Shell Western E&P Inc.’s Belridge Cogeneration Project (SWEPI, SWEPI Belridge)

Docket No. 86-SPPE-2 (60 MW Facility Already Constructed)

Small Power Plant Exemption Granted October 5, 1988

Project Manager: Bob Eller

Staff Counsel: Caryn Hough

Hearing Officer: Gary Fay

Project Summary

SPPE Filing and Project Description

Shell California Production Inc. (SCPI), later merged into Shell Western E&P Inc. (SWEPI), filed an Application for a Small Power Plant Exemption (SPPE) on December 22, 1986 for its already constructed 60 MW natural gas-fired cogeneration plant. The same oil field had previously been the site for Shell's withdrawn Belridge Field Cogeneration Project, Docket No. 82-AFC-3, an 800 MW project.

This SPPE filing eliminated potential litigation on the issue of CEC jurisdiction over SWEPI. (Despite submitting the SPPE, it remained Shell’s legal position that the CEC had no jurisdiction over the project.) The plant consisted of three 20 MW turbines (60 MW), exceeding the Energy Commission's 50 MW jurisdictional threshold when the third turbine was constructed.

The cogeneration plant produced steam for Thermally Enhanced Oil Recovery (TEOR), a process where the thick, underground oil was heated so that it could be pumped to the surface. Surplus power from the initial 40 MW facility was sold to PG&E. Electricity from the last 20 MW unit was used to pump water to the Belridge oil field in Kern County, near Bakersfield. This field had been the proposed site for Shell’s 800 MW Belridge Cogeneration Project, Docket no. 82-AFC-3, withdrawn in 1983.

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)).

If an exemption is granted, no AFC need be filed, and the applicant can obtain local permits to build the powerplant. An SPPE is thus an exemption from the Energy Commission’s site certification process. Since Shell’s project had already been constructed under local permits, this SPPE would legally validate the status quo.

CEC staff’s 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 Initial Study and Environmental Issues

On June 15, 1988, CEC staff issued its Initial Study and Proposed Negative Declaration, finding no significant impact on the environment or energy resources from the Shell facility, provided certain mitigation measures, especially in biology, were implemented. The applicant agreed to staff’s proposed mitigation measures, including a contribution of $32,000 for the purchase, enhancement, and preservation of off-site habitat for affected sensitive species: primarily the San Joaquin kit fox and San Joaquin antelope squirrel. (Page 16 of the CEC Decision.)

The NOx emissions from the combustion turbines were limited by the use of water injection in the turbine combustor cans. To offset the project’s emission increases, a comparison was done of the overall Shell west side oil fields’ emissions from steam generators and heaters before the cogeneration project operated and then after the project went on line. That comparison showed that overall oil field emissions decreased after the cogeneration project went into operation, therefore the project’s air emissions were mitigated. (Pages 42-46 of the Initial Study.)

No public comments were filed on the Initial Study. SWEPI thus conformed to the requirements of section 25541(a) of the Warren-Alquist Act.

Demand Conformance

Need for the SWEPI project was evaluated under ER 6, subject to disputes regarding how this analysis should be carried out for an existing cogeneration plant.

Physical Need

Passage of the Physical Need Test could be achieved through dispatchability, or other evidence that core resources would not be displaced. Shell argued that it passed because the first 40 MW were already part of PG&E’s core resources, while the last 20 MW were self-generation that had no physical impact upon PG&E.

CEC staff analyzed the first 40 MW as a new project. Since this electricity was not dispatchable, staff found some small displacement of PG&E’s core resources. Believing that ER 6 prohibited any core displacement, staff concluded that SWEPI failed the Physical Need Test.

The Committee agreed with applicant that the original 40 MW were already part of PG&E’s core as expressly identified in ER 6. CEC staff continued to dispute this point, filing a Petition for Reconsideration. Staff offered an alternative theory under which SWEPI also satisfied the Physical Need Test, but the Committee declared the matter to be moot. SWEPI had passed the Physical Need Test. (Pages 27-33 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. Applicant again argued that the test only applied to the last 20 MW. Since none of that electricity was sold to PG&E, the project therefore passed the Economic Need Test.

CEC staff analyzed SWEPI as a new 60 MW project, concluding that it saved the PG&E system $3 million, also passing the Economic Need Test.

The Committee and Commission ignored the methodological differences, adopting merely the applicant/staff conclusion that SWEPI complied with the test. (Pages 33-34 of the CEC Decision.)

Self Generation

An attempt was also made to evaluate SWEPI under the ER 6 test for self-generators. However, it was too late for the SWEPI-PG&E negotiations specified by the test, negotiations intended to occur prior to construction, possibly leading to discounted rates as a project alternative.

The Committee found it unrealistic to strictly apply this test to the entire project, although the third 20 MW unit passed. However, some ER 6 self-generation requirements, such as notice to the utility of intent to withdraw load, were imposed upon the whole plant. (Pages 34-38 of the CEC Decision.) In any event, SWEPI complied with Public Resources code section 25541(b).


In a 40 page Decision, The Energy Commission unanimously granted the SWEPI Cogeneration Project a Small Power Plant Exemption on October 5, 1988. The Decision stated at page 40, that due to the unique situation of this case, it was not to be used as a precedent for any subsequent proceeding.