Existing law provides for the regulation and licensing of bar pilots for Monterey Bay and the Bays of San Francisco, San Pablo, and Suisun. Existing law also establishes, in the Transportation Agency, a Board of Pilot Commissioners for the Bays of San Francisco, San Pablo, and Suisun and prescribes the membership, functions, and duties of the Board of Pilot Commissioners with regard to the licensure and regulation of bar pilots.

This bill would prohibit a state regulation from requiring or compelling the San Francisco bar pilots, as defined, to replace certain pilot station boats unless the state regulation authorizes the San Francisco bar pilots to replace the pilot station boat upon the pilot station boat reaching the end of its useful service life, as specified.

This bill would make legislative findings and declarations as to the necessity of a special statute for San Francisco bar pilots who provide pilotage service on Monterey Bay and the Bays of San Francisco, San Pablo, and Suisun.

Existing law, the California Consumer Financial Protection Law, generally regulates the provision of consumer financial products and services by covered persons. The law requires the Commissioner of Financial Protection and Innovation to, among other things, prepare and publish on the Department of Financial Protection and Innovations internet website an annual report detailing actions taken during the prior year under the law. The law requires the report to include information on actions taken with respect to rulemaking, enforcement, oversight, consumer complaints and resolutions, education, and research.

This bill would, on and after January 1, 2024, would, until January 1, 2028, require the report described above to separate information described above with respect to crypto assets and associated consumer financial products and services services, as specified, from information described above with respect to other consumer financial products and services.

Existing law, the California Consumer Financial Protection Law, generally regulates the provision of consumer financial products and services by covered persons. The law requires the Commissioner of Financial Protection and Innovation to, among other things, prepare and publish on the Department of Financial Protection and Innovations internet website an annual report detailing actions taken during the prior year under the law. The law requires the report to include information on actions taken with respect to rulemaking, enforcement, oversight, consumer complaints and resolutions, education, and research.

This bill would, on and after January 1, 2024, require the report described above to separate information described above with respect to crypto assets and associated consumer financial products and services from information described above with respect to other consumer financial products and services.

GOVERNOR'S VETO

GV Bill Id:AB 1296

Author:(Grayson)

As Enrolled Ver:September 4, 2024

2/3 vote

SUMMARY

Prohibits a state regulation requiring the San Francisco Bar Pilots (SFBP) to replace a pilot station boats unless the state regulation authorizes the SFBP to replace a pilot station boat upon the pilot boat reaching the end of its useful service life.

Senate Amendments

1. Provides that a state regulation shall not require, or compel, directly or indirectly, the SFBP to replace a pilot station boat unless the state regulation authorizes the SFBP to replace the pilot station boat upon it reaching the end of its useful service life, as determined by California Air Resources Board (CARB) in consultation with the SFBP and a board-approved accredited marine surveyor, and not before the pilot station boat reaches the end of its useful service life.
2. Specifies that the useful service life shall be between 25 and 35 years from the date the boat was commissioned.
3. Defines "pilot station boats" to mean the 104-foot San Francisco class pilot vessels (PV) employed by the SFBP to embark and disembark by the pilots from ships entering or leaving the Bays of San Francisco, San Pablo, and Suisun, which consists of the PV San Francisco, the PV California, and the PV Drake.

Governor's Veto Message

This bill would prohibit state regulations, namely the Commercial Harbor Craft (CHC) regulation, from requiring the San Francisco Bar Pilots to replace pilot station vessels with lower-emitting vessels, unless such a regulation authorizes its replacement at the end of the vessel's useful life, prescribed as between 25 and 35 years.

In 2020, I issued Executive Order (EO) N-79-20, which directed the California Air Resources Board (CARB), among other things, to develop strategies to transition to 100 percent zero-emission off-road vehicles, vessels, and equipment by 2035, where feasible. Under this EO, CARB amended the CHC regulation to accelerate emission reductions while providing safe, feasible, and flexible compliance options for affected vessels, including compliance extensions of up to six additional years for pilot station vessels beyond the compliance dates of December 2024 and December 2025.

While I recognize the challenges of adopting new technologies, California must work diligently to reduce air pollution that fouls our air and greenhouse gas emissions that contribute to our rapidly changing climate. In addition, this amendment to the CHC rule would require CARB to resubmit its request for authorization to the U.S. Environmental Protection Agency (U.S. EPA) - a step that would delay the U.S. EPA's final decision and undo months of work. Delays in receiving that federal authorization would deprive local communities of the substantial public health benefits associated with the regulations and compromise the State's ability to meet our federally mandated air quality standards.

COMMENTS

The transportation sector is responsible for about 40% of greenhouse gas (GHG), 80% of nitrous oxides (NO_X), and 90% of diesel particulate matter emissions (DPM) in California. Vessels make up a relatively small portion of the transportation sector's GHG emissions, about 3%. However, the diesel engines used by vessels contribute a high proportion other toxic air contaminants, such as NOx and DPM that can increase the risk of developing lung cancer and other health problems. A 2021 CARB emissions inventory of ocean-going vessels found that they were responsible for about 20% of statewide NO_X emissions and that this would grow to 30% by 2037, unless regulatory action was taken to improve emissions. There is no similar inventory for Commercial Harbor Craft Regulations (CHC), but CARB has reported that CHC emissions at the Port of Los Angeles and the Port of Long Beach were the second-largest contributor of near-source cancer risk in 2016 and would become the largest source of seaport emissions at those ports by 2023.

The U.S. Environmental Protection Agency (EPA) has established nationwide emissions standards for vessel engines that have become more stringent as emission control technologies have improved. The EPA established Tier 1 and Tier 2 standards in 1999 and Tier 3 and Tier 4 emissions standards in 2008. Their stringency generally requires engines to utilize after treatment technologies capable of removing pollutants from the exhaust gas stream. For example, DPFs are installed on engine exhaust systems and use a porous ceramic material or metallic filter to physically trap DPM and remove it from the exhaust stream. After DPM is collected by the filter, it is reduced to ash during filter regeneration. DPFs verified by EPA and CARB are typically effective at reducing emissions of PM by 85 to 90% or more.

CARB Clean harbor craft rules. CHCs include any private, commercial, government, or military marine vessel that does not otherwise meet the definition of ocean-going vessels. This includes vessels such as ferries, barges, tugboats, crew and supply vessels, research vessels, commercial fishing vessels, and research vessels. CHCs are a vital part of California's economy and are essential to moving cargo and people throughout its various ports, harbors, and marinas. These vessels are predominantly powered by diesel engines that emit significant amounts of harmful pollutants.

In 2008 CARB adopted initial CHC regulations, which established new and in-use engine emissions limits for engines on certain CHC vessels. These regulations reduced NOx and PM emissions by requiring in-use CHCs to meet Tier 1 - 3 marine engine standards. The initial CHC regulation was amended in 2010 and was updated again in 2022. The regulation currently requires upgrading most CHC engines to Tier 4 engines with DPF filters. The oldest engines must upgrade between 2024-2026. After that different classes of vessels must upgrade beginning with tugboats and ferries, followed by excursion vessels and commercial passenger fishing vessels, then dredges, barges, and workboats. The final upgrade requirements phase in by 2033.

CARB estimated that the new rule would further reduce statewide emissions by approximately 1,560 tons of DPM, 33,110 tons of NOx, and 375,490 metric tons of GHGs. Based on these emissions reductions, CARB estimates reducing 501 premature deaths, 153 hospital admissions, and 224 emergency room visits over the implementation period. This would save the state $4.95 billion in healthcare costs. Because these emissions are localized in the ports, the benefits would be concentrated in nearby disadvantaged communities.

San Francisco Bar Pilots. In California, SFBP have been guiding ships into the San Francisco Bay since at least 1835, and one of the first legislative enactments by the newly formed California Legislature in 1850 was to address the regulation of San Francisco bar pilots.

The SFBP's primary function is to ensure that large commercial vessels are navigated safely through the San Francisco Bay's confined waters. SFBP steer large commercial vessels through the Golden Gate of San Francisco Bay and adjoining navigable waters, which include San Pablo Bay, Suisun Bay, the Sacramento River, and associated tributaries. When a vessel arrives at a point eleven miles west of the Golden Gate Bridge, a bar pilot boards the vessel, takes navigational control, and guides the vessel to its berth. The same process occurs in reverse as vessels depart from the San Francisco Bay. They provide service for all types of commercial vessels, from 100-foot tugs to 1000-foot supertankers. The SFBP intermittently operate five pilot vessels: three offshore station vessels and two high speed harbor vessels. Corporations and ship owners who use the SFBP's services pay for 100% of their operating costs, including the costs of obtaining new pilot boats.

The Pilot Boat Surcharge Account. AB 2056 (Grayson), Chapter 769, Statutes of 2022 established the Pilot Boat Surcharge Account (PBSA) to hold monies available to fund the costs of obtaining new pilot boats and of funding design and engineering modifications to extend the service life of existing pilot boats, excluding costs for repair or maintenance, and other related costs. The account is expected to accumulate $6 million annually and currently has a balance of approximately $9 million.

Regulatory extensions. As part of the CHC regulation, a number of extensions are available to delay the implementation date when compliance would be impossible due to circumstances outside of the vessel owner's control. Processes are already in place in the regulation to extend the compliance dates for the pilot station vessels based on technical feasibility and cost, and scheduling extensions are also available if challenges arise such as supply chain delays or shipyard availability.

SFBP has already begun the process of designing new station vessels and has applied to CARB for 2-year renewable feasibility extension (E3 Extension) for their three station vessels as a contingency. Vessels are eligible for three renewals under the E3 extension for a total of 6 years. Their application notes that the three vessels would require extensions of 4, 8, and 10 years beyond the current compliance dates to accumulate sufficient monies to fund the vessel replacements.

Compliance costs. According to the SFBP's most recent build cost estimate, it expects the costs of the three vessels to be approximately $60 million. If SFBP is required to finance the cost of replacement because it does not receive compliance extensions from CARB, it anticipates an estimated additional $27 million in interest to finance these costs.

Committee comments. SFBP applied for the E3 feasibility extensions on May 24, 2024, which includes technical analysis demonstrating infeasibility of repowering the existing vessels, and their finances may demonstrate an inability to pay for new-build.

Under the Clean Air Act, CARB must seek a waiver from the US EPA to enforce their regulations. Enactment of this bill would require CARB to amend the CHC regulation for which the US EPA is considering a waiver. As a result, this would delay and possibly jeopardize the waiver approval needed to enforce these regulations. As a result, this would delay and possibly jeopardize the waiver approval needed to enforce these regulations. Finally, delaying repowers or retrofits for inspected vessels would result in a loss of air quality benefits for impacted communities and jeopardize attainment of National Ambient Air Quality Standards set by the federal government, which could result in federal sanctions and the loss of billions in federal transportation funding.

According to the Author

"Under California Code, SFBP is mandated to maintain a minimum of two pilot boats in service, with one boat "on station" in the open ocean at all times. To meet these requirements, SFBP maintains a fleet of five pilot boats, including three 104-foot station boats subject to Commercial Harbor Craft Regulations (CHC). However, these regulations, effective December 31, 2024, will render San Francisco Bar Pilot's services nearly impossible. Of SFBP's existing pilot boats fleet, three are immediately subject to CARB's stringent compliance deadlines. With a total construction cost of $68 million, not including financing, replacing these vessels within the specified deadlines is neither financially nor logistically feasible. Although the cost of the boats is ultimately borne by the shipping interests that utilize pilotage services, SFBP must secure and guarantee the construction loans, which entails significant financial risk."

