TITLE
Recommendation to receive supporting documentation into the record and conduct a public hearing on the appeal filed by Earthjustice on behalf of Communities for a Better Environment, the Natural Resources Defense Council and the Sierra Club (Appellants), in accordance with Long Beach Municipal Code Section 21.21.507; and adopt resolution denying the appeal and upholding the Board of Harbor Commissioners' environmental determinations made in accordance with the California Environmental Quality Act (CEQA) for the Metropolitan Stevedore Company Operating Agreement for the Pier G dry bulk facility in the Port of Long Beach and for the Oxbow Energy Solutions LLC Lease of the Pier G Coal Shed (Coal Shed).
DISCUSSION
The Board of Harbor Commissioners found that the approval of the two subject agreements for the use and operation of existing Port dry bulk facilities was exempt from CEQA under two Categorical Exemptions designated under CEQA relating to the use and repair of existing public facilities. In addition, the Board found that because the Coal Shed had been studied in a 1992 Negative Declaration, CEQA did not require any further review since no changes are being proposed to the Coal Shed and none of the other circumstances that would trigger a subsequent CEQA review are present.
As set forth below and in the attached documents, the Port believes that the Commission's determinations are correct under CEQA. However, it will be up to the Council to consider the appeal and determine whether the Commission has complied with CEQA.
If the Council determines that the approval of the agreements is exempt from CEQA, it must reject the appeal. Additionally, if it determines on the basis of the prior CEQA review that no further review is required under CEQA, it must reject the appeal.
Alternatively, if the Council finds that the Commission did not comply with CEQA, then it must uphold the appeal and direct the Commission to set aside the approval of the agreements and conduct appropriate CEQA analysis before reconsidering them.
A. OVERVIEW OF THE BOARD OF HARBOR COMMISSION ACTIONS BEING APPEALED
On June 9, 2014, the Harbor Commission adopted the following two ordinances by a unanimous vote:
• Ordinance No. HD-2188 (Attachment 2) for the Metropolitan Stevedore Company (Metro) Operating Agreement for the Pier G dry bulk facility (Attachment 3); and
• Ordinance No. HD-2187 (Attachment 4) for the Oxbow Energy Solutions LLC (Oxbow)" Lease for the Coal Shed (Attachment 5).
As part of these actions, the Commission determined that the Operating Agreement and Coal Shed Lease are categorically exempt from CEQA. The Commission further determined that, in addition to being exempt from CEQA, the approval of the Coal Shed Lease did not trigger the need for further environmental review beyond the previously adopted Negative Declaration for the Coal Shed.
The Harbor Commissioners serve as the trustees over the portion of the tidelands that comprises the Port. The legislation that granted the tidelands to the City stated that the property is to be used for, among other things, "the establishment, improvement and conduct of a harbor and the construction, maintenance and operation thereon of wharves, docks, piers, slips, quays and other utilities, structures and appliances necessary or convenient for the promotion and accommodation of commerce and navigation." (Stats. 1935, ch. 158.)
Consistent with this tidelands grant, the Port has contracted with Metro to operate the Pier G dry bulk facility (Facility) since 1962. Under an agreement which does not expire until April 2016, Metro provides terminal operating services for all of the bulk materials entering or leaving the Facility. In addition, the existing agreement grants Metro a preferential assignment of the Port's Coal Shed, which is one of the eight dry bulk storage sheds at the Facility. This preferential assignment arrangement dates back to 1992, when the Board approved the construction of the Port's Coal Shed. The granting of this interest to Metro was somewhat unusual since Metro is primarily in the business of providing terminal operating services, while Metro's customers typically are in the export business. Metro has subassigned the Coal Shed to entities such as Oxbow. Currently, Oxbow is the only entity utilizing that Coal Shed.
The other seven storage sheds at the Facility are administered through ground leases that the Port has entered into directly with commodity exporters. Those exporters are customers of Metro. Those leases, including five leases held by Oxbow, have varying terms that last until 2019 and up to 2027, and are not at issue in this appeal.
