BILL ANALYSIS Ó
AB 1112
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator S. Joseph Simitian, Chairman
2011-2012 Regular Session
BILL NO: AB 1112
AUTHOR: Huffman
AMENDED: June 23, 2011
FISCAL: Yes HEARING DATE: July 6, 2011
URGENCY: No CONSULTANT: Randy Pestor
SUBJECT : OIL SPILL PREVENTION AND RESPONSE
SUMMARY :
Existing law , under the Lempert-Keene-Seastrand Oil Spill and
Response (OSPR) Act:
1) Requires the Governor to establish a state oil spill
contingency plan (Government Code §8574.1 et seq.),
establishes oil spill response and contingency planning
requirements (§8670.1 et seq.), and establishes oil spill
prevention, response, containment, and cleanup programs
(Public Resources Code §8750 et seq.).
2) Requires the OSPR administrator to adopt and implement
regulations governing the adequacy of oil spill contingency
plans to be prepared and implemented, taking into
consideration marine facility or vessel contingency plan
requirements of the national and California contingency
plans, the State Lands Commission, State Fire Marshal, and
California Coastal Commission. The regulations must, among
other things: a) ensure that standards set for response,
containment, and cleanup equipment are maintained and
regularly improved to protect state resources; and b)
ensure that each contingency plan demonstrates that all
protection measures are being taken to reduce the
possibility of an oil spill occurring as a result of the
operation of the marine facility or vessel. (Government
Code §8670.28).
3) Creates the Oil Spill Prevention and Administration Fund to
be used for the above purposes, requires the Office of
Spill Prevention and Response (OSPR) administrator to
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administer the fund, and requires the State Board of
Equalization to collect a fee in an amount determined by
the administrator to be sufficient to carry out certain
purposes. The amount of the fee cannot exceed $0.05 per
barrel of crude oil or petroleum products. The fee is
collected by marine terminal operators from the owner of
crude oil or petroleum products based on each barrel of
those products received by means of a vessel operating in,
through, or across marine waters of the state. (§§8670.38,
8670.39, and 8670.40).
4) Requires the OSPR administrator to charge a nontank vessel
owner or operator a reasonable fee with each application to
obtain a certificate of financial responsibility in an
amount that is based on the administrator's costs in
implementing the above requirements relating to nontank
vessels. Before January 1, 2005, the fee must be $2,500 or
less per vessel. (§8670.41).
5) Requires the Department of Fish and Game to contract with
the Department of Finance for preparation of a report that
must be submitted on or before January 1, 2005, regarding
the effectiveness of the state's oil spill prevention,
response, and preparedness program. (§8670.42).
6) Provides various powers and duties of the State Lands
Commission (Public Resources Code §6001 et seq.), and
requires the OSPR administrator and the State Lands
Commission (SLC) executive officer to propose, and requires
the SLC to adopt, rules and regulations relating to certain
matters for a marine terminal (a marine facility used for
transferring oil to or from tankers and barges) (§8755).
This bill :
1) Revises the Oil Spill Prevention and Administration Fund
provisions (#3 above) to: a) require the State Auditor to
conduct an audit of the Oil Spill Prevention and
Administration Fund; b) revise the fee procedures by
providing that the fee cannot exceed $0.07 per barrel,
rather than $0.05 per barrel; c) authorize the OSPR
administrator to annually adjust the maximum fee for
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inflation based on the California Consumer Price Index; and
d) require the OSPR administrator to notify the State Board
of Equalization of the adjusted fee to be effective the
first day of the month from the date of the notification.
2) Revises the nontank fee (#4 above) to not exceed $3,000 per
vessel before January 1, 2012. Ý NOTE : The author will be
striking this amendment.]
3) Revises the report requirement (#5 above) to: a) also
require the State Lands Commission to contract with the
Department of Finance for the report; b) require the report
to be submitted January 1, 2013, rather than January 1,
2005; and c) require the report to be submitted no less
than once every four years thereafter.
4) Requires the OSPR administrator to develop and implement a
screening mechanism and a comprehensive risk-based
monitoring program to reduce the risk of an oil spill as a
result of fuel and lube oil transfers. (§8670.32).
