Application Withdrawn; June 14, 1989 Order Terminating Proceeding (Re-filed by new applicant and Certified as Docket No. 92-AFC-1)

Project Manager: Darrell Woo

Staff Counsel: Arlene Ichien

Hearing Officer: Steve Cohn and Gary Fay

Presiding Member: Commissioner Doug Noteware

Associate Member: Commissioner Richard Bilas

AFC Filing and Data Adequacy

Pacific Thermonetics, Inc. (PTI) filed its AFC on July 16, 1984, for a 246 MW cogeneration facility at the C&H Sugar Refinery in Crockett, an unincorporated community in Contra Costa County. The Energy Commission identified a list of data deficiencies, which were corrected by a long series of supplemental filings. Data adequacy was finally achieved, effective February 15, 1985.

Project Description

The Crockett Cogeneration Project was intended to supply steam for operations of the C&H Sugar Refinery, while generating electricity for sale to PG&E under a Standard Offer 4 contract, which obligates PG&E to buy the power over a 30-year term at fixed prices. At 246 MW, Crockett was a very large natural gas-fired baseload facility, designed for maximum electricity production.

The thermal host, C&H Sugar, was not the applicant. The Crockett applicant was Pacific Thermonetics, Inc. (PTI), a private energy development company that would own and operate the powerplant under an agreement with C&H Sugar.

The C&H Sugar Refinery sits on the Carquinez Strait, beneath the Carquinez Bridge (Interstate 80), an integral part of the little town of Crockett. Crockett grew up around the refinery, although it no longer houses the C&H workforce. Residential areas are thus close to the cogeneration site, and on the nearby hillside with a scenic view overlooking the Carquinez Strait.

The original cogeneration plant site was directly across the street from several houses, and had both grading and land use problems. Applicant relocated the project 100 feet north, to the opposite side of the C&H sugar refinery, near the Carquinez Strait waterfront.

Overview

Crockett was arguably one of the most bitterly contentious proceedings in the CEC’s history, opposed by both its neighbors and the CEC staff. The proceeding was protracted, extending over nearly a five-year period. PTI generally resisted or delayed making changes that would address the concerns raised by the public and staff, instead arguing unsuccessfully that the concerns were without merit. When PTI faced potential rejection of its AFC, the applicant then adopted improvements it had earlier rejected. This caused a cycle of suspensions and delays. In the end, PTI was defeated by its own intransigence, and had to withdraw the AFC.

The Crockett Cogeneration Project was later resubmitted by a new and more cooperative applicant, who had the benefit of the lessons learned during the first proceeding. Crockett was ultimately certified in this second proceeding, Docket No. 92-AFC-1 (Crockett II). The unique demonstration here is that an unresponsive applicant such as PTI can be a greater impediment to licensing than the powerplant project itself.

Issues - Need

Demand Conformance was the dominant issue in Crockett, encompassing other concerns within the framework of ER 5’s need tests. ER 5 recognized that the PG&E service area had a surplus of energy resources and no need for additional baseload plants. Thus, Crockett faced major difficulties passing any ER 5 test, and the plant’s economic, environmental and engineering problems would all become factors in the ultimate demand conformance judgment.

The June 1986 Presiding Member’s Report (PMR)

The ER V Unspecified Reserved Need Test

Condition 4(a). To pass Condition 4(a) there had to be sufficient remaining total need for energy in the PG&E service area to accommodate the Crockett facility. Since ER 5 identified an energy surplus for PG&E, the condition could not be satisfied, even though PTI offered various creative interpretations which were rejected. In its June 23, 1986 Presiding Member’s Report (PMR), the Committee determined that Crockett failed Condition 4(a), and thus failed the Unspecified Reserved Need Test as a whole. (Pages 26-32 of the PMR.)

The ER V System Displacement Need Test

ER V’s need tests became progressively harder to pass as an applicant moved from one to another. Having failed the Unspecified Reserved Need Test, PTI confronted ER V’s most stringent challenge, the System Displacement Need Test.

There was agreement that PTI passed Condition 1 of this need test (power sold at or below PG&E’s avoided cost) with its standard Offer 4 contract, as approved by the PUC. (Pages 34-37 of the PMR.)

Condition 2 (matching the load conditions of the PG&E service area) was bitterly contested. CEC staff’s testimony, consistent with its position in Gilroy Foods (Docket No. 84-AFC-4), was that, as a baseload facility, Crockett failed this test. PTI countered with theories based upon computer modeling and economic calculations, under which it claimed to pass Condition 2. (Pages 37-47 of the PMR.)

