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Industrial water dependency: The BCDC experienceStanley R. Euston aa Chief Planning Officer, San Francisco Bay Conservation and Development Commission ,Berkeley, California, 94708Published online: 30 Sep 2008.

To cite this article: Stanley R. Euston (1978) Industrial water dependency: The BCDC experience, Coastal Zone ManagementJournal, 4:4, 463-474

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Industrial Water Dependency:The BCDC Experience

Stanley R. Euston*Chief Planning Officer, San Francisco Bay Conservation andDevelopment Commission, Berkeley, California 94708

The Bay Conservation and Development Commission (BCDC), hasdesignated a number of shoreline sites around San Francisco Bayfor exclusive use of water-related industry. This is intended bothto reduce future needs for Bay fill, and to reserve those waterfrontsites needed for long-term industrial growth. The Commission cur-rently defines water-related industries as those "requiring" a shore-line site for water transportation. The Commission is now consider-ing the use of an economic criterion for identifying waterdependency. This involves comparisons of the uniquely water-relatedbenefits and costs to the firm to locate on the shoreline, as opposedto its location at an inland site. By limiting use of deepwater sitesto those industries that are significantly water-dependent under thiscriterion, long-term economic efficiency is served, and the need forfuture Bay fill for industrial growth is reduced. The data and analy-sis required to implement an economic water-dependency criteriondo not appear to be a barrier to use of such a test in the regulatoryprocess. Whereas water dependency is an important concern toBCDC, other factors, including environmental constraints, mustalso be weighed when evaluating industrial projects.

The San Francisco Bay Conservation and Development Commission(BCDC), a state planning and regulatory agency established in 1965,

*The author wishes to acknowledge the assistance of Charles Goodman, Gradu-ate Student, Environmental Planning, University of California at Davis, in thepreparation of this article.

Coastal Zone Management Journal, Volume 4, Number 40990-8339/78/1215-0463/$02.00/0Copyright © 1978 Crane, Russak & Company, Inc.

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is one of the older experiments in the new art of coastal zone manage-ment, and it is the second state coastal agency to have its managementprogram approved by the Federal Office of Coastal Zone Management.The Commission is currently involved in second-generation coastalzone planning, involving an update and refinement of the San FranciscoBay Plan2 which, along with state law, provides the policy base thatguides the Commission's regulatory functions over the Bay and theimmediate shoreline. A major emphasis of the Commission's manage-ment program involves the identification and protection of shorelinesites for designated priority uses, one of the most prominent of whichis water-related industry. The BCDC experience with coastal resourceallocation in general, and water-related industry in particular, maytherefore be of some interest to other agencies now involved in coastalzone planning and management.

BCDC's concern with water-related or water-dependent industry3 isreflected in provisions of the Commission's organic legislation, theMcAteer-Petris Act.4 Among other things, the law states that:

The legislature further finds and declares that certain water-oriented land uses along the bay shoreline are essential to thepublic welfare of the Bay area, and that such uses include ports,water-related industry, airports, wildlife refuges, water-orientedrecreation and public assembly, desalinization plants and powerplants the San Francisco Bay Plan should make provision foradequate and suitable locations for all such uses thereby minimizingthe necessity for future bay fill to create such uses. . . .

There are two objectives behind the BCDC concept of reservingshoreline for water related industry: (1) To assure a sufficient supplyof waterfront land6 to handle future industrial needs without resortingto massive Bay fill, and (2) to assure an adequate supply of such sitesto protect the region's long-term economic base. The former objective isan environmental imperative, while the latter aims at efficient resourceallocation and use. Thus, at least in the instance of water-related in-dustry, environmental protection and long-term economic growth areserved by the same land-use prescription: reserve selected waterfrontsites for industrial uses that are water-dependent.

In carrying out this approach, the Bay Plan designates certain segmentsof shoreline as industrial priority use areas.7 Within these areas, theCommission cannot issue a permit for any new or substantially changed

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Industrial Water Dependency and the BCDC 465

use that conflicts with, or that would preclude future water-relatedindustrial use of, the site.

The Bay Plan reserves approximately 19,000 acres of shorelinearound San Francisco Bay for water-related industrial use. Sites wereselected on the basis of a rating system that includes many factorsrelevant to industrial site location.8 The size of the allocation of shore-line to water-related industry was based on certain assumptions andprojections about industrial employment and industrial plant spaceneeds.9 More land is reserved for water-related industry than for anyother priority use.

