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Long Beach Mayor Garcia Blasts President Trump, Boasts He's Joined "Climate Mayors" BUT [Amnesia File] Remained Silent, Didn't Veto Council Action That Overruled Enviro Appeals And Extended Contracts To Continue Storing Coal/Bulk Petroleum Coke For Export Thru Port of LB For At Least 15 More Years


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(June 1, 2017, 4:50 p.m.) -- Earlier today (June 1), Long Beach Mayor Robert Garcia swiftly Tweeted criticism of President Donald Trump for pulling the U.S. out of the Paris Climate Accord and Mayor Garcia associated himself with the self-proclaimed "Climate Mayors."



[Scroll down for further.]

However in August 2014, Mayor Garcia remained silent, said nothing and refused to veto a City Council action (9-0) that overruled appeals by environmental groups who strongly opposed the Port of LB's use of a roughly 20+ year-old "Environmenal Impact Report" [that the appellants contended doesn't reflect updated research and science] to extend contracts (leases) facilitating the export of coal and bulk petroleum coke through LB's Port for at least 15 years.

LBREPORT.com opens our "Amnesia File" below showing what took place in August, 2014.

[Headline] Council Votes 9-0 To Deny Appeal, Independently Approves On Its Own ("De Novo Review") Contracts Enabling Continued Coal/Petroleum Coke Export (Using Open Rail Cars) With No New Environmental Review Since '92; Mayor Garcia Voices No Views Pro or Con

(Aug. 20, 2014, 7:25 a.m.) -- Following a roughly three hour hearing with sharply polarized testimony, the LB City Council voted 9-0 (motion by Andrews) to deny appeals and approve -- on the Council's independent de novo review -- contracts without new CEQA environmental review (since 1992) that will enable the long-term continued export of coal and bulk petroleum coke from the Port of Long Beach, including the continued use of uncovered rail cars.


Screen save: City of LB webcast

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At the opening of the hearing (which LBREPORT.com carried LIVE on our front page), Assistant City Attorney Mike Mais informed the Council (salient unofficial transcript below) that the Council wasn't being asked to "uphold" the Harbor Commission's action; the Council was making its own determination anew ("de novo"), with no duty to defer to the Harbor Commission's previous determination, on whether the agreements (leases) required CEQA determination (review of the operations' environmental impacts). (The Harbor Commission voted 5-0 in June to approve the leases without requiring new CEQA review.)

Mr. Mais advised Councilmembers that they had two choices: they could deny the appeal and approve the resolution affirming the CEQA determinations made by the Board; OR Councilmembers could grant the appeal and direct the Harbor Department to proceed with appropriate CEQA review before the Harbor Dept. reconsiders the two agreements.

Following public testimony, every Long Beach Councilmember indicated in varying terms that they opposed granting the appeal. Some said the issue before the Council was a "very narrow" legal issue. Mayor Robert Garcia said nothing publicly on whether he supported or opposed the appeals.

After presentations by the Port, the appellants and public testimony pro and con, the Council voted 9-0 -- with no statement by Mayor Garcia for or against -- to approve the long term agreements with no CEQA environmental review of the impacts...including the transport of coal and petroleum coke in open rail cars.
The appellants (seeking to have the City Council send the long-term (15-20 year) leases back to the Harbor Commission for environmental review) were Earth Justice on behalf of the Sierra Club, Communities for a Better Environment and National Resources Defense Council.

Among those opposing the appeals in Council testimony were the LB Area Chamber of Commerce, ILWU, Harbor Trucking Ass'n and Pacific Merchant Shipping Association.

Supporting the appeals were individual residents, the Los Cerritos Neighborhood Ass'n, health care workers (nurses) and several environmental groups.

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Following public testimony, several Councilmembers framed the issue as a narrow legal one: whether CEQA requires any environmental review for what the Port said is a continuing use. The Port cited a 1982 proceeding on the facility and a 1992 "negative declaration" on the current coal/coke operation and said the new contracts make no significant change and thus allow the Port to exempt the new contracts (leases) from CEQA review (examination of the contracts' environmental impacts.)

