Certified on December 6, 2000

Project Managers: Kristina Bergquist, Marc Pryor

Compliance Project Manager: Nancy Tronaas

Staff Counsel: Caryn Holmes

Hearing Officer: Gary Fay

Presiding Member: Commissioner Michal Moore

Filing, Data Adequacy, Project Description and Transformation.

Sunrise is the story of a project that transformed itself (more than once). There are really two or three Sunrises. The original AFC (Sunrise Cogeneration and Power Project) was filed on December 21, 1998 as a 320 megawatt cogeneration facility, a merchant plant that would also produce steam for oilfield use in the thermally enhanced oil recovery (TEOR) process. The original applicant, Sunrise Power Company, was owned by Texaco, whole Midway Sunset oilfield needed the steam to recover thick oil. The Sunrise AFC was found data adequate by the Energy Commission on February 17, 1999.

This AFC proved impossible to license over the next year and a half, primarily due to air quality problems caused by Texaco's ownership of the project, combined with the existence of Notices of Violation against other Texaco affiliates for failure to comply with air quality laws. The Environmental Protection Agency (EPA) would not allow a new Texaco facility to be licensed under these circumstances and voided the Determination of Compliance (DOC) issued by the San Joaquin Valley Unified Air Pollution Control District. There appeared to be non-compliance with Federal law on Texaco's part, precluding CEC licensing of the original AFC. There was also a major dispute over potential indirect impacts from the cogeneration project providing steam that would be used for up to 700 new oil wells. (See May 10, 2000 Presiding Member's Proposed Decision recommending that the Sunrise Cogeneration and Power Project not be licensed at this time.)

On September 12, 2000, applicant amendments caused a new Sunrise to be born, called the Sunrise Power Project. Cogeneration was gone, replaced by a 320 MW natural gas-fired simple cycle peaking project. Within a short time there was also a new applicant, as Edison Mission Energy (a Southern California Edison affiliate) purchased the Sunrise Power Company from Texaco. The new applicant did not have Notices of Violation with EPA and this Sunrise Project could be licensed very promptly.

For me, the ultimate irony is that, once certified at the end of 2000, the Sunrise Power Project immediately began construction, overtaking larger facilities that had been licensed at least fifteen months earlier. Sunrise, a deeply troubled project that had taken nearly two years to achieve certification, won the race to the finish line. By a margin of days, Sunrise became the first merchant plant AFC licensed by the Energy Commission to come on-line in time to help with the energy supply crisis of 2000-2001. Governor Gray Davis attended the Sunrise ceremony as the switch was thrown and power flowed. The Governor also attended similar ceremonies for the two runners-up, Calpine's Sutter and Los Medanos (Pittsburg) plants, Docket Nos. 97-AFC-2 and 98-AFC-1. (Sutter was licensed on April 14, 1999, Los Medanos on August 17, 1999, and Sunrise so much later on December 6, 2000.)

While the Sunrise project changed, its location always remained in Western Kern County, oil country, a heavily disturbed site near the little community of Derby Acres. This is extremely friendly territory for powerplants. Three other large facilities in the same general area, La Paloma, Elk Hills, and Midway Sunset, would also receive their CEC licenses within a seventeen-month period starting in October 1999.

Issues.

Since Texaco proposed Sunrise as a non-union project, California Unions for Reliable Energy (CURE) seriously intervened. CURE employed its normal strategy: raising environmental issues that would delay certification while seeking a union contract for the project. CURE's efforts to impede the progress of Sunrise and end up with a union workforce matched its success in Elk Hills, Docket No. 99-AFC-1. The original Sunrise turned out to be a highly vulnerable AFC. CEC staff and another intervenor, Transmission Agency of Northern California (TANC), would also find impediments to certification of the initial Sunrise cogeneration plant.

Many of the contested Sunrise issues would become irrelevant after (a) the project was amended to eliminate cogeneration and (b) Mission Energy replaced Texaco as the applicant.

Transmission System Engineering.

The only dispute in this area was raised by the Transmission Agency of Northern California (TANC). TANC, a joint powers agency composed of more than a dozen municipal utilities, asserted that Sunrise would potentially have adverse effects on the regional electric transmission system, to the detriment of TANC's members. It was a question of cumulative impacts, the effects of more than one project, which the Energy Commission is required to analyze as lead agency under the California Environmental Quality Act (CEQA). TANC believed Sunrise, combined with the other large merchant plant AFCs then under Commission review, would overload the system, creating congestion at the Midway Substation. This congestion, asserted TANC, would harm the ability of its members to import electricity from southern California to northern California. TANC urged the Energy Commission to conduct further studies on the problem prior to licensing Sunrise.

