Oakland-Shafter Inland Port

OAKLAND-SHAFTER INLAND PORT

Overview The Oakland-Shafter Inland Port (OSIP) is a proposed collaborative project between the Port of Oakland and the City of Shafter in Kern County to create an inland multi- modal transportation hub supported by air, ground and rail connections. The “inland port” concept is built around the development of an intrastate short-haul freight rail cargo expressway service connecting the San Joaquin Valley with the Port of Oakland. Shafter would serve as the inland port providing integrated and highly efficient freight transportation services for the enhanced movement of goods in California, and from the Midwest, including but not limited to: ♦ Intermodal rail transfer and trans-loading facilities; ♦ Industrial warehouses and distribution centers; and ♦ Related freight transport and logistics service The OSIP is strategically positioned to leverage existing transportation corridors, including Interstate 5, Highway 58 and Highway 99, and will dramatically enhance the movement of goods to and from the San Joaquin Valley. Equally important, the OSIP is located within 300 miles of 40 million U.S. residents, or roughly 15 percent of the nation’s total population. Major population centers within a 300 mile radius include Sacramento, San Francisco, Los Angeles, San Jose, San Diego and Las Vegas. Development of an inland port and distribution center in the Southern San Joaquin Valley will bolster freight supporting infrastructure improvements, provide greater flexibility and efficiency for both exporting and importing goods, and dramatically improve the state’s cargo handling ability. Experience has documented that rail freight transportation is not only three times more efficient but also three times less polluting than truck transportation. The OSIP provides multiple economic and environmental benefits for California including, but not limited to, the following: ♦ Produces, on average, $1.2 billion per year in direct financial benefits for California; - $703 million per year in new economic activity - $428 million per year in health care cost reductions - $64 million in direct state and consumer cost savings ♦ Provides 31,800 permanent jobs in the state by 2030, including; - 16,700 jobs in the San Joaquin Valley - 1,800 jobs in the Bay Area ♦ Increases state and local tax revenues by $161 million per year; - $3.4 billion cumulative by 2030 ♦ Provides substantial regional air quality benefits and enhances San Joaquin Valley Air Pollution Control District efforts to meet state and national air quality standards; - Net decrease in NOx emissions of 1684 tons annually or roughly 5 tons/day

- Net decrease of 104 tons of PM10 annually

- Net decrease of 96 tons of PM2.5 annually - Net decrease in ROG emissions of 148 tons annually ♦ Facilitates state efforts to achieve Greenhouse Gas (GHG) reduction targets by

providing a net statewide decrease of 172,000 metric tons of CO2 equivalent annually; ♦ Removes heavy duty truck traffic from Interstate 5 and Highway 99 relieving congestion and reducing impacts to air quality; ♦ Enhances public transportation funding by leveraging private sector investments in state-of-the-art freight transportation technologies; ♦ Provides an innovative and collaborative model to help California ports address increasing competition from international and national ports; and ♦ Reduces California highway maintenance costs by reducing wear and tear from heavy duty trucks. In short, the OSIP creates a dynamic public/private collaboration to help the state address critical infrastructure and economic issues in order to maintain California’s competitive edge in a global economy. International trade accounts for roughly 15 percent of all jobs in California and the OSIP provides a cost-effective and sustainable way to expand trade and stimulate economic activity in California, especially for the San Joaquin Valley. Finally, due to limited need for infrastructure improvements, the OSIP could be in operation within 12 months of securing funding and the necessary operating agreement for short-haul rail cargo service to and from the Port of Oakland.

PROJECT SUMMARY

OAKLAND-SHAFTER INLAND PORT (OSIP)

TABLE OF CONTENTS

Page

1.0 PROJECT SUMMARY...... 1

2.0 GENERAL OVERVIEW AND INTRODUCTION...... 2 2.1 Fierce Competition...... 3 2.2 Long-Term Infrastructure Needs...... 3 2.3 Cargo Volume...... Error! Bookmark not defined. 2.4 Environmental Stewardship...... 3 2.5 Railroad Pricing...... 3 2.6 Lack Of Available Land For Logistics Centers...... 3 2.7 Competitive Pricing...... 3

3.0 OSIP CREATES AN INNOVATIVE AND COLLABORATIVE MODEL TO HELP CALIFORNIA PORTS FACE INCREASING INTERNATIONAL AND NATIONAL COMPETITION...... 4 3.1 Mexican Efforts...... 5 3.2 Canadian Efforts...... 5 3.3 East Coast Ports – Three Factors...... 5 3.3.1 Panama Canal And The Decline Of Long-Haul Rail Model...... 5 3.3.2 Diversification Of Entry Points...... 6 3.3.3 Infrastructure Investment...... 6

4.0 OSIP LEVERAGES THE SIGNIFICANT INVESTMENT OF PUBLIC FUNDS BY THE STATE OF CALIFORNIA AND THE PORT OF OAKLAND BY PROVIDING ADDITIONAL MARKETS AND LOCAL FINANCIAL RESOURCES TO CREATE A COMPREHENSIVE, LONG- TERM INFRASTRUCTURE PLAN FOR THE MOVEMENT OF GOODS WITHIN THE STATE OF CALIFORNIA...... 7 4.1 Background...... 7 4.1.1 State Of California Trade Corridor Improvement Fund...... 7 4.1.2 Port Of Oakland - General...... 7 4.1.3 Port Of Oakland – Historical Investments...... 8 4.1.4 Increasing Capacity – Rail Infrastructure Improvements...... 8 4.1.5 TCIF Port Of Oakland Projects...... 9 (a) Tehachapi Pass Project – Gateway to the Southeast...... 9 (b) Donner Project – Gateway to the Midwest ...... 9 (c) Outer Harbor Intermodal Terminal...... 9 (d) Martinez Subdivision ...... 9 (e) 7th Street Improvements ...... 9 (f) Stockton-Fremont Short-Haul Railway ...... 9

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4.2 To Enhance The Investments Already Made By The State Of California And The Port Of Oakland, The City Of Shafter And Local Private Industry Leaders Have Pledged Significant Public And Private Infrastructure Investments To Financially Support The OSIP, Furthering The Collaboration Required For The Effective Movement Of Goods In The State Of California...... 9 4.3 OSIP Will Leverage The Port’s Significant Capital Investment And Create Job Opportunities In The Near Future...... 10 4.4 The OSIP Reduces Existing Taxpayer Burdens On The State’s Highways And Local Roads By Reducing Maintenance Costs...... 10

5.0 OSIP WILL INCREASE CARGO VOLUMES AT THE PORT OF OAKLAND...... 10 5.1 OSIP Will Increase The Port Of Oakland’s International Market Share For Imported Goods And Allow Cargo Owners and Major Ocean Carriers To Make The Port Of Oakland Their “First Port of Call” From Asia...... 10 5.2 OSIP Will Increase Economic Growth By Ensuring The Port Of Oakland’s International Dominance As Being The Preferred West Coast Port For The Export Of Agricultural Goods...... 11 5.2.1 Previous Efforts...... 11 5.2.2 Port Of Oakland’s Competitive Edge And The Importance Of The State’s Agricultural Industry...... 12 5.2.3 Existing Models For Collaboration Targeting Agricultural Exports...... 13 5.3 Experts Concur That The OSIP Provides The Best Possible Location In The State Of California For An Inland Port...... 13

6.0 THE OSIP CREATES SIGNIFICANT OPPORTUNITIES FOR STATEWIDE ENVIRONMENTAL STEWARDSHIP BY ELIMINATING TRUCK CONGESTION AND IMPROVING AIR QUALITY BY REDUCING AIR POLLUTION...... 14 6.1 The Environment And Air Quality – Background...... 14 6.1.1 Trains Versus Trucks...... 14 6.1.2 State Of California Mandates...... 14 6.1.3 San Joaquin Valley...... 15 6.1.4 Oakland...... 15 6.1.5 Southern California...... 15 6.2 The OSIP Provides Significant And Unmatched Environmental Benefits To The State Of California, Northern California, Central Valley, And Southern California...... 15 6.2.1 State of California...... 15 6.2.2 San Joaquin Valley...... 16 6.2.3 Oakland...... 16 6.2.4 Southern California...... 16

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7.0 TO HELP ADDRESS THE ISSUE OF RAILROAD PRICING FACING WEST COAST PORTS, PUBLIC POLICY MAKERS MUST CREATE LONG-TERM, SUSTAINED EFFORTS TO DEVELOP AND SUSTAIN SHORT-HAUL RAIL IN THE STATE OF CALIFORNIA...... 17 7.1 State Of California And Short-Haul Rail...... 17 7.2 Port Of Oakland Position On Short-Haul Rail...... 18 7.3 BNSF Position On Short-Haul Rail And Inland Ports...... 18 7.4 Freight Experts Believe Short-Haul Is A Competitive Alternative And Valuable Asset To The Growth Of Ports...... 19 7.5 Examples Of Successful Short-Haul Rail And Inland Ports...... 20 7.5.1 State of Virginia...... 20 7.5.2 State of New York...... 21 7.5.3 State of Colorado...... 21 7.5.4 State of Michigan...... 21 7.5.5 State of Florida...... 21 7.6 BNSF And Past Intermodal Activities...... 22 7.6.1 Port Of Seattle...... 22 7.6.2 Port Of Oakland...... 22 7.6.3 Alameda Corridor Transportation Authority...... 22 7.6.4 Victorville...... 22 7.7 Recent BNSF Environmental Initiatives...... 24

8.0 TO STAY COMPETITIVE, THE PORT OF OAKLAND MUST CONSIDER ESTABLISHING AN INLAND PORT GIVEN THE LACK OF AVAILABLE LAND FOR LOGISTICS CENTERS NEAR THE PORT OF OAKLAND AND THE OSIP IS THE APPROPRIATE OPPORTUNITY FOR THE PORT AT THE RIGHT TIME...... 26

9.0 BY CREATING ADDITIONAL CONTAINER VOLUMES AND SUBSTANTIAL ECONOMIC GROWTH IN THE CITY OF SHAFTER, OSIP WILL PROVIDE COMPETITIVE PRICING...... 27

10.0 CALIFORNIA’S CONGRESSIONAL DELEGATION IS CRITICAL TO CALIFORNIA PORTS ADDRESSING CHALLENGES FACING THE PORTS...... 28

11.0 THE OSIP PROVIDES ECONOMIC AND FISCAL BENEFITS TO THE STATE OF CALIFORNIA...... 30

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OAKLAND - SHAFTER INLAND PORT (OSIP)

1.0 PROJECT SUMMARY.

The Port of Oakland and the City of Shafter would establish in the City of Shafter the Oakland-Shafter Inland Port (OSIP), an inland port providing integrated multi-modal transportation resources including the following:

• intermodal rail transfer and transloading facilities;

• industrial warehouses and distribution centers; and

• related freight transport logistics services.

In collaboration with Burlington Northern Santa Fe Railroad (BNSF), the City of Shafter and the Port of Oakland would establish an intrastate (dedicated) short-haul, freight rail expressway service connecting the Port of Oakland with the San Joaquin Valley in the City of Shafter.

OSIP is a cost-effective way to stimulate economic activity in California, the bay area, and the San Joaquin Valley, with limited need for expensive public infrastructure, such as building new roadways or port facilities, while at the same time leveraging key transportation and private infrastructure investments by the Federal Government, the State of California, local governments, and the private sector including the following:

• U.S. Interstate Highway 5;

• California Highway 58;

• California Highway 99;

• Union Pacific (UP) Railroad;

• BNSF Railroad;

• Meadows Field Airport (City of Bakersfield) which has the 3rd longest private runway in California behind LAX and SFO; and

• Over 5,000 acres of available (entitled) land for distribution centers and warehouse space (e.g., Tejon Industrial complex, International Trade and Transportation Center, including Target’s nearly 2 million square feet distribution center, and airport industrial park, including related municipal and public infrastructure) (see Exhibit 1).

All these resources are within close proximity to the proposed OSIP (see Exhibit 2). In fact, within a 300 mile radius of the OSIP, nearly fifteen (15%) percent of the U.S. population resides including major population centers and cities, such as Sacramento, San Francisco, Los Angeles, San Diego, and Las Vegas.

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The proximity of all these critical public and private assets could lead, in the immediate future, to the creation of a multi-modal transportation hub supported by air, ground, and rail connections and substantial development of manufacturing and distribution uses that would generate substantial employment opportunities in the San Joaquin Valley and the State of California.

The OSIP requires approximately $30,000,000 in funds to complete the project and is seeking funds from the following sources:

• California Proposition 1B Trade Corridor Improvement Funds (TCIF) $15,000,000

• City of Shafter $15,000,000

The Kern Council of Governments has programmed over $45 million dollars towards offsite improvements that will enhance access to the OSIP once operational. It is anticipated that some of the Federal economic recovery and infrastructure stimulus funds might also be available to build and operate the OSIP.1

The OSIP could be in operation within nine to twelve months from securing the required funding and a Memorandum of Understanding (MOU) between BNSF and the City of Shafter for short-haul rail service to and from the Port of Oakland.

2.0 GENERAL OVERVIEW AND INTRODUCTION.

California ports are a critical component of the United States’ and California’s economic engine. California’s 3 major ports – Long Beach, Los Angeles, and Oakland – carry approximately 50 percent of the “nation’s total container cargo volume.”2 Officials estimate that “international trade generates about $436 billion for the state’s economy, or about a quarter of its gross-domestic product.”3 In 2007, the Ports of Los Angeles and Long Beach moved over $250 billion in U.S. trade goods including over $60 billion in California cargo, while creating nearly 900,000 jobs and $7 billion of state and local tax revenues.4 As of 2002, state officials estimated that “1 in 7 jobs are tied to trade and the value of international trade exceeds $350 billion annually.”5

After years of being a leader in U.S. maritime trade, according to shipping experts, West Coast ports are facing a number of serious challenges, beyond the current credit squeeze and global economic slowdown. Maritime experts, such as the Pacific Merchant Shipping Association (a trade association representing 60 maritime terminal operators and ocean carriers), have stated that “in the long term, we are seeing the threat of all kinds of issues [facing West Coast ports] – issues on steroids.”6 The issues facing West Coast ports include the following:

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2.1 Fierce Competition.

Increasingly, international ports, Gulf Coast ports, and East Coast ports are gaining favor with cargo owners and customers who are using these ports to provide access to Asian goods through the Panama Canal and the Suez Canal in Egypt.7

2.2 Cargo Volume.

West Coast ports must identify ways to increase cargo volume given that volume is expected to be at a 5-year low with a collective decline of more than 1 million containers in 2008.8

2.3 Long-Term Infrastructure Needs.

Even with the short-term drop in cargo volume, experts believe that West Coast ports need to bolster freight-supporting infrastructure improvements, such as improved rail service and port facilities.9

2.4 Environmental Stewardship.

In the face of reduced cargo volume, increased infrastructure needs, higher costs, and increased competition, West Coast ports must continue to identify long-term strategies for improving air quality around ports and related regions resulting from truck emissions and other port industries.10

2.5 Railroad Pricing.

Experts believe that a critical component of maintaining competitive pricing at West Coast ports is to address the increased rates of U.S. railroads, which according to some experts, make the shipping of goods entering West Coast ports to destinations in the East more expensive as compared to an “all-water” route to the East Coast via Gulf Coast ports, thereby eliminating the need for rail passage across the country.11 As such, a critical and transparent analysis of the benefits of short-haul rail is vital to the success of West Coast ports.

2.6 Lack Of Available Land For Logistics Centers.

Experts believe that the key component to whether a port can prosper “in the future is land availability, which is often scarce near major ports” thereby making it impossible to develop logistics centers near ports, particularly given that the transfer of goods to the distribution centers from ports have to rely on heavy-duty trucks.12

2.7 Competitive Pricing.

The ports must continue to keep costs down in order to improve shipping prices that are critical to cargo owners who have expressed concerns relating “to fuel costs, environmental costs, port container fees, and the other costs associated with congestion at ports.”13

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The OSIP, as set forth below, provides critical solutions to these issues facing California ports because it:

• helps California address the fierce competition it faces from other national and international ports;

• leverages Federal, State, local, and private investment dollars to improve the Port of Oakland’s infrastructure including critically needed rail improvements;

• increases cargo volume in the Port of Oakland by providing new markets for importing goods and expanding existing markets for exports;

• provides significant environmental benefits to Northern California, the Central Valley, and Southern California;

• creates innovative strategies to create cost-effective, express short-haul rail service within the State of California to link one of the State’s most important industries (agriculture) with a vital State seaport (the Port of Oakland);

• creates new opportunities for cost-effective logistics centers supporting the Port of Oakland via rail to ensure the efficient movement of goods out of the Port of Oakland without heavy reliance on trucks; and

• provides cargo owners with competitive pricing options including providing an alternative path to serve the California market, particularly Southern California.

In short, the OSIP creates a dynamic collaboration between public (federal, state, and local agencies) and private sectors to help California address key infrastructure and economic issues in order to keep California’s competitive edge in a global economy. Without the OSIP, California will not be prepared to handle the volume of imported and exported goods expected by 2030 or beyond, as the State’s transportation infrastructure and environment simply cannot continue to accommodate growth based upon truck traffic.