The contracts are a 20-year renewal lease for Metropolitan Stevedore Co. on Pier G and 15 year lease with Oxbow Energy Solutions LLC (Oxbow Carbon, LLC's CEO is Bill Koch) which uses a coal shed on Pier G (under a sublease with Metro.) The shed is covered today mainly through efforts in the early 1990s by then-Councilman Alan Lowenthal via AQMD rule 1158, adopted after years of stiff resistance by the Port and industry interests. Prior to covering the shed, the Port allowed petroleum coke to stand in open piles. Years of complaints by residents (citing black dust) which were met by denials, some contending the black dust was the result of road tires. The AQMD rule requiring covered coke storage only pertained to stationary sources, not rail cars.

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Assistant City Attorney Mike Mais described the Council item's background and the two options available to the Council. Mr. Mais said that on June 9, 2014, LB's Board of the Harbor Commissioners adopted two separate ordinances in approving agreements with Metropolitan Stevedore Company ("Metro") for the Pier G dry bulk facility and an ordinance for Oxbow Energy Solutions lease of a coal shed also located at the Pier G dry bulk facility. Mr. Mais continued:

[Ass't City Attorney Mais].. As part of approving both of those agreements, the Board of Harbor Commissioners was required to make a CEQA determination, and basically the determination in this case was made that for both of the agreements, they were both what is referred to as "categorically exempt" from the requirements of CEQA and with respect to the coal shed approval they made an additional determination, an alternate determination, that since there had previously been a negative declaration in connection with the approval of the construction of that coal shed, that there was no additional environmental review required...

[The appellants appealed the CEQA determination to the City Council]

The scope of this appeal is really quite narrow, and it only involves whether or not the CEQA approvals were appropriately made by the Port. The City's Charter gives the Port the absolute authority to make a determination as to whether or not the agreements, in this case the operating agreement and the lease were appropriate, so those two items and what those leases agreements and operating agreements contain are really not before this City Council tonight. It's only the issue of whether the CEQA determination was appropriate.

And as you're listening to all the testimony tonight and ultimately when you take it behind the rail for deliberation, the legal standard that you apply you make what's called a de novo determination, which means you are hearing this as if the Board of Harbor Commissioners had not heard it. You are judging this on the facts as you hear them and not required to give deference to the Board of Harbor Commissioners.

The options available to the City Council after you've received all the evidence are basically two: One: deny the appeal and approve the resolution affirming the CEQA determinations made by the Board and making findings and in that case, if you take that course of action, you will also be adopting a resolution in support of your determination of the findings.

The second option available to the Council is to grant the appeal and direct the Harbor Department to proceed with appropriate CEQA review before the Harbor Dept. reconsiders the two agreements that we've been discussing.

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Among those supporting the appeal was "Organizing for Action -- Greater Long Beach Chapter (OFA-GLB)" whose Facebook page "About" section advises visitors to go to mybarackobama.com for more information...and OFA-GLB firmly sides with the appellants in asking the Council to send the agreements back to the Harbor Commission for environmental review.

[OFA-GLB text prior to Council hearing] More trains filled with dirty, dangerous coal and petcoke could be coming through California communities near you, courtesy of the Port of Long Beach! Join OFA-GLB and its environmental coalition partners to tell the Long Beach City Council to follow its "Green Port Policy" and take climate change seriously by overturning the Port's decision to ship toxic coal and petcoke that will blow into our air and water from open railcars for 15 years, to then be shipped from the Port and burned, emitting carbon that worsens our climate crisis. Come to the Long Beach City Hall to make your voice heard and require the Port to do the bare minimum by conducting the proper environmental analysis.

A week earlier, the advocacy group "California Beyond Coal" sent a mass email urging the City Council to "put families first and stop the fossil fuel trains...filled with dirty, dangerous coal and petcoke [from] coming through California communities...courtesy of the Port of Long Beach."

The Port of Long Beach transmitted a 16 page legal style memo (plus an attached resolution), co-signed by PoLB's new Executive Director Jon Slangerup, urging the City Council [in forceful terms, excerpt below] to reject the appeal and approve the contracts approved by the Harbor Commission.