Because the Metro agreement is set to expire in 2016, the Port and Metro entered into renewal negotiations. The Port concluded that the existing agreement for the Coal Shed was allowing Metro to receive revenues that would otherwise flow to the tidelands trust if the Port itself were to lease the Coal Shed directly to a dry bulk exporter. The Port proposed to replace Metro's agreement and eliminate the preferential assignment of the Coal Shed, thereby allowing the Port to enter into a lease for the Coal Shed directly with Oxbow, Metro's current tenant of the Coal Shed. This revised agreement brings the Coal Shed Lease into alignment with the agreements for the other seven storage sheds and will result in a significant increase in tidelands revenues. The Metro agreement also requires Metro to carry out certain repairs, maintenance and replacement of materials and equipment, none of which would have any measurable effect on the capacity of the Facility but, which taken together, improve worker safety and bring the condition of the Facility up to common industry standards. In addition, Metro has agreed to assist with berth emission control testing, to install energy saving equipment at the Facility and to replace existing terminal vehicles with zero emission vehicles to improve air quality.
B. PROCEDURAL HISTORY OF HARBOR COMMISSION ACTION
On May 27, 2014, the Harbor Commission conducted the first reading of the two ordinances. The staff reports for the Metro and Oxbow agreements are included in the Additional Reference Documents. 2 The Harbor Commission received a detailed explanation regarding the applicability of the Categorical Exemptions and of the alternative findings relating to the previously adopted Negative Declaration for the Pier G Coal Shed.
After the close of the final business day prior to the May 27th meeting, the Appellants submitted a two-page letter containing policy arguments in opposition to the proposed agreements. Regarding CEQA, the letter stated only as follows: "Significantly, no [CEQA] analysis has been conducted associated with this action." Appellants testified regarding their policy arguments during the Board item on the Metro agreement. However, no members of the public spoke during the agenda item relating to the Coal Shed Lease. On the afternoon of June 9th, the scheduled date for the second reading of the ordinances, the Appellants submitted a 24-page letter and a stack of exhibits approximately one-foot in height. Appellants testified at the June 9th meeting, primarily making policy arguments against the export of coal and petroleum coke. After considering all of the comments, the Board unanimously found the agreements exempt from CEQA and approved them. In addition, the Board concluded that, in light of the prior Negative Declaration prepared for the Coal Shed, no further environmental review was necessary under Public Resources Code section 21166 and CEQA Guideline 151623.
C. DESCRIPTION OF THE FACILITY AND THE EXISTING AGREEMENT WITH METRO
The primary purpose of the Facility is storage and shiploading of dry bulk commodities such as petroleum coke, coal, sulfur, and soda ash.
The core of the Facility was constructed in the 1960s, before the enactment of CEQA4 The rock dikes and fill at Berths 212-216 occurred in 1960. The wharf followed in 1963. Between 1966 and 1970, the bulk handling facilities were completed. This included five of the storage sheds, a conveyor system, shiploader, railroad improvements, utilities and pavement. In 1968, the Port embarked on 30-month ($3.1 million) project to expand the bulk loading facilities.
The improvements to the Facility that post-date the enactment of CEQA have been made in full compliance with its requirements. In 1979, the construction of a petroleum coke shed for Berth 214-215 was completed pursuant to a Negative Declaration issued in 1973. During the early 1980s, the Port upgraded the facility to increase its handling capacity, including a submerged bulkhead, dredging for larger ships, and a second ship loader. These improvements were assessed in a Negative Declaration approved in 1982. The improvements were specifically designed to increase the capacity of the facility to export coal. According to that Negative Declaration, the improvements increased the annual coal export capacity to 5 million metric tons. The report notes that, in addition to coal, the facility would handle 3.5 million metric tons of petroleum coke and 370,000 metric tons of white bulk commodities. This Negative Declaration, along with several others, is included in the Additional Reference Documents. The amount of dry bulk commodities anticipated to be exported under the authorization of the Agreements is well within this existing capacity.
The dry bulk goods are delivered to the site by truck or rail and then either transferred to storage facilities for later shipment, or loaded directly onto vessels and shipped to destinations worldwide.
