BILL ANALYSIS Ó
AB 881
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Jerry Hill, Chair
2013-2014 Regular Session
BILL NO: AB 881
AUTHOR: Chesbro
AMENDED: June 18, 2013
FISCAL: Yes HEARING DATE: July 3, 2013
URGENCY: No CONSULTANT: Laura Feinstein
SUBJECT : OIL SPILL PREVENTION AND ADMINISTRATIVE FEE
SUMMARY :
Existing law , under the Lempert-Keene-Seastrand Oil Spill
Prevention and Response Act (Government Code §8670.1 et seq.):
1) Establishes the Office of Spill Prevention and Response
(OSPR) within the California Department of Fish and Wildlife
(DFW) to administer the state's oil spill prevention and
preparedness program.
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 SLC, 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 SLC to minimize the possibility of a
discharge of oil.
3) Establishes the Oiled Wildlife Care Network (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) Requires the responsible party in an oil spill to fully
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mitigate adverse impacts to wildlife, fisheries, wildlife
habitat, and fisheries habitat.
5) Establishes the Oil Spill Prevention and Administration
Fund (OSPAF) to pay for the administrative functions of OSPR
and SLC. OSPAF has two funding sources:
a) A fee on non-tank vessels coming to
California that pays for non-tank vessel oversight.
The fee does not have a statutory cap, but present
regulations set it at $3,250.
b) A 6.5 cent per-barrel fee on oil received at
marine terminals sunsets on January 1, 2015, at which
point the fee is reduced to 5 cents. The per-barrel
fee covers a number of specified activities related
to prevention, research, and the maintenance of
emergency response programs, including costs incurred
by the Oiled Wildlife Care Network for training,
field collection, and search and rescue activities.
The per-barrel fee is not to be used for oil spill
response efforts.
6) 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
Oil Spill Response Trust Fund is funded by a fee on
distributors, pipeline operators, refiners, and marine
terminal operators, in an amount not to exceed 25 cents for
each barrel of petroleum product received or transported.
Fee collection is modulated to bring the Trust Fund to its
statutory cap, which is slightly less than $55 million
($54,875,000).
7) Allows the interest on the Trust Fund to pay for the OWCN
by requiring OSPR to submit a proposed appropriation each
year to the Governor's Budget to transfer $2 million from
the interest earned on the Trust Fund to OWCN.
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This bill :
1) Increases the maximum per-barrel fee from 6.5 to 7 cents
beginning January 1, 2015, instead of allowing the existing
sunset provision to drop the fee to 5 cents.
2) Caps the nontank vessel fee for oil spill prevention
activities at a maximum of $3,500 per nontank vessel, $250
higher than the level set in current regulations, beginning
January 1, 2015.
3) Allows OSPR to charge a lower nontank vessel fee for
vessels that pose a low risk of pollution, such as vessels
used for research or that rarely move.
4) Authorizes OSPR to transfer up to $2 million from OSPAF to
the Trust Fund to cover the annual costs of the OWCN. The
funds transfer is the amount necessary to cover a shortfall
if annual interest earned on the Trust Fund is less than $2
million.
COMMENTS :
1) Purpose of Bill . The author states that the bill is
intended to fund the state's oil spill prevention and
preparedness program and the Oiled Wildlife Care Network
for the next two to three years.
According to DFW, OSPAF is operating at a $3.8 million
structural deficit and will be insolvent in fiscal year
2014-15 when the present 6.5 cent per-barrel fee returns to
5 cents due to a sunset date put in place by AB 1112
(Huffman, Chapter 583, Statutes of 2011). According to a
2012 audit from the Department of Finance, the Oiled
Wildlife Care Network will be insolvent next year.
2) History of the Lempert-Keene-Seastrand Oil Spill
Prevention and Response Act (Oil Spill Act). In the wake of
the March 24, 1989 Exxon Valdez oil spill in Alaska and the
February 7, 1990 American Trader oil spill near Huntington
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Beach, 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.
