Plaintiff, Southern California Gas Company, appeals from the denial of its mandate and prohibition petition and declaratory relief complaint. Plaintiff filed suit against defendants, South Coast Air Quality Management District (the district) and the Governing Board of the South Coast Air Quality Management District (the board). Plaintiff unsuccessfully challenged the district's rule No. 433 (Rule 433) which imposes monitoring, recordkeeping and reporting requirements on it. We conclude the trial court correctly denied plaintiff's petition and complaint.
Before proceeding to a discussion of the petition and complaint, we note many of the theories therein are not raised on appeal. For completeness purposes, though, we set forth the plaintiff's allegations in their entirety. Filed August 4, 2009, the petition and complaint alleges plaintiff operates the nation's largest natural gas distribution facility; distributes gas and provides service to over 20 million customers; and is a network that encompasses over 20,000 square miles across 12 counties and nine local air pollution and quality management districts. Emissions of nitrogen oxides from "stationary sources' combustion of natural gas in Southern California" account for only 5 percent of all such discharges in the South Coast Air Basin (the basin). Fourteen percent of the natural gas in plaintiff's system comes from wells in California and offshore. Eighty-six percent of the gas comes from producers in Canada, the southwestern United States and the Rocky Mountains. Plaintiff's commercial customers directly purchase natural gas from these out-of-state producers. Plaintiff's pipelines are used to convey the gas to local commercial customers who have purchased it directly from out-of-state producers. Approximately 60 percent of the gas flowing through plaintiff's pipelines is owned by its customers. Different natural gas supplies have varying chemical compositions and performance characteristics. It is essential that different supplies be interchangeable without adversely affecting operational safety and efficiency or materially increasing air pollution.
Further, the Public Utilities Commission's tariff specifications require the natural gas in plaintiff's system be interchangeable. One interchangeability measure is the Wobbe Index or Wobbe Number reading which is based on the heating value and specific gravity of the gas. Stated more basically, the Wobbe Index is the measure of the density of the heating volume for a given natural gas amount. In September 2006, the Public Utilities Commission revised plaintiff's tariff rule No. 30. The 2006 revision required that non-California supplies of natural gas have a maximum Wobbe Index reading of 1385. The Public Utilities Commission considered the necessity of diversifying gas sources; the need to set a relatively high Wobbe Index standard; and the fact that increased gas supplies will result in lower costs to natural gas and electricity consumers. During the lengthy two-year proceedings leading up to the September 2006 Public Utilities Commission decision, the district had advocated the adoption of a maximum Wobbe Index reading of 1360 and additional testing be conducted. The Public Utilities Commission rejected the district's proposed Wobbe Index figure and the need for future testing. The Public Utilities Commission found that imposing a different Wobbe Index figure in the district's jurisdiction was infeasible. The district filed a mandate petition in the Court of Appeal seeking to set aside tariff rule No. 30 which was denied. The district's review petition filed in the Supreme Court was denied on July 16, 2008.
In 2007, while the Public Utilities Commission proceedings were pending, the district unilaterally proposed setting a Wobbe Index reading of 1360. The district proposed a control measure, designated as CMB-04, which consisted of two components. According to the petition: "`The first component will include monitoring and testing of natural gas supplies to enhance quantification of emission changes attributable to gas quality higher than a Wobbe Index of 1360.' The second component, which is to follow the first, will impose a [Wobbe Index] of 1360 `or equivalent mechanism/parameter.' It will also include unspecified `mitigation measures."' The document describing CMB-04 admitted that it may be necessary to seek additional legislation in order to implement the proposed control measure. The district adopted its 2007 Air Quality Management Program which included CMB-04.
