BILL ANALYSIS
AB 2503
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2503 (John A. Perez)
As Amended August 20, 2010
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |73-0 |(June 2, 2010) |SENATE: |31-1 |(August 25, |
| | | | | |2010) |
-----------------------------------------------------------------
Original Committee Reference: W., P. & W.
SUMMARY : Enacts the California Marine Resources Legacy Act,
authorizing partial removal of a decommissioned offshore oil
platform as an alternative to full removal if the Ocean
Protection Council (OPC) determines there would be a net benefit
to the marine environment and other requirements are met, and
creates the California Endowment for Marine Preservation
(Endowment).
The Senate amendments :
1) Reorganize various sections into a new chapter and
rename the Act the California Marine Resources Legacy Act
instead of the California Marine Life Legacy Act.
2) Add new legislative findings and declarations including
references to a California Ocean Science Trust June 2010
study on oil rig decommissioning which found that partial
removal can result in a net benefit to the marine
environment and substantial cost savings as compared to
full removal.
3) Add new definitions.
4) Clarify the Department of Fish and Game's (DFG)
authority to take title to decommissioned offshore oil
structures in federal waters.
5) Prohibit an application for partial removal from being
finally approved until applicant has complied with all
AB 2503
Page 2
requirements, including payment of all state costs to
review and approve the proposed project and has transmitted
the portion of the cost savings required.
6) Clarify that a proposed project for partial removal of
an offshore oil structure is a project for purposes of the
California Environmental Quality Act (CEQA) and provide
that the State Natural Resources Agency shall serve as the
lead agency for the environmental review.
7) Authorize an owner or operator or other party
responsible for decommissioning of an offshore oil
structure to apply to DFG for approval to partially remove
the structure. Require DFG to design an application
process to facilitate review. Require DFG upon receipt of
an application to transmit a copy to the OPC, State Lands
Commission (SLC), and the Endowment.
8) Specify the minimum elements that must be included in an
application. Require the applicant to also demonstrate
that it will provide sufficient funds to cover the costs of
all required activities, including the environmental
review, determination of net benefit and cost savings,
preparation and implementation of a management plan and
ongoing maintenance of the structure, development of an
advisory spending plan, and other activities including
costs of application review.
9) Require that the first person to file an application to
partially remove an offshore oil structure shall pay, in
addition to all other required costs, the startup costs
incurred by DFG or the SLC to implement this bill,
including the costs to develop and adopt regulations.
Requires DFG to reimburse payment of these startup costs
from the cost savings transmitted to DFG upon conditional
approval.
10)Require the OPC to determine whether partial removal will
provide a net benefit to the marine environment as compared
AB 2503
Page 3
to full removal. Require the OPC, prior to its initial
determination of net benefit, to establish criteria for
evaluating the net benefit, which criteria shall include
but not be limited to the depth of the structure relative
to its value as habitat and its location, including
proximity to other reefs. Require OPC to consult with DFG,
SLC, the Coastal Commission and the California Ocean
Science Trust.
11)Require the OPC, in determining whether there would be a
net benefit to the marine environment to take into account,
at a minimum, specified factors. Delete air quality and
other offshore and onshore environmental impacts or
benefits from the list of factors that must be considered,
and add other marine environmental impacts and benefits, in
addition to identified management requirements and
restrictions, including restrictions on fishing or other
activities at the site.
12)Provide that the determination on net benefit submitted by
the OPC to DFG shall be a final determination and may not
be revised except by the OPC.
13)Strike the requirement for DFG to develop criteria for
biological evaluation.
14)Require the SLC to determine or cause to be determined the
cost savings that will result from partial removal.
Require the applicant to provide necessary documentation to
the SLC to calculate the cost savings, and provide that
failure to do so in a timely manner may result in rejection
of the application. Provide that the SLC's determination
of cost savings shall be a final determination and may not
be revised except by the SLC.