5) Requires the State Lands Commission, in consultation with
the Department of Conservation, to report to the
Legislature on or before March 1, 2012, on regulatory
action and statutory recommendations for the Legislature to
ensure maximum safety and prevention of harm during
offshore oil drilling. The report must include certain
matters (e.g., comprehensive set of requirements for
offshore drilling rigs, complete description of response
plan). (Public Resources Code §6226).
COMMENTS :
1) Purpose of Bill . According to the author, "The goals of AB
1112 are to ensure our state agencies mandated with
protecting our bays and coastline from the impacts of oil
spill contamination are adequately equipped with the
resources they need to fulfill their responsibilities, and
to ramp up our current oversight and protection efforts to
better safeguard our invaluable coastal economies,
environment, wildlife habitats, tourism, and overall
coastal livelihood from oil spills."
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According to the author regarding the allowed fee
adjustment:
"A June 7, 2011 fund condition statement of the OSPAF
ÝOil Spill Prevention and Administration Fund] from the
Department of Fish & Game shows the fund being deficient
$7 million in 2011-12 and $15 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).
The primary fee that supports OSPAF is a 5-cent fee that
is imposed on each barrel of crude or petroleum product
delivered to a marine terminal in the state. In the 20
year history of OSPAF, this fee has only increased
once-in 2002, the Legislature raised the fee from 4-cent
to 5-cent when OSPR was faced with a staffing reduction
as a result of a declining reserve in the fund. In
addition to the one-cent increase in the per barrel fee,
the Legislature also approved a fee not to exceed $2,500
on non-tank vessels.
The Assembly Natural Resources Committee's analysis
noted that when the governor signed the bill creating
the fund in 1990, the price of oil was approximately $24
per barrel. In 2002, when the governor signed the bill
essentially increasing the OSPAF fee from $0.04 to $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-over 400 percent above the 1990 and 2002
prices.
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, which could mean the loss of oil spill
prevention specialists, environmental scientists,
enforcement agents, engineers, field inspectors, and
support staff. These cuts will seriously jeopardize the
protection SLC and OSPR's programs provide to the public
and the environment from oil spills.
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OSPR cannot administratively increase the fees because
they are statutorily set and they are currently being
administered at their statutory maximum.
To preserve SLC and OSPRS's oil spill prevention and
response programs and to protect public health and
safety and the environment, AB 1112 authorizes OSPR to
increase the OSPAF revenues to generate an amount that
would be sufficient to carry out the state's oil spill
prevention programs.
Specifically, AB 1112 gives OSPR the authority to
increase the per barrel fee on oil from 5-cents up to
7-cents, and OSPR is given discretion to increase
that fee, based on the consumer price index, to cover
its administrative costs."
2) Background . The Lempert-Keene-Seastrand Oil Spill
Prevention and Response Act requires the Governor to
establish a state oil spill contingency plan (Government
Code §8574.1 et seq.), establishes oil spill response and
contingency planning requirements (Government Code §8670.1
et seq.), and establishes oil spill prevention, response,
containment, and cleanup programs (Public Resources Code
§8750 et seq.). SB 1644 (Thompson) Chapter 964, Statutes
of 1998, added a provision to the oil spill response and
contingency planning requirements for "nontank" vessels.
3) Background on fee - and fee cap issues . SB 849 (Torlakson)
Chapter 514, Statutes of 2002, increased the oil spill fee
from $0.04 per barrel set in 1990 to $0.05 per barrel.
According to the California Research Bureau at that time,
the inflation-adjusted value of the $0.04 fee declined by
over 20% since 1990 so that it was worth slightly more than
$0.03. The Research Bureau also noted that OSPR
responsibilities increased significantly, noting in
particular the contingency plan requirements for nontank
vessels and review of those plans (where the number of
nontank vessels exceeded tankers by four or five times).
Based on these increased responsibilities, AB 849, as
approved by the Environmental Quality Committee April 16,
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2001, increased the fee cap by $0.02 to 0.06 per barrel,
and authorized the OSPR administrator to adjust that amount
based on changes to the Consumer Price Index (CPI), but
subsequent amendments reduced this to $0.05 per barrel
without any provisions for CPI adjustments.
