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 --