BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 881
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          Date of Hearing:  April 1, 2013

                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES
                                Wesley Chesbro, Chair
                 AB 881 (Chesbro) - As Introduced:  February 22, 2013
           
          SUBJECT  :  Oil spill prevention and administrative fee

           SUMMARY :  (1) Repeals a sunset date that will reduce the primary  
          source of funding for the state's oil spill prevention and  
          preparedness program (a 6.5[ per barrel fee on oil received at  
          marine oil terminals or from offshore production facilities) to  
          a level established in 2002; (2) increases the per barrel fee by  
          an additional 1.5[ to pay for various needs of the oil spill  
          prevention and preparedness program; (3) caps and adjusts a fee  
          on nontank vessel fees by $250 (collected every two years),  
          which is the secondary source of revenue for the program, and  
          (4) transfers revenues from the per barrel fee and nontank  
          vessel fee to the Oiled Wildlife Care Network (OWCN), which is  
          the state-funded program to rescue and rehabilitate wildlife  
          impacted by marine oil spills. 

           EXISTING LAW  :  Pursuant to the Lempert-Keene-Seastrand Oil Spill  
          Prevention and
          Response Act (Oil Spill Act):

          1)Establishes the Office of Spill Prevention and Response (OSPR)  
            within the Department of Fish and Wildlife and requires it to  
            administer the state's oil spill prevention and preparedness  
            program, which includes, among other things:

             a)   Personnel who are fully trained and familiar with oil  
               spill response, containment, and cleanup technologies,  
               procedures, and operations, risk evaluation and management,  
               and emergency systems safety;

             b)   Announced and unannounced oil spill drills to ensure  
               companies with the potential to spill oil along the coast  
               are prepared for response;  

             c)   The review and approval of oil spill contingency plans  
               for tank vessels, nontank vessels, and facilities along the  
               coast;

             d)   Sensitive site strategy evaluations to determine the  








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               effectiveness of booming and other protective strategies  
               for sensitive marine sites;

             e)   Harbor Safety Committees and Port Area Committees,  
               jointly led by OSPR and the U.S. Coast Guard, which meet  
               regularly at the state's busiest ports with environmental  
               groups, city/state/federal government, labor organizations,  
               and the industry to improve vessel traffic safety and  
               practices within the ports, and work on spill response  
               strategies;

             f)   Local government grants, which are distributed by OSPR  
               for local agency spill responder training, local oil spill  
               plans, and response equipment (e.g. trailer, boom,  
               protective equipment);

             g)   Review of financial responsibility to ensure a vessel or  
               facility has the financial resources to pay for oil spill  
               cleanup and damages;

             h)   The evaluation licensing of applied response  
               technologies to ensure best achievable protection, for use  
               during an oil spill;

             i)   Enforcement patrol and investigation of violations, for  
               handling by a local prosecutor or the Attorney General;

             j)   The development and implementation of a screening  
               mechanism and a comprehensive risk-based monitoring program  
               for inspecting the bunkering and lightering operations of  
               vessels at anchor and alongside a dock; and

             aa)  The development of agreements regarding oil spill  
               prevention and response with the states of Alaska, Hawaii,  
               Oregon, and Washington, the Coast Guard, the Province of  
               British Columbia in Canada, and the Republic of Mexico.

          2)Requires the State Lands Commission (Commission) to adopt  
            rules, regulations, guidelines, and leasing policies for  
            reviewing marine terminals (i.e. facility used for  
            transferring oil to or from tankers or barges), whether or not  
            on lands leased from the Commission, and other marine  
            facilities (i.e. facilities used to explore for, drill for,  
            produce, store, handle, transfer, process, refine, or  
            transporting oil) under lease from the Commission to minimize  








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            the possibilities of a discharge of oil.

          3)Establishes the OWCN, which is a network of rescue and  
            rehabilitation stations for sea birds, sea otters, and other  
            marine mammals.  In addition to rehabilitative care, the  
            primary focus of the OWCN includes proactive oiled wildlife  
            search and collection rescue efforts.  

