BILL ANALYSIS Ó
SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
Senator Jim Beall, Chair
2015 - 2016 Regular
Bill No: SB 1277 Hearing Date: 4/5/2016
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|Author: |Hancock |
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|Version: |3/30/2016 Amended |
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|Urgency: |No |Fiscal: |No |
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|Consultant|Erin Riches and Sarah Carvill |
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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.
ANALYSIS:
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.
COMMENTS:
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
County.
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
rules.
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
project.
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
today.
FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local:
No
POSITIONS: (Communicated to the committee before noon on
Wednesday,
March 30, 2016.)
SUPPORT:
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
inNative
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
Meeting
Physicians for Social Responsibility
Public Advocates
San Francisco Baykeeper
SEIU Local 1021
Sierra Club California
OPPOSITION:
California Railroad Industry
California Teamsters Public Affairs Council
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