SCAQMD for such use.

On the second point, CUE asserts that there is new information regarding the condition of many of the pipeline assets that warrants further review. However, we find that there is no evidence that the facilities are degraded and, to the contrary, all information points to their continued use. The two completed pipeline additions cited by CUE were fully disclosed in the applicant's PEA, and there is no new relevant information for these projects that is not addressed in the PEA. These two pipeline segments were completed in full compliance with CEQA (one segment was exempt pursuant to Public Resources Code Section 21080.21 and the other was the subject of a Mitigated Negative Declaration issued by the City of Carson). We find nothing in the record indicating the need for replacement of any pipeline segments and there is no indication that any of the pipeline segments pose any significant risk. We note from SCE's response to the Energy Division that these lines will remain subject to the same regulatory regime irrespective of ownership, including maintenance, monitoring and testing requirements. Should PT seek to operate the EPTC system in a different manner, CEQA review would be initiated at that time to review that proposed change in operating regime. SCE asserts, and we are persuaded, that CUE has incorrectly assumed that there are pipeline segments that are not now in use that PT could start using. SCE explains in its communication to the Energy Division that all lines which have not been disconnected and capped off remain in an in-service state, fully maintained, monitored and tested by SCE, and that there is no reason to presume that they pose any significant risk. Indeed, CUE identifies Line 385 as an "unused" segment; however, SCE maintains that Line 385 remains fully in-service and was used for product transport as recently as March of 2002. In summary, there is no substantial evidence in the record indicating that the assets subject to transfer are in a degraded condition, nor is there any evidence that the transfer will exacerbate existing conditions of the assets subject to transfer. The assets are currently being operated under existing permits and subject to all applicable federal and state laws and regulations regarding pipeline safety. They will continue to be operated as such with no foreseeable incentives to change operations beyond current permits and entitlements, especially given the current market for black oil and bulk terminalling services.

CUE's third point is that potential reductions in staff or the use of less-qualified staff may lead to environmental impacts. PT's president has testified in this case that PT intends to operate the oil pipeline and storage facilities in much the same manner as SCE operated the facilities, and that PT anticipates that a substantial number of current SCE employees assigned to EPTC will be hired by PT. We note that oil pipeline safety, including operator personnel, is governed by U.S. Department of Transportation regulations, which are administered by the California State Fire Marshall. SCE indicated to the Energy Division that PT's affiliate, PPS LLC has participated in a nation-wide effort in developing a program for qualifying pipeline operators and contractor personnel performing operations and maintenance tasks on hazardous liquid pipelines, and that PT will comply with these rules and guidelines. We note from SCE's response to the Energy Division and the testimony of PT's president that PPS LLC employs only full-time company employees for the operation of company-owned pipelines, that PPS LLC does not employ contract personnel as pipeline system operators, and that it is PT's intention to implement a similar policy for PT. There is no substantial evidence in the record that the transfer will cause the staff to be reduced, that less-qualified staff will be used, or that either of these factors would lead to significant environmental impacts.

We note that CEQA Guidelines Section 15162, which imposes a "substantial evidence" standard and not the "fair argument" standard, governs the appropriate test for whether additional or subsequent environmental review is required. We are not persuaded that the record in this case provides substantial evidence to warrant additional environmental review and find that an Addendum to the 1994 SCAQMD MND is appropriate.

As to CUE's request that we should allow the parties to submit additional briefing on this issue after the Commission completes its CEQA review of the sale, we believe there is no need for further briefing of this issue because CUE concerns have been addressed.