BILL ANALYSIS �
SB 234
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Date of Hearing: July 2, 2012
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
SB 234 (Hancock) - As Amended: June 15, 2012
SUBJECT : Highway Safety, Traffic Reduction, Air Quality, and
Port Security Bond Act of 2006 (Bond Act): shoreside electrical
power infrastructure funds
SUMMARY : Requires the California Air Resources Board (ARB) to
disperse Bond Act funds for projects that provide shorepower for
vessels. Specifically, this bill :
1)Requires ARB to disburse Bond Act funds, that are appropriated
and allocated for a project, upon a port entering into a
design or construction contract, or both, for the shorepower
project.
2)Requires ARB to revise its guidelines for the "Ships at Berth
and Cargo Handling Equipment Projects" to also consider a
project fully operational if the facility providing on-shore
electrical power has completed a building and safety
inspection and load bank testing.
EXISTING LAW :
1)Enacts the Bond Act, approved by the voters as Proposition 1B
on November 7, 2006, that includes a $1 billion Goods Movement
Emission Reduction Program (Prop 1B Program) administered in
partnership between ARB and local agencies (air districts and
ports) to quickly reduce air pollution emissions and health
risk from freight movement along California's trade corridors.
Authorizes funds for on-shore electrical power for ocean
freight carriers calling at the state's seaports to reduce the
use of auxiliary and main engine ship power.
2) Establishes, through ARB's "Regulation to Reduce
Emissions from Diesel Auxiliary Engines on Ocean-Going
Vessels while at Berth at a California Port," measures to
reduce emissions of diesel particulate matter (PM),
nitrogen oxides, and sulfur oxides from the use of
auxiliary diesel engines and diesel-electric engines from
the operation of auxiliary engines on container vessels,
passenger vessels, and refrigerated cargo vessels while
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these vessels are docked at berth at a California port.
3) Establishes ARB, in partnership with local air
districts, to oversee all air pollution control efforts to
attain and maintain health-based air quality standards in
California.
FISCAL EFFECT : Unknown
COMMENTS : Ocean-going vessels are a significant source of
harmful air emissions in California that negatively affect the
health of millions of residents. Technologies are currently
available that provide shoreside electrical power to a ship at
berth while its main and auxiliary engines are turned off. Such
technologies in place are commonly referred to as cold ironing,
alternative maritime power, shorepower or shore supply. These
technologies are eligible for grant funding through the Prop 1B
Program administered by ARB. The grant funds are passed through
ARB and administered by the regional air quality management
districts with the grantee. In accordance with the Prop 1B
Program, local agencies can receive grant funding from ARB
provided that they can demonstrate a project's capability to
reduce hoteling (or at-berth) emissions and associated health
impacts from diesel-fueled auxiliary engines on board ships
docked at California ports by either on-shore applications or
ship engine emission capture technologies.
In December 2007, ARB approved a regulation to reduce emissions
from diesel auxiliary engines on container ships, passenger
ships, and refrigerated-cargo ships while berthing at a
California port. The regulation defines a California port as
the Ports of Los Angeles, Long Beach, Oakland, San Diego, San
Francisco, and Hueneme. The regulation provides vessel fleet
operators visiting these ports two options to reduce at-berth
emissions from auxiliary engines: 1) turn off auxiliary engines
for most of a vessel's stay in port and connect the vessel to
some other source of power, most likely grid-based shore power;
or 2) use alternative control techniques that achieve equivalent
emission reductions.
Further, the Prop 1B Program authorized $100 million for
shorepower projects or emission capture technologies. By
statute, these Prop 1B Program funds can only be used for
emission reductions "not otherwise required by law or
regulation." (see prior paragraph). Further, the Prop 1B
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Program implementing statutes (see "Related Bills" section)
requires ARB to adopt guidelines to administer the $100 million
port emission reduction program to include the following:
1)An application process for the funds and any limits on
administrative costs.
2)Requirements that local agencies identify the useful life of
the project and project delivery milestones as part of the
application process.
3)Criteria for selection of local agency projects and equipment
projects.
4)Requirements for match funding.
5)The method by which ARB will consider an air basin's status in
achieving state and federal air quality standards.
6)Requirements that grant agreements between ARB and local
agencies identify project milestones and remedies for failure
to meet project milestones.
7)Accountability and auditing requirements, including provisions
for audits of project expenditures and outcomes.
ARB adopted the guidelines in March 2010, governing the
expenditure of the Prop 1B Program's $100 million grant funds
for port emission reduction projects. The guidelines, among
other items, require:
1)Projects to be plug-in ready prior to funds to be reimbursed
to applicants.
2)Large shipping lines to meet 50% fleet plug-in shoreside
requirements in 2014-2016.
3)Shorepower electrification contracts to include provisions for
non-performance penalties.
4)A statement that all grant funds will be forfeited for any
grid-based ships at berth or ship emissions capture and
control system project that is not fully operational by
December 31, 2013, unless the grant funds will fund a berth
project that serves only ships not subject to ARB's shorepower
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regulations.