Based on these factual allegations, plaintiff alleges six causes of action. The first cause of action seeks a writ of mandate. The first cause of action alleges defendants exceeded their authority under the Health and Safety Code; by acting in excess of their jurisdiction, they committed a prejudicial abuse of discretion; and plaintiff has no adequate remedy at law. The second cause of action alleges the Public Utilities Commission has authority over natural gas public utilities; the 2006 decision adopting a Wobbe Index reading of 1385 has the force of law; Rule 433 is intended to enforce a different Wobbe Index reading of 1360; and in setting a lower Wobbe Index reading than that established by the Public Utilities Commission, defendants acted in contravention of their authority under law. The third cause of action seeks issuance of a writ of mandate because defendants violated Health and Safety Code section 40727. According to plaintiff, Health and Safety Code section 40727 requires the board make specified findings before adopting a rule. In making the findings which lacked any evidentiary support, the board acted in an arbitrary and capricious manner. The fourth cause of action sought issuance of a writ of mandate based on an alleged commerce clause violation. (U.S. Const., art. I, § 8, cl. 3.) The fifth cause of action seeks issuance of a writ of prohibition based on all of the theories in the first four causes of action. The sixth cause of action for declaratory relief is not before us as it was dismissed pursuant to stipulation after the trial court denied plaintiff's request for issuance of a writ of mandate and prohibition.
In January 2004, the Public Utilities Commission instituted a rulemaking proceeding which addressed, in part, the potential introduction of gas derived from liquefied natural gas into California. Among the issues addressed during the rulemaking proceeding was whether gas quality tariff specifications for natural gas transported by plaintiff should be revised. The reason for the potential revision was the anticipated introduction of gas derived from liquefied natural gas into California. One of the issues resolved was whether the Wobbe Index reading should be revised for gas derived from liquefied natural gas transported by plaintiff. The district argued during the rulemaking proceeding the combustion of gas derived from liquefied natural gas would result in increased nitrogen oxides emissions. The district argued during the rulemaking proceeding the Wobbe Index for liquefied natural gas entering the basin should be a range between 1332, plus or minus 2 percent, and a maximum reading of 1360. In addition, the district requested the Public Utilities Commission order plaintiff to conduct further investigation of the air emission impacts of Wobbe Index reading changes.
In September 2006, the Public Utilities Commission rejected the district's position that the Wobbe Index maximum reading be set at 1360. The California Public Utilities Commission concluded a Wobbe Index reading of 1360 would "unnecessarily constrain" this state's natural gas supplies; the district's proposal to require that plaintiff apply a different Wobbe Index reading in the basin was infeasible; and increasing the use of gas derived from liquefied natural gas would benefit the environment by displacing the use of less environmentally friendly fuels. Also, the Public Utilities Commission rejected the proposal of several parties, including plaintiff, that an upper Wobbe Index reading of 1400 be established. The Public Utilities Commission established an upper Wobbe Index reading of 1385 for plaintiff and San Diego Gas & Electric Company. The Public Utilities Commission
In addition, the district attempted to impose Wobbe Index reading limitations on plaintiff's operations in an interstate pipeline certificate proceeding before the Federal Energy Regulatory Commission. The Federal Energy Regulatory Commission refused to deviate from the decision of the Public Utilities Commission. The Ninth Circuit Court of Appeals affirmed the decision of the Federal Energy Regulatory Commission. (South Coast Air Quality Management Dist. v. FERC (9th Cir. 2010) 621 F.3d 1085, 1094-1101.)
In 2007, the district's 2007 Air Quality Management Plan included a control measure denominated CMB-04 (Natural Gas Specifications). CMB-04 was developed in anticipation of the opening of the Energia Costa Azul regasification terminal located in Ensenada in Baja California and the introduction of gas derived from liquefied natural gas into California. CMB-04 requires the district to work with "stakeholders" to "assess emission impacts based on the data collected" and to conduct additional studies "to further refine emission factors" by equipment type. In 2009, prior to the public release of the then proposed Rule 433, district staff met with plaintiff's employees. Plaintiff's representatives extensively commented and asserted the district had no authority to regulate natural gas under the Health and Safety Code. On June 5, 2009, the board adopted Rule 433. The district's counsel argued Health and Safety Code section 41511, which granted the board the authority to regulate air pollution emission sources, authorized the adoption of Rule 433.