The building that is the subject of the Coal Shed Lease is located at the Facility and is identified by the Port as the "Oxbow Coal Shed." This shed is currently being used by Oxbow for coal and petroleum coke export. The Harbor Commission approved the construction of this 150,000-ton-capacity5 Coal Shed in November 1992. A Negative Declaration was prepared for the construction and operation of the Coal Shed. The Negative Declaration was circulated for comment for 30 days and no comments were received. The Harbor Commission adopted the Negative Declaration and approved the Coal Shed's construction over no objection. The construction was completed in 1994. The Negative Declaration and the accompanying staff report indicated that the Coal Shed would be used for coal storage and coal blending. The addition of a third shiploader was included as part of the Coal Shed improvements. To date, the Port has invested over $35 million in the Coal Shed and the related improvements. The replacement cost of the Coal Shed is in excess of $60 million.
Neither the Harbor Development Permit for the construction of the Coal Shed (#91046) nor the Metro preferential assignment agreement placed any limitation or cap on the amount of coal that could be exported through the Coal Shed. To the contrary, Metro was subject to certain minimum throughput payment requirements that are discussed below.
The level of throughput of the Coal Shed has fluctuated over the years, with the highest annual throughput of 2.35 million metric tons achieved in 1996. The following table shows the throughput since 2011.
Recent Throughput for the Pier G Coal Shed
[In Metric Tons]
Year Petroleum Coke Coal Total Metric Tons
2011 79,019 1,229,380 1,308,399
2012 47,775 1,582,421 1,630,196
2013 26,106 1,543,538 1,569,644
2014 34,820 1,689,196 1,724,016*
* Based upon doubling the quantities from January 1, 2014 through June 30, 2014.
A Port consultant that has studied the Coal Shed (TranSystems 2014) estimates that the Coal Shed currently has the capacity to handle up to 2.3 million metric tons of coal per year.
All incoming coal arrives by rail. Throughout the history of the Facility, the trains delivering coal have arrived uncovered. The Surface Transportation Board is the entity that has jurisdiction over how the railroads transport this commodity. (49 U.S.C ยง 10501.)
As stated above, Metro has been operating the Facility since 1962 under various agreements. In 1992, the Port entered into an amended preferential assignment agreement with Metro, entitled the Amended and Restated Preferential Assignment Agreement HD-5000, in anticipation of the construction of the Coal Shed. That agreement set an initial benchmark for the Guaranteed Minimum Tonnage (GMT) payment at 15,000,000 metric tons for the first five-year period of the agreement. Upon completion of the construction of the Coal Shed, the Port's Executive Director sent Metro a letter explaining that pursuant to the 1992 agreement, the GMT for the Facility was being increased, directly and expressly attributed to the Coal Shed, in the amount of 2,476,000 metric tons per year. As will be explained below, this GMT for the Coal Shed is significantly higher than the GMT contained in the Coal Shed Lease.
Metro's current preferential assignment agreement, entitled the Second Amended and Restated Preferential Assignment Agreement HD-6655 (Restated PM), was entered into in 2002, and will expire on March 31, 2016. Similar to the 1992 agreement, the Restated PM continued to impose a GMT payment requirement, but it set the GMT at 22,250,000 metric tons for the first five-year period and applied it to Metro's total operation at the Facility. In 2006, the benchmark for the GMT payment requirement was increased to 26,700,000 metric tons, and the applicable time period was increased from 5 years to 6 years. It was subsequently dropped to 17,000,000 for the four year period from April 1 ,2007 to March 31,2011.
D. DESCRIPTION OF NEW COAL SHED LEASE, THE GMT, AND THE METRO OPERATING AGREEMENT
Under the existing agreements covering the Coal Shed, which expire in 2016, the Port annually receives $2,505,580 plus the wharfage and shiploader fees on the commodity throughput. Under the Coal Shed Lease, the Port will annually receive $5,813,500 plus the wharfage and ship loader fees on the throughput, with $8,618,500 in total annual guaranteed revenue.
Appellants have argued that the GMT payment requirement for the Coal Shed will somehow constitute a change in its operation that defeats the Port's reliance on the Categorical Exemptions. This is factually incorrect for numerous reasons.