Each $0.01 per barrel increase in the OSPR fee results in
about a $5.4 million revenue increase to fund certain OSPR
programs. Each $0.01 per barrel increase in this fee could
reflect about a $0.00024 increase per gallon of gasoline,
or about $0.0048 for 20 gallons of gasoline. If the fee
cap increased based on the CPI since 2002, the $0.05 fee
cap would now be approximately $0.06, and if the fee cap
increased based on SB 849 as approved by the Committee in
2001 with the CPI adjustment, the fee cap would now be
approximately $0.08.
Increasing the OSPR fee cap from $0.05 to $0.07 could result
in increased revenues of about $10.8 million per year, and
reflect a $0.00048 increase per gallon of gasoline, or
about $.0096 for 20 gallons of gasoline.
According to the Department of Fish and Game, "The ÝOil Spill
Prevention and Administration Fund] is currently facing a
significant fiscal crisis. If the fee is not increased
there will be a shortfall of approximately $8 million for
FY 2011/12 which will adversely impact OSPR functions as
well as state entities that get funding from OSPR,
including the State Lands Commission, California Coastal
Commission, Bay Area Conservation and Development
Commission, and the Office of Environmental Health Hazard
Assessment."
4) Trying again . AB 2032 (Hancock) of 2008 increased the per
barrel fee cap from $0.05 to $0.08 and was vetoed by
Governor Schwarzenegger because "The per-barrel fee was
increased in 2002, and OSPR is currently using those
increased funds to implement a number of strategies to
improve preparedness and operations that will not result in
costs above what is included in the 2008 Budget bill."
AB 234 (Huffman) of 2010 addressed "pre-booming" issues and
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increased the per barrel fee cap from $0.05 to $0.06. In
vetoing AB 1112, Governor Schwarzenegger asserted that "the
magnitude of the fee increase proposed to fund OSPR's
regulatory activities per this bill far exceeds what OSPR
estimates it would cost to promulgate the 'pre-booming'
regulations this bill would require."
5) Support and opposition concerns . Supporters of AB 1112
believe the bill "will increase of vessels conducting oil
transfers and ensure adequate funding for the Oil Spill
Prevention Administration Fund," noting that "California is
largely defined by and intrinsically connected to our
priceless marine environment. We have an obligation Ýto]
do everything reasonable and practical to ensure the best
achievable protection against oil spills."
In opposing AB 1112, the Pacific Merchant Shipping Association
wants a cap on the fee for renewal of the Certificate of
Financial Responsibility and "are looking for assurance
that the management and operation issues that we have
experienced in the past do not occur again and asking that
the Legislature maintain this critical check and balance .
. ." The Western States Petroleum Association wants AB
1112 to be a two-year bill so that Oil Spill Technical
Advisory Committee recommendations are addressed.
6) Author's amendments . As noted in the above digest, the
author will be striking Section 4 (lines 1 to 24,
inclusive, on page 7), thereby retaining current law
regarding the nontank vessel fee.
SOURCE : Pacific Environment, San Francisco Baykeeper
SUPPORT : Blue Frontier Campaign; California Association
of Professional Scientists; California Coastal
Commission; California State Lands Commission;
California Statewide Law Enforcement
Association; Center for Biological Diversity;
California Coastkeeper Alliance; Center for
Oceanic Awareness, Research, and Education;
Clean Water Action; Crab Boat Owners
Association; Defenders of Wildlife; East Bay
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Bird Advocates; Environment California;
Environmental Action Committee; Environmental
Defense Center; Friends of the Earth;
Greenpeace; Natural Resources Defense Center;
Ocean Champions; Ocean Conservancy; Ocean
Conservation Research; Ocean Defenders
Alliance; Ocean Revolution; Oceana; Pacific
Coast Federation of Fisherman's Associations;
Pacific Coast Federation of Fisherman's
Associations; Pacific Environment; San
Francisco Baykeeper; Save Our Shores; Save The
Bay; Sierra Club California; Waterways
Restoration Insitute
OPPOSITION : Pacific Merchant Shipping Association; Western
States Petroleum Association