BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 1319| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 CONTINUED SB 1319 Page 2 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 CONTINUED SB 1319 Page 3 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. CONTINUED SB 1319 Page 4 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, CONTINUED SB 1319 Page 5 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. CONTINUED SB 1319 Page 6 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 CONTINUED SB 1319 Page 7 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 CONTINUED SB 1319 Page 8 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. CONTINUED SB 1319 Page 9 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 CONTINUED SB 1319 Page 10 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 **** END **** CONTINUED SB 1319 Page 11 CONTINUED