AB 1296 creates a viable path towards compliance with the Air Resources Board's harbor craft regulations by affording a narrowly tailored extension of time for certain pilot station boats operated by the SF Bar Pilots. AB 1296 prohibits a state regulation from requiring or compelling the San Francisco Bar Pilots (SFBP) to replace specified pilot station boats unless the state regulation authorizes the San Francisco Bar Pilots to replace the pilot station boats upon the boats reaching their end useful service life, as specified. Ultimately, AB 1296 will ensure the economic health and stability of the pilotage system while aligning with California's environmental goals."

Arguments in Support

In support, the San Francisco Bar Pilots and Pacific Merchant Shipping Association (co-sponsors) write: "Under current California Air Resources Board Commercial Harbor Craft regulation, SFBP must replace two of its three existing station boats by the end of 2024, and the third by the end of 2025. Considerable resources have been expended to evaluate the feasibility of repowering these three station boats with CARB-compliant engines. However, due to the nature and size of the exhaust filtration and treatment systems those engines require, and engineering space limitations onboard, repowering is not feasible. Therefore, new replacement station boats must be built in order for SFBP to comply with the Harbor Craft Regulation. It should also be noted that zero-emission technology for this very specific application does not currently exist. The estimated cost to build the new, CARB-compliant station boats is $22.5 million each, exclusive of financing costs, or in excess of $67 million to build all three. While the construction costs are ultimately recovered from the shipping interests that utilize pilot services, SFBP must secure and guaranty considerable financing in order to build them. While the construction costs are ultimately recovered from the shipping interests that utilize pilot services, SFBP must secure and guaranty considerable financing in order to build them. At today's interest rates, the total cost of the build program is in excess of $85 million. It is not feasible for SFBP, an association currently comprised of 52 individual licensed pilots, to obtain or guaranty such financing, and if it were feasible, it would be an untenable business risk to do so."

Arguments in Opposition

The Coalition for Clean Air, Pacific Environment, Sunflower Alliance, Ocean Conservancy, the Union of Concerns Scientists and Earth Justice state: "The CHC Rule as adopted provides a feasible pathway towards cleaner harbor craft. The rule already allows for compliance extensions for various circumstances that may prevent regulated parties from complying, and contains exemptions for low-use vessels so that requirements are imposed on the largest emitters. …

"The proposed extension in AB 1296 would undermine the emissions reductions and health benefits of the CHC Rule by delaying requirements to replace pilot station boats until vessels have reached the end of their useful service life. A vessel's useful service life is between 25 to 35 years, which is an unacceptable timeframe to deliver emissions reductions to California's portside communities. Harbor craft vessels are a major driver of air pollution at seaports, and in

Los Angeles, Long Beach, San Diego and Oakland, these vessels are one of the top three drivers of cancer risk to frontline communities."

FISCAL COMMENTS

According to Senate Appropriations Committee, "The California Air Resources Board (CARB) reports total costs of approximately $2.4 million beginning in Fiscal Year 2024-25 and annually ongoing for additional staff resources to amend the Commercial Harbor Craft (CHC) Regulation to change compliance deadlines and implement a process to determine the end of useful service life of pilot vessels (Certification and Compliance Fund)."

VOTES

ASM BANKING AND FINANCE: 11-0-1

YES: Grayson, Bauer-Kahan, Cervantes, Dixon, Mike Fong, Gabriel, Petrie-Norris, Soria, Waldron, Wicks, Wilson

ABS, ABST OR NV: Chen

ASM APPROPRIATIONS: 14-0-2

YES: Holden, Megan Dahle, Calderon, Wendy Carrillo, Dixon, Mike Fong, Addis, Lowenthal, Papan, Pellerin, Robert Rivas, Sanchez, Weber, Wilson

ABS, ABST OR NV: Bryan, Mathis

ASSEMBLY FLOOR: 74-0-6

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Wallis, Ward, Weber, Wicks, Wood, Zbur, Rendon

ABS, ABST OR NV: Cervantes, Vince Fong, Friedman, Villapudua, Waldron, Wilson

SENATE FLOOR: 31-0-9

YES: Alvarado-Gil, Archuleta, Ashby, Blakespear, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Stern, Umberg, Wiener, Wilk

ABS, ABST OR NV: Allen, Atkins, Becker, Bradford, Menjivar, Min, Skinner, Smallwood-Cuevas, Wahab

ASM TRANSPORTATION: 13-0-2

YES: Davies, Aguiar-Curry, Berman, Juan Carrillo, Hoover, Jackson, Lowenthal, Papan, Sanchez, Ting, Wallis, Ward, Wicks

ABS, ABST OR NV: Wilson, Hart

ASSEMBLY FLOOR: 69-1-9

YES: Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Gallagher, Garcia, Gipson, Grayson, Haney, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Stephanie Nguyen, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NO: Muratsuchi

ABS, ABST OR NV: Addis, Cervantes, Friedman, Gabriel, Hart, Ortega, Rendon, Reyes, Luz Rivas

UPDATED

VERSION: September 4, 2024

CONSULTANT: Aaron Kurz / TRANS. / (916) 319-2093 FN: 0005168

CONCURRENCE IN SENATE AMENDMENTS

CSA2 Bill Id:AB 1296

Author:(Grayson)

As Amended Ver:June 10, 2024

Majority vote

SUMMARY

Original Committee of Reference: Assembly Committee on Banking and Finance

Senate Amendments

Current Committee Recommendation: Concur

1. Provides that a state regulation shall not require, or compel, directly or indirectly, the SFBP to replace a pilot station boat unless the state regulation authorizes the SFBP to replace the pilot station boat upon it reaching the end of its useful service life, as determined by California Air Resources Board (CARB) in consultation with the SFBP and a board-approved accredited marine surveyor, and not before the pilot station boat reaches the end of its useful service life.
2. Specifies that the useful service life shall be between 25 and 35 years from the date the boat was commissioned.
3. Defines "pilot station boats" to mean the 104-foot San Francisco class pilot vessels (PV) employed by the SFBP to embark and disembark by the pilots from ships entering or leaving the Bays of San Francisco, San Pablo, and Suisun, which consists of the PV San Francisco, the PV California, and the PV Drake.

COMMENTS

The transportation sector is responsible for about 40% of greenhouse gas (GHG), 80% of nitrous oxides (NO_X), and 90% of diesel particulate matter emissions (DPM) in California. Vessels make up a relatively small portion of the transportation sector's GHG emissions, about 3%. However, the diesel engines used by vessels contribute a high proportion other toxic air contaminants, such as NOx and DPM that can increase the risk of developing lung cancer and other health problems. A 2021 CARB emissions inventory of ocean-going vessels found that they were responsible for about 20% of statewide NO_X emissions and that this would grow to 30% by 2037, unless regulatory action was taken to improve emissions. There is no similar inventory for Commercial Harbor Craft Regulations (CHC), but CARB has reported that CHC emissions at the Port of Los Angeles and the Port of Long Beach were the second-largest contributor of near-source cancer risk in 2016 and would become the largest source of seaport emissions at those ports by 2023.

The U.S. Environmental Protection Agency (EPA) has established nationwide emissions standards for vessel engines that have become more stringent as emission control technologies have improved. The EPA established Tier 1 and Tier 2 standards in 1999 and Tier 3 and Tier 4 emissions standards in 2008. Their stringency generally requires engines to utilize after treatment technologies capable of removing pollutants from the exhaust gas stream. For example, DPFs are installed on engine exhaust systems and use a porous ceramic material or metallic filter to physically trap DPM and remove it from the exhaust stream. After DPM is collected by the filter, it is reduced to ash during filter regeneration. DPFs verified by EPA and CARB are typically effective at reducing emissions of PM by 85 to 90% or more.

CARB Clean harbor craft rules. CHCs include any private, commercial, government, or military marine vessel that does not otherwise meet the definition of ocean-going vessels. This includes vessels such as ferries, barges, tugboats, crew and supply vessels, research vessels, commercial fishing vessels, and research vessels. CHCs are a vital part of California's economy and are essential to moving cargo and people throughout its various ports, harbors, and marinas. These vessels are predominantly powered by diesel engines that emit significant amounts of harmful pollutants.

In 2008 CARB adopted initial CHC regulations, which established new and in-use engine emissions limits for engines on certain CHC vessels. These regulations reduced NOx and PM emissions by requiring in-use CHCs to meet Tier 1 - 3 marine engine standards. The initial CHC regulation was amended in 2010 and was updated again in 2022. The regulation currently requires upgrading most CHC engines to Tier 4 engines with DPF filters. The oldest engines must upgrade between 2024-2026. After that different classes of vessels must upgrade beginning with tugboats and ferries, followed by excursion vessels and commercial passenger fishing vessels, then dredges, barges, and workboats. The final upgrade requirements phase in by 2033.

CARB estimated that the new rule would further reduce statewide emissions by approximately 1,560 tons of DPM, 33,110 tons of NOx, and 375,490 metric tons of GHGs. Based on these emissions reductions, CARB estimates reducing 501 premature deaths, 153 hospital admissions, and 224 emergency room visits over the implementation period. This would save the state $4.95 billion in healthcare costs. Because these emissions are localized in the ports, the benefits would be concentrated in nearby disadvantaged communities.

San Francisco Bar Pilots. In California, SFBP have been guiding ships into the San Francisco Bay since at least 1835, and one of the first legislative enactments by the newly formed California Legislature in 1850 was to address the regulation of San Francisco bar pilots.

The SFBP's primary function is to ensure that large commercial vessels are navigated safely through the San Francisco Bay's confined waters. SFBP steer large commercial vessels through the Golden Gate of San Francisco Bay and adjoining navigable waters, which include San Pablo Bay, Suisun Bay, the Sacramento River, and associated tributaries. When a vessel arrives at a point eleven miles west of the Golden Gate Bridge, a bar pilot boards the vessel, takes navigational control, and guides the vessel to its berth. The same process occurs in reverse as vessels depart from the San Francisco Bay. They provide service for all types of commercial vessels, from 100-foot tugs to 1000-foot supertankers. The SFBP intermittently operate five pilot vessels: three offshore station vessels and two high speed harbor vessels. Corporations and ship owners who use the SFBP's services pay for 100% of their operating costs, including the costs of obtaining new pilot boats.

The Pilot Boat Surcharge Account. AB 2056 (Grayson), Chapter 769, Statutes of 2022 established the Pilot Boat Surcharge Account (PBSA) to hold monies available to fund the costs of obtaining new pilot boats and of funding design and engineering modifications to extend the service life of existing pilot boats, excluding costs for repair or maintenance, and other related costs. The account is expected to accumulate $6 million annually and currently has a balance of approximately $9 million.

Regulatory extensions. As part of the CHC regulation, a number of extensions are available to delay the implementation date when compliance would be impossible due to circumstances outside of the vessel owner's control. Processes are already in place in the regulation to extend the compliance dates for the pilot station vessels based on technical feasibility and cost, and scheduling extensions are also available if challenges arise such as supply chain delays or shipyard availability.

SFBP has already begun the process of designing new station vessels and has applied to CARB for 2-year renewable feasibility extension (E3 Extension) for their three station vessels as a contingency. Vessels are eligible for three renewals under the E3 extension for a total of 6 years. Their application notes that the three vessels would require extensions of 4, 8, and 10 years beyond the current compliance dates to accumulate sufficient monies to fund the vessel replacements.

