BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
2503 (J. Perez)
Hearing Date: 08/12/2010 Amended: 08/10/2010
Consultant: Brendan McCarthy Policy Vote: NR&W 9-0
AB 2503 (J. Perez), Page 2
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BILL SUMMARY: AB 2503 establishes a program to allow for the
partial removal of existing off-shore oil platforms. Under the
bill, any cost savings realized from partial removal would be
split between the state and the platform owner. The bill
specifies that any state proceeds would largely be provided to a
new endowment corporation and would be used for various
ocean-related purposes.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Fish and Game review $750 $1,700 $1,700 Special
*
State Lands Commission $450 $450 $1,900 General
**
review
Revenues from cost savings Unknown revenues, potentially
in the tens Various
or hundreds of millions in future
years
* Fish and Game Preservation Fund. Ultimately offset with fees.
** Ultimately offset with fees.
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STAFF COMMENTS: SUSPENSE FILE.
Under current state and federal law, as well as leases
authorized by the state and federal government, owners of
offshore oil platforms are required to fully remove platforms at
the end of their lease term. There are 27 oil platforms off the
California coast (4 are in state waters and 23 are in federal
waters). Federal law allows for partial removal of oil
platforms, provided that certain conditions are met, including
the enactment of a law allowing for partial removal in the
adjacent state.
AB 2503 establishes a program under which an offshore oil
platform owner is allowed to partially remove a platform,
AB 2503 (J. Perez), Page 3
leaving behind some of the underwater structure for marine
habitat.
Under the bill, a platform owner could (voluntarily) apply to
the Department of Fish and Game for permission to partially
decommission an oil platform. The applicant would be responsible
for reimbursing the state for costs incurred reviewing the
application and taking other actions under the bill. The Ocean
Protection Council would determine whether partial removal of a
platform would provide a net environmental benefit. The State
Lands Commission would be responsible for determining the cost
savings associated with partial removal of an oil platform, as
opposed to full removal.
Under the bill, the Department of Fish and Game is authorized to
approve partial removal of an oil platform if: 1) partial
removal conforms to all existing state and federal laws, 2)
partial removal would result in a net environmental benefit, 3)
the cost savings from partial removal have been determined, 4)
the platform owner has agreed to provide sufficient funds to
cover state regulatory costs, 5) the platform owner has agreed
to provide funding sufficient to manage the remaining structure,
6) the platform owner has indemnified the state from any
liability associated with the structure, and 7) the platform
owner has received all required permits.
In order for the Department to provide final approval for
partial removal, the applicant must provide a portion of the
cost savings to the state. Before 2017, the applicant must
provide the state 55 percent of the cost savings, from 2017 to
2023, the state share is 65 percent, and after 2023, the state
share is 80 percent.
The state share of the cost savings is to be apportioned as
follows: 85 percent shall be transferred to an endowment
corporation created under the bill; 3 percent shall be provided
to the county adjacent to the platform; 10 percent is to be
deposited in the General Fund; and 2 percent shall be deposited
in a special fund and used for coastal protection activities.
The bill creates the California Endowment for Marine
Preservation as a public benefit corporation. The Endowment is
governed by a board made up of the Secretary for Natural
Resources, the Secretary for Environmental Protection, one
member appointed by each of the Governor, the Senate Rules
Committee, and the Speaker of the Assembly. The Endowment would
AB 2503 (J. Perez), Page 4
directly receive 85 percent of the state's share of any cost
savings from a partial removal of an offshore oil platform. The
Endowment is directed to hold those funds in trust as an
endowment and generally to only use interest earnings from the
endowment to fund a variety of activities related to the
protection of the marine environment.
The bill requires the Endowment to report annually to the
Governor and the Legislature on its activities and makes the
Endowment subject to audit by the Bureau of State Audits.
The Department of Fish and Game and the State Lands Commission
will both need additional staff resources to review
applications, determine environmental benefits, and evaluate
cost savings. Staff estimates annual costs (once applications
have been submitted) of about $3.6 million. Most of those costs
will reimbursed by applicants.
In addition, the program may generate significant revenues to
the state and the Endowment created by the bill. The amount of
those revenues will depend on the number of applications the
state receives and their timing. According to a report prepared
by the California Ocean Science Trust, the total cost to remove
all 27 offshore oil platforms will be just over $1 billion. The
cost to partially remove all 27 platforms is estimated to be
about $500 million. Under the bill, the state could receive
between 55 percent and 85 percent of those potential cost
savings.