15)Require DFG, prior to granting conditional approval, to:
a) Prepare a management plan that will ensure the net
AB 2503
Page 4
benefits to the marine environment are maintained or
enhanced. Management measures may, consistent with state
and federal law, include a buffer zone in which fishing or
removal of marine life is restricted or prohibited, and,
b) Hold a public hearing in the county nearest to the oil
structure.
16)Require the owner or operator of an oil structure, upon
receipt of conditional approval for partial removal, to
transmit a portion of the total cost savings as follows:
a) 55% if the transaction occurs before January 1, 2017;
b) 65% if the transaction occurs between January 1, 2017
and January 1, 2023; and,
c) 80% if the transaction occurs on or after January 1,
2023.
17)Require the amount of cost savings transmitted to be
apportioned as follows:
a) 85% to the Endowment;
b) 10% to the state General Fund;
c) 2% to the Fish and Game Preservation Fund (FGPF);
d) 2% to the Coastal Act Service Fund; and,
e) 1% to the county immediately adjacent to the facility.
18)Require DFG, upon determining that the full amount of cost
savings has been transmitted as required, to grant final
approval of the application for partial removal of the oil
structure.
19)Require the State Coastal Conservancy (Conservancy), upon
DFG's final approval of the first application for partial
removal of an offshore oil structure, to create an advisory
spending plan for the cost savings deposited in the
Endowment in order to provide guidance to the Board of
Directors of the Endowment on spending of those funds.
AB 2503
Page 5
Require the Conservancy to update the plan every five years
and when each additional application for partial removal is
approved. Require the Conservancy to submit a copy of the
spending plan and updates to the Legislature and the
Endowment Board of Directors.
20)Add legislative findings regarding California's marine
resources, the importance of managing these resources for
environmental sustainability, funding constraints on the
ability of the state to manage and conserve marine
resources, and the state interests to be served by
establishing an endowment.
21)Require the Board of the Directors of the Endowment to
include the following members: the Secretary of Natural
Resources; the Secretary of Environmental Protection; one
public member appointed by the Governor; one member
appointed by the Assembly Speaker who is an expert in
marine fisheries from the University of California,
California State University or other accredited university;
and one member appointed by the Senate Committee on Rules
who is from a nonprofit public interest organization with
emphasis on marine conservation or sustainable consumptive
recreational activities. Board member terms shall be for 6
years, except the first member appointed by the Governor
shall be appointed for a 3 year term.
22)Modify the types of projects and programs that can be
funded from the Endowment to include programs with an
emphasis on open coastal marine resources that will
improve, encourage and support sustainable marine
activities. Authorize the Endowment Board to award grants
to public agencies and nonprofit organizations for
specified activities, including: applied research,
monitoring and data collection; projects in open coastal
waters to enhance habitat for marine life, including but
not limited to identification, monitoring and protection of
important ecological areas; and programs to aid in
establishing sustainable fishing levels, including but not
limited to, identification, monitoring and protection of
ecological areas to reduce or prevent habitat damage in
AB 2503
Page 6
open coastal waters.
23)State that Endowment funds are not intended and shall not
be used to supplant funding provided through the annual
budget process to support existing obligations and
activities related to coastal and marine resources.
24)Strike references to the Accelerated Existing Platform
Decommissioning Program.
25)Provide that 10% of Endowment funds received per year
shall be allocated by the Endowment Board as grants for
projects within 24 months of receipt of the funds, and
require the majority of these funds to be granted to state
agencies engaged in coastal and ocean protection.
26)Make various technical changes.
EXISTING LAW :
1)Establishes the California Artificial Reef Program to research
the construction and placement of artificial reefs in
California waters to enhance marine fish species.
2)Requires, generally, pursuant to existing state and federal
offshore oil leases, removal of decommissioned oil platforms
after the lease ends, though federal regulations and state and
federal lease provisions allow the federal government to
consider and approve decommissioning methods other than
complete removal.