Compliance costs. According to the SFBP's most recent build cost estimate, it expects the costs of the three vessels to be approximately $60 million. If SFBP is required to finance the cost of replacement because it does not receive compliance extensions from CARB, it anticipates an estimated additional $27 million in interest to finance these costs.

Committee comments. SFBP applied for the E3 feasibility extensions on May 24, 2024, which includes technical analysis demonstrating infeasibility of repowering the existing vessels, and their finances may demonstrate an inability to pay for new-build.

Under the Clean Air Act, CARB must seek a waiver from the US EPA to enforce their regulations. Enactment of this bill would require CARB to amend the CHC regulation for which the US EPA is considering a waiver. As a result, this would delay and possibly jeopardize the waiver approval needed to enforce these regulations. As a result, this would delay and possibly jeopardize the waiver approval needed to enforce these regulations. Finally, delaying repowers or retrofits for inspected vessels would result in a loss of air quality benefits for impacted communities and jeopardize attainment of National Ambient Air Quality Standards set by the federal government, which could result in federal sanctions and the loss of billions in federal transportation funding.

According to the Author

"Under California Code, SFBP is mandated to maintain a minimum of two pilot boats in service, with one boat "on station" in the open ocean at all times. To meet these requirements, SFBP maintains a fleet of five pilot boats, including three 104-foot station boats subject to Commercial Harbor Craft Regulations (CHC). However, these regulations, effective December 31, 2024, will render San Francisco Bar Pilot's services nearly impossible. Of SFBP's existing pilot boats fleet, three are immediately subject to CARB's stringent compliance deadlines. With a total construction cost of $68 million, not including financing, replacing these vessels within the specified deadlines is neither financially nor logistically feasible. Although the cost of the boats is ultimately borne by the shipping interests that utilize pilotage services, SFBP must secure and guarantee the construction loans, which entails significant financial risk.

AB 1296 creates a viable path towards compliance with the Air Resources Board's harbor craft regulations by affording a narrowly tailored extension of time for certain pilot station boats operated by the SF Bar Pilots. AB 1296 prohibits a state regulation from requiring or compelling the San Francisco Bar Pilots (SFBP) to replace specified pilot station boats unless the state regulation authorizes the San Francisco Bar Pilots to replace the pilot station boats upon the boats reaching their end useful service life, as specified. Ultimately, AB 1296 will ensure the economic health and stability of the pilotage system while aligning with California's environmental goals."

Arguments in Support

In support, the San Francisco Bar Pilots and Pacific Merchant Shipping Association (co-sponsors) write: "Under current California Air Resources Board Commercial Harbor Craft regulation, SFBP must replace two of its three existing station boats by the end of 2024, and the third by the end of 2025. Considerable resources have been expended to evaluate the feasibility of repowering these three station boats with CARB-compliant engines. However, due to the nature and size of the exhaust filtration and treatment systems those engines require, and engineering space limitations onboard, repowering is not feasible. Therefore, new replacement station boats must be built in order for SFBP to comply with the Harbor Craft Regulation. It should also be noted that zero-emission technology for this very specific application does not currently exist. The estimated cost to build the new, CARB-compliant station boats is $22.5 million each, exclusive of financing costs, or in excess of $67 million to build all three. While the construction costs are ultimately recovered from the shipping interests that utilize pilot services, SFBP must secure and guaranty considerable financing in order to build them. While the construction costs are ultimately recovered from the shipping interests that utilize pilot services, SFBP must secure and guaranty considerable financing in order to build them. At today's interest rates, the total cost of the build program is in excess of $85 million. It is not feasible for SFBP, an association currently comprised of 52 individual licensed pilots, to obtain or guaranty such financing, and if it were feasible, it would be an untenable business risk to do so."

Arguments in Opposition

The Coalition for Clean Air, Pacific Environment, Sunflower Alliance, Ocean Conservancy, the Union of Concerns Scientists and Earth Justice state: "The CHC Rule as adopted provides a feasible pathway towards cleaner harbor craft. The rule already allows for compliance extensions for various circumstances that may prevent regulated parties from complying, and contains exemptions for low-use vessels so that requirements are imposed on the largest emitters. …

"The proposed extension in AB 1296 would undermine the emissions reductions and health benefits of the CHC Rule by delaying requirements to replace pilot station boats until vessels have reached the end of their useful service life. A vessel's useful service life is between 25 to 35 years, which is an unacceptable timeframe to deliver emissions reductions to California's portside communities. Harbor craft vessels are a major driver of air pollution at seaports, and in

Los Angeles, Long Beach, San Diego and Oakland, these vessels are one of the top three drivers of cancer risk to frontline communities."

FISCAL COMMENTS

According to Senate Appropriations Committee, "The California Air Resources Board (CARB) reports total costs of approximately $2.4 million beginning in Fiscal Year 2024-25 and annually ongoing for additional staff resources to amend the Commercial Harbor Craft (CHC) Regulation to change compliance deadlines and implement a process to determine the end of useful service life of pilot vessels (Certification and Compliance Fund)."

VOTES

ASM BANKING AND FINANCE: 11-0-1

YES: Grayson, Bauer-Kahan, Cervantes, Dixon, Mike Fong, Gabriel, Petrie-Norris, Soria, Waldron, Wicks, Wilson

ABS, ABST OR NV: Chen

ASM APPROPRIATIONS: 14-0-2

YES: Holden, Megan Dahle, Calderon, Wendy Carrillo, Dixon, Mike Fong, Addis, Lowenthal, Papan, Pellerin, Robert Rivas, Sanchez, Weber, Wilson

ABS, ABST OR NV: Bryan, Mathis

ASSEMBLY FLOOR: 74-0-6

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Wallis, Ward, Weber, Wicks, Wood, Zbur, Rendon

ABS, ABST OR NV: Cervantes, Vince Fong, Friedman, Villapudua, Waldron, Wilson

SENATE FLOOR: 31-0-9

YES: Alvarado-Gil, Archuleta, Ashby, Blakespear, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Stern, Umberg, Wiener, Wilk

ABS, ABST OR NV: Allen, Atkins, Becker, Bradford, Menjivar, Min, Skinner, Smallwood-Cuevas, Wahab

ASM TRANSPORTATION: 13-0-2

YES: Davies, Aguiar-Curry, Berman, Juan Carrillo, Hoover, Jackson, Lowenthal, Papan, Sanchez, Ting, Wallis, Ward, Wicks

ABS, ABST OR NV: Wilson, Hart

UPDATED

VERSION: June 10, 2024

CONSULTANT: Aaron Kurz / TRANS. / (916) 319-2093 FN: 0005010

CONCURRENCE IN SENATE AMENDMENTS

CSA2 Bill Id:AB 1296

Author:(Grayson)

As Amended Ver:June 10, 2024

Majority vote

SUMMARY

Original Committee of Reference: Assembly Committee on Banking and Finance

Senate Amendments

Current Committee Recommendation: Concur

1. Provides that a state regulation shall not require, or compel, directly or indirectly, the SFBP to replace a pilot station boat unless the state regulation authorizes the SFBP to replace the pilot station boat upon it reaching the end of its useful service life, as determined by California Air Resources Board (CARB) in consultation with the SFBP and a board-approved accredited marine surveyor, and not before the pilot station boat reaches the end of its useful service life.
2. Specifies that the useful service life shall be between 25 and 35 years from the date the boat was commissioned.
3. Defines "pilot station boats" to mean the 104-foot San Francisco class pilot vessels (PV) employed by the SFBP to embark and disembark by the pilots from ships entering or leaving the Bays of San Francisco, San Pablo, and Suisun, which consists of the PV San Francisco, the PV California, and the PV Drake.

COMMENTS

The transportation sector is responsible for about 40% of greenhouse gas (GHG), 80% of nitrous oxides (NO_X), and 90% of diesel particulate matter emissions (DPM) in California. Vessels make up a relatively small portion of the transportation sector's GHG emissions, about 3%. However, the diesel engines used by vessels contribute a high proportion other toxic air contaminants, such as NOx and DPM that can increase the risk of developing lung cancer and other health problems. A 2021 CARB emissions inventory of ocean-going vessels found that they were responsible for about 20% of statewide NO_X emissions and that this would grow to 30% by 2037, unless regulatory action was taken to improve emissions. There is no similar inventory for Commercial Harbor Craft Regulations (CHC), but CARB has reported that CHC emissions at the Port of Los Angeles and the Port of Long Beach were the second-largest contributor of near-source cancer risk in 2016 and would become the largest source of seaport emissions at those ports by 2023.

The U.S. Environmental Protection Agency (EPA) has established nationwide emissions standards for vessel engines that have become more stringent as emission control technologies have improved. The EPA established Tier 1 and Tier 2 standards in 1999 and Tier 3 and Tier 4 emissions standards in 2008. Their stringency generally requires engines to utilize after treatment technologies capable of removing pollutants from the exhaust gas stream. For example, DPFs are installed on engine exhaust systems and use a porous ceramic material or metallic filter to physically trap DPM and remove it from the exhaust stream. After DPM is collected by the filter, it is reduced to ash during filter regeneration. DPFs verified by EPA and CARB are typically effective at reducing emissions of PM by 85 to 90% or more.

CARB Clean harbor craft rules. CHCs include any private, commercial, government, or military marine vessel that does not otherwise meet the definition of ocean-going vessels. This includes vessels such as ferries, barges, tugboats, crew and supply vessels, research vessels, commercial fishing vessels, and research vessels. CHCs are a vital part of California's economy and are essential to moving cargo and people throughout its various ports, harbors, and marinas. These vessels are predominantly powered by diesel engines that emit significant amounts of harmful pollutants.

In 2008 CARB adopted initial CHC regulations, which established new and in-use engine emissions limits for engines on certain CHC vessels. These regulations reduced NOx and PM emissions by requiring in-use CHCs to meet Tier 1 - 3 marine engine standards. The initial CHC regulation was amended in 2010 and was updated again in 2022. The regulation currently requires upgrading most CHC engines to Tier 4 engines with DPF filters. The oldest engines must upgrade between 2024-2026. After that different classes of vessels must upgrade beginning with tugboats and ferries, followed by excursion vessels and commercial passenger fishing vessels, then dredges, barges, and workboats. The final upgrade requirements phase in by 2033.

CARB estimated that the new rule would further reduce statewide emissions by approximately 1,560 tons of DPM, 33,110 tons of NOx, and 375,490 metric tons of GHGs. Based on these emissions reductions, CARB estimates reducing 501 premature deaths, 153 hospital admissions, and 224 emergency room visits over the implementation period. This would save the state $4.95 billion in healthcare costs. Because these emissions are localized in the ports, the benefits would be concentrated in nearby disadvantaged communities.

San Francisco Bar Pilots. In California, SFBP have been guiding ships into the San Francisco Bay since at least 1835, and one of the first legislative enactments by the newly formed California Legislature in 1850 was to address the regulation of San Francisco bar pilots.

The SFBP's primary function is to ensure that large commercial vessels are navigated safely through the San Francisco Bay's confined waters. SFBP steer large commercial vessels through the Golden Gate of San Francisco Bay and adjoining navigable waters, which include San Pablo Bay, Suisun Bay, the Sacramento River, and associated tributaries. When a vessel arrives at a point eleven miles west of the Golden Gate Bridge, a bar pilot boards the vessel, takes navigational control, and guides the vessel to its berth. The same process occurs in reverse as vessels depart from the San Francisco Bay. They provide service for all types of commercial vessels, from 100-foot tugs to 1000-foot supertankers. The SFBP intermittently operate five pilot vessels: three offshore station vessels and two high speed harbor vessels. Corporations and ship owners who use the SFBP's services pay for 100% of their operating costs, including the costs of obtaining new pilot boats.