3.0 OSIP CREATES AN INNOVATIVE AND COLLABORATIVE MODEL TO HELP CALIFORNIA PORTS FACE INCREASING INTERNATIONAL AND NATIONAL COMPETITION.

International competition to take away business from California ports is fierce and countries have recognized that the issues facing California ports are long-term with no easy solutions in the foreseeable near future. The National Retail Federation’s Supply Chain and Shipping Policy experts have stated that the need for alternate cargo routes is not only a function of the global economic downturn but also the financial issues faced by cargo owners and ocean carriers at California ports:

People are looking at the business environment surrounding California right now [e.g., container fees imposed by ports and

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expenses relating to clean truck efforts] trying to balance the risk in the supply chain, trying to look and see how they get the best advantage [including considering Canadian and Mexican ports].14

3.1 Mexican Efforts.

Mexican authorities have initiated a process to create a “mega port” (Puerto Colonet) in Baja California, just 275 miles south of Los Angeles, with facilities that could “transload containers arriving by ship onto trains, then send the freight inland to border-crossing points in Arizona and Texas.”15 The project is envisioned as a “joint port-and-rail project” with UP and BNSF being critical to the success of the port because either UP or BNSF could have the ultimate decision as to where the U.S.-Mexico border crossing would connect to the short-haul rail route from Mexico.16 The concept envisioned by the Mexican authorities is similar to the proposed by OSIP: the use of short-haul rail to move goods to critical distribution centers. Contrary to recent news reports, many believe that the proposed facility will ultimately be constructed “in the coming decade” despite the global financial crisis and the nearly 10 percent decline in 2008 of container volumes at U.S. West Coast ports.17

3.2 Canadian Efforts.

In 2003, Canadian railroad companies began offering short-haul rail “terminal-to- terminal expressway service” (with shippers arranging on their own “drayage to and from rail terminals”) between Montreal and Toronto, a trip of nearly 350 miles, after the “realization that there were three million non-reinforced trucker and shipper-owned trailers on North American highways.”18 In addition, in 2007, the Port of Prince Rupert in British Columbia, which is served by the Canadian National Railway with service to Chicago, opened a new container terminal with the goal of bringing “more intermodal business between Asia, central Canada, and the U.S. Midwest.”19 In fact, similar to the OSIP concept, the Canadian federal government, the Quebec government, and the private sector have recently announced that they have “overlooked to date [the] modernization of the infrastructure of the country’s short line railways” and have proposed an initiative to “reinvigorate ‘short line railways’ serving regional . . . industries, such as the forestry and mining sectors. . ..”20

3.3 East Coast Ports – Three Factors.

There are 3 critical factors responsible for the growth of East Coast Ports.

3.3.1 Panama Canal And The Decline Of Long-Haul Rail Model.

By 2014, as part of the Panama Canal Authority’s $5 billion investment in the Canal, a third set of locks is set to open at the Canal creating more transit capacity for container ships using the all-water route linking Asia and the United States versus the “transpacific intermodal route from Asia to the West Coast and to the rest of the U.S. by rail,” according to the University of New Orleans’ National Ports and Waterways Institute.21 In fact, in 2007, major shipping companies, like Maersk and some other shipping lines, began “to deliver more goods directly to East Coast ports instead of dropping them into the rail system on the West Coast” and thus reduced the “transcontinental traffic of loaded containers and empties [that] head back to port, hitting BNSF and UP [the] hardest . . ..”22 The ports benefitting the most from the substantial

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investment by the Panama Canal Authority are East Coast ports, like the Port of Virginia, the Port of Savannah, and the Port of Houston.

In response, Port of Oakland executives, while agreeing that more cargo is moving directly to the East Coast, have argued that the West Coast continues to be a very important market “given that it also serves the Midwest and West Coast.”23 Nevertheless, in November 2008, Neptune Orient Lines, the parent of APL, one of the largest shipping carrier lines in the world, announced that it was taking out of service 20 of its 130 cargo ship fleet and that, following the recovery, all major shipping carriers will be “leaner” and continue to identify more “cost-effective” locations outside of the State of California, which resulted in the closure of APL office in Oakland and the loss of 350 local jobs.24 In January 2009, APL announced it had moved the regional headquarters to Arizona (Phoenix area) because the state “is well known for its support and encouragement of business” and the “civic and business community has been very welcoming.”25

3.3.2 Diversification Of Entry Points.

According to experts, retailers are beginning “from a logistics strategy standpoint . . . to diversify their points of entry” and “looking at four – sometimes five – ports that they are going into [to ensure] that their freight is going to flow to the consumer . . ..”26

3.3.3 Infrastructure Investment.

Significant infrastructure improvements are being made by East Coast ports themselves, such as the Port of Virginia and the Port of Savannah. As a result, East Coast ports have experienced substantial volume increases.27 In fact, the Port of Savannah has eclipsed the Port of Oakland as the 4th busiest port in the United States and, since 2000, achieved the status of the fastest growing port in the U.S., with more than 2.6 million Twenty-foot Equivalent Units (TEUs) passing through the port in 2007.28 Critical to the Port of Savannah’s growth are three competitive factors:

• its location given proximity to Atlanta, South Florida, and the increasing U.S. population east of the Mississippi;

• shipping times and costs for various routes from Asia to the West and East coasts;29 and

• the operation of a short-haul rail.

Facing these pressures, the Port of Los Angeles, on its own initiative, recently discussed an incentive program (paying tenants $10 for every new TEU (container) to use its facilities ostensibly because it wanted to “attract business from Prince Rupert and Savannah.”30 However, it is clear that such local incentive programs will not solve the major structural issues facing California ports.

Two examples of the importance of collaboration between regions are important to highlight. First, State of Washington ports have recognized the benefit of a collaborative approach: the ports of Seattle and Tacoma have joined forces to initiate a global marketing

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campaign including taking joint trade missions to China to promote the Pacific Northwest as a gateway for Pan-Asian commerce as well as partnering together on a Northwest Ports “Clean Air Strategy” to reduce air emissions.31 Second, East Coast ports have also understood the importance of a collaborative approach: in April of 2008, the Port of Virginia and the Panama Canal Authority agreed to “share information about shipping and port trends to help them better align their services to shippers’ needs.”32

The OSIP presents California with precisely the type of collaborative approach needed to address economic challenges facing the State by creating the following:

• A (state-of-the art) short-haul expressway rail service, which is a critical component of any major port including some that are competing with the Port of Oakland;

• The opportunity for another “point of entry” providing cargo owners and shippers the diversification they seek; and

• The investment of local infrastructure funds to create an inland port to support an existing seaport.

4.1 Background.

4.1.1 State Of California Trade Corridor Improvement Fund.

In 2006, California voters approved Proposition 1B, a nearly $20 billion transportation bond measure as part of a nearly $43 billion infrastructure improvement effort aimed at creating nearly 750,000 jobs statewide.33 Of the nearly $20 billion in bond funds, Proposition 1B contained nearly $2 billion in funds, known as “the Trade Corridor Improvement Fund” (TCIF), to improve the movement of goods from California’s busy ports which handle much of the trade with Asia and Mexico.34 In addition, in 2007, Governor Arnold Schwarzenegger “proposed a $15 billion Goods Movement Action Plan, with some 200 projects designed to improve transit in California.”35

4.1.2 Port Of Oakland - General.

The City of Oakland, like many local jurisdictions, is facing substantial budget deficits, estimated to be over $40 million in 2008.36 One of the critical, if not the most critical, components of the city’s economic engine is the Port of Oakland, directly employing nearly 600 people and generating an estimated “55,000 jobs and $7 billion worth of economic activity annually” in the Bay Area.37 In 2008, cargo shipments at the Port “declined 6.4 percent” reportedly the “sharpest decline in eight years,” to a total of 2,236,244 container shipments.38 In

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2008, the Port of Oakland announced plans to cut 100 of its 600 jobs and anticipated a $1,000,000 budget shortfall for its maritime operations in 2009.39

In the past decade, the Port of Oakland has “embarked on an ambitious program” for growth and acknowledged the “[i]ncreasing competition from other ports up and down the West Coast, including Canada and Mexico, and eventually other parts of the United States because of the expansion of the Panama Canal, . . ..”40 The Port has produced a plan entitled “The Framework for Strategic Alignment with the Future” outlining “the biggest issues facing the port, including a rapidly changing global business climate, financial constraints, customer and industry demands, government regulation, and community expectations, especially on environmental issues.”41

4.1.3 Port Of Oakland – Opportunity for Increased Future Growth.

The Port’s business plan is to double its container volume to 5 million containers by 2020 from the nearly 2,400,000 million containers (20-foot equivalent unit or TEUs) which were carried on just over 2,000 ships in 2007.42 To that end, the Port has made substantial investments (over $700 million) including, but not limited to, the following:

• Deeping of the Oakland Harbor to minus 50 feet so that the Port could “accommodate the newer, larger container ships that now transit the globe;”43

• Purchase of “giant container cranes;”44 and

• The creation of 20 shipping births.45

According to Port Tracker, which tracks cargo volumes at the nation’s major container ports, the Port has a “low” congestion rating as compared to a “medium” rating for the ports of Los Angeles and Long Beach, demonstrating significant capacity at the Port of Oakland for additional volumes with the existing port infrastructure.46

4.1.4 Increasing Capacity – Rail Infrastructure Improvements.

“[I]t costs importers, exporters and vessel owners more to use Oakland’s maritime terminals than it does to ship through at ports in Southern California and Seattle” because “those locations have easy access to rail routes, which helps facilitate ground shipping of products flowing into the ports.”47 As of 2008, only thirty (30) percent of the containers leaving the Port used rail while the other seventy (70) percent used trucks and the Port’s goal is to have the “divide shift to at least 50-50.”48 Thus, the Port has stated that it “could really grow if [it] could get the rail capacity [it] needed down the line” so that it does “not lose business to other West Coast ports” and allow it to “help reduce congestion and promote a better environment for [the Oakland] community, . . ..”49

To that end, in 2008, the State of California through the California Transportation Commission awarded the Port of Oakland a substantial portion of nearly $825 million in TCIF funds (over $450 million)50 in order:

• To facilitate the Port’s “growth by improving its rail capacity”; and

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• To help the Port with the expected “large amount of new cargo from Asia” that the Port needed to “get out of the Bay Area and to the rest of the United States” thereby allowing it to be a “first port of call.”51

4.1.5 TCIF Port Of Oakland Projects.

The Port of Oakland sought TCIF for the following projects:

(a) Tehachapi Pass Project – Gateway to the Southeast. This project would allow “double-stacked” trains (on private infrastructure owned and operated by BNSF) to travel through the Tehachapi mountains. The total project costs are estimated to be nearly $200 million with BNSF applying for nearly $100 million in TCIF funds and committing to private funding for the remaining $100 million.

(b) Donner Project – Gateway to the Midwest. In “rural” Placer County, Union Pacific Railroad would “raise tunnel clearances and construct a second main track over Donner Summit, making it possible to move goods [via double-stacked trains] across the Sierra [Nevada mountains] to major East Coast and Midwest destinations.”52 The total cost of the project is estimated to be nearly $180 million with TCIF funds paying for one-half of the total costs, nearly $90 million, and UP paying for the other one-half.53

(c) Outer Harbor Intermodal Terminal. A $325 million project to create a truck-train terminal at the Port on the former Oakland Army Base property controlled by the Port using $110 million in TCIF funds.54

(d) Martinez Subdivision. A $75 million project to make improvements to a 37-mile stretch of Union Pacific tracks connecting the Port through Richmond onto Emeryville and ultimately Martinez.55

(e) 7th Street Improvements. A $250 million project to expand road and rail crossings at 7th Street in West Oakland with $175 million in TCIF funds.56

(f) Stockton-Fremont Short-Haul Railway. With a total cost of $150 million, TCIF funds would provide $75 million to purchase a right-of-way for a short-haul railway from Stockton to Fremont.57

The City of Shafter has also applied for, and will match upon approval, a $15 million allocation from the TCIF funds. Illustrating its commitment to the OSIP with the significant early financial support for the project, the City of Shafter has allocated $6 million dollars for initial rail infrastructure.58 Major agricultural companies have expressed their support for the OSIP. For example, Paramount Farming will build a state-of-the art logistical center adjacent to the OSIP. Furthermore, with its proximity to major oil operations in Kern County, the OSIP

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creates a significant incentive for “green” industries to locate in Kern County, as evidenced in other parts of the nation.59 Accordingly, it is expected that major oil companies would express an interest in leveraging the investments in the OSIP.

4.3 OSIP Will Leverage The Port’s Significant Capital Investment And Create Job Opportunities In The Near Future.

It is expected that the OSIP could be in operation within 12 months of obtaining funding commitments and achieving the necessary agreements for rail service. The OSIP would provide an increase in market demand for the Port’s products given the anticipated volume of exported goods, thereby ensuring that the Port’s infrastructure is optimally used. With increased revenues, the Port could repay its existing debt service thereby providing additional resources to be used at the Port for additional economic development efforts. The OSIP would (within the next 12 months) create Port jobs given the increase in container volumes being processed at the Port.

It is important to note that the completion of the double tracking of the Tehachapis may not be operational potentially for seven (7) years (and quite possibly 10 years), given the extensive environmental review process required by the California Transportation Commission. In addition, recent reports have raised concerns relating to the progress being made on the expansion of the Port of Oakland’s rail yards and intermodal facilities, given issues surrounding what types of improvements need to be made and who would pay for them – the railroads or the Port of Oakland.60 Port of Oakland officials have publicly stated as followed: “we can’t wait on the railroads sitting and waiting and talking. We’re wasting time.”61

Thus, against this background, the OSIP provides immediate economic benefits and job creation opportunities in the City of Oakland.

4.4 The OSIP Reduces Existing Taxpayer Burdens On The State’s Highways And Local Roads By Reducing Maintenance Costs.

OSIP will reduce the costs to maintain the taxpayer-supported highway infrastructure by eliminating the use of heavy trucks, which cause severe wear and tear, for a portion of the movement of goods. In fact, given these savings, the State of Washington has recently taken the extraordinary step of funding a “railroad network” – including short-haul rail opportunities – to support its agricultural industries, like wheat, partially due to an economic analysis that concluded “without the railroad the state would have to pay [millions of dollars] more for [state] road maintenance, every 12-20 years.”62

5.0 OSIP WILL INCREASE CARGO VOLUMES AT THE PORT OF OAKLAND.

5.1 OSIP Will Increase The Port Of Oakland’s International Market Share For Imported Goods And Allow Cargo Owners and Major Ocean Carriers To Make The Port Of Oakland Their “First Port of Call” From Asia.

As of 2006, the Port of Oakland has only 6 percent of the West Coast market share for imported goods. The Ports of Los Angeles and Long Beach have 79 percent, while the City of Seattle has 15 percent. Railroad executives have stated that “[t]he ports of Los Angeles and Long Beach are close to reaching capacity and the Port of Oakland really wants to capitalize on

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that.”63 In addition to the limited capacity available at the ports of Long Beach and Los Angeles, cargo owners and shippers recognize that they could save nearly 24 hours in sailing time to the Port of Oakland versus sailing to Los Angeles or Long Beach, if facilities like the OSIP were in operation.

Furthermore, a critical component of efficient and cost-effective movement of goods is the availability of distribution centers. A 2007 survey by Cal Poly Pomona indicated that “94 percent of warehouse distribution center operators in the Inland Empire and San Gabriel Valley have no plans to relocate in the near future” and that “50 percent of their goods are going to Southern California destinations.”64 In fact, given that the City of Shafter has nearly 40 million people living within a 300 miles radius of the City, it is anticipated that a number of major retailers will build major distribution centers near the OSIP, upon completion of the facility. Currently, mega-retailer Target has a massive distribution center in Shafter, with warehouse space exceeding 1.7 million square feet as part of the International Trade and Transportation Center.

Equally important, distribution location experts have concluded that distribution centers in Shafter and in Kern County have some of the lowest operational costs “in the nation” and the lowest costs of any county in the State of California.65 Because of the availability of these major distribution centers in Shafter and the immediately surrounding area and the lower costs, major retail cargo owners and ocean carriers could, through the Port of Oakland (versus the ports of Los Angeles and Long Beach) and the OCIP, create a new, reliable, and cost-effective way to access Midwest and Eastern Cities (e.g., Denver, Salt Lake, Dallas, Kansas City, Memphis and Chicago).

Simply put, the OSIP would allow the Port of Oakland to serve these potential customers by allowing the movement of goods to the Southern California market via rail transportation versus truck transportation, which is the only way currently the Port can access the Southern California markets. It is worth noting that, without the OSIP, the improvements to the Tehachapi Pass will not, by itself, create a comprehensive system of delivery of goods because, as noted above, shippers seek multiple points of entry into markets. Thus, without the OSIP, valuable import opportunities would be lost to other states negatively impacting the California economy.

5.2 OSIP Will Increase Economic Growth By Ensuring The Port Of Oakland’s International Dominance As Being The Preferred West Coast Port For The Export Of Agricultural Goods.