CEC staff, joined by the California Independent System Operator (ISO), the body in charge of system reliability under de-regulation, argued that the necessary studies had already been performed. These studies showed that adding Sunrise to the electricity grid would not have the adverse impacts claimed by TANC. The applicant also asserted that the issues raised by TANC were beyond the Energy Commission's siting jurisdiction and should be the ISO's responsibility.

The Committee and Commission suggested that the jurisdictional question did not have to be formally resolved, even though it was clear the CEC did have a CEQA responsibility to analyze cumulative impacts. TANC's arguments were rejected on their merits. The Commission thus upheld the CEC staff/ISO position that Sunrise, even when combined with La Paloma, Elk Hills and Midway Sunset, would not cause a significant cumulative transmission system impact. No additional studies were necessary prior to certifying Sunrise.

Air Quality.

Oxidizing soot filters.

CURE asserted that there was a health hazard caused by air emissions from the diesel engines to be used in applicant's heavy construction equipment. The focus was on particulate matter that could enter the lungs. CURE believed CEC staff had failed to require the applicant to install the most effective control device: oxidizing soot filters. The issue was first adjudicated with applicant and staff allied. However, the Committee's May 10, 2000 Presiding Member's Proposed Decision sided with CURE. The issue was later resolved when CEC staff changed its position to require the oxidizing soot filters (Condition of Certification AQ-C3). Staff, CURE, and the applicant were now all in agreement. (This was an example of how CURE initiates an effort to achieve greater environmental protection than is typically required by CEC staff, and ends up persuading the Energy Commission and CEC staff to agree with CURE.)

Texaco's Notices of Violation.

On November 4, 1999, the San Joaquin Valley Unified Air Pollution Control District issued its final Determination of Compliance (DOC) for Sunrise, concluding that the project complied with all applicable federal, state, and local rules. This was a significant green light for licensing the Sunrise Cogeneration Project.

However, at the January 13, 2000 evidentiary hearing, Matt Haber, Chief of the Permits Office for the U.S. Environmental Protection Agency (EPA), Region IX, declared the DOC to be void because Texaco, the Sunrise parent applicant, was in violation of the Clean Air Act at some of its facilities. EPA stated that, under controlling federal law and air district rules, Texaco could not receive a license for Sunrise until it first eliminated all Notices of Violation at existing Texaco facilities, including other Texaco subsidiaries having no connection with the Sunrise project. (It was CURE that first brought this matter to EPA's attention, leading to CURE's ultimate victory in the Sunrise case.)

The Committee concluded in its May 10, 2000 Presiding Member's Proposed Decision that EPA's position was determinative and Sunrise could not be licensed without a valid DOC. This required Texaco to eliminate its outstanding Notices of Violation, which Texaco was very close to accomplishing. However, the subsequent replacement of Texaco by SCE Mission Energy as the Sunrise applicant eliminated this obstacle to licensing. Neither SCE nor Mission Energy had any Notices of Violation. A new final DOC was issued on October 26, 2000, clearing the way for Commission certification. (Mission already operated under a union contract, so CURE had achieved its objectives, duplicating the comparable triumph in Elk Hills, Docket No. 99-AFC-1.)

Oilfield Indirect Impacts.

This was another CURE issue, related to the oilfield cogeneration aspect of the project, and raised for the first time in Sunrise. CURE asserted that the CEC's lead agency responsibility under the California Environmental Quality Act (CEQA) required analysis of air quality and other impacts from the hundreds of new oil wells Texaco would drill using steam from the cogeneration plant to recover thick crude oil.

The Committee agreed with CURE that this subject was an appropriate indirect impact or secondary effect that had to be analyzed. The Committee set the scope for analysis, agreed to by CEC staff and applicant, limiting it to 700 new steam wells within a 3/4 mile radius of the powerplant. (CURE disagreed, insisting that the impacts from all 2,000 wells that could receive steam from Sunrise must be addressed.) The possible adverse indirect impacts from these 700 new wells were then adjudicated at length.