The act also gives the SLC responsibility to minimize the
possibilities of a discharge of oil at marine oil terminals
and offshore oil production facilities, which they do
through their Marine Oil Terminal Engineering and
Maintenance Standards (MOTEMS).
3) Structure and Purpose of OSPAF. OSPAF is funded from the
per-barrel fee charged for oil received at marine terminals
and the nontank vessel fee. At present, the per-barrel fee
is 6.5 cents, but due to a sunset provision, the fee will
return to 5 cents on January 1, 2015. The maximum nontank
vessel fee was recently set at $3,250 by regulations;
however, there is no statutory cap on the fee. OSPAF funds
OSPR at DFW and the MOTEMS program at the SLC.
4) Structure and Purpose of the Trust Fund. The Trust Fund
is financed by a maximum 25 cent per-barrel fee on
distributors, pipeline operators, refiners, and marine
terminal operators. The Trust Fund is maintained at a cap
just below $55 million. Of the interest earned on the Trust
Fund, $2 million is appropriated annually for the OWCN, and
the remainder is retained in the Trust Fund. The fee is
only collected if the balance of the Trust Fund drops below
its capped level. The fee was collected for a few months at
the inception of the program; once the Trust Fund reached
its cap, the fee was discontinued and has never been
re-imposed.
5) Structure and Purpose of OSPR. The Office of Spill
Prevention and Response (OSPR) is a division of DFW, and
the lead state agency for marine and off-highway oil spill
prevention, response and natural resource restoration. When
a spill occurs, OSPR deploys a field response team of
wardens, environmental scientists and oil spill prevention
specialists to evaluate the incident and direct response
efforts. When there is not an ongoing incident, OSPR
collaborates with other organizations to develop oil spill
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contingency plans. OSPR also conducts drills and exercises
to promote readiness in the event of a spill.
6) Structure and Purpose of the OWCN. The OWCN is the state
program that rescues and rehabilitates oiled wildlife in
the state. It is a network of more than 30 organizations
and facilities throughout California.
AB 1549 (Sher), Chapter 940, Statutes of 1995, 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, the OWCN focused on increasing the
capacity for oiled wildlife rehabilitation along the
California coast by working with wildlife organizations to
prepare for caring for oiled wildlife, and constructing new
facilities where necessary. The OWCN continues to work on
training and preparedness, fostering inter-agency
cooperation, refining emergency response procedures, and
supporting research activities to improve oiled wildlife
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) Rising Expenditures for OSPAF. The Oil Spill Act requires
both OSPR and SLC to provide the "best achievable
protection" of public health, safety, and the environment.
Best achievable protection is defined as the highest level
of protection that can be achieved through 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. As OSPR and SLC have developed their
programs to provide the best achievable protection, the
costs to implement the act have increased.
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8) Funding Problems for OSPAF. The rising cost of
maintaining best achievable protection coupled with
inflation have caused OSPAF's expenditures to exceed its
revenue. DFW estimates that in the first fiscal year
affected by the sunset, 2014-15, OSPAF will incur a 1.24
million structural deficit. The following year, the deficit
will rise to 10.89 million. For a program that currently
costs $42 million a year, OSPR and SLC will have to cut
over $11 million in costs ($7.4 million a year from the AB
1112 sunset and $3.8 million from the structural deficit).
Without a new source of revenue, OSPR and SLC will have to
identify 90 staff positions to eliminate and cut oil spill
prevention and preparedness functions as part of next
year's budget process.
9) Funding Problems for the Trust Fund and OWCN. The OWCN's
budget is approximately $2 million, which has been funded
from interest earned on the Trust Fund. In 2011 the Budget
Act of 2010, SB 84, transferred $40 million from the Trust
Fund as a loan to the General Fund. As a result of the
loan, coupled with low interest rates, the Oil Spill
Response Trust Fund is generating virtually no money for
OWCN's budget.
The 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 of 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 DFW 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.