5.2.1 Previous Efforts.

In 2004, the Port of Oakland announced critical plans to expand its operations in its three revenue divisions – maritime, aviation, and commercial real estate.66 Critical to its expansion efforts was the creation of a “joint intermodal terminal to facilitate rail access to the maritime terminals” because providing “access by rail within the state” was the “future of [the Port’s] maritime operation.”67 As such, the Port initiated negotiations with the Central Valley and the City of Shafter to create an inland port so that “Central Valley goods, both agricultural and manufactured, [could] be sent by rail rather than road to Oakland for export.”68

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5.2.2 Port Of Oakland’s Competitive Edge And The Importance Of The State’s Agricultural Industry.

Importantly, the Port of Oakland has been less impacted by the recent decrease of imported goods than other major ports in the West Coast because of the following factors:

• The Port of Oakland has a better balance between imports and exports and, in 2008, saw a increase of nearly 5 percent in exports while a decline of 7 percent in imports;69

• According to Port of Oakland officials, “the percent of exports at Oakland has dropped from its historically high level” during the early part of the decade where “exports constituted about 60 percent of port activity . . .;”70

• In fact, “in 2006, imports outpaced exports for the first time in the port’s eight decades of operation, constituting 51 percent of port activity.”71 (Emphasis added);

• The “value of exports leaving all Bay Area seaports, including Oakland, increased by more than 31 percent during the third quarter of 2007, as compared to the same period a year before, . . .;”72

• The Port of Oakland “handled a far higher volume of exports than San Francisco, with the overall value at about $2.7 billion as compared to about $359 million in San Francisco” during the third quarter in 2006;73

• This increased “export volume at the Port of Oakland translates into approximately 500,000 tons of agricultural products from California and points east passing through [Oakland];”74

• “Oakland is the preferred port of the state’s agricultural community because of its proximity to Central Valley farming areas and various wine regions, so it exports the majority of the state’s food and wine products to Asia and other markets;”75

• “California is the nation’s top agricultural state, producing $31.7 billion in gross cash receipts from agricultural products during 2005, according to the state Department of Food and Agriculture;” and76

• Given its proximity, agricultural products exported to Asia from the Port of Oakland travel close to 24 hours faster to their destination than Long Beach or Los Angeles, thereby creating substantial savings for agricultural exporters to Asia.

In light of these facts, it is easy to understand why Bay Area transportation policy experts have recognized that “one of the advantages the Port of Oakland has over much larger ports of

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Los Angeles and Long Beach is that it sends a much greater proportion of exports to other countries, much of it agricultural products grown in the Central Valley.”77

5.2.3 Existing Models For Collaboration Targeting Agricultural Exports.

The strategic collaboration created by the OSIP is not without precedent. Importantly, the Port of Oakland has recognized the importance of the Central Valley to its prosperity and has established critical collaborations including a strategic and “lucrative” partnership with the Port of Sacramento to “run the inland port as a satellite operation.”78 Because of the collaboration, “the Port of Sacramento has increased the volume of cargo it moves and its profits.”79 At the time in 2006, the “collaboration between two non-adjacent ports – located about 80 miles apart – [had] never been attempted.”80

Like the OSIP proposal, the Sacramento and Oakland port effort relied on innovative methods for transporting goods between the two distant ports – “by barge through the Sacramento-San Joaquin Delta” – that attempted to bring major economic and environmental benefits to the East Bay while reducing traffic congestion and diesel pollution from trucks.

Thus, arguably, the proposed collaboration between San Joaquin Valley and the Port of Oakland is even more critical to the long-term success of the Port of Oakland than the collaboration with the Port of Sacramento especially considering these facts:

• San Joaquin Valley is a “240-mile-long valley from Bakersfield to Stockton” producing “a quarter of the nation’s food . . .;”81

• San Joaquin Valley produces nearly $20 billion in annual sales of agricultural goods, which is approximately two-thirds of the entire State’s annual sales; and

• The majority of large agricultural companies are based out of San Joaquin Valley, particularly within close proximity to the City of Shafter.

By enhancing the transportation services available to San Joaquin Valley’s agricultural industries and facilitating the shipment of agricultural goods via rail in a timely manner to Oakland for export, the OSIP creates an immediate and significant impact on the critical export market advantage that has been the successful historical business model for the Port of Oakland.

5.3 Experts Concur That The OSIP Provides The Best Possible Location In The State Of California For An Inland Port.

Experts believe that success of inland ports must be located in areas where there are “the import-export volumes . . . [moving] through the area” – like the San Joaquin Valley, where “there are tremendous volumes of food and agricultural exports, while at the same time major U.S. retail importers such as Target, Wal-Mart, Sears, IKEA, . . . have located mega import distribution centers . . ..82 Currently, “[u]nfortunately, the majority of the San Joaquin agricultural exports and the retail import volumes are trucked from the ports of Los Angeles and Long Beach.”83 Accordingly, logistics experts have concluded:

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A better model would be for retail importers to move loaded containers from steamship carriers calling the Port of Oakland to their distribution centers in the San Joaquin Valley via short-haul rail. There, agricultural shippers could utilize the equipment to move loaded export containers back out. In this case, the Port of Oakland provides a competitive alternative because it is not faced with the capacity and congestion issues experienced at the ports of Los Angeles and Long Beach.

In short, the OSIP would serve as a pivot point for U.S. exports and imports that should (but currently do not) move through the Port of Oakland.

6.0 THE OSIP CREATES SIGNIFICANT OPPORTUNITIES FOR STATEWIDE ENVIRONMENTAL STEWARDSHIP BY ELIMINATING TRUCK CONGES- TION AND IMPROVING AIR QUALITY BY REDUCING AIR POLLUTION.

6.1 The Environment And Air Quality – Background.

The following are critical data points relevant to the OSIP’s environmental benefits:

6.1.1 Trains Versus Trucks.

According to BNSF figures, “[a] train carrying 100 tons for 1,000 miles produces 45 percent fewer greenhouse-gas emissions that contribute to climate change than long-haul trucks bearing the same load.”84 Locomotive “fuel efficiency has increased 80 percent since 1980” because “[o]n average a train can carry a ton of freight for 423 miles on a gallon of fuel” due to the efficiencies created by “running steel wheels on a steel track which produce only one-tenth of the resistance as rubber tire on pavement.”85 “50 percent of the time a container is moved by truck, [the container] is empty.”86 In fact, “in 2003, nearly 524,000 empty containers passed through the Port of Oakland.”87

BNSF has stated that “[r]ail is three times as energy efficient and three times cleaner than trucks” and that “[r]ail is four times safer than trucks.”88 According to estimates by the Port of Los Angeles, 36,000 tons of “tailpipe emissions” resulted from approximately 1,200,000 million truck trips between the port and local near-dock rail yard in 2006.89 Thus, approximately 33 truck trips produce 1 ton of emissions (i.e., 1,200,000 divided by 36,000 = 33 truck trips per ton).

6.1.2 State Of California Mandates.

The California Air Resources Board (CARB) has mandated that heavy-duty trucks, including the nearly “20,000 truckers who frequent the state’s six major ports and rail yards,” with pre-1994 engines be replaced with at least 1994-model engines by December 31, 2009.90 CARB officials have estimated that the cost to “port-and-rail-yard” truckers between $360 million and $480 million to meet the 2009 mandate.91 CARB officials have estimated that the new rules “will save the lives of 9,400 people between 2011 and 2025.”92 CARB officials believe that because of “their heavy weight, high mileage and longevity,” heavy-duty trucks are the “single-largest source of toxic air pollution” in California.93 CARB officials estimate that “diesel pollution from Los Angeles, Long Beach and Oakland kills 2,400 people a year . . ..”94

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6.1.3 San Joaquin Valley.

SJV “has led the nation in ozone violations several times in the last eight years” and “heavy-duty diesel trucks are the region’s single biggest ozone problem.”95 “Diesel truckers drive more miles in the San Joaquin Valley than any other corridor in the state . . ..”96 San Joaquin Valley Air Pollution Control District (SJVAPCD) has estimated that “80,000 trucks . . . annually travel through the Valley.”97 SJVAPCD has found that “80 percent of the valley’s pollution is attributable to mobile sources[:] cars, buses, trucks, and trains . . . [o]f that 80 percent, 50 percent comes from heavy-duty trucks” used to transport port products.98 CARB officials have estimated that 70 percent of all truck traffic emissions in the San Joaquin Valley (8 counties) are Port related goods movement, both import and export.99

6.1.4 Oakland.

It is estimated that truck traffic is responsible for “about 70 percent” of West Oakland’s “diesel emissions.”100 A recent CARB risk analysis study found that “22,000 residents in West Oakland face a cancer risk three times higher than the rest of the Bay Area due to air pollution” from “traffic on local roads and freeways, [including] some from port traffic.”101 This fact has prompted local editorial writers to state that “action needs to be taken by the state air board [CARB]. . . along with the Bay Area Air Quality Management District.”102 The Port of Oakland has “launched several initiatives aimed at reducing the emissions 85 percent by a self-imposed deadline of 2020.”103 The Port “estimates that it will cost about $350 million to fund all of its various plans.”104

6.1.5 Southern California.

Currently, Southern California “shoulder[s] 40 percent of the nation’s cargo [containers] traveling by ship”105 and its “roads and rail network carries 75 percent of all cargo exported” from California.106 In 2003, it was estimated that “60 percent of the rail cargo arriving in Chicago each day” started its “land journey at the ports of Los Angeles and Long Beach.”107 “The ports of Los Angeles and Long Beach account for more than 25 percent of the cancer- causing diesel exhaust in the region.”108 “In Southern California, the San Pedro Bay Ports (i.e., Long Beach and Los Angeles) are the single largest source of air pollution.”109

6.2 The OSIP Provides Significant And Unmatched Environmental Benefits To The State Of California, Northern California, Central Valley, And Southern California.

According to the rigorous analysis of the OSIP by air quality specialists, WZI Inc., as set forth in Exhibit 3 of this paper, the OSIP will provide the following environmental benefits:

6.2.1 State of California.

• Creates a statewide reduction of nearly 1,700 tons per year (or 5 tons per day) of nitrogen oxides (NOx);

• Create a statewide reduction of over 170,000 tons per year of CO2 (including GHG);

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• Creates a statewide reduction in 5 major areas of “criteria pollutant emissions” (i.e., ROG, NOx, CO, PM10, and PM2.5);

• Assuming the “average cost of effectiveness” of nearly $12,000 per ton of reduced emissions (per SJVAPCD figures), creates for the State of California an annual benefit of over $20,000,000, as compared to its investment of $15,000,000 through TCIF; and

• Because trains are more fuel efficient, the movement of goods away from truck onto rail creates additional opportunities to leverage existing public funds because the OSIP will be “freeing up valuable highway capacity for ‘people’ movement” resulting from the reduction in truck hauls thereby further enhancing fuel efficiency for residents.110

6.2.2 San Joaquin Valley.

• Creates a reduction of nearly 1,200 tons per year of NOx in the Valley which, measured against the SJVAPCD’s 2007-2008 results of nearly 2,100 tons of NOx reductions, could account for nearly 60 percent of the SJVAPCD’s on-going efforts; and

• Eliminates nearly 40,000 truck trips per year in the Valley (using the above-listed information from the Port of Los Angeles), which measured against current trends would result in a nearly 50 percent reduction in Valley truck traffic.111

6.2.3 Oakland.

• Creates a reduction of nearly 300 tons per year of NOx in Oakland; and

• Eliminates nearly 10,000 truck trips per year in Oakland (using the above-listed information from the Port of Los Angeles).

6.2.4 Southern California.

• Eliminates nearly 250 tons per year of NOx from the Los Angeles area because the OSIP will act as a “relief valve for congestion in Southern California” by shifting goods to under-used Port of Oakland.112

As set forth above, it is clear that the OSIP provides significant air quality benefits that ultimately will result in less deaths and health-related illness, which ultimately creates a savings to California beyond “dollars and sense” but of actual human life and suffering.

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7.1 State Of California And Short-Haul Rail.

As set forth in California’s the “Goods Movement Action Plan” (2007), the Business, Transportation and Housing Agency and California Environmental Protection Agency have made the following statements relating to short-haul rail intermodal shuttle services:

Short-haul rail intermodal shuttle services are a concept where international marine shipping containers are moved to and from a seaport to an “inland port” distribution site. These rail shuttle services have been proposed in major seaport market areas with distances from as short as 60 miles, to 300 miles or more, in both Northern and Southern California. They are of interest given their potential ability to reduce highway congestion around ports, improve safety by reducing truck movements, reduce roadway deterioration, energy consumption, and emissions, and to provide greater flexibility for shippers to both export and receive goods.

Typically, the break-even point between rail and truck movement of goods is 750 miles. Therefore, a combination of operational efficiencies and/or subsidies is required to make such services work. In addition, due to the growth of demand, California’s Class I railroads (Union Pacific and the Burlington Northern Santa Fe) have been reluctant to offer or test short-haul rail intermodal shuttle services, if such services could displace higher-yielding long-haul business. Thus, in order to make the economics work for a short-haul rail intermodal shuttle services, the following elements must be present:

• To be attractive to the railroads, the service must either offer a comparable profit margin that achieves some balance between profit and capacity used, and/or system capacity must be augmented. An ongoing subsidy may be necessary to manage, market and operate the service to close the gap between market-rate shuttle service fees (as compared to truck-only services), and shuttle services costs.

• There must be inland intermodal freight and transload facilities that can be easily accessed and serviced by rail and trucks, close to existing shipper operations (i.e., a freight/service nexus). The ability to transload or ship heavier weighted containers is a plus. To capture reasonable market share, such rail shuttle services must offer competitive time, cost, labor,

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reliability, and service advantages (either directly or indirectly) for shippers to use such services.

• Operation of night trains is crucial, as it would allow shippers extended freight delivery cutoff times, would cut conflicts with passenger services, and make it easier to load trains. To avoid delays and reliability issues, a minimum of switching must be achieved by having the only one railroad providing through service, to or from port to terminal site.

A good example of successful rail shuttle service and terminal is the Virginia Inland Port (VIP), sponsored by the Port of Virginia. See Pages VIII-10 through VIII-11.

7.2 Port Of Oakland Position On Short-Haul Rail.

In 2007, Oakland Port officials made the following statements relating to their position relating to short-haul rail service:

• While they were “supportive of the [short-haul] rail concept as a long-range strategy,” they were not interested “at this time;”113

• Their “priority projects all involve long-haul rail” because “[t]hat’s our proven market[,] [t]hat’s what our customers are pushing, [and] that’s what the railroads are pushing”114 (emphasis added);

• “If improvements to the overall rail system are not made, then local initiatives such as short-haul rail become infeasible due to congestion on the state’s rail system as a whole;”115

• “The port’s highest priority must be focused on expanding and improving the main rail line service to the port’s facilities;”116 and

• The Port would “study the feasibility of short-haul rail” and “establishing inland ports at [Patterson], Stockton, Fresno, Sacramento, and Shafter in Kern County.”117

7.3 BNSF Position On Short-Haul Rail And Inland Ports.

Railroads believe that their primary function is to “move the long haul, then a trucking company does the short-haul”118 and “somewhere in the, maybe, 500 or 600 miles, is where that bridge gets crossed and [short-haul] rails really start to participate and can provide the proper service and also the efficient rate structure compared to trucks.”119 BNSF executives have stated that “[r]ailroads are interested in the idea [of inland ports], but must ensure it does not harm their primary business, which is to move freight across the county.”120 According to BNSF, “[i]t’s all about capacity, and it’s got to work for everybody . . . [b]ut we are not closing the door on these things.”121 As of 2004, BNSF ran approximately 50 freight trains a day into the San Joaquin Valley.122

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7.4 Freight Experts Believe Short-Haul Is A Competitive Alternative And Valuable Asset To The Growth Of Ports.