The Pilot Boat Surcharge Account. AB 2056 (Grayson), Chapter 769, Statutes of 2022 established the Pilot Boat Surcharge Account (PBSA) to hold monies available to fund the costs of obtaining new pilot boats and of funding design and engineering modifications to extend the service life of existing pilot boats, excluding costs for repair or maintenance, and other related costs. The account is expected to accumulate $6 million annually and currently has a balance of approximately $9 million.

Regulatory extensions. As part of the CHC regulation, a number of extensions are available to delay the implementation date when compliance would be impossible due to circumstances outside of the vessel owner's control. Processes are already in place in the regulation to extend the compliance dates for the pilot station vessels based on technical feasibility and cost, and scheduling extensions are also available if challenges arise such as supply chain delays or shipyard availability.

SFBP has already begun the process of designing new station vessels and has applied to CARB for 2-year renewable feasibility extension (E3 Extension) for their three station vessels as a contingency. Vessels are eligible for three renewals under the E3 extension for a total of 6 years. Their application notes that the three vessels would require extensions of 4, 8, and 10 years beyond the current compliance dates to accumulate sufficient monies to fund the vessel replacements.

Compliance costs. According to the SFBP's most recent build cost estimate, it expects the costs of the three vessels to be approximately $60 million. If SFBP is required to finance the cost of replacement because it does not receive compliance extensions from CARB, it anticipates an estimated additional $27 million in interest to finance these costs.

Committee comments. SFBP applied for the E3 feasibility extensions on May 24, 2024, which includes technical analysis demonstrating infeasibility of repowering the existing vessels, and their finances may demonstrate an inability to pay for new-build.

Under the Clean Air Act, CARB must seek a waiver from the US EPA to enforce their regulations. Enactment of this bill would require CARB to amend the CHC regulation for which the US EPA is considering a waiver. As a result, this would delay and possibly jeopardize the waiver approval needed to enforce these regulations. As a result, this would delay and possibly jeopardize the waiver approval needed to enforce these regulations. Finally, delaying repowers or retrofits for inspected vessels would result in a loss of air quality benefits for impacted communities and jeopardize attainment of National Ambient Air Quality Standards set by the federal government, which could result in federal sanctions and the loss of billions in federal transportation funding.

According to the Author

"Under California Code, SFBP is mandated to maintain a minimum of two pilot boats in service, with one boat "on station" in the open ocean at all times. To meet these requirements, SFBP maintains a fleet of five pilot boats, including three 104-foot station boats subject to Commercial Harbor Craft Regulations (CHC). However, these regulations, effective December 31, 2024, will render San Francisco Bar Pilot's services nearly impossible. Of SFBP's existing pilot boats fleet, three are immediately subject to CARB's stringent compliance deadlines. With a total construction cost of $68 million, not including financing, replacing these vessels within the specified deadlines is neither financially nor logistically feasible. Although the cost of the boats is ultimately borne by the shipping interests that utilize pilotage services, SFBP must secure and guarantee the construction loans, which entails significant financial risk.

AB 1296 creates a viable path towards compliance with the Air Resources Board's harbor craft regulations by affording a narrowly tailored extension of time for certain pilot station boats operated by the SF Bar Pilots. AB 1296 prohibits a state regulation from requiring or compelling the San Francisco Bar Pilots (SFBP) to replace specified pilot station boats unless the state regulation authorizes the San Francisco Bar Pilots to replace the pilot station boats upon the boats reaching their end useful service life, as specified. Ultimately, AB 1296 will ensure the economic health and stability of the pilotage system while aligning with California's environmental goals."

Arguments in Support

In support, the San Francisco Bar Pilots and Pacific Merchant Shipping Association (co-sponsors) write: "Under current California Air Resources Board Commercial Harbor Craft regulation, SFBP must replace two of its three existing station boats by the end of 2024, and the third by the end of 2025. Considerable resources have been expended to evaluate the feasibility of repowering these three station boats with CARB-compliant engines. However, due to the nature and size of the exhaust filtration and treatment systems those engines require, and engineering space limitations onboard, repowering is not feasible. Therefore, new replacement station boats must be built in order for SFBP to comply with the Harbor Craft Regulation. It should also be noted that zero-emission technology for this very specific application does not currently exist. The estimated cost to build the new, CARB-compliant station boats is $22.5 million each, exclusive of financing costs, or in excess of $67 million to build all three. While the construction costs are ultimately recovered from the shipping interests that utilize pilot services, SFBP must secure and guaranty considerable financing in order to build them. While the construction costs are ultimately recovered from the shipping interests that utilize pilot services, SFBP must secure and guaranty considerable financing in order to build them. At today's interest rates, the total cost of the build program is in excess of $85 million. It is not feasible for SFBP, an association currently comprised of 52 individual licensed pilots, to obtain or guaranty such financing, and if it were feasible, it would be an untenable business risk to do so."

Arguments in Opposition

The Coalition for Clean Air, Pacific Environment, Sunflower Alliance, Ocean Conservancy, the Union of Concerns Scientists and Earth Justice state: "The CHC Rule as adopted provides a feasible pathway towards cleaner harbor craft. The rule already allows for compliance extensions for various circumstances that may prevent regulated parties from complying, and contains exemptions for low-use vessels so that requirements are imposed on the largest emitters. …

"The proposed extension in AB 1296 would undermine the emissions reductions and health benefits of the CHC Rule by delaying requirements to replace pilot station boats until vessels have reached the end of their useful service life. A vessel's useful service life is between 25 to 35 years, which is an unacceptable timeframe to deliver emissions reductions to California's portside communities. Harbor craft vessels are a major driver of air pollution at seaports, and in

Los Angeles, Long Beach, San Diego and Oakland, these vessels are one of the top three drivers of cancer risk to frontline communities."

FISCAL COMMENTS

According to Senate Appropriations Committee, "The California Air Resources Board (CARB) reports total costs of approximately $2.4 million beginning in Fiscal Year 2024-25 and annually ongoing for additional staff resources to amend the Commercial Harbor Craft (CHC) Regulation to change compliance deadlines and implement a process to determine the end of useful service life of pilot vessels (Certification and Compliance Fund)."

VOTES

ASM BANKING AND FINANCE: 11-0-1

YES: Grayson, Bauer-Kahan, Cervantes, Dixon, Mike Fong, Gabriel, Petrie-Norris, Soria, Waldron, Wicks, Wilson

ABS, ABST OR NV: Chen

ASM APPROPRIATIONS: 14-0-2

YES: Holden, Megan Dahle, Calderon, Wendy Carrillo, Dixon, Mike Fong, Addis, Lowenthal, Papan, Pellerin, Robert Rivas, Sanchez, Weber, Wilson

ABS, ABST OR NV: Bryan, Mathis

ASSEMBLY FLOOR: 74-0-6

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Wallis, Ward, Weber, Wicks, Wood, Zbur, Rendon

ABS, ABST OR NV: Cervantes, Vince Fong, Friedman, Villapudua, Waldron, Wilson

SENATE FLOOR: 31-0-9

YES: Alvarado-Gil, Archuleta, Ashby, Blakespear, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Stern, Umberg, Wiener, Wilk

ABS, ABST OR NV: Allen, Atkins, Becker, Bradford, Menjivar, Min, Skinner, Smallwood-Cuevas, Wahab

ASM TRANSPORTATION: 13-0-2

YES: Davies, Aguiar-Curry, Berman, Juan Carrillo, Hoover, Jackson, Lowenthal, Papan, Sanchez, Ting, Wallis, Ward, Wicks

ABS, ABST OR NV: Wilson, Hart

UPDATED

VERSION: June 10, 2024

CONSULTANT: Aaron Kurz / TRANS. / (916) 319-2093 FN: 0005010

 THIRD READING  

Bill No: AB 1296

Author: Grayson (D), et al.

Amended: 6/10/24 in Senate

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 14-0, 6/25/24

AYES: Dodd, Wilk, Alvarado-Gil, Archuleta, Ashby, Bradford, Glazer, Nguyen, Ochoa Bogh, Padilla, Roth, Rubio, Seyarto, Smallwood-Cuevas

NO VOTE RECORDED: Jones, Portantino

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 7-0, 7/3/24

AYES: Allen, Dahle, Gonzalez, Hurtado, Menjivar, Nguyen, Skinner

SENATE APPROPRIATIONS COMMITTEE: 6-1, 8/15/24

AYES: Caballero, Jones, Ashby, Becker, Bradford, Seyarto

NOES: Wahab

ASSEMBLY FLOOR: 74-0, 5/18/23 (Consent) - See last page for vote

SUBJECT: Bar pilots: regulation of vessels

SOURCE: Pacific Merchant Shipping Association

San Francisco Bar Pilots

DIGEST: This bill prohibits a state regulations requiring or compelling the San Francisco Bar Pilots (SFBP) to replace specified pilot station boats unless the state regulation authorizes the SFBP to replace a pilot station boat upon the pilot boat reaching the end of its useful service life, as specified.

ANALYSIS:

Existing law:

1. Establishes the SFBP for the Bays of San Francisco, San Pablo, and Suisun for the purpose of prescribing the membership, functions, and duties of the SFBP with regard to the licensure and regulation of bar pilots.
2. Makes findings and declarations that it is the policy of the state to ensure safety of persons, vessels, and property using Monterey Bay and the Bays of San Francisco, San Pablo, and Suisun, and its tributaries, and to avoid damage to those waters and surrounding ecosystems as a result of vessel collision or damage, by providing competent, efficient, and regulated pilotage vessels that require pilotage services.
3. Prescribes the rates of bar pilotage fees required to be charged by pilots and paid vessels inward and outward bound through the bays mentioned above.
4. Imposes an additional pilot boat surcharge to recover the pilot’s costs of obtaining new pilot boats, including, preliminary design and engineering, and of funding design and engineering modifications for the purpose of extending the service life of existing pilot boats, as specified.
5. Establishes the California Air Resources Board (CARB), which is charged with protecting the public from the harmful effect of air pollution and developing programs and actions to fight climate change.

This bill:

1. Provides that a state regulation shall not require the SFBP to replace a pilot station boat unless the state regulation authorizes the SFBP to replace the pilot station boat upon the boat reaching the end of its useful service life, as determined by CARB in consultation with the SFBP, and not before the pilot station boat reaches the end of its useful service life.
2. Specifies that the useful service life, as determined by CARB, in consultation with the SFBP, shall be between 25 and 35 years from the date the boat was commissioned.
3. Defines “pilot station boats” to mean the 104-foot San Francisco class pilot vessels employed by the SFBP to embark and disembark by the pilots from ships entering or leaving the Bays of San Francisco, San Pablo, and Suisun, which consists of the PV San Francisco, the PV California, and the PV Drake.
4. Makes various findings and declarations pertaining to the role of the bar pilots in the protection of the state’s waters and shorelines.

Background

The Board of Pilot Commissioners. The SFBP is the oversight body that licenses and regulates approximately 52 maritime pilots who make up the San Francisco bar pilots. The SFBP was established in California’s first Legislative Session and has been in continuous existence since 1850. The SFBP is a “tax neutral” agency as all of its expenses are paid for by the shipping industry through surcharges on pilotage fees and not by state or local taxes.

