ML021640252
| ML021640252 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 05/31/2002 |
| From: | Landau J Howard, Rice, Nemerovski, Canady, Falk & Rabkin, Pacific Gas & Electric Co |
| To: | Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California |
| References | |
| 01-30923 DM, 94-0742640 | |
| Download: ML021640252 (9) | |
Text
1 JAMES L. LOPES (No. 63678)
JANET A. NEXON (No. 104747) 2 JULIE B. LANDAU (No. 162038)
HOWARD, RICE, NEMEROVSKI, CANADY, 3
FALK & RABKIN A Professional Corporation 4
Three Embarcadero Center, 7th Floor San Francisco, California 94111-4065 5
Telephone:
415/434-1600 Facsimile:
41.5/217-5910 6
Attorneys for Debtor and Debtor in Possession 7
PACIFIC GAS AND ELECTRIC COMPANY 8
9 UNITED STATES BANKRUPTCY COURT 10 NORTHERN DISTRICT OF CALIFORNIA 11 SAN FRANCISCO DIVISION 12 In re Case No. 01-30923 DM 13 PACIFIC GAS AND ELECTRIC Chapter 11 Case S14 COMPANY, a California corporation, "CAI 14 Date:
June 20, 2002
- A(
Debtor.
Time:
1:30 p.m.
15 Place:
235 Pine Street, 22nd Floor Federal I.D. No. 94-0742640 San Francisco, California 16 17 NOTICE OF MOTION AND MOTION FOR AUTHORITY TO INCUR 18 EXPENSES RELATED TO THE FERC LICENSE APPLICATION FOR HAMILTON BRANCH HYDROELECTRIC FACILITY; MEMORANDUM OF 19 POINTS AND AUTHORITIES IN SUPPORT THEREOF 20
[Supporting Declaration of Thomas A. Jereb Filed Concurrently Herewith]
21 22 23 24 bN 25 c
26 27 28 MOTION FOR AUTHORITY TO INCUR EXPENSES RELATED TO FERC LICENSE APPLICATION
1 NOTICE OF MOTION AND MOTION 2
PLEASE TAKE NOTICE that on June 20, 2002, at 1:30 p.m., or as soon 3
thereafter as the matter may be heard, in the Courtroom of the Honorable Dennis Montali, 4
located at 235 Pine Street, 22nd Floor, San Francisco, California, Pacific Gas and Electric 5
Company, the debtor and debtor in possession in the above-captioned Chapter 11 case 6
("PG&E"), will and hereby does move the Court for entry of an Order Authorizing 7
Expenditures related to the FERC License Application for Hamilton Branch Hydroelectric 8
Facility (the "Motion").
9 This Motion is based on this Notice of Motion and Motion, the accompanying 10 Memorandum of Points and Authorities, the Declaration of Thomas A. Jereb filed 11 concurrently herewith, the record of this case and any evidence presented at or prior to the 12 hearing on this Motion.
13 PLEASE TAKE FURTHER NOTICE that pursuant to Rule 9014-1 (c)(2) of the 14 Bankruptcy Local Rules for the Northern District of California, any-written opposition to the 15 Motion and the relief requested herein must be filed with the Bankruptcy Court and served 16 upon appropriate parties (including counsel for PG&E, the Office of the United States 17 Trustee and the Official Committee of Unsecured Creditors) at least five (5) days prior to the 18 scheduled hearing date. If there is no timely objection to the requested relief, the Court may 19 enter an order granting such relief without further hearing.
20 21 22 23 24 25 26 27 28 MOTION FOR AUTHORITY TO INCUR EXPENSES RELATED TO FERC LICENSE 1
MEMORANDUM OF POINTS AND AUTHORITIES 2
Pacific Gas and Electric Company, the debtor and debtor in possession in the 3
above-captioned Chapter 11 case ("PG&E"), requests authority to incur expenses for 4
environmental studies and reports that will be required in connection with a license 5
application to the Federal Energy Regulatory Commission ("FERC") for a currently 6
unlicensed hydroelectric facility. This request is made pursuant to Bankruptcy Code Section 7
363(b)(1).
