BILL ANALYSIS Ó
AB 881
Page 1
Date of Hearing: April 16, 2013
ASSEMBLY COMMITTEE ON WATER, PARKS AND WILDLIFE
Anthony Rendon, Chair
AB 881 (Chesbro) - As Introduced: February 22, 2013
SUBJECT : Oil Spill Prevention and Administrative Fee
SUMMARY : Increases the maximum annual per barrel oil spill
prevention and administration fee to implement oil spill
prevention activities from 6.5[ to 8[ per barrel. Specifically,
this bill :
1)Increases the maximum annual assessment for oil spill
prevention and administration from 6.5[ to 8[ per barrel of
crude oil or petroleum products and allows the Oil Spill
Prevention and Response program administrator to adjust the
fee annually based on the percentage increase in the
California Consumer Price Index. Repeals an existing January
2015 sunset on the current 6.5[ per barrel fee amount.
2)Caps the nontank vessel fee for oil spill prevention
activities at an amount not to exceed $3,500 per nontank
vessel. Authorizes the program administrator to reduce the
fee for nontank vessels that pose a reduced risk of pollution
and to adjust the fee annually based on the percentage
increase in the California Consumer Price Index.
3)Transfers 3[ of the per barrel fee on crude oil or petroleum
products, and $250 of the per nontank vessel fee collected to
fund activities of the Oiled Wildlife Care Network (OWCN).
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 (DFW) 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;
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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
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 and 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
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British Columbia in Canada, and the Republic of Mexico.
2)Requires the State Lands Commission (SLC) to adopt rules,
regulations, guidelines, and leasing policies for reviewing
marine terminals (i.e. facilities used for transferring oil to
or from tankers or barges), whether or not on lands leased
from the SLC, and other marine facilities (i.e. facilities
used to explore for, drill for, produce, store, handle,
transfer, process, refine, or transport oil) under lease from
the SLC to minimize 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 SLC'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 an
amount based on OSPR's costs in implementing the Oil Spill Act
relating to nontank vessels. The fee is collected with each
vessel's financial responsibility certificate application,
which is submitted every two years. There is currently no
statutory cap on the nontank vessel fee; however, recent
regulations set the fee at $3,250 for the largest class of
nontank vessels.
5)Establishes the Oil Spill Response Trust Fund (Trust Fund),
which provides funding to clean up an oil spill if the
responsible party is unknown or not financially capable. The
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.
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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
activities.
FISCAL EFFECT : Unknown
COMMENTS :
Author's Statement : The author indicates the purpose of this
bill is to provide funding for the OWCN, to ensure that the
state's oil spill prevention and readiness programs have
adequate funding for the forseeable future, and to place a cap
on the nontank vessel fee. According to a 2012 audit by the
Department of Finance (DOF), the OWCN will have no funding
beginning fiscal year 2014-15. Without legislative action, the
state will not have a program that can adequately care for
wildlife affected by oil spills. In addition, the existing 6.5[
per barrel fee that funds the state's overall oil spill
prevention program will sunset in January and revert to 5[ per
barrel, which is the level the program was funded at in 2002.
This will cut the program's funding by 18% and make the state
more vulnerable to marine oil spills. This bill will save the
OWCN and the state's oil spill prevention program by eliminating
the sunset date on the per barrel fee and increasing it by 1.5[.
The additional revenue will go toward funding the OWCN and oil
spill prevention responsibilities that are mandated by law but
currently unfunded.
Oil Spill Act Background : After the Exxon Valdez oil spill of
1989, which spilled 11 million gallons of crude oil in Alaska,
and the Huntington Beach oil spill in 1990, which spilled
approximately 300,000 gallons of crude oil into the Pacific
Ocean off southern California, the Legislature passed the Oil
Spill Act. The Act established OSPR and gave the OSPR
administrator primary authority for directing prevention,
removal, abatement, response, containment, and cleanup efforts
with regard to all aspects of oil spills in the marine waters of
the state. The Act also gives the SLC responsibility for
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minimizing the risk of discharge of oil at marine oil terminals
and offshore oil facilities. The Oil Spill Act requires OSPR and
the SLC to provide the "best achievable protection" of public
health and safety and the environment. Best achievable
protection is defined as the highest level of protection that
can be achieved through both the use of the best available
technology and those manpower levels, training procedures, and
operational methods that provide the greatest degree of
protection available. As part of the state's comprehensive
response to oil spills, the state also created the OWCN, a
statewide network of rescue and rehabilitation stations for
treatment of oiled sea birds, sea otters, and other marine
mammals.
