BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  SB 1319
          Author:   Pavley (D), et al.
          Amended:  5/27/14
          Vote:     21

           
           SENATE NATURAL RESOURCES AND WATER COMMITTEE  :  7-1, 4/8/14
          AYES:  Pavley, Evans, Hueso, Jackson, Lara, Monning, Wolk
          NOES:  Fuller
          NO VOTE RECORDED:  Cannella

           SENATE ENVIRONMENTAL QUALITY COMMITTEE  :  5-1, 4/30/14
          AYES:  Hill, Hancock, Jackson, Leno, Pavley
          NOES:  Fuller
          NO VOTE RECORDED:  Gaines

           SENATE APPROPRIATIONS COMMITTEE  :  6-1, 5/23/14
          AYES:  De León, Gaines, Hill, Lara, Padilla, Steinberg
          NOES:  Walters


           SUBJECT  :    Oil spills:  oil spill prevention and response

           SOURCE  :     Author


           DIGEST  :    This bill expands the Lempert-Keene-Seastrand Oil  
          Spill Prevention and Response Act (Act) and expands the  
          responsibilities of the administrator for oil spill response  
          (administrator), relating to oil spills to cover all waters of  
          the state, as defined; directs the Governor to require the  
          administrator to amend the California oil spill contingency plan  
          to provide for the best achievable protection of all state  
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          waters, not solely coastal and marine waters, and to submit the  
          plan to the Governor and the Legislature on or before January 1,  
          2017; and requires the regulations to provide for the best  
          achievable protection of all waters and natural resources of the  
          state.

           ANALYSIS  :    

          Existing law:

           1. Requires, under the Act, the administrator, acting at the  
             direction of the Governor, to implement activities relating  
             to oil spill response, including emergency drills and  
             preparedness, and oil spill containment and cleanup, and to  
             represent the state in any coordinated response efforts with  
             the federal government. 

           2. Directs the Governor to require the administrator to amend,  
             not in conflict with the National Contingency Plan, the  
             California oil spill contingency plan to add a marine oil  
             spill contingency planning section containing specified  
             elements, including an environmentally and ecologically  
             sensitive areas element. 

           3. Requires the administrator to adopt and implement  
             regulations governing the adequacy of oil spill contingency  
             plans to be prepared and implemented and requires the  
             regulations to provide for the best achievable protection of  
             coastal and marine waters. 

           4. Imposes various administrative civil penalties on a person  
             that violates specified provisions of the Act based on  
             whether it was an oil spill or an inland oil spill.

           5. Requires the administrator for oil spill response, upon  
             request by a local government, to provide a program for  
             training and certification of a local emergency responder  
             designated as a local spill response manager by a local  
             government with jurisdiction over or directly adjacent to  
             waters of the state.

           6. Requires the administrator to offer grants to a local  
             government with jurisdiction over or directly adjacent to  
             marine waters to provide oil spill response equipment to be  

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             deployed.

           7. Requires the administrator, within five working days after  
             receipt of a contingency plan, prepared as specified, to send  
             a notice that the plan is available for review to the Oil  
             Spill Technical Advisory Committee (Committee).

           8. Requires the administrator to establish a network of rescue  
             and rehabilitation stations for sea birds, sea otters, and  
             marine mammals affected by an oil spill in marine waters.

           9. Imposes an oil spill prevention and administration fee in an  
             amount determined by the administrator to be sufficient to  
             implement oil spill prevention activities, but not to exceed  
             6.5 cents per barrel of crude oil or petroleum products and,  
             beginning January 1, 2015, to an amount not to exceed five  
             cents, on persons owning crude oil or petroleum products at a  
             marine terminal.  The fee is deposited into the Oil Spill  
             Prevention and Administration Fund (OSPAF) in the State  
             Treasury.  Upon appropriation by the Legislature, monies in  
             the OSPAF are available for specified purposes.

           10.Imposes a uniform oil spill response fee on specified  
             persons, except specified independent crude oil producers,  
             owning petroleum products during any period that the Oil  
             Spill Response Trust Fund (Trust Fund) contains less than a  
             designated amount.  The money in the Trust Fund is  
             continuously appropriated for specified purposes, including,  
             to pay for the costs of rescue, medical treatment,  
             rehabilitation, and disposition of oiled wildlife, as  
             specified.