8 9
I. FACTUAL BACKGROUND1 10 PG&E filed a voluntary petition for relief under Chapter 11 of the Bankruptcy II Code on April 6, 2001. A trustee has not been appointed, and PG&E continues to function 12 as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
13 On April 19, 2002, PG&E, together with its parent corporation, PG&E 14 Corporation, filed its amended Plan of Reorganization (as amended from time to time, the 15 "Plan"). The Court-approved Disclosure Statement for the Plan (the "Disclosure 16 Statement"), along with the Plant, will be mailed to creditors for voting on June 17, 2002. A 17 Plan confirmation hearing has been set for August 1, 2002...
18 The Plan generally provides for the creation of three new companies, ETrans 19 LLC, GTrans LLC and Electric Generation LLC, whereby PG&E will separate its operations 20 into four lines of business based on PG&E's historical functions. Accordingly, the 21 Reorganized Debtor will continue the retail gas and electric distribution business, ETrans 22 LLC will operate the electric transmission business, GTrans LLC will operate the interstate 23 gas transmission business, and Electric Generation LLC will operate the electric generation 24 business.
25 26 27 1 The evidentiary basis and support for the facts set forth in this Motion are contained 28 in the Declaration of Thomas A. Jereb filed concurrently herewith.
MOTION FOR AUTHORITY TO INCUR EXPENSES RELATED TO FERC LICENSE 1
A.
Description of Environmental Studies and Reports Required for the FERC License Application for Hamilton Branch Hydroelectric Facility.
2 3
Section VI. D. 1. of the Disclosure Statement sets forth PG&E's agreement to file 4
an application for a FERC operating license for the Hamilton Branch Hydroelectric Facility 5
("Hamilton Branch"). FERC previously determined that PG&E is not required to obtain a 6
FERC license to operate Hamilton Branch. However, after reviewing previous versions of 7
PG&E's Plan and Disclosure Statement, the California Public Utilities Commission 8
("CPUC") contended that Hamilton Branch would be "completely unregulated" under the 9
Plan, as a result of the transfer of Hamilton Branch to Electric Generation LLC ("Gen").
10 PG&E disagreed with the CPUC since Hamilton Branch is and would remain subject to state 11 regulation. Nonetheless, PG&E agreed to file an application with FERC for a license for 12 Hamilton Branch and added the following language to the final version of the Disclosure 13 Statement:
14 Additionally, the Debtor currently owns three small hydroelectric projects that are not subject to FERC operating licenses because the FERC has disclaimed 15 mandatory licensing jurisdiction over these projects. Two of these projects, Lime Saddle and Coal Canyon (and their associated lands, appurtenances and water 16 contracts), will be retained by the Reorganized Debtor, subject to existing regulatory jurisdiction. [footnote omitted]. The third project, Hamilton Branch, 17 will be transferred to Gen or a subsidiary of Gen and will be incorporated within its FERC license application for the Upper North Fork Feather River Project, 18 FERC Project No. 2105, to be submitted to the FERC no later than October 31, 2002, or an amendment to that application. See Disclosure Statement, Section 19 VI. D.1.
20 The first and most immediate step in preparing the application for a FERC license 21 is to perform environmental studies and prepare environmental reports (collectively, the 22 "Environmental Studies") for Hamilton Branch. The Environmental Studies are required as 23 part of the FERC-mandated "Environmental Report" to be included as part of the license 24 application, and include the following study areas: (i) water use and quality; (ii) fish, wildlife 25 and botanical resources; (iii) historical and archeological resources; (iv) recreational 26 27 28 MOTION FOR AUTHORITY TO INCUR EXPENSES RELATED TO FERC LICENSE 1
2 3
4 5
6 7
8 9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Consultant Firm Foster Wheeler Environmental Corp.
EDAW Inc.
Confluence Research and Consulting Resource Decisions ECORP Consulting, Inc.
Garcia and Associates Spring Rivers Ecological Sciences Hydroacoustic Technology, Inc.
Thomas R. Payne & Assoc.
Entrix, Inc.
Wreco PAR Environmental Albian Environmental Study Subject Land Use, Visual Recreation Boating and Fishing Recreation Economics Aquatic Amphibians and Rare Plants Mollusk Fish Entrainment Fisheries aihd Water Temperature Geomorphology Sediments and Erosion Prehistoric and Historic Resources Cultural Resources PG&E requests approval to incur approximately $1 million in expenses to be paid to the consultants for the Environmental Studies and related work that may be necessary after the review and comment period.
