BILL ANALYSIS                                                                                                                                                                                                    

                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 1277 (Hancock) - California Environmental Quality Act:   
          supplemental environmental impact report:  City of Oakland:   
          coal shipment
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          |Version: April 4, 2016          |Policy Vote: T. & H. 7 - 3,     |
          |                                |          E.Q. 5 - 2            |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: May 16, 2016      |Consultant: Mark McKenzie       |
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          This bill meets the criteria for referral to the Suspense File.

          Summary:  SB 1277 would require a public agency with  
          discretionary authority over a proposed project that is  
          necessary for the shipment of coal at a proposed Oakland port  
          facility to prepare a supplemental environmental impact report  
          (EIR) to consider and mitigate the environmental impacts of coal  

          Impact:  Unknown significant costs, which could be state or  
          local costs depending on which public agency would have the next  
          discretionary authority over approving a project.  These costs  
          would be recovered by fees charged to the project proponent for  
          the cost of preparing the supplemental EIR.  See staff comments.  


          SB 1277 (Hancock)                                      Page 1 of  

           California Environmental Quality Act (CEQA)
           Existing CEQA law generally requires lead agencies with the  
          principal responsibility for carrying out or approving a  
          proposed discretionary project to prepare a negative  
          declaration, mitigated negative declaration, or EIR for this  
          action.  Generally, an EIR must accurately describe the proposed  
          project, identify and analyze each significant environmental  
          impact expected to result from the proposed project, identify  
          mitigation measures to reduce those impacts to the extent  
          feasible, and evaluate a range of reasonable alternatives to the  
          proposed project.  If mitigation measures are required or  
          incorporated into a project, the agency must adopt a reporting  
          or monitoring program to ensure compliance with those measures.

          Lead agencies and other responsible agencies are required to  
          prepare a subsequent or supplemental EIR only if specified  
          events occur, such as when new information of substantial  
          importance was not known or could not have been known without  
          the exercise of reasonable due diligence at the time the  
          original EIR was certified.  When the original EIR has been  
          certified, comprehensive analysis of the project is presumed to  
          have already taken place and the question becomes whether  
          circumstances have changed enough to justify repeating a part of  
          the environmental review process.  A supplemental EIR need only  
          address those EIR topics that require major revisions to the  
          original EIR.  If the project was approved by the lead agency  
          before the conditions that trigger a supplemental EIR occurred,  
          then the supplemental EIR must be prepared by the public agency  
          that grants the next discretionary approval for the project.
          Existing law authorizes a lead agency to charge and collect a  
          reasonable fee from a project proponent to recover the estimated  
          costs incurred by the lead agency in preparing a negative  
          declaration or an EIR, as specified.

           The Oakland Bulk and Oversized Terminal (OBOT) and coal 
           After the Oakland Army Base was closed in 1999, part of the  
          property reverted to the City of Oakland, while another portion  
          was transferred to the Port of Oakland.  The following year, the  


          SB 1277 (Hancock)                                      Page 2 of  
          Oakland City Council designated the base and surrounding  
          properties as a redevelopment project area, and the City of  
          Oakland prepared an EIR in 2002 related to proposed development  
          in the project area.  In 2009, the Port of Oakland secured state  
          transportation bond funding for a project to develop warehouse  
          space, logistics facilities, and a rail terminal on the site.  

          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 (OBOT).  
           The expansion required an update to the original EIR that was  
          completed in 2002, and the City prepared an addendum in 2012.  

          The City entered into an agreement with two private entities,  
          California Capital and Investment Group (CCIG) and Prologis, to  
          develop the site and find 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 original and addendum environmental documents  
          for the project.  CCIG subsequently executed a contract with  
          Terminal Logistics Solutions (TLS) as a long-term lessee that  
          would also manage an existing track network.

