China Lake Joint Ventureís Navy 2 Geothermal Project (China Lake, Coso, Navy 2, or Coso Navy 2)

Docket No. 88-SPPE-1

Small Power Plant Exemption Granted December 14, 1988

Project Manager: Bob Eller

Staff Counsel: Caryn Hough and Dick Ratliff

Hearing Officer: Stan Valkosky

Presiding Member: Commissioner Richard Bilas


Project Summary

SPPE Filing and Project Description

China Lake Joint Venture, a private applicant, filed an Application for a Small Power Plant Exemption (SPPE) on April 11, 1988 for its 80 MW Navy 2 Geothermal Project, which would sell electricity to Southern California Edison. The geothermal field was called the Coso Known Geothermal Resources Area, giving the project its other name: Coso (also known as Coso Navy 2). To date, this has been the Commissionís only geothermal SPPE.

Coso plants used a different geothermal technology from the geysers facilities in Lake and Sonoma Counties. Geothermal water, in addition to steam, powered the turbines. The use of fluids, Navy 2ís "dual flash design", was a new development.

This filing, in accordance with a February 17, 1988 stipulation between the CEC and the California Energy Company, Inc., eliminated a legal dispute as to whether the proposed plant, located at the U.S. Navyís China Lake Weapons Center in Inyo County, came under Energy Commission jurisdiction. Applicant had previously argued that the project was on federal Department of Defense land, and therefore exempt from state regulation. The stipulation also provided that the Navy 2 SPPE could include review of environmental impacts from already constructed geothermal plants in the same Coso area, i.e. Navy 1 and the Bureau of Land Management (BLM) projects, plus their associated transmission lines.

The SPPE Process

SPPE eligibility is limited to plants with a capacity of 50 MW up to 100 MW. SPPEs are governed by Public Resources Code section 25541. The CEC must make two separate findings in order to grant an SPPE - that "No substantial adverse impact on the environment or energy resources will result from the construction or operation of the proposed facility" (Public Resources Code section 25541(a)), and that "Generating capacity will not be added which is substantially in excess of the forecast of electrical energy demands adopted pursuant to subdivision (e) of section 25305." (Public Resources code section 25541(b)). This second "need" provision was repealed as part of electric industry de-regulation in 1999.

If an exemption is granted, no AFC need be filed, and the applicant can obtain local permits to build the powerplant. An SPPE had traditionally been an exemption from the Energy Commissionís site certification process.

CEC staffís environmental analysis for an SPPE is presented in an Initial Study, which the CEC conducts as the CEQA lead agency for the project under Public Resources Code section 25519(c). Traditionally, a facility which qualifies for issuance of a negative declaration is considered to also satisfy the environmental finding for granting an SPPE.

The Navy 2 Initial Study and Environmental Issues; Conditions of Exemption

On October 31, 1988, CEC staff issued its Initial Study and Proposed Negative Declaration, finding no significant impact on the environment or energy resources from the Navy 2 facility, provided certain mitigation measures were implemented. The applicant agreed to all of staffís mitigation measures, as identified in the Initial Study as "Proposed Conditions of Exemption".

These Conditions of Exemption, indistinguishable from an AFCís Conditions of Certification, would be incorporated into the Commission Decision as Appendix F, a Navy 2 Compliance Plan. The Navy 2 Decision, with its AFC-like Compliance Plan and Conditions of Exemption, began to blur the distinctions between AFCs and SPPEs, a process that continues to this day. However, the decision attempted to comply with a CEQA amendment (Chapter 1232, Statutes of 1988), which added Public Resources Code section 21081.6, requiring a "reporting or monitoring program" for project changes or conditions which the lead agency had adopted to avoid significant impacts.

With the Conditions of Exemption agreed to by CEC staff and applicant, Navy 2 thus conformed to the requirements of section 25541(a) of the Warren-Alquist Act. 

Transmission line upgrades

The CEC staff review focused upon transmission line upgrades necessitated by Navy 2 (plus the other Coso projects) and their repercussions in biology and cultural resources. These upgrades involved Southern California Edisonís system and were under PUC jurisdiction. PUC staff, SCE, and CEC staff all cooperated to ensure appropriate mitigation for cumulative impacts was achieved.


