BILL ANALYSIS Ó SB 1279 Page 1 Date of Hearing: August 3, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair SB 1279 (Hancock) - As Amended June 20, 2016 ----------------------------------------------------------------- |Policy |Transportation |Vote:|10 - 5 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill prohibits state funding for future bulk coal terminal projects. Specifically, this bill: 1)Prohibits the California Transportation Commission (CTC), to the extent consistent with federal law, from programming or allocating state funds for new bulk coal terminal projects, as defined and proposed on or after January 1, 2017. 2)Requires CTC to evaluate each new terminal project to determine whether the purpose of the project is to increase SB 1279 Page 2 the state's 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 project's lead agency. 3)Requires a terminal project grantee to annually notify the CTC that the project is not being used to handle, store, or transport bulk coal. 4)Provides that the prohibition for funding bulk coal terminals does not apply to infrastructure permitted as of January 1, 2016. FISCAL EFFECT: Any costs to the CTC will be minor and absorbable. COMMENTS: 1)Background. The burning of coal produces a significant amount of pollution which adversely affects human health and the environment. The Legislature's policies addressing climate change include SB 1368 (Perata), Chapter 598, Statutes of 2006, which had the effect of preventing the state's electric utilities from entering into or renewing contracts for coal-fire electricity generation, and SB 185 (de León), Chapter 605, Statutes of 2015, which prohibits the California Public Employees' Retirement System (CalPERS) and California State Teachers' Retirement System (CalSTRS) from investing in thermal coal companies. SB 1279 Page 3 The CTC has allocated $242 million in general obligation bonds from the Trade Corridor Improvement Fund (TCIF) for the Oakland Bulk and Oversized Terminal Project (OBOT), which has also received federal transportation grant funding. This project at the Port of Oakland involves construction of an 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. 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. 2)Purpose. 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. The author contends that, while such a disclosure was not required as part of the TCIF application, it is her belief that, had the information been provided to CTC with regard to plans for coal transport, the project likely would not have qualified for TCIF bond funds given that the authorizing bond measure, "The Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006", SB 1279 Page 4 was explicitly intended to result in air quality improvements. To address this issue going forward, and to memorialize that state transportation infrastructure funding should not be expended for projects that move significant quantities of bulk coal, SB 1279 prohibits the CTC from programming or allocating state funds, to the extent consistent with federal law, for new bulk coal terminals proposed after January 1, 2017. 3)Opposition. The League of California Cities argues 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. Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081