BILL ANALYSIS Ó
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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2013-2014 Regular Session |
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BILL NO: AB 881 HEARING DATE: June 25, 2013
AUTHOR: Chesbro URGENCY: No
VERSION: June 18, 2013 CONSULTANT: Katharine Moore
DUAL REFERRAL: Environmental QualityFISCAL: Yes
SUBJECT: Oil spill prevention and administrative fee.
BACKGROUND AND EXISTING LAW
In response to concern following significant oil spills, the
Legislature passed the Lempert-Keene-Seastrand Oil Spill
Prevention and Response Act (Act) (SB 2040, c. 1248, Statutes of
1990) (Government Code (GOV) §8670.1 et seq., and others). The
act created the Office of Spill Prevention and Response (OSPR)
in the Department of Fish and Wildlife (department). The State
Lands Commission (commission) has responsibility under OSPR to
minimize the possibility of oil spills at the California's 58
marine oil terms. OSPR's mission is to provide the best
achievable protection (GOV §8670.3) of California's natural
resources and the public health and safety by preventing,
preparing for, and responding to spills of oil and other
deleterious materials; and to restore and enhance affected
resources. The act provides for an administrator to be appointed
for OSPR and establishes the Oil Spill Prevention and
Administration Fund (OSPAF) which finances oil spill prevention
and planning programs and the Oil Spill Response Trust Fund
(OSRTF) which is used to provide the cash flow for the response
to and clean-up of California's oil spills and for certain
wildlife care and spill-related damages.
OSPAF is funded by a per barrel fee assessed on each barrel of
oil received at marine oil terminals or from offshore production
facilities. OSPAF is also supported by the application fee for
a certificate of financial responsibility (COFR) nontank vessels
(e.g. ships that do not carry oil as a cargo and are larger than
300 gross tons in size) are required to have in California's
waters. The nontank vessel fee is a "reasonable fee" intended
to pay for the costs to OSPR of the state's oil spill prevention
and response activities related to nontank vessels. Each
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certificate is good for 2 years. In order to address OSPR
funding problems, AB 1112 (Huffman, c. 583, Statutes of 2011)
increased the maximum per barrel fee temporarily to $0.065. On
January 1, 2015, the per barrel fee will revert to $0.05.
Legislative attempts to change the nontank vessel fee have
failed in recent years and the current base fee of $3,250 was
set recently by regulation. This increase was instituted, at
the Governor's behest, to bring revenues from the nontank
program more in line with program costs. Lower COFR fees are
charged to nontank vessels associated with a reduced pollution
risk.
OSRTF is funded by a $0.25 per barrel fee. This fee is assessed
on distributors, pipeline operators, refiners, and marine
terminal operators until the fund balance reaches its statutory
target of $55 million. Fee collection resumes only when the fund
contains less than 95% of its designated funding level. This
automatic replenishment is designed to prevent any oil spill
response from being limited by available funds.
The Oiled Wildlife Care Network (OWCN) rescues and rehabilitates
wildlife affected by coastal oil spills and has more than 30
member organizations and affiliated agencies. It maintains more
than 12 specialized facilities in a constant state of readiness,
and has saved more than 14,000 oiled birds and mammals affected
by more than 80 oil spills since 1995. It was formed pursuant
to the act in collaboration with the department in order to
provide the most proactive response in the world to oiled
wildlife.
OWCN's $2 million annual budget has come from interest accruing
to the OSRTF. In 2011, $40 million was transferred from the
OSTRF and loaned to the general fund resulting in a temporary
loss of earned interest. As a result, it is projected that the
OWCN will not be fully funded as early as 2014. Further,
current interest rates, according to a recent audit report from
the Department of Finance (DOF) titled "Review of State's Oil
Spill Prevention, Response, and Preparedness Program," are too
low to support the cost of the program. In his response to the
report, the department's director notes that "?California's oil
spill contingency plan holders rely on OWCN existing in order to
meet regulatory requirements."
PROPOSED LAW
This bill would amend the act to ensure that significant cuts
are not required in the state's oil spill prevention and
preparedness program when current fee levels sunset and to
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ensure that OWCN is funded. Specifically, this bill would :
As of January 1, 2015, increase the maximum annual
assessment to $0.07 per barrel of crude oil or petroleum
products.
As of January 1, 2015, increase and cap the nontank
vessel fee to obtain a COFR at $3,500, while allowing the
administrator to charge less for vessels that pose reduced
risk for pollution as of January 1, 2015.
Allow the administrator to transfer up to $2 million in
funds from OSPAF to OSRTF annually, as described, to fund
specified OWCN activities if interest revenue from the
OSRTF is insufficient.
ARGUMENTS IN SUPPORT
According to the author, the goal of this bill is to "save the
OWCN and ensure the solvency of the OSPAF for the near future by
increasing the per barrel fee to 7[."
The Natural Resources Defense Council and the Ocean Conservancy
state that this bill "would provide a stable funding source for
the [OWCN]. [?] AB 881 provides funding to address the
structural budget gap in the state's important oil spill
prevention and response work."