Recently, “national rail trend is toward large, long-haul ‘unit trains’ with a single commodity” making it “harder and harder . . . for small shippers to get a few carloads accepted by big railroads.”123 This trend was due to the fact that “[s]oaring rail volume has put rail space at a premium” and “low-volume shippers of [agricultural goods] are often struggling to adapt to . . . that ‘fundamental change’ in BNSF’s and Union Pacific’s business model” of long-haul rail.124 In fact, this focus by the railroads on long-haul rail has created significant controversy, particularly in states with significant agricultural industries. For example, in 2005, Washington State “[p]roduce shippers . . . complained that BNSF [was] more concerned with shipping long- haul freight from the Midwest, which [was] more profitable, than short-hauls of regional commodities.”125

Historically, and according to some experts, “railroads have been able to make money only at distances of at least 500 miles” and short-haul rail services connecting seaports to inland ports with logistics centers, like the OSIP, have required “some measure of public-sector funding.”126 In other words, while arguably “most [short-haul] rail shuttle services do not make sense purely on economics,” short-haul rail services “can make good financial sense when public policy issues such as roadway congestion and the need to reduce pollution from freight transportation are part of the equation.”127

In fact, some industry leaders have suggested that “the industry’s business model could benefit from some further refinement” given “all of rail’s advantages – tonnage capability, public safety, road congestion, highway maintenance, fuel efficiency, air quality, [and] land use.”128 Furthermore, ‘[t]he prevailing emphasis on long-haul trainload traffic has left thousands of miles of line economically underutilized.”129 Some experts even believe that “[e]xpensive, privately owned rail infrastructure is often underused because of business strategies that place more emphasis on controlling the costs of train crews than on overall asset utilization.”130 In fact, some experts have turned the industry’s assumptions on their heads – arguing that short-haul rail can make economic sense and have publicly challenged the “conventional wisdom that the rail mode can only be competitive over long distances.”131

These experts rely on the following facts:

• “The value of shorter-distance rail service is rising because the cost structure of [w]ould be short-haul trucking has increased more rapidly” and “[m]arkets within 500 miles account for 86 percent of all domestic freight movements” thereby offering “railroads far greater growth potential than the longer hauls;”132

• “Intermodal traffic, that is truck trailers or ocean containers handled on special rail equipment, is the fastest-growing segment of rail traffic;”

• “Between 1990 and 2000, rail intermodal grew at an annual rate of 4.6 percent – much faster than rail carload freight, which grew at an annual rate of only 1.4 percent;”

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• “If [terminal and drayage costs] can be reduced, rail intermodal can be competitive even in short-distance corridors;”

• “Several ways to lower these costs, both by industry initiatives and by public investment” are possible, including “better scheduling of drays to increase productivity and central management of drayage;”133

• Short-haul rail operators are “generating a growing volume of captive and short-haul interline business, based on their ample line capacity, customized door-to-door service, high equipment utilization, use of remote-control technology, and enhanced pricing power . . .;”134

• “As trucking costs have increased due to fuel, driver shortages, insurance, and other variables, rail is becoming more cost-competitive with trucking;”135

• “Container dwell time is a growing challenge to the efficient operation of the marine terminal” and a “major deterrent to the ability to improve supply-chain velocity;”136

• Because most U.S. “ports are in heavily populated urban areas” and “[a]vailable land adjacent to deep water is scarce,” terminal “expansion is expensive and time-consuming;”137 and

• Given “acute shortages of drayage drivers” (due to new federal regulations relating to immigration and security), the “[i]ncreased fuel costs”, limitations on “hours-of-service,”138 the “use of truck for both short and long-haul movement of marine containers” is “seriously” impacted.139

These facts undermined the validity of the historical belief that short-haul rail does not work and provide the support for cutting-edge initiatives like OSIP (a strategic inland port using short-haul rail with intermodal facilities) as an integral component of successful seaside port.

Thus, “[t]he long-term solution is rapid rail transfer of freight containers to and from remote inland intermodal rail transfer yards” where “[s]pace-consuming reconsolidation and distribution activities can be performed at lower-cost locations close to newly established distribution centers and cross-docking facilities.”140

In short, inland ports, like OSIP, relying on rail, will be the “most efficient and environmentally responsive way to move marine freight to its final inland destination.”141 As a result, a significant number of examples exist proving the value and the need for short-haul rail and an inland port as part of any successful seaport.

7.5 Examples Of Successful Short-Haul Rail And Inland Ports.

7.5.1 State of Virginia.

As noted above, the State of California has noted that a “good example of successful rail shuttle service and terminal is the Virginia Inland Port (VIP), sponsored by the Port of Virginia.”

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The 160-acre facility is 220 miles inland from three ports and was built for approximately $10,000,000 in the late 1980s.142

It is critically important to understand that the VIP was built “despite skepticism that intermodal transport could be cost effective over such a short distance.”143 In fact, in less than 20 years, “[b]usiness is booming” at the VIP and the “inland port has attracted 24 major companies that have invested nearly $600 million in the area to build more than 6 million square feet of warehouses and distribution centers employing more than 7,000.”144

7.5.2 State of New York.

Norfolk Southern Corporation and 10 New York-based short line railroads “have created a program to convert short-haul truck movements to rail” in “lanes that are less than 500 miles” in what some called the “most creative business initiatives” between a Class I operator, like Norfolk Southern, and short line railroads.145 These include a short-haul route of 300 miles from Atlanta to the Port of Savannah.146

7.5.3 State of Colorado.

Short-haul rail lines, such as the Great Western Railway “funnel business to the main lines” operated by BNSF and UP and, according to economic development executives in the State, have created a rail infrastructure system that has “become a key part of economic developers’ recruitment efforts that target wind-energy manufacturers and other businesses” because often the wind-energy sectors have product, such as blades whose length makes them difficult to transport by truck.147 In fact, BNSF recently identify as “potential new customers” and began “pitching rail service to manufacturers of drilling pipelines and wind turbines, which are bulky to transport on highways . . ..”148

7.5.4 State of Michigan.

Short-haul rail operators work with Class I rail operators, CSX and Norfolk Southern, to provide services to major customers like Dow Chemical, potentially even at speeds of 40 mph.149

7.5.5 State of Florida.

CSX has announced plans for an inland port in Winter Haven and the Port of Palm Beach has announced plans for an inland port in western Palm Beach County, relying on short-haul rail.150 In fact, RailRunner, Inc., since 2004, has been operating a short-haul rail service between Fort Wayne, IN and Jacksonville, FL., using state-of-the-art technologies.151

A critical component of success for such short-haul rail is to “attract enough cargo to warrant rail service” and, thus, experts advise that “agricultural shippers pool their cargoes and the logistics hubs attract enough business to give the railroads the volume they need to operate a service.”152

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7.6 BNSF And Past Intermodal Activities.

The following summarized BNSF’s involvement in facilities similar to the proposed OSIP:

7.6.1 Port Of Seattle.

In 1985, BNSF became an industry leader by opening a 30-acre, state-of-the-art intermodal facility at the Port of Seattle – the “Seattle International Gateway” – which provided BNSF “the closest rail-operated intermodal yard to water terminals in the West Coast.”153 The terminal was developed under an agreement between BN and the Port of Seattle which was “the first of its kind between a railroad and a public port district” because the port “provided port- related support services to BN.”154

7.6.2 Port Of Oakland.

BNSF currently operates an intermodal container transfer facility of approximately 85 acres – the “Oakland International Gateway” – using short-haul rail versus trucks to move goods to its Gateway facility located nearly 15 miles out of the Port of Oakland.155 Port of Oakland officials have stated that using trucks to move these goods out of the Port was “not a good business model.”156 The Terminal resulted in moving “20,000 trucks a year off Interstate 80” and had a total construction cost of nearly $40 million, with over $22 million coming from federal grants.157

BNSF officials have stated as follows:

[The Oakland International Gateway Terminal] is an excellent example of public/private partnerships that not only improve the way of life for the community by reducing highway traffic and pollution, but also assist the shipping community with more efficient and competitive transportation solutions.158

7.6.3 Alameda Corridor Transportation Authority.

To help improve the movement of containers from the Ports of Los Angeles and Long Beach, the Alameda Corridor Transportation Authority was established to oversee a “20-mile dedicated rail route linking Los Angeles and Long Beach harbors” to BNSF’s rail yards in order to “reduce the number of long-haul trucks on Los Angeles’ roads.”159

7.6.4 Victorville.

In 2007, BNSF entered into a Memorandum of Understanding with the City of Victorville to create a nearly 300 acre “intermodal logistics” facility (“for domestic intermodal shipments” versus for “international containers”) approximately 100 miles east of the Los Angeles-Long Beach port complex.160 According to city officials, the intermodal facility would be part of the “Southern California Rail Complex” that would bring “as many as 20,000 well- paying jobs connected to the manufacturing sites and distribution centers that would be lured by the rail yard.”161

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At the time, BNSF officials stated the following (in reference to the intermodal concept in Victorville):

In Victorville, there is plenty of available land, it’s in close proximity to (Interstate 15), and there is a very welcoming attitude . . . [because] they understand what this could bring to the area.162

The City’s “welcoming attitude” included the following items:

• building critical infrastructure with city funds;

• partnering with major retailers, like Wal-Mart, to establish major distribution centers near the proposed inland port; and

• completing environmental reviews and providing for entitlements for nearly “3,500 acres” for the Southern California Rail Complex, which would include “nearly 20,000,000 square feet of manufacturing and distribution uses.163

In 2007, “Victorville officials and the logistics airport’s development company . . . suggested that the location [would serve] as a ‘relief valve’ for congestion 100 miles away at the Ports of Los Angeles and Long Beach” and proposed a “shuttle train pilot project” to connect Victorville to the ports.

However, BNSF officials stated as follows:

This would be a domestic facility. I don’t want to say never, but it is not our intention to use it for international containers. The ports would be better served with another facility there [namely, the Southern California International Gateway, a near-dock facility four miles from the port complex]. Short-haul rail is just too expensive and not in the best interest of our customers. We still need the [Southern California International Gateway] to be built . . .. Victorville just isn’t a substitute for that traffic.164

Nevertheless, contrary to BNSF’s stated position, and following the efforts of congressional and state leaders, in October of 2008, the Port of Long Beach agreed to participate in a “[long-term] study on the feasibility of an inland port” in Victorville where “cargo would be shipped on ocean carriers to Long Beach and Los Angeles, then quickly loaded onto rail cards and sent on a fast track to [Victorville], where workers would sort freight for distribution throughout the country.”165

The Victorville inland port would be modeled after the “Port of Rotterdam’s inland port in Duisburg, Germany, which like Victorville, is similarly situated approximately 90 miles away.”166

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In fact, recently, Port of Long Beach officials have stated that “[l]ooking at 10 to 20 years down the line, you look at inland intermodal facilities as an important link” to the movement of goods.167

7.7 Recent BNSF Environmental Initiatives.

BNSF has recently taken the following actions:

• Increasing its locomotive infrastructure paying particular attention to “locomotives that burn 20 percent less than their predecessors” and “deploy[ing] [in 2009] the industry’s first hydrogen-powered locomotive.”168

• Focusing on the “three-legged stool [o]f fuel, congestion on highways, and carbon” for its “long-term” prosperity.169

• Spending “$2.6 billion dollars, or 16 percent of its nearly $15.8 billion in 2007 sales to extend and improve its rail network.”170

• Finishing “a second track along one of its most profitable freight routes [the 2,120-mile line from Los Angeles to Chicago],” and adding a “fourth track in Wyoming to carry coal.”171

• Announcing that “it will begin delivering train units to a new ethanol storage terminal” facility located in Dallas/Fort worth where “the facility maintains its own rail spur and is designed to completely unload a unit train of 95 cars every 24 hours.”172 “The new facility will receive shipments exclusively from BNSF Railway’s Ethanol Express, a 95-car unit train service specifically created to move ethanol from a single origin or gathering place to a single destination.”173

• In July of 2008, reporting “a 6 percent increase in volume on the domestic side for intermodal” and that “more volume [is] coming from the highway to the rail” thereby making BNSF consider short-haul rail.174

• Stating as follows:

From a standpoint of short-haul and intermediate markets, I think you really have to look at the demographics of the west versus the demographics of the east. We’re really a long haul market because that’s how the population centers line up, and some of the shorter haul markets happen to be coastwise markets and so a lot of the traffic that goes into those markets comes directly into the markets and is distributed locally like the L.A. local traffic or the Oakland local traffic so where someone might say could you run intermodal up and down the I-5 corridor, certainly there might be some intermodal there but a lot of that freight

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comes in via the ocean right to those markets and gets distributed locally. We are looking at some of the intermediate markers in the west, but there’s just not a lot of them because of the way the population centers play out.175

• Declaring that “intermodal continues to be our primary growth driver, helping to improve our return on invested capital from 6.6 percent to 10.5 percent [in 2007].”176

• Stating as follows:

The rail industry offers an efficient, environmentally friendly solution to potential crises that our surface transportation network is facing. However, we’ll only be able to handle the increasing demand from our customers and the nation, if we’re allowed to continue to earn adequate returns.177

• Declaring that its customers are “beginning to address the need for more intermodal services as a way to reduce the shippers’ environmental impact.”

• Stating as follows:

It is common knowledge rail transportation is substantially more fuel efficient than trucking and so the higher the fuel prices go the greater the difference in the total line haul cost between truck and intermodal. Similarly rail is much more environmentally friendly than over-the-road transportation and as environmental regulation or greenhouse regulations become more stringent shippers will be looking for ways to be more environmentally responsible in managing their supply chains, and it’s already happening to a great extent.178

• Stating as follows:

Long term, our industry is in a great position, as companies look for more fuel-efficient ways to move their products.179

Accordingly, in light of its past successes with similar projects and its current and future environmental initiatives, the OSIP provides BNSF with an economic and environmentally sustainable growth opportunity, including, but not limited to, the following:

• the potential for economic growth for BNSF via the OSIP;

• the increased demand in the U.S. intermodal markets;

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• the declining advantages of short-haul trucking versus short-haul rail, particularly in light of non-economic priorities, such as reducing diesel emissions and improving public health;

• shipper interest in reducing environmental impacts;

• the City of Shafter’s critical investment in key infrastructure; and

Experts believe that the key component of whether a port can prosper “in the future is land availability, which is often scarce near major ports” thereby making it impossible to develop logistics centers near ports, particularly given that the transfer of goods to the centers from the port have to rely on trucks.180 In fact, “[i]land ports are not a new concept” and [w]ith land near seaports costly and scarce, other ports around the country have looked inland to develop space for warehouse and distribution facilities and a hub to transport goods by truck, rail car or airplane.”181 Planning and policy experts have stated that given that “there is no land to expand [a] port[‘s] facilities,” to create a “decent” inland port facility “at least 500 acres” are required and such “land is not available in the urban core.”182

Recently, the City of Oakland has requested proposals for the development of the Oakland Army Base, a 108-acre site. Only 2 companies are currently in the process of possibly submitting responses, due by January 2009. One of the teams has proposed a logistics park that also includes not only the Army Base site but also a 157-acre parcel controlled by the Port of Oakland, and an additional 24-acre parcel.183 If developed as envisioned, the nearly 300-acre development would be a state-of-the-art industrial warehouse and logistics park.184

The OSIP would provide immediate tenants to such a facility illustrating the central point of the OSIP – innovative collaboration with the ultimate goal of growing volumes in the Port of Oakland for the benefit of the entire State of California. Even with the potential expansion of a logistics facilities at the Port of Oakland, there will continue to be a lack of space at the Port to sort and distribute containers of goods such that the direct movement of those goods from the ships to rail cars to be delivered to an inland port for subsequent sorting and distribution is critically important.

As stated above, experts have pointed out that container “dwell time is a growing challenge to the efficient operation of the marine terminal” and a “major deterrent to the ability to improve supply-chain velocity.”185 Because most U.S. “ports are in heavily populated urban areas” and “[a]vailable land adjacent to deep water is scarce,” terminal “expansion is expensive and time-consuming.”186

Thus, the OSIP provides low-cost, efficient land for the Port to expand its operations and to secure its future growth.

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9.0 BY CREATING ADDITIONAL CONTAINER VOLUMES AND SUBSTANTIAL ECONOMIC GROWTH IN THE CITY OF SHAFTER, OSIP WILL PROVIDE COMPETITIVE PRICING.

“The global economic downturn has cut the rates that some ships charge to less than $600 per 40-foot container from as much as $3,400 in 2007.”187 Nevertheless, economist specializing in goods movement have stated as follows:

[The U.S. economy] won’t be down forever and global trade will come back [and] [a] lot of that trade will still enter the West Coast in spite of new competition. Getting ready for that now, in a way that sharply reduces pollution, just makes good sense.188

In partnership with the Port of Oakland, the OSIP will help the Port continue to keep costs down in order to improve shipping prices that are critical to cargo owners. In addition, a successful OSIP will likely generate substantial Federal, State, and local tax increment that can be used to help the Port of Oakland address environmental challenges in the immediate future (less than 5 years) including providing funds to address related costs associated with congestion at the Port.

CARB has estimated that its stringent new emissions restriction rules will “cost the trucking industry $5.5 billion, causing some truckers to plead for financial assistance” with CARB offering “truck owners $1 billion in help.”189

In 2008, the Port of Oakland received nearly $3.5 million from the TCIF to “reduce diesel truck and ship pollution – including money to provide cleaner power for big ships in port.”190 Of these funds approximately $1,000,000 “would be used to add pollution filters to 75 trucks that haul containers in and out of the port” – approximately $13,500 per truck.191 It is estimated that “hundreds of the 2,000 trucks that use the port are believed to need pollution upgrades” in order to meet CARB mandates by the end of December 2009.192 Thus, assuming 50 percent of the trucks serving the Port of Oakland require upgrades, the total costs would be approximately $13,500,000.

