BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Martha M. Escutia, Chair
2001-2002 Regular Session
AB 1350 A
Assembly Member Canciamilla B
As Amended April 16, 2002
Hearing Date: April 23, 2002 1
Public Utilities Code 3
CJW:sr 5
0
SUBJECT
Gas Corporations: Condemnation
DESCRIPTION
This bill would exempt a natural gas storage company, Wild
Goose Storage Inc., from a recent law requiring an
additional hearing before the Public Utilities Commission
(PUC) for expansion of its storage facilities. A similar
exemption was provided to another company, Lodi Gas
Storage, last year.
BACKGROUND
This bill is a follow-up to AB 21XX (Canciamilla, Ch. 14,
Stats. of 2001), which was sponsored by Wild Goose in an
earlier effort to obtain an exemption for the expansion of
its gas storage facility from a portion of the approval
process that Wild Goose argues was not meant to apply to
its circumstances.
AB 21XX clarified that Section 625 of the Public Utilities
Code, which added a local public hearing to the approval
process for certain public utility projects, was directed
primarily at telecommunications companies and did not apply
to public gas or electric utility corporations seeking to
expand projects for which a Certificate of Public
Convenience and Necessity (CPCN) had been granted. Due to
time constraints, however, Wild Goose will be unable to
take advantage of AB 21XX and still complete its facility
expansion this year.
(more)
AB 1350 (Canciamilla)
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Both the PUC and the California Energy Commission have
found that gas storage facilities contribute to price
stability and supply adequacy. Another gas storage
provider, Lodi Gas Storage, applied for and received an
exemption from Section 625 through SB 28X (Sher, Ch. 12,
Stats. of 2001). That exemption expires June 1, 2002.
With this bill, Wild Goose seeks to extend that exemption
through December 31, 2002, in order to complete its
construction project this year.
CHANGES TO EXISTING LAW
Existing law provides that public and private companies
that sell gas, electricity, or water to the public are
subject to the regulatory authority of the PUC, and are
authorized to exercise the power of eminent domain. [Pub.
Util. Code Sec. 216; Pub. Util. Code Secs. 610 et seq .]
Existing law provides that property may be acquired by
eminent domain for a particular project only when (a)
public interest and necessity require the project; (b) the
project is planned or 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. [CCP Sec. 1240.030.]
Existing law further provides that a company seeking to
construct or expand a pipeline or facility must obtain a
Certificate of Public Convenience and Necessity (CPCN) for
the project from the PUC. [Pub. Util. Code Sec. 1001 et
seq .]
Existing law further provides that a company offering
competitive services may not condemn property for the
purposes of competing with another company unless it
obtains a finding by the PUC that the project is necessary,
is in the public interest, and is compatible with the
greatest public good and the least public harm. This
requirement is in addition to any other statutory review
requirement, including the public utility's obligation to
obtain a CPCN for the project from the PUC. [Pub. Util.
Code Sec. 625.]
Existing law further provides that Section 625 does not
AB 1350 (Canciamilla)
Page 3
apply to proposed condemnations by gas or electric
companies when the PUC has issued a CPCN for the project.
[AB 21XX (Canciamilla, Ch. 14, Stats. of 2001).]
Existing law further provides that, notwithstanding Section
625, a gas company may exercise the power of eminent domain
"to condemn any property for the purpose of competing with
another entity in the offering of natural gas and services
related to natural gas," from the effective date of this
section to June 1, 2002. [SB 28X (Sher, Ch. 12, Stats. of
2001)(effective May 22, 2001).]
This bill would restate the exemption set forth in SB 28X,
further limiting it to apply only as to property "for which
the gas corporation public utility has filed a complaint in
eminent domain in superior court on or before October 31,
2002."
This bill further would provide that the exemption would
become inoperative on October 31, 2002, and would be
repealed as of April 1, 2003.
This bill would take effect immediately as an urgency
statute.
COMMENT
1. Stated need for legislation
The sponsor, Wild Goose Storage, Inc., is a privately
owned natural gas storage company affiliated with
Alberta Energy Company, the largest independent natural
gas storage operator in North America. Wild Goose is
licensed and regulated by the PUC, which may (but
currently does not) set the rates Wild Goose charges its
customers.
Wild Goose built and operates the first independent
natural gas storage facility in California, and currently
is applying for a CPCN to expand its underground storage
area. The facility is located in the City of Gridley in
Butte County, in a wetland area under a rice field that
serves as a wild fowl sanctuary during the winter. Due
to weather, rice planting, and bird migration timetables,
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the window for any construction or expansion at the
facility is only a little over two months long, from
mid-June to late August.
a. The regulatory review process
When a gas, electric or water company seeks to build or
expand a facility, such as Wild Goose's gas storage
project, it must undergo a substantive "public
convenience and necessity" review by the PUC. If the
review is positive, a CPCN is issued for the project.
[Pub. Util. Code Sec. 1001.] If the project will
involve the condemnation of property, it also is
subject to the three-step eminent domain review process
set forth in CCP Section 1240.030.
