As Predicted, Jerry Brown to Propose Using Cap-and-Trade Funds for HSR

Jan 6th, 2014 | Posted by

Yesterday I predicted that Governor Jerry Brown would propose using some of the cap-and-trade funds for high speed rail in this Friday’s budget announcement. Sure enough, the Sacramento Bee reported late yesterday afternoon that’s exactly what he plans to do:

Gov. Jerry Brown plans to propose spending millions of dollars in fees paid by carbon producers to aid the state’s controversial high-speed rail project, sources said.

The proposal – and the prospect of additional funding from the state’s cap-and-trade program in future years – could provide a significant lift to a $68 billion rail project beleaguered by uncertainty about long-term financing.

Brown plans to propose allocating several hundred million dollars this year….

Brown is expected to include the proposal in the annual budget plan he will release Friday. Brown has made high-speed rail a priority of his administration, and he suggested two years ago that cap-and-trade revenue, which is designed to reduce greenhouse gas emissions, would be a future source of funding for the project.

The LA Times has also reported on the story and notes that the Governor’s office won’t release details, including the specific amount budgeted, until Friday. UPDATE: David Siders of the Sacramento Bee reports that, according to “sources,” the amount will be $250 million.

Last month I took a close look at the concept of using cap-and-trade funds for HSR. If $500 million in cap-and-trade revenues were given to HSR annually, that would generate $3.5 billion by 2020 and $8.5 billion by 2030. That money would go a long way in getting the HSR project from the Central Valley to one of the coastal metropolitan areas, likely Los Angeles, enabling the start of revenue service. And that in turn is crucial for getting private investors to be willing to put up funds to help complete the system.

One could also devote an annual percentage of cap-and-trade revenues to HSR, rather than a flat sum. The entire point of cap-and-trade is that the licenses cost more each year, with the rising cost acting as an incentive to emit less carbon. If, say, 30% of cap-and-trade revenues were allocated to HSR each year, one could reach $13 billion (the number that SPUR suggested in their 2012 report) by 2030, perhaps more depending on how well future auctions go.

Jerry Brown is doing the right thing by proposing to use cap-and-trade funds for this purpose. The California Air Resources Board included HSR as part of their scoping plan for achieving the mandatory AB 32 carbon emission reductions. Estimates for how much carbon emissions HSR will reduce have gone as high as 10 million metric tons once the entire system is operating. HSR helps get people out of cars and planes and onto electric trains, which the California High Speed Rail Authority has pledged to power with 100% renewable energy.

The anti-HSR folks at the Legislative Analyst’s Office claimed in 2012 that HSR might not help achieve the AB 32 goals, a conclusion that was widely debunked at the time but still crops up occasionally in reporting. But sadly we have come to know that when it comes to HSR, the LAO is not committed to getting all of its facts in order.

Governor Brown should be applauded for this, and I look forward to his specific proposals when they are released on Friday.

  1. Paul Druce
    Jan 6th, 2014 at 08:27

    Your link is broken on the 12 billion tons a year (yay website redesigns; only the GAO appears to be immune to the intense desire to break links); however, the archived page says 12 billion POUNDS a year, 5.4 million metric tons. Very important distinction there.

    Also, I don’t think that a post by yourself really qualifies as “widely debunked.”

    And I’d rather see cap and trade funds spent on something which gets rid of CO2 emissions now and does so in a more cost effective fashion, not 40 years down the line when it barely matters anymore. These predictions are also based on no increase in efficiency by vehicles, which stands in stark contrast with other state and Federal goals.

    Robert Cruickshank Reply:

    Thanks, I corrected the link and the stat. I linked to my post because it contains several other links, including to the WaPo’s Wonkblog, that were critical of the LAO report.

    If Brown were proposing to spend every dollar of cap-and-trade revenue on HSR you’d have a point. But he isn’t. His proposal would probably come to 30% of the annual revenues, maybe less. CARB already declared HSR to be part of its scoping plan to achieve the AB 32 goals.

    Paul Druce Reply:

    That’s still far more than HSR deserves. It is simply not a very cost effective means of reducing CO2 emissions. We want to eliminate as many emissions as possible as soon as possible. Remember too that every bit of success in increasing the percentage of electric cars or increased MPG by oil burners means a corresponding decrease in the potential emissions saved by HSR.

