Environmental Review Runs Off the Rails

The VMT/Orcem Environmental Impact Report has consistently failed to meet the fundamental purpose of California Environmental Quality Act to inform the public and decision-makers about project impacts.  The EIR has lacked a stable comprehensive project description from the start, and examines only the initial stage of a multi-stage project.  The report is fatally flawed and cannot serve as the basis for final certification and project approval.

The project description has changed significantly throughout the review process, depriving the public of the opportunity to properly evaluate and comment on project impacts.  The draft final version fails to describe the complete project and instead reports on impacts from initial and transient stages of a multi-stage project, further depriving the public and decision-makers an opportunity to assess cumulative project impacts.  The public record reveals that the project description presented in the draft EIR consisted largely of storytelling, divorced from the existing regulatory framework and any realistic economic analysis.

The draft EIR circulated for public and agency review and comment described a project consisting of two major components - a break bulk cargo-handling marine terminal and a slag cement mill tenant that would import raw waste slag from the Asian steel industry by cargo ship and process it on site.  In a letter dated Nov. 2, 2015 from the Bay Conservation and Development Commission to the City of Vallejo Economic Development Director, Commission staff inform the applicants that they didn’t do their homework when putting the project proposal together:

“The San Francisco Bay Plan Maps designate the area of the proposed project for a "water-related industry" priority use.  Phase I of the project, using a rehabilitated wharf to import raw materials to the Orcem facility, constitutes a "water-related industrial" use because it is an industrial use that requires a waterfront location to receive raw materials and distribute finished products that have been processed on site.  Phase I of the project is therefore consistent with the priority use designated in the San Francisco Bay Plan.

By contrast, the break bulk and dry bulk marine terminal proposed for Phase ll of the project involves the shipping of goods without any on-site processing component.  As a result, the uses proposed for Phase ll of the project constitute a port use, and would conflict with the "water-related industrial" designation in the Bay Plan.

The Bay Plan reserves specific areas around the Bay for specially designated Port Priority Use areas.  These Port Priority Use Areas are subject to the Commission's Seaport Plan.  The Seaport Plan assists the Commission to minimize fill in the Bay by determining where and when fill might be needed for port uses.  In the Commission's 2014 Bay Area Maritime Cargo Monitoring Report, issued October 23, 2015, the Commission found that no break bulk cargo was handled in 2014, and that no break bulk has been handled by areas within BCDC Port Priority Use Areas since 2006.  Furthermore, neo-bulk, dry bulk, and liquid bulk cargo were below capacity.  As a result, there are likely alternative existing upland port facilities in other parts of the Bay available for break bulk and other bulk cargo activities.

The fill proposed for this project may have an alternative upland location and, therefore, may not meet the requirements of Section 66605 of the McAteer-Petris Act.  Furthermore, the project proposes a significant amount of fill for a use for which there appears to be little demand.”

The applicant’s consultant confirmed that they considered the Phase 2 port development an essential component for economic viability of the project in an email to the City sent on February 2, 2016 that copied the applicants.  

“ I understand it, VMT Phase 2 is critical to the long-term efficiency and would therefore affect the long-term economics of VMT Phase 1.”

A summary of a subsequent meeting among City staff, consultants, and the BCDC staff makes it clear that the cargo handling operations described and analyzed in the draft EIR and cited as a major economic benefit of the project constituted well over half of the proposed project activity.  Only after the EIR was written and circulated does it become obvious that the project as proposed and presented to the public is simply not viable.  

City of Valley, Dudek (consulting), and BCDC Meeting – February 25, 2016
BCDC’s Coordination with Applicants –

“Prior to EIR preparation and Applicant's response to BCDC letter BCDC did meet with the applicants and did review their response to the comment letter.

Letter on EIR was a message to the developer that they had not met all of the requirements to obtain a permit for Phase 1 and 2.  If not a water dependent industry, then Phase 2 could be considered a port and it would need to be consistent with the Sea Port Plan.  BCDC says there is not a need to bulk and break bulk facility in the area and therefore the bay fill is not justified.  If, in fact, Phase 1 is only 25% Orcem specific than the same objection may be true for Phase 1 as well.”

All of the confusion and changes documented in the communications among the responsible parties comes after the public has had its only opportunity to review the project and comment before the final version comes for a vote.  The lack of a stable and realistic project description is highlighted in a March 2016 letter from the BCDC addressed to Vallejo’s Community and Economic Development Director seeking clarification:
“Dear Ms. Ouse:
On February 25, 2016, the San Francisco Bay Conservation and Development Commission
staff met with City of Vallejo  staff at the City's request regarding BCDC staff's comments on the draft Environmental Impact Report for the Vallejo Marine Terminal /Orcem Cement Plant Project  submitted on November 2, 2015.  At the meeting, BCDC staff learned that the use of the wharf proposed for reconstruction in Phase 1 of the project would not be limited to transporting material related to the Orcem California, Inc.  project.  As a result, Phase 1 of the project may not be consistent with the San Francisco Bay Plan Map designation of the site as a "water-related industry" priority use area.