First and foremost, the GMT payment requirement is simply an economic term of a ground lease. Based upon the current tariff, the Port receives $1.65 per metric ton in wharfage and shiploading fees for coal. Oxbow has represented that it anticipates exporting a minimum of 1.7 million metric tons of coal per year. For 1.7 million metric tons, the wharfage and ship loading fees amount to $2,805,000, based upon current tariffs. The GMT payment ensures that the Port will either receive the promised level of tariff income, or a payment that makes up the difference between the promised level of tariff income and the actual level of tariff income. These types of GMT payments are standard in the industry. The Port utilizes this concept in many of its leases and preferential assignments agreements, as does the Port of Los Angeles. Each of the seven other ground leases at the Facility is subject to a GMT. A recent article in Port Technology International, Edition 54, entitled "Finding the Right Balance Between Property Based and Minimum Guaranteed Throughput Rents at Ports" explained how adding a GMT component to port leases helps to promote efficient use of port property and an optimal tenant mix, as well as to help maximize the return on investment.'
Second, even if throughput falls short of the benchmark, this is not a "penalty" as Appellants have claimed. Guaranteed minimum rental payments are common provisions in commercial leases, and are simply economic terms. "Penalties," on the other hand, are completely different. The characteristic feature of a penalty is its lack of proportional relation to the damages which may actually flow from failure to perform under a contract. (Ridgley v. Topa Thrift & Loan Assn (1998) 17 Cal.4th 970, 977.) Here, there is no lack of proportionality. Instead, the GMT payment is based precisely on the shortfall in the wharfage and shiploader charges (the difference between the charges the Port actually receives and what would have been received if Oxbow met its GMT).
The ability to rely upon minimum payments is a critical part of the Port's financial planning and strategy, and has been an important factor in financial ratings of the Port. (See, e.g., the 2014 Fitch and Standard & Poor's Ratings included in the Additional Reference Documents.)
Third, Appellants' argument rests on the erroneous premise that the amount of coal that Oxbow will export is somehow tied to the GMT payment. The amount of coal that Oxbow will export is based upon supply and demand. Oxbow cannot simply export more coal than is called for by market demand for the sake of meeting a benchmark. Obviously, Oxbow needs customers and destinations to which to send the coal, and it is not logical to assume that it would incur all of the production, transportation, and shipping costs just to avoid paying the Port $1.65 per ton on any shortfall. If Oxbow falls short of its GMT, it makes additional payments to the Port as its landlord. Such payments are of no environmental consequence.
Finally, the GMT benchmark in this lease - 1.7 million metric tons per year - reflects what Oxbow has projected for its annual throughput in 2014. Based upon throughput levels for the first half of 2014, this projection appears to be accurate. As discussed above, this GMT is far below the original GMT that was applicable when the Coal Shed was first put into operation, and it is well below the maximum historical throughput of the Coal Shed. It is a level of throughput allowed and achievable under the current agreements utilizing the existing Coal Shed and terminal equipment, and it is entirely consistent with current and historical operations at the Coal Shed.
Appellants also argue that by requiring the Coal Shed to be used primarily for coal, and not counting the petroleum coke toward the GMT, the Coal Shed Lease is somehow fundamentally changing the existing operation. The Coal Shed Lease requires that the Coal Shed be used primarily for coal exports for the first five years, during which no more than 100,000 metric tons of petroleum coke may be stored in the Coal Shed per year. However, the Coal Shed Lease's coal versus petroleum coke mix is entirely consistent with the current operations, as shown in the throughput table above. For the Coal Shed to be used primarily for coal is not a change. The Coal Shed was built as just that - a coal shed. The Negative Declaration and Harbor Development Permit identified it as a "coal shed." The 1992 preferential assignment agreement with Metro originally limited its use to coal storage. It was only in 2001, after the demand for coal declined, that the Port agreed to modify the agreement to also allow the storage of petroleum coke, and at present the Coal Shed is being used for both coal and petroleum coke, with coal as the predominant use.
Moreover, Oxbow already has the use of five other storage sheds at the Facility (the other two storage sheds at the Facility are ground leased to an unrelated third party), and these sheds are primarily devoted to petroleum coke export. These seven sheds have ample capacity to handle 100% of the petroleum coke exported from the Port. In addition, Oxbow is currently meeting its GMT for those other five shed leases. If the Port were to allow petroleum coke to count toward the GMT in the Coal Shed Lease, Oxbow could reallocate some of the petroleum coke from those other facilities to the Coal Shed, thereby reducing its total payments to the Port for the use of the Facility. The Coal Shed Lease terms ensure that the Port is fairly compensated for the use of its Port-funded assets in accordance with the Port's trust duties.