    Tony D. Reply:

    That’s why the bookends should have been given priority over the Central Valley line; take hundreds of smog belching cars off our freeways by upgrading/modernizing Metrolink, ACE and Caltrain. Then, with revenues pouring in from the bookends, the final link through the Central Valley could be constructed. Anyhow, the train has probably left the station with this idea.

    Looking forward to see what Brown has in store Friday…

    Joe Reply:

    We are spending at the bookends. We are modernizing Caltrain – it’s called electrification.

    The Central Valley has horrible air quality and must of it, over 55%, is auto emissions. It’s part of California.

    Finally prop1a prioritizes least costly segments. The CV start is exactly that, the least costly segment.

    synonymouse Reply:

    AmBART ridership in the San Joaquin Valley will be insignificant but the subsidy requirements will be quite substantial as with all commute ops. Nil effect on automobiles and freeways.

    The DogLeg is just a patronage machine porkfest, paying off friends of the Regime.

    jimsf Reply:

    but co2 is only one reason to build hsr. There are many other benefits as well.

    Paul Druce Reply:

    CO2 is, however, the purpose behind AB32 funds.

    Joe Reply:

    First CO2 is the radiative standard – carbon dioxide equivalent. It is not the sole target for the law.
    Second, the law does not mandate or stipulate that spending is prioritized by the criteria you gave.

    Acquiring land and Building infrastructure that will last well over 100 years like a new ROW within CA that also accommodates population and economic growth makes sense.

    Paul Druce Reply:

    First CO2 is the radiative standard – carbon dioxide equivalent. It is not the sole target for the law.

    Oh dear me, I left off the letter e for equivalence, how terribly dreadful.

    Second, the law does not mandate or stipulate that spending is prioritized by the criteria you gave.

    Kinda does actually; quoth the Air Resources Board: ARB shall prepare and approve a scoping plan for achieving the maximum technologically feasible and cost-effective reductions in greenhouse gas emissions from sources or categories of sources of greenhouse gases by 2020 (Health and Safety Code (HSC) §38561).

    joe Reply:

    Oh dear me. JimSF wrote CO2 and you responded with CO2. You made a mistake conflating CO2 for greenhouse gas. It happens.

    That AB32 text certainly doesn’t emphasise fast.

    Fast often favours short term fixes. Fixes need to be sustained. Say you fund an electric car subsidy – fast impact until the cars are retired and then the investment is gone. That still is state subsidizing driving and encouraging car centric development. Car manufacturing has a carbon footprint.

    Paul Druce Reply:

    It does, in fact, emphasize fast, what with the “by 2020” bit.

    joe Reply:

    Fast – That’s your interpretation.

    The inital 2020 Scoping Plan includes High Speed Rail. It’s listed as a accomplishment in the 2013 draft.

    joe Reply:

    ” The HSR, in conjunction with targeted investments in intercity and commuter rail and urban transit systems, will change the way people travel throughout California. “

    joe Reply:

    and to assure that the AB32 isn’t focused on fast reductions, the Scoping Plan has a significant section on post 2020.

    V. Continuing Progress Beyond 2020 pages 74-104 or 30 of 111 pages dedicated to continued progress which requires substantial changes to how we travel.

    “California is well on its way to meeting its 2020 emission goals, but it will need to continue and expand current programs to accelerate progress and achieve another 80 percent emission reduction by 2050.”

    Paul Druce Reply:

    Also, you screwed it up again. Your new link does not claim “10 billion metric tons per year,” it claims the aforementioned 12 billion pounds and “Between 2022 and 2040, the cumulative reduction of CO2 is estimated to be between 5 and 10 million metric tons.”

    Robert Cruickshank Reply:


    Paul Druce Reply:

    Still says ten billion metric tons. B needs to be an M.

    Richard Mlynarik Reply:

    Category error!

    Robert has said again and again that he simply doesn’t care about costs or cost effectiveness.

    Because: CHOO CHOO!

    Stop mothering him with binute batters.

    EJ Reply:

    Not entirely accurate. When it comes to building tunnels through suburban areas like Palo Alto, costs suddenly become extremely important.

    Robert Cruickshank Reply:

    Really truly, finally fixed. I think…

  2. Ian
    Jan 6th, 2014 at 10:22

    What would the CO2 reduction per $B for CAHSR vs continued inner city transit improvements?