In spring 2011, subsequent to the adoption of the guidelines,
California's regional air quality management districts (AQMDs),
the entities managing the Prop 1B Program funding on behalf of
ARB, solicited requests for the use of the grant monies to the
ports. The Ports of Hueneme, Long Beach, Los Angeles, and
Oakland each requested grant funding for their particular
shorepower, electrical plug-in infrastructure projects. To
receive their Prop 1B Program grant funds, the Ports of Hueneme,
Long Beach, and Los Angeles separately entered into contracts
with the South Coast Air Quality Management District (South
Coast). Further, the Port of Oakland entered into a Prop 1B
Program grant agreement with the Bay Area Air Quality Management
District (BAAQMD).
ARB's current Prop 1B Program guidelines (guidelines) allow
reimbursement to the ports for funds that they have expended for
their shorepower grant projects only upon demonstration of
actual vessel "plug-in" of the project, thus giving ARB and the
AQMDs assurances that the equipment is functional. According to
this bill's sponsor, the California Association of Port
Authorities (CAPA), they contend that the ports may have
difficulty meeting this requirement due to construction
schedules, the nature of port operations, and the shipping
industry's readiness for shore power. They indicate that the
ports have no control over the availability and deployment of
vessels to a particular berth, particularly as many of the
on-shore power-ready vessels may not be deployed until mid-2014.
Rather than waiting for final reimbursement based upon actual
vessel plug in, this bill would require ARB to revise their
guidelines to provide an alternative definition of operability
that would consider a project fully operational if the facility
providing on-shore electrical power has completed a building and
safety inspection and load bank testing. Upon the guideline's
revision, this will provide more flexibility to ARB to approve
payments to ports upon project completion. Furthermore, this
will also provide relief in regards to the guideline's penalty
provisions that require on-shore power systems to be constructed
by December 31, 2013. Under the guidelines, ports unable to
meet this deadline will be penalized grant funds if unable to
meet this date.
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Timely distribution of state funds to ports :
In addition, it is the author's contention that the state has
sold the bonds designated for shoreside power projects and is
currently holding these funds and paying interest on these funds
and that it is unreasonable to require ports that are
subdivisions of the state that are making improvements to public
lands, including state tidelands, to borrow funds to complete
their projects. The author further indicates that "this creates
a situation where the state and ports end up paying
double-interest because one subdivision of the state, ARB, has
placed a rigid reimbursement requirement on other subdivisions
of the state."
Although ARB has traditionally distributed grant funds upon
completion of projects, CAPA contends that nothing in
Proposition 1B, or related enabling legislation, prohibits the
distribution of funds on a reimbursement basis as project
proponents appropriately spend funds. This "reimbursement"
method, often based on monthly reimbursable invoicing, is the
method used by many state and federal entities (including the
California Transportation Commission) for funding infrastructure
improvement projects; including other Bond Act funded projects.
Writing in support of this bill, the Ports of Hueneme and
Oakland contend that the ARB's Prop 1B Program guidelines should
be different for port infrastructure improvement projects as
opposed to, for instance, funds allocated for commercial truck
purchases, where the vehicle purchases may be paid by state
funds but assurances are necessary to ensure that the trucks
stay deployed within the state. The ports argue that these
massive infrastructure projects will be owned by a California
public entity, will remain in the state, and "unlike other air
quality projects to reduce emissions, ports will never cross
state lines." They further indicate that the Prop 1B Program
funds will only be released to the ports after construction is
completed, which puts a significant, unnecessary strain on their
budget and limits additional environmental and operational
improvements that they could otherwise implement.
Suggested committee amendment : This bill currently requires ARB
to disburse funds to ports upon them entering into a design or
construction contract, or both. The committee suggests that the
bill be amended to allow Prop 1B Programs funds to be disbursed
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to the ports on a reimbursement basis similar to that used by
the California Transportation Commission and others that
administer Bond Act funds. Essentially, this would authorize
ARB to disburse funds on a quarterly basis for actual project
costs incurred and paid by the ports, only for project grant
activities consistent with the grant application as approved by
the AQMD.
Related bills : SB 88 (Senate Committee on Budget and Fiscal
Review) Chapter 181, Statutes of 2007, establishes guidance for
the Bond Act programs, including the Goods Movement Emission
Reduction Program.
AB 201 (Assembly Committee on Budget) Chapter 187, Statutes of
2007, provides minor clarification to the Goods Movement
Emission Reduction Program.
AB 1064 (Furutani) of 2011, would have allowed ARB to average
vessel calls that use the shoreside power as funding by ARB for
compliance with their guidelines that would allow ports to get
compensated for their project costs. That bill was held in the
Assembly Transportation Committee as ARB modified their
guidelines consistent with the intentions of AB 1064.
AB 937 (Mendoza) of 2011, would have required ARB to amend its
regulations to allow alternative emission capture (such as
bonnet) technologies as an option to use onboard power
generation technologies or shoreside grid plug in. That bill
passed this committee but was held in the Assembly
Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Port Authorities (sponsor)
Port of Hueneme
Port of Oakland
Opposition
None on file
Analysis Prepared by : Ed Imai / TRANS. / (916) 319-2093
SB 234
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