Certification granted December 6, 2000

Project Manager: Marc Pryor

Staff Counsel: Kerry Willis

Hearing Officer: Major Williams Jr.

Presiding Member: Commissioner Michal Moore

AFC Filing, Data Adequacy, and Project Description.

The Elk Hills Power Project AFC was filed by applicant Elk Hills Power on February 24, 1999. Elk Hills Power was a subsidiary of Sempra Energy Resources (SDG&E's parent company) and Occidental Energy Ventures. The AFC was not found data adequate by the Energy Commission until June 9, 1999. Elk Hills is a nominal 500 MW, natural gas-fired, combined cycle project, located in the western Kern County oilfields, 25 miles from Bakersfield, and nine miles from both the community of Buttonwillow and the City of Taft. This is the same general area in which the La Paloma, Sunrise, and Midway Sunset AFCs, fellow merchant plants, were all concurrently seeking licensing. It's oil country, perhaps the friendliest area of the state to new powerplants.

Elk Hills (and also Sunrise, Docket No. 98-AFC-4) would have a different experience, primarily thanks to California Unions for Reliable Energy (CURE). In my opinion, CURE is the most effective intervenor active at the Energy Commission. Elk Hills was a non-union project, and thus a target for CURE's intervention. CURE's innovative approach, through the Adams Broadwell Joseph & Cardozo law firm, is to vigorously raise environmental issues, adjudicating potential impacts, and generally delaying a non-union AFC by utilizing every method available under the statutes and the CEC regulations. CURE does not oppose projects. It seeks an agreement with the applicant in which the environmental impacts are mitigated and the project signs a union contract. At that point, CURE becomes a supporter of certifying the AFC.

CURE's first merchant plant victory had been Sutter, Docket No. 97-AFC-2, in which Calpine became a union firm and permanent CURE ally. Now the next contest would be CURE vs. Elk Hills.

Issues.

Water Supply.

Elk Hills proposed to receive its water from the West Kern Water District, the same supplier as for the neighboring AFCs. The Elk Hills water would come via a new 9.8 mile pipeline from the district's groundwater well field in the Tupman area, which also supplied existing residential and industrial customers. This proposed use of water for powerplant cooling would normally have been an uncontested issue.

CURE asserted that an obscure State Water Resources Control Board (SWRCB) resolution from 1975 (SWRCBR 75-58) prevented Commission approval of Elk Hills' proposed water supply and required serious consideration of alternatives, such as dry cooling (which had been adopted in Sutter).

This issue greatly perplexed and delayed the entire Elk Hills proceeding. CEC staff sought clarification from the State Water Resources Control Board, which had difficulty explaining how to apply its policy. The policy's general principle was clear that inland waters should not be used for powerplant cooling if other alternatives, such as wastewater, were available and feasible. But when it came to implementing the policy in the specific context of Elk Hills, a typical Water Board staff response was an e-mail stating "I was not able to come up with anything." (Page 234 of the CEC Decision.) Having a Water Board attorney testify provided no help either. Or, as the CEC itself stated: "The SWRCB did not offer further guidance on SWRCBR 75-58 and its application to siting cases." (Page 235 of the CEC Decision.)

On this adjudication, CURE was opposed by the applicant, CEC staff, and the Western Kern Water District. The State Water Board resolution issue was extensively argued and briefed, as parties poured over the relevant Water Code sections, making a variety of technical and jurisdictional claims, including questions of whether the resolution applied at all and, if so, which agency was responsible for implementing it. Defining the terms involved was another serious problem. Alternative water supply sources and alternative technologies were investigated in detail, as the Committee wrestled with a solution over a lengthy period of time and tried to reach a final conclusion. Special hearings were held to gather additional testimony as the issue lingered.

Finally, the Committee ruled it was not persuaded that SWRCBR 75-78 "has any application to this case, other than as non-binding policy guidance." (Page 251 of the CEC Decision.) CURE had lost on the merits, but successfully delayed the case and now had possible grounds for a lawsuit (even though litigation is not a typical CURE approach).

Air Quality.

Elk Hills proposed to use a state-of-the-art selective catalytic reduction (SCR) system to reduce nitrogen oxide (NOx) emissions to 2.5 parts per million. As with water supply, air would normally have been uncontested. CURE had other ideas.

CURE argued that proper application of air quality rules required use of the untested SCONOx system rather than the proven SCR. This adjudication found CURE opposed by the applicant, CEC staff, and the San Joaquin Valley air district. The issue was far less complicated than water, as the Committee and Commission ruled in favor of applicant's proposed use of SCR.

Hazardous Materials.

Elk Hills originally proposed to use anhydrous ammonia as part of its SCR system. Ammonia is the only dangerous feature of SCR, and CEC staff has always favored selection of the much less hazardous aqueous ammonia over its anhydrous counterpart. Very few applicants even propose anhydrous ammonia. On this issue, CURE and CEC staff both argued for Elk Hills to reconsider its choice.

The CURE-Elk Hills Settlement.

By the fall of 2000, the Elk Hills applicant had clearly decided that it was too costly to continue fighting CURE. The case was now several months behind schedule, with no end in sight if CURE were to pursue the water supply issue all the way to court. There were rumors the applicant was disgusted enough to withdraw the project entirely. Perhaps that was just a negotiating ploy. No Elk Hills Power Project meant zero jobs, union or otherwise.

In October 2000, CURE and Elk Hills released a Joint Statement or Joint Agreement, which resolved all outstanding issues in the case. CURE withdrew its request for SCONOx technology in air quality, and, most importantly, abandoned its argument that State Water Resources Control Board Resolution 75-78 must be applied. Elk Hills converted its SCR system to the safer use of aqueous ammonia. Elk Hills also made a serious of concessions to CURE in other areas such as Worker Safety. And, of course, Elk Hills would now be a union project. All sides declared victory.

Adoption.

The Committee was now finally able to move the case rapidly to a conclusion, expressly relying upon the Joint Statement as another basis to rule in the applicant's favor on previously contested issues such as water and air.

The Energy Commission unanimously certified the Elk Hills Power Project on December 6, 2000. (That date was six months past the statutory one-year deadline, a clear indication of how successful CURE's tactics had been.)

Elk Hills began construction in two phases, starting with a smaller simple cycle to be operational by March 2002, with the entire facility on-line a year later. The complete 500 MW powerplant became operational on July 24, 2003.