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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