2 See 18 Code of Federal Regulations, Section 4.50 et seq. Section 4.51(f) lists the required contents of the Environmental Report.
3 As the project proceeds, it may be necessary to retain additional consultants that are not identified here. However, the budget set forth herein includes anticipated expenses for all consulting work that may be required in connection with the Environmental Studies.
MOTION FOR AUTHORITY TO INCUR EXPENSES RELATED TO FERC LICENSE resources; and (v) land management and aesthetics.2 After the Environmental Studies are completed, a draft of the license application, including the Environmental Report, must be made available to various resource agencies (state and federal) and Indian tribes for comment during a 90-day review period. In addition, PG&E typically makes the draft license application available to the public for comment during this same time period.
Depending on the comments received, the Environmental Report may need to be amended before it is filed with FERC.
PG&E proposes to use the following consultants for the Environmental Studies, including any related work in amending the Environmental Report that may be necessary after the review and comment period:3
1 B.
Current Need for Approval of Expenses for Environmental Studies 2
Related to the FERC License Application for Hamilton Branch 3
As noted above, PG&E has agreed to apply for a FERC license for Hamilton 4
Branch in connection with the Plan. Hamilton Branch is -located in Plumas and Lassen 5
Counties, California, in the same general area as other PG&E hydroelectric facilities that are 6
part of the Upper North Fork Feather River Project ("Feather River Project"). PG&E is 7
currently in the process of preparing an application to re-license these hydroelectric 8
facilities, to be filed by October 31, 2002. PG&E intends to amend the Feather River Project 9
application to add Hamilton Branch, so that Hamilton Branch will become part of the 10 Feather River Project.
11 The consultants described above are already under contract with PG&E for 12 similar work in connection with the Feather River Project. PG&E believes that the total cost 13 for the FERC license application for Hamilton Branch can be minimized by amending the 14 Feather River Project application to include Hamilton Branch, along with using the same 15 consultants.
16 After the Feather River Project application is filed and FERC has reviewed it, 17 FERC will establish a deadline for filing amendments to the application, including an 18 amendment related to Hamilton Branch. PG&E anticipates that the amendment deadline 19 may be set as early as June 1, 2003. However, the-work required to perform the 20 Environmental Studies is season-dependent. Many of the studies must be commenced prior 21 to the summer season or risk being delayed an entire year. If the Environmental Studies are 22 not performed during the summer of 2002, the delay could jeopardize Gen's ability to apply 23 for a FERC license for Hamilton Branch in a timely manner. Therefore, it is critical that this 24 work begin now, in advance of Plan confirmation.
25 To the extent that subsequent events demonstrate that the Environmental Studies 26 will not be necessary, the work can be terminated immediately. PG&E's standard 27 contractual provisions in place with the consultants listed above do not guarantee any future 28 work or any minimum amount of revenue. PG&E also maintains the right to terminate the MOTION FOR AUTHORITY TO INCUR EXPENSES RELATED TO FERC LICENSE 1
contracts at any time without cause, in which case PG&E is liable only for the work 2
performed to the date of termination plus costs reasonably incurred by the consultants in 3
terminating any work in progress.
4 5
I.
6 THE COSTS FOR ENVIRONMENTAL STUDIES FOR HAMILTON BRANCH SHOULD BE APPROVED PURSUANT 7
TO SECTION 363(b)(1) OF THE BANKRUPTCY CODE 8
As set forth above, PG&E seeks approval to pay the various consultants 9
approximately $1 million as a use of estate property that is outside of the ordinary course of 10 business under Bankruptcy Code Section 363(b)(1). Since the services relate to a license 11 application required by the Plan, PG&E believes that the purpose and scope of this 12 expenditure may be characterized as outside of the ordinary course of business and is 13 therefore seeking Court approval.
14 PG&E believes that the consultants described above should not be considered 15 "professional persons" requiring any approval under Bankruptcy Code Section 327(a). This 16 is due both to the nature of the serVices to-be' rovided and.to the consultants' limited role in 17 connection with PG&E's reorganization proceeding.: See In.relThat's Entertainment Mktg.