Specifically, San Francisco bar pilots are responsible for steering large commercial vessels through the Golden Gate of San Francisco Bay and adjoining navigable waters, which include San Pablo Bay, Suisun Bay, the Sacramento River, and associated tributaries. When a vessel arrives at a point 11 miles west of the Golden Gate Bridge, a San Francisco bar pilot boards the ship, takes navigational control, and guides the ship to its berth. The same process occurs in reverse as ships depart from the San Francisco Bay. The SFBP’s primary function is to ensure that large commercial vessels are navigated safely through the San Francisco Bay's confined waters. They provide service for all types of commercial vessels, from 100-foot tugs to 1000-foot supertankers.

The SFBP is required to maintain a minimum of two pilot boats in service with one pilot boat “on station” at all times in the open ocean, 11 miles west of the Golden Gate Bridge. In current practice, in order to meet its operational requirements, the SFBP maintains a fleet of five pilot boats, three of which are the 104-foot station boats that would be impacted by the provisions of this bill.

In addition to the three station boats, the fleet consists of a 70-foot “run boat” which transports pilots to and from the station boats offshore, as well as to and from various ports around the bay. This vessel, the PV Golden Gate, is brand new and was custom built to CARB-compliant specifications, with Tier-4 diesel engines, and launched in 2023. Finally, the SFBP operates a smaller vessel out of Pittsburg to carry out pilot changes for vessels on long transits from sea to the port of Stockton and Sacramento. This boat, the PV Pittsburg, is also CARB-compliant until December 31, 2028.

The three station boats that would be impacted by the provisions of this bill, the PV California, the PV San Francisco, and the PV Drake, are identical in design, and were launched in 2000, 2000, and 2010 respectively. The former two face a CARB compliance deadline of December 31, 2024, while the latter has a compliance deadline of December 31, 2025.

CARB Regulations. CARB adopted the Airborne Toxic Control Measure for Diesel Engines on CHC in 2008 to reduce emissions of diesel particulate matter, oxides of nitrogen, and reactive organic gases from diesel engines used on commercial harbor craft operated in regulated California waters. CARB amended the original regulation in 2010 to include additional vessel categories, including crew and supply, barge, and dredge vessels. At the end of 2021, CARB proposed to amend the current regulation to further reduce emissions from harbor craft in impacted communities.

The proposed regulations accelerate the bar pilots’ new build program to a schedule that requires the construction of three vessels by year-end 2024, one by year-end 2025 and one by year end 2028. According to information provided by the author’s office, the SFBP has wholly supported the intent of the CARB regulations and has expended significant resources in an attempt to achieve timeline compliance. However, due to configuration of the station boats and their unique operation profile, the author’s office states that repowering these vessels with currently available CARB-compliant engine systems is simply not feasible.

For example, according to the SFBP, one of the primary issues is the incompatibility of available CARB-compliant engines with the station boat operation dynamics. The SFBP states that CARB-compliant engines are paired with diesel particulate filters, known as DPF’s, and selective catalytic reduction units (SCRs) to achieve lower emissions. Of the currently available CARB-compliant engines suitable to power the boats, the SFBP argues that only one is available on the market, the MAN D2862, equipped with SCRs and DPFs, that could potentially accommodate the existing station boat hulls. The SCRs and DPFs paired with the engines from the other manufacturers are too large to fit the station boat engineering spaces.

The SFBP argues that while it would technically be possible to shoehorn the Man D2862, DPFs above the engines, doing so would require prohibitively costly structural changes to the vessels. Even if that could be accomplished, the SFBP states that the result would be boats with engines unable to meet the unique performance requirements of offshore station-keeping and pilot transfers.

Ultimately, the SFPB argues that because it is not feasible to retrofit existing boats, absent a regulatory change, SFBP’s only viable path to compliance with the CARB regulations is to build new vessels. In trying to meet CARB-regulations compliance, the SFBP sent out requests for interest to approximately 12 different shipyards in October of 2023, and to-date has had only four responses. If, and when, a construction agreement is reached, the build-times for these types of vessels will very likely be more than one year, and possibly more than two, depending on availability of labor, materials, and parts. Thus, even if the SFBP were able to enter into such constructions agreements this year, it is likely impossible that those boats would be operations before the current CARB deadlines.

This bill seeks to provide the necessary time for the SFBP to be able to replace three pilot station boats, not by the current CARB-regulation deadline, but rather by when these boats reach the end of their useful service life. Historically, the useful service life of these vessels is approximately 30 years. Given the 30-year approximation, the anticipated end of useful service life for the three pilot state boats impacted by this bill would be as follows:

1. PV San Francisco – built in 2000; anticipated end of useful service life is approximately 2030.
2. PV California – built in 2000, anticipated end of useful service life is approximately 2030.
3. PV Drake – built in 2010; anticipated end of useful service life is 2040.

Related/Prior Legislation

SB 295 (Dodd, 2024) would remove current limits in the SFBP Special Fund and expressly authorizes any funds that remain in the account to be expended in or carried over to any subsequent fiscal year. (Pending on the Assembly Floor)

AB 1122 (Bains, 2024) would require any diesel particulate filter installed on a CHC to be equipped with an emergency bypass system and delays the compliance dates for towing vessels CHCs to replace or retrofit their engines until their next regularly scheduled inspection by the Coast Guard or an authorized classification society. (Pending in the Senate Appropriations Committee Suspense File)

AB 1594 (Garcia, Chapter 585, Statutes of 2023) required any state regulation that seeks to require the procurement of medium- and heavy-duty zero-emission vehicles (ZEVs) to authorize public agency utilities to purchase replacements for traditional utility-specialized vehicles that are at the end of life, as determined by CARB in consultation with public agency utilities, when needed to maintain reliable service and respond to major foreseeable events, including severe weather, wildfires, natural disasters, and physical attacks, as specified.

Author Statement. According to the author’s office, “under California Code, the SFBP is mandated to maintain a minimum of two pilot boats in service, with one boat ‘on station’ in the open ocean at all times. To meet these requirements, the SFBP maintains a fleet of five pilot boats, including three 104-foot station boats subject to Commercial Harbor Craft Regulations (CHC). However, these regulations, effective December 31, 2024, will render San Francisco Bar Pilot’s services nearly impossible. Of SFBP’s existing pilot boats fleet, three are immediately subject to CARB’s stringent compliance deadlines. With a total construction cost of $68 million, not including financing, replacing these vessels within the specified deadlines is neither financially nor logistically feasible. Although the cost of the boats is ultimately borne by the shipping interests that utilize pilotage services, SFBP must secure and guarantee the construction loans, which entails significant financial risk.”

The author’s office further argues, “AB 1296 creates a viable path towards compliance with the CARB’s harbor craft regulations by affording a narrowly tailored extension of time for certain pilot station boats operated by the SFBP. AB 1296 prohibits a state regulation from requiring or compelling the SFBP to replace specified pilot station boats unless the state regulation authorizes the SFBP to replace the pilot station boats upon the boats reaching their end useful service life, as specified. Ultimately, AB 1296 will ensure the economic health and stability of the pilotage system while aligning with California’s environmental goals.”

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, CARB reports total costs of approximately $2.4 million beginning in Fiscal Year 2024-25 and annually ongoing for additional staff resources to amend the Commercial Harbor Craft (CHC) Regulation to change compliance deadlines and implement a process to determine the end of the useful service life of pilot vessels (Certification and Compliance Fund).

SUPPORT: (Verified 8/14/24)

Pacific Merchant Shipping Association (co-source)
San Francisco Bar Pilots (co-source)

Bay Area Council

OPPOSITION: (Verified 8/14/24)

Coalition of Clean Air

Earthjustice

Ocean Conservancy

Pacific Environment

Sunflower Alliance

Union of Concerned Scientist

ARGUMENTS IN SUPPORT: According to supporters of the bill, “under CARB’s CHC regulations, SFBP must replace two of its three existing station boats by the end of 2024, and the third by the end of 2025. Considerable resources have been expended to evaluate the feasibility of repowering these three station boats with CARB-compliant engines. However, due to the nature and size of the exhaust filtration and treatment systems those engines require, and engineering space limitations onboard, repowering is not feasible. This bill will create an alternative path for SFBP to reach compliance with the CHC regulations by extending the CARB deadlines to match the service life of the station boats. This would allow for construction of replacement boats in a way that is both financially and practically feasible.”

ARGUMENTS IN OPPOSITION: According to opponents of the bill, “the proposed extension in AB 1296 would undermine the emissions reductions and health benefits of the CHC Rule by delaying requirements to replace pilot station boats until vessels have reached the end of their useful service life. A vessel’s useful service life is between 25 to 35 years, which is unacceptable timeframe to deliver emissions reductions to California’s portside communities. Harbor craft vessels are a major driver of air pollution at seaports, and in Los Angeles, Long Beach, San Diego and Oakland, these vessels are one of the top three drivers of cancer risk to frontline communities.”

ASSEMBLY FLOOR: 74-0, 5/18/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Wallis, Ward, Weber, Wicks, Wood, Zbur, Rendon

NO VOTE RECORDED: Cervantes, Vince Fong, Friedman, Villapudua, Waldron, Wilson

Prepared by: Felipe Lopez / G.O. / (916) 651-1530

8/18/24 8:46:10

**** END ****

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

AB 1296 (Grayson) - Bar pilots: regulation of vessels

Bill Summary:

AB 1296 prohibits a state regulation from requiring or compelling the San Francisco Bar Pilots (SFBP) to replace a pilot station boat earlier than the end of its useful life, as specified.

Fiscal Impact:

The California Air Resources Board (CARB) reports total costs of approximately $2.4 million beginning in Fiscal Year 2024-25 and annually ongoing for additional staff resources to amend the Commercial Harbor Craft (CHC) Regulation to change compliance deadlines and implement a process to determine the end of useful service life of pilot vessels (Certification and Compliance Fund).

Background:

The SFBP is the oversight body that licenses and regulates approximately 52 maritime pilots who make up the San Francisco bar pilots. The SFBP is a “tax neutral” agency as all of its expenses are paid for by the shipping industry through surcharges on pilotage fees and not by state or local taxes.

Specifically, San Francisco bar pilots are responsible for steering large commercial vessels through the Golden Gate of San Francisco Bay and adjoining navigable waters, which include San Pablo Bay, Suisun Bay, the Sacramento River, and associated tributaries. The SFBP is required to maintain a minimum of two pilot boats in service with one pilot boat “on station” at all times in the open ocean, 11 miles west of the Golden Gate Bridge. In current practice, in order to meet its operational requirements, the SFBP maintains a fleet of five pilot boats, three of which are the 104-foot station boats that would be impacted by the provisions of this bill.

CARB Regulations. CARB adopted the Airborne Toxic Control Measure for Diesel Engines on CHC Regulations in 2008 to reduce emissions of diesel particulate matter, oxides of nitrogen, and reactive organic gases from diesel engines used on commercial harbor craft operated in regulated California waters. CARB amended the original regulation in 2010 to include additional vessel categories, including crew and supply, barge, and dredge vessels. At the end of 2021, CARB proposed to amend the current regulation to further reduce emissions from harbor craft in impacted communities.

The proposed regulations accelerate the bar pilots’ new build program to a schedule that requires the construction of three vessels by year-end 2024, one by year-end 2025 and one by year end 2028.

This bill seeks to provide the necessary time for the SFBP to be able to replace three pilot station boats, not by the current CARB-regulation deadline, but rather by when these boats reach the end of their useful service life. Historically, the useful service life of these vessels is approximately 30 years. Given the 30-year approximation, the anticipated end of useful service life for the three pilot state boats impacted by this bill would be as follows:

1) PV San Francisco – built in 2000; anticipated end of useful service life is approximately 2030.