Appellants have taken certain language from the Coal Shed Lease out of context and attempt to use the language to argue that starting with the sixth year of the Coal Shed Lease, "the Executive Director could potentially require a minimum of 10 million MT of coal to be shipped through Pier G under his sole and absolute discretion." (Attachment 7, p. 4.) That is not what the Coal Shed Lease (Attachment 5) says. Instead, when read in context, it is quite clear that the language, contained in Section 4, means that the Executive Director could approve a request made by Oxbow to increase the amount of petroleum coke above the 100,000 ton annual cap that applies in the first five years.
Moreover, given that the annual throughput capacity of the Coal Shed is over 2.3 million metric tons, Appellants' hypothetical argument is not possible. As noted above, when the CEQA analysis was completed for the 1980 Facility improvements, it was anticipated that up to 5 million metric tons of coal would be exported through Pier G.
The Operating Agreement between the Port and Metro (Attachment 3) allows Metro to continue in its terminal operating role at the Facility. It requires Metro to give up its preferential assignment in the Coal Shed so that the Port may lease the facility directly to Oxbow. It also requires Metro to undertake certain maintenance, repairs and replacements at the Facility, primarily for worker safety. Those activities are discussed further below.
The new agreements also contain environmental covenants that reinforce Port and City requirements and programs, as well as regional, state, federal and international policies for the Facility and vessels, including:
• Clean Air Action Plan
• Storm Water Pollution Prevention Program
• Inspections and testing for hazardous substances, materials or wastes
• Efficiency improvements at the Facility to reduce emissions
• Standards for new off-road, diesel engine, heavy duty vehicles
• Annual reporting for off-road and material handling equipment
• Annual reporting of locomotive hours of operation
• Green Building Leadership in Energy and Environmental Design (LEED)
• Vessel Speed Reduction Program
• Vessel At-Berth Emissions Controls
• Vessel Low Sulfur Fuel
• Vessel International Maritime Organization (IMO) Compliance
• Green Ship Incentive Program
• Vessel At-Berth Clean Technology Demonstrations and Testing
In summary, the intent of the new agreements is to ensure a fair return on the Port's tidelands assets and to ensure proper maintenance, repair and replacements at the Facility, which will not have any measurable effect on the capacity of the Facility but which will improve worker safety. The agreements involve an existing facility that will continue to be operated within its existing capacity. The current operator of the Facility and the current user of the Coal Shed will remain the same. The only change is the amount of rent and other compensation paid to the Port, and that the Facility will get needed maintenance, repairs and equipment replacements.
E. INFORMATION REGARDING COAL AND PETROLEUM COKE EXPORTS AND IMPORTS FROM OTHER PORTS
Appellants contend that the Port cannot enter into these agreements for existing Port facilities and specifically cannot renegotiate the Coal Shed Lease without considering the full lifecycle impacts associated with coal use, including production, transportation, and end-use overseas. Appellants' argument appears to be based upon the assumption that if these new agreements are not in place, the export of coal and petroleum coke will stop and these commodities will not find their way overseas. First of all, this argument overlooks the fact that the existing leases and agreements for the Facility extend over a long period. While the agreement on one of the eight sheds will expire in two years, the other seven are subject to long term leases that extend as far out as 2027. Therefore, these exports of coal and/or petroleum coke from the Port will continue with or without these new agreements. Moreover, the Port is not the only shipping location where these dry bulk commodities are exported. In fact, coal exports from the Port of Long Beach are an extremely small part of national coal exports. Most coal is exported from East Coast ports with the Virginia ports of Newport News and Norfolk alone exporting over 44 million metric tons in 2012. In addition to Long Beach, coal import/export facilities exist in at least four other ports along the West Coast within the U.S., including Richmond, Stockton, Tacoma and Seattle. Further north, near Vancouver, B.C., the Ports of West Shore and Ridley export coal. Petroleum coke is exported from eleven ports along the West Coast, including nine U.S. ports and two Canadian ports.