Also, in early 2008, the Port of Oakland Commissioners voted to levy fees on containers in “an effort to reduce diesel particulates form truck emissions.”193 The National Retail Federation has expressed significant opposition to such fees, including threatening legal action, because shippers and retailers ultimately pay them.194

In late 2008, the “clean truck program” of the Ports of Long Beach and Los Angeles (designed to provide via fees on containers nearly $1.6 billion to help replace a fleet of nearly 17,000 old trucks) was stalled as part of continuous litigation surrounding the decision of the Federal Maritime Commission to seek a court order to halt parts of the program.195 The National Retail Federation estimated that the program would “add more than $1 billion per year to cargo container costs for goods” at a time that the retail industry is “ill-equipped to bear them.”196

Legislative efforts, such as SB 974, which would have provided up to $350 million annually (via container fees from Long Beach and Los Angeles) “for air quality and

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transportation improvements in the Inland area and around Southern California”, failed due to the Governor’s veto.197

In fact, by late 2008, citing the “economic downturn” hitting the shipping industry, the Port of Oakland withdrew its offer to the Bay Area Air Quality Management District (BAAQMD) to provide close to $5 million in funding to provide “grants to cleanup diesel truck models from 1994 to 2003” and “postponed a decision to impose a container fee that would force companies to pay millions of dollars to finance pollution reduction for diesel trucks, ships, and plans.”198 This action by the Port has prompted some members of the BAAQMD to suggest that the District exercise its regulatory authorities and impose monetary fines on the Port.199

At the same time, the Port of Los Angeles, in late 2008, began “distributing $44 million worth of grants to serve as an incentive for freight haulers who have committed to purchasing low-emission big rigs that comply with the [Port’s] Clean Trucks Program.”200

The OSIP provides a potential partnership to help the Port of Oakland create much needed economic growth at the Port while at the same time creating additional revenue streams to help mitigate some of the impacts of the Port.

10.0 CALIFORNIA’S CONGRESSIONAL DELEGATION IS CRITICAL TO CALIFORNIA PORTS ADDRESSING CHALLENGES FACING THE PORTS.

Recently, local communities impacted by port operations in Los Angeles and Long Beach have demanded financial assistance to address some of the port’s impacts. For example, in 2008, leaders in the Inland Empire discussed whether it would be feasible to change the California Tidelands Trust Act of 1911, which requires the Ports of Los Angeles and Long Beach to reinvest their revenues within their boundaries, in order to secure financial resources to mitigate the negative impacts to communities in the Inland Empire, like Riverside, from the two ports.201

In response, congressional leaders in California, such as Representative Ken Calvert (Corona), proposed plans in Congress to impose fees on containers in order to “help pay for roads and rail lines within 300 miles of shipping ports.”202 The response from Representative Calvert illustrates the critical role the Federal government can play in addressing the fiscal and environmental issues facing ports in the State of California.

In fact, as discussed above, the Federal government is currently in a unique position to forge consensus among competing interests by virtue of the unprecedented stimulus package being discussed in Washington D.C. and existing sources of funding for innovative solutions like the OSIP, through programs like the Transportation Infrastructure Finance and Innovation Act and local air pollution credit programs, like SJVAPCD Indirect Source Review Program funds, which as of 2007-2008 had an expended balance of nearly $7,500,000.203

It is estimated that the recovery package could total “$400 billion to $700 billion” and include “the single largest new investment in [the Nation’s] national infrastructure since the creation of the federal highway system in the 1950s.”204 The OSIP will further a number of goals of any Federal plan including producing jobs that “reduce energy use and global warming emissions” and focusing limited resources on improving transportation infrastructure that leads to ongoing economic growth in the State of California.205

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As detailed above, a critical component to the development of the OSIP is the establishment of an express short-haul rail service using BNSF rail lines and capacity. Experts have stated as follows:

Without a strong visionary program at the Federal level – one that is funded at a level that will result in the development of new rail infrastructure that can augment and complement existing rail infrastructure and/or bridge critical gaps in our nation’s short-haul network, new short-haul freight models [such as inland ports] will be difficult to replicate.206

An example of the importance of Federal legislation to support short-haul rail can be found in the recently enacted tax credit bill to “entice rural railroads to re-invest in track improvements.”207 Congressman Jerry Moran, an author of the tax credit bill, stated as follows, in describing the credit’s impact on the state of Kansas:

Short lines matter to us greatly. We are in the middle of the country, we’ve got to be able to get commodities and goods moved in a cost-effective and efficient way.208

In addressing these challenges, policy leaders should seek guidance from competitors who, even in the face of a triple threat of a global financial crisis, increased competition, and a slowdown in shipping, continue to forge ahead with multi-billion-dollar expansion efforts:

When we put a piece of infrastructure in place, it’s there 100 years. It’s not a short-term business and we have a lot of confidence in the long term.209

Thus, it is critically important that Federal, state, and local governments, with their limited resources, work collaboratively to wisely and prudently invest public infrastructure dollars with a laser-like focus on leveraging all available public funds with identified private sector partners to grow California’s ports and address the issues facing impacted communities in a responsible and immediate manner.

The OSIP, for the reasons cited in this paper, provides just that opportunity—with significant Federal, State, and local benefits not only in terms of economic growth but environmental stewardship.

In fact, importantly, the Federal Government, as demonstrates by the “oversight plan” of the Committee on Transportation and Infrastructure (2007), has stated that the “railroads will have to concentrate increasingly on replacing and building new capacity, such as . . . constructing new intermodal or transloading facilities” and that the Government “will also have to take responsibility for ensuring that all facets of our transportation system are in working order.”210

As provided herein, the private sector stands ready to participate.

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To summarize, experts have also stated that there are seven key factors to a successful inland port:

• access to a major container port;

• an intermodal facility served by a Class I railroad;

• at least 1,000 acres of total land;

• foreign trade zone status;

• access to a local metropolitan market;

• accessibility to major interstate highways; and

• access to a strong local labor pool.211

The OSIP has all of these attributes and, as such, is a landmark project providing a unique opportunity to build California’s infrastructure to create “win wins” bridging together all of the impacted regions of California – Northern California, Central California, and Southern California – to ensure speedy movement of goods from California ports into the U.S. and California markets.

11.0 THE OSIP PROVIDES ECONOMIC AND FISCAL BENEFITS TO THE STATE OF CALIFORNIA

Forward Observer estimates that over the course of the next two decades, the OSIP will produce an average of $1.2 billion per year in direct financial benefits for California:

- State and private entities are expected to make ongoing investments of about $18 million per year through 2030.

- New economic activity resulting from increased supply logistics operations, agricultural market expansions and retail expansions will account for $703 million per year.

- Health care cost savings resulting from NOx, PM and CO2 pollution reductions and fewer truck-related accidents will account for $428 million per year.

- Cost savings from trucking fuel and wage savings, commuter time reductions and averted road wear and tear will result in an additional $64 million in benefits per year.

The OSIP would produce and support 31,800 permanent jobs in the state by 2030:

- New economic activity will generate 22,000 jobs by 2030.

- Economic cost savings will create 250 jobs by 2030.

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- Health care cost savings will generate 9,600 jobs by 2030.

- Cumulatively, the OSIP will support 494,300 job-years by 2030.

Annual state output will increase by an average of $2.6 billion per year and $55.1 billion cumulatively between 2010 and 2030.

Annual earnings will increase by an average of $890 million per year and $18.7 billion cumulatively over the next 21 years.

State and local taxes will increase by an average of $161 million per year and $3.4 billion cumulatively over the next 21 years.

- By 2030, the State of California will collect an additional $1.8 billion cumulatively in new general fund revenue as a result of the OSIP.

- By 2030, local governments will collect an additional $1.6 billion cumulatively in additional sales taxes and property taxes.

For Alameda County and the Bay Area, the OSIP will inject $81 million in average annual direct benefits into the region and support 1,800 permanent jobs by 2030.

For the South San Joaquin Valley, the OSIP will inject $872 million in average annual direct benefits into the region and support 16,700 jobs by 2030.

As demonstrated by these key findings, the OSIP will provide tremendous economic benefits to the State of California.

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1 The New York Times (12/7/08). “Obama pledges public works on a vast scale.” 2 www.portofoakland.com. “Facts and Figures.” 3 The Daily News of Los Angeles (6/13/07). “Delays and difficulties in handling shipping cargo threaten state’s title as a gateway to trade: officials developing plans to ease congestion, pollution.” 4 Los Angeles Times (11/28/08). “West Coast ports face struggle to maintain relevance” (citing Alameda Corridor Transportation Authority 2007 Study). 5 Global Gateways Development Program (January 2002). Business, Transportation and Housing Agency. 6 San Francisco Chronicle (11/30/08). “Ship cargo volume slumping at West Coast ports” (citing National Retail Federation, American Shipper Magazine and the Drewry Shipping Consultants of London 2008 report). The Drewry Consultants act has a maritime industry research firm with about 3000 clients in more than 100 counties. See also, Los Angeles Times article. 7 Id. 8 Id. 9 Id. 10 Id. 11 Id. 12 National Real Estate Investor (6/1/08). (attributing comments to senior executives at ProLogis). 13 San Francisco Chronicle (11/30/08). 14 Id. 15 Press Telegram (10/7/08). “Mexico port could take local shipping.” 16 Caltrade.com (California International Business Report (9/2/08). “Mexico moving forward with massive port at Punta Colonet.” 17 The Journal of Commerce Online (1/14/09). “Mexico port plan on track.” 18 Transportation Research Board Workshop presentation (1/11/04). See also Railway Age (1/2003) “CP Expands Expressway service.” 19 Canada NewsWire (12/29/06). “Railways on a roll Canada.” 20 Id. 21 Los Angeles Times (11/28/08). 22 Florida Shipper (4/28/08). “Scrambling for the advantage.” 23 San Francisco Chronicle (11/30/08) 24 Id. See also KCBS Report (11/20/08). “Oakland Loses Major Shipping Company.” 25 San Francisco Chronicle (1/9/09). “APL to move offices from Oakland to Arizona” (quoting Neptune’s regional president for Americas). 26 National Real Estate Investor (6/1/08). “U.S. ports battle for trade” (quoting senior executives at ProLogis, a Denver-based industrial developer, and AMB Property, a San-Francisco based company). 27 San Francisco Chronicle (11/30/08). 28 San Francisco Chronicle (11/30/08). National Real Estate Investor (6/1/08). 29 National Real Estate Investor (citing AMB analysis of major West Coast and East Coast ports). 30 The Cunningham Report (10/26/08). “Los Angeles considers $10 incentive plan; Long Beach not happy” (quoting Los Angeles Harbor Commission President S. David Freeman). 31 Cargo News Asia (10/20/08). “Houston looks at new port site to double capacity.” 32 National Real Estate Investor (6/1/08). 33 Sacramento Bee (10/27/08). “Bonds slow to aid state.” 34 San Diego Union-Tribune (4/11/08). “Region’s ports set for bond allocation.” 35 The Daily News of Los Angeles (6/13/07). “Delays and difficulties in handling shipping cargo threaten state’s title as a gateway to trade: officials developing plans to ease congestion, pollution.” 36 San Francisco Chronicle (10/14/08). “Oakland runoff: old guard versus outside.” 37 East Bay Business Times (1/7/08). “Value of Bay Area exports on the rise.” San Francisco Business Times (11/21/08). “City Chases job growth in food, retail, biotech.” 38 San Francisco Business Times (1/16/09). “Oakland port traffic fell 6.4% in 2008.” 39 San Francisco Business Times (8/15/08). See also, Contra Costa Times (12/28/08). “Port of Oakland facing $12 million shortfall.” 40 Id., (quoting Omar Benjamin, Port of Oakland’s Executive Director).

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41 Id. 42 Id. See also, East Bay Business Times (4/28/08). “State OKs $456 million to aid California port projects.” 43 San Francisco Business Times (12/28/07). “Oakland gets $50 Million to deepen harbor.” 44 Oakland Port Press Release (3/4/05). “Port of Oakland Giant Cranes Set to Enter the Bay.” See also, www.portofoakland.com. “Facts and Figures.” 45 San Francisco Business Times (7/18/08). “Port of Oakland nears investment deal for shipping berths.” 46 The Journal of Commerce Online (11/10/08). “Lowest peak container traffic for US in four years.” 47 Inside The Bay Area (2/11/08). “Port of Oakland director bullish on future.” 48 San Francisco Business Times (8/15/08). “Port of Oakland’s rail plans can’t leave the station.” 49 San Francisco Business Times (8/15/08). “Port of Oakland’s rail plans can’t leave the station.” See also, East Bay Business Times (4/28/08). “State OKs $456 million to aid California port projects” (quoting Executive Director Omar Benjamin). 50 Inside Bay Area (4/11/08). “Bay Area getting $825 million to reduce traffic at ports.” See also, San Francisco Business Times (11/21/08). “City chases job growth in food, retail, biotech.” 51 Contra Costa Times (12/6/07). “Areas near tracks fear congestion” (quoting Jon Amdur, the Port’s Manager of Maritime Capital Improvement Program). East Bay Business Times (4/28/08). “State OKs $456 million to aid California ports projects.” 52 Sacramento Business Journal (2/11/08). “Union Pacific seeks bond funds for overhaul of Sierra route.” 53 San Francisco Business Times (8/15/08). 54 East Bay Business Times (4/28/08). “State OKs $456 million to aid California ports projects.” 55 Id. 56 Inside Bay Area (4/11/08). “Bay Area getting $825 million to help reduce traffic at ports” 57 Oakland Tribune (10/18/07). 58 The Californian (9/12/08). “Shafter import-export center would boost trade efficiency.” 59 The Denver Post (5/4/08). “Rolling with the wind railroads fill niche as they deliver for state’s growing wind- power industry” (citing the proximity to rail as a key factor for a major solar wind manufacturer to locate a state of the art manufacturing plant in Colorado). 60 San Francisco Business Times (8/15/08). San Francisco Business Times (1/16/09). “Oakland port traffic fell 6.4% in 2008.” 61 Id. 62 Puget Sounds Business Journal (5/7/07). “State saves three railroad lines.” 63 San Francisco Business Times (8/15/08). 64 San Bernardino County Sun (11/11/07). “Cargo surge her to stay.” 65 The Californian (11/11/08). “Five Questions: Why is Kern good for distribution centers?” (quoting a study by The Boyd Company (Princeton, N.J.)). 66 San Francisco Business Times (11/19/04). “Expansion plans afloat at Port of Oakland.” 67 Id. 68 Id. 69 Id. 70 East Bay Business Times (1/7/08). “Value of Bay Area exports on the rise.” 71 Id. 72 Id. 73 Id. 74 Id. 75 Id. 76 Id. 77 Oakland Tribune (10/18/07). “$840 million would speed port traffic” (citing comments by Therese McMilland, Deputy Executive Director – Metropolitan Transportation Commission). 78 Sacramento Bee (3/8/08). “Port of Oakland prospers, with more ahead.” See also, Sacramento Bee (1/19/06). “Port help arrives: Oakland vows to revive West Sac facility.” 79 Id. 80 East Bay Business Times (4/17/06). “California’s 2 northern ports teaming up: Oakland, Sacramento launch cooperative era.” 81 Sacramento Bee (3/3/08). “San Joaquin Valley hopes clout brings bucks.”

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82 Congressional Quarterly, Inc. (4/28/08). House Transportation and Infrastructure Committee, Highways and Transit Subcommittee. “Freight Movement” – Testimony by Gary Cardwell, Vice President Northwest Container Services. 83 Id. 84 Business Week (10/23/08). “Burlington Northern and the revival of railroads.” 85 The Denver Post (5/4/08). 86 Congressional Quarterly, Inc. (4/28/08). House Transportation and Infrastructure Committee, Highways and Transit Subcommittee. “Freight Movement” – Testimony by Gary Cardwell, Vice President Northwest Container Services. 87 The Shafter Advantage (2004). Page 7. 88 BNSF. Proposition 1B TCIF Tehachapi Trade Corridor Project Application, at page 7. 89 Reuters (5/16/08) and Port of LA News Release. “Port of Los Angeles and South Coast Air Quality District Roll Out world’s most powerful heavy duty electric truck.” 90 San Francisco Chronicle (9/25/08). “Freight-hauler battles to keep truckers busy.” See also, Los Angeles Times (12/7/08). “State OKs strict air emission measures: one will ban much of the current diesel truck fleet from ports statewide.” 91 Id. 92 San Francisco Chronicle (12/13/08). “Air board adopts strict rules on diesel exhaust.” 93 Sacramento Bee (12/11/08). “California air board to vote on plan to slash emissions.” 94 The Business Press (7/16/07). “Container fee to fight smog.” 95 Fresno Bee (1/18/08). “Valley air district upset by state offer.” 96 Id. 97 Fresno Bee (2/29/08). “Valley losses on more air money.” 98 Modesto Bee (8/26/08). “Engineering Rails’ Rebirth: Freight cars may join big rigs in transporting Valley’s Bounty” (quoting Oakland Port Executive Director Omar Benjamin). 99 “Proposed Emission Reduction Plan for Ports and Goods Movement in California”, 2006 and EMFAC 2007, as set forth in WZI report (Exhibit 3 of this paper) at page 8, footnote 10. 100 San Francisco Business Times (10/10/08). “Big polluter Port of Oakland charts a less toxic path.” 101 Oakland Tribute (12/11/08). “Editorial: Cut Port of Oakland pollution now.” See also, Contra Costa Times (12/05/08). “Port air pollution riles regulators, neighbors.” 102 Contra Costa Times (9/28/08). “Time to clean the air.” (Editorial). 103 San Francisco Business Times (10/10/08). “Big polluter Port of Oakland charts a less toxic path.” 104 Id. 105 Contra Costa Times (2/26/07). “Domino effect travels down railway.” 106 Los Angeles Times (11/7/07). “We Deserve More.” (Editorial). 107 Los Angeles Times (8/22/03). “A Future Tied to the Tracks.” 108 OnEarth (Natural Resources Defense Council Inc. - (3/22/07)) “Dark Side of the New Economy . . ..” 109 eMagazine.com (9/08-10/08 – Vol. XIX, no. 5). “The Port of Long Beach Hoists the Green Flag.” 110 Congressional Quarterly, Inc. (4/28/08). House Transportation and Infrastructure Committee, Highways and Transit Subcommittee. “Freight Movement” – Testimony by Gary Cardwell, Vice President Northwest Container Services. 111 SVJAPCD at page 2. 112 Port of Oakland Press Release (10/28/08). “Port of Oakland announces alliance between Northwest and the City of Shafter” (quoting Port Director of Maritime Wilson Lacy). 113 Modesto Bee (9/14/07). “Port shoots down Crows Landing rail line.” 114 Id. 115 Modesto Bee (8/26/08). “Engineering Rails’ Rebirth: Freight cars may join big rigs in transporting Valley’s Bounty” (quoting Oakland Port Executive Director Omar Benjamin). 116 Id. 117 Id., (attributing comments to Libby Schaff, Port of Oakland’s Director of Public Affairs). 118 Christian Science Monitor (12/21/06). “Railroad boom hits environmental, ‘not in my backyard’ snags.” 119 FD (Fair Disclosure) (11/14/06). “BNSF at Citigroup 21st Annual Transportation Conference – Final” (quoting Tom Hund, BNSF C.F.O.). 120 The Press Enterprise (5/5/07). “‘Inland port’ plan for traffic sputters” (quoting BNSF director of facility development, Bob Brendza).