According to the draft EIR, the terminal development in Phase 1 of the VMT project will
"allow for up to a total of four vessels per month and a maximum average monthly cargo of
160,000 metric tons (this volume includes 40,000 metric tons of material associated with
Orcem Phase 1, and approximately 63,400 metric tons of material associated with Orcem
Phase 2)" (Draft EIR Section Therefore, the material transported by the Orcem facility will comprise 25% to 40% of the total cargo transported through the Phase 1 terminal.

The proposal to use the Phase 1 terminal for break bulk activities, separate from the Orcem activities, was not clearly described in the draft EIR, nor was it clearly stated in pre-application meetings with VMT developer.  Please clarify the precise nature of the proposed Phase 1 activities and Phase 2 activities.  Based on the most recent information that we have obtained which identifies break bulk cargo transportation unrelated to the Orcem as the primary use at the site, the proposal would be inconsistent with the “water-related industry" priority use designation in the San Francisco Bay Plan.”

In a last ditch effort to keep their project alive the applicants now propose simply dropping Phase II from the project and EIR entirely.  After considerable internal discussion among the principals it was decided that since eliminating a huge chunk of the project would not in itself entail any new impacts that had not been considered in the already circulated draft EIR, that it would not be necessary to re-circulate a new draft environmental report.  That decision seeks to ignore the glaringly obvious question of what will replace Phase II.  It is difficult to imagine that well over half of the project activity could simply evaporate without affecting the financial viability and future direction of the project.

The April 29, 2016 summary of an exchange between the applicants and the BCDC staff provides an answer to the question of what might replace the Phase II cargo-handling operation, and while the solution the applicants propose might satisfy the narrow BCDC requirements, it utterly fails to satisfy the mandate under CEQA to inform the public about the full range of impacts.   

The BCDC staff writes to the Vallejo Economic Development Director:

“Dear Ms. Ouse:

On April 11, 2016, representatives from VMT and Orcem met with Commission staff and
provided further clarity about the potential uses related to Phase 1 of the project.  Based on additional information provided by the project developer, Commission staff now believes that the Commission could potentially find that the interim uses of Phase 1 would be consistent with the "water-related industry" designation in the Bay Plan.

As described to the Commission staff by representatives of VMT and Orcem, the wharf
reconstruction to be undertaken by VMT and the construction and use of the cement plant by Orcem are financially interdependent.  The intent of the wharf reconstruction is to provide Orcem with the means to receive raw materials and distribute finished products that have been processed on-site, a use that is consistent with the "water-related industry" designation in the Bay Plan.  Orcem's capacity and production are expected to increase over time, beginning at approximately 25% of the capacity of the wharf, leaving some capacity of the reconstructed wharf unused.

At the meeting on April 11, 2016, VMT expressed an interest in attracting more water-related industry to the site, but acknowledged that additional water-related industry use would take time to attract and develop.  In the interim period, VMT proposed to use the wharf to move some cargo, primarily raw materials, to and from the site.   While the draft environmental impact report states that the VMT Terminal is anticipated to handle a wide range of commodities, at the April 11 meeting, VMT informed Commission staff that, at this time, VMT has not secured contracts or tenants for any Phase I cargo users.

The Bay Plan policies on "Water-related Industry" states, in part, "land reserved for both
water-related industry and port use will be developed over a period of years.  Other uses may be allowed in the interim that, by their cost and duration, would not preempt future use of the site for water-related industry or port use."  Based on the description of anticipated activities presented by representatives of VMT and Orcem at our April 11, 2016 meeting, the use of the site for cargo would be consistent with the Bay Plan provided that the use is interim in nature and does not preclude future use of the site for water-related industry.

The Commission has allowed some limited interim uses at sites, which the Bay Plan and
Seaport Plan designate for port priority uses, pursuant to specific standards.  Interim uses are allowed for a limited period typically ranging from five years to ten years, depending on the proposed use and conditions of the site.  In some cases, the interim use is renewable by permit amendment.

At the time a BCDC permit application is prepared for the project, it should provide, among other things, a detailed description of the potential uses not associated with the Orcem project, including the type of cargo, so that the Commission can determine the appropriate interim period for the identified uses. The application should also include an explanation of how the use of the site for these interim uses would not preclude future use of the site for water-related industry.

