Certification Granted on May 14, 1987

Staff Counsel: Toni Radillo

Hearing Officer: Gary Fay

Presiding Member: Vice Chair Barbara Crowley

(See also the Western Midway Sunset Power Project, Docket No. 99-AFC-9, Midway-Sunset II)

AFC Filing and Data Adequacy

The Sun Cogeneration Company (Sun Oil) and a Southern California Edison (SCE) unregulated subsidiary filed an AFC on August 28, 1985 for a 225 MW natural gas-fired cogeneration plant appropriately named the Midway-Sunset Cogeneration Plant (Midway-Sunset), at the Midway-Sunset Oilfield in Kern County, approximately 40 miles southwest of Bakersfield.

After CEC staff found significant data deficiencies, the AFC was withdrawn and resubmitted on October 2, 1985. Multiple staff findings of continued deficiencies led to a 4-month series of supplemental filings, and the applicant waived normal data adequacy procedures and deadlines for Commission action. The Commission finally accepted the Midway-Sunset AFC as data adequate on February 19, 1986.

Cogeneration/Need Overview

Midway-Sunset followed Kern River, ARCO-Watson, and Sycamore, a group of large, natural gas-fired cogeneration plants in oil fields and refineries. Gas-fired cogeneration by now had become the CEC’s dominant preferred technology, replacing geothermal.

However, California was facing an emerging electricity surplus, caused by completion of the Diablo Canyon and San Onofre nuclear power plants, intensive construction of qualifying facilities (QFs) under 50 MW, and the availability of cheaper electricity from out of state. This was reflected in the 1985 Electricity Report (ER V), with much more complex and difficult need tests, even for preferred technologies.

By 1986, CEC staff had concluded that the number of proposed powerplants (both AFCs and SPPEs) seeking Energy Commission approval greatly exceeded the need for new facilities in the SCE service area as established under Electricity Report 5 (ER 5). CEC staff thus presented testimony challenging the need for a series of facilities, including Arco-Watson (Docket No. 85-AFC-1) and Sycamore (Docket No. 84-AFC-2).

In each of these contested proceedings, the applicant won and CEC staff lost. After this string of defeats, in which the challenged powerplants were all found needed by several Committees and the Commission as a whole, CEC staff continued to present the same arguments against additional powerplants in Midway-Sunset. However, during this proceeding, CEC staff changed its position and accepted the prior decisions of the Energy Commission. Demand conformance was essentially uncontested in Midway-Sunset. (In hindsight, Energy Commission licensing of all these powerplants clearly was necessary, given the 2000-2001 electricity supply crisis later brought on by industry de-regulation.)

Project Description

The Midway-Sunset Cogeneration Project would burn natural gas to produce steam for Sun’s Thermally Enhanced Oil Recovery (TEOR) process, in which the thick, underground oil is heated to a more liquid state, so that it can be pumped to the surface. The plant would also generate 225 MW for sale to Southern California Edison. The cogeneration plant would lead to a 40% fuel savings for Sun, compared to the old system of burning crude oil for TEOR use. The project also included an 18.5 mile transmission line.

Issues

Demand Conformance

Midway-Sunset was evaluated under ER V’s Unspecified Reserved Need Test. In the Preliminary Staff Assessment (PSA), CEC staff found that the project failed this test. However, the Final Staff Assessment (FSA) grudgingly accepted the Commission’s prior decision in ARCO-Watson (Docket No. 85-AFC-1) and did not insist that the project failed. Instead, staff raised what the Committee called a "reservation", "concerns", "disagreement", and "a touch of intrigue" regarding precisely how Midway-Sunset satisfied certain conditions of the Unspecified Reserved Need Test. (Pages 22-23 of the CEC Decision.)

The Committee sorted through various lingering conflicts over calculations and some ER V rebuttable presumptions, before declaring them irrelevant to the decision necessary for this proceeding. The uncontested Committee and Commission finding, supported by applicant and staff testimony, was that Midway-Sunset passed each condition of ER V’s Unspecified Reserved Need Test. (Pages 28-31 of the CEC Decision.)

  Cogeneration/Efficiency

There was no dispute that Midway-Sunset met the state and federal definitions for a cogeneration plant. Beyond these legal minimums, it was also a highly efficient "thermally matched" facility, producing no excess electricity beyond the minimum required to meet the industrial steam demands for the TEOR process. (Pages 34-35 of the CEC Decision.)

