BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 1350 - Canciamilla Hearing Date:
April 9, 2002 A
As Amended: February 7, 2002
Non-FISCAL/URGENCY B
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DESCRIPTION
Current law bars any public utility offering competitive
services from condemning any property for competitive purposes
without first obtaining a finding from the California Public
Utilities Commission (CPUC) that the condemnation is in the
public interest.
This bill allows a gas corporation to condemn property for
competitive purposes without first obtaining a finding from the
CPUC that the condemnation is in the public interest. This only
applies to property that the gas corporation has filed a
complaint in eminent domain in superior court before December
31, 2002.
This bill contains an urgency clause.
This bill becomes inoperative on December 31, 2002.
BACKGROUND
Gas storage facilities are primarily naturally occurring
underground structures. They allow customers more flexibility
in gas purchasing and increase the capacity of the natural gas
infrastructure in the state. Both the CPUC and the California
Energy Commission (CEC) have found that gas storage facilities
contribute to price stability and supply adequacy.
Gas storage facilities fall under the regulatory jurisdiction of
the CPUC. The CPUC licenses the operation of gas storage
facilities, and has authority to regulate rates and charges.
The gas storage facilities can be part of the regulated utility
or independently owned.
Wild Goose Storage, Inc. (WGSI) is an affiliate of Alberta
Energy Company (AEC). AEC is a large energy company with
exploration, supply, storage, and transport facilities. It is
the largest Canadian-headquartered producer of natural gas and
the largest North American independent natural gas storage
operator with $12 billion in assets and $6 billion in annual
revenues (Canadian dollars).
WGSI owns and operates a natural gas storage facility in Butte
County and the company has an application before the CPUC to
double the capacity of that facility, which it expects to be
approved by June 2002. Should the application be approved, WGSI
expects to have to condemn property to build a connecting
pipeline to PG&E's natural gas transmission line some 25 miles
away. Under current law, condemning that piece of property
requires WGSI to first go to the CPUC and seek a finding that
condemnation is in the public interest, a process could take
months when considering the adversarial nature of condemnation
proceedings in general. A delay of any significance would
likely extend construction well into 2003 because the
construction zone is in rice fields which are flooded during the
winter and don't dry out until the summer. By eliminating the
requirement that the CPUC find that the condemnation is "in the
public interest," WGSI believes it could begin condemnation
proceedings as soon as the CPUC approves the company's
application to expand the size of its existing facility (which
it expects to happen in June). Without this bill, WGSI believes
it won't be able to increase its natural gas storage capacity
until 2004.
Under existing law, the power of eminent domain may only be
exercised when (a) the public interest and necessity require the
project; (b) the project is located in the manner most
compatible with the greatest public good and the least private
injury; and (c) the property sought to be acquired is necessary
to the project. If the property is condemned, then the property
owner must be compensated for the fair market value of his or
her property. This bill doesn't change that process.
COMMENTS
1.Who is affected? Among the property owners whose land WGSI is
seeking to condemn is the Roseville Land Development
Association (RLDA), an 18-member California corporation. WGSI
condemned a one-mile easement through RLDA property to service
its initial gas storage facility and additional condemnations
will be required for this project expansion.
RLDA believes this bill tilts the legal setting in favor of
WGSI by providing an exception to the Public Utilities Code
Section 625 requirement that the CPUC make a finding of public
interest before a condemnation can occur. RLDA further
contends that WGSI is not a public utility because its rates
and service are not regulated, and therefore it's not entitled
to invoke the power of eminent domain under any circumstance.
2.Dates . This bill allows for the exemption from the finding of
public necessity for property for which a complaint in eminent
domain in superior court is filed on or before December 31,
2002. However, the rational for this bill is that
construction needs to begin before the rainy season begins in
2002 in order to have the facility available for gas storage
in 2003. If WGSI doesn't file its complaint before late fall,
it will be too close to the rainy season to make a difference
in the construction schedule and will push back the
availability of the expanded gas storage until 2004 anyway,
which is exactly what the sponsors of this measure say they're
trying to avoid. The author and committee may wish to
consider shortening the date by which the court filing has to
be made to October 31, 2002 to minimize the possibility of
other projects taking advantage of this exemption.
3.Alleged conflict of interest . A December 2001 report in the
San Jose Mercury News raised questions about an energy
consultant hired by the state and his relationship to WGSI.
That story asserted that the energy consultant, who was hired
to develop the state's natural gas reserves, arranged for a
$256,000 contract between the state and one of his private
clients, WGSI. The consultant and the state all deny the
existence of a conflict. The Department of Water Resources
says the consultant recused himself from the WGSI contract
deliberations and that the consultant's contract with the
state was terminated in January 2002.
4.Technical amendment . The bill refers to WGSI as a "gas
corporation public utility," but the phrase used in the Public
Utilities Code for entities such as WGSI is "gas corporation."
The author and committee may wish to consider making this
change throughout the bill.
5.Sounds Familiar . Last year, the Lodi Gas Storage project was
before the CPUC for a Section 625 finding. A letter from the
President of the CPUC indicated that the CPUC's review would
delay completion of the project past the fall of 2001, making
the project unavailable to meet critical gas storage needs.
The President expressed support for narrowly tailored
legislation limiting further CPUC review of the Lodi project.
This led to provisions in SB 28X (Sher), Chapter 12, Statutes
of 2001-02 First Extraordinary Session, which exempted the
Lodi Gas Storage project from the need to receive a Section
625 finding from the CPUC.
6.Related Legislation . AB 21XX, (Canciamilla), Chapter 14,
Statutes of 2001-02 Second Extraordinary Session of 2001,
provides that for gas corporations, the CPUC may review the
application for a certificate of public convenience and
necessity simultaneously with the review as to whether
condemnation by that gas corporation serves the public
interest. That legislation won't take effect until 90 days
after the adjournment of the Second Extraordinary Session.
7.Double Referral . This bill has been double-referred to the
Senate Judiciary Committee.
ASSEMBLY VOTES
Assembly Floor (75-0) (unrelated version)
Assembly Utilities and Commerce Committee
(15-0) (unrelated version)
POSITIONS
Sponsor:
Wild Goose Storage, Inc.
Support:
None on file
Oppose:
None on file
Randy Chinn
AB 1350 Analysis
Hearing Date: April 9, 2002