In 1999, the Legislature passed SB 177 (Peace),
codified as Section 625 of the Public Utilities Code,
which required companies other than the regulated
monopolies to undergo an additional review process with
the PUC before they could condemn property for a new or
expanded project. This requirement was in addition to
the existing requirement that the company obtain a CPCN
for the project from the PUC.
Last year, Wild Goose sponsored AB 21XX (Canciamilla),
which added Section 625.5 to the Public Utilities Code,
clarifying that Section 625 does not apply to a
condemnation by a gas or electric company when the PUC
already has issued a CPCN for the project, or for the
expansion of a project for which a CPCN already has
been granted. However, as Wild Goose is seeking its
CPCN simultaneously with its eminent domain action in
order to be ready for the June-August construction
period, the new Section 625.5 will not exempt Wild
Goose from the Section 625 requirement as it attempts
to proceed with expansion this year.
b. Wild Goose seeks an exemption from Section 625
As Wild Goose pursued AB 21XX last year, another
private gas storage company, Lodi Gas Storage, obtained
a direct exemption from the additional requirements of
Section 625 through SB 28X (Sher, Ch. 14, Stats. of
2001). That exemption expires on June 1, 2002.
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Due to the unique time constraints on Wild Goose's
underground gas storage expansion project, however, it
will not be able to begin expansion of its facility
until at least mid-June and it must be completed by the
end of August. Accordingly, this bill would restate
the exemption language of SB 28X, extending its
expiration date to October 31, 2002, and further would
narrow the exemption to apply only to utilities that
have filed a complaint in eminent domain on or before
October 31, 2002.
This bill would take effect immediately as an urgency
statute. If it passes,
Wild Goose believes it could begin condemnation
proceedings as soon as the PUC approves its application
to expand its storage facility (which the company
expects to occur in June). Without this bill, Wild
Goose believes it will not be able to expand its
facility until 2004.
2. Local government bodies and facility neighbors favor
the proposed expansion
Wild Goose has supplied a copy of resolutions in support
of the expansion of the facility adopted last year by the
Boards of Supervisors of Butte County (where the Wild
Goose facility is located) and Colusa County (into which
the expanded facility will extend). Similar letters of
support have been received from the Gridley City Council,
the area's Assembly Member, State Senator, and Member of
Congress, local waterfowl and hunting clubs, and
neighbors of the Wild Goose facility.
3. The affected property owner opposes the bill
The affected property owner in this case is Roseville
Land Development Association (RLDA). Wild Goose
condemned a one-mile easement through RLDA property for
its initial storage facility, and seeks additional
easements for its planned expansion.
According to its attorney, RDLA objects to the right of a
private company like Wild Goose to condemn property under
any circumstances, and believes that this bill's proposed
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removal of the Section 625 requirement for an additional
PUC hearing would give Wild Goose an undeserved
advantage. He writes:
The bill is intended by Wild Goose to influence the
proceedings before the CPUC, including the Phase I
proceeding on whether an amended certificate should
issue, which is currently under submission . . . and
the [EIR] proceeding, which has not begun yet . . .
. This is an attempt to predetermine the outcome of
an adversary proceeding at the CPUC.
In response, Wild Goose points out that the law granting
private gas companies the right to condemn property has
existed for decades and is not at issue here. Further,
this bill would exempt Wild Goose only from the
additional PUC hearing required by Section 625; it would
not excuse the company from (or pre-determine the outcome
of) either the CPCN process required by the PUC, or the
three-step eminent domain process set forth in CCP
Section 1240.030.
4. Alleged conflict of interest is denied by the parties
According to the Senate Energy, Utilities and
Communications Committee analysis of this bill, a San
Jose Mercury News story in December 2001 raised questions
about an energy consultant hired by the state and his
relationship to Wild Goose. The story said the
consultant, who was hired to develop the state's natural
gas reserves, arranged for a $256,000 contract between
the state and Wild Goose, one of his private clients.
The consultant and the state deny any conflict. The
Department of Water Resources says the consultant recused
himself from the Wild Goose contract deliberations, and that
his contract with the state was terminated in January 2002.
Support: Butte County Board of Supervisors; Colusa County
Board of Supervisors; Gridley City Council; Hangtown
Duck Club; Butte Sink Waterfowl Association, Inc.;
California Waterfowl Association; Sprig Meadows
Club; Henry F. Trione (neighbor of the facility)
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Opposition: Dennis DeCuir (attorney for RLDA)
HISTORY
Source: Wild Goose Storage, Inc.
Related Pending Legislation: None Known
Prior Legislation: SB 28X (Sher, Ch. 12, Stats. of 2001)
temporarily exempted gas companies from the
additional hearing requirement of Pub. Util.
Code Sec. 625; expires June 1, 2002;
AB 21XX (Canciamilla, Ch. 14, Stats. of 2001)
clarified that Sec. 625 does not apply to
condemnations by gas companies where a CPCN
already has been granted.
Prior Vote: Senate Committee on Energy, Utilities and
Communications (5-1)
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