BILL ANALYSIS Ó
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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2011-2012 Regular Session |
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BILL NO: AB 1112 HEARING DATE: June 28, 2011
AUTHOR: Huffman URGENCY: No
VERSION: June 23, 2011 CONSULTANT: Newsha Ajami
DUAL REFERRAL: Environmental QualityFISCAL: Yes
SUBJECT: Oil spill prevention and administration fee: State
Lands Commission.
BACKGROUND AND EXISTING LAW
The Department of Fish and Game's (DFG) office of Oil Spill
Response and Prevention (OSPR) was created in 1990 by the
Lempert-Keene-Seastrand Oil Spill Prevention and Response Act
(Act) (commencing with §8670.1 of the Government Code). The Act
establishes the position of the Administrator to direct
activities relating to oil spill prevention and response
including drills and preparedness and oil spill containment and
clean up (§8670.5).
Section 8670.38 creates the Oil Spill Prevention and
Administration Fund (OSPAF) which funds the OSPR's prevention
and response activities as well as oil spill prevention programs
at the State Lands Commission, Coastal Commission, and the San
Francisco Bay Conservation and Development Commission. It also
funds the Oiled Wildlife Care Network's training and field
collection, and search and rescue activities. OSPAF is financed
through (1) a $0.05 maximum assessment on each barrel of crude
oil or petroleum products brought into the state (§8670.40), and
(2) a $2500 maximum fee imposed on nontank vessels biennially
(§8670.41).
The Administrator is required, among other things, to conduct
regular inspections of the vessels engaged in bunkering (an
operation where one vessel loads another vessel with fuel and
lubricants) and lightering (transfer of the oil as cargo from
one vessel to another) to evaluate their compliance with
existing OSPR laws.
Section 8670.42 of the Government Code requires DFG to contract
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with the Department of Finance to prepare and submit a report on
the financial basis and programmatic effectiveness of OSPR in
oil spill prevention and response to the Governor and the
Legislature, on or before January 1, 2005.
The State Lands Commission (SLC) is responsible for oil and gas
and mineral leases (commencing with §6801 of the Public
Resources Code). This includes jurisdiction over the offshore
oil drilling facilities. The Division of Oil, Gas, and
Geothermal Resources (DOGGR) within California's Department of
Conservation (DOC) also has extensive and broad authority to
regulate activities associated with the production and removal
oil and gas (§3106 of the Public Resources Code).
PROPOSED LAW
This bill would:
1. Require the Administrator to:
Develop and implement a screening and
monitoring program for inspection of bunkering and
lightering operations at anchorage and alongside
docks.
Identify the bunkering and lightering
operations that pose the highest risk of a pollution
incident and routinely monitor and inspect them in
coordination with the United States Coast Guard.
Establish regulations to provide
best-achievable protection during bunkering and
lightering operations in the marine environments.
1. Raise the maximum per barrel assessment fee to $0.07 and
authorize the Administrator to adjust maximum fee annually
for inflation.
2. Raise the maximum nontank vessels fee to $3000.
3. Require the DFG and the SLC, independently, to contract
with the Department of Finance for a report on the
financial basis and programmatic effectiveness of the
state's oil spill prevention, response, and preparedness
programs. The report is due on or before January 1, 2013
and no less than once every four years thereafter.
4. Require SLC, in consultation with the DOC, to report to
the Legislature on regulatory action, pending or already
taken, and statutory recommendations for the Legislature to
ensure maximum safety and prevention of harm during
offshore drilling.
ARGUMENTS IN SUPPORT
According to the author AB 1112 will ensure adequate funding for
the Oil Spill Prevention and Administration Fund (OSPAF) and
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increase oversight of vessels conducting oil transfers and.
Regarding the fee portion of the bill the author states, "A June
3, 2011 fund condition statement of the OSPAF from the
Department of Fish & Game shows the fund being deficient $9
million in 2011-12 and $17 million in 2012-13. This statement is
based on an assumption that FY 11-12 and beyond funding is at
previous levels (i.e., no furloughs and no other program
reductions).Without an increase in the fees or a new funding
source, the projected deficits in OSPAF will force both SLC and
OSPR to cut positions essential to their respective programs.
For fiscal year 2011-12, the estimated deficit is approximately
17% of the cost to operate the programs funded by OSPAF. As
such, the author is concerned that OSPR and SLC will likely have
to cut 17% of their payroll, which could mean the loss of oil
spill prevention specialists, environmental scientists,
enforcement agents, engineers, field inspectors, and support
staff. Since the deficit is estimated to continue after 2011-12,
additional cuts will be required. These cuts will seriously
jeopardize the protection SLC and OSPR's programs provide to the
public and the environment from oil spills."
Regarding the oil transfer provisions of the bill the author
states, "AB 1112 will better ensure Californians that oil transfer
units have the equipment and trained personnel on site and ready
to respond in the event of a spill during an oil-transfer
operation by requiring OSPR to develop and implement a screening
mechanism and comprehensive risk based monitoring program for the
inspection of bunkering and lightering operations at anchorage and
alongside that pose the highest risk of a pollution incident."
ARGUMENTS IN OPPOSITION
The Western States Petroleum Association states, "According to
the official reports from the Office of Spill Prevention and
Response, the Oil Spill Prevention and Administration Fund
(OSPAF) will finish the 2011-2012 fiscal year with a surplus
of more than $1.7 million, without a fee increase. Recent
audits of OSPR have found inappropriate use of the OSPAF for
non-oil spill related activities by its parent agency. The Oil
Spill Technical Advisory Committee (TAC) has recommended
reforms to help avoid inappropriate use of the Fund. The
TAC's most recent biennial report, issued last week,
recommends some important reforms that should be pursued
before funding is increased for the spill prevention program.