F. SUMMARY OF APPEAL AND THE HARBOR DEPARTMENT'S RESPONSE TO THE APPEAL
The following is a summary of the Harbor Department's response to the issues raised in the appeal. A detailed response is contained in Attachment 8.
On June 23, 2014, Appellants filed an appeal of the Harbor Commission's CEQA determinations contained in the ordinances approving the Metro Operating Agreement and the Coal Shed Lease. The appeal states that the Commission did not comply with CEQA and requests that the Port be directed to undertake a CEQA review of the agreements.
Many of the issues raised in the appeal letter relate to policy issues that are beyond the scope of the City Council's review in this appeal. Responses to the issues that are within the Council's purview are summarized below.
1. The Approval of the Two Agreements is Categorically Exempt From CEQA.
As previously stated, the Harbor Commission made the determination that the approvals of the Metro Operating Agreement and the Coal Shed Lease are categorically exempt from the provisions of CEQA. Appellants attempt to argue that the approvals do not fit within any Categorical Exemption. In fact, the re-Ieasing of an existing facility is exactly the type of project that does qualify for a Categorical Exemption.
a. The Agreements Qualify for a Class 1 Categorical Exemption.
The Class 1 exemption consists of "the operation, repair, maintenance, ... leasing, ... or minor alteration of existing public or private structures, facilities, [or] mechanical equipment ... involving negligible or no expansion of use beyond that existing at the time of the lead agency's determination." The Class 1 Categorical Exemption is appropriate here because the agreements involve the existing Facility and provide for the continuation of existing operations by two current users of the Facility. The Coal Shed Lease eliminates Metro as the intermediary, thereby substantially increasing tidelands revenues. It does not modify or change in any respect the capacity of the existing Coal Shed. The Metro Operating Agreement allows Metro to continue to provide its terminal operating services for the Facility, eliminates Metro's preferential assignment in the Coal Shed, and requires Metro to complete certain maintenance, repairs and equipment replacement. The Class 1 Categorical Exemption specifically extends to such maintenance and repairs. Thus, the approval involves "negligible or no expansion of an existing use" and is a classic example of a project that qualifies for a Class 1 Categorical Exemption.
As explained more fully in the detailed response (Attachment 8), in considering the applicability of a Categorical Exemption, the "baseline" is the existing ongoing operations at the Facility. While Appellants' arguments might be relevant if the Facility did not already exist or was not operating, they are clearly inapplicable in this case.
In arguing against a Class 1 Categorical Exemption, the appeal states that the GMT payment requirement in the Coal Shed Lease is a new requirement for the Facility. As explained in more detail above, the GMT payment requirement contained in the Coal Shed Lease does not change the operation of that Port asset. It is simply an economic term of the lease that allows the Port to count on receiving at least $2.8 million annually in wharfage and shiploading fees from the operation of the Port's Coal Shed, in which the Port has over $35 million invested." It does not force Oxbow to actually export any dry bulk commodities.
Appellants attempt to reply upon a study relating to the operation of the Facility and rail infrastructure prepared by TranSystems to suggest that the approval of the Agreements is somehow changing the use or operation of the Facility so as to disallow reliance on the Class 1 exemption. The study has nothing to do with the Agreements. The study focused on the average train tum time under various scenarios. It is nothing more than a study and in no way precludes reliance on the Categorical Exemptions.
Appellants also argue that the maintenance, repairs and replacements required under the Metro Operating Agreement 9 preclude reliance on the Class 1 exemption. Appellants are wrong. "Maintenance" and "repairs" to existing facilities are expressly covered in the exemption. The Facility encompasses more than 21 acres and includes structures, extensive paved areas and indoor and outdoor equipment. In preparation for negotiations with Metro regarding the new Operating Agreement, the Port contracted to have a physical assessment of the Facility conducted by AECOM. The assessment resulted in a list of maintenance, repairs and safety upgrades that Metro needs to complete at the Facility. The items on the list pertain to existing equipment, utilities, outdoor spaces and structures and are largely directed at ensuring worker safety at the Facility.
