BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 881
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          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