Certification Granted on April 14, 1999.

On-Line July 2, 2001

Project Manger: Paul Richins

Staff Counsel: Dick Ratliff

Hearing Officer: Gary Fay

Presiding Member: Commissioner Michal Moore

AFC Filing, Data Adequacy, and Project Description.

Calpine filed its Application for Certification (AFC) for the Sutter Power Plant Project on December 15, 1997. It was the second merchant plant proposal received by the Energy Commission, trailing only High Desert, Docket No. 97-AFC-1. Unlike High Desert, with its confusing multiple configurations, Calpine presented Sutter as a conventional, nominal 500 MW natural gas, combined cycle facility. This was encouraging to the CEC, since it suggested High Desert's "menu" approach might be rejected by other merchant plants. Only its large capacity, distinguished Sutter from predecessor AFCs. It was found data adequate on January 21, 1998.

When licensed fifteen months later, Sutter became the first merchant plant certified by the Energy Commission and the largest facility ever approved in CEC history, beating Arco-Watson's record of 385 MW from 1986. Sutter would hold its capacity title very briefly, as 500 MW turned out to be normal, even small for merchant plants, some of which exceed 1000 MW. In the race that followed during the summer of 2001 to be the first new facility on-line, Sutter ultimately finished second by five days to Sunrise, Docket No. 98-AFC-4.

Sutter's site was north of Sacramento, seven miles from Yuba City, in Sutter County, adjacent to Calpine's existing Greenleaf powerplant. The project was on land designated for agriculture, creating a county land use conflict that would be one of Calpine's many challenges. Some local farmers and nearby neighbors would be major opponents. Water supply and wastewater problems would also delay the project, ultimately leading to Calpine's acceptance of dry-cooling technology.

Calpine's first AFC began as a non-union project that brought the intervention of California Unions for Reliable Energy (CURE), a coalition of unions that build and operate powerplants. CURE's strategy, as expertly conducted by the Adams Broadwell Joseph & Cardozo law firm, is to aggressively raise environmental obstacles in the hope of delaying non-union AFCs. In the precedent-setting test that followed, Calpine ultimately signed a union contract for all its projects, converting CURE from Calpine enemy to ally. CURE's approach to environmental law proved to be very effective in Sutter, and it would attempt to duplicate this success in other AFCs with non-union applicants. (See Elk Hills, Docket No. 99-AFC-1, and Sunrise, Docket No. 98-AFC-4.)

Having run the gauntlet, Calpine thought certification meant victory. To everyone's surprise, the project's remaining opponents had a new tactic for delay the CEC was completely unprepared for. (See the Environmental Appeals Board below.)

Issues.

Demand Conformance.

Demand conformance would not be an issue in any of the new merchant plant cases, initially because ER 96 established a need for 6,737 MW of additional capacity. When the avalanche of AFC filings threatened to approach this high ceiling, the Commission abolished any limits on new capacity in a 1999 addendum to ER 96. The Legislature went even further on behalf of electric industry de-regulation, abolishing the Energy Commission's demand conformance finding entirely in SB 110, Chapter 581, Statutes of 1999. A quarter century of state policy that powerplants be found needed was abandoned. Concerns regarding too many powerplants had become irrelevant. All projects would now automatically be needed because they represented private investments, without any possible impact to ratepayers or the public. (This presumption was a major casualty of the 2000-2001 energy supply crisis.)

For this case, demand conformance, the issue which had tormented countless AFCs in the past, was easily disposed of with an affirmative finding of need for 500 MW at pages 32-33 of the Sutter Decision.

Air Quality.

Air quality would not be an issue in Sutter either. Calpine proposed an advanced SCR system which it later improved to reach an extremely low nitrogen oxide NOx level of 2.5 ppm. Merchant plant emissions were going to be the lowest on record. Calpine also had a satisfactory offsets package that mitigated the impacts from its new emissions. Objections from intervenors on this subject were considered insignificant by the Committee.

Visual Resources.

CEC staff, allied with the Yuba-Sutter Farm Bureau intervenor, concluded that Sutter's transmission lines would be a significant adverse environmental impact, even after Calpine had imposed all feasible mitigation measures. In other words, there was nothing further Calpine could do to improve its project, but CEC staff still wanted an official finding regarding the presence of an adverse impact. Calpine, joined by Sutter County staff, opposed CEC staff in what became the major adjudication of the Sutter case.