    Robert Cruickshank Reply:

    Huh? Those are totally different things. Inner city transit doesn’t reduce the carbon emissions of people going between metropolitan areas and vice versa.

    blankslate Reply:

    The refugees from Kiribati aren’t going to care whether the CO2 that put their country under water was emitted by people traveling between cities or within cities. It’s a valid question to ask which strategy reduces more CO2 per dollar spent, period.

    adirondacker12800 Reply:

    The people traveling intercity in the first world are going to travel. People in Los Angeles who want to be in Fresno are going to go to Fresno and vice versa. Or people in New York who want to go to Boston. Or St Louis and Chicago. Which alternative they use and the emissions of those alternatives is a question that needs to be asked and answered.

  3. Donk
    Jan 6th, 2014 at 13:11

    This is great. However, a few hundred million/year is a drop in the bucket. Much more significant savings would come from a review of the fundamental assumptions on the project, such as the need for the Palmdale section (a potential $5B savings), the tunnel under Milbrae BART (a potential $1.2B savings), and the extravagent approache and layout in San Jose Integalactic (a potential $2-3B in savings). CHSRA can probably get $10B closer without a penny of additional funding.

    Eric Reply:


    “If $500 million in cap-and-trade revenues were given to HSR annually, that would generate $3.5 billion by 2020 and $8.5 billion by 2020 [should say 2030].”

    I would bet $8.5B is enough to build an IOS from LA-Tejon-Fresno-Tracy which leaves you just a half hour drive from the East Bay.

    Tony D. Reply:

    Tracy? Did I miss the news or something?

    Eric Reply:

    No, it’s just a logical end – the closest you can get to the bay area without a second mountain crossing.

    EJ Reply:

    So you’re saying you can build over half the line for $8.5 Billion? Why is the whole thing going to cost $68 Billion then?

    Eric Reply:

    Yep. Lots of waste in there.

    Robert Cruickshank Reply:

    This is almost certainly just the start.

  4. Stephen Smith
    Jan 6th, 2014 at 14:34

    Sierra Club California and the Coalition for Clean Air are not pleased. (Their first priority? Electric cars, of course.)

    Robert Cruickshank Reply:

    Looks like I’ve got the topic for tomorrow’s post…

    synonymouse Reply:

    The Sierra Club should hang its collective head in shame for getting snookered into endorsing Palmdale sprawl.

    Paul Druce Reply:

    Much as I may like electric cars, that’s a bit of a shame, there are better ways of doing that. Oh well. Climate change mitigation need only benefit the 1% I suppose.

    Mike Reply:

    Ms Phillips (Sierra Club) really said it all when she said that “it FEELS irresponsible.” It’s all about how it feels. Because it doesn’t matter HOW these dollars are spent, they aren’t going change the effects of climate change in California, either in the near term or the long term. It’s GLOBAL climate change, not California climate change, and the main benefit of AB32 is symbolic, to shame the federal government into action (to set strong national policy, and to reach strong global agreements). So what has more of a symbolic value, HSR, or electric car subsidies, or weatherization etc? I dunno, but how it FEELS to the Sierra Club is kind of irrelevant.

    J. Wong Reply:


    joe Reply:

    I’ve seen climate research under attack using the very arguments made by the Sierra club – urgency.

    Spending climate research money on electric cars – CFC light bulbs or whatever product today would do more to reduce the emission in the short term than a scientific study. It’s an urgent problem.

    “The problem with taking that [cap-and-trade] money and applying it to high-speed rail is that we don’t anticipate that we’re going to get those benefits — reductions in greenhouse gas emissions — in the short-term. Given how urgent the problem is and has become, and how much we’re seeing the effects of climate change in this state, especially in water availability, it feels irresponsible to not apply that money to those programs that will get you greenhouse gas emissions reductions now.”

    Knowledge science produces does not expire. It is important and urgent just as changing infrastructure away from cars (electric or otherwise) to mass transit which includes a comprehensive rail system.

  5. Tony D.
    Jan 6th, 2014 at 17:27

    $250 million? That’s it?! So much for this project being saved… (Oh well)

    VBobier Reply:

    That’s only for 2014.

    joe Reply:

    …and it’s doubled to $500M with Prop 1a funds.

