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HomeMy WebLinkAbout2008-01-08 - AGENDA REPORTS - FEINSTEIN SOLEDAD CYN MINE (2)NEW BUSINESS DATE: SUBJECT: DEPARTMENT Agenda Item: CITY OF SANTA CLARITA AGENDA REPORT City Manager Approval Item to be presented by: January 8, 2008 M4 Michael P. Murphy SENATOR FEINSTEIN: SOLEDAD CANYON MINE PROPOSAL City Manager's Office RECOMMENDED ACTION City Council, upon recommendation of the City Council CEMEX Ad Hoc Committee, discuss Senator Feinstein's requests relating to CEMEX's Soledad Canyon mine proposal and oppose any increase in mining levels beyond historical levels of mining or issuance of a general obligation bond to purchase the CEMEX mining contracts with the Bureau of Land Management. City Council authorizes the Mayor to communicate a position statement to Senator Feinstein. BACKGROUND During the past eight years, the City of Santa Clarita has been an active opponent of a proposal to site a sand and gravel mine in Soledad Canyon, located just beyond the City's eastern municipal boundary. The proposed mine, which would be operated by CEMEX, has been authorized by the United States Bureau of Land Management (BLM) through two consecutive ten year contracts. The property proposed for the mine is located on split estate; with the surface owned by the City of Santa Clarita and the subsurface mineral estate owned by the BLM.. The City's surface estate ownership is subordinate to the contracts issued under the federal government's mineral estate. The City of Santa Clarita and CEMEX have been working cooperatively over the past calendar year in an effort to develop a legislative solution that would address the community's concerns regarding the mining proposal, while concurrently addressing CEMEX's concerns regarding the value of their existing contracts with the Bureau of Land Management. The two parties entered into a "truce" in early 2007, designed to focus the efforts of the two organizations on developing a mutually agreeable solution. The parties have been working cooperatively, in conjunction with United States Representative Howard P. "Buck" McKeon, to develop federal legislation that will API'llP OWED satisfactorily address the concerns of all parties. While federal legislation has not yet been introduced in Congress, it is anticipated that legislative language will be finalized and a bill introduced by Representative McKeon within the next month. In recognition of the successful cooperative efforts to date, the City of Santa Clarita and CEMEX agreed to extend their truce agreement through June 30, 2008. The original agreement expired on December 31, 2007. Over the course of the past year, the City of Santa Clarita, CEMEX and Representative McKeon have been working with the offices of Senator Dianne Feinstein and Senator Barbara Boxer regarding the legislative proposal under development. Both Senators have been helpful in providing suggestions relative to provisions that should and should not be included in any final legislative proposal. It should be noted that at this point, however, neither Senator has committed to introducing legislation in the.U.S. Senate. On October 9, 2007, at the invitation of the City of Santa Clarita, in conjunction with the Santa Clarita Valley Chamber of Commerce and the Valley Industrial Association of the Santa Clarita Valley, Senator Dianne Feinstein visited Santa Clarita and spoke at a community luncheon. At that time, the Senator reaffirmed her desire to be of assistance in resolving the dispute between the City and CEMEX. The Senator expressed concerns over the potentially large amount of money that could be involved as part of any legislative solution. She offered to meet with both representatives of the City and CEMEX to explore options that might possibly be available in resolving the matter before moving forward with federal legislation. As the Chair of the United States Senate Committee on Appropriations Subcommittee on Interior, Environment and Related Agencies, Senator Feinstein is acutely aware of the difficulties in securing support for legislative proposals such as the one being contemplated by the City and CEMEX. Therefore, she wants to be assured that no avenue currently exists for resolution of the matter by non -legislative means. On November 19, 2007, representatives of the City and CEMEX met with Senator Feinstein. They reviewed the history of the project proposal, the concerns leading to the dispute, earlier efforts at resolution of the issue, and why the parties believe that a legislative approach is the most effective way to move forward. During the course of the discussion, the Senator requested that the City of Santa Clarita consider two potential approaches toward ending the dispute. The first approach would be for the City Council to reconsider its position regarding supportable levels of mining from the current historical levels of mining, identified at 300,000 tons per year, to 1.5 million tons per year. The second approach would be for the City of Santa Clarita to consider issuing voter approved general obligation bonds in an amount suitable for buying out CEMEX's contracts with the Bureau of Land Management. The value of the bond is estimated to be in the $110 - $170 million range. In September 2002, in recognition of sand and gravel mining that has historically taken place in the community, the City Council adopted Resolution 02-146, establishing the Council's position of support for historical levels of mining at the Soledad Canyon location. Historical levels are defined at 300,000 tons per year. CEMEX representatives expressed to Senator Feinstein that 1.5 million tons per year is the minimum mining level to make site production economically feasible for the company. Senator Feinstein requested the the City Council look at this issue due to the reduction in truck trips that the lower extraction amount provides and on the theory that most of the operations could take place during night time hours, thus reducing both truck traffic and air quality impacts. The 1.5 million ton level of mining represents a 35% reduction in annual production by CEMEX and would represent a 500% increase in annual production over historical levels of mining advocated by the community and the City Council. With the proposed annual extraction reduction, CEMEX would need approximately 38 years to complete 56 million tons of extraction, compared to the 20 years under the existing contracts. Additionally, with the material extraction reduction, the truck traffic would be reduced from 1,164 daily trips to 757 daily trips. However, even at one truck trip per minute, truck traffic would run approximately 13 hours per day, thus missing the goal of limiting freeway and local road impacts during non -peak hours without further restrictions. A change in the extraction amount or term of the BLM contracts would require federal legislation as significant contract changes cannot be handled through administrative action by the BLM. The suggestion of the* City issuing general obligation bonds stems from Senator Feinstein's tenure as Mayor of the City of San Francisco. Senator Feinstein believes that issuance of a general obligation bond provides an avenue for the issue to be resolved at the local level without further involvement of the federal government. General obligation bonds, issued by the City to buy out the CEMEX contracts, would require that a methodology be developed by the two parties for determining the value of the contracts. Once the amount is established, general obligation bonds would need to be placed on a ballot requiring approval by two-thirds of the electorate. General obligation bonds essentially contains two key components; authorization to issue debt and then a method for repayment, which is essentially a self-imposed tax on real property of the electorate to pay the debt service. Historically, it has been difficult for communities to secure two-thirds voter approval for general obligation bonds, thus raising the possibility that more than one election would need to be held to gain support for such a measure. Additionally, without a change in existing law, even with voter bond approval, the Bureau of Land Management would still own the mineral rights and could issue new contracts for mineral extraction in the future. On December 6, 2007, the City Council CEMEX Ad Hoc Committee (Mayor Kellar and Councilmember Weste) met to discuss Senator Feinstein's requests relating to the two options. While appreciative of Senator Feinstein's efforts to resolve the dispute, the two committee members expressed opposition to the proposals. The Committee directed that the matter be brought to the entire City Council for adoption of a statement of position in opposition to the proposals. ALTERNATIVE ACTIONS Other direction as provided by the City Council. FISCAL IMPACT No fiscal impact by undertaking the recommended action.