The BCDC designation of a substantial shoreline area for the exclu-sive use of water-related industry raises a fundamental question: Whatis water-related industry? How can it be defined or measured? The SanFrancisco Bay Plan currently uses a rather straight forward definitionof water-related industries—those which "require frontage on navigablewaters to receive raw materials and to distribute processed materialsby ship."10

This definition has appeal in that it appears to offer a clear test ofwater dependency. On second look, however, it is apparent that "re-quires" is a very ambiguous word in the context of a process so complexas industrial siting. Unfortunately, BCDC regulatory experience withwater-related industry does not clarify this issue to any extent, as therehave been relatively few industrial permit applications. In those permitsthat have been issued, the Commission's interpretation of "requires"appears to have been largely pro forma. That is, if a permit applicantindicates that the industrial project will involve water transportation,then the use is considered to be water-related.11

In reviewing the development of BCDC's water-related industry con-cept, it seems clear that at least implicitly the water transportation cri-terion was put forth as a proxy for a firm's economic dependency on awaterfront site. Use of water transportation is the major economic ad-vantage associated with deep draft sites.12 From this it can be inferredthat if a firm uses a shoreline site for water transportation, then it mustbe gaining unique transportation advantages from this site, and becausewater-related industry is often basic to the regional economy, these ad-vantages are relevant to the region's long-term economic welfare. Putanother way, if there were no economic advantages to a waterfront site,there would be no reason to allocate scarce shoreline to this use, sinceless environmentally sensitive inland sites are generally available.

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Refining the Water-Dependency Concept

As part of the BCDC's plan updating and refinement process, the Com-mission hired Gruen Gruen + Associates, a San Francisco based eco-nomic and planning consultant, to analyze the water-related industryconcept. In recognition of the economic nature of the water-dependencyrelationship, the consultant study focused largely on the use of an eco-nomic approach in the planning-regulatory process governing water-related industry.13 Of major concern in this regard was the definition ofwater-related industry.

Based on analysis of the operation of the land market for industrialsites, and on the opportunity cost concept as it applies to shoreline landuse, the consultant proposes to define water-related industrial firms asthose which "gain cost savings or revenue-differentiating advantages,neither of which is associated with land costs, by being located on thebay shore that it could not obtain at an inland location."14 Land costsare omitted from consideration in this definition, because this factor maynot be related to the underlying factors that tie firms to the water.

The consultant proposes a procedure for testing the water-relatednessof given firms based upon the above definition. A number of differentvariables may be relevant to this determination, and different ones maybe relevant from case to case. The questions listed below, however, givea good illustration of the kind of data needed to determine the degree ofwater dependency based on the economic benefits of using water trans-portation.15

1. Why does the firm desire to use a bayfront site?a. Deep or shallow draft shipping is desired?b. Bay water for cooling or processing use is desired?c. Some other bayfront resource is desired?d. The land is less expensive or offers better access to rail or road

transport then other comparable sites?If 1 (d) is indicated, the activity may not be water-related.If 1 (a) is indicated, consider the following:

2. Which raw materials would be received and which products wouldbe shipped from the site?

3. What additional costs would be associated with increasing the dis-tance between the waterfront and the firm's facilities other than pierfacilities? (Some facilities may be found to be water-related, while

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Industrial Water Dependency and the BCDC 467

others are not and could be located at some distance from the bay-front.)

4. What other materials-handling technologies are available and howwould the answer to the previous question differ were an alternativetechnology substituted for the proposed technology as distance isincreased? (It may be found that some facilities are less stronglydependent on bayfront sites if alternative industrial technologies areconsidered.)

5. What additional costs would be associated with operating at an in-land location and using other public or private port facilities to shipor receive materials? (If there are no additional costs, then the pro-posed activities may not be water-related.)

6. If operation at an inland site is infeasible, what would be the addi-tional annual cost of operation at a waterfront site in an alternativeregion? This may be expressed in terms of price reductions necessaryto generate an equivalent volume of business or other applicablemeasures. (If there are neither additional costs associated with op-eration at an inland site or at a site in another region, then the ac-tivity would not be water-related.)

7. What is the draft of the vessels to be used and what additional costswould be associated with using shallower draft vessels? (If a permitfor use of a deep draft site is being considered, but if it is found thatthe applicant does not incur any greater costs at a shallow draft site,consideration should be given to requiring the applicant to use sucha site.)