           11.Provides that, until June 30, 2014, if a loan or other  
             transfer of money from the Trust Fund to the General Fund  
             (GF) pursuant to the Budget Act reduces the balance of the  
             Trust Fund to less than or equal to 95% of the designated  
             amount, the administrator is not required to collect oil  
             spill response fees if the annual Budget Act requires the  
             transfer or loan to be repaid (a) to the Trust Fund with  
             interest calculated at a rate earned by the Pooled Money  
             Investment Account and (b) on or before June 30, 2014.

           12.Establishes the Committee to provide public input and  
             independent judgment of the actions of the administrator.   

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             The Committee is composed of 10 members.

          This bill:  

          1.  Expands the Act and the administrator's responsibilities  
             relating to oil spills to cover all waters of the state, as  
             defined.

          2. Directs the Governor to require the administrator to amend  
             the California oil spill contingency plan to provide for the  
             best achievable protection of all state waters, not solely  
             coastal and marine waters, and to submit the plan to the  
             Governor and the Legislature on or before January 1, 2017.   
             Requires the regulations to provide for the best achievable  
             protection of all waters and natural resources of the state. 

          3. Provides that, for purposes of administrative civil  
             penalties, it will no longer distinguish between an oil spill  
             and an inland oil spill, subjecting all persons to the oil  
             spill provisions. 

          4. Makes the program for training and certification of a local  
             emergency responder optional at the discretion of the  
             administrator. 

          5. Authorizes the administrator to offer the grants to a local  
             government with jurisdiction over or directly adjacent to  
             state waters.

          6. Requires the administrator, within five working days after  
             receipt of a contingency plan, to post a notice that the plan  
             is available for review.

          7. Requires the administrator to establish a network of rescue,  
             as specified, for wildlife injured by oil spills in waters of  
             the state, including sea otters and other marine mammals.   
             Authorizes the administrator to establish additional stations  
             or facilities in the interior of the state for the rescue and  
             rehabilitation of wildlife affected by inland spills.

          8. Requires the administrator to annually determine the fee in  
             an amount sufficient to pay the reasonable regulatory costs  
             of specified oil spill prevention activities.  Deletes the  
             provision that reduces the fee beginning on January 1, 2015,  

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             and will additionally impose this fee on a person owning  
             crude oil at the time the crude oil is received at a  
             refinery, as specified, by any mode of delivery that passed  
             over, across, under, or through waters of the state, whether  
             from within or outside the state.

          9. Authorizes the Director of the Department of Finance to  
             augment a specified appropriation in the Budget Act of 2014  
             for the reasonable costs incurred by the State Board of  
             Equalization (BOE) related to the collection of the oil spill  
             prevention and administration fee, as specified.

          10. Requires every person who operates an oil refinery, marine  
             terminal, or a pipeline to register with the BOE.

          11. Deletes the fee exception for independent crude oil  
             producers, and deletes the provision authorizing the monies  
             in the Trust Fund to be used to pay for the costs of rescue,  
             medical treatment, rehabilitation, and disposition of oiled  
             wildlife and authorizes monies in the Trust Fund to be used  
             to respond to an imminent threat of a spill. 

          12. Provides, until June 30, 2017, that if a loan or other  
             transfer of money from the Trust Fund to the GF reduces the  
             balance of the Trust Fund to less than or equal to 95% of the  
             designated amount, the administrator is not required to  
             collect oil spill response fees if the annual Budget Act  
             requires the transfer or loan to be repaid (a) to the Trust  
             Fund with interest calculated at a rate earned by the Pooled  
             Money Investment Account and (b) on or before June 30, 2014.   
             Provides that these provisions will be repealed July 1, 2017.

          13. Increases the number of Committee members from 10 to 14 and  
             requires the Speaker of the Assembly and the Senate Rules  
             Committee to each appoint one additional member who has  
             knowledge of environmental protection and the study of  
             ecosystems, and also requires the Governor to appoint two  
             additional members, with one having knowledge of the railroad  
             industry and another having knowledge of the oil production  
             industry.

          14. Revises various definitions within that Act, and makes other  
             conforming and technical changes.


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           Background 
           
          Two major crude oil spills from tankers influenced state law for  
          emergency response following marine oil spills:  the Exxon  
          Valdez spill in Alaska on March 24, 1989, and the American  
          Trader spill near Huntington Beach on February 7, 1990.  As a  
          result, the Legislature passed the Act in 1990.  This Act covers  
          all aspects of marine oil spill prevention and response in  
          California.  In 1991 the Office of Spill Prevention and Response  
          (OSPR) opened, headed by the administrator.