2) PV California – built in 2000, anticipated end of useful service life is approximately 2030.

3) PV Drake – built in 2010; anticipated end of useful service life is 2040.

Proposed Law:

• Prohibits a state regulation from requiring or compelling the SFBPs to replace a pilot station boat unless the regulation authorizes the replacement of a boat upon reaching the end of its useful service life, as determined by CARB in consultation with the board and board-approved accredited marine surveyor.
• Provides that the useful service life, as determined by CARB in consultation with the board and board-approved accredited marine surveyor, shall be between 25 and 35 years from the date the pilot station boat was commissioned.
• Defines “pilot station boats” as the 104-foot San Francisco class pilot vessels employed by the SFBPs to embark and disembark the pilots from ships entering or leaving the Bays of San Francisco, San Pablo, and Suisun, which consist of the PV San Francisco, Official Number 1105895, the PV California, Official Number 1108685, and the PV Drake, Official Number 1222874.
• Defines “SFBP” as a group of maritime pilots, individually licensed by the board, organized as an unincorporated association for the purpose of providing pilotage service on Monterey Bay and the Bays of San Francisco, San Pablo, and Suisun.
• States legislative findings and declarations.

-- END --

SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Allen, Chair

2023 - 2024 Regular

SUBJECT: Bar pilots: regulation of vessels

DIGEST: This bill prevents a state regulation from requiring the San Francisco Bar Pilots to replace a pilot station boat, as defined, earlier than the end of its useful life, as specified.

ANALYSIS:

Existing law:

1. Establishes the Air Resources Board (CARB) as the air pollution control agency in California and requires CARB, among other things, to control emissions from a wide array of mobile sources and coordinate, encourage, and review the efforts of all levels of government as they affect air quality. (Health and Safety Code (HSC) § 39500 et seq.)
2. Authorizes CARB to adopt standards and regulations for off-road and non-vehicular engine categories, including marine vessels. (HSC § 43013)
   
3. Through regulation, requires all commercial harbor crafts (CHCs) to use renewable diesel fuel and to upgrade engines to higher tiers over several years, as specified by model year and engine type. This requirement excludes ocean-going vessels except for tugboats, towboats, dredges, petrochemical tank barges, and articulated tug barges. (17 CCR § 93118.5)
   
4. States that it is the policy of the state to ensure the safety of persons, vessels, and property using Monterey Bay and the Bays of San Francisco, San Pablo, and Suisun, and the tributaries thereof, and to avoid damage to those waters and surrounding ecosystems as a result of vessel collision or damage, by providing competent, efficient, and regulated pilotage for vessels required to secure pilotage services. (Harbors and Navigation Code (HNC) § 1100)
   

This bill:

1. Defines “pilot station boats” to mean three specific vessels, and “San Francisco bar pilots” to mean a group of maritime pilots, individually licensed by the board, organized as an unincorporated association for the purpose of providing pilotage service on Monterey Bay and the Bays of San Francisco, San Pablo, and Suisun.
   
2. Prevents a state regulation from requiring or compelling the San Francisco Bar Pilots (SFBP) to replace a pilot station boat before it reaches the end of its useful life, as determined by CARB in consultation with the Board of Pilot Commissioners and an accredited marine surveyor.
   
3. Stipulates that the useful service life determined as described above will be between 25 and 35 years.
   

Background

1. Vessels and air pollution. According to CARB, the transportation sector is responsible for about 40 percent of greenhouse gas (GHG), 80 percent of nitrous oxides (NO_X)_, and 90 percent of diesel particulate matter emissions (DPM) in California. Broadly implementing zero-emission and pollution reduction technologies in the transportation sector is necessary to improve public health and help prevent climate change. The largest source of transportation emissions, particularly GHGs, is on-road motor vehicles but this will change as the state transitions its fleets to zero-emission vehicles.
   
   Vessels make up a relatively small portion of the transportation sector’s GHG emissions, about 3 percent. However, the diesel engines used by vessels contribute a high proportion other toxic air contaminants, such as NO_x and DPM, that can increase the risk of developing lung cancer and other health problems. A 2021 CARB emissions inventory of ocean-going vessels found that they were responsible for about 20 percent of statewide NO_X emissions and that this would grow to 30 percent by 2037 unless regulatory action was taken to improve emissions. There is no similar inventory for commercial harbor craft (CHC), which are a smaller segment of the overall vessel population, but CARB has reported that CHC emissions at the Port of Los Angeles and the Port of Long Beach were the second-largest contributor of near-source cancer risk in 2016 and would become the largest source of seaport emissions at those ports by 2023.
   
2. Commercial harbor craft. CHCs include any private, commercial, government, or military marine vessel that does not otherwise meet the definition of ocean-going vessels. This includes vessels such as ferries, barges, tugboats, crew and supply vessels, research vessels, commercial fishing vessels, and research vessels. CHCs are a vital part of California’s economy and are essential to moving cargo and people throughout its various ports, harbors, and marinas. These vessels are reliable and operationally efficient but are predominantly powered by diesel engines that emit significant amounts of harmful pollutants.
   
   In 2008, CARB adopted initial CHC regulations, which established new and in-use engine emissions limits for both auxiliary and propulsion diesel engines on certain categories of CHC. These regulations reduced NOx and particulate matter (PM) emissions by requiring in-use CHCs to meet certain engine standards. The regulation was further amended in 2010 to encompass more types of CHCs and accelerate turnover. The initial CHC Regulation was amended in 2010 to include requirements for additional CHC categories, accelerated turnover to Tier 2 or Tier 3 standards, and required usage of CARB-approved diesel or alternative fuel.
   
   Building upon the initial regulations and based on CARB’s Community Air Protection Blueprint strategies for AB 617 and actions outlined in the State Implementation Plan, CARB proposed in 2018 to further strengthen the CHC regulations. A key feature of these regulations that goes beyond Environmental Protection Agency (EPA) regulations is the requirement for in-use vessels to replace or retrofit engines before their normal end of life. In addition to the up-front costs of these new engines and pollution control technologies, the owners of the vessels will also have to bear lost revenue from the time it takes to install these technologies, and the people who normally crew the vessels will not be able to work during that time. The emissions standards are stricter for most CHCs than the Tier 4 standards established by the EPA, requiring the installation of DPFs on most vessels.
   
   Not all CHCs are regulated, even with the latest amendments to the regulation. Prior to the 2022 update, ferries, excursion vessels, crew & supply vessels, barges under 400’, dredges, and tug & tugboats were the only regulated categories. The 2022 update added charter fishing boats, all barges, pilot vessels, research vessels, work boats, and certain temporary replacements. Left unregulated are commercial fishing vessels, historic vessels, military/Coast Guard vessels, and recreational vessels. Ocean-going vessels are not part of the CHC regulation but are covered by their own set of regulations.
   
3. CHC rules costs and benefits. According to the Standardized Regulatory Impact Assessment of these updated rules, the cost of compliance for the industry is estimated to be approximately $2.1 billion during the implementation period of 2023-2038. This estimate comes from capital costs, labor and installation costs, operational costs, loss of use costs, and fuel savings. The cost for an individual business will depend on the type and number of vessels they have, but CARB modeled a “typical business” in order to assess the impact. The total amortized costs for this typical business are estimated to be $38 million and range between approximately $25,000 and $2.8 million per year. Comparing these costs to the annual revenue of a typical business in the water transportation industry, which is $375 million, the maximum amortized costs for this typical business is 0.7 percent of the average annual revenue for businesses in the industry.
   
   CARB estimated that the new rule would further reduce statewide emissions by approximately 1,560 tons of DPM, 33,110 tons of NOx, and 375,490 metric tons of GHGs. Based on these emissions reductions, CARB estimates reducing 501 premature deaths, 153 hospital admissions, and 224 emergency room visits over the implementation period. This would save the state $4.95 billion in healthcare costs. Because these emissions are localized in the ports, the benefits would be concentrated in nearby communities, many of which are disadvantaged. CARB also estimates that these rules will result in unquantified financial benefits to associated businesses like CHC engine manufacturers, Californian shipyards, and design, engineering, and construction firms.
   
4. The San Francisco Bar Pilots. The San Francisco Bar Pilots (SFBP) is an organization of highly trained and experienced mariners, licensed by the State of California to direct the navigation of ships into, out of, and within the Bays of, San Francisco, San Pablo, Suisun, and Monterey, and on the Sacramento and San Joaquin Rivers. SFBP is organized as an unincorporated association whose membership is currently comprised of 52 state-licensed pilots who collectively pool resources to provide 24/7 on-demand pilotage service. Commercial vessels over 750 tons engaged in foreign trade are statutorily obligated to be under the navigational control of a state-licensed pilot when navigating anywhere within the above-described pilotage grounds.
   
   In order to provide these pilotage services, SFBP is statutorily obligated to maintain a fleet of pilot boats approved by the state regulatory agency governing pilotage, the Board of Pilot Commissioners.
   
   As provided in the California Code of Regulations, SFBP is required to maintain a minimum of two pilot boats in service, with one pilot boat “on station” at all times in the open ocean, 11 miles west of the Golden Gate Bridge. In current practice, in order to meet its operational requirements, SFBP maintains a fleet of five pilot boats, three of which are the 104-foot station boats that are the subject of this bill, of which only one is on station at any time.
   

Comments

1. Purpose of Bill. According to the author, “Under California Code, SFBP is mandated to maintain a minimum of two pilot boats in service, with one boat "on station" in the open ocean at all times. To meet these requirements, SFBP maintains a fleet of five pilot boats, including three 104-foot station boats subject to Commercial Harbor Craft Regulations (CHC). However, these regulations, effective December 31, 2024, will render San Francisco Bar Pilot’s services nearly impossible. Of SFBP’s existing pilot boats fleet, three are immediately subject to CARB’s stringent compliance deadlines. With a total construction cost of $68 million, not including financing, replacing these vessels within the specified deadlines is neither financially nor logistically feasible. Although the cost of the boats is ultimately borne by the shipping interests that utilize pilotage services, SFBP must secure and guarantee the construction loans, which entails significant financial risk.
   
   “AB 1296 creates a viable path towards compliance with the Air Resources Board’s harbor craft regulations by affording a narrowly tailored extension of time for certain pilot station boats operated by the SF Bar Pilots. AB 1296 prohibits a state regulation from requiring or compelling the San Francisco Bar Pilots (SFBP) to replace specified pilot station boats unless the state regulation authorizes the San Francisco Bar Pilots to replace the pilot station boats upon the boats reaching their end useful service life, as specified. Ultimately, AB 1296 will ensure the economic health and stability of the pilotage system while aligning with California’s environmental goals.”
   
2. Bound by law. The SFBP is required by law to operate 24/7 and is permitted to collect certain fees and surcharges. Thus, unlike some of the private, commercial enterprises that also have vessels affected by the recent CHC regulation amendments, SFBP is uniquely unable to adapt by changing their services or reallocating funds without statutory direction.
   
   The author and sponsors of this measure have run a number of bills in recent years to enable the SFBP to collect an additional surcharge on top of the existing pilotage fees to be able to bankroll the upgrades required under the CHC regulations, but they contend they are not yet able to afford the necessary work.
   
