California’s state regulators and proponents wanting to site a liquefied natural gas (LNG) terminal in Long Beach Harbor had what may be a concluding head-butt late last month when a final request for a rehearing by Sound Energy Solutions (SES) was denied, reiterating the California Public Utilities Commission’s order that SES file with the state authorities for permission to build its proposed 1 Bcf/d receiving facility.

Executive Vice President and COO for the Mitsubishi Corp.’s SES operations in California Tom Giles told NGI on Monday that the company has “a little bit of time” — maybe close to the end of the month — to determine what, if any, additional actions it will take to avoid making formal applications to the CPUC. Although the company’s attorneys were still assessing their options on Monday, Giles, who also is an attorney, said he doesn’t think SES has many options left.

In the meantime, Giles said, SES continues with its development partner, ConocoPhillips, to proceed with pre-permitting environmental assessment work on the $400 million terminal projected to process between 700 MMcf/d and 1 Bcf/d equivalent of LNG.

The CPUC said it “carefully reviewed each and every one” of the dozen arguments made by SES, and it found that no “good cause” for the proposed rehearing was demonstrated. SES argued that the CPUC had “abused its discretion and acted prematurely” in opening a statewide investigation, making SES a respondent in the proceeding, ordering it to file an application and ordering SES to respond to information requests by the CPUC and its staff.

“SES has not yet engaged in any activity which would qualify it as a public utility under California law,” SES’s filing for rehearing argued. The CPUC reiterated that SES would, in fact, qualify as a ‘public utility” under the state law “if it commences construction of its LNG terminal as it currently proposes.”

The 70-page decision by the CPUC even got into the legal/legislative history of LNG in California by determining that the legislation did not — as SES argued — explicitly repeal the CPUC’s jurisdiction over LNG terminal siting when in 1987 it repealed the 1977 LNG Terminal Act, a law that gave the CPUC exclusive state jurisdiction over the then-proposed onshore LNG terminals along the Southern California coast by a partnership between affiliates of Southern California Gas Co. and Pacific Gas and Electric Co.

While the jurisdictional fight between the CPUC and Federal Energy Regulatory Commission remains unresolved in a pending federal court case, state regulators have moved ahead with a formal regulatory proceeding, and Mitsubishi Corp.’s Sound Energy Solutions (SES) has been refusing to participate until the jurisdictional question is resolved.

Under the current ruling by the FERC that it holds exclusive jurisdiction over SES’s proposed import facility, it would be “inappropriate” for SES to participate in another jurisdiction, said Giles last summer when the CPUC pushed ahead.

The CPUC established a proceeding parallel to FERC’s and held a pre-hearing conference last August to outline the scope and hearing schedule for the case, with a targeted proposed decision from the CPUC administrative law judge by April next year on all issues, except an assessment of the proposed market for the supplies. SES told the CPUC “it will not participate in this proceeding until and unless the federal court finds that the (CPUC) has jurisdiction over the project,” the co-CPUC ALJs said in a scoping memo released Sept. 13.

Citing past cases, the co-ALJs, Peter Allen and Kim Malcolm, said that the CPUC has the “authority to investigate matters that are germane to utility regulation even when the (state) commission would otherwise not have jurisdiction over the entities engaged in transactions with California public utilities.” They warned SES in the scoping memo that the CPUC “expects SES to respond to any reasonable discovery request and to comply with all orders, rulings and directives” from the CPUC and its ALJs.

SES told the CPUC at the Aug. 23 pre-hearing conference that for the company to participate in the CPUC proceeding “would put it in the awkward position of having to disobey the order of one or the other of the agencies.” The CPUC ALJs, however, argued that FERC’s relevant orders do not require SES “not participate in any commission proceeding or that such participation would somehow prejudice or harm SES.”

The ALJs noted that the proposed interconnectiuon of the terminal with Sempra Energy’s SoCalGas intrastate transmission pipeline backbone system gives the CPUC the right to determine the “safety and effectiveness” of that interconnection since SoCalGas is a state-regulated utility.

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.