The CURE witness asserted that the new wells would result in a series of adverse air quality impacts and violations of air quality laws and regulations. CURE's position was opposed by witnesses from CEC staff, the applicant, and the local air district. Their testimony attacked CURE's assumptions and scientific rationale, concluding that the new wells would result in no significant impacts and not violate air quality standards.

In its May 10, 2000 Presiding Member's Proposed Decision, the Committee concluded that, based upon the evidence, CURE had failed to make its case. At worst, the impacts CURE had alleged were speculative, and thus were not suitable for mitigation. Furthermore, it appeared to the Committee that the oilfield wells would not result in any significant adverse impacts or air quality violations. Lastly, Texaco's oilfield emissions were under continuous review by other agencies, including the local air district and EPA. Any actual future violations could be addressed by these agencies.

Applicant's September 12, 2000 amendments, eliminating the cogeneration aspect of Sunrise, made this entire subject irrelevant to the revised project. The oilfield indirect impacts debate was omitted from the Commission Decision licensing Sunrise.

The Electricity Crisis.

After the initial rolling blackout in the summer of 2000, Sunrise was one of the first applicants to recognize that emergency legislation and Executive Orders by the Governor in response to the crisis could be tailored to Sunrise's own needs. (Credit here apparently goes to applicant's counsel, Grattan & Galati of Sacramento.)

AB 970, the first major urgency statute in response to the electricity shortage, signed September 6, 2000, included a new Warren-Alquist Act provision, Public Resources Code section 25552. This section directed the Commission to expedite approval of simple cycle powerplants meeting certain conditions, including a reasonable demonstration of coming into service before August 1, 2001. When Sunrise filed its September 12, 2000 amendments (six days after AB 970 became effective), the powerplant miraculously qualified for special treatment under Public Resources Code section 25552, which it did not even need. The Energy Commission expedited the revised Sunrise AFC without reliance upon the new statute.

However, Sunrise had always intended to become a much larger, combined cycle powerplant, expanding in phases. Following certification, the applicant wished to significantly increase its capacity through project amendments as part of the Commission's compliance process. This would not have been allowed by the Warren-Alquist Act, under which a 50 MW powerplant increase triggers a new Application for Certification. Sunrise declined to file a new AFC.

Instead, Governor Davis issued Executive Order D-25-01 on February 8, 2001, which, under the State of Emergency due to the electricity shortage, expressly directed the Commission to suspend normal legal requirements in order to "expedite review and approval of post-certification amendments … including proposals to convert simple-cycle powerplants to combined cycle or cogeneration powerplants…." That meant Sunrise. (See post-certification below.)

Adoption.

All major controversy having been eliminated by project and applicant changes, the Energy Commission unanimously certified the Sunrise Power Project on December 6, 2000.

Post Certification.

TANC filed a lawsuit against the CEC and Sunrise in Sacramento County Superior Court. It has not been pursued to date, resulting in no impact upon the Sunrise license.

While Sunrise was successfully racing to complete its 320 MW simple cycle peaker plant, finishing first with a June 27, 2001 on-line date, it was concurrently planning for immediate expansion.

On May 14, 2001, Sunrise filed an amendment for Sunrise II, an approximate 265 MW addition that would result in a nominal 585 MW combined cycle powerplant, which the applicant hopes to be operational by the summer of 2003. It is by far the largest capacity amendment ever filed with the Energy Commission. Such an amendment (rather than a new AFC) was only possible under the express authority of Executive Order D-25-01 by Governor Davis, dated February 8, 2001. (I should note that this Executive Order overruled my own legal opinion as the compliance attorney that Sunrise was required to file a new AFC because its proposed amendment exceeded 50 MW.)

I do not know whether Sunrise II will be in place by the summer of 2003. But a 265 MW powerplant can now be reviewed and approved through the Energy Commission's highly informal compliance process, which was never intended to take the place of a formal Application for Certification. Under the State of Emergency and Executive Order D-25-01, the CEC compliance office is even authorized to suspend laws and regulations on a case-by-case basis. Sunrise has thus proven to be a most ingenious and adaptive applicant.

CEC staff recommended that the Energy Commission grant Sunrise's petition to become a 585 MW combined cycle powerplant, and this amendment was approved by the Energy Commission on November 30, 2001, Docket No. 98-AFC-4C.