The only repair work identified specifically by Appellants is the replacement of 126,560 square feet of asphalt, in the area of Berths G212 and G213, the parking lot near Berth G211A and an area south of the Pier G Coal Shed. This is an "in kind" replacement of asphalt concrete surface areas. An aerial that illustrates the condition of asphalt concrete pavement at Pier G is included in the Additional Reference Documents. There is nothing unique about this replacement that takes the approval of the Metro Operating Agreement outside of the Class 1 exemption.
b. The Required Maintenance/Repair/Replacement Work Also Qualifies for a Class 2 Categorical Exemption.
A Class 2 Categorical Exemption applies to the "replacement or reconstruction of existing structures and facilities where the new structure will be located on the same site as the structure replaced and will have substantially the same purpose and capacity as the structure replaced." The identified maintenance, repairs and replacements that Metro is required to perform in accordance with the Operating Agreement fall within this categorical exemption.
The appeal states that the required asphalt replacement described above precludes the application of this exemption because asphalt is neither a structure nor a facility for the purpose of a Class 2 exemption. Clearly, the asphalt is a component of the Facility here at issue. Appellants' argument seems to suggest that the exemption cannot apply unless an entire facility or structure is replaced, rather than one of its components.
Nothing in the text of the Class 2 exemption or its interpreting cases suggests that it is so limited. Moreover, the Class 2 exemption is used routinely by local agencies for both public and private projects where the work effort involves the "in kind" replacement of asphalt and/or concrete for right-of-way improvements, including sidewalks, curbs and gutters, street resurfacing, driveways, and parking lots.
Appellants' argument that asphalt is not a "structure" and, therefore, that asphalt replacement cannot fall within the Class 2 Categorical Exemption is incorrect. As Acting Chief Harbor Engineer Sean Gamette explained to the Harbor Commission at its June 9 meeting, for engineering purposes, a structure is " ... an assembly of various parts or components designed to support or resist loads." (June 9, 2014 Transcript, p. 7, included in the Additional Reference Documents.) Asphalt concrete pavement at industrial facilities such as Pier G must be designed to support the loads of vehicle traffic and the wide variety of equipment necessary for the operation of the Facility. It must be engineered and designed with the same careful specifications required for other structures in the Port and City.
The American Association of State Highway and Transportation Officials has published a book titled AASHTO Guide for Design of Pavement Structures (4th Edition) (emphasis added) that details the structural design requirements for various types of pavements. State agencies, such as the California Department of Transportation (Caltrans), also prepare design manuals for pavement for highways and streets. The Caltrans Highway Design Manual contains definitions that are instructive. "Pavement" is defined as "[t]he planned, engineered system of layers of specified materials ... placed over the subgrade soil to support the cumulative vehicle loading anticipated during the design life of the pavement. The pavement is also referred to as the pavement structure and has been referred to as pavement structural section." (Caltrans Highway Design Manual, Section 62.7(33).) (Emphases added.) Asphalt concrete, or HMA as it is also known, is defined as " ... a graded asphalt concrete mixture ... used primarily as a surface course to provide the structural strength needed to distribute loads to underlying layers of the pavement structure." (Caltrans Highway Design Manual, Section 62.7(24).) (Emphases added.)
These definitions and the detailed engineering requirements for pavement demonstrate that the asphalt replacement at the Facility involves a "structure" and clearly fits within the Class 2 exemption.
2. The Exceptions to the Application of the Categorical Exemptions Do Not Apply.
Certain exceptions preclude reliance on the Categorical Exemptions. For instance, a Categorical Exemption cannot be used if there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances. An exemption also cannot be used when the cumulative impact of successive projects of the same type in the same place over time is significant. Since neither of these exceptions apply, the Harbor Commission properly relied on the above Categorical Exemptions when acting on the new agreements.
Application of the first exception involves two distinct inquiries: (1) whether the project presents unusual circumstances and (2) whether there is a reasonable possibility of a significant environmental impact resulting from those unusual circumstances. A negative answer to either question means the exception does not apply. There are no unusual circumstances if a project is consistent with the types of projects for which the exemption was intended to apply.
The two new agreements and the repair, maintenance and replacements of existing equipment and structures at the Facility are entirely consistent with the types of projects for which the Class 1 and Class 2 exemptions were intended to apply. The Appellants have submitted no evidence that would establish unusual circumstances in this situation. In addition, the agreements will result in no significant effect on the environment. CEQA defines "significant effect on the environment" as "a substantial, or potentially substantial, adverse change in the environment." Public Resources Code Section 21068. The operation and use of the Coal Shed for coal storage and transport and the continued provision of terminal operating services for the Facility will not materially change as a result of the new agreements. The primary substantive changes to the agreements relate to financial terms, which do not relate to physical effects on the environment.