Data derived from this set of questions would help the permittingagency to assess the degree of dependency of a given industrial proposal,based on the water transportation values of the site. In contrast to aphysical definition (i.e., the firm "requires" a deep draft site for watertransportation), the proposed definition recognizes that the dependencyrelation lies upon a continuum. It provides the decisionmaker with areasonably objective information base for identifying where a given firmor industry falls on this continuum. Use of this definition in evaluatingwhether or not a given industry should be permitted to locate on awaterfront site is intended to result in a more efficient land use alloca-tion over the long run than would be achieved if the land market oper-ated without constraint, and in a real-world milieu of less-than-perfect

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468 Stanley R. Euston

competition and knowledge.16 By focusing decision criteria on the eco-nomic values to the firm of deepwater sites (and assuming that deep-water access is a very scarce site characteristic),17 deep draft shorelinesites are reserved for those industries realizing most benfit from thesesites, and the region's long-term economic base is therefore enhanced.

In addition, and very central to BCDC's concern with waterfront landuse, this definition provides the basis of a criterion by which to screenpotential industries wishing to locate on deepwater frontage. Only thoseindustries that gain benefit from deepwater that they could not obtainfrom inland sites would meet this criterion. This would lessen the chancethat such water-related industries will run out of existing deepwater sitesin the future, and thereby create pressure for more Bay fill to create newdeepwater frontage and industrial backup land.

Applying a Water-Dependency CriterionThe variability of the water-dependency relationship can be illustratedwith a few simplified examples. At one end are cases of almost totaldependency, firms that must obtain a waterfront site in order to function.Large-scale ship building is a prime example, one in which nonwater-front sites are obviously infeasible. The other end of the continuum ischaracterized by nondependency (e.g., most electronics manufacturing).Between these extremes lie industries with varying degrees of water-dependency, such as petroleum refineries and petrochemical plants.These uses are often served by deep-draft tankers, and may be mod-erately dependent on a shoreline location, in that pipeline access to deep-water is in some cases economically essential, while the plant itself canbe located some distance inland without incurring a significant increasein operation or capital costs.

It can be readily discerned that the crucial decision juncture in apply-ing an economically based definition in the regulatory process is thedetermination of the point on the water-dependency continuum that issignificant enough to justify the industry's right to location on the water-front. This is particularly true when the permit process allows onlyincremental decisions about whether or not a given firm should be per-mitted to use a given waterfront site. In other words, one permit appli-cation cannot be compared with others or with a universe of all poten-tial applications.

In defining "significant" water dependency, it would seem reasonableto require that a proposed industry demonstrate a dependency function

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Industrial Water Dependency and the BCDC 469

that is more than marginal—that is, the added costs incurred by use ofa nonwaterfront site would be more than a minor part of the industry'stotal capital and operating costs.18 But to define "significant" in quanti-tive terms, for instance as some minimum ratio of added costs of using anonwaterfront site to total costs would lead to too rigid of a criterion,one not allowing for exceptions. For instance, in a situation where anindustry's environmental impacts are minimal, a somewhat lesser degreeof dependency than that required for a heavily polluting industry, mightbe acceptable, based on the overall beneficial aspects of the project. Orwhen an existing large industry located on the water proposes to expand,the argument might be made that requiring a strong water-dependencyfunction would run counter to efficiency goals, considering the existinglarge capital investment in the site and in the public infrastructure serv-ing it.

Of course, land-use regulatory bodies are constantly required to inter-pret words like "significantly," or "reasonable," or "optimum," as forinstance when BCDC must determine what is "maximum feasible publicaccess" for each permit application. Case-by-case interpretation doesnot necessarily mean arbitrariness. The use of an economic dependencycriterion would provide the regulatory body with a discernible factualbase on which to interpret "significant dependency." It would bring someobjectivity into an inherently judgmental process.

Another possible concern associated with utilizing an economic defi-nition in the regulatory process involves the feasibility of obtaining thedata needed to determine the dependency of a given firm. The principalsource of information regarding the potential cost savings of a shorelinelocation would generally be the applicant firm,'and these data wouldgenerally be based on the firm's own locational analysis. Interviews witha number of spokesmen for Bay Area industrial interests indicate thatthe data requirements discussed earlier may well be obtained withoutundue burden, and without encroaching to any material extent on pro-prietary matters.19

Perhaps a greater problem involves the accuracy and objectivity ofthe data supplied by an applicant. Because these data may be complex,it would be essential to provide a thorough staff review of its adequacyand to give it critical exposure through the environmental impact reviewprocess as well as through public hearings. It may also be necessary tosupplement staff work on particularly large and complex industrial per-mit applications with specialized assistance from consultants.

