Original SCE Demonstration AFC Approved on December 21, 1979, Docket No. 78-AFC-2;

SCE Petition for Commercial Operation Denied, June 2, 1988, Docket No. 78-AFC-2A;

Texaco Demonstration AFC Withdrawn by Applicant and Terminated by the Commission on November 3, 1993, Docket No. 78-AFC-2B

Project Manager (Docket No. 78-AFC-2B): Bob Eller

Staff Counsel (Docket No. 78-AFC-2B): Jeff Ogata

Hearing Officer (Docket No. 78-AFC-2B: Susan Gefter

Presiding Member (Docket No. 78-AFC-2B) Chairman Charles Imbrecht

Southern California Edison filed a Notice of Intention on July 13, 1978 for a 100 MW coal gasification/combined cycle demonstration project (Docket No. 78-NOI-4). The experimental facility was to operate for three to five years. Three sites were proposed, in accordance with NOI requirements, including the Cool Water site, 12 miles from Barstow in the Mojave Desert of San Bernardino County.

Just as the NOI proceeding began, the Legislature passed an urgency statute, effective September 21, 1978, enacting the Coal Gasification Generation Act. The new provisions, Public Resources Code sections 25650-25655, declared the importance of expedited development of coal gasification technology as a promising new source of energy. Accordingly, a coal gasification combined cycle demonstration plant AFC could now be reviewed by the Energy Commission, with exemptions from both the NOI and demand conformance requirements.

On October 27, 1978, Edison filed a petition with the CEC under authority of the Coal Gasification Generation Act to convert its NOI into an AFC for the Cool Water site. The petition was granted, terminating the NOI and creating a new application, the SCE Cool Water Coal Gasification Demonstration Project, Docket No. 78-AFC-2.

The coal gasification technology involved a collaboration between numerous parties including the Federal government, SCE and Texaco. Project capacity was reduced to 90 MW and the demonstration period became seven years. The Energy Commission conducted an environmental review under CEQA, certifying a Final Environmental Impact Report for the project. There were no substantial contested issues, as the Commission heeded the mandate of the Coal Gasification Generation Act to assist this promising new technology.

On December 21, 1979, the Energy Commission unanimously certified the SCE Cool Water Coal Gasification Demonstration Project in an eight page decision, the shortest AFC decision ever. After the seven year demonstration phase, commercial operation would require recertification of the facility. The Cool Water project was constructed and began operations.

On September 27, 1985, Edison filed a Petition to Amend the original demonstration project license in order for Cool Water to operate commercially, Docket No. 78-AFC-2A. By an order dated January 22, 1986, the Energy Commission determined that commercial operation of Cool Water, unlike the original demonstration project, would be subject to demand conformance requirements.

The Commission adopted a need test for Cool Water on April 13, 1988 that was similar to ER 6, containing physical, economic, and balancing test elements. Edison and CEC staff concurred that the project failed the physical and economic need tests. On April 20, 1988, CEC staff moved to deny the petition and terminate the proceeding.

Edison’s April 25, 1988 response contested staff's motion, arguing that commercial operation of Cool Water was in the public interest. At an April 28, 1988 evidentiary hearing, SCE witnesses testified that Cool Water passed the balancing test because it was cleaner than conventional coal and oil plants, diversified the fuel supply by burning coal, provided employment, and paid $2 million a year in taxes to San Bernardino County. CEC staff, while submitting no testimony on the balancing test, concluded that Edison had failed to meet its heavy burden of proof under that test. (Pages 5-13 of the June 2, 1988 CEC Order Denying Petition to Amend.)

The Committee and Commission agreed with staff. Commercial operation of Cool Water would cost Edison’s ratepayers an additional $100 million more than other available sources of energy, while providing no clear advantages over the natural gas facilities it would displace. Cool Water failed the balancing test. However, a continuation of the successful demonstration project, hopefully with federal funds, would be in the public interest. (Pages 14-18 of the June 2, 1988 CEC Order Denying Petition to Amend.)

SCE’s petition was denied and the Cool Water commercial licensing proceeding terminated by the Commission on June 2, 1988.

Texaco’s Application for Amended Certification of the Cool Water Project, Docket No. 78-AFC-2B

It appears that SCE failed to receive the federal funds it needed to continue running Cool Water as a demonstration project, following denial of its CEC petition for commercial operation.

By 1989, Edison ceased Cool Water operations and put the facility out to bid. The winning bidder was Texaco, one of SCE’s original Cool Water partners.

Texaco Syngas Incorporated filed its Application for Amended Certification of Cool Water on December 29, 1989, Docket No. 78-AFC-2B. Texaco’s proposal was to gasify sewage sludge in addition to coal, as part of a new demonstration project.

The Texaco filing suffered from a number of major deficiencies, including lack of both a power purchase contract and a Cool Water facility purchase contract with Edison, failure to develop an adequate air emissions offset package, and a bewildering array of project modifications, often marked "confidential", that continually changed the fundamental nature of the proposed facility. Cool Water became a moving target, with major amendments, revisions, and restatements filed throughout the 1990-92 period, adding and withdrawing one component after another, such as alcohol fuels.

Texaco was trying hard to devise a commercially feasible project, but apparently not succeeding. There was an air of unreality about this entire filing, especially when Texaco asked for CEC/PUC help to obtain a negotiated power purchase agreement with Edison.

Much greater clarity was achieved on Cool Water’s status as a demonstration project. On April 24, 1991, SCE requested an extension of the original certification beyond the June 24, 1991 expiration date. This matter became Docket No. 78-AFC-2C. It was considered jointly with Texaco’s request, Docket No. 78-AFC-2B, that its proposed new Cool Water project be granted demonstration status under Public Resources Code section 25540.6(a)(5). That would exempt Texaco from any demand conformance requirement.

Neither of these two matters was controversial. On June 12, 1991, the Energy Commission adopted an order designating Texaco Cool Water as a demonstration project and extending SCE’s original demonstration project license until the Texaco Syngas proceeding was completed.

In spite of applicant’s endless project modifications, CEC staff managed to publish its Preliminary Staff Assessment on June 23, 1992, with the air quality section following on July 27, 1992. However, Texaco’s air quality submittal was still incomplete, preventing a staff recommendation on the project. Little progress on Cool Water was made by either applicant or staff during the balance of 1992. Texaco, SCE, and other entities were still negotiating on the project's future.

On January 27, 1993, Texaco requested a suspension of the proceeding, pending resolution of economic feasibility issues. The suspension was granted. On September 23, 1993, Texaco informed the Committee of its intent to develop a natural-gas fired powerplant at the Cool Water site instead of the gasification project.

This was followed by a letter dated October 14, 1993, in which Texaco Syngas notified the CEC of its intention to withdraw the application for amended certification of Cool Water, Docket No. 78-AFC-2B. That unusual application, never subject to data adequacy review, was nearly four years old. On November 3, 1993, the Commission granted Texaco’s request and terminated the Cool Water proceeding, which also ended the certification extension of SCE’s original demonstration project.

Closure

Cool Water had been off line since 1989. A formal closure plan was submitted in 1998, and the project is now classified by the Energy Commission as closed.