BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 881 (Chesbro) - Oil spill prevention and administrative fee.
Amended: June 18, 2013 Policy Vote: NR&W 7-2, EQ 8-1
Urgency: No Mandate: No
Hearing Date: August 30, 2013 Consultant:
Marie Liu
SUSPENSE FILE. AS AMENDED.
Bill Summary: AB 881 would increase the maximum per-barrel fee
from 6.5 to 7 cents beginning January 1, 2015, cap the nontank
vessel fee at a maximum of $3500 per nontank vessel, and
authorize the Oiled Wildlife Care Network (OWCN) to receive up
to $2 million from the Oil Spill Prevention and Administration
Fund (OSPAF).
Fiscal Impact (as approved on August 30, 2013):
Ongoing estimated increased revenue of $2.5 million
annually to the OSPAF (special) from the increased maximum
per-barrel fee beginning on January 1, 2015.
Cost pressures of $2 million to the Oil Spill Prevention
and Administrative Fund (special fund) beginning January 1,
2014 until January 1, 2016 for the activities of the OWCN.
Background: Under the Lempert-Keene-Seastrand Oil Spill
Prevention and Response Act (act), the Office of Oil Spill
Prevention and Response (OSPR) is responsible for regulating the
prevention, response, removal, and cleanup of oil spills in
state waters. OSPR's oil spill prevention and response readiness
responsibilities cost approximately $42 million annually and is
funded by a fee imposed on imported oil up to $0.065 per barrel
until 2015 and $0.05 per barrel after 2015. Fee revenues are
deposited in the Oil Spill Prevention and Administration Fund
(OSPAF). OSPAF also receives fee revenues from nontank vessel
certificate fees, which is set by regulation to cover the costs
to OSPR for the prevention and response activities related to
nontank vessels. The base fee is currently $3,250.
OSPR requires vessel operators to take certain precautions and
to undertake specific containment and cleanup actions in
response to an oil spill. Existing law requires OSPR to
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establish an Oiled Wildlife Care Network (OWCN), to be available
to respond to wildlife that have been impacted by oil spills.
OWCN facilities are maintained in a constant state of readiness
and are stocked with emergency medical equipment and supplies
and staffed by local volunteers specifically trained in the care
of oiled birds and marine mammals. The OWCN is largely funded by
interest accrued on the Oil Spill Response Trust Fund (Trust
Fund). The Trust Fund is funded by a $0.25 per barrel fee, which
is only collected until the balance reaches $55 million.
Proposed Law: This bill would raise the OSPAF per barrel fee on
imported oil to $0.07 beginning on January 1, 2015 and establish
a cap on the nontank vessel fee of $3,500 ($250 above the
existing fee).
This bill would also allow up to $2 million from the OSPAF to be
used to supplement funding that the OWCN receives from the Trust
Fund.
Related Legislation: AB 1112 (Huffman) Chapter 583/2011
temporarily raised the per-barrel fee from 5 to 6.5 until
January 1, 2015. AB 1112 also required OSPR to oversee
vessel-to-vessel fuel transfers.
Staff Comments: One of the key principals of the Oil Spill
Prevention and Response Act is that the vessel and marine
facilities are required to provide best achievable protection of
the state's resources from an oil spill, not the state. The
state is to provide an oversight role. Vessels and marine
facilities are required to have oil spill contingency plans that
identify the necessary dedicated response equipment needed to
achieve this level of protection. The OWCN, as an element of the
oil spill contingency plans, just like booms, needs to be ready
to respond to an oil spill at all times. If OWCN cannot be fully
funded through the state, vessels and marine facilities will
either need to rely on a different method to illustrate
readiness to deal with oiled wildlife in their contingency other
than the OWCN.
The OWCN has an operating budget of approximately $2 million.
Interest earnings have dropped significantly on the balance of
the Trust Fund primarily because of extremely low interest
rates, but also of a loan to the GF. While interest rates have
been low for several years, the OWCN has continued to get
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funding from excess interest earned earlier. OWCN will need some
supplemental funds to its Trust Fund allocation in FY 2013-14 to
remain in operation, though beginning in FY 2014-15, it is
anticipated that almost all of its funding will need to come
from the OSPAF.
At the current volume of imported oil (approximately 496 million
barrels), a half-cent increase in the per barrel fee results in
an additional $2.48 million in revenue. This increase offsets
the $2 million needed to fully fund the OWCN. However, as noted
by the Department of Finance analysis, this increase is not
sufficient to correct the ongoing OSPAF structural deficit.
Expenditures from the OSPAF have exceeded revenues by an average
of $2.56 million annually over the past six years. This
structural deficit has been masked by the spending down of a
large reserve ($18.78 million in FY 2006-07). Should this bill
pass, the Department of Fish and Wildlife calculates that the
reserve will be deleted in FY 2014-15. Program and personnel
cuts will be necessary in FY 2015-16 as there will be a $2
million shortfall in the OSPAF.
This bill does not increase the nontank vessel fee, but would
limit its growth in the future. If the nontank vessel fee was
raised to the maximum level of $3,500 proposed by this bill, an
additional $600,000 in revenue would be deposited into the
OSPAF. Staff notes that §8670.41 requires that the nontank
vessel fee must be a "reasonable fee" to cover the
administrator's costs in implementing the act relating to
nontank vessel. As the fee cannot exceed the administrator's
costs under statute as well as Proposition 26, it is unclear why
a cap is necessary or desirable. If a cap is established and the
nontank vessel fee becomes insufficient to support OSPR, then
other fee payers under the act will effectively subsidize the
nontank vessels until the Legislature allows an increase in that
cap.
Committee Amendments: Amendment to sunset the use of OSPAF for
the OWCN as of January 1, 2016 and to remove the cap on the
nontank vessel fee.