Rule 433 applies to all operators of natural gas distribution systems. But plaintiff is the only entity that is subject to all of Rule 433's requirements. Plaintiff is one of only two entities that are subject to any of its provisions. Rule 433 implements the first component of control measure CMB-04. The first component of CMB-04 requires the monitoring of natural gas supplies to quantify emission changes attributable to a Wobbe Index reading of greater than 1360. While CMB-04 contemplates potential future actions to mitigate emission increases, Rule 433 is limited to monitoring and data gathering. The information collected pursuant to Rule 433 would allow the district to determine the extent of increases in nitrogen oxides emissions from the combustion of higher Wobbe Index natural gas. We will describe the requirements imposed by Rule 433 in detail later in this opinion. (See, post, at pp. 271-274.)
Natural gas is a component of the district's clean air strategy. Many of the district's rules effectively mandate the use of natural gas as a clean energy source. The predominate fuel used by stationary sources in the district is natural gas. Stationary sources burn very little coal and oil in the district. Less than 15 percent of the natural gas used in the district originates from sources within the United States but outside California. The chemical composition of these traditional sources of natural gas is relatively stable. Natural gas is composed primarily of methane. But there are additional components of natural gas other than methane which affect its heating value. Higher concentrations of hydrocarbons such as ethane, propane, and butane increase the heating value of the gas. But inert compounds such as carbon dioxide and nitrogen decrease natural gas's heating value.
The district staff described the Wobbe Index thusly: "The Wobbe Index . . . is one of the most important characteristics of natural gas in terms of natural gas interchangeability and its effect on air pollutant emissions." The Wobbe Index readings of domestic natural gas supplies materially vary depending on the place of origin. But the quality of the natural gas historically consumed in the district has been very stable. Based on data provided by plaintiff, Wobbe Index readings vary between only 1319 and 1353 which is less than plus or minus 0.9 percent.
Imported liquefied natural gas has a different chemical composition than the traditional sources of natural gas consumed in the district. Imported liquefied natural gas is cooled and condensed into liquid for shipment to the United States. As a result of this condensing process and differing international standards and markets, natural gas derived from liquefied natural gas has significantly higher hydrocarbon levels. Additionally, liquefied natural gas possesses lower levels of inert compounds. As a result, liquefied natural gas has a much higher Wobbe Index reading than traditional natural gas. As noted previously, between 2000 and 2004, the natural gas Wobbe Index readings in the district were between 1319 and 1353. Indonesian liquefied natural gas has a Wobbe Index reading of 1412. Australian liquefied natural gas has a Wobbe Index reading of about 1426. Malaysian liquefied natural gas has a Wobbe Index reading of 1414. In May 2008, a study was conducted by the San Diego County Air Pollution Control District (the San Diego district). The San Diego district study indicates that traditional sources of natural gas have a Wobbe Index reading of 1340. By contrast, the Wobbe Index reading for gas derived from liquefied natural gas is near 1385.
Before liquefied natural gas is useable, it must be regasified. The first liquefied natural gas terminal on the West Coast, the Energia Costa Azul
Energia Costa Azul is owned by Sempra LNG, a subsidiary of Sempra Energy. Sempra Energy has contracted for the purchase of liquefied natural gas from Tangguh, Indonesia. Royal Dutch Shell leases 50 percent of the Energia Costa Azul liquefied natural gas capacity. Royal Dutch Shell has contracted to purchase liquefied natural gas from Russia. Sempra Energy is also plaintiff's parent company.
Concern over the increases in liquefied natural gas-related nitrogen oxides emissions is universally shared by the district; the San Diego district; the California Air Resources Board; and the federal Environmental Protection Agency. Studies conducted by industry groups, air districts and plaintiff indicate that burning gas with a higher Wobbe Index reading will increase nitrogen oxides emissions. Gas derived from liquefied natural gas has a higher Wobbe Index reading and thus burns at higher temperatures. Plaintiff's consultant, Charles Benson of ENVIRON International Corp. indicates, as combustion temperatures are higher, there is an exponential increase in the formation of nitrogen oxides emissions. A study prepared by ENVIRON International Corp., which was funded by plaintiff, calculated the difference in nitrogen oxide output if the Wobbe Index reading increased from 1360 to 1385. According to the ENVIRON International Corp. analysis, if current equipment is used, liquefied natural gas use could increase the district's nitrogen oxides emissions by 124.1 tons per year. The San Diego district analyzed the effects of a one-day influx of liquefied natural gas in that county. The analysis was conducted on several pieces of equipment. The San Diego district study found that the liquefied natural gas influx could trigger increases in nitrogen oxides emissions of up to 10 percent.
