II. BACKGROUND
We initiated this Rulemaking proceeding (R.04-01-025) on January 22, 2004. The purpose of the proceeding is "to establish policies, processes and rules to ensure reliable, long-term supplies of natural gas to California." (Order Instituting Rulemaking ("OIR"), p. 28 [Ordering Paragraph 1] (slip op.).) The proceeding was divided into two phases. Phase I dealt with policy matters related to interstate pipeline capacity contracts, liquefied natural gas access, and interstate pipeline access. (See Order Instituting Rulemaking to Establish Policies and Rules to Ensure Reliable, Long-Term Supplies of Natural Gas to California ("Opinion on Phase I Issues") [D.04-09-022] (2004) ___ Cal.P.U.C.3d ___, p. 2 (slip op.).) Phase II is currently examining policy issues related to natural gas quality specifications, transmission capacity, cost allocation, and ratemaking provisions, among other issues. In D.06-05-017, issued on May 11, 2006 as part of Phase I of R.04-01-025, 1 we determined that environmental review pursuant to CEQA was not required in Phase I of R.04-01-025 because Phase I does not constitute a "project" within the meaning of CEQA. RACE challenged this determination in a petition for writ of mandate filed in the California Supreme Court on September 25, 2006. (Ratepayers for Affordable Clean Energy v. California Public Utilities Commission, California Supreme Court, Case No. S146858.) After filing its petition for writ of mandate, RACE sought a stay of Case No. S146858 so that it could eventually be consolidated with review of the Phase II CEQA issues, discussed herein. The Commission answered RACE's writ petition and denied that the writ should be issued, and also opposed RACE's stay request. On December 13, 2006, the California Supreme Court summarily denied RACE's petition for writ of mandate as to the Phase I CEQA issues, and also denied RACE's stay request.2
We issued the challenged decision, D.06-09-039, on September 21, 2006. In D.06-09-039, we took the following actions: (1) approved interconnection agreements and operational balancing agreements for liquefied natural gas ("LNG") providers; (2) endorsed the creation of an Infrastructure Working Group to enable all participants and state agencies to monitor system utilization and identify expansion needs; (3) clarified and expanded policies related to receipt points expansion on the Southern California Gas Company ("SoCalGas") system; (4) modified SoCalGas' proposed revisions to its rules affecting open seasons related to local transmission capacity; (5) directed Pacific Gas & Electric Company ("PG&E"), San Diego Gas & Electric Company ("SDG&E") and SoCalGas to adopt specific backbone transmission planning standards; and (6) adopted rule changes to gas quality tariffs, including a Wobbe Index3 range of 1279-1385 for SoCalGas and SDG&E, and adopting other changes to PG&E Rule 21 and SDG&E/SoCalGas Rule 30 to make the rules more consistent with each other. (D.06-09-039, pp. 2-3.)
Existing Rule 30 establishes various specifications for the quality of gas flowing in the utility systems, including specifications addressing: (a) heating value; (b) moisture/water content; (c) hydrogen sulfide; (d) mercaptan sulfur; (e) total sulfur; (f) carbon dioxide; (g) oxygen; (h) inerts; (i) hydrocarbons (i.e., hydrocarbon dew point); (j) dust, gums, and other objectionable matter; (k) hazardous substances; (l) delivery temperature; and (m) interchangeability of gas in utility systems. These existing gas quality specifications in Rule 30 allow for the flow of gas with a Wobbe Index number ranging from 1271 to 1437. (D.06-09-039, p. 108.)
Like D.06-05-017 in Phase I, D.06-09-039 also determined that CEQA review was not required in Phase II of R.04-01-025. (D.06-09-039, pp. 160-163, 177 [Conclusions of Law 47 & 48].) We found that "the narrowing of the parameters of the gas quality standards in SoCalGas Rule 30 is not an essential step culminating in action that may affect the environment and, therefore, is not a project under CEQA." (D.06-09-039, p. 177 [Conclusion of Law 47].) We reasoned that the current version of Rule 30, which permits a Wobbe range of 1271-1437, actually allows gas into California with higher Wobbe numbers than the gas that would be permitted under revised Rule 30, with a permissible Wobbe range of 1279-1385. (D.06-09-039, pp. 163, 181 [Ordering Paragraphs 17-19].) In addition, we determined that revising gas quality standards would not lead to the importation of potentially hotter burning LNG gas, but rather "it would be the construction of new LNG terminals or receiving stations that would likely cause the potentially higher level Wobbe LNG gas to be introduced into California." (D.06-09-039, p. 163.) Because D.06-09-039 did not authorize the construction of any facilities related to LNG importation or consumption, but instead provided guidelines and parameters for the possible future use of LNG in California, we concluded that there was no causal link between the narrowing of gas quality parameters in D.06-09-039 and any alleged, direct or indirect, impact on the environment that would trigger environmental review pursuant to CEQA.
Timely applications for rehearing of D.06-09-039 were filed by the SCAQMD, RACE, and the City on October 27, 2006. The City also filed a motion to intervene in R.04-01-025.4 On October 27, 2006, the Commission received an amicus curiae brief from the AG in support of the applications for rehearing of D.06-09-039. Responses to the rehearing applications were filed on November 13, 2006 by PG&E, Sempra LNG, Shell Trading Gas & Power, and SDG&E.
On January 23, 2007, SCAQMD filed petitions for writ of review of D.06-09-039 in the California Supreme Court and the California Court of Appeal, Second Appellate District, Division Four.
1 Order Instituting Rulemaking to Establish Policies and Rules to Ensure Reliable, Long-Term Supplies of Natural Gas to California ("Opinion Regarding the Petition for Modification of Decision 04-09-022") [D.06-05-017] (2006) ___ Cal.P.U.C.3d ___.
2 RACE's application for rehearing of D.06-09-039 alleges that we erred in considering environmental review for Phase I separately from environmental review for Phase II. (RACE App., pp. 2-3.) This argument lacks merit because, as noted above, the California Supreme Court has already denied RACE's petition for writ of mandate as to the application of CEQA to Phase I.
3 The Wobbe Index measures the interchangeability of gas, i.e., the ability to substitute one gaseous fuel for another in a combustion application without materially changing operation safety, efficiency, or performance, or materially increasing air pollutant emissions. Gas with a higher Wobbe number produces more heat because it burns hotter than gas with a lower Wobbe number.
4 The City's motion to intervene as a party is granted based on its close proximity to the North Baja LNG importation facility currently under construction off the coast of Baja California. Thus, the City is uniquely situated as a public entity, and its concerns regarding the possible impacts of D.06-09-039 are relevant to the issues considered by the Commission in the underlying decision.
