BILL ANALYSIS                                                                                                                                                                                                    Ó


                                                                    SB 1279


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          Date of Hearing:  June 27, 2016


                        ASSEMBLY COMMITTEE ON TRANSPORTATION


                                 Jim Frazier, Chair


          SB  
          1279 (Hancock) - As Amended June 20, 2016


          SENATE VOTE:  26-12


          SUBJECT:  California Transportation Commission:  funding  
          prohibition:  coal shipment


          SUMMARY:  Prohibits the California Transportation Commission  
          (CTC) from programming or allocating state funds for bulk coal  
          terminal projects, and requires terminal project grantees under  
          specific conditions, to annually report to CTC that the project  
          is not being used to handle, store, or transport bulk coal.   
          Specifically, this bill:  


          1)Makes findings and declarations with regard to impacts  
            associated with the transportation and use of coal.


          2)Declares the intent of the Legislature to cease all  
            investments in transportation infrastructure projects that  
            store, transfer, or transport significant quantities of bulk  
            coal.


          3)Prohibits CTC, to the extent consistent with federal law, from  
            programming or allocating state funds, including bond  
            proceeds, for new bulk coal terminal projects proposed on or  





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            after January 1, 2017.


          4)Requires CTC to evaluate each new terminal project to  
            determine whether or not the purpose or intent of the project  
            is to increase the state's overall capacity to facilitate the  
            transport of bulk coal based on a review of the completed  
            California Environmental Quality Act (CEQA) documents and  
            written confirmation from the lead agency of the project.


          5)Requires a terminal project grantee identified by CTC as  
            subject to this section to annually notify the CTC that the  
            project is not being used to handle, store, or transport bulk  
            coal.


          6)Provides that the prohibition for funding bulk coal terminals  
            does not apply to infrastructure already permitted as of  
            January 1, 2016.


          7)Defines a "new bulk coal terminal" as a terminal that stores,  
            handles, or transports coal in bulk to a degree or  
            significance that is categorized as having the potential for  
            significant impacts in an environmental document prepared  
            pursuant to CEQA as a result of the storage, handling, or  
            transport of coal in bulk.


          8)Provides that a "new bulk coal terminal" does not include a  
            project that is designed for safety, rehabilitation,  
            congestion reduction, modernization, maintenance, or repair of  
            an existing operation or facility, including rail terminals,  
            railyards, rail facilities, rail infrastructure, and rail  
            right-of-way.


          9)Provides that a terminal project does not include a project  
            that is designed for safety, rehabilitation, congestion  
            reduction, modernization, maintenance, or repair of an  





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            existing operation or facility, including rail terminals,  
            railyards, rail facilities, rail infrastructure, and rail  
            right-of-way.


          


          EXISTING LAW:    


          1)Establishes CTC consisting of 11 voting members and two  
            non-voting ex-officio members.  


          2)Vests the CTC with the responsibility for programming and  
            allocating funds for the construction of highway, passenger  
            rail, and transit improvements throughout California.


          3)Vests CTC with responsibility to advise and assist the  
            Secretary of the California State Transportation Agency and  
            the Legislature in formulating and evaluating state policies  
            and plans for California's transportation programs. 


          4)Requires CTC to submit to the Legislature an annual report  
            that, among other things, identifies timely and relevant  
            transportation issues facing California and that may include a  
            discussion of any significant upcoming transportation issues  
            anticipated to be of concern to the public and the  
            Legislature.  


          5)Assigns to the CTCs the responsibility of advising and  
            assisting the Administration and the Legislature in  
            formulating and evaluating state policies and plans for  
            California's transportation programs.  A large part of this  
            responsibility currently includes approving various  
            transportation programs funded by state and federal funds and  
            proposed by both the state and regional transportation  





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            planning entities.


          6)Enacts, pursuant to the passage of Proposition 1B (Prop. 1B),  
            the Highway Safety, Traffic Reduction, Air Quality, and Port  
            Security Bond Act of 2006 that authorized $19.9 billion in  
            general obligation bonds to fund a variety of transportation  
            projects.