Since the OSPAF will be intact through the coming fiscal year,
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our view is that AB 1112 should be a two year bill, and that
immediate efforts should be focused on implementing the
recommendations of the TAC to ensure that OSPR's resources
(staff and funding) are protected from inappropriate use in
the future."
COMMENTS
Expansion of the existing screening and monitoring program:
Bunkering and lightering (transfers) happens both alongside
docks and at anchorage. According to DFG most of the monitoring
and inspection is done alongside docks since it is very labor
intensive and expensive to inspect and screen a transfer at
anchorage (requires 4 DFG wardens for 6 hours). Up until 2009,
DFG conducted only shoreline monitoring. In 2009, the oil tanker
Dubai Star had a major bunkering accident at anchorage spilling
400-800 gallons of fuel oil into San Francisco Bay.
Subsequently, DFG expanded their monitoring and inspections in
recognition of its importance to prevent costly spills. They
increased their monitoring level from 0.9% in 2009 to 1.9% in
2010 and started monitoring at anchorage as well alongside
docks.
According to DFG, the department has a system in place to
identify high risk bunkering and lightering operations which is
already being used for their monitoring efforts. This bill aims
to ensure that DFG's plan properly prioritizes their monitoring
efforts to focus on the highest risk transfers.
Oil prevention and response programs are not fully sustainable
under current OSPAF fund condition:
Subsequent to every major oil spill incident (e.g. Cosco Busan
2008, Dubai Star 2009) OSPR and SLC's responsibilities have
increased. Their constantly increasing responsibilities are
partially due to the Act's requirement that OSPR and SLC should
provide "the best achievable protection" of the public health
and safety and environment. This includes using the best
achievable technologies and methods. In the past twenty years,
both OSPR and SLC have been evolving in order to comply with
this protective standard.
Thus, SLC and OSPR's funding source, OSPAF, has been stretched
thin in order to meet the rising demands for its funds. OSPAF's
main funding source, the fee on the barrel of crude oil, has not
been raised since 2002. SB 849 (Chapter 514, Statutes of 2002)
authorized an increase in the fee from $0.04 to $0.05 per barrel
and established a biennial fee of up to $2,500 for non-tank
vessels (which since has been not been adjusted for inflation).
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Just considering the Consumer Price Index (CPI), $0.05 fee cap
would now be almost $0.065. This $0.015 increase would not
reflect the ever increasing pressure on these agencies to meet
their best achievable protection goal. Therefore the committee
may wish to consider additional $0.005 increase on top of the
CPI adjustment.
It is worth mentioning that since 1990 the price of the crude
oil has increased almost 400%, from $24/barrel to $110/barrel.
Also based on the data provided by DFG, the quantity of
petroleum products brought into California has been relatively
steady since 2002 fluctuating 10% around the average of 540
million barrels per year.
Under current conditions OSPAF is not sustainable. Without a fee
increase, OSPAF is expected to have a deficit of up to $7
million starting in 2012-2013 and accumulating from then on.
Consequently, it may not have sufficient monies to be able to
fully fund its existing programs. According to OSPR, their
research and development program will be eliminated starting
next year due to lack of funding. Deficit in OSPAF can lead to
the loss of highly specialized staff including engineers,
scientists and technicians who help both SLC and OSPR to keep up
with their "best achievable protection" and "best achievable
technology" standards.
OSPR and SLC oil spill response and prevention activities are
perpetual therefore regular audits, also in perpetuity, are
necessary
Current law only requires a one-time submission of a report on
financial basis and programmatic effectiveness of OSPR. As it
was discussed earlier to catch up with the best achievable
protection techniques and technologies, both SLC and OSPR has
been evolving. In order for the Governor and the Legislature to
be informed on the financial basis and programmatic
effectiveness of these programs, the committee may wish to agree
that audits conducted regularly every four years are valuable.
State Lands Commission Report
Currently there are 27 offshore oil and gas platforms located
1.2 to 10.5 miles off the southern California coast. Four of
these platforms are in the State lands Commission's
jurisdiction. Subsequent to the British Petroleum Deepwater
Horizon oil spill in the Gulf of Mexico in 2010, there has been
much concern about the safety of the deep water horizon offshore
drilling platforms and possible prevention programs and response
strategies. In August 2010, SLC released a report on oil spill
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prevention programs in light of the Deepwater Horizon spill.
Additionally 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.
SUPPORT
San Francisco BayKeeper - Sponsor
Pacific Environment - co-sponsor
Blue Frontier Campaign
California Association of Professional Scientists
California CoastKeeper Alliance
California Coastal Commission
California State Lands Commission
California Statewide Law Enforcement Association
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
Greenpeace
Natural Resources Defense Center
Ocean Champions
Ocean Conservation Research
Ocean Conservancy
Ocean Defenders Alliance
Ocean Revolution
Oceana
Pacific Coast Federation of Fisherman's Associations
Planning and Conservation League
San Francisco Bay Conservation and Development Commission
Save Our Shores
Save The Bay
Sierra Club California
Turtle Island Restoration Network
Waterways Restoration Institute
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OPPOSITION
California Independent Petroleum Association
California Manufacturing & Technology Association
CalChamber
CalTax
Western States Petroleum Association
Pacific Merchant Shipping Association
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