8. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner, and A. Kirk McKenzie is the assigned ALJ in this proceeding.

Findings of Fact

1. The application is unopposed.

2. We affirm Resolution ALJ 176-3192's preliminary determination that this proceeding should be categorized as ratesetting, and that a hearing is not necessary.

3. Once the requirements imposed in D.08-01-018 are carried out, LGS will become 100% owned by Buckeye Gas Storage LLC.

4. The existing Kirby Hills Facility consists of three parts, the first of which is a gas storage field and compressor/dehydration station located near the western edge of the Montezuma Hills, approximately six (6) miles west of the City of Rio Vista, and 16 miles southeast of the City of Fairfield.

5. The second part of the existing Facility is a 5.9-mile pipeline that runs from the compressor/dehydration station east to a remote metering station and interconnection facility.

6. The third part of the existing Facility consists of the remote metering station and interconnection facility, which is located near PG&E's Line 400.

7. As part of the proposed Phase II, LGS would change the first part of the Facility by (a) adding three new well pad sites with 15 injection and withdrawal wells to the gas storage and withdrawal field, (b) connecting these new wells to the existing compressor site by means of a 3700 foot, 12-inch flowline, and (c) expanding the compressor site by adding two additional compressors totaling 5900 hp.

8. As part of the proposed Phase II, LGS would change the third part of the existing Facility by expanding the capacity of the metering station and interconnection with PG&E's Line 400 from 100 MMcf/d to 350 MMcf/d.

9. As part of Phase II, LGS does not propose to make any changes to the 5.9-mile pipeline that runs from the compressor/dehydration station east to the remote metering station and PG&E interconnection facility.

10. Upon completion of the proposed Phase II, the working capacity of the Facility would be increased by up to 12 Bcf, of which approximately 6 Bcf would be cushion gas capacity. Upon completion of Phase II, a maximum of 250 MMcf/d of firm injection and withdrawal capacity would be added to the Facility.

11. As part of the authority sought here, LGS requests permission to charge market-based rates for the gas injection, withdrawal and related services that will become available as a result of the completion of Phase II.

12. All of the capacity in the existing Kirby Hills Facility is fully subscribed.

13. As stated in Energy Action Plan II, the proposed Phase II is needed to provide additional natural gas storage facilities in Northern California so as to enhance reliability and mitigate price volatility.

14. As part of the environmental review required by CEQA, the staff of the Commission's Energy Division caused to be prepared a Proposed Subsequent MND/IS, which was issued for 30 days of public review and comment on August 24, 2007.

15. On September 19, 2007, counsel for KH Associates, the lessor of the site on which the Facility's gas storage field and compressor station are located, submitted a letter in response to the Proposed Subsequent MND/IS that contended, among other things, that the 2005 lease governing the site did not give LGS authority to drill at the subsurface depths contemplated by the instant application.

16. On September 27, 2007, counsel for LGS submitted a letter in response to the September 19 letter from KH Associates arguing, among other things, that (a) the issues raised in the September 19 letter should have been raised in a protest, but no timely protest had been filed, (b) the September 19 letter represented a misuse of the CEQA process, in that it commented upon the application itself rather than upon environmental issues, (c) since the dispute raised by the September 19 letter would be resolved outside of Commission processes, the letter was no reason to hold up continued work on the application, and (d) both LGS and parties seeking additional gas storage capacity that would result from Phase II would be adversely affected if the application were delayed as a result of the September 19 letter.

17. On October 17, 2007, counsel for KH Associates submitted for filing a motion for intervention in this proceeding, a motion for acceptance of a late-filed protest, a protest, and a declaration from counsel in support of the motion for acceptance of the late-filed protest.

18. On October 26, 2007, counsel for LGS informed the ALJ by e-mail that LGS and KH Associates had reached a settlement in principle of their dispute, but that additional time was needed to work out details and document the settlement. Counsel for KH Associates also requested an extension of time to respond to the pleadings submitted by KH Associates on October 17, 2007 in case the settlement fell through and such a response became necessary.