To view the Harbor Dept. memo, click here.

The Port's memo states in part:

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 exporting a minimum of 1.7 million metric tons of coal per year. For 1.7 million metric tons, the wharfage and shiploading fees amount to $2,8.05,000, 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 PoriTechnology 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. Tapa 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.

As Trustees, the Harbor Commissioners have a fiduciary duty to ensure that the trust property is used productively and that the trust obtains a reasonable return on its investments. (Long Beach v. Morse (1947) 31 Cal.2d 254, 257.) "the trustee has a duty to make the trust property productive under the circumstances and In furtherance of the purposes of the trust." (Prob. Code § 16007; see also Rest.2d Trusts, § 181 ["The trustee Is under a duty to the beneficiaries to use reasonable care and skill to make the trust property productive in a manner that is consistent with the fiduciary duties of caution and Impartiality"].)

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 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.

The coal being exported through the Port can't be burned here under U.S. environmental regulations but it is used abroad. In Harbor Commission testimony, industry representatives noted that coal has been exported through the Port for decades and said the Port now strikes a good balance between the environment and business.

At the June Harbor Commission meeting, in response to a podium inquiry by enviro advocate Ann Cantrell -- to which Harbor Commission President Doug Drummond publicly pursued an answer -- PoLB staff acknowledged that SCAQMD's current rule 1158 doesn't prevent transporting coal and petroleum coke to and from the Port by train in open rail cars.

Environmental advocates argued that exporting coal flew in the face of reducing use of fossil fuels, was inconsistent with PoLB's "Green Port" policies and subjected people in other countries to pollution we didn't accept for ourselves.

The Harbor Commission vote (the second of two votes, the first was in late May), recommended by PoLB staff, approved a twenty year agreement with Metropolitan Stevedore Co., which operates the Port's dry bulk terminal at Pier G (where the major commodity is petroleum coke but coal and soda ash are also exported.) Also approved was a 15 year agreement with Oxbow Carbon, which operates a storage shed at the Port under a sublease agreement with Metropolitan.

Until the mid to late 1990s, bulk petroleum coke was piled in open air at the Port of LB, sending black dust into downtown and beyond. Port and industry officials offered multiple excuses for this, at one point trying to attribute the soot to tire debris. Then newly-elected Councilman Alan Lowenthal made an issue of this, insisting on covering the open coke piles. After a sizable political battle, the City of LB ultimately supported [and the Port abandoned its previous resistance to] amending SCAQMD Rule 1158 to require covering bulk petroleum coke and coal, which are now housed inside sheds/barns on Port property.]

In late May 2014, project attorney Morgan Wyenn of the Natural Resources Defense Council's Santa Monica office criticized the Port of LB's coal exporting practices and the two new contracts on NRDC's blog.

[NRDC attorney Wyenn blog text]...These agreements require the Port to export 1.7 million metric tons of coal every year for the next five years. And after five years, the amount of coal required can be increased, without any input from the public.

It is unacceptable for an arm of our government -- the Port is an entity of the City of Long Beach -- to be in the business of pushing climate-change causing fuels on to other countries. This is especially true given that every level of our government, from the White House to the State of California and even the City of Long Beach, are advancing increasingly stronger policies to phase off of coal and otherwise reduce our greenhouse gas emissions. The Port deciding to stay in the business of coal exports flies in the face of our national, state, and local city policies.

Further, this decision flies in the face of one of our state's most important environmental laws, the California Environmental Quality Act (CEQA). CEQA requires agencies like the Port to analyze the environmental impacts of these kinds of decisions, yet the Port has done absolutely zero analysis of the environmental impacts of exporting millions of tons of coal...

With the Aug. 19, 2014 Council vote (9-0) denying the appeal, the coal and petroleum coke activities (including continued transport in open rail cars) approved without CEQA environmental review since 1992 are no longer directly attributable to LB's non-elected Harbor Commission, but now reflect the voted de novo independent review and determination by Long Beach's elected Councilmembers without public statement by the City's Mayor.



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