BILL ANALYSIS Ó ----------------------------------------------------------------- |RULES COMMITTEE | SB 1279| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 1279 Author: Hancock (D) Amended: 5/31/16 Vote: 21 SENATE TRANS. & HOUSING COMMITTEE: 8-3, 4/19/16 AYES: Beall, Allen, Galgiani, Leyva, McGuire, Mendoza, Roth, Wieckowski NOES: Cannella, Bates, Gaines SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16 AYES: Lara, Beall, Hill, McGuire, Mendoza NOES: Bates, Nielsen SUBJECT: California Transportation Commission: funding prohibition: coal shipment SOURCE: Author 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 proposes to allow or facilitate the handling, storage, or transportation of coal in bulk. ANALYSIS: Existing law: 1)Establishes the CTC, which consists of 11 voting members and SB 1279 Page 2 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. 2)Enacts, pursuant to Proposition 1B (Prop. 1B), enacts the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006 and authorizes $19.9 billion in general obligation bonds to fund a variety of transportation projects. (Government Code §8879.22 et seq.) This bill: 1)Prohibits the CTC from programming or allocating any state funds under its jurisdiction for any project proposed on or after January 1, 2017, that proposes to allow or facilitate the handling, storage, or transportation of coal in bulk for any project at a port facility located in or adjacent to one or more disadvantaged communities (DACs). 2)Requires the CTC to determine whether or not a project's purpose or intent is increase the state's overall capacity to facilitate the transportation of coal, based on a review of completed environmental documents and written confirmation from the lead agency on the project. 3)Requires a recipient of funds allocated by the CTC to annually notify the CTC that the project is not being used to handle, store, or transport coal in bulk. 4)Excludes projects or infrastructure at port facilities that were already permitted in operation as of January 1, 2016, as well as those designed for safety, rehabilitation, congestion reduction, modernization, maintenance, or repair of an existing operation or facility, including rail terminals, yards, facilities, infrastructure, and right-of-way. Background 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 SB 1279 Page 3 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 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 SB 1279 Page 4 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 was signed by Governor Gary Herbert on March 22, 2016. 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. Comments 1)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. 2)How might this bill impact the Oakland project? TCIF requires at least a 50% match from local, federal, or private sources. As currently written, this bill excludes projects that were already permitted in operation as of January 1, 2016 and thus would likely not threaten the $53 million worth of matching funds for Oakland project. 3)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 SB 1279 Page 5 located in a DAC, while the ports of Long Beach and Richmond are located in or near DACs; thus, this bill could potentially prohibit any more public funding from being allocated to these ports. 4)Recent amendments. To help address opposition concerns, the author amended this bill in the Appropriations Committee to require the CTC, instead of evaluating the project in relation to transportation of coal, to review completed environmental documents and written confirmation from the project's lead agency; require fund recipients to annually report to the CTC that the funds are not being used in relation to coal in bulk; and to clarify exemptions from this bill. The California Railroad Industry indicated on May 9 that it would remove its opposition if the amendment was taken to exempt rail terminals, yards, and facilities; this amendment was taken in Appropriations Committee. Related/Prior Legislation SB 1277 (Hancock, 2016) 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.FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee: 1)Minor CTC costs to adopt guidelines prohibiting programming and allocation of state funds for port facility projects. (State Highway Account) 2)Likely minor CTC costs to determine consistency with specified requirements and also whether or not an applicable project at a port facility near a disadvantaged community is intended to increase overall capacity to facilitate coal transportation. SUPPORT: (Verified5/27/16) SB 1279 Page 6 Alameda County Democratic Central Committee Berkeley Climate Action Coalition California Interfaith Power and Light California Nurses Association 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 Save the Bay SEIU Local 1021 Sierra Club California West Oakland Environmental Indicators Project 350 Bay Area One individual OPPOSITION: (Verified5/27/16) California Capital and Investment Group California Railroad Industry California Teamsters Public Affairs Council California Trade Coalition League of California Cities Pacific Merchant Shipping Association SB 1279 Page 7 ARGUMENTS IN SUPPORT: 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 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. ARGUMENTS IN OPPOSITION: Opponents raise a variety of concerns about this bill, including the possibility that it might violate U.S. treaty obligations and the Commerce Clause; concerns about the legal implications of singling out port infrastructure; the potential impact on existing business relationships and operations; and singling out a single commodity. Prepared by:Erin Riches / T. & H. / (916) 651-4121 5/31/16 20:45:39 **** END **** SB 1279 Page 8