          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 proposed 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 early 2016, Utah Governor Gary Herbert signed legislation  
          that would contribute $53 million in Utah transportation funds  
          towards the construction of the new Oakland cargo terminal.  To  
          fund the Oakland project, Utah would use state tax revenue and  
          then reimburse the state with federal royalties from mineral  
          leases.  TLS is looking to partner with four Utah counties to  
          export commodities including coal, providing four to five  
          million tons of annual shipping capacity and access to overseas  
          markets in exchange for a $53 million investment in the OBOT.   


          SB 1277 (Hancock)                                      Page 3 of  
          TLS has yet to exercise its option to develop the terminal.

          According to the Senate Environmental Quality Committee's  
          analysis of this bill:

               "Coal dust is a fine powdered form of coal, which is  
               created by the crushing, grinding, or pulverizing of coal.   
               Because of the brittle nature of coal, coal dust can be  
               created during mining, transportation, or by mechanically  
               handling coal.  Also, not all coal is created equally -  
               some types break down into dust more easily than others.   
               Particulate matter from the transportation of coal can  
               impact air quality, and severe exposure to coal dust can  
               cause various pulmonary diseases.  In addition, questions  
               may arise regarding potential environmental impacts caused  
               by chronic, low-level input of coal dust that may result  
               from steady coal shipment traffic.  For example, could the  
               transportation of coal cause pollutant emissions, noise,  
               potential fires, or leaching of chemicals?  Could coal dust  
               cover the leaves of nearby vegetation and reduce its  
               photosynthesis capabilities or have toxic effects on public  
               health or wildlife?"

          Proposed Law:  
            SB 1277 would require a public agency with discretionary  
          authority over a project that is necessary for, and directly  
          related to, the use of the OBOT for the shipment of coal, to  
          prepare or cause to be prepared a supplemental EIR to consider  
          and mitigate the environmental impacts of coal shipment through  
          the terminal, prior to approving the project.
          The bill also includes extensive findings and declarations.   
          Among these is a statement that coal was not considered as a  
          commodity that would be shipped through the terminal when the  
          City of Oakland prepared the 2012 EIR, but that there is a  
          current proposal to export coal from the OBOT.  There is also a  
          finding that this constitutes a change in the proposed project  
          that is new information that was not known and could not have  
          been known at the time the EIR was certified as complete.


          SB 1277 (Hancock)                                      Page 4 of  

          Legislation:  SB 1279 (Hancock), which is also scheduled for  
          hearing in this Committee, would prohibit the California  
          Transportation Commission (CTC) from programming or allocating  
          state funds for proposed projects at certain port facilities  
          that are involved in the handling, storage, or transportation of  
          coal.  The bill would also require the CTC to evaluate every  
          project it considers to determine whether it will increase the  
          state's capacity to facilitate the transportation of coal.

          Comments:  Since there has been no action on the local level to  
          consider the environmental impacts related to the transportation  
          and shipment of coal through the proposed OBOT, this bill  
          requires the next public agency with discretionary authority  
          over a project related to the terminal to prepare a supplemental  
          EIR that would consider and mitigate those impacts.  This duty  
          could fall to any one of several public entities that may have  
          permitting authority over a project, including the City of  
          Oakland, the Bay Area Air Quality Management District (BAAQMD),  
          the San Francisco Bay Conservation and Development Commission  
          (BCDC),  or other public agency.  To the extent the  
          responsibility is placed upon a local agency, any costs related  
          to the preparation of a supplemental EIR would not be  
          reimbursable from the state because existing law provides fee  
          authority to offset those costs.  To the extent the  
          responsibility falls to a state entity, there would be  
          significant state costs, and potentially peripheral impacts if  
          the agency has no expertise in considering environmental issues  
          that fall outside of its purview.  These costs would eventually  
          be recovered by fees charged to the project proponent for the  
          cost of preparing the supplemental EIR, but the responsible  
          agency could experience significant workload disruptions and  
          incur secondary fiscal impacts.

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