The Oil Spill Act also created the OSPAF to fund the state's oil
spill prevention and preparedness program. The OSPAF is funded
through a per barrel fee on crude oil and petroleum products
piped into California from a marine production facility or
imported to a marine facility, and a nontank vessel fee. The
OWCN, which has an annual budget of $2 million, is funded
through a share of the interest earned on the Trust Fund.
Under existing law, the current 6.5[ per barrel fee is due to
sunset in 2015 and revert to 5[, the fee effective in 2002. If
the sunset is allowed to take effect, the state's annual budget
for oil spill prevention will be reduced by 18% ($7.4 million).
Even at the 6.5[ level, there is a structural deficit gap in the
fund, meaning that the funds taken in annually are insufficient
to cover the costs of the program. For example, for fiscal year
2012-13, there is a $3.8 million gap between expenditures and
revenues. Major cuts have not yet been made to the program
because OSPR has been drawing from the reserve in the fund to
cover the deficit. The reserve, however, will be depleted
entirely by mid fiscal year 2014-15. Even without the sunset,
the current funding of 6.5[ per barrel is insufficient to
support existing program needs. The Governor recognized this
structural deficit when he signed AB 1112 and directed OSPR, in
order to make up the difference, "to increase the non-tank
vessel fee and reduce continued program expenditures in order to
address the structural imbalance of the [OSPAF]." Without
legislative action this year, OSPR and the SLC will have to
begin the process of laying off over 90 positions and planning
cuts to oil spill prevention and preparedness functions as part
of next year's budget process. In addition, the 6.5[ per barrel
fee has not produced enough funding for OSPR to perform its
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Scientific Study and Evaluation Program, which evaluates ways to
improve oil spill prevention and response in California. The
SLC also needs additional funding to address the oversight and
review issues highlighted by the Department of Finance in its
recent audit of the program.
This bill was double-referred to the Assembly Natural Resources
Committee, which heard and passed this bill on April 1st. The
primary reason this bill was referred to the Assembly Water,
Parks & Wildlife Committee is its provisions related to the
OWCN, which coordinates rescue and rehabilitation of oiled
wildlife. The OWCN is a statewide collaborative network of over
30 rescue and rehabilitation stations strategically placed
throughout the state to provide rapid response for the rescue
and treatment of oiled sea birds and marine mammals. In
addition to rehabilitative care, the primary focus of the OWCN
includes proactive oiled wildlife search and rescue efforts.
OWCN Background : 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. In 2007, as a result of
the Cosco Busan oil spill in San Francisco Bay, the Oil Spill
Act was further modified by Assembly Bill 2911 (Wolk) to
officially add the development and oversight of oiled wildlife
capture activities during spills to the OWCN's responsibilities.
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 protocols, 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. The OWCN has been
recognized as one of the most proactive response organizations
in the world dedicated to wildlife affected by catastrophic oil
spills. When the massive BP Deepwater Horizon Oil Spill hit the
Gulf of Mexico in 2010, the California OWCN was called on to
provide expert training for oiled wildlife care response in the
Gulf.
OWCN Funding Issues : According to a 2012 audit conducted by the
DOF, the OWCN is projected to be out of funding entirely by
fiscal year 2014-15. Currently, OWCN is funded primarily from
interest earned on the Trust Fund. A loan from the Trust Fund
has prevented interest from accruing; however, even if the loan
is repaid, interest rates are too low to support the cost of the
program.
In 2011, the Legislature transferred $40 million from the Trust
Fund as a loan to the General Fund to help backfill revenue loss
from the cancelation of a proposed sale-for-leaseback of 11
state office buildings that were included in the 2010 State
Budget. As a result of the loan, the Trust Fund is generating
virtually no money for the OWCN's budget. The Trust Fund loan
is scheduled to be repaid on June 30, 2014 with interest earned;
however, as stated in the DOF 2012 audit there is no assurance
of repayment. Moreover, the audit states that "even 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 audit recommends that OSPR "explore feasible
options to obtain a dedicated funding source for OWCN."
The DFW has identified funding for the OWCN as a "top priority,"
and urges 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 would establish a reliable funding
source for the OWCN by dedicating a portion of the increase in
the OSPAF fees to the program.
