Docket No. 93-SPPE-1

Small Power Plant Exemption Granted March 16, 1994

Staff Counsel: Dave Abelson

Hearing Officer: Susan Gefter

Presiding Member: Chairman Charles Imbrecht

SPPE Filing and Project Description

Shell Oil Company filed an Application for a Small Power Plant Exemption (SPPE) on August 31, 1993 for a 98.5 MW natural gas-fired cogeneration plant at Shell’s refinery in Martinez, Contra Costa County (the Martinez Manufacturing Complex). The facility would be a self-generator, providing both steam and electricity for Shell’s refinery operations. PG&E would provide back-up power to the refinery, and a limited amount of Shell electricity could be sold to PG&E.

The cogeneration plant was part of Shell’s much larger Clean Fuels Project, a major refinery modernization and expansion that would allow Shell to produce the special reformulated gasoline soon to be required by California’s new clean air regulations, administered by the Air Resources Board.

Contra Costa County was the CEQA lead agency for the Clean Fuels Project. In addition to Contra Costa County’s EIR, the CEC would now add its own environmental review of the cogeneration plant.

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.

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 (including a mitigated negative declaration) is considered to also satisfy the environmental finding for granting an SPPE.

The Shell Initial Study and Environmental Issues

On October 26, 1993, CEC staff issued its Initial Study and Proposed Mitigated Negative Declaration. Staff incorporated by reference portions of the Contra Costa County EIR for the Clean Fuels Project that pertained to the cogeneration plant. (Page 3 of the CEC Decision.)

The Initial Study found no significant impact on the environment or energy resources from the Shell facility, provided that specific mitigation measures and Conditions of Exemption were implemented. The vast majority of mitigation measures were already identified in the Contra Costa County EIR and accepted as sufficient by CEC staff. In the areas of air quality, hazardous materials management, energy resources, and transmission system capacity, CEC staff proposed additional mitigation measures which Shell agreed to.

Air quality was uncontested after the applicant accepted staff Conditions of Exemption to reduce construction-related NOx emissions through urea injection in refinery boilers, add source testing to determine (and mitigate, if necessary) PM10 emissions, restrict fuel use to those fuels identified in the SPPE, and establish a daily worst case emissions cap. (Pages 12-18 of the CEC Decision, and Appendix D, Air Quality Conditions of Exemption.)

Under hazardous materials management, CEC staff added a Condition of Exemption to prohibit Shell from using any hazardous materials beyond those listed in the SPPE application without Commission approval. Staff also required Shell to utilize a detailed safety checklist for ammonia deliveries to reduce the likelihood of accidents caused by human error. (Pages 18-21 of the CEC Decision, and Appendix D, Hazardous Materials Handling Conditions of Exemption.)

There were no issues involving Shell’s impacts upon energy resources. Under this topic, CEC staff proposed and Shell accepted a Condition of Exemption requiring the project to meet federal Public Utility Regulatory Policies Act (PURPA) standards for a cogeneration facility. The condition would ensure that proper efficiency levels were maintained and would also allow Shell to sell surplus electricity to PG&E in accordance with PURPA. A second Condition of Exemption specified reporting requirements for Shell as a self-generator under the 1992 Electricity Report. (Pages 22-23 of the CEC Decision, and Appendix D, Energy Resources Conditions of Exemption.)

Under transmission system capacity, CEC staff required Shell to reach an interconnection agreement with PG&E. Such an agreement would confirm the adequacy of arrangements between PG&E and shell to accommodate changes to the existing system caused by the new facility. (Pages 24-25 of the CEC Decision, and Appendix D, Transmission System Capacity Condition of Exemption.)

The Shell Cogeneration Project thus conformed to the requirements of section 25541(a) of the Warren-Alquist Act.

Demand Conformance

Need was uncontested. CEC staff’s five paragraph analysis (page 88 of the Initial Study) found that Shell complied with the ER 92 self-generation test by selling no more than 10 percent of its power to PG&E and by having unsuccessfully attempted to negotiate with PG&E for a discount electricity rate that would undercut the economic benefit to Shell from the cogeneration plant. The Commission concurred at pages 26-27 of the Decision. Shell had satisfied Public Resources code section 25541(b) of the Warren-Alquist Act.

Adoption

The Energy Commission unanimously granted the Shell Cogeneration Plant a Small Power Plant Exemption on March 16, 1994, and the project was constructed under local permits. It began operations in 1995.