18 Group, Inc., 168 B.R. 226, 230 (N.D. Cal. 1994); see also In re'Saybrook Mfg. Co., Inc., 108 19 B.R. 366, 368-369 (Bankr.'M.D. Ga. 1989) (in determining whether:a person is a 20 professional for purposes of Section 327, courts consider not only the nature of the services 21 provided but also how central the services are to the reorganization proceeding). Although 22 the Environmental Studies are related to implementation of the Plan, PG&E believes that 23 these services should not be considered "central" to the Chapter 11 case or the Plan 24 proceedings.
25 The Court has considerable discretion in approving a request pursuant to Section 26 363(b)(1) of the Bankruptcy Code ("'[t]he trustee, after notice and a hearing, may use, sell, 27 or lease, other than in the ordinary course of business, property of the estate"). See In re 28 Montgomery Ward Holding Corp., 242 B.R. 147, 153 (D. Del. 1999) (affirming the MOTION FOR AUTHORITY TO INCUR EXPENSES RELATED TO FERC LICENSE 1
bankruptcy court's decision to approve expenditure for employee incentive programs, noting 2
that bankruptcy court has considerable discretion in approving a Section 363(b) motion).
3 In determining whether to authorize a transaction under Section 363(b)(1), courts 4
require a debtor to show that a sound business purpose justifies such actions, applying the 5
business judgment test. See, e.g*, Stephens Indus., Inc. v. McClung, 789 F.2d 386, 389-90 6
(6th Cir. 1986); Comm. of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 7
F.2d 1063, 1071 (2d Cir. 1983); see also 3 Lawrence P. King, Collier on Bankruptcy 8
¶363.02[1][g] (15th ed. rev. 1998).
9 Once the debtor has articulated a rational business justification, a presumption 10 attaches that the decision was made "on an informed basis, in good faith and in the honest 11 belief that the action taken was in the best interest of the [debtor]." See, e.g., Official 12 Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated Res., Inc.),
13 147 B.R. 650, 656 (S.D.N.Y. 1992) (citing Smith v. Van Gorkom, 488 A.2d 858, 872 (Del.
14 1985)).
15 Here, sound business justifications exist for approval of the expenditures related 16 to preparing a FERC license application for Hamilton Branch. PG&E requires the expertise 17 and resources of the consultants to perform the Environmental Studies that will be integral to 18 the preparation of the Environmental Report required by FERC. Delaying the work would 19 likely jeopardize PG&E's ability to timely meet its commitment set forth in the Disclosure 20 Statement, as the work is essential to preparing the amendment to the Feather River Project 21 application.
22 Also, PG&E is solvent and has sufficient cash to pay these expenses without 23 causing any detriment to its creditors.4 Thus, while there is the possibility that the Plan will 24 not be confirmed and therefore some of the Environmental Studies will become unnecessary, 25 this does not justify denial of the expenditure. See Montgomery Ward, 242 B.R. at 154 (no 26 27 4 As reflected in PG&E's April 2002 Monthly Operating Report, PG&E held more than 28
$4.5 billion in cash reserves as of April 30, 2002.
MOTION FOR AUTHORITY TO INCUR EXPENSES RELATED TO FERC LICENSE 1
requirement for debtor to show a successful prospect of reorganization in order to justify 2
expenditure request under Section 365(b)(1)). It is sufficient that PG&E currently has sound 3
business reasons for the expenditure. As shown above, any delay in performing the 4
Environmental Studies would likely prevent PG&E from submitting a license application for 5
Hamilton Branch in a timely manner. Performing the Environmental Studies now will 6
enable PG&E to file the FERC license application for Hamilton Branch in a timely and cost 7
effective manner.
8 9
CONCLUSION 10 For all of the foregoing reasons, PG&E respectfully requests that the Court
.11 approve the expenditures for the Environmental Studies and related work as set forth herein 12 and grant such other and further relief as may be just and appropriate.
13 14 DATED: May 31, 2002 15 Respectfully, HOWARD, RICE, NEMEROVSKI, CANADY, 16
.FALK
& RABKIN 17 A Professional Corporation 18 BY:9 "JULIE B. LANDAU 19 Attorneys for Debtor and Debtor in Possession 20 PACIFIC GAS AND ELECTRIC COMPANY WD 053102/1-1419905/998112/v4 21 22 23 24 25 26 27 28 MOTION FOR AUTHORITY TO INCUR EXPENSES RELATED TO FERC LICENSE