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121 Id. 122 Modesto Bee (2/23/04). “Off Trak Passenger Trains a Little Pokey.: 123 Spokesman Review (11/23/06). “Railing against the costs” (citing testimony of Barbara Ivanov, Washington State Department of Transportation – Freight Strategy Director). 124 Id. 125 Tri-City Herald (12/21/05). “Farmers: Rail proposal inadequate.” 126 Florida Shipper (6/25/07). “Public Private rail shuttles touted” (citing comments by H. Declan Brown, a partner in consulting firm Railroad Industries Inc. in a presentation to the 1st Annual Real Estate Logistics Forum sponsored by The Journal of Commerce). 127 Traffic World (6/27/07). “Planning Intermodal Shuttles” citing comments by H. Declan Brown. 128 Railway Age (6/1/08). “Can we make better use of existing capacity? shortline/regional perspective”, written by George Betke, Jr., C.E.O. of Farmrail System, Inc. 129 Id. 130 States News Service (3/28/08). “Rail advocate urges greater public role in shifting freight off state highways” (citing article by former railroad executive Richard L. Beadls entitled “Can Public Investment in Freight Rail Deliver the Goods?”). 131 Railway Age (10/1/06). 132 Railway Age. 133 Transportation Research Board Workshop and Abstract. 134 Id. 135 World Trade (11/1/08). “The short tale: near-sourcing tends to create new winners and losers in the supply chain.” 136 Journal Of Commerce (9/1/08). “ Intermodal rail: the long-term solution,” (column by W. Gordon Fink, an independent consultant with Emerging Technology Markets, a Maryland-based company specializing in transportation and public policy). 137 Id. 138 Railway Age (10/1/06). “Let’s be in it for the ‘short-haul’ too” (article by George Betke, Jr. C.E.O. of Farmrail System, Inc.). 139 Journal Of Commerce (9/1/08). “Intermodal rail: the long term solution” 140 Id. 141 Id. 142 The Journal of Commerce (8/23/89). “Traffic increases at inland VA port.” 143 The Journal of Commerce (4/28/92). “US inland ports adding punch to spruce up cargo volumes.” 144 The Journal of Commerce (2/6/06). “Northwest passage: nearly 20 years after opening, Virginia’s inland port at Front Royal is growing up.” 145 Reuters (5/29/08). “Norfolk Southern and 10 short line railroads create short-haul rail options in New York and beyond. 146 Transportation Research Board – Alternative Freight Capacity Workshop Powerpoint (1/11/04). Zeta-Tech Associates, Inc. (citing Norfolk Southern executives). 147 The Denver Post (5/4/08) (citing Tom Clark, executive vice president of the Metro Denver Economic Development Corporation). 148 Business Week (10/23/08) 149 Ludington Daily News (8/20/07). “Marquette Rail hopes to change industry’s image.” 150 Florida Shipper (6/25/07). “Public-private rail shuttles touted.” 151 Business Wire (8/23/04). “Railrunner begins short-haul intermodal service.” 152 Id. 153 Business Wire (8/9/85). “BN opens new Seattle International Gateway container handling facility.” 154 Id. 155 Jacksonville Business Journal (10/15/07). “Port seeks new container facility.” 156 Id., (quoting Gay Joseph, general manager of maritime administration and finance for the Port of Oakland). 157 BNSF News Release (3/4/02). “Port of Oakland and BNSF Announce Opening of Joint Intermodal Terminal.” 158 Id. (quoting Steve Branscum, VP of Consumer Products at BNSF). 159 Investor’s Business Daily (7/26/06). “BN Optimistic, puts effort on port bottlenecks.”

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160 Traffic World (6/25/07). “Planning Intermodal Shuttles” with public, private funding, rail shuttles could speed containers from ports, reduce congestion, pollution.” See also, San Bernardino County Sun (3/21/07). “Desert BNSF yard would mean more jobs.” 161 Pacific Shipper (1/2/5/07). “For BNSF, intermodal growth is all uphill..” 162 Id. 163 Id. See also, News Release (1/17/08) – City of Victorville. “BNSF Railway and City of Victorville agree to explore rail intermodal project.” 164 Id. (quoting BNSF spokeswoman Lena Kent). 165 The Cunnigham Report (10/19/08). “Long Beach Commission OKs inland port study.” See also, The Press Telegram (10/13/08). “Legislators promoting inland port.” 166 Signal Tribute (10/23/08). “Harbor Commissioners considering Victorville as internal port.” 167 San Bernardino County Sun (3/21/07). Desert BNSF yard would mean more jobs. 168 Business Week (10/23/08). “Burlington Northern and the revival of railroads.” 169 Business Week. 170 Id. 171 Id. 172 Ethanol Producer Magazine (November 2008 Issue). “BNSF to deliver ethanol to new Texas terminal.” 173 Id. 174 FD (Fair Disclosure) Wire (July 24, 2008). “Q2 2008 BNSF Corporation – Earnings Conference Call – Final” 175 Id. (quoting C.E.O. Mathew Rose). 176 FD (Fair Disclosure) Wire (3/06/08). “BNSF 2008 Financial Analysts’ Meeting - Final” (quoting C.E.O. Matthew Rose). 177 Id. (quoting CEO Matthew Rose). 178 Id. (quoting Steven Branscum, Vice President of BNSF’s Consumer Products division). 179 Great Falls Tribute (12/14/08). “For BNSF, 2008 was a good year” (quoting C.E.O. Matthew Rose). 180 National Real Estate Investor (attributing comments to senior executives at ProLogis). 181 Los Angeles Times (7/12/07). “County offers ‘inland port’ plan” (quoting Hasan Ikhrata, Director of Planning and Policy for the Southern California Association of Governments). 182 Id. 183 San Francisco Business Times (11/21/08). “Prologis/Catellus, First Industrial exit Oakland base race.” 184 San Francisco Business Times (10/10/08). “Developer Tagami wants all of Oakland Army Base.” 185 Journal Of Commerce (9/1/08). “Intermodal rail: the long-term solution” (column by W. Gordon Fink, an independent consultant with Emerging Technology Markets, a Maryland-based company specializing in transportation and public policy.) 186 Id. 187 Los Angeles Times (12/15/08). “L.A., Long Beach ports push projects despite rocky economy.” 188 Id., (quoting John Husing, an Inland Empire economist specializing in goods movement). 189 Los Angeles Times (12/13/08). 190 Inside Bay Area (1/6/08). “Port of Oakland to get $3.4 million to cut pollution.” 191 Id. 192 Contra Costa Times (12/05/08). “Port air pollution riles regulators, neighbors.” 193 Inside the Bay Area (3/20/08). “Port of Oakland to begin levying container fees.” 194 Id. 195 Los Angeles Times (9/8/08). “Los Angeles port, truckers group head for court.” 196 Id. 197 The Press Enterprise (10/1/08). “Inland officials blast governor’s port-fee bill veto.” 198 Oakland Tribute (12/11/08). 199 Contra Costa Times (1/7/09). “Port of Oakland, regulators fight over clean air funds.” 200 Dailybreeze.com (12/29/09). “Port of L.A. distributes emission cleanup grants.” 201 The Press Enterprise (9/6/08). “Ports goods flow through Inland area: port funds don’t.” 202 Id. 203 Journal Of Commerce (9/1/08). “ Intermodal rail: the long-term solution.” (column by W. Gordon Fink, an independent consultant with Emerging Technology Markets, a Maryland-based company specializing in transportation and public policy). See also SJVAPCD “2008 Annual Report on the District’s Indirect Source Review Program” (Page 2).

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204 Id. (quoting President-elect Barack Obama). 205 Id. 206 Congressional Quarterly, Inc. (4/28/08). House Transportation and Infrastructure Committee, Highways and Transit Subcommittee. “Freight Movement” – Testimony by Gary Cardwell, Vice President Northwest Container Services. 207 The Topeka Capital-Journal (11/29/08). “Moran-authored bill extends tax credit for rural railroads.” 208 Id. 209 CBS News (11/27/08). “It’s full steam ahead for Port of Vancouver Expansion” (quoting Vancouver Port Authority CEO Gordon Houston). 210 www.transportation.house.gov. Tasks of the Subcommittee of Railroads, Pipelines, and Hazardous Materials, Paragraph 6. 211 The Journal of Commerce (10/27/08). “Inland port savings” (citing Heitman, a real estate investment manager firm.)

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The Oakland-Shafter Inland Port: Assessing the Economic and Fiscal Benefits

June 2009 2 Executive Summary

This report assesses the economic and fiscal benefits of the proposed Oakland-Shafter Inland Port (OSIP). This report relied on publicly available reports and data to estimate the impact of the OSIP on jobs, state output and state resident earnings. Both cash flow analysis and regional input-output multipliers produced by the United States Department of Commerce were used to estimate the impact of the OSIP on driving down costs for commercial operations, generating new economic activity, and producing environmental and health benefits using generally accepted economic, statistical and financial principles. Based on our analysis, Forward Observer estimates that over the course of the next two decades, the OSIP will produce an average of $1.2 billion per year in direct financial benefits for California: – State and private entities are expected to make one-time investments of about $18 million per year over a 21 year period. – New economic activity resulting from increased supply logistics operations, agricultural market expansions and retail expansions will account for $703 million per year. – Health care cost savings resulting from NOx, PM and CO2 pollution reductions and fewer truck-related accidents will account for $428 million per year. – Cost savings from trucking fuel and wage savings, commuter time reductions and averted road wear and tear will result in an additional $64 million in benefits per year. The OSIP would produce and support 31,800 permanent jobs in the state by 2030 Annual state output will increase by an average of $2.6 billion per year and $55.1 billion cumulatively between 2010 and 2030. Annual earnings will increase by an average of $890 million per year and $18.7 billion cumulatively over the next 21 years. State and local taxes will increase by an average of $161 million per year and $3.4 billion cumulatively over the next 21 years. – By 2030, the State of California will collect an additional $1.8 billion cumulatively in new general fund revenue as a result of the OSIP. – By 2030, local governments will collect an additional $1.6 billion cumulatively in additional sales taxes and property taxes. The OSIP will inject $81 million in average annual direct benefits into Alameda County and the Bay Area and support 1,800 permanent jobs by 2030.

The OSIP will inject $872 million in average annual direct benefits into the Southern San Joaquin Valley and support 16,700 permanent jobs by 2030. 3 The OSIP will create direct economic benefits of $1.2 billion per year in California Average Annual Direct Economic Benefits Key Observations Averted road repair $1M Between 2010 and 2030, $64M $1.2B cumulative direct benefits from the Averted Commuter $428M OSIP will equal $25.1 billion as a CO2 gas and result of new economic activity, pollution time economic cost savings and health Health $140K $8M benefits savings New economic activity will $428M generate an average of $703 Trucking million annually due to new fuel and revenue from increased shipping and cargo capacity, new Retail revenue wage $703M distribution center operational $1M $55M expenditures, agriculture stimulus and retail stimulus

Agriculture revenue Economic cost savings, from $6M averted road repair and maintenance costs and time Shipping and cargo savings from less truck traffic, will revenue equal an average of $64 million per $14M year Distribution Distribution center Health care improvement will center generate an average of $428 operational Start-up construction million in annual savings because expenditures investment investment of fewer health issues and averted $2M $682M deaths from pollution and truck- $16M related accidents $18M Start-up investment and Start-up and New economic Health benefits Economic cost Total direct benefits distribution center construction distribution center activity savings investment will amount to $18 investments million per year between 2010 and 2030 4 31,800 permanent jobs will be created by 2030 because of the OSIP

New Jobs Created Key Observations

35,000 Start-up investment Economic cost savings The vast majority of jobs Distribution center construction investment created by the OSIP will come Health benefits from permanent benefits: 30,000 New economic activity – New economic activity will generate 22,000 jobs by 2030 – Economic cost savings will create 250 jobs by 2030 25,000 – Improvements in public health will generate 9,600 jobs by 2030

20,000 The start-up investment of $50 million will create and support 480 jobs from 2011 through 2012 Jobs created 15,000 The distribution center construction investment will create and support 620 jobs between 2010 and 2019 10,000 By 2030, the OSIP will create 494,300 cumulative job-years

5,000 New economic activity will create a demand for more technically-skilled workers in the Southern San Joaquin Valley 0 and Alameda County areas to support the growth in the warehousing, agriculture, retail and rail cargo shipping sectors Sources: www.portofoakland.com, Seaport news; Nexis.com, news search; IMS world report, Container traffic in San Joaquin Valley 5 Annual state output will increase by an average of $2.6 billion per year Increase in State Output Key Observations

$4,000 Economic cost savings Start-up investment New economic activity includes Distribution center construction investment new shipping and cargo Improvements in public health capacity, new distribution center $3,500 operational expenditures, new New economic activity agriculture and new retail stimulus – Average annual output will $3,000 increase by $1.6 billion between 2010 and 2030

$2,500 Economic cost savings include truck fuel and wage reduction savings, averted road repair costs, and commuter gas and $2,000 time savings

(In millions) – Average annual output will increase by $25 million between 2010 and 2030 $1,500 Health improvements include the market value for averted $1,000 CO2 pollution, health savings from averted PM2.5 and NOx pollution, and averted truck- related traffic accidents $500 – Average annual output will increase by $965 million between 2010 and 2030

$0 Cumulative output from 2010 to 2030 will increase by $55.1 billion 6 Annual earnings will increase by an average of $890 million per year

Increase in Annual Earnings Key Observations Economic cost savings $1,400 Start-up investment Average annual earnings from Distribution center construction investment Health benefits new economic activity will New economic activity increase by $593 million between 2010 and 2030 $1,200 Earnings from economic cost savings will increase by an average of $8 million per year $1,000 between 2010 and 2030

Average annual earnings from health care improvements will $800 increase by $275 million between 2010 and 2030 (In millions) Cumulative annual earnings $600 from the OSIP will total $18.7 billion, which includes: – $40 million from the start-up capital investment $400 – $257 million from distribution center capital expenditures – $12.5 billion from new $200 economic activity – $160 million from economic cost savings – $5.8 billion from health $0 benefits 7 State and local governments will benefit from $161 million per year in additional tax revenues Additional Tax Revenue Key Observations

$250 Local State The State of California will accumulate $1.8 billion in new tax revenue because of the OSIP

$200 Annual state tax revenue will increase by an average of $85 million between 2010 and 2030 due to the OSIP

$150 Kern, Fresno, Tulare, Kings and Alameda Counties will accumulate $1.6 billion in new tax revenue from 2010 to 2030

(in millions) Local tax revenue will increase $100 by an annual average of $76 million between 2010 and 2030 for the aforementioned counties due to the OSIP

Cumulative state and local tax $50 revenues will increase by $3.4 billion between 2010 and 2030 because of the OSIP

Notes: (1) State taxes account for all anticipated general fund revenues expected as a result of OSIP (3) “The Benefits of Meeting Federal Clean Air Standards in the South Coast and San Joaquin Valley Air Basins,” Jane V Hall, PhD; Victor Brajer, PhD; Frederick W. Lurmann, M.S; 2008 (2) Local taxes only include local sales and property tax, less assessments (4) http://www.arb.ca.gov/app/emsinv/emssumcat.php, 2007 Almanac Emission Projection Data, California EPA, Air Resources Board New economic activity will inject an average of $703 million into 8 California’s economy every year