          When a spill occurs, OSPR deploys a field response team of  
          wardens, environmental specialists, 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  
          contingency plans.  OSPR also conducts drills and exercises to  
          promote readiness in the event of a spill.

          Although OSPR has authority to respond to marine oil spills and  
          inland oil spills near state water, it can only use money from  
          the OSPAF to respond to marine spills.  If an inland spill  
          occurs in an area distant from state waters, the primary  
          responsible agencies are Office of Emergency Services (OES) and  
          Department of Fish and Wildlife (DFW), although neither agency  
          has a dedicated fund for oil spill response and cleanup.

           Funding for OSPR  .  OSPR is funded by a per-barrel fee on any oil  
          delivered at marine terminals within the state and a fee on  
          non-tank vessels.  The per-barrel fee has varied over the years,  
          but currently the cap is 6.5 cents.  After January 1, 2015, the  
          fee will return to five cents.

          OSPR has recently faced challenges of rising costs to  
          maintaining protection from oil spills, inflation, and changes  
          in how oil enters California.  The DFW estimates that the OSPAF  
          already has a $2-3 million structural deficit.  This deficit  
          will be intensified following the fee sunset; the DFW projects a  
          47% decline in annual revenue by 2016.

           Budget change proposal  .  Governor Brown Administration has  
          proposed significant changes to the existing oil spill  
          prevention and response program through the fiscal year 2014-15  
          Budget to address the expected increase of crude oil transport  

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          by rail.  The proposed DFW Budget Change Proposal (BCP) expands  
          the current oil spill prevention and response program focused on  
          marine waters inland to include all waters of the state.  The  
          Administration's proposal will require the implementation of a  
          statewide inland oil spill program encompassing oil-related  
          facilities and oil transporters.

          To implement and fund the new inland program, OSPR will add 38  
          positions with an ongoing appropriation of $6.2 million  
          annually.  Revenue for the program is provided by removing the  
          January 1, 2015, sunset date on the 6.5 cents cap on the  
          per-barrel fee for oil delivered at marine terminals and  
          extending the fee to include all crude oil delivered to  
          refineries in California by any transportation method.  The  
          planned changes require legislative action and extensive  
          budgetary trailer bill language accompanies the BCP.  This bill  
          is based on the budgetary trailer bill language.

          The Legislative Analyst's Office has recommended support for the  
          proposal, although it recommends that a risk-based fee, if  
          feasible, be implemented that covers the cost of the entire oil  
          spill program and that the requested positions be funded for  
          one-half year only.

           Senate Hearing on Emergency Response to Rail Accidents  
          Regulatory Framework  .  On March 19, 2014, the Senate  
          Environmental Quality and the Senate Natural Resources and Water  
          Committees held an oversight hearing on Emergency Preparedness  
          for Rail Accidents.  During that hearing, representatives from  
          OSPR, OES, Department of Forestry and Fire Protection,  
          Department of Toxic Substances Control, and the Sacramento  
          County Certified Unified Program Agencies (CUPA) testified on  
          their responsibilities and preparedness in the event of a rail  
          accident.

          At the hearing, the agencies stated that while there is  
          significant cooperation at the state level, the coordination  
          with local agencies can be lacking.  The CUPAs are typically the  
          first responders after an accident.  Although immediate response  
          by a CUPA is likely in the event of an urban spill, local CUPA  
          staff in rural parts of the state may not be able to respond for  
          hours or until the next day.

          Testimony from OSPR highlighted the complete approach it  

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          currently has for prevention, preparedness, and response for a  
          marine oil spill.  However, OSPR testified that there are  
          significant gaps in all three of these areas for an inland oil  
          spill.  Although prevention of a spill from a train is largely  
          regulated by the Federal Rail Administration and the Public  
          Utilities Commission, there are substantial regulatory gaps in  
          preparedness.  In addition, OSPR highlighted the lack of  
          dedicated state resources for response.

           Transportation of oil  .  OSPR states that 65% of California's  
          crude oil supply arrives by tankers originating from Alaska or  
          overseas.  The remaining 35% is supplied by pipeline within  
          California.

