GFB/PVA/KLM/hl2 9/13/2004

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Investigation into the Proposal of Sound Energy Solutions to Construct and Operate a Liquefied Natural Gas Terminal at the Port of Long Beach.

Investigation 04-04-024 (Filed April 22, 2004)

ASSIGNED COMMISSIONER AND ADMINISTRATIVE

LAW JUDGE'S RULING AND SCOPING MEMO

This ruling and scoping memo sets forth the scope, process, and schedule for this proceeding, following a prehearing conference before Commissioner Geoffrey Brown and Administrative Law Judge (ALJ) Malcolm held on August 23, 2004, in Long Beach.

1. Background

The Commission opened this proceeding on April 22, 2004 to consider a liquefied natural gas (LNG) facility proposed by Sound Energy Solutions (SES) at the Port of Long Beach. The order initiating this proceeding, Investigation
(I.) 04-04-024, asserts the Commission's jurisdiction over SES as a public utility, under authorities including Pub. Util. Code §§ 216, 221, 222, 227 and 228, based on SES's proposal for the project and assuming the project is as proposed before the Federal Energy Regulatory Commission (FERC). I.04-04-024 finds that SES must receive a Certificate of Public Convenience and Necessity (CPCN) from this Commission prior to operating its proposed LNG facility.

The project has been the subject of a dispute between the Commission and the FERC with regard to the jurisdiction of each agency. On January 26, 2004, SES filed an application at FERC under section 3 of the Natural Gas Act for authority to construct the project. The Commission filed a Notice of Intervention and Protest to SES' application, arguing that California has jurisdiction over the siting of such projects, and that the Natural Gas Act provides no authority for FERC jurisdiction over the siting of SES' proposed LNG facilities.

On March 24, 2004, the FERC issued a declaratory order which asserted exclusive jurisdiction in advance of its decision on the merits of the SES proposal. On April 23, 2004, the Commission filed a request for rehearing, which the FERC denied on June 9, 2004. On August 5, 2004, the Commission filed a Petition for Review with the U.S. Court of Appeals for the D.C. Circuit, seeking review of the FERC's March 24^th and June 9^th Orders. That appeal is currently pending.

On May 27, 2004, SES filed an application for rehearing of I.04-04-024 and sought a stay of the investigation until the jurisdictional disputes between the FERC and the Commission are decided by the federal court. The Commission denied SES' request for stay of the OII on July 8, 2004. The Commission has not yet issued a decision on SES' application for rehearing.

On August 5, 2004, the FERC issued a clarification of its June 9^th Order, again asserting exclusive jurisdiction, while indicating that SES must comply with certain requirements of the California Coastal Commission.

The Commission held a prehearing conference in this proceeding on August 23, 2004 in Long Beach.