BILL ANALYSIS Ó
AB 1112
Page 1
Date of Hearing: April 26, 2011
ASSEMBLY COMMITTEE ON WATER, PARKS AND WILDLIFE
Jared Huffman, Chair
AB 1112 (Huffman) - As Amended: April 13, 2011
SUBJECT : Oil Spill prevention and administration fee: State
Lands Commission
SUMMARY : Requires the Office of Spill Prevention and Response
(OSPR) within the Department of Fish and Game (DFG) to increase
its monitoring and inspections of vessel oil transfer
operations; authorizes an increase in the per barrel Oil Spill
Prevention and Administration Fund (OSPAF) fee to support the
state's oil spill prevention programs; increases the fee for
nontank vessels; requires a financial report on the state's oil
spill prevention program; and requires the State Lands
Commission to submit safety recommendations to the Legislature.
Specifically, this bill :
1)Requires the OSPR administrator to conduct screening and risk
assessment of vessels engaged in bunkering and lightering
operations to determine highest risk transfers, to increase
monitoring and inspections of vessel oil transfers by 2
percent per year until a minimum of 10% of oil transfer
operations are being monitored and inspected, to ensure the
vessel has the appropriate equipment in the event of an oil
spill. Requires that a minimum of 50% of oil transfer
operations subject to monitoring shall be conducted at fuel
transfer operations occurring at anchorage.
2)Increases the maximum authorized OSPAF per barrel fee assessed
on crude oil or petroleum products received at a marine
terminal from $0.05 cents to $0.08 cents, and authorizes the
OSPR administrator to adjust the maximum fee annually for
inflation based on the California Consumer Price Index.
Requires the administrator to notify the State Board of
Equalization of the adjusted fee rate, which shall be
effective the first day of the month beginning not less than
30 days from the date of the notification.
3)Increases the nontank vessel fee collected with each
application for a certificate of financial responsibility from
$2,500 to $3,000. Clarifies that these fees must be used for
specific purposes specified in statute and shall not be used
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for responding to an oil spill.
4)Requires the DFG and the State Lands Commission (SLC), to
independently contract with the Department of Finance for a
report to the Legislature and Governor on the financial basis
and programmatic effectiveness of the state's oil spill
prevention, response, and preparedness program. Requires that
the report be submitted on or before January 1, 2013 and no
less than once every four years thereafter. This reporting
requirement would sunset on January 1, 2017.
5)Requires the SLC, on or before March 1, 2012, to report to the
Legislature on regulatory actions and statutory
recommendations for the Legislature to ensure maximum safety
and prevention of harm during offshore oil drilling. Requires
the report to include comprehensive requirements for fully
redundant and functioning safety systems to prevent major oil
spills caused by the failure of a blowout preventer; a
response plan to control a blowout and manage hydrocarbon
discharge; and requirements for the use of best available and
safest technologies and practices if failure of the equipment
would have a significant effect on safety, health or the
environment. Further requires that this report be prepared
taking into account all relevant information contained in
reports and investigations related to the Deepwater Horizon
oil spill in the Gulf of Mexico. This reporting requirement
would sunset on January 1, 2016.
EXISTING LAW :
1)Requires OSPR to direct prevention, removal, abatement,
response, containment, and cleanup efforts with regard to all
aspects of an oil spill in the marine waters of the state.
2)Requires OSPR to adopt and implement regulations that govern
the adequacy of oil spill contingency plans and provide for
the best achievable protection of coastal and marine
resources. These regulations are required to include, among
other things, rules regarding the transfer of oil between
vessels. OSPR is authorized to conduct vessel inspections to
determine compliance with oil spill prevention and response
laws.
3)Requires the SLC to adopt rules, regulations, guidelines and
leasing policies related to all existing and proposed marine
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terminals in the state to minimize the possibilities of a
discharge of oil. Requires that these rules, regulations,
guidelines and leasing policies must provide the best
achievable protection of public health and safety and the
environment.