    VBobier Reply:

    And Cap and Trade is a source of funding which Judge Kenny wants to see…

    John Nachtigall Reply:

    Yeah!! Only 29.5 billion to go.

    joe Reply:

    While I think they’ll do something else, this 500M is a solution.

    The funding source is AB32 which has a Scope Plan that addresses cap and trade to help meet goals for 2020, and into 2030, 2050 and post 2050. It’s multi-decade.

    Technically, an assurance of 500M a year from AB32 would make the IOS fully compliant with the requirement – identify a funding source. Just add schedule – push back the completion date on paper – there’s all the money needed.

    Now compliant, they can go ahead spending the 2014-2017 ARRA/prop1a funding.

  6. aw
    Jan 6th, 2014 at 18:40

    Robert, there seems to be a problem with this phrase, that would generate $3.5 billion by 2020 and $8.5 billion by 2020. Should the second year be 2030?

    Robert Cruickshank Reply:

    Yes. Sleep deprivation…

    Tony D. Reply:

    I remember those days we’ll ;)

  7. jonathan
    Jan 6th, 2014 at 18:53

    My immediate reaction is:
    – Some hundreds of millions of dollars per year, is some billions per decade.
    – Or tens of billions per century.

    Totally underwhelming.

    joe Reply:

    Well it’s for 2014 right? And we have too much money to spend as it is. or so critics have written….

    The bullet train track through the Central Valley would cost $6 billion and have to be completed by September 2017, or else potentially lose some of its federal funding. It would mean spending as much as $3.5 million every calendar day, holidays and weekends included — the fastest rate of transportation construction known in U.S. history, according to industry and academic experts.

    synonymouse Reply:

    And not everybody is happy with Jerry’s version of green:,0,5134884.story#axzz2pft1jHIx

    For Jerry green is the color of developers’ money.

  8. J. Wong
    Jan 6th, 2014 at 21:20

    New York Times article

    joe Reply:

    Joe Nation, a professor of public policy at Stanford University and a critic of the plan, said Mr. Brown would have to grapple with this decline in support, which he argued reflected voters’ growing doubts about the basic competence of government.

    “Obamacare has leached over into this,” Mr. Nation said. “You have people saying, ‘The federal government that can’t build a website — how can we expect them to build a multibillion-dollar train?’ ”

    Yes and those people saying we can’t build HSR are called tea partiers and Foxnews.

    adirondacker12800 Reply:

    but the same people are just happy as clams over the trillion dollars we spent in the Middle East. Odd isn’t it?

    synonymouse Reply:

    The Tea Party is hiding under every bush.

    joe Reply:

    Union Bosses ride BART to Palmdale.

    synonymouse Reply:

    Amalgamated and TWU are relocating their headquarters to Palmdale.

    Judge Moonbox Reply:

    When I read articles on the CAHSR, I’ve come to watch how they treat the demographics and the current Amtrak service level. Would it have killed Adam Nagourney to say that metropolitan Fresno has over a million people? He didn’t even say that the segment under discussion (Borden to Corcoran) includes Fresno, and the Hanford stop serves many people in Visalia.

  9. Ted Judah
    Jan 6th, 2014 at 21:30

    This sounds like The Administration wants to make sure they can hold on to the federal funds id somehow Prop 1A funds are impounded. Alternatively, if they aren’t it allows them to get a bit closer to finishing the ICS.

    synonymouse Reply:

    About time for adult supervision. The Feds should have recognized the project was derailed when the hicks, hacks, amateurs, morons fired Van Ark, the only professional in the room.

    Pull the ARRA funds and send Jerry to assisted living.

  10. John Nachtigall
    Jan 6th, 2014 at 22:22

    Did I miss the “widely debunked” part of the post. Basically everything the LAO said was true. It won’t help reach goals prior to 2020 and there are much more cost efficient ways of reducing CO 2. What did they say that was not true?

    joe Reply:

    That the AB32 Scope Plan spends 30 pages of 111 on post 2020. Emissions reductions must continue into 2030 and 2050 which will require massive infrastructural changes across CA. That’s why HSR is in the Plan.

    John Nachtigall Reply:

    Which may all be true. But “debunked” means that it was proven what they said was false. What they said was not false. it wont help reach the goal by 2020 and there are more cost efficient ways to lower CO2.