3. We already have extensions for this. As part of the CHC regulation, a number of extensions are available to delay the implementation date when compliance would be impossible due to circumstances outside of the vessel owner’s control. Thus, processes are already in place in the regulation to extend the compliance dates for the pilot station vessels based on technical feasibility and cost, and scheduling extensions are also available if challenges arise such as supply chain delays or shipyard availability.
   
   In fact, SFBP has already begun the process of designing new station vessels and has already applied for feasibility extensions for their three station vessels as a contingency in case loan funding does not come through. They are eligible for feasibility extensions for potentially six years beyond the compliance dates of December 2024 and 2025, and scheduling extensions as needed. Their feasibility application notes that the vessels San Francisco and the California are within 6-7 years of their planned service life.
   
   On one hand, existing extensions provided by CARB for just such instances likely apply, and this bill represents another erosion of CARB’s authority to resolve such issues through regulation. On the other hand, this bill affects three vessels that must, by law, wait idling—one at a time—11 miles west of the Golden Gate Bridge at all times.

DOUBLE REFERRAL:

This measure was heard in Senate Governmental Organization Committee on June 25, 2024, and passed out of committee with a vote of 14-0.

Related/Prior Legislation

SB 295 (Dodd and Grayson, 2024) would remove certain prohibitions on the expenditures of pilotage fees and allow excess fees to rollover into subsequent years. SB 295 is currently in the Assembly Transportation Committee.

AB 2056 (Grayson, Chapter 769, Statutes of 2022) revises and recasted the pilot boat surcharge provisions, including specifying that the costs of obtaining new pilot boats includes preliminary design and engineering and the costs of repowering existing pilot boats or the acquisition of new pilot boats in order to meet the requirements of any rule governing the emissions of commercial harbor craft adopted by CARB, as specified.

AB 807 (Grayson, Chapter 172, Statutes of 2021) requires a surcharge to be imposed per each movement of a vessel as is necessary and authorized by the Board to recover the cost of the pilot associated with a catastrophic event, as described.

AB 1594 (Garcia, Chapter 585, Statutes of 2023) requires any state regulation that seeks to require the procurement of medium- and heavy-duty zero-emission vehicles (ZEVs) to authorize public agency utilities to purchase replacements for traditional utility-specialized vehicles that are at the end of life, as determined by CARB in consultation with public agency utilities when needed to maintain reliable service and respond to major foreseeable events, including severe weather, wildfires, natural disasters, and physical attacks, as specified.

SOURCE:

Pacific Merchant Shipping Association

San Francisco Bar Pilots

SUPPORT:

Pacific Merchant Shipping Association
San Francisco Bar Pilots

OPPOSITION:

Coalition for Clean Air

Earthjustice

Ocean Conservancy

Pacific Environment

Sunflower Alliance

Union of Concerned Scientists

ARGUMENTS IN SUPPORT:

According to the sponsors, “This bill would create an alternative path for SFBP to reach compliance with the Commercial Harbor Craft regulation by extending the CARB deadlines to match the service life of the station boats. This would allow for construction of replacement boats in a way that is both financially and practically feasible. By allowing the existing station boats to serve out their useful service lives, the bill would allow for the funds to be collected in advance of construction of each new boat and would allow for the construction of one boat at a time, as the old boats reach the end of their service lives, rather than all three at once. SFBP would be able to finance construction of a single boat at a time and pay off that construction loan immediately upon completion of the boat with the funds that have been collected in advance.

“Specifically, the bill would prohibit the state regulation from mandating the replacement of the three station boats PV California, PV San Francisco and PV Drake, unless the regulation permits SFBP replace those station boats at the end of their useful service lives as specified.”

ARGUMENTS IN OPPOSITION:

According to a coalition of the opposed environmental groups, “The CHC Rule as adopted provides a feasible pathway towards cleaner harbor craft. The rule already allows for compliance extensions for various circumstances that may prevent regulated parties from complying, and contains exemptions for low-use vessels so that requirements are imposed on the largest emitters.

“The proposed extension in AB 1296 would undermine the emissions reductions and health benefits of the CHC Rule by delaying requirements to replace pilot station boats until vessels have reached the end of their useful service life. A vessel’s useful service life is between 25 to 35 years, which is an unacceptable timeframe to deliver emissions reductions to California’s portside communities. Harbor craft vessels are a major driver of air pollution at seaports, and in Los Angeles, Long Beach, San Diego and Oakland, these vessels are one of the top three drivers of cancer risk to frontline communities. At full implementation, the updated CHC Rule is estimated to avoid 531 premature deaths, save $5.25 billion in public health care costs, and reduce diesel PM by 89 percent, NOx by 54 percent, and GHG emissions by 415,000 metric tons. If adopted, AB 1296 would reduce these benefits by delaying the zero-emission transition for pilot station boats, possibly for decades.”

Positions reflect letters received by noon one week prior to the hearing.

-- END --

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Bill Dodd

Chair

2023 - 2024 Regular

Bill No: AB Hearing Date: 6/25/2024

SUBJECT:

DIGEST: This bill prohibits a state regulations requiring or compelling the San Francisco Bar Pilots (SFBP) to replace specified pilot station boats unless the state regulation authorizes the SFBP to replace a pilot station boat upon the pilot boat reaching the end of its useful service life, as specified.

ANALYSIS:

Existing law:

1. Establishes the SFBP for the Bays of San Francisco, San Pablo, and Suisun for the purpose of prescribing the membership, functions, and duties of the SFBP with regard to the licensure and regulation of bar pilots.
2. Makes findings and declarations that it is the policy of the state to ensure safety of persons, vessels, and property using Monterey Bay and the Bays of San Francisco, San Pablo, and Suisun, and its tributaries, and to avoid damage to those waters and surrounding ecosystems as a result of vessel collision or damage, by providing competent, efficient, and regulated pilotage vessels that require pilotage services.
3. Prescribes the rates of bar pilotage fees required to be charged by pilots and paid vessels inward and outward bound through the bays mentioned above.
4. Imposes an additional pilot boat surcharge to recover the pilot’s costs of obtaining new pilot boats, including, preliminary design and engineering, and of funding design and engineering modifications for the purpose of extending the service life of existing pilot boats, as specified.
5. Establishes the California Air Resources Board (CARB), which is charged with protecting the public from the harmful effect of air pollution and developing programs and actions to fight climate change.

This bill:

1. Provides that a state regulation shall not require the SFBP to replace a pilot station boat unless the state regulation authorizes the SFBP to replace the pilot station boat upon the boat reaching the end of its useful service life, as determined by CARB in consultation with the SFBP, and not before the pilot station boat reaches the end of its useful service life.
2. Specifies that the useful service life, as determined by CARB, in consultation with the SFBP, shall be between 25 and 35 years from the date the boat was commissioned.
3. Defines “pilot station boats” to mean the 104-foot San Francisco class pilot vessels employed by the SFBP to embark and disembark by the pilots from ships entering or leaving the Bays of San Francisco, San Pablo, and Suisun, which consists of the PV San Francisco, the PV California, and the PV Drake.
4. Makes various findings and declarations pertaining to the role of the bar pilots in the protection of the state’s waters and shorelines.

Background

Author Statement. According to the author’s office, “under California Code, the SFBP is mandated to maintain a minimum of two pilot boats in service, with one boat ‘on station’ in the open ocean at all times. To meet these requirements, the SFBP maintains a fleet of five pilot boats, including three 104-foot station boats subject to Commercial Harbor Craft Regulations (CHC). However, these regulations, effective December 31, 2024, will render San Francisco Bar Pilot’s services nearly impossible. Of SFBP’s existing pilot boats fleet, three are immediately subject to CARB’s stringent compliance deadlines. With a total construction cost of $68 million, not including financing, replacing these vessels within the specified deadlines is neither financially nor logistically feasible. Although the cost of the boats is ultimately borne by the shipping interests that utilize pilotage services, SFBP must secure and guarantee the construction loans, which entails significant financial risk.”

The author’s office further argues, “AB 1296 creates a viable path towards compliance with the CARB’s harbor craft regulations by affording a narrowly tailored extension of time for certain pilot station boats operated by the SFBP. AB 1296 prohibits a state regulation from requiring or compelling the SFBP to replace specified pilot station boats unless the state regulation authorizes the SFBP to replace the pilot station boats upon the boats reaching their end useful service life, as specified. Ultimately, AB 1296 will ensure the economic health and stability of the pilotage system while aligning with California’s environmental goals.”

The Board of Pilot Commissioners. The SFBP is the oversight body that licenses and regulates approximately 52 maritime pilots who make up the San Francisco bar pilots. The SFBP was established in California’s first Legislative Session and has been in continuous existence since 1850. The SFBP is a “tax neutral” agency as all of its expenses are paid for by the shipping industry through surcharges on pilotage fees and not by state or local taxes.

Specifically, San Francisco bar pilots are responsible for steering large commercial vessels through the Golden Gate of San Francisco Bay and adjoining navigable waters, which include San Pablo Bay, Suisun Bay, the Sacramento River, and associated tributaries. When a vessel arrives at a point 11 miles west of the Golden Gate Bridge, a San Francisco bar pilot boards the ship, takes navigational control, and guides the ship to its berth. The same process occurs in reverse as ships depart from the San Francisco Bay. The SFBP’s primary function is to ensure that large commercial vessels are navigated safely through the San Francisco Bay's confined waters. They provide service for all types of commercial vessels, from 100-foot tugs to 1000-foot supertankers.

The SFBP is required to maintain a minimum of two pilot boats in service with one pilot boat “on station” at all times in the open ocean, 11 miles west of the Golden Gate Bridge. In current practice, in order to meet its operational requirements, the SFBP maintains a fleet of five pilot boats, three of which are the 104-foot station boats that would be impacted by the provisions of this bill.

In addition to the three station boats, the fleet consists of a 70-foot “run boat” which transports pilots to and from the station boats offshore, as well as to and from various ports around the bay. This vessel, the PV Golden Gate, is brand new and was custom built to CARB-compliant specifications, with Tier-4 diesel engines, and launched in 2023. Finally, the SFBP operates a smaller vessel out of Pittsburg to carry out pilot changes for vessels on long transits from sea to the port of Stockton and Sacramento. This boat, the PV Pittsburg, is also CARB-compliant until December 31, 2028.

The three station boats that would be impacted by the provisions of this bill, the PV California, the PV San Francisco, and the PV Drake, are identical in design, and were launched in 2000, 2000, and 2010 respectively. The former two face a CARB compliance deadline of December 31, 2024, while the latter has a compliance deadline of December 31, 2025.

CARB Regulations. CARB adopted the Airborne Toxic Control Measure for Diesel Engines on CHC in 2008 to reduce emissions of diesel particulate matter, oxides of nitrogen, and reactive organic gases from diesel engines used on commercial harbor craft operated in regulated California waters. CARB amended the original regulation in 2010 to include additional vessel categories, including crew and supply, barge, and dredge vessels. At the end of 2021, CARB proposed to amend the current regulation to further reduce emissions from harbor craft in impacted communities.

The proposed regulations accelerate the bar pilots’ new build program to a schedule that requires the construction of three vessels by year-end 2024, one by year-end 2025 and one by year end 2028. According to information provided by the author’s office, the SFBP has wholly supported the intent of the CARB regulations and has expended significant resources in an attempt to achieve timeline compliance. However, due to configuration of the station boats and their unique operation profile, the author’s office states that repowering these vessels with currently available CARB-compliant engine systems is simply not feasible.