New Economic Activity Key Observations

$1,200 Shipping and distribution capacity Agriculture From 2010 to 2030, shipping Retail and distribution capacity will inject an average of $696 million per year into California’s $1,000 economy – Cumulative revenue will inject $14.6 billion – The Port of Oakland, Alameda County and the Southern San $800 Joaquin Valley region will be the main beneficiaries

Average annual revenue from $600 agricultural expansion will inject $6 million into California’s (in millions) economy – Cumulative revenue will inject $127 million $400 – The primary beneficiary will be the Southern San Joaquin Valley region

Average annual revenue from $200 new retail revenue will inject $1 million into California’s economy – Cumulative revenue will inject $23 million – The primary beneficiary will be $- the Southern San Joaquin Valley region

Sources: Warehousing cost in % of sales from Establish, inc/Herbert W. Davis and Company, http://www.establishinc.com/pdfs/2006_CSCMP_Presentation.pdf; TEU counts: “Regional Intermodal Analysis Report, Central Valley Market, Paramount Farms,” IMS Worldwide Inc., July, 2008 Average value per TEU from Moffat & Nichol, http://www.cleanairactionplan.org/civica/filebank/blobdload.asp?BlobID=2257; “Retail and Wholesale Trade,” US Census Bureau, http://www.census.gov/econ/www/retmenu.html California Agriculture proportion from 2007 census of agriculture, http://www.agcensus.usda.gov/; Average freight revenue per ton mile from Bureau of Transportation, http://www.bts.gov/publications/national_transportation_statistics/html/table_03_17.html 9 $64 million in annual economic cost savings: Truck fuel and wages, commuter savings and averted road repair Economic Cost Savings Key Observations

$100 Averted road repair Commuter gas and time savings Cumulative economic cost Truck fuel and wage cost reduction savings will be $1.3 billion $90 Truck fuel and wage cost reduction comes from trucks $80 being taken off the roads due to the OSIP – Average yearly savings due $70 to truck fuel and wage cost reductions will be $55 million $60 between 2010 and 2030

Savings in commuter gas and $50 time comes from reduced highway congestion because of (in millions) fewer trucks moving goods $40 – Average annual gains from commuter gas and time savings will be $8 million $30 between 2010 and 2030

Savings result from averted $20 road repair because of less wear and tear from fewer trucks moving goods within California $10 – Average savings from averted road repair and maintenance costs will be $1 million $0 annually between 2010 and 2030

Sources: Average hourly wage for Californians: Bureau of Labor Statistics, http://www.bls.gov/ro9/news.htm#wages; http://www.nytimes.com/packages/html/business/20060510_LEONHARDT/cost_per_mile.html Average general volume during peak hour: California traffic data branch, http://traffic-counts.dot.ca.gov/; Road maintenance cost per mile, Commuter Solutions: http://www.commutesolutions.org/calc.htm Gas cost per mile driven: New York Times “calculate how much your gas really costs,” TEUs transported per truck: The Shafter Advantage report 10 Health and welfare improvements provide $428 million annually

Statewide Health Benefits Key Observations

$700 Net CO2 reduction savings Health care cost savings from Savings from trucking accident averted deaths the OSIP, including averted Health and death savings from averted PM2.5 and NOx pollution-related sicknesses $600 and deaths from PM2.5 and NOx and averted truck-related accidents, will save California an average of $428 million $500 annually

Fewer truck accident-related deaths will save the State an $400 average of $4 million per year between 2010 and 2030

Fewer health issues and fewer (in millions) $300 deaths from lower levels of PM2.5 and NOx will save California an average of $424 million per year between 2010 $200 and 2030

Cumulative improvements in public health will equal $9 $100 billion between 2010 and 2030 The market value for averted CO2 pollution will equal an average of $140,000 annually $0 between 2010 and 2030, with cumulative savings of $3 million

Sources: Pounds of pollution (NOx and PM) emitted per mile of truck travel, Air Resources Board: http://www.arb.ca.gov/enf/hdvip/bip/naftamextrk.pdf Total statewide healthcare related to the cost of Pm and NOx (low end) and premature deaths due to goods movement: Union of Concerned Scientists, www.ucsusa.org/clean_california Cost per death from traffic accident: California DMV www.dmv.ca.gov/about/profile/rd/resnotes/accident.htm Total miles traveled by heavy trucks in California per year: U.S. Census Bureau, Vehicle inventory and use survey: http://www.census.gov/svsd/www/vius/2002.html, “Climate Change 2007: Synthesis report,” http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr.pdf NOx and PM released per year due to goods movement, California Air Resources Board, www.arb.ca.gov/app/emsinv/fcemssumcat_query.php ; “Calculating fossil fuel footprints,” http://www.rprogress.org/energyfootprint/energy_footprint/?id=1b The OSIP will inject $81 million in annual direct economic benefits into 11 Alameda County and the Bay Area and support 1,800 permanent jobs by 2030

Economic and Fiscal Benefits Environmental and Health Benefits

Average annual direct benefits to Alameda County and the Bay Due to the goods movement trucks the OSIP will remove from Area will total $81 million between 2010 and 2030 Alameda County and Bay Area roads, 32 tons of NOx and – $14 million will stem from new shipping and cargo capacity PM2.5 will be removed annually between 2010 and 2030 – $66 million will stem from health care cost savings As a result of these reduced pollution levels, an average of 70 – $1 million will stem from commuter gas and time savings lives will be saved annually from 2010 to 2030. Local residents will also save an average of $65 million every year in averted By 2030,1,800 jobs will be supported by OSIP in the San healthcare costs Francisco Bay Area Fewer goods movement trucks on Bay Area roads because of the OSIP, which will reduce the number of truck-related accidents, will also save an average of 1 life per year between 2010 and 2030 Bay Area commuters will save 110 hours every day because of fewer goods movement trucks on the roads because of the OSIP between 2010 and 2030. Bay area commuters will also save $600 every day because of less wasted gasoline The OSIP will remove 40 trucks from Alameda County and Bay Area roads each year between 2010 and 2030 The OSIP will inject $872 million in annual direct economic benefits into the 12 Southern San Joaquin Valley and support 16,700 permanent jobs by 2030

Economic and Fiscal Benefits Environmental and Health Benefits

Average annual direct benefits to Southern San Joaquin Valley’s Due to the goods movement trucks the OSIP will remove from (SSJV) will total $872 million between 2010 and 2030 Southern San Joaquin Valley (SSJV) roads, 200 tons of NOx – $704 million will stem from new distribution center construction and PM2.5 will be removed annually between 2010 and 2030 investment and operational expenditures, agricultural expansions and retail expansions As a result of these reduced pollution levels, an average of 175 – $165 million will stem from health care cost savings lives will be saved annually from 2010 to 2030. Local residents – $3 million will stem from commuter gas and time savings will also save an average of $163 million every year in averted healthcare costs By 2030, 12,600 permanent high-wage jobs will be created in the warehousing sector. 16,700 total jobs will be supported by Fewer goods movement trucks on SSJV roads because of the the OSIP in the area OSIP, which will reduce the number of truck-related accidents, will also save an average of 2 lives per year between 2010 and 2030

SSJV commuters will save 275 hours every day because of fewer goods movement trucks on the roads because of the OSIP between 2010 and 2030. SSJV commuters will also save $1,400 every day because of less wasted gasoline

The OSIP will remove 100 trucks from SSJV roads each year between 2010 and 2030 13 Conclusion

The proposed OSIP project will provide significant economic stimulus to the Southern San Joaquin Valley as well as to the State of California as a whole. – Based on our analysis, Forward Observer estimates that over the course of the next two decades, the OSIP will produce an average of $1.2 billion per year in direct financial benefits for California. – The OSIP will produce and support 31,800 permanent jobs in the state by 2030. – Annual state output will increase by an average of $2.6 billion per year and $55.1 billion cumulatively between 2010 and 2030. – Annual earnings will increase by an average of $890 million per year and $18.7 billion cumulatively over the next 21 years. State and local governments will gain significant revenues as a result of implementing the OSIP. State and local taxes will increase by an average of $161 million per year and $3.4 billion cumulatively over the next 21 years. – By 2030, the State of California will collect an additional $1.8 billion cumulatively in new general fund revenue as a result of the OSIP. – By 2030, local governments will collect an additional $1.6 billion cumulatively in additional sales taxes and property taxes.

Intermodal Facility Study

January 16, 2008

Submitted to: City of Shafter 336 Pacific Avenue Shafter, CA 93263

Prepared by: WZI Inc. 1717 28th Street Bakersfield, California 93301

1 7 1 7 2 8 th Street Bakersfield, California 93301 (661) 326 - 1112 FAX: (661) 326 - 0 1 9 1 Intermodal Facility Study: 16-Jan-08

TABLE OF CONTENTS

Introduction ...... 3 Executive Summary...... 3 Discussion ...... 8 Emissions Quantification ...... 8 Criteria Pollutants ...... 9 Greenhouse Gases (GHG) ...... 10 Health Risk Analysis ...... 11 Alternatives to mitigate the freight impacts on the San Joaquin Air Basin ...... 12 Limit the amount of goods diversion ...... 12 Levy fees on all goods entering the basin ...... 12 Create an intermodal transfer that allows short haul rail to and from Port regions to transit the sensitive basin with highly efficient and cleaner rail shipments using state of the art engines dedicated to the air basin...... 12 References ...... 13

Intermodal Facility Study: 16-Jan-08

Introduction

This air impact assessment is provided to the Shafter Intermodal Rail Facility Team in support of the Trade Corridors Improvement Fund (TCIF) project nomination process. The purpose of the Shafter Intermodal Rail Facility (Intermodal Facility) is to reduce Heavy Heavy Duty Truck (HHDT) freight traffic in the San Joaquin Valley air basin, the Port of Los Angeles freight transportation corridor and the Port of Oakland freight transportation corridor.1 A large number of port related goods are scheduled for delivery by HHDT to destinations within approximately 500 miles of the ports of Oakland and Los Angeles, including out-of-state markets. Selections of modes of freight transport are market-based. Purchasers of freight transportation are concerned with performance specification and value.2 The Intermodal Facility provides a market-based mechanism to remove a portion of the HHDT freight traffic in the sensitive freight transport corridors, thereby relieving congestion and reducing air impacts. Between 2000 and 2004 the amount of freight in the ports of Los Angeles and Oakland increased by 40% and freight traffic through the Port of Oakland alone increased at 5% per year.3 This trend is 4 expected to increase, leading to a doubling of the traffic through the Port of Oakland by 2020. The Southern California Association of Governments (SCAG) estimated freight volumes would double or triple in the Los Angeles region over the next two decades. The Bay Area Metropolitan Transportation Commission projected that total cargo tonnage would double at the Port of Oakland between 2002 and 2020. The Shafter Intermodal Facility will provide substantial regional air quality benefits while having a less than significant impact on sensitive receptors in the specific neighborhood of the facility. The Intermodal Facility provides the opportunity to remove heavy duty truck traffic from Interstate 5 and Highway 99 while increasing the efficiency of movement of goods related to import and export in California. The Intermodal Facility will optimize the in-valley use of containers for export thereby ensuring no wasted empty containers will be transported. The Intermodal Facility can immediately function once rail intermodal service is granted.

Executive Summary Five critical questions are raised in the TRADE CORRIDORS IMPROVEMENT FUND (TCIF) PROJECT NOMINATIONS process: 1. Does the project provide a regional air quality benefit? 2. Does the project increase the expected future level of polluting activity in specific neighborhoods or communities?

1 CalEPA, “Goods Movement Action Plan”, 2007 , These corridors consisting of highway and rail are identified by the Regional Transportation Planning Agencies. 2 Transportation Research Board of the National Academies, “Rail Freight Solutions to Roadway Congestion-Final Report and Guidebook”, 2007 3 http://www.portofoakland/maritime/facts_cargo.asp 4 Between 2000 and 2004, the number of containers measured as twenty-foot equivalent units (TEU) increased by 40 percent at the Ports of Los Angeles and Long Beach. Between 1992 and 2006, traffic increased 5% annually from 1.3 to 2.4 million TEUs at the Port of Oakland. The data show that historically-based average projections may underestimate the future growth of imports through the port of Oakland. Relying on HHDT fleet–based controls, CARB currently projects progress toward attainment in all freight corridors. However the data indicates that the current increase in port related traffic will cause total HHDT emissions to outpace the CARB reductions. (DOE) It is anticipated that greater quantities of oversea freight will be routed through the port of Oakland to relieve some of the port of Los Angeles congestion. This increase in port related goods movement will add greater pressure on the air quality of the San Joaquin Valley Air Basin and the other freight corridors due to the increase in HHDT transport on Interstate 5, State Highway 99 and other major highways.

Intermodal Facility Study: 16-Jan-08

3. Does project design avoid or mitigate any emission increases resulting from the increased activity? 4. Does a screening assessment show localized impacts? 5. Are there mitigation opportunities in the impacted area?

1. Does the Project Provide a Regional Air Quality Benefit?

Yes.

The Intermodal Facility will provide much needed regional air quality benefit to the San Joaquin Valley Basin which because of its unique geography its location relative to commercial traffic has never been able to achieve attainment with air quality standards. Additionally, the South Coast Air Basin and Oakland freight transportation corridor will see a reduction of pollutant inventories. The associated emission reductions are described below.

Criteria Pollutants The criteria pollutant emission impacts of carrying the equivalent freight of 600 trucks of port goods truck on dedicated rail units in the Los Angeles and Oakland transportation corridors and the San Joaquin Valley Air Basin are shown in the figure below:

COMPARISON of CRITERIA POLLUTANT EMISSIONS WITHOUT and WITH SHAFTER INTERMODAL RAIL FACILITY 2500

1,971 Without Shafter Intermodal Rail Facility 2000

With Shafter Intermodal Rail Facility 1500

Reduction in NOX due to

1000 Shafter Intermodal Rail Facility TONS PER YEAR PER TONS 498 500 287 163 114 105 15 10 9 71 0 ROG NOX PM10 PM2.5 CO

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Greenhouse Gases (GHG) The reduction in greenhouse gases is even more significant than the criteria pollutants. Unlike tailpipe reductions which may trade criteria pollutant reductions against GHG emissions, the Intermodal Facility serves to reduce both criteria pollutants and GHG.

Comparison of Emissions Including GHG Without and With Shafter Intermodal Rail Facility 200000 184,683 180000

160000 Without Shafter Intermodal Rail Facility

140000 With Shafter Intermodal Rail Facility

120000

100000 CO2 Reductions due to Shafter Intermodal Rail Facility

80000 TONS PER YEAR PER TONS

60000

40000

20000 11,882 1,971 163 114 105 9 498 0 15 287 10 71

ROG NOX PM10 PM2.5 CO CO2

The state of California has recently adopted AB32 and has set targets for reductions of GHG to 1990 levels by 2020. Meanwhile, freight movement within 500 miles of the ports has increasingly become reliant on HHDTs due to the lack of available rail service for interstate freight with intermodal facilities. Data shows that trucks have become less fuel efficient on a per ton-mile basis, thereby increasing the amount of GHGs emitted per freight ton-mile.5 CARB’s current Goods Movement Emissions Reduction Program does not consider GHGs; the figure above shows how the Intermodal Facility GHG reductions outweigh criteria pollutant reductions. 6 The Intermodal Facility reductions could occur as early as 2008, without relying on technology breakthrough or implementation. CARB’s emissions reduction program will serve to enhance the Intermodal Facility benefits.

5 Davies, J, et al. U.S. EPA-Office of Transportation and Air Quality, “Greenhouse Gas Emissions from Freight Trucks International Emissions Inventory Conference”, 2007 6 CARBs “Goods Movement Emissions Reduction Program” focuses on criteria pollutants (tailpipe reductions). The HHDT (tailpipe) criteria pollutant emissions reductions from implementation of the CARB program would be 83% of the Intermodal Facility- based reductions by 2030. However, the current program provides no GHG reduction. 5

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2. Does the project increase the expected future level of polluting activity in specific neighborhoods?

No.

The proposed project by its very nature provides mitigation for the regional emissions caused by port- related freight transport and by design is situated in a location where the community is protected from potential impacts related to local emissions increases.

The County of Kern and the City of Shafter considered the goods movement issues prior to1996 at which time the concept was included in the EIR for the International Trade and Transportation Center (ITTC) Specific Plan and the Master Plan Negative Declaration (at the time the Intermodal Facility area was annexed to City of Shafter).7 The related air quality studies considered impacts from the full implementation of the ITTC, including the Intermodal Facility, without quantifying the offsetting benefit of removing the equivalent truckloads of freight. Therefore, there are no substantial changes to, or significant adverse impacts not covered or contemplated, in the CEQA documents.

The Intermodal Facility will be situated at the southern end of the San Joaquin Valley. The HHDT freight transportation emissions removed from the San Joaquin Valley Air Basin by the Intermodal Facility are primarily upwind of the City of Shafter. NOX and other ozone precursors are a regional issue in the San Joaquin Valley. Removing any criteria pollutant emissions from the region directly benefits the communities near the Intermodal Facility. The local CO and Particulate Matter emissions from activities taking place on the Intermodal Facility have been reviewed and determined to be less than significant at the project boundary.