Related Legislation : AB 1112 (Huffman), Chapter 583, Statutes
of 2012, increased the per barrel fee from 5[ to 6.5[, and
contained a 2015 sunset date, after which time the per barrel
fee will revert to 5[. AB 1112 also created new
responsibilities for OSPR regarding vessel to vessel fuel
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transfers. The Governor in signing AB 1112 directed OSPR "to
increase the non-tank vessel fee and reduce continued program
expenditures in order to address the structural imbalance of the
[OSPAF]." Even with these reductions, OSPR still projects a
$3.8 million deficit in the OSPAF for fiscal year 2012-13.
Support Arguments : Supporters assert this bill is needed to
provide a stable source of funding for the Oiled Wildlife Care
Network and to address the structural gap in the State's
important oil spill prevention and response work. This bill
will provide funding needed to fully implement the program and
provide best achievable protection for California's coastal
ecosystems. According to staff at the SLC and OSPR budget
projections, it was recognized that the increase in the per
barrel fee to 6.5[ would only temporarily address the structural
deficit in the OSPAF, and that removal of the sunset is crucial
to ensure adequate funding to maintain the state's successful
oil spill prevention and preparedness program, and to protect
California's marine environment and coastal communities.
Supporters especially stress the critical need for a stable
funding source for the Oiled Wildlife Care Network, the loss of
which would be of great consequence to the state's natural
resources. Supporters also note that while the oil industry
could absorb the additional 1.5[ per barrel, even if the
industry chose to pass this cost on entirely to consumers, a
typical driver driving 15,000 miles per year in a car that gets
20 miles per gallon would at most see their annual fuel costs
increase by a mere 27[ per year, and would be unlikely to see
any impact at all. This cost pales in comparison to the effect
a catastrophic oil spill would have on the economy, the
environment, and people's lives.
The Pacific Merchant Shipping Association (PMSA) supports this
bill if amended. PMSA, whose members pay the non-tank vessel
fee, recognizes the need to establish a stable funding source
for the OWCN, supports having non-tank vessels share in the cost
of funding the OWCN and are amenable to increasing the fee to
help support the OWCN shortfall. However, they suggest an
amendment to clarify that the amount authorized to be
transferred from the OSPAF be limited to the amount needed to
fill the shortfall of funds generated by interest on the Trust
Fund up to the budget appropriation for the OWCN.
Opposition Arguments : Opponents assert that by authorizing an
increase in the maximum per barrel fee to 8[, this bill could
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result in a 60% increase in the fee (if measured from the 5[
that the per barrel fee will revert to in 2015 rather than the
current 6.5[ fee). Opponents also assert that it is not
necessary to pass an increase in the fee this year, since the
OSPAF will still have a $5.4 million reserve for the 2013-2014
fiscal year. Opponents express support for the need to fund the
OWCN, but assert that existing funds in the OSPAF should be
redirected to fund the OWCN.
Suggested Amendment : The committee and author may wish to
consider amending this bill, as suggested by PMSA, to limit the
amount authorized to be transferred from the OSPAF to fund the
OWCN to the amount needed, over and above the interest earned on
the Trust Fund, to meet the OWCN's annual $2 million budget.
REGISTERED SUPPORT / OPPOSITION :
Support
Aquarium of the Pacific
California Academy of Sciences
California Association of Zoos and Aquariums
California Coastal Protection Network
California Coastkeeper Alliance
California State Lands Commission Staff
Channel Islands Marine and Wildlife Institute
Clean Water Action
Environment California
Heal the Bay
International Bird Rescue
Monterey Bay Aquarium
Natural Resources Defense Council
Ocean Conservancy
Orange County Coastkeeper
Pacific Merchant Shipping Association (if amended)
Point Reyes Bird Observatory
Russian Riverkeeper
Santa Barbara Wildlife Care Network
San Francisco Bay Bird Observatory
San Francisco Baykeepers (sponsor)
Sierra Club California
SPCA for Monterey County
Surfrider
The Marine Mammal Center
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University of California, Santa Cruz, Marine Mammal Stranding
Network
West Marin Environmental Action Committee
Opposition
California Independent Petroleum Association
California Manufacturers & Technology Association
Western States Petroleum Association
Analysis Prepared by : Diane Colborn / W., P. & W. / (916)
319-2096