    Nothing was debunked

    joe Reply:

    HSR will help to reach the 2020 goal. Electrification of Caltrain which will complete prior to 2020 is a notable accomplishment.

    Electrification will allow economic growth to continue where we have high paying jobs and qiuality of life. That segment will replace many auto trips with electric rail trips. Most peninsula cities depend on Caltrain service to comply with EIR and keep cars off roads – its probably one the better documented GHG and traffic reduction benefits out there.

    There are other local rail improvements which are part of the HSR portfolio.

    California has a multi-decade commitment to reduce emissions. Selecting a subset of the HSR project and criticizing the GHG of that subset to 2020 isn’t serious. When it comes to HSR, the LAO is rarely serious.

  11. synonymouse
    Jan 6th, 2014 at 23:21

    Yeah, Google is responsible for Muni being run by cretins like Rose Pak.

    jackie Reply:

    That is hilarious, especially since she bemoans David Weissman losing his illegal SF pied-a-terre when he’s been living in Portland since 2004 and already owns a home there.

    In 2005, Weismman said:

    “I MOVED TO Portland, Ore. from San Francisco last summer, and right away I got a bunch of press: “Cockettes filmmaker moves to Portland.” It seemed rather ridiculous to me, a medium fish in a small pond. But Portland loves its filmmakers, and Gus Van Sant is its favorite son and biggest celebrity.”

  12. John Burrows
    Jan 7th, 2014 at 00:37

    So would it work out something like this—

    $4.7 billion in state and $3.2 billion in Federal funds appropriated so far—Total $7.9 billion

    $250 million per year from cap-and-trade matched with the remaining $4.3 billion from Prop 1-A.
    With a 50-50 match we would have another $8.5 billion by 2031 for a total of $16.4 billion.

    $16.4 billion by 2031 is still just a down payment but a big step in the right direction.

    And this may help to get the project going in 3 different ways.

    1.–With additional state funding Judge Kenny will be more likely to let the project go forward.

    2.–Increase in cap-and-trade revenue beyond the initial $250 million per year may add billions of dollars more to the pot.

    3.–With California putting more money down, those elusive private investors may become less elusive.

    John Burrows Reply:

    Was trying to reply to Joe but something went wrong.

    joe Reply:

    Authority has three tools: $ or resources, Scope of the useable segment, and schedule or time. They can get more $, change the scope of the useable segment or extend work over time.

    ARRA restricts time and the scope of the useable segment (called IOS) is to ambitious for the funding.

    That’s the current status – ARRA time limits are a problem.

    A steady funding source of even 250M / Yr (500 M with matching) solves both Time and Money. The Authority can spend at the high rate to use ARRA and Prop1a funds. Post 2017 they can slow and complete the Useable Segment at a 500M per year construction rate.

    I think they’ll revise the Useable Segment or find more funds, decrease the scope of work for the useable segment. Once they have a dedicated a multi-year source, they can simply push back the competition time and meet the Law. Highways took decades.

    John Nachtigall Reply:

    A few issues.

    1. The IOS is supposed to be built by 2021 according to the athorities 2012 buisness plan, some of your 16.4 billion wont be available until 2031, 10 years later

    2. you are still 14 billion short, and the judge said you needed to identify all the funds.

    But closer than before, assuming cap and trade actually gets spent on HSR which is an “if” because the enviromentalists want to spend it on other stuff

    joe Reply:

    Mental exercise. Freeze the IOS. It will change but assume it cannot.

    If CA establishes a 250M a year founding source with cap and trade, then they’ll have all the money needed to finish the IOS.

    They can build at a rate to spend the ARRA funds in time and slow. Now that IOS in the 2014 compliant HSR plan show it will take 10-15 years but the law doesn’t stipulate a time limit.

    When they get more funds from other sources, CA can modify the Plan and spend those funds accelerating the construction of the IOS.

    Environmentalists will have many alternative ideas of how to spend the cap and trade money. Some possibly will try to teach a vegan lifestyle in our schools. Vegan-ism will reduce our climate and water use footprint immensely over beef/meat eating diets and even vegetarian diets that use animal products.

    The head of the legislature and executive branches want to send some to HSR. They’ll beat the vegans.

    VBobier Reply:

    The 250M is only for 2014 and a minimum for later on, in 2015 to 2020 it could be much bigger.

