BILL ANALYSIS                                                                                                                                                                                                    Ó

                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          SB 1277           Hearing Date:    4/5/2016
          |Author:   |Hancock                                               |
          |Version:  |3/30/2016    Amended                                  |
          |Urgency:  |No                     |Fiscal:      |No              |
          |Consultant|Erin Riches and Sarah Carvill                         |
          |:         |                                                      |

          SUBJECT:  Ports and harbors: City of Oakland: coal shipment

            DIGEST:  This bill prohibits the transport of coal to or through  
          the Bulk and Oversized Terminal located in the former Oakland  
          Army Base.

          AB 32 and Disadvantaged Communities

          AB 32 (Núñez and Pavley, Chapter 488, Statutes of 2006) requires  
          the state Air Resources Board (ARB) to develop a plan to reduce  
          emissions to 1990 levels by 2020.  It also requires ARB to  
          ensure that programs to reduce greenhouse gas (GHG) emissions  
          are targeted, to the extent feasible, to the most disadvantaged  
          communities (DACs) in the state.  AB 32 authorizes ARB to  
          deposit any fees paid by GHG emission sources into the  
          Greenhouse Gas Reduction Fund (GGRF).

          SB 535 (De León, Chapter 830, Statutes of 2012) requires 25% of  
          GGRF funds to be allocated to projects that provide benefits to  
          DACs, and at least 10% to projects located within DACs.  DACs  
          have been identified by the California Environmental Protection  
          Agency using census tract data based on geographic,  
          socioeconomic, public health, and environmental hazard criteria.  

          Proposition 1B and the Trade Corridor Improvement Fund (TCIF) 


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          Proposition 1B, the Highway Safety, Traffic Reduction, Air  
          Quality, and Port Security Bond Act of 2006, was approved by  
          California voters in November 2006.  Proposition 1B authorized  
          the issuance of $19.9 billion in general obligation bonds to  
          fund a variety of transportation projects.  Of this, $2 billion  
          was allocated to the TCIF for infrastructure improvements along  
          high-volume freight corridors.

          The TCIF program requires at least a 50% match from local,  
          federal, or private sources.  The project application must  
          include a specific description of non-TCIF funding (source,  
          amount, and availability) to be applied to the project.  The  
          California Transportation Commission (CTC) evaluates TCIF  
          applications based on factors including increased speed of  
          freight traffic; relief for freight system bottlenecks; and  
          reduction of local and regional emissions of diesel particulate  
          matter (PM), carbon dioxide (CO2), oxides of nitrogen (NOx), and  
          other pollutants.

          The Oakland Army Base Redevelopment Project 

          After the Oakland Army Base was closed in 1999, part of the  
          property reverted to the City of Oakland while another portion  
          went to the Port of Oakland.  The following year, the Oakland  
          City Council designated the base and surrounding properties, an  
          area totaling 1,800 acres, as a redevelopment project area.  In  
          2009, the Port of Oakland secured TCIF funding for a project to  
          develop warehouse space, logistics facilities, and a rail  
          terminal on the site.  By diverting freight from trucks to  
          trains, the new rail terminal complex was expected to reduce  
          diesel PM emissions while simultaneously increasing the  
          efficiency of goods movement through the Port.    

          Following the dissolution of the redevelopment agency in 2012,  
          the area owned by the redevelopment agency was transferred to  
          the City of Oakland. The Port and the City began working  
          together on the site and significantly expanded the scope of the  
          redevelopment, including the addition of a bulk terminal.  The  
          Port obtained a grant under the federal Transportation  
          Investment Generating Economic Recovery (TIGER) program, as well  
          as additional TCIF funds.  The expansion of the project required  
          an update to the environmental impact report (EIR) completed in  
          2002; an addendum was prepared in 2012.  

          Meanwhile, the Port and the City forged an agreement with two  


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          private entities, California Capital and Investment Group (CCIG)  
          and Prologis, to develop the site.  These two companies were  
          tasked with finding additional investors and tenants for the  
          project.  Details of what commodities would be transported  
          through the bulk terminal were largely contingent upon the  
          contracts that would be executed, and therefore were not  
          reviewed in the new environmental documents.