Such an increase could affect the district's ability to accurately quantify its emissions inventory. Further, the studies highlight that hotter-burning gas may negatively affect the performance of a wide variety of combustion equipment. Among the types of combustion equipment that may be affected are appliances, reciprocating engines, combustion turbines, industrial boilers, furnaces and heaters. Hotter burning natural gas can result in an increase in emissions from combustion. Hotter burning gas can lead to noncompliance with emission requirements in industrial boilers, furnaces and heaters. Most natural
The district is legally obligated to account for its emissions inventory in its air quality management plan. Thus, if information concerning potential increases in the inventory of nitrogen oxides emissions is incomplete, the district is obligated to engage in further data gathering and monitoring. The federal Environmental Protection Agency has determined that the district is not meeting federal particulate matter standards. These standards apply to particulate matter less than 2.5 micrometers in diameter and are referred to as PM
Nitrogen oxides contribute to the formation of both ozone and PM
The trial court denied the mandate and prohibition petition. The trial court ruled, "[Plaintiff] is the operator of a natural gas distribution system which can be regulated because the natural gas it distributes is a source which can lead to the discharge of air emissions produced when the end-user burns the natural gas." The trial court relied in part on Health and Safety Code section 40000 et seq. which provides that regional authorities, such as defendants, have the primary responsibility for control of air pollution from all sources other than motor vehicle emissions. The trial court interpreted the phrase "all sources" as evidence of the Legislature's intent to allow regional authorities such as defendants to control air pollution from anything "that leads to a discharge" into the air. Also, the trial court relied on Health and Safety Code section 40716, subdivision (a)(1) which grants the district the power to reduce or mitigate indirect or areawide air pollution emissions. Finally, the trial court concluded: "In sum, section 41511 permits the [d]istrict to adopt rules and regulations that apply to the owner or operator of air pollution emissions. [Plaintiff] owns and operates the pipeline system that delivers
But we conduct independent review of whether defendants have exceeded the scope of authority delegated by the Legislature to them or the meaning of a statute. (Yamaha Corp. of America v, State Bd. of Equalization, supra, 19 Cal.4th at pp. 11-12 & fn. 4; Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1389 [241 Cal.Rptr. 67, 743 P.2d 1323].) Deference is not accorded to an administrative action which is incorrect in light of unambiguous statutory language or which is clearly erroneous or unauthorized. (Bonnell v. Medical Board (2003) 31 Cal.4th 1255, 1265 [8 Cal.Rptr.3d 532, 82 P.3d 740]; People ex rel. Lungren v. Superior Court, supra, 14 Cal.4th at p. 309.) Nor can we, in construing a remedial statute liberally, apply it in a manner not reasonably supported by its statutory language. (Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 645 [88 Cal.Rptr.3d 859, 200 P.3d 295].)
Further, the district is empowered by the Legislature to require an operator of a pollution source to disclose data concerning emissions. The district may require an operator of any source to disclose data necessary for estimating air pollution emissions: "A district shall have power: [¶] . . . [¶] (g) To require any owner or operator of any air pollution emission source, except a noncommercial vehicular source, to provide (1) a description of the source, and (2) disclosure of the data necessary to estimate the emissions of pollutants for which ambient air quality standards have been adopted, or their precursor pollutants, so that the full spectrum of emission sources can be addressed equitably pursuant to Section 40910." (Health & Saf. Code, § 40701.) As noted previously, Health and Safety Code section 40910 obligates the district maintain state ambient air quality standards for "ozone, carbon monoxide, sulfur dioxide, and nitrogen dioxide" by the earliest feasible date. Health and Safety Code section 40910 requires the district "consider the full spectrum of emission sources" and focus specific concentration on reducing the emissions from transportation and areawide emission sources. And the district powers extend to taking reasonable actions to
Rule 433(d) requires plaintiff to develop a gas quality monitoring plan: "All operators shall submit to the Executive Officer for written approval and shall implement a gas Quality Monitoring ... Plan. The objectives of the [gas quality monitoring plan] are to monitor: 1) the quantity and [Wobbe Index] of natural gas in high-pressure transmission pipelines entering the District; and 2) the [Wobbe Index] of natural gas in each Btu District." Rule 433(c)(6) defines the Wobbe Index, "The [Wobbe Index] of natural gas is the higher heating value ... of the natural gas, expressed as Btu per standard cubic foot, divided by the square root of the gas' real relative density ...." A Btu district is defined in Rule 433(c)(1): "A B[tu district] is a geographic area defined by the operator of a natural gas distribution system for the purpose of determining the heating value of natural gas and natural gas bills for natural gas customers within that area."