The Pacific Merchant Shipping Association states "the existing
mechanism for funding of the OWCN through interest earned on the
[OSRTF] [?] is inadequate for their budget needs, due to the
very low interest rates earned, and coupled with the loan of 80%
($40 million) of that fund to the general fund. We understand
and support the need for non-tank vessels to share in the cost
of funding this important program, and are amendable to
increasing that fee to help support the OWCN shortfall."
ARGUMENTS IN OPPOSITION
None received
COMMENTS
Financial viability and recent amendments. The December 31,
2012 DOF audit report of OSPR's programs stated that OSPAF was
financially sound, but found, as noted above, that the OWCN
lacks funding. This result conflicts with a department report
prepared pursuant to GOV §8670.40 that shows OSPAF with a
projected structural deficit of $3.8 million for fiscal year
(FY) 2012/13. Given that the per barrel fee will be reduced
from $0.065 to $0.05 on January 1, 2015, OSPAF will have a
considerably increased structural deficit (projected at $9.7
million in FY 2015/16 when fully phased in). The author's
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office has asked the DOF for clarification of the basis for
their findings.
On the Assembly floor, the author committed, by a letter to the
Journal, to amendments reducing the maximum proposed per barrel
fee from $0.08 to $0.07, and removing the administrator's
authority to adjust fees based upon changes to the California
Consumer Price Index. These amendments removed prior
opposition. Based upon current projections, however, this fee
increase would raise a maximum of $2.5 million per year which in
addition to the projected $600,000 increased revenue in the
nontank vessel fee program would not be sufficient to offset the
current deficit.
Commission staff in a June 19, 2013 letter to the author
expressed concerns about the June 18, 2013 amendments:
"While capping the fee at 7[ will fund the state's
[OWCN] program, it will not resolve the $3.8 million
structural deficit. The program will continue to
experience a multi-million dollar structural deficit
that will result in staff layoffs and cuts to the
program."
Per barrel vs nontank vessel fee. While the proportion varies,
the per barrel fees in FY 2011/12 accounted for roughly 80% of
the $35.5 million collected for OSPAF ($28.4 million).
Implications of Proposition 26 . Concerns were raised in the
last legislative session regarding the implication of
Proposition 26 for proposed changes to OSPR, including
expansions in the purposes of the OSPAF and OSRTF and placing
maximum or minimum limits on per barrel and nontank vessel fees.
In a written opinion dated May 21, 2013, Legislative Counsel
stated that none of these actions would constitute a tax.
OSTRF loan repayment . Per the DOF audit report, the $40 million
loan from OSTRF to the general fund is intended to be repaid on
June 30, 2014 with interest earned. However, there is no
assurance of repayment.
Recent related legislation
AB 1601 (Huffman, 2012) would have placed a temporary cap of
$3,500 on the nontank vessel fee for a certificate of financial
responsibility and allowed for the fee to change annually based
upon a price index (held in Senate Appropriations Committee
Suspense file)
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SB 1192 (Evans, 2012) would have increased the nontank vessel
fee cap to $3,500, raised the per barrel fee to $0.068, among
other provisions, to support, in part, the Oiled Wildlife Care
Network. (died on Assembly floor)
SB 584 (Evans, 2011) would have allowed the Oil Spill Prevention
and Administration Fund to support more elements of the Oiled
Wildlife Care Network. (held on Senate Appropriations Committee
Suspense file)
AB 1112 (Huffman, c. 583, Statutes of 2011) raised the per
barrel fee from $0.05 to $0.065 until January 1, 2015 to support
the marine facilities and tank vessel programs under OSPR (a
provision to set the nontank vessel fee cap at $3,000 was
removed in the Senate).
AB 234 (Huffman, 2010) would have, among other provisions,
raised the nontank vessel fee to exactly $3,000 (vetoed by
Governor Schwarzenegger (the nontank vessel fee was not
mentioned in the veto message.))
SUPPORT
San Francisco Baykeeper (sponsor)
Aquarium of the Pacific
California Academy of Sciences
California Association of Professional Scientists
California Association of Zoos and Aquariums
California Coastal Protection Network
California Coastkeeper Alliance
Channel Islands Marine and Wildlife Institute
Environment California
Environmental Action Committee of West Marin
Heal the Bay
International Bird Rescue
The Marine Mammal Center
Monterey Bay Aquarium
Natural Resources Defense Council
Ocean Conservancy
Orange County Coastkeeper
Pacific Merchant Shipping Association
PRBO Conservation Science
Russian Riverkeeper
Santa Barbara Wildlife Care Network
San Francisco Bar Pilots Association
San Francisco Bay Bird Observatory
Surfrider Foundation
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Sierra Club California
The Society for the Prevention of Cruelty to Animals for
Monterey County
University of California, Santa Cruz, Marine Mammal Stranding
Network
2 individuals
OPPOSITION
None Received
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