AS PASSED BY THE ASSEMBLY , this bill:
1) Enacted the California Marine Life Legacy Act
authorizing conversion of decommissioned offshore oil
platforms or production facilities into artificial reefs if
specified conditions were met, including a finding by DFG
AB 2503
Page 7
that conversion to an artificial reef would provide a net
benefit to the environment as compared to removal.
2) Required DFG to determine criteria for biological
evaluation of the facility for use as an artificial reef.
Upon conditional approval of a conversion, the owner or
operator would be required to submit 50% of the cost
savings, as determined by DFG, that the owner or operator
would receive from conversion, with 90% of that amount
going to the Endowment and 10% to the county immediately
adjacent to the facility.
3) Established an Accelerated Existing Platform
Decommissioning Program under which the 50% cost savings
would be apportioned as follows: 85% to the Endowment; 5%
to the county immediately adjacent to the oil facility; and
10% to the General Fund. The Endowment created by the bill
would have been governed by a board of directors consisting
of nine members appointed by the Governor.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1) Increased costs to DFG for review estimated at $750,000
in 2010-11, $1.7 million in 2011-12, and $1.7 million in
2012-13 (FGPF, ultimately offset by fees).
2) Increased costs to SLC for review estimated at $450,000
in 2010-11, $450,000 in 2011-12, and $1.9 million in
2012-13 (General Fund, ultimately offset by fees).
3) Unknown increased revenues from cost savings potentially
in the tens of hundreds of millions of dollars in future
years.
COMMENTS : The purpose of this bill is to provide a process by
AB 2503
Page 8
which an oil company may apply to the state to leave a
decommissioned offshore oil structure partially in place, with
the top removed, and share the cost savings the company would
incur from not having to fully remove the structure with the
state and a nonprofit endowment for marine preservation that
would be created. According to the author and sponsors, this
bill is necessary to create the legal framework for this option
and to determine how the cost savings generated will be spent.
Currently, there are 27 offshore oil and gas platforms located
1.2 to 10.5 miles off the southern California coast, at depths
ranging from 35 to 1,198 feet. Four of the platforms are in
state waters and 23 in federal waters. Several of these rigs
are expected to be decommissioned in the next decade. In the
Gulf of Mexico, 85% of decommissioned oil platforms have been
partially removed or toppled, providing aquatic habitat. Most
of these are in much shallower water than the rigs in
California. In California, six platforms have been
decommissioned, all by removal. Oil companies stand to gain
substantial cost savings (by some estimates in the tens to
hundreds of millions of dollars per platform) if they are
allowed to leave some of the platform in place.
The most significant Senate amendments to this bill include the
following: 1) make the OPC rather than DFG responsible for
determining whether there would be a net benefit to the marine
environment from partial removal as compared to full removal,
and narrow the scope of the net benefit determination to focus
on the net benefit to the marine environment rather than the net
benefit to the environment as a whole; 2) make the SLC rather
than DFG responsible for calculating the cost savings; 3) make
the Natural Resources Agency the lead agency for purposes of
CEQA; 4) eliminate the accelerated program, thereby simplifying
the process and establishing one formula for allocation of the
cost savings; 5) increase the amount of the cost savings that
must be shared with the state and the Endowment, and provide
that the amount of cost savings required to be shared increases
the longer the time period that passes before the transaction
occurs, thereby creating an economic incentive for the oil rig
to be decommissioned sooner; and 6) change the makeup of the
AB 2503
Page 9
board of directors of the Endowment. The amendments also modify
the types of projects and programs that can be funded from the
Endowment, require the Conservancy to develop an advisory
spending plan for the Endowment funds, and update the
legislative findings to reflect a California Ocean Science Trust
study on oil rig decommissioning options that was completed
subsequent to passage of this bill in the Assembly.
Analysis Prepared by : Diane Colborn / W., P. & W. / (916)
319-2096
FN: 0006628