          4)Establishes the Oil Spill Prevention and Administration Fund  
            (OSPAF), which finances OSPR and the Commission's oil spill  
            prevention and planning programs.  OSPAF is supported by a fee  
            not to exceed 6.5[ that is imposed on each barrel (42 gallons)  
            of crude oil or petroleum products piped in from a marine  
            production facility or imported to a marine facility (the fee  
            is commonly referred to as the "per barrel fee").  This fee  
            will sunset on January 1, 2015 and revert back to 5[, which  
            was the amount set by the Legislature in 2002.  The OSPAF is  
            also supported by a reasonable fee on nontank vessels in the  
            amount that is based on OSPR's costs in implementing the Oil  
            Spill Act relating to nontank vessels.  The fee is collected  
            with each vessel's application to obtain a certificate of  
            financial responsibility, which is submitted every two years.   
            There is currently no statutory cap on the nontank vessel fee;  
            however, recent regulations set a fee limit at $3,250 for the  
            largest class of nontank vessels.

          5)Establishes the Oil Spill Response Trust Fund, which provides  
            funding to clean up an oil spill if the responsible party is  
            unknown or not financially capable.  The Oil Spill Response  
            Trust Fund is funded by a uniform oil spill response fee on  
            distributors, pipeline operators, refiners, and marine  
            terminal operators, in an amount not exceeding 25[ for each  
            barrel of petroleum product received or transported.  The fee  
            is only collected to bring the Trust Fund to its statutory  
            level, which is approximately $55 million. 

          6)Requires OSPR to submit, as a proposed appropriation in the  
            Governor's Budget, an amount up to $2 million of the interest  
            earned on the Trust Fund for the purpose of (1) equipping,  
            operating, and maintaining the OWCN's rescue and  
            rehabilitation stations, (2) OWCN's proactive oiled wildlife  
            search and collection rescue efforts, and (3) supporting  
            technology development and research related to oiled wildlife  
            care.  Funding is also available to OWCN from the OSPAF for  
            certain training and field collection and search and rescue  








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            activities.

           THIS BILL  :  

          1)Repeals the above referenced January 1, 2015 sunset date on  
            the OSPAF per barrel fee.

          2)Increases the OSPAF per barrel fee limit by 1.5[ and  
            authorizes OSPR to adjust the maximum fee annually based on  
            the percentage increase in the California Consumer Price  
            Index.

          3)Establishes a maximum fee limit on the nontank vessel fee at  
            the amount of $3,500.  OSPR may adjust the maximum fee  
            annually based on the percentage increase in the California  
            Consumer Price Index.

          4)Transfers .3[ of the per barrel fee and $250 of the per  
            nontank vessel fee from the OSPAF to the Trust Fund to cover  
            the annual costs of the OWCN.
           
          FISCAL EFFECT  :  Unknown

           COMMENTS  :

           1)Background of Oil Spill Act.   In the wake of the March 24,1989  
            Exxon Valdez oil spill in Alaska (which spilled approximately  
            11 million gallons of crude oil) and the February 7, 1990  
            American Trader oil spill near  Huntington Beach (which  
            spilled approximately 300,000 gallons of crude oil), the  
            Legislature passed the Oil Spill Act.  This act established  
            OSPR and gave the administrator of OSPR primary authority to  
            direct prevention, removal, abatement, response, containment,  
            and cleanup efforts with regard to all aspects of any oil  
            spill in the marine waters of the state.

            Additionally, the Oil Spill Act gives the Commission  
            responsibility to minimize the possibilities of a discharge of  
            oil at marine oil terminals (where, in 2012, 27.3 billion  
            gallons of oil were transferred) and offshore oil production  
            facilities.  

            The Oil Spill Act requires both OSPR and the Commission to  
            provide the "best achievable protection" of public health and  
            safety and the environment. Best achievable protection is  








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            defined as the highest level of protection that can be  
            achieved through both the use of the best achievable  
            technology and those manpower levels, training procedures, and  
            operational methods that provide the greatest degree of  
            protection achievable. The act prohibits the use of a  
            cost-benefit or cost-effectiveness analysis in determining  
            which measures provide the best achievable protection.  This  
            standard has led to the creation of programs such as the  
            Commission's Marine Oil Terminal Engineering and Maintenance  
            Standards, which establishes standards to ensure that an oil  
            terminal's infrastructure can withstand earthquakes and other  
            threatening events.  As OSPR and the Commission have developed  
            their programs to provide the best achievable protection, the  
            costs to implement the act have increased.







































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           2)OSPAF Fee.   The OSPAF was created by the Oil Spill Act to fund  
            the state's oil spill prevention and preparedness programs.   
            The fees that support OSPAF are (1) a 6.5[ per barrel fee on  
            oil piped in from a marine production facility or imported to  
            a marine facility and (2) a $650 to $3,250 nontank vessel fee  
            that is collected from a nontank vessel when the owner or  
            operator submits an application for certificate of financial  
            responsibility, which occurs every two years.  The 6.5[ per  
            barrel fee will decrease to 5[ per barrel on January 1, 2015.   
            The maximum nontank vessel fee was recently established at  
            $3,250 by regulations; however, there is no statutory cap on  
            the fee.  