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The preceding presupposes that the coastal management agency ap-proaches the water-dependency issue on a strictly case-by-case, permit-by-permit basis, as is the situation with BCDC. Another possibilitywould be to establish a priority system whereby industries would beclassified generally during the planning process according to the natureand degree of their economic water dependency. Suitable shoreline siteswould then be reserved for various water-dependent industrial groups.For example, shoreline areas with deep draft access might be reservedfor shipbuilding and basic steel. Industries that use large volumes ofcooling water, but that do not use water transportation, would be givenpipeline access to the shoreline, but the plant itself would be required tolocate somewhat inland. Firms using barge transportation would begiven priority in shallow-draft areas, but would be excluded from deep-water sites.

This type of system would be based on the application of an economictest to industrial classes, rather than to individual industrial projects.The key feature of this approach is the elimination of the requirementthat applicants individually demonstrate their dependency in a detailedeconomic fashion.

Such an approach to determining industrial water dependency woulduse some proxy for estimating the economic water dependency of vari-ous industrial classes, such as industry averages for tons of cargoshipped per year, or water use per year. The benefits of this approachwould be reduced informational costs and simplicity of administration.But it is not at all certain that industrial water-dependency functionscan be developed which would be valid for individual projects. Pos-sibly a more feasible system would approach the problem on a permitby permit basis, but would use a proxy for measuring the economic de-pendency of the specific proposed industrial plant, rather than of anindustrial class. This issue presents opportunities for further analysis andapplication.20

Planning for Shoreline Industrial SitesThe efficient use of lands designated for water-related industry depends,of course, on far more than simply ensuring that only water-dependentfirms be allowed to locate on water-related industrial priority sites. Thecoastal management agency, through a permit process, also needs toensure that the site is designed in a way that will make the most efficientuse of scarce shoreline frontage. The Bay Plan suggests that efficient

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Industrial Water Dependency and the BCDC 471

siting for water-related industrial development can be achieved using afew simple operational and design prescriptions:1. The shoreline itself should not be used for long-term storage. Any

necessary storage areas should be perpendicular to the shoreline.2. The longest dimension of a plant site should be at right angles to the

shoreline.3. Docks and wharves should be shared as much as possible.4. Access roads should be shared as much as possible.5. Access roads should, wherever possible, run at right angles to the

shoreline.Achievement of these guidelines requires detailed cooperative plan-

ning between BCDC and local jurisdictions, particularly in light of theCommission's limited shoreline permit authority. BCDC has enteredinto several joint planning efforts with cities around the Bay, and theresulting "Special Area Plans" have been adopted by both the localgovernments and by BCDC. It is anticipated that similar planning effortswill be undertaken with local governments with jurisdiction over vacantor underutilized water-related industrial sites, the aim being to secureagreement on how and what shoreline parcels should be reserved forwater-dependent industries, and how critical environmental resources,such as marshes, can be protected.

Other Factors in Industrial Location

This article has highlighted particular facets of the industrial water-dependency issue as perceived by BCDC, that of identifying industrialwater dependency in terms of the planning and regulatory process, andof assuring efficient use of waterfront industrial sites. The McAteer-Petris Act and the Bay Plan contain many other provisions that applyto the BCDC regulatory function over water-related industry on the Bay,including policies that limit fill to water-related uses and that requirepublic access to the shoreline, consistent with the proposed project. Inaddition, the California Environmental Quality Act of 1972 requiresthat environmental impacts of proposed projects be analyzed andmitigated.

There are also other regional regulatory agencies that exercise juris-diction over industrial development, such as the Air Pollution ControlDistrict and the Regional Water Quality Control Board. At present,regulatory agencies generally review industrial projects on a case-by-case basis, and in the perspective of their own policies. There is no

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472 Stanley R. Euston

institutional structure to allow a synoptic regional or state view of indus-trial location, no means to evaluate a broad range of benefits and costsof a specific proposal for a specific site.

