Organized opposition to a coastal liquefied natural gas (LNG) terminal in California, along with critical environmental organizations and utilities, Friday raised the spectre of challenging at least part of the sweeping new state natural gas rules approved by the California Public Utilities Commission (see Daily GPI, Sept. 22). At least one group threatened to file a lawsuit in state Superior Court Monday.

An anti-LNG group called Ratepayers for Affordable Clean Energy, a coalition of environment, consumer and community groups, told news media it will file the lawsuit in state court, challenging the decision’s lack of environmental review.

The opposition contends that the new rules should have been subjected to review under the California Environmental Quality Act (CEQA), an aspect that the CPUC President Michael Peevey strongly disputed in introducing the issue at the regulators’ business meeting in San Francisco. Nevertheless the head of the South Coast Air Quality Management District (AQMD) said his regional environmental regulatory agency would “aggressively challenge” the CPUC’s action.

A critic of the part of the new rules related to natural gas quality and heating value standards, Southern California Edison Co. said in a prepared statement that the new CPUC rules for the gas industry are “inconsistent with the nominal design of our Mountainview power plant [in Redlands, CA]. Therefore, we will need to gain operating experience to confirm that all existing emissions and operating capabilities will continue to be achieved when operating with LNG.”

A source indicated that Edison has not ruled out the possibility of challenging at least part of the CPUC action, but no decision is likely to be made for a few more business days while the utility’s internal experts review the final order.

Peevey said he “respects the view” of AQMD, but he thinks the emissions regulatory unit is wrong. Another CPUC regulator, Rachelle Chong, emphasized that gas was the cleanest of the fossil fuels and demand for it was growing, but she said the CPUC’s action was not “sanctioning LNG.” It is merely establishing the “terms for future access,” so developers can plan proposed projects more specifically, she said.

The CPUC’s 5-0 action rejected recommendations for delay by an administrative law judge (ALJ), and in doing so, Peevey and some of his colleagues said the CPUC wanted to “send a clear signal to the marketplace” that the state regulatory panel wants to take action in a timely manner and not delay decisions on contested issues. (The ALJ had suggested that issues of gas quality, pipeline/storage and environmental review be deferred, and each examined further in separate new regulatory proceedings.)

The action Thursday closes a nearly three-year-old proceeding that sets California’s new rules governing 7 Bcf/d of gas transmission capacity over a 10-year future period and affecting over a dozen major areas. It provides for evaluating reserve margins and the adequacy of the system, setting tariffs, tradable capacity rights, balancing and interconnection agreements and reporting. It envisions a global market for supplies from LNG, while grandfathering historic in-state producers from many of the changes. Future oversight and planning of the state transmission system will be left to a newly created Infrastructure Working Group that will allow all major stakeholders, including state agencies, to monitor system use and identify expansion needs.

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