           3)The Oil Spill Fiscal Cliff.   By 2011, the OSPAF per barrel fee  
            had only increased 1[ since 1990 (while gas prices nearly  
            quadrupled), which was not enough to address inflation as well  
            as OSPR's and the Commission's responsibilities to provide the  
            best achievable protection from oil spills.  As such, a  
            multi-million dollar deficit was projected for the OSPAF.  

            Previously, the Legislature had responded to the OSPAF funding  
            issues when it passed AB 2032 (Hancock, 2008), which would  
            have increased the per barrel fee from 5[ to 8[.  Governor  
            Schwarzenegger, however, vetoed this bill.  Strangely, that  
            same year, Governor Schwarzenegger signed AB 2031 (Leno) into  
            law, which requires OSPR to expand its local government grant  
            program with OSPAF moneys.  The Assembly Floor analysis for AB  
            2031 noted that OSPR's existing grant program had not been  
            adequately funded.

            In 2011, facing a major structural deficit in the OSPAF that  
            would have led to a 20% cut to the state's oil spill  
            prevention and preparedness program, AB 1112 (Huffman) was  
            introduced to increase the OSPAF per barrel fee from 5[ to 8[.  
             In response to the 2009 Dubai Star oil tanker spill that  
            spilled 400 to 800 gallons of intermediate fuel oil into San  
            Francisco Bay, AB 1112 also created significant  
            responsibilities for OSPR regarding vessel to vessel fuel  
            transfers.  According to the Senate Appropriations Committee,  
            these additional responsibilities will cost the OSPAF $2 to $3  
            million a year.

            The Assembly Natural Resources Committee passed AB 1112 with  
            the 8[ fee and an inflation adjustment provision.  Through the  








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            legislative process, however, the opponents were successful in  
            negotiating the fee down to 6.5[.  They also negotiated a  
            sunset provision that will reduce the fee back to 5[ on  
            January 1, 2015.  

            With only a 1.5[ per barrel increase and the additional  
            responsibilities with vessel to vessel transfers, the OSPAF  
            still showed a significant structural deficit.  Recognizing  
            this problem, Governor Brown issued a signing statement for AB  
            1112 directing OSPR "to increase the non-tank vessel fee and  
            reduce continued program expenditures in order to address the  
            structural imbalance of the Oil Spill and Administration  
            Fund."  Even with the Governor's measures, OSPR still projects  
            a $3.8 million deficit in the OSPAF for fiscal year 2012-13.

            Major cuts have not yet been made to the state's oil spill  
            prevention and preparedness program because it has a reserve  
            that has been absorbing the OSPAF's annual deficit.  The  
            reserve, however, will be depleted when the AB 1112 sunset  
            provision takes place in fiscal year 2014-15.  Without  
            legislative action this year, OSPR and the Commission will be  
            forced to begin the process of laying off over 90 positions  
            and planning cuts to critical oil spill prevention and  
            preparedness functions as part of next year's budget process.   


            For a program that currently costs $42 million a year, OSPR  
            and the Commission will have to cut over $10 million in costs  
            ($7.4 million a year from the AB 1112 sunset and $3.8 million  
            from the structural deficit).  With approximately 25% of the  
            state's oil spill prevention and preparedness program cut, the  
            state would be making its environment, economy, and public  
            health substantially more vulnerable to oil spills.

           4)The OSPAF is constantly audited.   The OSPAF and the programs  
            it funds have been audited by the Department of Finance  
            (January 2005, January 2012) and by the State Auditor (August  
            2008, August 2012).  Current law requires the Department of  
            Finance to audit the OSPAF programs no less than once every  
            four years.  The audit report is specifically required to  
            focus on "the financial basis and programmatic effectiveness  
            of the state's oil spill prevention, response, and  
            preparedness program."  These audits have helped improve the  
            state's oil spill prevention and preparedness program achieve  
            the best achievable protection from oil spills while ensuring  








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            that the OSPAF moneys are being used appropriately and  
            efficiently.

           5)Equality for nontank vessels.   While the Oil Spill Act  
            contains a cap on the per barrel fee, it does not provide a  
            cap on the nontank vessel fee.  The lack of a cap is what  
            allowed Governor Brown to direct OSPR to increase the nontank  
            vessel fee through the AB 1112 signing statement.  This bill  
            provides a $3,500 cap on the nontank vessel with an inflation  
            adjuster.  This cap is $250 more than what the largest vessel  
            currently pays pursuant to fee regulations.  The additional  
            $250 will be transferred to the OWCN to help support its  
            budget.

