BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |RULES COMMITTEE                   |                       SB 1279|
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                                   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  








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            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  







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          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  







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          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  







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            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)







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          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








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          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


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