          To date, the Port and the City have secured about two-thirds of  
          needed project funding.  Of this, the majority comes from public  
          funding sources; specifically, the state TCIF ($242 million);  
          the federal TIGER program ($15 million); the Port of Oakland  
          ($16 million); and the City of Oakland ($55 million).  In  
          addition, CCIG and Prologis have identified funding totaling  
          approximately $172 million.  

          In spring of 2015, stories surfaced in the media revealing that  
          the state of Utah was in discussions with Port developers about  
          shipping coal from Utah to China through the bulk terminal in  
          Oakland.  Utah currently exports about 1 million tons of coal  
          each year, mainly through the ports of Richmond, Stockton, and  
          Long Beach.  As coal-fired power plants in the U.S. close or  
          switch to natural gas, access to overseas markets is becoming  
          increasingly important for coal-producing states.  In February  
          2016, eight working days before the end of the Utah legislative  
          session, a bill surfaced to authorize, and provide $53 million  
          in funding for, the deal with the Port.  The legislation passed  
          by a wide margin and is currently on the desk of the state's  
          Republican Governor, Gary Herbert, who is expected to sign it.  

          As noted above, the Port and the City had tasked two companies,  
          CCIG and Prologis, to come up with additional project funding.   
          CCIG, in turn, executed a contract with Terminal Logistics  
          Solutions, a company headed by Jerry Bridges, a former executive  
          director of the Port of Oakland.  It was this company that  
          negotiated the deal with Utah. 

          This bill prohibits the transport of coal to or through the Bulk  
          and Oversized Terminal located in the former Oakland Army Base.


          1)Purpose.  The author states that coal transport spreads the  
            damages caused by coal dust and contributes to the likelihood  
            that residents in adjacent communities will suffer from  


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            illnesses linked to pollution, such as cancer, heart disease,  
            and asthma.  Coal dust is a source of PM that is dangerous to  
            breathe and is responsible for most occupational lung disease.  
             West Oakland is already heavily impacted by pollution: its  
            residents are 2.5 times more likely to get cancer due to  
            breathing air which contains three times the amount of diesel  
            PM than air in other parts of the Bay Area.  In addition, West  
            Oakland residents are two times as likely to go to the  
            emergency room with asthma as people in other parts of Alameda  

            The author states that the initial redevelopment project  
            proposal provided to the CTC in the TCIF application did not  
            include the potential for the transport and export of coal,  
            nor did the initial EIR examine the use of a coal export  
            facility.  Now, however, the project proposes to transport up  
            to 9 million tons of coal each year from Utah, through the  
            Port, to China and other countries.  West Oakland, the  
            location of the project, has already been designated by the  
            state as a DAC due to its high asthma rates, cancer risks, and  
            pollution levels.  The author states that this proposal is not  
            in accordance with Proposition 1B and contradicts California's  
            efforts in reducing climate change.
          2)Why didn't the TCIF application mention coal?  The TCIF  
            application, in reference to the bulk terminal portion of the  
            project, stated that it would be "converted to a modern bulk  
            cargo marine terminal for movement of commodities such as iron  
            ore, corn, and other products brought in to the terminal by  
            rail ? the terminal would also accommodate project cargo such  
            as windmills, steel coils, and oversized goods."  The TCIF  
            application did not require the applicant to disclose, or  
            commit to, exactly what commodity or commodities would be  
            transported through the terminal.

          3)Does coal shipment violate the terms of Proposition 1B?  The  
            author states that "the state needs to analyze whether funding  
            infrastructure for a coal export facility violates the intent  
            of Proposition 1B.  California cannot continue to finance a  
            project that would harm the air quality, health and safety of  
            West Oakland residents as well as all Californians."  

            The TCIF guidelines state that "Proposition 1B mandates that  
            the Commission program and allocate TCIF monies in a manner  
            that," among other things, "places emphasis on projects that  
            improve trade corridor mobility while reducing emissions of  


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            diesel particulate and other pollutant emissions."  By  
            shifting goods movement from trucks to trains, the Oakland  
            project will indeed reduce diesel PM in keeping with the  
            intent of the TCIF.  However, if coal is shipped on these  
            trains, the project potentially could also increase CO2  
            emissions via coal dust from the rail cars.  Nonetheless,  
            since the TCIF application did not require a commitment to a  
            certain commodity or commodities to be transported through the  
            terminal, the project developers did not violate any program  