4)Requires the SLC to inspect, on a regular basis, all marine
facilities and associated equipment, and to monitor marine
facility operations and their effect on public health and
safety and the environment.
5)Establishes the OSPAF, which finances OSPR and the SLC's oil
spill prevention programs. OSPAF is supported by a fee set
annually by the OSPR administrator, not to exceed $0.05 cents
per barrel of crude oil or petroleum products received at a
marine terminal, and by a $2,500 fee imposed on nontank
vessels every two years. Requires that the OSPR administrator
set the fee so that projected revenues, including interest,
are equivalent to expenses as reflected in the current Budget
Act and the Governor's proposed budget. The administrator may
allow for a surplus in the fund if necessary to cover possible
contingencies.
6)Requires offshore oil drilling facilities under the SLC's
jurisdiction to conform to various pollution prevention
regulations.
FISCAL EFFECT : Unknown. Increases the authorized per barrel
fee for oil or petroleum products received at marine terminals
from within or outside the state, which would increase the
revenues available to the state for administration of the
state's oil spill prevention program.
COMMENTS : The author indicates that the purpose of this bill
is twofold: to ensure state agencies mandated with protecting
the state's bays and coastline from the impacts of oil spills
are adequately equipped with the resources they need to fulfill
their responsibilities; and to increase current oversight and
protection efforts to better safeguard the state's invaluable
coastal economies, wildlife habitats, tourism, and overall
coastal livelihoods from oil spills.
OSPAF Fee : This bill would increase the maximum authorized
OSPAF fee from 5 cents to 8 cents per barrel. Recent budget
projections indicate that at current funding and operational
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levels, the OSPAF will be deficient by over $2 million in
2011-12, over $10 million in 2012-13, and over $18 million in
2013-14. Without an increase in the authorized per barrel fee
or a new funding source, both OSPR and the SLC will be required
to cut positions essential to their oil spill programs. The
primary fee which supports OSPAF is currently capped in statute
at $0.05 cents per barrel. This bill would raise the cap to
$0.08 cents. The author asserts that to preserve OSPR's and the
SLC's oil spill programs and to protect public health and safety
and the environment, legislation is needed to authorize an
adjustment in the fees to an amount sufficient to carry out both
agencies' oil spill programs. Without sufficient resources to
finance their statutory responsibilities, OSPR and the SLC's oil
spill prevention and response programs will be deficient and
California's environment and coastal communities will suffer.
The Assembly Natural Resources Committee, which also heard this
bill, notes in their analysis that in the 20 year history of the
OSPAF, the per barrel maximum fee was only increased once in
2002 when the Legislature raised the authorized fee from $0.04
cents to $0.05 cents. To put the fee into perspective, when the
fund was created in 1990 the price of oil was approximately $24
per barrel. In 2002 when the fee was increased by one cent to
the current $0.05 per barrel, the price of oil was approximately
$26 per barrel. On March 21, 2011, the price of oil was almost
$110 per barrel, an over 400% increase from 1990 and 2002
prices. The Natural Resources Committee analysis further notes
that while the fee has only increased one cent since it was
established, the state's oil spill prevention programs have
necessarily expanded substantially. The law requires OSPR and
the SLC to meet a "best achievable protection" standard, which
requires the agencies to update their programs as technologies
improve and additional information and experience on oil spill
prevention and response is obtained. The estimated deficit for
fiscal year 2012-13 is over 20% of the cost needed to operate
the state's oil spill prevention programs, which will likely
require payroll reductions, and could lead to the loss of oil
spill prevention specialists, environmental scientists,
enforcement agents, engineers, field inspectors and support
staff, and seriously jeopardize the state's ability to protect
the public and environment from oil spills.
OSPAF Audits : This bill requires OSPR and the SLC to contract
with the Department of Finance to conduct an audit report in
2013 and every 4 years thereafter on the financial basis and
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programmatic effectiveness of the state's oil spill prevention,
response and preparedness program. Current law only requires a
one-time Department of Finance report which was due on or before
January 1, 2005. Due to the ongoing nature of the program, this
bill requires an audit in 2013 and every 4 years thereafter.