19. On October 29, 2007, the ALJ granted LGS an extension of time until November 15, 2007 to file responses to KH Associates' October 17, 2007 pleadings, in the event such responses became necessary. In response to further requests from LGS, the time for filing such responses was subsequently extended until November 30, 2007.

20. On November 30, 2007, KH Associates filed a motion to withdraw the four pleadings it had submitted on October 17, 2007, and stated in an accompanying letter that it now supported the instant application.

21. The Subsequent MND/IS, which sets forth and responds to the comments received concerning the Proposed Subsequent MND/IS, was issued on December 19, 2007.

22. The Subsequent MND/IS reflects the independent judgment of this Commission.

23. The Subsequent MND/IS conforms to the requirements of CEQA.

24. The Subsequent MND/IS identifies no significant environmental effects of the proposed Phase II that cannot be avoided or reduced to less-than-significant levels by implementing the Mitigation Monitoring Plan set forth in Section C of the Subsequent MND/IS.

25. The Commission has considered the Subsequent MND/IS in deciding to grant the authority requested in the instant application.

26. Based upon the mitigation measures set forth in the Mitigation Monitoring Plan contained in the Subsequent MND/IS, Phase II of the Kirby Hills Facility will not have a significant effect upon the environment.

27. In order to construct and operate the proposed Phase II of the Kirby Hills Facility, LGS must obtain permits from Solano County and various local, state and federal agencies, including the U.S. Army Corps of Engineers.

28. The Commission has considered community values, recreational and park areas, historical and aesthetic values and influence on the environment in deciding to grant the authority requested by LGS in this application, and concludes that granting LGS authority to construct and operate Phase II of the Kirby Hills Facility would not be inconsistent with them.

29. To continue the necessary monitoring of the natural gas storage and related markets, the conditions that were imposed on LGS as part of the settlement reached in A.07-07-025 and approved in D.08-01-018 should also be incorporated here.

Conclusions of Law

1. The motions of PG&E for party status in this proceeding, of Wild Goose for intervention in this proceeding, and of Sacramento NGS for information-only status in this proceeding, should be granted.

2. The October 17, 2007 motion of KH Associates to intervene in this proceeding should be granted.

3. The November 30, 2007 motion of KH Associates to withdraw the other pleadings that it submitted on October 17, 2007, viz., the motion for acceptance of a late-filed protest, protest, and declaration of David Bowie in support of motion for acceptance of a late-filed protest, should be granted.

4. LGS's May 8, 2007 motion for leave to file under seal its audited financial statements for the years ending December 31, 2005 and December 31, 2006, which financial statements are included as Exhibit 8 to the application, should be granted, as set forth in the order below.

5. LGS has provided the showing required by Pub. Util. Code §§ 1001 and 1002(a) as a condition of granting or amending a CPCN.

6. Because ratepayers will not be at risk if expected demand for the gas storage and withdrawal services provided by Phase II fails to materialize, it is appropriate to grant LGS the authority it has requested to charge market-based rates for the gas storage, withdrawal and related services that will be offered as a result of Phase II of the Kirby Hills Facility.

7. The Subsequent MND/IS has been completed in compliance with the requirements of CEQA.

8. The Subsequent MND/IS and the Proposed Subsequent MND/IS should be received into the record of this proceeding.

9. Permits from Solano County and from various local, state, and federal agencies, including the U.S. Army Corps of Engineers, will be necessary before Phase II of the Kirby Hills Facility can be constructed.

10. LGS's application for authority to amend the CPCN granted in D.06-03-012 so as to permit construction and operation of Phase II of the Kirby Hills Facility should be granted, subject to full compliance by LGS and each of its employees, agents and contractors with each and every condition set forth in the Mitigation Monitoring Plan that comprises Section C of the Subsequent MND/IS.

11. LGS's application for authority to amend the CPCN granted in D.06-03-012 so as to permit construction and operation of Phase II of the Kirby Hills Facility should be granted, subject to the requirement that LGS shall at all times comply with Conditions 2(a), 3, 4, and 5 set forth in Appendix A to D.08-01-018 in A.07-07-025.

