BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: SB 1279 Hearing Date: 4/12/2016 ----------------------------------------------------------------- |Author: |Hancock | |----------+------------------------------------------------------| |Version: |4/4/2016 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Erin Riches | |: | | ----------------------------------------------------------------- SUBJECT: California Transportation Commission: funding prohibition: coal shipment DIGEST: This bill prohibits the California Transportation Commission (CTC) from programming or allocating funds for any port facility project located in or adjacent to a disadvantaged community which exports or proposes to export coal from California. ANALYSIS: AB 32 and disadvantaged communities AB 32 (Núñez and Pavley, Chapter 488, Statutes of 2006) requires the state Air Resources Board (ARB) develop a plan to reduce emissions to 1990 levels by 2020. It also requires ARB to ensure that programs 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. SB 1279 (Hancock) Page 2 of ? 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 Trade Corridor Improvement Fund (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 particulate matter (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 City forged an agreement with two 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 SB 1279 (Hancock) Page 3 of ? 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 exchange for investing in the bulk terminal, Utah hoped to secure the right to ship a fixed amount of cargo through it each year. 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, this deal. 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 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 CTC from programming or allocating any state funds under its jurisdiction for any project at a port facility located in or adjacent to one or more DACs, that exports or proposes to export coal from the state. 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 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 SB 1279 (Hancock) Page 4 of ? 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 disadvantaged community (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)How would this bill impact the Oakland project? TCIF requires 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. On the other hand, allowing the shipment of coal through the bulk terminal could conflict with AB 32 goals to reduce GHG emissions. 4)How might this bill impact other ports? This bill applies to ports in or adjacent to one or more DACs. The state of Utah currently exports about 1 million tons of coal each year, mainly through the ports of Richmond, Stockton, and Long Beach. The committee understands that the Port of Stockton is located in a DAC, while the ports of Long Beach and Richmond are located near DACs; thus, this bill could potentially prohibit any more public funding from being allocated to these ports. The ports of Los Angeles and West Sacramento are located in DACs, but the committee is not aware that coal is currently being shipped through these ports. SB 1279 (Hancock) Page 5 of ? 5)Opposition concerns. The California Teamsters Public Affairs Council, writing in opposition to the February 19 version of this bill, stated that "It should be up to the countries that import fuels to determine whether they wish to ban a product." The California Railroad Industry, writing in opposition to the current version of this bill, states that because it applies to every port in California and therefore appears to restrict coal exports statewide, it appears to violate both U.S. treaty obligations and the Commerce Clause. In response, the author states that Legislative Counsel indicates that this bill would only place restrictions on funding, not commodities; furthermore, these restrictions would only be on public funding, with no impact on private funding. In addition, this bill would only affect other ports in California if they have received public funding. To help address opposition concerns, the author amended this bill on March 30 to clarify that it will be implemented only to the extent it is consistent with federal law. In addition, the author amended this bill on April 4 to change "public funds" to "state funds" to avoid any potential conflict with federal or local funds. Related Legislation: SB 1277 (Hancock) - This bill requires a public agency with discretionary authority over the Bulk and Oversized Terminal project, located in the former Oakland Army Base, to prepare or cause to be prepared a supplemental EIR to consider and mitigate the shipment of coal through the terminal. This bill is also being heard by this committee today. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No POSITIONS: (Communicated to the committee before noon on Wednesday, April 6, 2016.) SUPPORT: Alameda County Democratic Central Committee Berkley Climate Action Coalition California Nurses Association SB 1279 (Hancock) Page 6 of ? City of Berkeley City of Emeryville City of Richmond East Bay Young Democrats Ecology Center El Cerrito Democratic Club Environment California Fossil Free 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 West Oakland Environmental Indicators Project One individual OPPOSITION: California Railroad Industry California Teamsters Public Affairs Council -- END --