BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 1279 (Hancock) - California Transportation Commission:   
          funding prohibition:  coal shipment
          
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          |Version: April 26, 2016         |Policy Vote: T. & H. 8 - 3      |
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          |Urgency: No                     |Mandate: No                     |
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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.



          Bill  
          Summary:  SB 1279 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.


          Fiscal  
          Impact:  
           CTC costs of $413,000 annually for two new positions to  
            conduct additional project evaluations to determine the impact  
            on the state's capacity to transport coal.  (State Highway  
            Account)
           Minor CTC costs to adopt guidelines prohibiting programming  
            and allocation of state funds for port facility projects.   







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            (State Highway Account)


          Background:  Existing law establishes the CTC, which consists of 11 voting  
          members and two non-voting ex officio members.  The CTC is  
          responsible for programming and allocating funds for the  
          construction of highway, passenger rail, and transit  
          improvements throughout California.  
          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, including $2 billion  
          for Transportation Corridor Improvement Fund (TCIF) projects.   
          The TCIF is a program designed to improve freight movement along  
          trade high-volume trade corridors while reducing diesel  
          particulate and other pollution emissions.  The CTC evaluates  
          TCIF applications based on certain factors and projected  
          outcomes, including increased speed of freight traffic; relief  
          for freight system bottlenecks; and reduction of local and  
          regional emissions of diesel particulate matter, carbon dioxide,  
          oxides of nitrogen, and other pollutants.


          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  
          Oakland City Council designated the base and surrounding  
          properties 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  
          Oakland Bulk and Oversized Terminal, or OBOT).  The Port  
          obtained federal transportation grant funding, as well as  
          additional TCIF funds.  Meanwhile, the City of Oakland forged an  








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          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  
          environmental documents for the project.  CCIG 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 federal  
          mineral leases.  TLS is looking to partner with four Utah  
          counties to export commodities including coal, which would  
          provide four million to five million tons of annual shipping  
          capacity and access to overseas markets in exchange for a $53  
          million investment in OBOT.  TLS has yet to exercise its option  
          to develop the terminal.

          In total, the CTC has allocated $242 million in TCIF funds for  
          the bulk terminal portion of the project.  The TCIF funding is  
          for construction of a proposed intermodal rail terminal complex  
          that will provide a high-density, green intermodal terminal,  
          trade and logistics facilities, marine terminal improvements,  
          and a grade separation connection between intermodal and marine  
          terminals.  The Port of Oakland's 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  








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          applicant to disclose, or commit to, exactly what commodity or  
          commodities would be transported through the terminal.  


          Proposed Law:  
            To the extent consistent with federal law, SB 1279 would  
          prohibit the CTC from programming or allocating any state funds,  
          including the proceeds of bonds, for any project proposed on or  
          after January 1, 2017 at a port facility that is located in or  
          adjacent to a disadvantaged community and that proposes to allow  
          or facilitate the handling, storage, or transportation of coal  
          in bulk.
          The bill would also require the CTC to evaluate each project it  
          considers for consistency with these requirements and determine  
          whether the project would increase the state's overall capacity  
          to facilitate the transportation of coal.


          The bill's requirements would not apply to projects or  
          infrastructure permitted in operation as of January 1, 2016, or  
          to projects designed for safety, rehabilitation, modernization,  
          maintenance, or repair of an existing operation or facility.




          Related  
          Legislation:  SB 1277 (Hancock), which is also scheduled for  
          today's hearing of the Senate Appropriations Committee, would  
          require a public agency with discretionary authority over a  
          proposed project that is necessary for the shipment of coal at  
          the OBOT to prepare a supplemental environmental impact report  
          to consider and mitigate the environmental impacts of coal  
          shipments.


          Staff  
          Comments:  According to the Senate Environmental Quality  
          Committee's analysis of SB 1277:
               "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 -  








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               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."


          This bill seeks to limit the dedication of state funding for  
          projects that facilitate the handling, storage, or  
          transportation of coal because of the potential environmental  
          and air quality impacts.  Specifically, the bill prospectively  
          prohibits the CTC from programming or allocating state funds for  
          projects at ports located in the vicinity of disadvantaged  
          communities for those proposed purposes.  The CTC indicates that  
          it would adopt guidelines to prohibit the allocation of state  
          funds for any project at port facilities since there is no way  
          to feasibly determine that a port project may at some point  
          allow or facilitate the handling, storage, or transportation of  
          coal.  The costs to adopt those guidelines would be minor and  
          absorbable.


          SB 1279 would also require the CTC to evaluate every project it  
          considers (not just port projects) to determine whether or not  
          the proposed project would increase the state's overall capacity  
          to facilitate the transportation of coal.  Staff notes that the  
          CTC annually considers approximately 250 projects under the  
          State Highway Operation and Protection Program (SHOPP), 175  
          projects under the State Transportation Improvement Program  
          (STIP), 200 projects under the Active Transportation Program  
          (ATP), as well as hundreds of projects that are included in  
          lump-sum allocations to regional transportation partners.  The  
          CTC estimates that evaluating hundreds of projects each year to  
          determine whether they would facilitate coal transportation  
          would require two additional staff positions at a cost of  
          approximately $413,000 annually.




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