10) The Nontank Vessel Fee. Nontank vessels are vessels
weighing 300 gross tons or more that carry oil exclusively
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for their own propulsion, not as cargo. There is no
statutory limit set on the nontank vessel fee. In 2011,
OSPAF faced a major structural deficit. In response, AB
1112 (Huffman, Chapter 583, Statutes of 2011) was
introduced to increase the OSPAF per barrel fee from 5
cents to 8 cents. To address problems that led to the 2009
Dubai Star oil tanker spill in San Francisco Bay, AB 1112
also created significant responsibilities for OSPR
regarding vessel-to-vessel fuel transfers. With only a 1.5
cent per barrel increase and the additional
responsibilities with vessel to vessel transfers, OSPAF
still showed a 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." OSPR subsequently passed new
regulations to raise the fee to $3250 per vessel. Even with
the higher fee, DFW still projects a $3.8 million deficit
for OSPAF for fiscal year 2012-13.
11) A 7-cent per barrel fee will improve, but not repair,
OSPAF and the Trust Fund's fiscal condition. AB 881
originally would have raised the per-barrel fee to 8 cents,
which DFW projected was sufficient to maintain solvency for
OSPAF and OWCN indefinitely. However, to gain passage on
the Assembly floor, the bill was amended to raise the
per-barrel fee to only 7 cents.
DFW ran a preliminary analysis of how AB 881, as amended on
June 18 2013, would affect OSPAF's budget for 2014-15 and
2015-16. In their projection they assumed that, beginning
in 2014-15:
a) the per-barrel fee would rise to 7 cents, and
b) OSPAF would cover OWCN's nearly $2 million
shortfall.
If the bill were enacted, DFW predicts that OSPAF will
experience a $63,506 deficit in 2014-15, and a $1,988,743
deficit in 2015-16. OWCN will be able to meet its $2
million budget.
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Without the bill, projected deficits for OSPAF's next two
fiscal years are expected to be $1,240,000 in 2014-15 and
$10,888,000 in 2015-16, and OWCN would be essentially
bankrupt.
12) The Department of Finance Audit Versus DFW Projections.
In their 2012 audit of the State's Oil Spill Prevention,
Response and Preparedness Program, the Department of
Finance stated that "the overall financial basis is sound?
with the exception of two components, the Inland Spill
Response and the Oiled Wildlife Care Network Programs."
They went on to note that "AB 1112 increased the per barrel
fee of crude oil or petroleum from $.05 to $.065. We
reviewed the fee increase and determined it is reasonable
and sufficient to carry out oil spill prevention
activities."
DFW's projections are far less sanguine than the
Department of Finance's. DFW reports that OSPAF is
presently drawing on its reserve funds to fund its
activities. In 2014-15 the reserve will be exhausted and
the per-barrel fee will drop to 5 cents. At that point,
OSPAF will need to cut 11.2 million from its budget.
It is difficult to reconcile the discrepancies between the
Department of Finance's audit and DFW's budget projections.
It is possible that the Department of Finance's statement
that the financial basis of most of OSPR's activities was
sound only applied to the review period covered in the
audit, from July 1, 2011 through June 30, 2012.
13) Related legislation.
AB 2032 (Hancock) of 2008 would have increased the per
barrel fee from 5 cents to 8 cents. Vetoed by the Governor.
AB 2031 (Hancock), Chapter 563, Statutes of 2008, required
OSPR to expand its local government grant program with
OSPAF moneys.
SB 84 (Committee on Budget and Fiscal Review), Chapter 13,
Statutes of 2011, transferred $40 million from the Trust
Fund as a loan to the General Fund.
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AB 1112 (Huffman), Chapter 583, Statutes of 2011, raised
the per-barrel fee from 5 to 6.5 cents, with a sunset
provision that will reduce the fee back to 5 cents on
January 1, 2015. Also added new responsibilities for OSPR
to oversee vessel-to-vessel fuel transfers.
SOURCE : San Francisco Baykeeper
SUPPORT : 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
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 on file.
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