Visual resources is perhaps the most subjective of disciplines, lacking clear and objective standards. The land here was agricultural and rural residential, but disagreements can occur virtually anywhere. CEC Staff has a history of not being persuasive to Commissioners on visual resources, especially in the absence of proposed additional mitigation, when the only issue is a "finding of significance". (See Crockett II, Docket No. 92-AFC-1.)

This pattern continued with Sutter. The experts testified on both sides, and the issue of visual resources took up twenty pages of discussion in the Commission Decision, more than any other subject. The Committee and Commission ruled against staff, criticizing its methodology as relying too heavily upon views from a single observation point rather than broader project impacts. There would be no finding of significant visual impacts from the Sutter project.

Water Resources.

Calpine's original design for conventional wet cooling would have required about 4.3 million gallons of water per day from wells located on the site. This drawdown of scarce groundwater was opposed by CEC staff, local farmers, and CURE, among many others. Everyone except Calpine was concerned that such massive water use could negatively impact neighboring domestic and agricultural wells.

At the same time, Calpine's original design created a wastewater discharge problem involving the disposal of between 2 and 2.8 million gallons per day. CEC staff and other parties believed the chemicals in this wastewater could violate water quality standards and have harmful effects on local biology. Additionally, the local water district believed its available drainage canal capacity was insufficient for handling such a large discharge.

Dry cooling, as suggested by CEC staff and CURE, among other parties who were not against the project per se, was the obvious answer. On October 8, 1998, Calpine proposed a major mitigation package that replaced its cooling towers with dry cooling technology. Dry cooling reduced groundwater use by over 95% and allowed Calpine to avoid any wastewater discharge.

Dry cooling eliminated water resources as an issue in the Sutter case. There were technical downsides to dry cooling, such as added costs and reduced powerplant efficiency. Calpine clearly saw that dry cooling's benefits exceeded its burdens in Sutter. However, CURE would take up the banner of dry cooling and seek to impose it upon completely unwilling non-union applicants in other proceedings.

Land Use.

The project site had not been used for farming since 1984 or 1986. Nevertheless it was zoned for agriculture and this Sutter County zoning precluded a powerplant. Thus, it was a classic land use non-conformity that could prevent licensing. The Energy Commission is required to find conformity with state and local laws in order to grant certification. The only other alternative is an override, and this had not occurred since Geysers 16, nearly 20 years earlier, Docket No. 79-AFC-5. Calpine thus had to apply for a zoning change and General Plan Amendment from the Sutter County Board of Supervisors. This brought the AFC squarely into the realm of local politics.

It was never clear whether the Board of Supervisors would eliminate the land use non-conformity. Some farmers saw Calpine as an example of continued, unwanted industrialization in their agricultural community. The project's proposed transmission line was also considered disturbing to agricultural land, a possible danger to crop dusting planes, and harmful to existing scenic views. These opponents put their effort into blocking the zoning and General Plan modifications.

The Energy Commission and CEC staff also had to satisfy the Sutter County authorities that local action on the land use changes complied with the California Environmental Quality Act (CEQA). Since the Energy Commission process is "functionally equivalent" to the typical CEQA Environmental Impact Report (EIR), various CEC documents analyze impacts but no EIR is ever prepared. Local governments are used to EIRs. They are sometimes reluctant to vote on preliminary CEC documents that serve the same purpose as an EIR. Negotiations between the CEC and Sutter County established that the Board of Supervisors would rely upon the Commission-approved Revised Presiding Member's Proposed Decision in taking their final land use actions. The Sutter County Board of Supervisors would go last.

At the preliminary stage, after a two-night hearing, the Sutter County Planning Commission voted 4-3 on December 2, 1998 to recommend denial of Calpine's proposed zoning change on the grounds the project was inconsistent with the General Plan. Calpine filed an appeal. The pressure now was clearly on Calpine to resolve all other outstanding issues, satisfying as many parties as possible, before the supervisors voted. I believe Calpine's acceptance of a union contract occurred prior to final Board of Supervisors action.

The Energy Commission's Revised Presiding Member's Proposed Decision (Revised PMPD) indicated that the CEC would license Sutter if the land use non-conformities were to be eliminated. The Energy Commission adopted the Revised PMPD on March 17, 1999. That left everything up to Sutter County. The final showdown came on March 30, 1999, when the Sutter County Board of Supervisors reversed the Planning Commission and approved Calpine's requests for rezoning and a General Plan Amendment.