12. LGS's application for authority to amend the CPCN granted in D.06-03-012 so as to permit construction and operation of Phase II of the Kirby Hills Facility should be granted, subject to the condition that LGS shall comply with all of the undertakings to provide DRA with certain data, as set forth in LGS's June 21, 2007 response to the June 8, 2007 response of DRA to the application herein.

13. In order to allow construction of Phase II of the Kirby Hills Facility to proceed expeditiously, this order should be effective immediately.

ORDER

IT IS ORDERED that:

1. The June 7, 2007 motion of Pacific Gas and Electric Company for party status in this proceeding, the June 11, 2007 motion of Wild Goose Storage, Inc. to intervene in this proceeding, the June 11, 2007 request of Sacramento Natural Gas Storage LLC for information-only status in this proceeding, and the October 17, 2007 motion of Kirby Hills Associates, LLC (KH Associates) to intervene in this proceeding, are granted.

2. The November 30, 2007 motion of KH Associates to withdraw three of the pleadings that it submitted for filing on October 17, 2007, viz., a motion for acceptance of a late-filed protest, the protest, and the declaration of David Bowie in support of the motion for acceptance of a late-filed protest, is granted.

3. The May 8, 2007 motion of applicant Lodi Gas Storage, L.L.C. (LGS) for leave to file confidential materials under seal is granted with respect to the audited financial statements for LGS for the years ending December 31, 2005 and December 31, 2006, which financial statements comprise Exhibit 8 to the application. The aforesaid materials should be placed under seal for a period of two years from the effective date of this decision, through and including March 1, 2010, and during that period the material so protected shall not be made accessible or disclosed to anyone other than Commission staff except upon the further order or ruling of the Commission, the assigned Commissioner, the assigned Administrative Law Judge (ALJ), or the ALJ then designated as Law and Motion Judge. If LGS believes that further protection of the aforesaid materials is needed after March 1, 2010, then LGS may file a motion stating the justification for further withholding of these materials from public inspection, or for such other relief as the Commission's rules may then provide. Such a motion shall explain with specificity why the designated materials still need protection in light of the passage of time involved, and shall attach a clearly-identified copy of the ordering paragraphs of this decision to the motion. Such a motion shall be filed at least 30 days before expiration of the protective order set forth in this paragraph.

4. LGS's application to amend the certificate of public convenience and necessity granted in Decision (D.) 06-03-012 so as to permit LGS to construct and operate Phase II of the Kirby Hills Natural Gas Storage Facility, as described in the application, is approved pursuant to Pub. Util. Code § 1001, subject to the terms and conditions set forth in the following Ordering Paragraphs (OPs).

5. The authority granted in OP 4 is conditioned upon compliance by LGS and each of its employees, agents and contractors with each and every condition set forth in the Mitigation Monitoring Plan that comprises Section C of the Subsequent Mitigated Negative Declaration and Supporting Initial Study (Subsequent MND/IS) issued in connection with this application on December 19, 2007.

6. LGS shall provide to the Division of Ratepayer Advocates (DRA), the annual report and other information described in LGS's September 21, 2007 response to the June 8, 2007 response of DRA to the application herein. Competitively sensitive, confidential information provided pursuant to this OP may be submitted under seal in accordance with General Order 66-C and Pub. Util. Code § 583.

7. As a condition of the authority granted in this decision, LGS shall at all times comply with Conditions 2(a), 3, 4, and 5 set forth in Appendix A to D.08-01-018 in Application (A.) 07-07-025.

8. The Subsequent MND/IS and the Proposed Subsequent Mitigated Negative Declaration and Supporting Initial Study issued on August 24, 2007 are admitted into the record of this proceeding as Exhibits 1 and 2, respectively.

9. No hearing was held in this proceeding.

10. The authority granted herein shall expire if not exercised within one year of the date of this order.

11. A.07-05-009 is closed.

This order is effective today.

Dated February 28, 2008, at San Francisco, California.

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