          With the expansion of oil drilling in the Baaken region of North  
          Dakota and the Tar Sands in Canada, and the subsequent  
          transportation of crude oil by train, a shift is occurring in  
          the source of California oil imports.  OSPR states that in the  
          future, around 25% of California's crude oil supply would arrive  
          by rail.  This will be accompanied by a dramatic reduction in  
          the amount of oil arriving by tanker (43% predicted supply).

           Crude oil transportation by rail  .  The rapid expansion of crude  
          oil transportation by rail, coupled with a series of derailments  
          and explosions over the past year, has raised concerns about the  
          safety of rail transport of hazardous materials.

          Train accidents involving large crude oil spills resulting in  
          large fires and explosions have made headlines in the past year.  
           According to data from the Pipeline and Hazardous Materials  
          Safety Administration, the amount of crude oil spilled from rail  
          cars in 2013 exceeded that spilled in the preceding four  
          decades.  In 2013, 1.15 million gallons of crude oil were  
          spilled, compared with about 800,000 gallons spilled from rail  
          cars between 1975 and 2012.

          One of the most serious of these recent accidents was the  
          Lac-Mégantic derailment that occurred in the town of  
          Lac-Mégantic in Canada on July 6, 2013.  In this accident, a  
          74-car freight train carrying crude oil from the Bakken  
          formation derailed in the downtown area, killing 47 people and  
          destroying more than 30 buildings when multiple tank cars  
          exploded and burned.  In addition, the Chaudière River was  
          contaminated by 26,000 gallons of crude oil.

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           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes    
          Local:  Yes

          According to the Senate Appropriations Committee:

           Ongoing costs of $9.9 million (special*) to expand the oil  
            spill response program to include all waters of the state.

           Ongoing savings of $2 million (special**) resulting from  
            changing the funding source for the Oiled Wildlife Care  
            Network.

           Ongoing revenues of at least $11.9 million (special*) from  
            expansion of the per barrel oil fee base to include crude oil  
            received at refineries. 

          * Oil Spill Prevention and Administration Fund
          ** Oil Spill Response Trust Fund

           SUPPORT  :   (Verified  5/27/14)

          California League of Conservation Voters
          Clean Water Action
          Environmental Working Group
          Environment California
          Surfrider Foundation

           OPPOSITION  :    (Verified  5/28/14)

          California Chamber of Commerce
          California Independent Petroleum Association
          California Manufacturers & Technology Association
          Western States Petroleum Association

           ARGUMENTS IN SUPPORT  :    According to the author:

            Significant shifts in the mode of transportation of crude oil  
            into and within California are expected to occur in the near  
            future. [?] This shift in transportation mode - with an  
            accompanying shift in the source of the oil being refined in  
            the state - means that the nature of the risks associated with  
            oil spills as well as the likely locations of spills is also  
            changing.  It is time to update California's oil spill  

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            preparation, prevention and response.

            SB 1319 incorporates the Brown Administration's proposal  
            through the budget process to expand the  
            Lempert-Keene-Seastrand Oil Spill Prevention and Response Act  
            to all waters of the state and all modes of oil  
            transportation.

           ARGUMENTS IN OPPOSITION  :    The opponents state:

            We agree that sufficient funding is needed to fund the marine  
            program and better coordination is needed to ensure various  
            federal, state and local agencies have adequate tools to  
            respond to a potential crude-by-rail spill.  However, 
            SB 1319 is excessive and goes well beyond what's needed to  
            address emerging issues associated with crude-by-rail  
            transport.  The state has not prepared a sufficient regulatory  
            gap analysis to demonstrate the need to expand OSPR's role  
            over all inland spills, and the bill doesn't take into  
            consideration the regulatory authority of other federal, state  
            and local agencies. 

            As part of the budget discussions in the respective Senate and  
            Assembly subcommittees, we have proposed an alternative that  
            would immediately fund the marine program and the Oiled  
            Wildlife Care Network (OWCN) with sufficient funding, while  
            also establishing a new inland spill program that would be  
            separate and apart from the marine program, specifically to  
            address issues associated with crude-by-rail.  We think it  
            would be wise for the Legislature to address the immediate  
            funding needs of the marine program and OWCN through the  
            budget process to ensure entities can meet their spill  
            contingency requirements, and work on a separate policy bill  
            to address potential inland oil spills by rail.   
            Unfortunately, we have significant concerns with the current  
            version of SB 1319 and think that additional discussions with  
            the Administration and other stakeholders is needed before  
            moving this bill forward.

          RM:k  5/28/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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