This reporting requirement would sunset on January 1, 2016,
which means that there would only be one follow-up 4 year
report. The sunset was included because Government Code Section
10231.5 requires that Legislative Counsel include a sunset
clause in every new reporting requirement passed by the
Legislature. Due to the ongoing nature of the state's oil spill
prevention and response programs, the committee may wish to
consider whether an exception to Government Code Section 10231.5
would be appropriate in this circumstance in order to provide
for subsequent 4 year reports.
Increased Monitoring of Bunkering and Lightering : This bill
requires the OSPR administrator to conduct risk assessment of
vessels engaged in bunkering and lightering, to identify highest
risk transfers, and to increase the percentage of vessel oil
transfer operations that are monitored and inspected. According
to DFG, only 1.8% of all bunkering and lightering operations in
California are currently monitored. This bill would require
OSPR to increase the percentage of vessel transfer operations
that are subject to monitoring and inspection annually by 2% per
year, until a minimum of 10% of all vessel transfer operations
are being routinely monitored and inspected.
On October 20, 2009, due to a bunkering accident, the oil tanker
Dubai Star spilled 400 to 800 gallons of fuel oil into San
Francisco Bay. While relatively small, the spill affected more
than 10 miles of shoreline and resulted in shoreline oiling,
bird mortalities, and beach and fishery closures. The spill
reportedly occurred when one of the ship's fuel tanks overfilled
during an early morning refueling stop and crew members failed
to notice until the oil had spilled into the Bay. Increasing
the number of random inspections could operate as an incentive
for parties conducting bunkering and lightering operations to be
more vigilant in complying with rules and regulations and
avoiding spills.
The Natural Resources Committee analysis raised the idea of
requiring the presence of a "Pollution Safety Advisor" at oil
transfers between vessels, and encouraged the author and the
committee to further investigate the feasibility of that policy.
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Another alternative worth considering may be to require the
dedicated person already required by law to be on board each
vessel to continuously monitor the transfer during the entire
duration of the oil transfer operation. This may provide
increased oversight for transfers and protection against a spill
occurring in one tank while responsible personnel are attending
other tanks or operations on the vessel.
Offshore Oil Drilling and Prevention of Blow-outs : This bill
also requires the SLC to report to the Legislature on regulatory
actions taken and recommendations for statutory changes needed
to ensure maximum safety and prevention of harm during offshore
oil drilling in state waters, and specifically to address the
risk of oil spills caused by blowout preventer failures. As was
well publicized, in 2010 British Petroleum's Deepwater Horizon
offshore oil drilling platform in the Gulf of Mexico experienced
a blowout which spilled millions of barrels of oil into the
Gulf, creating the largest spill disaster in U.S. history. The
environmental impacts of the spill, as well as lessons learned
from the spill, are still being studied and investigated. The
federal agency investigatory team has held a series of public
hearings, including one on April 4, 2011 specifically on the
forensic examination of the Deepwater Horizon blowout preventer.
The tragedy of the spill serves as a reminder to California of
the importance of oil spill prevention and preparedness.
The SLC has jurisdiction over offshore oil production facilities
within 3 nautical miles of the coast and over the state's marine
oil terminals. Currently there are 27 offshore oil and gas
platforms located 1.2 to 10.5 miles off the southern California
coast. Four of the platforms are in state waters and 23 in
federal waters. The SLC released a report in August 2010 on the
SLC's oil spill prevention programs in light of the Deepwater
Horizon spill, and in October 2010, the SLC adopted several
action items, including directing SLC staff to obtain agreements
from state lessees to submit third party certification of all
drilling programs and operation of blowout prevention equipment
on lessee platforms. This bill would require the SLC to report
to the Legislature in 2012 on state requirements for preventing
and responding to a blowout, including consideration of relevant
information contained in the various reports and investigations
of the 2010 Deepwater Horizon oil spill.