          7)Established the Trade Corridor Improvement Fund (TCIF)  
            following the passage of Prop. 1B to distribute $2 billion of  
            Prop. 1B bond funds by the CTC in accordance with established  
            criteria for infrastructure improvements along federally  
            designated "Trade Corridors of National Significance" or along  
            other corridors with high volumes of freight movement.


          FISCAL EFFECT:    Unknown


          COMMENTS:  Coal is a material composed primarily of carbon that  
          has been burned throughout history to produce heat and, in more  
          modern times, to generate electricity.  Burning coal also  
          produces a significant amount of pollution which adversely  
          affects human health and the environment.  Health effects  
          include lung cancer, stroke, and heart disease while the  
          environmental effects include the release of carbon into the  
          atmosphere which contributes to climate change.  Breathing coal  
          dust is also known to cause "black-lung," and it is estimated  
          that in the United States approximately 1,500 former employees  
          of the coal industry die every year from the effects of  
          breathing coal mine dust.

          Background:  After the Oakland Army Base closed in 1999, part of  
          the property reverted to the City of Oakland, while another  
          portion was transferred to the Port of Oakland (Port).  The  
          following year, the Oakland City Council designated the base and  
          surrounding properties as a redevelopment project area and in  
          2009, the Port of Oakland secured TCIF funding for a project to  
          develop warehouse space, logistics facilities, and a rail  





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          terminal on the site.  By diverting freight from trucks to  
          trains, the new rail terminal complex was expected to reduce  
          diesel 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 to significantly expand 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 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.  

          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's Governor signed legislation that would  
          contribute $53 million in transportation funds towards the  
          construction of the new Oakland cargo terminal.  To fund the  
          Oakland project, Utah proposed to use state tax revenue and then  
          reimburse the state with federal royalties from federal mineral  
          leases.  Under the agreement, Utah would have access to overseas  
          markets for shipped products and commodities, such as coal, in  
          exchange for a $53 million investment in OBOT.

          In total, the CTC has allocated $242 million in TCIF funds for  
          the bulk terminal portion of the project, specifically, for the  
          construction of a proposed intermodal rail terminal complex that  





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          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, nor  
          did the applicant disclose or commit to, exactly what commodity  
          or commodities would be transported through the OBOT.  To date,  
          all of the TCIF funding has been allocated and the projects  
          utilizing TCIF funds are nearly completed.

          Author's statement:  According to the author, the project  
          proposal submitted to CTC along with the application for TCIF  
          funds did not disclose that the OBOT would involve the transport  
          and export of coal.  In fact, the author points out that the  
          TCIF application, when referencing 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 author contends that while the TCIF application did not  
          specifically require that the applicant to disclose, or commit  
          to, exactly what commodity or commodities would be transported  
          through the terminal, it is her belief that had the information  
          been provided to CTC with regard to plans for coal transport,  
          the project would likely not have qualified for TCIF funds given  
          that  Prop 1B, as its name implies "The Highway Safety, Traffic  
          Reduction, Air Quality, and Port Security Bond Act of 2006", was  
          explicitly intended to result in air quality improvements.

          To address this issue and to memorialize that state  
          transportation infrastructure funding should not be expended for  
          projects that move significant quantities of bulk coal, the  
          author introduced SB 1279 which would prohibit the CTC from  
          programming or allocating state funds, to the extent that it is  





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          consistent with federal law, for new bulk coal terminals  
          proposed after January 1, 2017.  This bill would also require  
          that CTC evaluate each new bulk terminal project that comes  
          before it for transportation funding to determine whether or not  
          the project would increase the state's ability to transport bulk  
          coal and if not, that any bulk terminal grantees be required to  
          continually submit information to the CTC to ensure that future  
          movement of coal is not undertaken. This bill also declares the  
          Legislature's intent to cease all investments in transportation  
          infrastructure projects that store, transfer, or transport  
          significant quantities of bulk coal.