           6)Oiled Wildlife Care Network Background.   The OWCN is the state  
            program that rescues and rehabilitates oiled wildlife in the  
            state.  It is an integrated system of more than 30  
            organizations and facilities strategically sited throughout  
            California that is largely considered the most proactive  
            response organization in the world dedicated to wildlife  
            affected by catastrophic oil spills.  

            In 1995, AB 1549 (Sher) directed OSPR to establish regional  
            oiled wildlife rescue and rehabilitation facilities along the  
            California coast.  In 1997, a Memorandum of Understanding was  
            signed between the Regents of the University of California and  
            OSPR assigning the administration of the OWCN to the Wildlife  
            Health Center at the University of California, Davis School of  
            Veterinary Medicine.

            Between 1995 and 2001, much of the OWCN's efforts went into  
            increasing capacity for oiled wildlife rehabilitation along  
            the California coast.  The OWCN constructed major facilities  
            in the San Diego, Los Angeles, Santa Cruz, San Francisco and  
            Humboldt regions.  The OWCN also began working with wildlife  
            organizations throughout the state to upgrade existing  
            facilities and increase capacity to care for oiled birds and  
            mammals.

            Since the completion of the initial construction and capital  
            improvement projects, the OWCN's focus has broadened to  
            include all aspects of oiled wildlife response.  These include  
            extensive training and preparedness, fostering inter-agency  
            cooperation, refining emergency response procedures, and  
            supporting research activities to improve oiled wildlife  








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            response efforts. 

            Since 1995, the OWCN has responded to more than 75 oil spills  
            throughout California and has cared for nearly 8,000 oiled  
            birds and mammals. 

           7)Oiled Wildlife Care Network Funding Issues.   The OWCN's budget  
            is approximately $2 million, which has been funded from  
            interest earned from the Oil Spill Response Trust Fund.  In  
            2011, however, SB 84 (Budget) transferred $40 million from the  
            Trust Fund as a loan to the General Fund.  This loan was made  
            to help backfill the revenue loss caused by the cancelation of  
            the sale-for-leaseback of 11 large state office buildings that  
            were included in the 2010 Budget.  As a result of the loan,  
            the Oil Spill Response Trust Fund is generating virtually no  
            money for OWCN's budget.

            The Oil Spill Response Trust Fund loan is intended to be  
            repaid on June 30, 2014 with interest earned; however, as  
            stated in a 2012 audit by the Department of Finance, there is  
            no assurance of repayment.  Moreover, the Department Finance's  
            audit states that "[e]ven if the loan is repaid, due to the  
            economy's low interest rates, interest earned is no longer  
            sufficient to support the cost of the Program."

            The 2012 Department of Finance's audit suggests that OSPR  
            "explore feasible options to obtain a dedicated funding source  
            for OWCN."  The Director of the Department of Fish and  
            Wildlife is treating the OWCN funding issue as a "top  
            priority."  The Director has stated that time is of the  
            essence to find a dedicated funding source, especially since  
            oil spill contingency plan holders rely on OWCN existing in  
            order to meet regulatory requirements.   

            This bill establishes a reliable funding source for the OWCN  
            by dedicating a portion of the OSPAF fees to the program.

           8)Double referral  :  This bill is double-referred to Water, Park  
            and Wildlife Committee.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           Aquarium of the Pacific
          California Academy of Sciences








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          California Association of Zoos and Aquariums
          California Coastal Protection Network
          California Coastkeeper Alliance
          California State Lands Commission Staff
          Channel Islands Marine and Wildlife Institute
          Environmental Action Committee of West Marin
          Heal the Bay
          Marine Mammal Center
          Monterey Bay Aquarium
          Natural Resources Defense Council
          Ocean Conservancy
          Orange County Coastkeeper
          PRBO Conservation Science
          Russian RiverKeeper







































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          San Francisco Bay Bird Observatory
          San Francisco BayKeeper (sponsor)
          SPCA for Monterey County
          Surfrider Foundation
          University of California Santa Cruz Marine Stranding Network

           Opposition 
           California Independent Petroleum Association
          California Manufacturers and Technology Association
          Western States Petroleum Association
           
          Analysis Prepared by  :  Mario DeBernardo / NAT. RES. / (916)  
          319-2092