BILL ANALYSIS Ó
AB 881
Page 1
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
AB 881
Page 2
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
AB 881
Page 3
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
AB 881
Page 4
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
AB 881
Page 5
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.
AB 881
Page 6
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
AB 881
Page 7
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
AB 881
Page 8
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
AB 881
Page 9
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
AB 881
Page 10
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
AB 881
Page 11
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