          Provisions that prohibit the programming or allocation of funds  
          for new bulk terminal projects that transfer coal does not apply  
          to infrastructure that is permitted as of January 1, 2016,  
          appear to exempt the OBO; however, if for some reason the  
          project were to be subject to this legislation, it is unlikely  
          that it would have a substantial impact on the construction of  
          projects currently funded using TCIF monies given that these  
          projects are largely completed.  (The portions of the OBOT that  
          received TCIF funding include construction of a proposed  
          intermodal rail terminal complex, marine terminal improvements,  
          and a grade separation connection between the intermodal and  
          marine terminal.)

          Writing in support of SB 1279, the California Nurses Association  
          notes that coal presents a clear health risk to workers and  
          communities at every state of its lifecycle, and they note that  
          coal pollutants affects all major body organ systems and  
          contributes to four of the five leading causes of mortality in  
          the United States.  They also point out that burning coal is  
          responsible for one third of the carbon emissions in the United  
          States and is the primary contributor to climate change.  For  
          these reasons, CNA believes it is vital that local and state  
          governments do everything possible to reduce and prevent the  
          transport and use of heavily polluting fossil fuels such as  
          coal.

          While organizations such as the Pacific Merchant Shipping  
          Association and the California Railroads have removed their  
          opposition, the League of California Cities (League) remains  





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          opposed to SB 1279 noting that California's ports are some of  
          the busiest in the world and make a critical contribution to the  
          global economy.  The League appropriately contends that a  
          blanket prohibition on allocating state funds because it  
          facilitates the transport of a specific commodity would set a  
          concerning precedent and potentially result in the unintended  
          consequence of making critical infrastructure projects of  
          statewide significance ineligible for public funds.

          While this bill's effect is largely symbolic (in that it is  
          unlikely to impact an existing project), the bill does serve to  
          emphasize California's commitment to policies on climate change  
          and health by ensuring that the state's funding practices are in  
          alignment with its important state policy objectives.  In fact,  
          the Legislature has a history of taking this stand on  
          investments relative to climate change policies with the recent  
          passage of SB 185 [(de León), Chapter 605, Statutes of 2015)  
          which prohibited the California Public Employees' Retirement  
          System (CalPERS) and California State Teachers' Retirement  
          System (CalSTRS) from investing in thermal coal companies along  
          with the call of California's Insurance Commissioner earlier  
          this year asking that the insurance industry divest its  
          interests in coal.  


          Related legislation:  SB 1277 (Hancock), requires a public  
          agency with discretionary authority over the OBOT project to  
          prepare or cause to be prepared a supplemental Environmental  
          Impact Report to consider and mitigate the shipment of coal  
          through the terminal.  SB 1277 is scheduled to be heard by the  
          Assembly Natural Resources Committee on June 27, 2016.

          Previous legislation:  SB 185 (de León), Chapter 605, Statutes  
          of 2015, prohibits CalPERS and CalSTRS from investing in thermal  
          coal companies, as specified.  


          REGISTERED SUPPORT / OPPOSITION:








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          Support
          Alameda County Board of Supervisors
          Alameda County Democratic Central Committee
          Asian Pacific Environmental Network
          Berkley 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 in California
          InNative
          No Coal in Oakland
          Northern California District Council of the International  
          Longshore and Warehouse Union
          Oakland Unified School District
          Physicians for Social Responsibility, San Francisco Bay Chapter
          Public Advocates
          Redlands Area Democratic Club
          San Francisco Baykeeper
          Save the Bay
          Service Employees International Union, Local 1021
          Sierra Club California
          The Peace, Earthcare and Social Witness Committee
          West Oakland Environmental Indicators Project
          350 Bay Area
          1 Individual




          Opposition
          League of California Cities
          California Teamsters Public Affairs Council
          California Trade Coalition





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          Analysis Prepared by:Victoria Alvarez / TRANS. / (916)  
          319-2093