Defendants could reasonably find that plaintiff's pipeline and natural gas derived from liquefied natural gas are a potential pollutant source. The administrative record demonstrates natural gas owned by plaintiff or carried in its pipelines will be imported from overseas. As previously noted, natural gas derived from liquefied natural gas produces significantly higher hydrocarbon levels. It also produces lower levels of inert compounds than that
Defendants cite to an analogous outcome in People ex rel. Lungren v. Superior Court, supra, 14 Cal.4th at pages 300-314. Defendants argue that the term "source" should include natural gas derived from liquefied natural gas which is part of plaintiff's pipeline system. In Lungren, our Supreme Court evaluated what constitutes a "source of drinking water" within the meaning of Health and Safety Code section 25249.5. Health and Safety Code section 25249.5 is part of the Safe Drinking Water and Toxic Enforcement Act of 1986. (Health & Saf. Code, §§ 25249.5-25249.13.) The issue, as posited by our Supreme Court, was as follows: "This case requires us to define what is meant by the phrase `source of drinking water.' The Attorney General, who brought this action to enforce the Act, contends that the phrase includes the water that is stored in or run through water faucets, and so defendant faucet manufacturers, whose products allegedly leach toxic chemicals into drinking water, may be sued for violations of the Act. The faucet manufacturers contend the contrary. [¶] We conclude that, in light of both the Act's language and its purpose, the Attorney General is correct in construing it to prohibit the discharge of toxic chemicals into faucet water." (People ex rel. Lungren v. Superior Court, supra, 14 Cal.4th at pp. 298-299.) When analyzing the issue in Lungren, our Supreme Court adverted in part to a
The judgment is affirmed. Defendants, South Coast Air Quality Management District and the Governing Board of the South Coast Air Quality Management District, shall recover their costs incurred on appeal from plaintiff, Southern California Gas Company.
Mosk, J., concurred.
The majority has thoroughly described the complex background: the facts concerning liquefied natural gas, regasification, and the pipeline; the role of the Public Utilities Commission and other regulators; the administrative proceedings and the proceedings in the trial court. I do not attempt to repeat that valiant effort. However, I draw a different conclusion from the facts and law.
When it adopted rule No. 433 (Rule 433), the South Coast Air Quality Management District (the District) relied on Health and Safety Code
The appeal thus presents a single question, whether Southern California Gas Company (SoCalGas) is the owner or operator of an "air pollution emission source" under the statute.
SoCalGas argues that it is not, but that the owners and operators of gas burning equipment are the owners or operators of the source. The District's position is that natural gas itself, even when it is contained in the pipeline, is a source. The trial court agreed with the District, finding that in the context of the statutory scheme, "source" means "something that leads to a discharge into the air."
I think SoCalGas has the better argument, and that the trial court was wrong, as is the majority.
I begin by noting that I believe we should apply the ordinary rules of statutory construction, not the rules applicable to review of a quasi-legislative act. An agency's interpretation of a statute "does not implicate the exercise of a delegated lawmaking power; instead, it represents the agency's view of the statute's legal meaning and effect, questions lying within the constitutional domain of the courts." (Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 11 [78 Cal.Rptr.2d 1, 960 P.2d 1031].) Thus, "A court does not ... defer to an agency's view when deciding whether a regulation lies within the scope of the authority delegated by the Legislature. The court, not the agency, has `final responsibility for the interpretation of the law' under which the regulation was issued. [Citations.]" (Id. at p. 11, fn. 4; see Security National Guaranty, Inc. v. California Coastal Com. (2008) 159 Cal.App.4th 402, 414 [71 Cal.Rptr.3d 522].)