Midway-Sunset thus had a favorable efficiency profile, especially compared to what were called "PURPA machines", cogeneration plants that maximized electricity production for sale to a utility. A PURPA machine was not thermally matched, generating electricity for its own financial sake, far in excess of the thermal host’s need for industrial steam. Looking at the array of proposed cogeneration plants now coming to the Energy Commission, CEC staff wanted to deliver a preemptive strike against PURPA machines.

Staff proposed a condition of certification requiring Midway-Sunset to meet its own declared high efficiency standards, so as to realize the full benefits from properly designed cogeneration. Applicant resisted this condition, challenging it as inconsistent with prior CEC decisions and federal law, illegal rulemaking, a violation of the Warren-Alquist Act and the equal protection clause of the U.S. Constitution, and beyond CEC legal authority. As the Committee wryly noted: "Basically, the Applicant dislikes the idea." (Pages 35-37 of the CEC Decision.)

The Committee determined that the Energy Commission possessed legal power to adopt powerplant efficiency standards which exceeded the federal minimum for QFs, but that it had not done so. Higher efficiency was a clear preference, and a factor in the need tests, but not a current requirement. While supportive of staff’s goal to maximize efficiency, the Committee felt a rulemaking proceeding was the more appropriate forum. The efficiency condition was not adopted. (Pages 37-42 of the CEC Decision.)

While rejecting CEC staff’s proposed condition, the Commission expressly retained continuing jurisdiction, promising to support staff efforts to investigate and correct any significant drop in Midway-Sunset’s efficiency that might occur during the project’s life. (Pages 42-43 of the CEC Decision.)

Structural Engineering

CEC staff contested the adequacy of applicant’s structural engineering design criteria, asserting that additional project components should be designated "critical" and strengthened so they would remain operable after a major earthquake. (Pages 70-74 of the CEC Decision.)

Applicant defended its judgment regarding what facilities were "critical" for the production of electricity and indicated that all of its design criteria met utility standards, complied with the Uniform Building Code, and were shown to be cost effective, consistent with prior AFCs approved by the Energy Commission. However, applicant was willing to make certain voluntary upgrades in response to staff’s requests. (Pages 72-73, 79 of the CEC Decision.)

The Committee and Commission determined that there was no public interest in dictating seismic standards to an applicant who had assessed its own risks based upon a valid cost-benefit analysis, in accordance with the Gilroy Foods decision, Docket No. 84-AFC-4. Applicant’s structural design criteria were accepted and CEC staff’s rejected. (Pages 74-80 of the CEC Decision.)

Transmission Line Engineering

The Committee reviewed five alternative routes for Midway-Sunset’s transmission line, three proposed by applicant and two by CEC staff. These involved different termination points and strategies for accommodating the numerous cogeneration plants being approved in the Kern County area. (Page 88 of the CEC Decision.)

Evaluating several factors, including reliability, economics, biology, land use, and visual resources, two different alternatives, one proposed by Midway-Sunset and another offered by CEC staff, were found acceptable. Both routes were certified to allow the applicant flexibility. (Pages 89-93 of the CEC Decision.)

Air Quality

While air quality was not formally adjudicated, it became argumentative. At one point, CEC staff, the Air Resources Board (ARB), and the applicant all viewed as inadequate the Preliminary Determination of Compliance (DOC) issued by the Kern County Air Pollution Control District (KCAPCD). (Page 138 of the CEC Decision.) The parties then discussed among themselves how the DOC could be fixed, modifying each other’s modifications and proposed conditions of certification until a final version was arrived at. Considering Midway-Sunset’s offsets, it appeared likely that the project would result in a net air quality benefit. (Pages 138-140 of the CEC Decision.)

Biology

Although the Midway-Sunset oilfield was highly disturbed land, the cogeneration project could still adversely impact three protected species, the San Joaquin kit fox, the blunt-nosed leopard lizard, and the San Joaquin antelope squirrel. Based upon the Sycamore settlement (Docket No. 84-AFC-6), biologists from CEC staff, the U.S. Fish and Wildlife Service (USFWS), and the California Department of Fish and Game (CDFG) reached agreement with the applicant on a comprehensive mitigation package. Midway-Sunset agreed to both on-site and off-site habitat improvement, and would provide $500,000 for the acquisition of approximately 500 acres for preservation of the endangered species. As in Sycamore, the Committee congratulated all the parties on their successful effort in negotiating a biology compromise. (Pages 154-156 of the CEC Decision, Biology Condition of Certification #5, page 164 of the CEC Decision.)

Adoption.

The Energy Commission unanimously certified the Midway-Sunset Cogeneration Project on May 14, 1987. The facility was constructed and began operation in 1989.