For example, according to the SFBP, one of the primary issues is the incompatibility of available CARB-compliant engines with the station boat operation dynamics. The SFBP states that CARB-compliant engines are paired with diesel particulate filters, known as DPF’s, and selective catalytic reduction units (SCRs) to achieve lower emissions. Of the currently available CARB-compliant engines suitable to power the boats, the SFBP argues that only one is available on the market, the MAN D2862, equipped with SCRs and DPFs, that could potentially accommodate the existing station boat hulls. The SCRs and DPFs paired with the engines from the other manufacturers are too large to fit the station boat engineering spaces.

The SFBP argues that while it would technically be possible to shoehorn the Man D2862, DPFs above the engines, doing so would require prohibitively costly structural changes to the vessels. Even if that could be accomplished, the SFBP states that the result would be boats with engines unable to meet the unique performance requirements of offshore station-keeping and pilot transfers.

Ultimately, the SFPB argues that because it is not feasible to retrofit existing boats, absent a regulatory change, SFBP’s only viable path to compliance with the CARB regulations is to build new vessels. In trying to meet CARB-regulations compliance, the SFBP sent out requests for interest to approximately 12 different shipyards in October of 2023, and to-date has had only four responses. If, and when, a construction agreement is reached, the build-times for these types of vessels will very likely be more than one year, and possibly more than two, depending on availability of labor, materials, and parts. Thus, even if the SFBP were able to enter into such constructions agreements this year, it is likely impossible that those boats would be operations before the current CARB deadlines.

This bill seeks to provide the necessary time for the SFBP to be able to replace three pilot station boats, not by the current CARB-regulation deadline, but rather by when these boats reach the end of their useful service life. Historically, the useful service life of these vessels is approximately 30 years. Given the 30-year approximation, the anticipated end of useful service life for the three pilot state boats impacted by this bill would be as follows:

1. PV San Francisco – built in 2000; anticipated end of useful service life is approximately 2030.
2. PV California – built in 2000, anticipated end of useful service life is approximately 2030.
3. PV Drake – built in 2010; anticipated end of useful service life is 2040.

Prior/Related Legislation

SB 295 (Dodd, 2024) removes current limits in the SFBP Special Fund and expressly authorizes any funds that remain in the account to be expended in or carried over to any subsequent fiscal year. (Pending in the Assembly Transportation Committee)

AB 1122 (Bains, 2024) requires any diesel particulate filter installed on a CHC to be equipped with an emergency bypass system and delays the compliance dates for towing vessels CHCs to replace or retrofit their engines until their next regularly scheduled inspection by the Coast Guard or an authorized classification society. (Pending in the Senate Environmental Quality Committee)

AB 1594 (Garcia, Chapter 585, Statutes of 2023) requires any state regulation that seeks to require the procurement of medium- and heavy-duty zero-emission vehicles (ZEVs) to authorize public agency utilities to purchase replacements for traditional utility-specialized vehicles that are at the end of life, as determined by CARB in consultation with public agency utilities, when needed to maintain reliable service and respond to major foreseeable events, including severe weather, wildfires, natural disasters, and physical attacks, as specified.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT:

Pacific Merchant Shipping Association (Co-source)
San Francisco Bar Pilots (Co-source)

OPPOSITION:

Coalition of Clean Air

Earthjustice

Ocean Conservancy

Pacific Environment

Sunflower Alliance

Union of Concerned Scientist

ARGUMENTS IN SUPPORT: According to supporters of the bill, “under CARB’s CHC regulations, SFBP must replace two of its three existing station boats by the end of 2024, and the third by the end of 2025. Considerable resources have been expended to evaluate the feasibility of repowering these three station boats with CARB-compliant engines. However, due to the nature and size of the exhaust filtration and treatment systems those engines require, and engineering space limitations onboard, repowering is not feasible. This bill will create an alternative path for SFBP to reach compliance with the CHC regulations by extending the CARB deadlines to match the service life of the station boats. This would allow for construction of replacement boats in a way that is both financially and practically feasible.”

ARGUMENTS IN OPPOSITION: According to opponents of the bill, “the proposed extension in AB 1296 would undermine the emissions reductions and health benefits of the CHC Rule by delaying requirements to replace pilot station boats until vessels have reached the end of their useful service life. A vessel’s useful service life is between 25 to 35 years, which is unacceptable timeframe to deliver emissions reductions to California’s portside communities. Harbor craft vessels are a major driver of air pollution at seaports, and in Los Angeles, Long Beach, San Diego and Oakland, these vessels are one of the top three drivers of cancer risk to frontline communities.”

DUAL REFERRAL: Senate Governmental Organization Committee & Senate Environmental Quality Committee

Date of Hearing: May 10, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 1296

Author:(Grayson) – As Amended Ver:April 11, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires, until January 1, 2028, the Department of Financial Protection and Innovation’s (DFPI’s) annual California Consumer Financial Protection Law (CCFPL) report to separate out specified information related to crypto assets in a standalone section.

FISCAL EFFECT:

Minor and absorbable costs to DFPI to organize the report, as specified.

COMMENTS:

1. Purpose. According to the author:

AB 1296 will help policymakers better understand the state’s oversight activities over the crypto asset industry, a volatile and quickly evolving area of finance. In May 2022, Governor Newsom issued an executive order that tasked DFPI to exercise its consumer protection authority to develop guidance, regulatory clarity and supervision of private entities offering crypto asset-related financial products and services. This bill modifies an existing report requirement to include standalone information on this activity so that policymakers can better understand DFPI’s ongoing work in this area.

1. Background.

CCFPL. Amongst other provisions, the CCFPL authorizes DFPI to oversee providers of consumer financial products or services that are not licensed by DFPI. DFPI must produce an annual report detailing CCFPL-related activities.

Executive Order (EO) N-9-22. They crypto industry has operated primarily outside of state and federal regulatory frameworks that apply to similar traditional financial products and services. On May 4, 2022, Governor Newsom issued EO N-9-22, with the aim of creating “a transparent regulatory and business environment for web3 companies which harmonizes federal and California approaches, balances the benefits and risks to consumers, and incorporates California values such as equity, inclusivity, and environmental protection.” It is unclear what comes next with regard to DFPI’s crypto-related work under the CCFPL. This bill requires DFPI to include standalone information related to crypto assets, including consumer complaint information, oversight actions, rulemaking, and education and outreach, in DFPI’s annual CCFPL report.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: April 24, 2023

ASSEMBLY COMMITTEE ON BANKING AND FINANCE

Timothy Grayson, Chair

ABPCA Bill Id:AB 1296 (

Author:Grayson) – As Amended Ver:April 11, 2023

SUBJECT: California Consumer Financial Protection Law: annual report

SUMMARY: This bill requires, until 2028, the Department of Financial Protection and Innovation (DFPI) to include in its annual California Consumer Financial Protection Law (CCFPL) report specified standalone information related to crypto assets.

EXISTING LAW:

1. Pursuant to the CCFPL, authorizes DFPI to require covered persons to register with the department (Financial Code Section 90009).
2. Defines “covered person” as a person that engages in offering or providing a consumer financial product or service to a resident of this state and affiliates or service providers, as specified (Financial Code Section 90005(f)).
3. Requires DFPI to publish an annual report on the following activities of the department pursuant to the CCFPL (Financial Code Section 90018):
   1. Rulemaking, enforcement, oversight, consumer complaints, and resolutions, education, and research.
   2. The activities of the Financial Technology Innovation Office.

FISCAL EFFECT: Unknown. This bill is keyed Fiscal by Legislative Counsel.

COMMENTS:

1. Purpose.

According to the author:

AB 1296 will help policymakers better understand the state’s oversight activities over the crypto asset industry, a volatile and quickly evolving area of finance. In May 2022, Governor Newsom issued an executive order that tasked DFPI to exercise its consumer protection authority to develop guidance, regulatory clarity, and supervision of private entities offering crypto asset-related financial products and services. This bill modifies an existing report requirement to include standalone information on this activity so that policymakers can better understand DFPI’s ongoing work in this area.

1. CCFPL and the annual report

DFPI is the new name of the department previously known as the Department of Business Oversight (DBO). In 2020 the Governor proposed the name change and a budget enhancement beginning in Fiscal Year (FY) 2020-21, along with trailer bill language that expanded the department’s oversight authority to include financial services companies that were previously not required to be licensed under laws administered by DBO.

Pursuant to the CCFPL, the department will increase its activity in several areas, including:

• Oversight of financial services companies, including the establishment of registration programs.
• Consumer research, outreach, education, and market monitoring.
• Market research and outreach to emerging financial services companies through the Financial Technology Innovation Office.

One of the primary purposes of the CCFPL is to authorize DFPI to oversee providers of consumer financial products or services that are not licensed by the department. DFPI will conduct this oversight using a range of tools familiar to the department: reviewing applications for registration and investigating backgrounds of key officers of the applicant, examining books and records of the company on a routine or ad hoc basis, and bringing enforcement actions when consumer protection laws have been violated.

As part of the department’s reorganization and implantation of the CCFPL, DFPI must produce an annual report detailing DFPI’s CCFPL-related activities.

1. Crypto assets and the Newsom executive order (EO).

The term “crypto asset,” often defined as a “digital financial asset” in legislative proposals, describes a range of money-like, digital representations of value that are not considered legal tender and are not issued by a central bank of a sovereign nation. Similar terms used to describe this concept are cryptocurrencies, digital currencies, virtual currencies, and digital assets, among others.

Since its inception, the crypto industry has operated primarily outside of state and federal regulatory frameworks that apply to similar products and services in the traditional financial system. Until 2022, the state of California had not taken a proactive stance on regulating crypto, but the activities in the crypto market last year sparked action from the Newsom Administration and Legislature.

On May 4, 2022, Governor Newsom issued EO N-9-22 with the aim of “creat[ing] a transparent regulatory and business environment for web3 companies which harmonizes federal and California approaches, balances the benefits and risks to consumers, and incorporates California values such as equity, inclusivity, and environmental protection.”

Among other provisions, the EO tasked DFPI with the following:

• Engage with federal agencies and work with other state regulators to promote a common regulatory approach.
• Develop guidance and, as appropriate, regulatory clarity and supervision of crypto companies based on public comments and information provided voluntarily by such companies.
• Provide guidance to state banks and credit unions regarding crypto assets.
• Initiate enforcement actions as appropriate and enhance complaint-handling efforts.

In December 2022, the Governor’s Office released an interagency report reflecting the Administration’s work to implement the executive order. ^[1]The report summarizes DFPI’s work aimed at creating clear and responsible regulatory frameworks. The department met with a variety of federal regulatory agencies and other states’ financial regulators to align with government agencies beyond California. DFPI also solicited public comments for feedback on how California should regulate the crypto industry.

1. What comes next?

It is unclear what comes next with regards to DFPI’s crypto-related work under the CCFPL. The interagency report cited above calls for DFPI to generate and publish data on consumer complaints and to engage with the Legislature on an ongoing basis to share regulatory insights and DFPI’s crypto-asset related resource needs.

AB 1296 formalizes this ongoing conversation between the executive branch and the legislative branch by requiring DFPI, in its annual CCFPL report, to include standalone information related to crypto assets, including consumer complaint information, oversight actions, rulemaking, and education and outreach. This bill’s report modification sunsets after the 2027 version of the report, which would reflect data for calendar year 2026.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file.

Opposition

None on file.

Analysis Prepared by: Luke Reidenbach / B. & F. / (916) 319-3081

1. https://dfpi.ca.gov/wp-content/uploads/sites/337/2022/12/TowardsResponsibleInnovation_221202.pdf ↑