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 ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 26, 2016 |Policy Vote: T. & H. 8 - 3 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 16, 2016 |Consultant: Mark McKenzie | | | | ----------------------------------------------------------------- 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. SB 1279 (Hancock) Page 1 of ? (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 SB 1279 (Hancock) Page 2 of ? 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 SB 1279 (Hancock) Page 3 of ? 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 - SB 1279 (Hancock) Page 4 of ? 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. -- END -- SB 1279 (Hancock) Page 5 of ?