    John Nachtigall Reply:

    ok, metal exercise then. I froze the IOS. It is supposed to cost 30 billion and be completed by 2021.

    assumption 1: they get to keep all the 7.9 billion (3.2 fed and 4.7 state) they want to spend now. Lets call it 8 billion to make the math easy.
    assumption 2: they get 250M a year from now until forever, that 250M will be matched with the remaining bond funds until they run out. so effectivly 500M for the first 17 years 9remaining 4.3 billion in bond funds)

    so how long until you get to 30 billion. start at 8 billion. add 1/2 billion per year for first 17 years. add 1/4 billion per year for remaining years (54). That is 71 years to get to the IOS of 2085. i would bet you they wont make it but I will be dead at that point so I cant collect.

    because i feel sorry for you, I am going to assume they get 1 billion a year which is 2-4X the actual plan at the moment. That is 22 years or 2036 for the IOS.

    Of course by then it wont really cost 30 billion any more. inflation alone will push it up but really its more than that because the 30 billion was estimated during a recession and as the economy recovers prices increase. Also as you spread time out costs go up on capital projects. So really you are going to need more like 40-50 billion. That puts it out at beyond 2050 for the IOS.

    That does not even take into account overruns which are guarenteed on large public works projects.

    Conclusion: The project would meet the letter of the law with respect to finances (we will talk about the other aspects of the law at a later date) but the IOS alone would take 2 generations to build. Another 2-3 generations for the full system. looking at opening around 2100?

    Now I know what you are going to say next. The Tea party will all be dead by then so fed money will come pouring in. First, the GOP is over a hundred years old, it ebbs and flows but it is not disappearing. And second, that knife cuts both ways. The CA support would need to last for 5+ decades. And third, the EU cap and trade system collasped in less than a decade, so those funds lasting for 50+ years would be an event in itself. And fourth, do you really expect technology to stand still for the 70-80 years it takes to build this? no way it is still relevent.

    better to let it die a clean death now than put it on eternal life support

    John Burrows Reply:

    Speaking of guaranteed cost overruns on large public works projects:

    For the first construction segment the CAHSRA estimate was $1.2 billion. The low bid by Tutor Perini was $985 million, and even the second bid of $1.09 billion was over $100 million under the estimate. As I understand it, there will be additional bids on two more segments plus a fourth bid to lay the track. A lot will depend on how these bids come in but if they too are under budget, and if Tutor Perini does complete its section under budget—

    We see how a botched roll out has messed up Obamacare (at least temporarily) and has sunk Obama’s approval rating. But now imagine a major public works project that completes its first section under budget,and has signed contracts for the next two sections that are also under budget. The effect this would have on the public’s view HSR would not be negative.

    John Burrows Reply:

    “public’s view of HSR”

    John Nachtigall Reply:

    signed contracts under budget does not equal under budget.

    The contractor is famous for adding to the contract after they win the bid.

    So if they come in under budget then you deserve to crow. But when they inevitably come in over budget, expect to eat crow.

    synonymouse Reply:

    What’s developing with the Miracle 5-Mile and the $500mil change order?

    Travis D Reply:

    They are only famous for this in the fever dreams of people that hate HSR.

    In the real world they finish their contracts under budget more often than not.

    John Nachtigall Reply:

    The truth hurts, but is easy to find

    synonymouse Reply:

    I love this: Moonbeam, Richards, PB-Bechtel, Tutor vs. the Vegans. The latter into veggies or are they aliens invading from the constellation Vega?

    Or send PB-Tutor down to Brasil to the rescue:

    California, like Brasil, the country of the future and always will be.

  13. JJJJ
    Jan 7th, 2014 at 01:19

    Air quality in the central valley has been extremely unhealthy for over a month now.

    Its 1am and the index is at 164 right now at 1am.

    Anything over 150 is “dont go outside”

    “Unhealthy” AQI is 151 – 200. Everyone may begin to experience some adverse health effects, and members of the sensitive groups may experience more serious effects..

    50 is the limit for “good”

    Go to

    Look at the top 5 worst cities in the country right now for air quality forcast:

    Bakersfield, CA 158
    Fresno, CA 153
    Visalia, CA 152
    Hanford, CA 151
    San Lorenzo Valley, CA

    Yeah I think spending money in the valley makes fucking sense.

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