In order to mitigate impacts to sensitive habitat caused by the transmission plans, applicant agreed to provide up to $610,000 for purchase of replacement habitat. A Biological Resources Evaluation Plan (Appendix C to the CEC Decision), incorporating this commitment as a Condition of Exemption (Appendix F, page F-13 of the CEC Decision), convinced the California Department of Fish and Game to issue a formal Biological Opinion on December 5, 1988 finding no significant project impacts to state-listed species such as the Mojave ground squirrel.

Cultural and Paleontological Resources

  Similar Cultural Resources and Paleontological Resources Evaluation Plans (Appendices D and E to the CEC Decision), also incorporated as Conditions of Exemption in Appendix F, pages F-14-16, were intended to mitigate the transmission line impacts in these disciplines.

Air Quality

In the area of air quality, CEC staff evaluated the particulate emissions from the cooling towers and the hydrogen sulfide emissions (H2S) associated with the use of the geothermal fluids for the project. Particulate emission increases are offset by the paving of one mile of a dirt road into the geothermal facility. Emission controls for H2S emissions and compliance with the Great Basin Unified Air Pollution Control District's geothermal emissions standards rule (Rule 424) will not cause a violation of the state H2S standard. Therefore, all potential air quality impacts are appropriately mitigated.

With all the Conditions of Exemption agreed to by CEC staff and applicant, Navy 2 thus conformed to the requirements of section 25541(a) of the Warren-Alquist Act.

Demand Conformance

Need for the Navy 2 project was evaluated under ER 6 (the 1986 Electricity Report), which expressly required an SPPE to pass the same demand conformance test as an AFC.

Physical Need

Passage of the Physical Need Test could be achieved through dispatchability, or other evidence that core resources would not be displaced. Navy 2 was not dispatchable by SCE. Applicant and CEC staff both agreed that the project displaced Edisonís core resources and failed the Physical Need Test. (Pages 15-16 of the CEC Decision.)

Economic Need

The ER 6 Economic Need Test required a proposed project not to increase total utility system costs, compared to the system without the facility. Using ER 6 assumptions, Navy 2 would cost Edisonís ratepayers approximately $180-190 million more than running the system without it. Applicant and CEC staff agreed that Navy 2 also failed the Economic Need Test. (Pages 16-17 of the CEC Decision.)

The Balancing Test

ER 6 allowed a project which failed the Physical and Economic Tests to still be found needed if the applicant could make a "showing of overriding circumstances" by clear and convincing evidence establishing that it is clearly in the public interest to permit facility. This was another discretionary balancing test.

Applicant presented the commander of the China Lake Naval Weapons Center who testified that that the Navy 2 project was critical to accomplishing the mission of the base, thus enhancing national security. CEC staff also found the project to pass the ER 6 balancing test through a combination of air quality improvements, "greenhouse effect" benefits, reduced oil dependence, and advances in geothermal and air pollution control technology. The Committee concurred, re-stating the CECís traditional preference for geothermal energy in Cosoís new liquid-dominated field. Based upon all these factors, Navy 2 passed the ER 6 balancing test, complying with Public Resources Code section 25541(b) of the Warren-Alquist Act. (Pages 17-20 of the CEC Decision.)


Approval of the SPPE was slightly delayed until the applicant satisfied a general requirement of ER 6 for a fully executed Interconnection Facilities Agreement (IFA) insuring transmission from Southern California Edison. Staff, the Committee and Commission ended up accepting an IFA that, while technically pending, was still a firm transmission commitment. (Pages 20-21 of the CEC Decision.)

The SPPE proceeding had now extended beyond applicantís October 1988 deadline for regulatory approval under its contract with SCE. The delay, primarily caused by extensive analysis of downstream transmission line impacts, was also a problem for the CEC. The Energy Commission had formally stipulated to make its best efforts to conclude the case by October 1988. The Commission therefore included clauses in its decision at pages 22-24 that the applicant could rely upon if it invoked the force majeure provision of the power purchase agreement.

The Energy Commission unanimously granted the Navy 2 Geothermal Project a Small Power Plant Exemption on December 14, 1988. Navy 2 was constructed and began operating in 1989.