The ordinary rules of statutory interpretation direct me to ascertain the intent of the Legislature by looking to the language of the statute itself, using the usual, ordinary meanings of the words, in the context of the statute and the statutory scheme. If "`the language is clear and there is no uncertainty as to the legislative intent, we look no further and simply enforce the statute according to its terms.'" (Phelps v. Stostad (1997) 16 Cal.4th 23, 32 [65 Cal.Rptr.2d 360, 939 P.2d 760].) In my view, this is a case in which the meaning of the statute can be ascertained from the statute.
Section 41511 permits the District to make regulations which compel the owner or operator of an air pollution emission source to determine "the amount of such emission from such source." The statute thus says that a "source" is something which actually releases emissions, not something
Further, the regulation may be imposed only on "the owner or the operator" of this emitting source. The natural reading of that phrase leads me to conclude, again, that SoCalGas is correct that regulations may be imposed on the entity which owns or operates the equipment which burns the gas, but not on the entity which owns the gas in the pipeline.
On appeal, the District (and the other air districts in their amicus curiae brief) does seek to justify Rule 433 by arguing that the pipeline itself releases some emissions, which the parties term "fugitive emissions." However, the administrative record, which is replete with information about the combustion of higher Wobbe Index natural gas and the effect of higher Wobbe Index natural gas on combustion equipment, is devoid of any information about fugitive emissions. Nor does the District seem to have announced any concern about fugitive emissions in the rule-making process. Instead, Rule 433 is intended to collect information about the emissions created by the combustion of natural gas, by SoCalGas's customers. The District's focus was and is on the effects of combustion, not on the gas itself.
The rest of the statutory scheme is in accord with my reading of section 41511.
The statutory scheme gives the District responsibility concerning air pollution from nonvehicular sources (§§ 40000, 40410), and "nonvehicular sources" is defined. It means "all sources of air contaminants, including the loading of fuels into vehicles, except vehicular sources." (§ 39043.) "Air contaminant" is also defined. It means "any discharge, release, or other propagation into the atmosphere and includes, but is not limited to, smoke, charred paper, dust, soot, grime, carbon, fumes, gases, odors, particulate matter, acids, or any combination thereof." (§ 39013, italics added.)
These statutes tell us that a nonvehicular source is something that discharges or releases emissions (which can be sampled) into the air. Fuel in a closed container is not a "source," and does not become one until it is out of the container (through loading into vehicles), when contaminants are released into the atmosphere.
Further, other statutes which authorize regulation are not limited to owners or operators of sources, telling us that section 41511's limits are meaningful. For instance, section 41712, which authorizes the state board to regulate consumer products such as cleaning compounds and floor finishes, does not speak to "sources," but instead provides that "The state board shall adopt regulations to achieve the maximum feasible reduction in volatile organic compounds emitted by consumer products ...." Section 40506.1 speaks to permits for "an article, machine, equipment, or contrivance which may cause the issuance of air contaminants." (See also §§40515 [permits for water treatment devices which emit toxic air contaminants], 40724.5 [regulation of "agricultural practices"].) The language of section 41511 is markedly different.
It is true that, as the majority writes, civil statutes for the protection of the public must be broadly construed in favor of that protective purpose (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 313 [58 Cal.Rptr.2d 855, 926 P.2d 1042]), and that "[t]he statutes that provide the [air pollution control] districts with regulatory authority serve a public purpose of the highest order—protection of the public health." (Western Oil & Gas Assn. v. Monterey Bay Unified Air Pollution Control Dist. (1989) 49 Cal.3d 408, 419 [261 Cal.Rptr. 384, 777 P.2d 157].)
It is also true that, as the District argues, it has broad duties to adopt and enforce rules and regulations to achieve and maintain state and federal ambient air quality standards (§§40001, subd. (a), 40402, subds. (e) & (g), 40406) and in so doing to "consider the full spectrum of emission sources" (§§40440, subd. (a), 40402, subd. (e), 40460, 40463). And I accept the District's representation that Rule 433 will assist it in carrying out these duties, and that obtaining information from SoCalGas, rather than from the end-users who burn the gas, is a far more practical and efficient way of obtaining the information it needs.