BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    SB 1279


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          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     |                    |
          |                |     |                      |                    |








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          |                |     |                      |                    |
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          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  








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            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  








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          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  








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          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."  









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          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  








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          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















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