BILL ANALYSIS Ó
AB 1112
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Date of Hearing: May 11, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1112 (Huffman) - As Amended: April 13, 2011
Policy Committee: Natural
ResourcesVote:6-3
Water, Parks and Wildlife 9-4
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill increases fees to fund the state's oil spill
prevention and response efforts and increases inspection of
oversight of vessels transferring oil. Specifically, this bill:
1)Requires the Office of Spill Prevention and Response (OSPR) to
conduct a risk assessment of vessels engaged in operations to
transfer oil and other goods to determine the highest risk
transfers.
2)Requires OSPR to increase by 2% annually the monitoring and
inspection of oil transfer operations until at least 10% of
such operations are monitored and inspected, and requires that
at least 50% of such inspections take place at fuel transfer
operations at anchorage.
3)Increases the maximum per-barrel fee to support OSPR, from
$0.05 per barrel to $0.08 a barrel, and authorizes OSPR to
adjust the maximum fee annually for inflation.
4)Increases the nontank per-vessel fee, from $2,500 or less to
$3,000, which is required for a vessel to receive a
certificate of financial responsibility from OSPR.
5)Requires the State Lands Commission (SLC) and the Department
of Fish and Game (DFG) to independently contract with the
Department of Finance for a report on the financial basis and
programmatic effectiveness of the state's oil spill prevention
programs, to be submitted by January 1, 2013, and
quadrennially thereafter.
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6)Requires SLC to report to the Legislature, by March 1, 2012,
on actions taken and pending, as well as recommended statutory
changes, to ensure maximum safety to prevention of harm during
offshore oil drilling.
FISCAL EFFECT
1)Increased annual revenue to OSPAF of $6.5 million to $16.5
million, comprised of:
a) $5 million to $15 million annually, assuming a
three-cent increase in the per-barrel fee. (Oil Spill
Prevention and Administration Fund (OSPAF).)
b) Approximately $1.5 million from the nontank vessel fee.
(OSPAF).
2)Annual costs beginning in 2011-12 and thereafter to OSPR, in
the range of $2 million to $3 million, to increase its
monitoring and inspection of oil transfer operations, which
will require additional specialist, wardens, vehicles and
monitoring equipment. (OSPAF.) (DFG, in which OSPR operates,
reports that it will need to increase, from 60 to about 650,
the number of transfers it monitors and investigates
annually.)
3)One-time costs to OSPR in 2011-12 of approximately $200,000,
equivalent to two staff members, to conduct a risk assessment
of bunkering and lightering and determine the highest risk
transfers. (OSPAF.)
4)Quadrennial costs to DFG and SLC in the tens of thousands of
dollars to contract with Finance for a report on the financial
basis and programmatic effectiveness of the state's oil spill
prevention programs. (Special funds.)
5)Minor, absorbable costs to SLC to report to the Legislature.
COMMENTS
1)Rationale. The author notes that OSPAF is nearing insolvency
and preparing for significant layoffs, which would leave the
state more vulnerable to damaging and costly marine oil
spills. The author intends this bill to provide the funding
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for these efforts and to increase oversight of oil transport
and transfer.
2)Background. Statute charges OSPR, which operates in DFG with
providing the best achievable protection of the state's
natural resources by preventing, preparing for and responding
to spills of "oil and other deleterious materials." OSPR is
funded by revenue generated by a small portion of fees imposed
on oil tanker owners and operators that is deposited into
OSPAF.
OSPR projects a $2.3 million OSPAF deficit in 2011-12, growing
to $18 million in 2013-14. Absent additional funding, OSPR
anticipates significant cuts that will severely hamper oil
spill prevention and response. The OSPAF per-barrel fee has
been increased only once in the last 20 years, and that
increase, in 2002, raised the fee to $0.05 per barrel from
$0.04 per barrel.
3)Related Legislation. AB 234 (Huffman) would have increased
the OSPAF fee to $0.06 per barrel. When heard by this
committee, the bill dealt with another subject. It passed the
Assembly 45-28 and the Senate 21-14 but was vetoed by the
governor, who stated the bill was unnecessary and that the
$0.02 fee increase far exceeded OSPR's estimates of its needs.
4)Support. The bill is supported by the State Lands Commission,
the California Coastal Commission and many organizations that
seek to protect the marine environment.
5)Opposition . This bill is opposed by the Pacific Merchant
Shipping Association and the Western States Petroleum
Association, who make several claims that that, they contend,
undercut the justification for raising the per-barrel fee by
as much as 60%. Those claims are:
a) The Legislature recently borrowed tens of millions of
dollars from what the opponents describe as OSPAF's sister
fund-the Oil Spill Response Trust Fund.
b) At current inspection levels, very few spills have
occurred during transfer, undercutting the rationale for
increased inspections.
c) DFG has used OSPAF monies for activity unrelated to oil
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spill prevention, such as funding inland warden patrols.
d) During the last five years, OSPR expenditures have
exceeded revenue by less than 5%.
e) The fund balance primarily reflects a severe drop in
economic activity; as the economy recovers, so will the
fund condition.
Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081