Related Legislation : AB 234 (Huffman) of 2010 would have
increased the OSPAF fee to $0.06 per barrel and added a similar
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SLC reporting requirement. AB 234 passed the Legislature but
was vetoed by the Governor. AB 2032 (Hancock) of 2009 proposed
to increase the OSPAF fee to $0.08 per barrel but was also
vetoed.
Opposition Arguments : The opposition, while acknowledging that
the OSPAF has experienced a deficit with expenditures exceeding
fee revenue, disagrees that the deficit has been or is likely to
be as large as projected, and asserts that the proposed fee
increases in this bill would provide greater revenue than the
shortfalls predicted by OSPR and the SLC. The opposition also
notes concerns regarding transparency of accounting for OSPAF
raised in a recent Bureau of State Audits report, and the
Legislature's decision to take $40 million from the Oil Spill
Response Trust Fund as a loan to the general fund. With regard
to fuel transfer operations, WSPA also objects to the frequency
of inspections that would be required under this bill, and
points to the low number of spills which have occurred given the
large number of transfers. With regard to the OSPAF fee, WSPA
also questions an apparent shift in the portion of the funding
allocated to SLC versus OSPR in the budget.
The Bureau of State Audits report referenced by the opposition
raised a number of issues with regard to the effectiveness of
OSPR's response to the Cosco Busan oil spill in 2007. The
Bureau's follow-up report indicated that ten of the fifteen
recommendations made by the Bureau to enhance OSPR's
effectiveness were fully implemented. Of the five remaining
recommendations, one related to fund accounting and compensation
of fish and game wardens. The Bureau recommended that to ensure
the fund is charged only for oil spill prevention activities,
and warden time is charged appropriately, that DFG conduct a
time study of wardens to use as a basis for allocating warden
time between the fund and other DFG funding sources. DFG
conducted a work study of warden time in the southern California
area. The study showed that wardens were available to respond
to oil spills within the marine zone more hours than they were
actually funded to respond. DFG indicates it continues to
monitor warden time within the marine zone to ensure proper time
accounting by wardens.
With regard to the assertion that an $0.08 cent per barrel fee
may raise greater revenue than is needed to cover OSPR and SLC
expenditures, it should be noted that this bill does not require
that the fee be set at $0.08 cents per barrel, but rather
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authorizes the OSPR administrator to set the fee at a level up
to but not in excess of $0.08 cents per barrel. The law
requires the administrator to set the annual fee at a level such
that projected revenues are equivalent to expenses. In setting
the fee the administrator may also allow for a surplus if the
administrator finds that revenues will be exhausted or the
surplus is necessary to cover possible contingencies. It should
also be noted that the SLC in its letter of support on this bill
agrees that the fee increase authorized by this bill "would be
sufficient to correct the current structural deficit, thus
preventing significant reductions in the marine facility oil
spill prevention program, including staff reductions, a
reduction in safety inspections and operations oversight, and
reductions to the Commission's recently enacted Marine Oil
Terminal Engineering Maintenance Standards (MOTEMS) program."
REGISTERED SUPPORT / OPPOSITION :
Support
Blue Frontier Campaign
California Association of Professional Scientists
California Coastal Commission
California Coastkeeper Alliance
California State Lands Commission
Center for Biological Diversity
Center for Oceanic Awareness, Research and Education
Clean Water Action
Crab Boat Owners Association
Defenders of Wildlife
East Bay Bird Advocates
Environment California
Environmental Action Committee
Environmental Defense Center
Friends of the Earth
Natural Resources Defense Council
Ocean Conservancy
Ocean Conservation Research
Ocean Defenders Alliance
Ocean Revolution
Oceana
Pacific Coast Federation of Fishermen's Associations
Pacific Environment
San Francisco Bay Area Estuary Partnership
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San Francisco Baykeeper
Save Our Shores
Save the Bay
Sierra Club California
Waterways Restoration Institute
Opposition
Pacific Merchant Shipping Association
Western States Petroleum Association
Analysis Prepared by : Diane Colborn / W., P. & W. / (916)
319-2096