BILL ANALYSIS Ó SB 1279 Page 1 SENATE THIRD READING SB 1279 (Hancock) As Amended August 4, 2016 Majority vote SENATE VOTE: 26-12 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Transportation |10-5 |Frazier, Baker, |Linder, Kim, | | | |Bloom, Brown, Chu, |Mathis, Melendez, | | | |Daly, Dodd, |O'Donnell | | | | | | | | | | | | | |Eduardo Garcia, | | | | |Gomez, Nazarian | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |14-6 |Gonzalez, Bloom, |Bigelow, Chang, | | | |Bonilla, Bonta, |Gallagher, Jones, | | | |Calderon, Daly, |Obernolte, Wagner | | | |Eggman, Eduardo | | | | |Garcia, Holden, | | | | |Quirk, Santiago, | | | | |Weber, Wood, Chau | | | | | | | SB 1279 Page 2 | | | | | ------------------------------------------------------------------ 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 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 SB 1279 Page 3 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 existing operation or facility, including rail terminals, railyards, rail facilities, rail infrastructure, and rail right-of-way. FISCAL EFFECT: According to the Assembly Appropriations Committee, any costs to the CTC will be minor and absorbable. COMMENTS: 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 SB 1279 Page 4 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 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 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 (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 United States (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 SB 1279 Page 5 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 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." SB 1279 Page 6 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 this bill, which would prohibit the CTC from programming or allocating state funds, to the extent that it is 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 SB 1279 Page 7 intermodal rail terminal complex, marine terminal improvements, and a grade separation connection between the intermodal and marine terminal.) 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. Please see the policy committee analysis for full discussion of this bill. Analysis Prepared by: Victoria Alvarez / TRANS. / (916) 319-2093 FN: 0003864 SB 1279 Page 8