The Committee agreed with staff that PTI failed to match PG&E’s load, noting that a dispatchable facility could meet Condition 2. At the time of evidentiary hearings, Crockett was purely baseload. However, just prior to issuance of the PMR, the applicant proposed a contract modification to become dispatchable. (Pages 52-61 of the PMR.)

Condition 3 (oil and gas displacement) was also adjudicated. CEC staff testimony, using various methods including ELFIN computer modeling, found that Crockett would not displace utility oil and gas for a significant portion of the time it operated, with a low of only 55% displacement in 1990. PTI calculated much higher levels of displacement than did staff, a range of 84% to 100% of the time. There were significant disputes between staff and applicant regarding various methodologies utilized under Condition 3. (Pages 62-71 of the PMR.)

The Committee, primarily relying upon staff’s ELFIN analysis, found that Crockett would displace non-oil and non-gas resources in the PG&E area, failing Condition 3. (Pages 72-78 of the PMR.)

Conditions 4 and 5 were subjective balancing tests. Condition 4 required an applicant to provide an overall benefit, while Condition 5 presented the single most difficult criteria: "The facility provides significant economic and environmental benefits compared to operating the system without the proposed facility."

Crockett would provide the first real application of these two tests, bringing in all aspects of the project, including numerous adverse environmental impacts raised by intervenors due to the project’s close proximity to residences and interference with their view of the Carquinez Strait.

In the PMR, the Committee was unable to find significant economic benefits from Crockett. (Pages 78-95 of the PMR.) The PMR also concluded that the project’s adverse environmental impacts outweighed its potential economic and environmental benefits. Crockett thus failed Conditions 4 and 5 of the System Displacement Test. (Pages 96-103 of the PMR.)

The PMR formally declared Crockett to have failed every need test in ER V. (Pages 104-108 of the PMR.) However, the Committee was willing to reevaluate its findings "if the PTI facility were dispatchable." (Page 109 of the PMR.)

The environmental and engineering sections of the PMR highlighted Crockett’s most serious potential impacts. These included high noise levels, a significant adverse visual impact from the project’s exhaust stack, adverse effects upon the Crockett community (including possible loss of property values), a land use conflict involving the need for greater public access to the shoreline, and uncertainty regarding the project’s ability to withstand earthquakes.

Dispatchability and Reopening the Record

The June 17, 1986 PMR Notice of Availability commented that, two months after the close of evidentiary hearings, applicant had sent a letter expressing a willingness to become dispatchable as a condition of AFC approval. Until then, PTI had always insisted upon a need determination based upon its Standard Offer 4 baseload contract. The Committee, Commissioner Doug Noteware, Presiding, now had to decide whether, and under what conditions, the record should be reopened to allow PTI to present its new proposal.

The January 1989 Revised Presiding Member’s Report

The Crockett record was reopened in November 1986. Applicant submitted a series of revised proposals, leading to a massive new analysis, and finally 23 additional days of contested hearings. CEC staff and the intervenors continued to oppose certification of PTI’s Crockett facility. The staff position was that Crockett still failed Conditions 4 and 5 of the System Displacement Test. All of this occupied 1987 and 1988.

PTI signed a Dispatch Agreement with PG&E making Crockett dispatchable at PG&E’s discretion. PTI and PG&E also agreed to delay the plant until 1994 at the earliest, which eliminated those early years in which demand was lowest. As a dispatchable, rather than a baseload, facility, CEC staff and PTI stipulated that Crockett now passed Conditions 2 and 3 of the System Displacement Test. (Pages 13-21 of the Revised PMR.)

PTI made less progress on the environmental front. While the AFC was under review, the Bay Area Air Quality Management District adopted new BACT criteria mandating the addition of Selective Catalytic Reduction (SCR) to the project. Applicant initially chose anhydrous ammonia for its SCR system, an acutely hazardous material, which would be stored and handled at the site. PTI placed its 58,800 gallon ammonia storage tank close to a major railroad line. This created a significant new hazard. CEC staff testified that a railroad accident could lead to a catastrophic ammonia release, an unacceptable risk to public health and worker safety. PTI witnesses disputed staff and defended the tank. (Pages 53-69 of the Revised PMR.)

Not until the record was again closed did PTI’s opening brief suggest additional ammonia safety measures, such as relocating the tank further from the tracks. Unsupported by testimony, this came too late for Committee consideration. (Pages 76-77 of the Revised PMR.)