The Association of Bay Area Governments (ABAG), the RegionalCouncil of Governments for the nine-county Bay Area, was at the timeof this writing engaged in a regional industrial siting project, in coopera-tion with the governor's Office of Planning and Research (OPR). Oneaspect of this study involves the reevaluation of the industrial siting per-mit process, and analysis of the ways in which it can be made moreefficient and predictable. Also, various alternatives are being investigatedfor evaluating economic, social, and environmental benefits/costs ofindustrial location at various sites in the Bay Area. How effective thisparticular effort will be, given ABAG's limited implementation powers,remains to be seen. But certainly there is a movement in the Bay Areafor some type of comprehensive approach to industrial siting.

ConclusionsWaterfront sites suitable for industrial location, particularly deep draftsites, are very scarce in the Bay Area, and these sites are now and shouldcontinue to be reserved exclusively for water-related industrial uses. Theuse of an economic approach for defining industrial water dependencyoffers a conceptual means for identifying the degree of dependency fora given firm at a given site. The data requirements of this approachdo not appear to be a major constraint to its use. A practical difficulty ofimplementing this approach on a case-by-case basis may be in determin-ing the degree of dependency necessary to approve a firm for location inan industrial priority use area. The dependency criterion needs to be ap-plied in practical situations in order to define the point at which waterdependency becomes significant. Development of waterfront sites shouldbe planned by both BCDC and local governments in order to assure theefficient use by industry of the shoreline proper.

Whereas industrial water dependency is of particular concern tocoastal zone management, there is also need for overall regional or statepolicies for industrial development. These policies should be concernedwith a synoptic view of environmental and socioeconomic benefits andcosts of various types of industries at various sites.

Notes1. The views expressed are those of the authors, and not necessarily those

of BCDC.

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Industrial Water Dependency and the BCDC 473

2. San Francisco Bay Plan, Bay Conservation and Development Com-mission, 1969.

3. BCDC's plans use the term "water related" industry, while the term"water dependent" is also often used in planning literature. In this ar-ticle, they are used interchangeably.

4. California Government Code, Section 66600 et seq.5. Ibid, Section 66602.6. The Bay Plan recommended Commission regulatory jurisdiction over

entire shoreline parcels. However, the legislation adopting the Plan andcreating a permanent agency limited the Commission's jurisdictiongenerally to a 100-ft shoreline band measured inland from the line ofhighest tidal action.

7. Other priority uses are seaports, airports, wildlife refuges, and water-front parks.

8. Dorothy Muncy, Waterfront Industry Around San Francisco Bay, SanFrancisco Bay Conservation and Development Commission (1968),pp. 62-85. Most of this area is classified as having deep draft access30-ft channel or greater).

9. Ibid, pp. 107-112.10. San Francisco Bay Plan, p. 17.11. Since 1969, the Commission has processed five major permits within

water-related industrial priority areas; these permits all involved petro-leum. Yet while there has been relatively little water-related industrialpermit activity in the Bay during the past few years, in the consultant'sview there is still a firm long term demand for waterfront industrialsites.

12. The Bay Plan definition specifically excludes industries that use waterfor processing or cooling, the rationale being that these water dependentfunctions are less critical to a firm's locational decisions than is watertransportation.

13. Gruen Gruen + Associates, Waterfront Industry Study: A Report tothe San Francisco Bay Conservation and Development Commission(1976).

14. Ibid., p. IV-4.15. Ibid, pp. IV 9-10. The Gruen report also proposes a set of similar

questions regarding dependency based upon the benefits derived fromuse of water for cooling or processing purposes.

16. In a perfect market it could be argued that land costs would reflectopportunity costs and that the market allocation of shoreline sites wouldbe in the best interest of society. However, a number of real-life factorscreate obvious exceptions to the model of a perfect market, includinglack of competition, less than perfect information, and the very limitedextent of the land market in deep draft waterfront sites. Arguments can

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also be made that private decisions in the market may not adequatelyreflect society's long-term view of resource allocation.

17. Which it is in the Bay Area, where only three or four such sites withsubstantial back area are currently available. Taking the State of Cali-fornia as a whole, only a few more sites are added.

18. Once again, land costs would not be considered in this procedure.19. Interviews with executive personnel of representative Bay Area indus-

trial firms were conducted in late August and early September 1977.20. The outline of this approach has been suggested by the Bay Area

Council, an organization representing business and industry throughoutthe Bay Area.

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