Adoption.

Land use conformity having finally been achieved by the supervisors' action, the Energy Commission certified the Sutter Power Project two weeks later on April 14, 1999.

Calpine began constructing Sutter in July of 1999.

Post-Certification.

The Courts.

The powerplant's remaining opponents, a segment of the agricultural community and some neighbors, filed suit against the Energy Commission in the Court of Appeals and the California Supreme Court. Both courts declined to issue any stay of construction and refused to hear the case. The litigation option had achieved nothing for the opponents.

The Environmental Appeals Board (EAB)

All powerplants, including Sutter, usually require issuance of a federal Prevention of Significant Deterioration (PSD) permit. This is an EPA air quality permit which determines that the proposed powerplant will not interfere with existing achievement of certain national air quality standards. The PSD permit can be issued by EPA itself or be delegated to the local air district. PSD permits are considered routine and non-controversial by the Energy Commission, which of course has nothing to do with their issuance. The Sutter PSD permit had been issued by Region 9 of EPA.

An opponent of the Sutter Power Plant filed a Petition for Review of the Sutter PSD permit with the Environmental Appeals Board on August 17, 1999, asserting various errors by EPA. A second petition was subsequently filed. The Energy Commission considered the petitions' allegations against EPA to be entirely without merit.

However, the shocker was that filing a Petition for Review with the Environmental Appeals Board automatically stayed the PSD permit under EAB rules, and thus prevented Calpine from proceeding with construction of the Sutter plant. Neither Calpine nor the Energy Commission had dealt with this problem before, and it was EPA that now had to defend its issuance of the PSD permit. The Environmental Appeals Board was not known for making expedited rulings on Petitions for Review.

Calpine resumed construction of Sutter, but the EAB appeal clearly cost it precious time and was directly responsible for Sutter losing the race to be the first merchant plant to go on line in 2001.

The Energy Commission could expect Petitions for Review to the Environmental Appeals Board to be routinely filed by opponents of other Applications for Certification, since each would have a PSD permit that could be targeted. The Energy Commission would be better prepared in the future, assigning a former U.S. Justice Department attorney to EAB cases, and actively intervening in subsequent EAB appeals to shorten the process. Some AFCs would also include defensive measures taken during the CEC phase of the proceeding to better defend against the anticipated EAB Petition for Review.

Several of these EAB petitions have been filed in the last two years. All were denied in less time than with Sutter. The Energy Commission and EPA Region 9 believe this EAB delaying tactic has ultimately proven to be ineffective against new powerplants, especially once the electricity supply crisis of 2000-2001 began.

However, the Sutter surprise of this EAB petition, with its automatic stay, was not a pleasant time for those persons involved in CEC licensing of the first merchant plant.

Compliance.

Trucking.

A Sutter Condition of Certification in the area of transportation required all project truck deliveries to use a specific route that bypassed residential streets. Calpine was required to place the condition in its trucking contracts.

However, in early 2000, while the plant was under construction, a number of truckers decided they would take the direct route to the project site, violating the condition and their contract. Enough truckers managed to parade their noisy vehicles past the house of a project intervenor that the problem turned into a major incident. What I labeled "mad truckers' disease" was ultimately debated at an Energy Commission Business Meeting, as Calpine had to defend itself against charges of violating Transportation Condition of Certification 4.

Calpine was actually doing its best to get the rebel truckers back under control. One trucking firm was fired and Calpine posted guards in front of the main residential street to block any of their trucks from using it. Calpine also refused deliveries from trucks observed ignoring the mandated route. These actions convinced the CEC that Calpine was innocent of all charges against it. The truckers were violating this condition in spite of Calpine, but the matter eventually died down.

Noise.

June 2001 and the final race to the finish line was underway. Due to an equipment problem, Calpine needed to perform noisy construction work at night for a limited period of time. Although Calpine's activities would not violate any condition of certification, there was the potential that 10-20 households might be disturbed.

Calpine voluntarily offered to put the residents of these households up in motels at Calpine's expense to avoid potential problems. The CEC Compliance Office supported this approach. Some of Calpine's neighbors accepted the offer and slept in motels. A few others declined to leave their homes and then complained about the noise.

Construction ended on July 2, 2001, as Calpine brought the Sutter Power Project on-line.