PTI was also unable to negotiate an agreement with Contra Costa County under which some economic benefits from the project would come directly to the Crockett community. PTI offered $250,000 a year, but negotiations broke down amid public controversy. (Page 5 of the Revised PMR.)

Two and a half years after issuing its original PMR, the Crockett Committee, Commissioner Noteware, Presiding, and Commissioner Bilas, came forward with a Revised Presiding Member’s Report on January 9, 1989.

The Revised PMR concluded that, while PTI had greatly improved several aspects of the project, Crockett still failed Conditions 4 and 5 of the System Displacement Test, due to a continuing lack of economic and environmental benefits. The Committee primarily based these findings upon the new ammonia tank spill hazard and the continuing absence of economic benefits for the people of Crockett, who were still vehemently opposed to PTI. (Pages 47-50 of the Revised PMR.) The revised PMR’s environmental analysis also declared the small but credible risk of a catastrophic ammonia spill to be unacceptable. (Page 76 of the Revised PMR.) However, the Revised PMR did not find the project's visual impacts sufficient to warrant denial, a major rejection of the intervenors' position. (Pages 90-95 of the Revised PMR.)

Since the project continued to fail the demand conformance test, the Committee therefore recommended that Crockett again be denied certification. (Pages 4-5 of the Revised PMR.)

Reopening the Record Again?

On January 12, 1989, three days after the Revised PMR was issued, PTI made a new motion to reopen the record. PTI wished to present evidence regarding (a) its offer to provide the Crockett community with annual payments of $250,000 and (b) its proposal to relocate the ammonia storage tank away from the rail line.

The intervenors and CEC staff opposed reopening the record. Staff had numerous concerns, including the validity of continuing to use ER 5, which was long out of date. Staff also doubted whether PTI’s new proposals would make any real difference. Intervenors argued that PTI had been given enough chances, and that it was unfair to the public for this case to drag on endlessly.

The Committee now split on whether to reopen the record. Commissioner Noteware, as the Presiding Member, spoke for the Committee. His February 16, 1989 order denying PTI’s motion declared at pages 8-9:

"The prospect of renewed and continuing litigation in this proceeding must be viewed in light of the fact that this case is already by far the longest AFC proceeding in the Commission’s history. ... The Committee has already reopened the record once to receive new evidence and now that an unprecedented second reopening stretches before us, I still cannot see the light at the end of the tunnel. I also note that PTI knew of the ammonia safety issue and the need to show significant economic benefits long before the evidentiary record closed in August 1988. While the evidence PTI offered on these issues was deemed insufficient in the Revised PMR, these are not new issues and PTI could have made its present offers while the evidentiary record was still open."

Commissioner Noteware therefore chose to exercise his discretion not to reopen the evidentiary record.

Commissioner Bilas, second member on the Committee, filed a February 16, 1989 dissenting opinion. He would grant PTI’s motion and reopen the record so that the applicant could correct the two primary deficiencies identified in the Revised PMR.

PTI appealed Commissioner Noteware’s ruling to the full Commission, which heard the matter at a highly dramatic hearing on March 29, 1989. Following oral argument, the Commission voted. With Commissioner Crowley backing the Presiding Member, and Chairman Imbrecht supporting the dissent. This meant that Commissioner Bob Mussetter, a true maverick, would cast the deciding vote. Commissioner Mussetter believed PTI had been given enough chances to pass the need tests and finish its AFC. After nearly five years of Crockett, he would not extend the matter any further, providing Commissioner Noteware with a 3-2 majority in favor of his order denying PTI’s motion to reopen the record.

Aftermath

PTI’s motion for reconsideration of the prior vote failed on May 24, 1989. PTI was never able to reopen the record, precluding certification of the Crockett Cogeneration Project. PTI’s AFC, Docket No. 84-AFC-3, was dead, based upon the Revised Presiding Member’s Report. The case did not move forward to a Proposed Decision. On May 30, 1989, PTI requested the immediate withdrawal of its Crockett AFC. The proceeding was terminated by the Committee in an order dated June 14, 1989.

PTI ultimately sold its interest (and the lucrative PG&E contract) to a different applicant, who started from scratch with a brand new Crockett Cogeneration Project filing, Docket No. 92-AFC-1 (Crockett II). Without PTI, this version of Crockett was ultimately certified unanimously by the Energy Commission on May 3, 1993. The Crockett Cogeneration Project was constructed and began operation in 1996.

All three Commissioners voting against PTI would later be denied re-appointment by Republican Governors George Deukmejian and Pete Wilson, while the two Commissioners voting for PTI were re-appointed.