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    CPUC Holds Prehearing Conference On LB LNG Proposal; SES Restates Its Jurisdictional Objections

    (August 24, 2004) -- The Mitsubishi subsidiary seeking Federal Energy Regulatory Commission (FERC) approval to build and operate a Liquefied Natural Gas (LNG) facility in the Port of LB has reiterated on jurisdictional grounds that it will not participate in a substantive manner in CA Public Utilities Commission (CPUC) proceedings to examine safety and other issues concerning the project -- including discovery to which formal opponents (including LB Citizens for Utility Reform) could be allowed under state law.

    LNG CPUC hearing Aug. 23/04The company's position was stated at an August 23 Prehearing Conference at which Administrative Law Judge Kim Malcolm and CPUC Commissioner Geoffrey Brown presided.

    The proceeding was held at LB's main library branch.

    "Sound Energy Solutions" attorney Michael B. Day also said (referencing an August 19 letter filed with the CPUC) that "in September or October of this year, SES will be making significant technical amendments to its FERC application. Not only with these amendments demonstrate SES' commitment to continuously improving the safety and environmental impact of the proposed LNG import terminal, but they will further serve to substantially change certain aspects of the project as previously contemplated."

    The SES letter stated in pertinent part:

    ...SES will not appear as a respondent or substantively participate in the [CPUC] proceeding at this time...SES will make a special appearance at the scheduled August 23, 2004 Prehearing Conference [in Long Beach] in order to offer on the record its jurisdictional and procedural objections to the proceeding as set forth herein...

    The Federal Energy Regulatory Commission ("FERC") currently has exclusive jurisdiction over SES's proposed liquefied natural gas (LNG) import terminal. FERC asserted such exclusive jurisdiction over the project in its March 24, 2004 Declaratory Order and reiterated its holding in a June 9, 2004 Order Denying CPUC's Request for Rehearing and Request for Stay...As a result of such intervention, CPUC has become a party to SES's application proceeding, and, like SES, it is now subject to the decisions issued by FERC in the proceeding. These decisions constitute final agency action and are given res judicata effect, as between the CPUC, SES an FERC, until and unless they are overturned on review in the D.C. Circuit [federal court]...

    The CPUC has properly filed a Petition for Writ of Review [with the D.C. Circuit]...However, until and unless it prevails in this proceeding, the CPUC remains subject to the FERC's assertion of exclusive jurisdiction over SES and its proposed project. Any attempt by the CPUC to assert jurisdiction over the project through the above-captioned investigation constitutes an improper collateral attack on the FERC orders.

    ...In order to preserve its rights and objections, avoid any appearance of a waiver, and so as not to commit any of its own violations of the FERC's existing orders, SES cannot appear before the [CA Public Utilities] Commission [in its proceeding] for any purpose other than to assert its jurisdictional objections. Necessarily, this requires that SES will not be able to respond to discovery requests [in the CPUC proceeding] concerning its proposed LNG import terminal...

    Notwithstanding all of the above, if in the future the federal courts should rule in favor of CPUC's position on the issue of jurisdiction, then SES would fully comply with the orders of the courts and would work closely with the CPUC on siting issues in the appropriate proceedings...

    ALJ Malcolm replied that CPUC has denied SES' request for a stay in the CPUC proceeding and she is following the directive of a unanimous vote of the CPUC until told otherwise. ALJ Malcolm said she was not aware of anything in FERC's rules that prohibits SES from participating and CPUC has statutory authority to direct discovery. Accordingly, she indicated that the CPUC proceeding will move ahead.

    Bry Myown (LB Citizens for Utility Reform), John Donaldson (LBCUR), Diana Mann (ECO-link), Don May (CA Earth Corps) told ALJ Malcolm and Commissioner Brown that they wish to exercise discovery and cross-examination. Ms. Myown added that she wishes to question Port of Long Beach on the LNG project (which is proposed for Port property in the state tidelands).

    Representatives of local construction industry unions voiced support for SES' LNG proposal on grounds it could bring their members jobs and indicated that if the CPUC proceeding progresses they wish to take part.

    On behalf of CPUC's Ratepayer Advocacy Section, CPUC Attorney Patrick Gileau indicated his office is in the process of retaining the services of consultants to assist it in the proceeding.

    The CPUC initiated its proceeding after SES declined to seek CPUC approval for the LNG project...which CPUC insists is required by CA law. SES did file an application with FERC...which then declared that it has exclusive authority over siting and safety issues (i.e. SES wouldn't need CPUC approval).

    CPUC is challenging FERC's position in a Washington, D.C. court in what could become a major test case on the ability of utility regulators in any state to deal with firms seeking to build LNG facilities.

    Assemblyman Alan Lowenthal (D., LB-SP-PV) and state Senator Betty Karnette (D., LB) have both declared their support for CPUC jurisdiction on the LB LNG project.

    CPUC is moving ahead with its proceeding under CA law and its pre-hearing conference was held to help decide the scope, timeline and calendar of those proceedings. ALJ Malcolm indicated that a scoping memo would be forthcoming.

    Discussion of the project's pros and cons wasn't within the formal scope of the prehearing conference...but advocates on both sides managed to get their points across in other ways.

    LNG CPUC hearing Aug. 23/04Opponents of the LNG project held a solar-powered rally and supported the CPUC. In photo, ECO-link chair Diana Mann speaks. Others included LBCUR's Bry Myown, who ridiculed LB officialdom for pursuing the project, saying it had turned LB into a "city of easy virtue. All they're doing is haggling over the price." Recently elected 8th district Councilwoman Rae Gabelich (who wasn't part those actions) also stopped by briefly. Also speaking was Gabrielle Weeks on behalf of LB Greens.

    LNG CPUC hearing Aug. 23/04Inside the prehearing conference, members of building industry unions sported orange "LNG Yes" stickers.

    Sound Energy Solutions CEO Tom Giles (foreground in suit) watched the proceeding but didn't speak.

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