          4)CTC's authority relating to project amendments.  TCIF award  
            recipients must submit quarterly reports to the CTC on project  
            implementation, including the "commitment status of  
            supplemental funding identified in the project baseline  
            agreement."  If the implementing agency anticipates that costs  
            will exceed the approved project budget, it must submit a plan  
            to the CTC that either downsizes the scope of the project or  
            identifies alternative funding sources.  The CTC may either  
            approve the corrective plan or direct the implementing agency  
            to modify its plan.  In the case of the Oakland project,  
            neither the funding source nor the funding amount changed;  
            rather, the commodities that were expected to be shipped  
            through the bulk terminal changed.  Since the original  
            application did not require a commitment to what commodity or  
            commodities would be shipped through the terminal, it does not  
            appear the CTC had cause to further review this project.

          5)Could the rail cars be covered to reduce coal dust concerns?   
            West Oakland has been identified by the state as a DAC  
            pursuant to SB 535.  As such, the prospect of rail cars full  
            of coal raises concerns in the community about coal dust from  
            the cars further polluting the local air.  The solution would  
            appear simple: cover the rail cars.  However, the committee  
            understands that the technology to do this either does not  
            exist or is prohibitively expensive.  In addition, the  
            railroads indicate they already conduct some degree of  
            mitigation for coal dust out of concern for track safety; for  
            example, coal can be coated before it leaves the mine in order  
            to reduce the amount of dust.  The author states that while  
            Utah already ships coal through several other California  
            ports, there are no current studies which highlight that coal  
            is not impactful to communities through which it travels.  

          6)How would this bill impact the Oakland project?  TCIF requires  


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            at least a 50% match from local, federal, or private sources.   
            By prohibiting transport of coal through the Port, this bill  
            would effectively eliminate $53 million worth of matching  
            funds.  Forcing the project developers to find an alternative  
            funding source potentially poses the risk of delaying the  

          7)Does this bill violate federal law?  The California Railroad  
            Industry, writing in opposition to this bill, states that its  
            provisions "reach far beyond the bounds of California's  
            regulatory authority in a number of different areas" such as  
            interfering with federal rail operations, discriminating  
            against common carriers, restricting the export of coal in  
            conflict with multiple treaties to which the U.S. is a party,  
            discriminating against interstate and foreign commerce, and  
            imposing retroactive restrictions on a project that has  
            already been approved.  

            The author states that Legislative Counsel indicates that this  
            bill only addresses regulation of a commodity, not regulation  
            of railroad operations.  In addition, this bill would only  
            apply retroactively, in cases where project money has already  
            been allocated - not prospectively.  To help allay concerns,  
            the author amended this bill on March 31 to clarify that it  
            will be implemented only to the extent it is consistent with  
            federal law.  
          8)Double-referral.  This bill has also been referred to the  
            Environmental Quality Committee.

          Related Legislation:
          SB 1278 (Hancock) - requires every public agency with  
          discretionary approval of any portion of a project relating to  
          the shipment of coal through the Port of Oakland to prepare or  
          cause to prepare an EIR.  This bill is also being heard by this  
          committee today.

          SB 1279 (Hancock) - prohibits the CTC from programming or  
          allocating any funds for any port facility project in or  
          adjacent to one or more DACs which exports or proposes to export  
          coal from California.  This bill is also being heard by this  
          committee today.

          SB 1280 (Hancock) - requires, for any project receiving TCIF  


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          monies, either a ban on coal shipment or full mitigation of the  
          coal shipment.  This bill is also being heard by this committee  

          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  No    Local:  

            POSITIONS:  (Communicated to the committee before noon on  
                          March 30, 2016.)

          Alameda County Democratic Central Committee
          California Nurses Association
          City of Berkeley
          City of Emeryville
          City of Richmond
          East Bay Young Democrats
          El Cerrito Democratic Club
          Environment California
          Friends Committee on Legislation
          International Longshore and Warehouse Union, Northern California  
               District Council 
          No Coal in Oakland
          Oakland Unified School District
          Peace, Earthcare, and Social Witness Committee of Strawberry  
          Creek Quaker 
          Physicians for Social Responsibility 
          Public Advocates
          San Francisco Baykeeper
          SEIU Local 1021
          Sierra Club California


          California Railroad Industry
          California Teamsters Public Affairs Council



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