BILL ANALYSIS Ó ----------------------------------------------------------------- | | | SENATE COMMITTEE ON NATURAL RESOURCES AND WATER | | Senator Fran Pavley, Chair | | 2011-2012 Regular Session | | | ----------------------------------------------------------------- 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 1 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 2 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, 3 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). 4 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 5 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 6 OPPOSITION California Independent Petroleum Association California Manufacturing & Technology Association CalChamber CalTax Western States Petroleum Association Pacific Merchant Shipping Association 7