A Categorical Exemption also cannot be used if the cumulative impact of successive projects of the same type in the same place, over time is significant. Here, no evidence has been presented by Appellants or anyone else that the cumulative impact of successive projects of the same type in the same place, over time would be significant. Even assuming that there was evidence of such impacts, the approval of the new agreements would make no contribution to those impacts and thus its contribution would be less than cumulatively considerable and less than significant.
3. No Further Environmental Review is Required for the Coal Shed Lease Under Public Resources Section 21166.
Under CEQA, once an EIR or a Negative Declaration is approved for a project, no further environmental review is required to carry out or utilize that project unless one of the three prongs of Public Resource Code Section 21166 is met. In simple terms, those three prongs are: (1) substantial changes are proposed to the project that would cause new or more severe environmental impacts than those previously disclosed; (2) substantial changes have occurred relating to the circumstances under which the project will be carried out, such that the project will now cause new or more severe environmental impacts than those previously disclosed; or (3) significant new information has become available that was not available during the prior review that reveals that the project will have new or more severe impacts than previously disclosed.
The Harbor Commission found that none of the three prongs were triggered here. The Commission therefore adopted alternative findings that, in addition to being categorically exempt from CEQA, the approval of the Coal Shed Lease did not trigger the need for further environmental review beyond that which was completed in the previously adopted Negative Declaration for the Pier G Coal Shed.
The capacity of the Coal Shed will not change or increase as a result of the new agreements. The current operator of the Coal Shed will remain in place. While the financial terms of the lease arrangement will change to increase the revenues received by the Port, the existing operation will continue. Thus, there are no substantial changes to the Coal Shed that would cause a reevaluation of its environmental impacts.
There are also no substantial changes to the circumstances under which the coal operations will be carried out. The dry bulk operations are an industrial use in the heart of an industrialized port. The industrial nature of the Port has not substantially changed since adoption of the Negative Declaration for the Coal Shed. Further, in light of the nature and scope of the activities at issue here, it will not result in any new or substantially more severe impacts.
Finally, there is no new information that was not previously available that indicates that the approval of these new agreements will cause new or more severe impacts than were previously disclosed. Appellants specifically contend that because the greenhouse gas (GHG) emissions associated with the Coal Shed were not analyzed in the 1992 Negative Declaration, this must be considered new information. It is well settled by case law, however, that because scientific data regarding GHGs has been known for quite some time, information regarding the potential adverse impacts of GHGs does not constitute information that could not have been known at the time the Negative Declaration was adopted.
TIMING CONSIDERATIONS
City Council action on this matter is requested on August 19, 2014, to respond to this appeal in a timely manner.
FISCAL IMPACT
Should the City Council grant the appeal, the Port would incur the expense of undertaking environmental review for the agreements, and the increased revenues to the Port would be delayed, reduced or lost. If the appeal is rejected, additional revenues will be realized by the Port as set forth above.
SUGGESTED ACTION
Approve recommendation.
BODY
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LONG BEACH AFFIRMING THE DETERMINATION BY THE BOARD OF HARBOR COMMISSIONERS THAT THE APPROVALS OF THE OPERATING AGREEMENT WITH METROPOLITAN STEVEDORE COMPANY AND THE LEASE WITH OXBOW ENERGY SOLUTIONS LLC ARE EXEMPT FROM THE CALIFORNIA ENVIRONMENTAL QUALITY ACT AND FURTHER DO NOT TRIGGER THE NEED FOR ADDITIONAL ENVIRONMENTAL REVIEW PURSUANT TO PUBLIC RESOURCES CODE SECTION 21166 AND MAKING FINDINGS RELATING THERETO
Respectfully Submitted,
JON SLANGERUP
CHIEF EXECUTIVE HARBOR DEPARTMENT
RICHARD CAMERON
MANAGING DIRECTOR, ENVIRONMENTAL AFFAIRS AND PLANNING BUREAU
HARBOR DEPARTMENT