Greater utilization of the Intermodal Facility will further reduce adverse regional air quality impacts of current and future freight traffic on the neighborhoods and communities of Shafter without significant immediate offsite impacts.

3. Does the project design avoid or mitigate any emission increases resulting from the increased activity?

Yes.

The Intermodal Facility removes regional emissions of all criteria pollutants and GHGs and has a less than significant local impact. The Intermodal Facility by its very nature provides mitigation for the regional emissions in the San Joaquin Valley, this benefit extends to other affected transportation corridors.

The Intermodal Facility by land use restrictions is situated in a location where the community is protected from potential impacts related to Intermodal Facility-related local emissions. Furthermore, the facility will use state-of-the-art locomotives and handling equipment, funded by private sector interests. The Intermodal Facility will enhance current Air District plans to make Reasonable Further Progress toward attainment of both National Ambient Air Quality Standards and California Ambient Air Quality Standards while also helping California meet its AB 32 target of reducing GHG.

7 The annexation consisted of 1700 aces encompassing the ITTC and the adjacent agricultural areas designated for future industrial use.

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4. Does a screening assessment show localized impacts?

No.

The Shafter Intermodal Facility will be situated in a remote area that is dedicated to industrial and agricultural facilities. The screening health risk analysis indicates a less than significant localized impact associated with the Intermodal Facility.

The land use restrictions of the Intermodal Facility will limit exposures and the ability for sensitive receptors to locate in proximity of the facility.8 The emissions from the facility will be limited to rail and truck loading/unloading and demurrage activities. The City’s ability to limit local uses to only those that are compatible with industrial activities will limit exposure times and proximity of sensitive receptors. There will be no increases in emissions of freight transportation related activities in any local neighborhoods or communities.

The health risk analysis protocol interpolates the results of the detailed health risk analysis performed by the California Air Resources Board on the Roseville Rail Yard based on Diesel Particulate emissions impacts.9 This screening assessment assumes similar geometry and that the size of the trains is similar in both Roseville and the proposed Intermodal Facility.

A screening health risk assessment shows that the 70-year exposure health risk at the boundary of the Intermodal Facility would be approximately 4 in a million excess cancer risks.

5. Are there mitigation opportunities in the impacted area?

Yes.

The Intermodal Facility serves as a major mitigation to the current and future port-related HHDT freight impacts. The Intermodal Facility can additionally provide numerous opportunities to enhance any public funds by leveraging private sector investments to apply state-of-the-art technologies to freight transportation. This could achieve significant additional emissions reductions on a voluntary basis. The Intermodal Facility will provide a natural market-based collecting point for those HHDTs having a high in-valley use (delivering port goods to the valley consumer from the Intermodal Facility and delivery of local agricultural products to the Intermodal Facility for export from the Port of Oakland). This Intermodal Facility–based central point will provide synergies with the Air District’s efforts to monitor and modernize the fleet of privately-owned trucks operating in the valley in accordance with the objectives of Prop 1B. The Intermodal Facility is negotiating with the San Joaquin Valley Air Pollution Control District to enter into a Voluntary Emissions Reduction Agreement. This VERA would provide a mechanism to facilitate

8 An agricultural buffer is required by land use, Negative Declaration, SCH 98071113. 9 CARB-Stationary Source Division, Roseville Rail Yard Study, 2004.

Intermodal Facility Study: 16-Jan-08 the contracting of privately funded emission reductions. Currently, the Air District has private funds available through several Voluntary Emissions Reduction Agreements. The Intermodal Facility could provide a commercial point-of-use clearinghouse for business-to-business arrangements to implement the Air District approved reductions. These reductions would be over and above those quantified in this preliminary assessment.

By providing an economic alternative for container management, the Intermodal Facility could serve as mitigation for a portion of the current impacts in the L.A. Basin by carrying an inventory of shipping containers at the Intermodal Facility. Private sector investment could grow the utilization of the container management opportunity to reduce current HHDT traffic for a greater pro rata benefit. In doing so, the Intermodal Facility will further reduce the need for truck travel into and out of the LA basin to retrieve shipping containers for valley products. Agricultural products shipped from valley farms south of Hanford, California will be able to readily ship to the Port of Oakland via unit trains as opposed to being trucked to the Port of L.A.

Discussion

Emissions Quantification The I-5/SR99 highway complex is a major transportation corridor through a geographically and aerometrically constrained basin with high unemployment and poverty levels. The region experiences high concentrations truck traffic on Interstate Highway 5 and State Route 99 which are aligned with the prevailing air currents from approximately 1000 feet above ground level to the Valley floor, running the entire length of the valley.

For the purpose of this study the simplifying assumption is to treat the San Joaquin Valley Air Basin, South Coast Air Basin and the Port of Oakland freight corridor as closed units.10 This allows one to estimate relative inventory adjustments related to alternative means for intra valley transportation of goods and materials.

The California Air Resources Board has estimated that 70% of the Heavy Heavy Duty Truck emissions in the San Joaquin Valley are port related goods movement (both import and export).11 CARB also estimated that 8% of the Port of Los Angeles’ and 30% of the Port of Oakland’s HHDT freight traffic passes through the San Joaquin Valley Air Basin. Export is largely dominated by agricultural goods from the San Joaquin Valley. Imports are primarily related to consumer goods that are warehoused for distribution to western U.S. and durable goods shipped directly from the ports to points of use.

The City of Shafter is located on the BNSF and UP rail system in the Southern San Joaquin Valley bounded on the east and west by SR99 and I5 respectively. The City proposes to consolidate the underutilized rail passing through their community with the HHDT freight activity in the region. The proposal is to create an intermodal facility which would shift the freight transported by 600 trucks per day to 2 unit trains per day to and from the ports of Oakland and Los Angeles. This study simply focuses on the impact of the replacement of 600 trucks per day with 2 trains per day including the Intermodal Facility emissions.

10 Limited transport out of the valley does occur. However, due to the surrounding terrain (i.e., mountains) the near ground level concentrations are maintained by meteorological conditions such as prevailing wind, inversion and lapse rate. 11 CARB, “Proposed Emission Reduction Plan for Ports and Goods Movement in California”, 2006 and EMFAC 2007

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The impact on pollutant inventory for HHDT as opposed to the Intermodal Facility is most pronounced in the reductions of GHG and NOX. The Intermodal Facility reductions are primarily a function of efficiency. According to USEPA and DOE on a per mile-ton basis freight rail transport is currently 10 times more efficient than transport with HHDT. CARB-based NOX reductions are driven by control technologies often at the expense of engine efficiency.

The proposed Intermodal Facility will provide a rail replacement for the most common mode of port related goods transportation, HHDT. The proposed Intermodal Facility will include: a rail yard, freight handling equipment, a container storage yard and warehousing. The initial planned facility will provide accommodation to handle the equivalent freight of 600 trucks per day. The comparative annual emissions impacts were calculated for 2008 only. For this preliminary study, no escalations or adjustments for technological change were considered essential to addressing the relative impact of removing the HHDT from the inventories for the Oakland, Los Angeles and San Joaquin Valley corridors. The 2008 year was selected as the start date of the Intermodal Facility operation since the facility can immediately function once intermodal rail service is provided.

Criteria Pollutants Criteria pollutants for the HHDT were quantified for the year 2008 using EMFAC 2007. Rail emissions were quantified with OFFROAD 2007. The ton-mile travelled for the San Joaquin Valley was based on a 250 mile one-way length from the point at which either truck or train enters the valley air shed to the proposed Intermodal Facility. The ton-mile travelled for the Oakland transportation corridor was based on a 65 mile one-way length from the point at which either truck or train enters the air shed to or from the Port of Oakland. The ton-mile travelled for the South Coast Air Basin was based on a 93 mile one-way length from the point at which either truck or train enters the air shed to or from the Port of Los Angeles. Each train was assumed to carry the equivalent freight of 300 trucks. The Intermodal Facility was assumed to consist of 2 trains per day.

Criteria Pollutant Emissions (Tons Per Year) HDDT Emissions removed by Intermodal Facility ROG NOX CO PM10 PM2.5 San Joaquin Valley 114 1371 325 82 75 Oakland 30 356 84 21 20 Los Angeles 19 244 89 11 10 Sub Total 163 1971 498 114 105 Source: EMFAC 2007 v.9.2 Emissions added by ROG NO CO PM PM Intermodal Facility X 10 2.5 Intermodal Facility 2 32 6 1 1 Trains in San Joaquin Valley 10 191 49 6 6 Trains in Oakland 3 64 17 2 2 Trains in Los Angeles n/a n/a n/a n/a n/a Sub Total 15 287 71 10 9 Source: OFFROAD 2007 Total Net Emissions due to -148 -1684 -427 -104 -96 Intermodal Facility

The primary criteria pollutant of concern (in order to reach attainment of the ozone standard) is NOX.

The NOX emission reduction due to the implementation of the proposed Intermodal Facility is estimated to

Intermodal Facility Study: 16-Jan-08 be 5 tons per day. This volume of emission reduction is currently not included in the State Implementation Plans. The implementation of the Intermodal Facility will assist the Air Districts in making Reasonable Further Progress toward attainment of the federal and state health-related standards.

Greenhouse Gases (GHG) Fuel efficiency relates directly to generation of GHGs. U.S. EPA and Department of Energy (DOE) have studied the energy intensity of a variety of freight transportation modes. The data has been gathered and developed into emission estimating methods to evaluate the impact of each mode on greenhouse gas inventories. The figure below indicates the degree to which rail is 10 times more fuel efficient in transportation of freight than HHDT.

Energy Intensity of Freight Modes in 2004 (Btu/ton-mile)

Waterborne 511

Pipeline 2,388

Rail 325

HHDT 3,163

- 500 1,000 1,500 2,000 2,500 3,000 3,500 Btu/ton-mile

From: ICFI, “Greenhouse Gas Emissions from Freight Trucks”, International Emissions Inventory Conference May 16, 2007

Criteria pollutant reductions on HHDT engines need to be considered in the context of fuel efficiency. Current trends indicate that tail pipe reductions create losses of power due to added backpressure and firing controls. This results in less efficient energy conversion in diesel cycle engines thereby increasing GHG emissions. 12 The analysis in this study did not penalize the HHDT alternative as far as increased GHG emissions for implementation of less energy efficient HHDT engines that may result from future criteria pollutant controls in the fleet. It has been estimated that the trend of decreasing fuel efficiency has been about 5% over the period from 1998 to 2004. This would then equate to a 5% increase in GHG emissions without traffic growth during the same period.13

12 Davies, J, et al. U.S. EPA-Office of Transportation and Air Quality, “Greenhouse Gas Emissions from Freight Trucks International Emissions Inventory Conference”, 2007 13 Ryan,T., Diesel Engine Alternatives, Southwest Research Institute,2004

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For this preliminary study, the HHDT GHG emissions were estimated using EMFAC 2007 without any consideration given to reduced fuel efficiency.14 The rail GHG emissions were estimated using DOE methodology for distillate fuel.15

The table below indicates the volume of the GHGs as CO2 equivalent emissions reduced by the implementation of the proposed Intermodal Facility.

Greenhouse Gas Emissions (CO2 metric tons per year)

Intermodal Facility Emissions 11,882 HDDT Emissions Removed by Intermodal Facility -184,683 Net Emission Reduction due to Intermodal Facility -172,801

The results show agreement with the USEPA/DOE estimates.

Health Risk Analysis This screening health risk analysis was accomplished using the protocol established for other port and rail yard health risk analysis. The protocol prorates the results of the detailed health risk analysis performed by the California Air Resources Board on the Roseville Rail Yard based on Diesel Particulate emissions impacts.16 This screening assessment conservatively assumes that the proximity to sensitive receptors and the size of the trains is similar in both facilities (Roseville and the proposed Intermodal Facility). The results from the Roseville study were interpolated based on the ratio of the number of trains and adjusted for differences in yard activities at Roseville and the Intermodal Facility.

The land use restrictions of the area surrounding the Intermodal Facility will limit exposures and sensitive receptors. The emissions from the facility will be limited to rail and truck loading/unloading and demurrage activities. The City’s ability to limit local uses to only those that are compatible with industrial and agricultural activities will limit exposure times and proximity of sensitive receptors.

The J. R. Davis Yard (rail yard or Yard) is a major full service rail yard in Roseville, California. The Yard is bounded by commercial, industrial, and residential properties. The Roseville study was based on 46,000 locomotives. The Roseville Yard was divided into the following areas: Main Receiving Yard, Main Departure Yard, City Yard, Rock pile Yard, Northside Tracks, Mod/Search Building, Subway, Ready Tracks, Maintenance Shop, Staging Tracks, Hump and Trim Operation and Service Tracks.

The Intermodal Facility will process 1500 locomotives per year and will not have a hump and trim operation.17 With the exception of the hump and trim area the maximum Roseville exposure was 100 in a million adjacent to the boundary. To be conservative, the 100 in a million risk value was not adjusted to reflect the fact that the Intermodal Facility will not have a rock pile area, subway or maintenance shop area.

The nearest Intermodal Facility-related receptor lies to the southwest, west of South Central Valley Highway and north of 7th Standard Road. Using the 70 year exposure risk of 100 in a million from the

14 For the Los Angeles portion of the HHDT emissions, the CO2 was estimated by applying the EMFAC2007 ratio of NOX to CO2 to those HHDT NOX emissions allocated to container traffic between the Port of Los Angeles and the San Joaquin Valley. 15 EPA Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2005, (April 2007), USEPA #430-R-07-002, 16 CARB-Stationary Source Division, Roseville Rail Yard Study, 2004. 17 Unlike the J.R. Davis Rail Yard, the Intermodal facility will not have a rock pile area, maintenance shop, subway or hump and trim area. 11

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Roseville study, the Intermodal Facility screening shows that the health risk at boundary of the Intermodal Facility would be approximately 4 in a million excess cancer risk which is less than commonly accepted standard, i.e., 10 in a million.

Alternatives to mitigate the freight impacts on the San Joaquin Air Basin Limit the amount of goods diversion This alternative would involve limitations being set on traffic slated to transit the San Joaquin Valley Air Basin based on attainment goals and the ability to absorb the emissions from the added fleet traffic. This alternative would have serious implications for the state economy as it would place a limit on the ability of the ports to manage import and export of goods. This alternative is not considered as a potential mitigation nor was it quantified in this study.

Levy fees on all goods entering the basin This alternative would involve establishing use fees (tolls) for traffic that is scheduled to enter the San Joaquin Valley Air Basin; these fees could then be earmarked to mitigate the impacts of the added traffic- related emissions. Practices that are similar to this alternative are being implemented in New York and Oklahoma. However, this alternative was not considered as a potential mitigation nor was it quantified in this study.

Create an intermodal transfer that allows short haul rail to and from port regions to transit the sensitive basin with highly efficient and cleaner rail shipments using state of the art engines dedicated to the air basin. The reality of commercial pressures and laws governing the transport of interstate goods will result in the continuation of growth in the amount of traffic through the San Joaquin Valley Basin. The amount of emissions related to increasing traffic will most likely exceed the reductions that may occur due to mandatory tail pipe emissions controls.18

The Intermodal Facility’s unique circumstances provide an opportunity to mitigate without conflict with existing and planned laws. In fact, the development of the Intermodal Facility would be harmonious with the laws and would amplify the potential mitigations by extending the service to non-growth related traffic and allowing a means for private participation in a regional solution. Additional non-governmental business growth will be encouraged; private-sector jobs will be created in a region suffering from high unemployment.

This alternative as a mitigation to increased commercial traffic impacts in the San Joaquin Valley is the focus of this study.

18 The tail pipe emissions will be limited to new fleet vehicles that are domestically licensed. NAFTA vehicles may not comply with California emission limits. 12

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References

CalEPA, “Goods Movement Action Plan.” 2007.

California Air Resources Board, “Goods Movement Emissions Reduction Program.”

California Air Resources Board, EMFAC 2007.

California Air Resources Board, “Proposed Emission Reduction Plan for Ports and Goods Movement in California.” 2006.

California Air Resources Board-Stationary Source Division, Roseville Rail Yard Study. 2004.

City of Shafter, Negative Declaration, SCH 98071113.

Davies, J, et al. U.S. EPA-Office of Transportation and Air Quality, “Greenhouse Gas Emissions from Freight Trucks International Emissions Inventory Conference.” 2007.

Kern County Planning Department, “Draft Environmental Impact Report for International Trade and Transportation Center, Specific Plan. SCH#95061015. January 1996.

Kern County Planning Department, “Final Environmental Impact Report for International Trade and Transportation Center, Specific Plan. SCH#95061015. May 1996.

Martin-McIntosh Civil Engineering & Surveying, “Master Plan for ITTC The International Trade & Transportation Center, City of Shafter. 1998.

Starcrest Consulting Group, LLC, “Port of Los Angeles Inventory of Air Emissions.” 2005.

Ryan,T., Diesel Engine Alternatives, Southwest Research Institute. 2004.

Transportation Research Board of the National Academies, “Rail Freight Solutions to Roadway Congestion-Final Report and Guidebook”, 2007

U.S. EPA, EPA Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2005, (April 2007), USEPA #430-R-07-002 http://www.portofoakland/maritime/facts_cargo.asp

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