As a result, the Commission staff believes that the project sponsors could submit a Phase I project proposal, including proposed interim uses, that is potentially consistent with the
Commission's site designation for a "water-related industry" and related policies, and that an amendment to the Bay Plan is not needed in order to consider the proposed development of Phase I. Therefore, the concerns raised in the Commission staffs letter dated March 25, 2016 are no longer applicable.

The Commission staff reiterates the issues it raised in its original DEIR comment letter dated November 2, 2015, including the potential inconsistency of Phase II of the development with the Bay Plan designation for "water-related industry" at the site.  Ultimately, however, the Commission will determine whether or not the project is consistent with BCDC's laws and policies at such time that it considers a BCDC permit application.”

What did we learn about the revised, amended, and modified proposal?  The interim port use period of ten years or less considered here represents less than one sixth of the term of the lease with the City, and the cement mill Phase I activity evaluated in the EIR amounts to much less than half of the total project at maximum buildout.  The applicants have no idea what sort of industrial tenants might replace the temporary port use or what environmental impacts the activity of these future tenants would entail.  The applicants can only say that additional tenants will take time to attract and develop.  

There is no mention at all in the EIR of the major portion of the industrial activity that would take place on the site over more than 80% of the lease term, according to what the applicants have told the BCDC and as documented in the public record.  The project description contained in the EIR was woefully inadequate from the start, and an environmental analysis built on such a flawed foundation must inevitably be fatally flawed as well.   The process failed to meet the minimum requirements under CEQA to provide a stable comprehensive project description and inform the public and decision-makers regarding the full extent of the project impacts.  

Recirculating one more version of the current document will no longer suffice. The applicants very plainly indicated to BCDC staff that this is actually a staged project proposal, beginning with the Phase I development of the terminal to service the slag cement mill, then a temporary port use for a period of five to ten years if allowed by the BCDC, followed by the recruitment and development of one or more additional water-related industry tenants of an unknown nature.  

Only the initial stage is mentioned or examined in an EIR presented as though it encompasses the entire project, and the document gives little indication of the activity that would actually take place on the site.  Rather than informing the public, the current EIR would badly mislead the public about the extent of environmental impacts over the life of the project.  Water-related industry at other designated sites around the Bay are typically high-impact industries like petroleum refineries and chemical plants.  The local community deserves to know at least the nature of these future industrial tenants that VMT plans to recruit.  The review process to date has failed at every step to fulfill the most basic requirements under CEQA to inform the public of the full range of environmental impacts related to the VMT/Orcem project.

Information regarding the inconsistencies with the Bay Plan and the lack of any discernible demand for the majority of the activity described in the draft EIR was readily available at the time the document was written.  The applicants must take full responsibility for their failure to exercise ordinary due diligence in their regulatory and market analysis.  The consultant for the applicants reveals how late in the process they came to that full realization in a June 2016 email to the City and BCDC staff - long after much of the investment in expensive environmental review has been made, and with significant cost to the City in time and resources.  

“Most importantly, and consistent with operation of law, it has been made clear to us that Commission staff could not recommend approval of, and the Commission could not approve any permit which does not contain the details necessary to demonstrate consistency with all applicable policies of the Bay Plan. This includes, of course, water-related industry policies, policies on providing alternative opportunities for public access (since this facility would be DOHS secured), and mitigation for Bay fill in proportion to the respective Phase 1 and 2 fill volumes to be authorized by permit."

It appears from the public record of behind the scenes discussions that the draft EIR circulated for public evaluation and comment amounted to little more than an attempt to get a foot in the door, rather than a serious effort to inform the public regarding actual project impacts and mitigations.  Here in another June 2016 email the consultant for the applicant talks about “placekeepers” incorporated into the draft EIR circulated for comments - a deliberate attempt to check a box in the environmental review process rather than fulfill the intent of the CEQA legislation to inform the public.  

“The personal watercraft improvements at the Vallejo Marina were identified in the Draft EIR as mitigation for the fact that public access cannot be provided at the project site (due to USDHC rules), and was vetted by the City with BCDC and others. As you know, these measures were included in the Draft EIR as place-keepers, understanding that these measures might be modified as a result of negotiations with BCDC at the permit stage (and might even require follow-up with the City).”

The CEQA process is intended to inform the public and allow decision-makers to stop and think about the full range of environmental impacts before approving projects.  That process cannot fulfill its purpose when applicants submit environmental documents that fail to describe a sizeable majority of the project activity and include placeholders instead of actual mitigations.  The lack of a stable project description and a document that only analyzes an initial stage of a multi-stage project constitute fatal flaws in the environmental review process.  The Council as lead agency cannot approve a final EIR based on a document so badly flawed that it deprived the public of an opportunity to evaluate the project.  The denial of permits by the planning commission must be upheld on appeal.