BILL ANALYSIS Ó SENATE COMMITTEE ON NATURAL RESOURCES AND WATER Senator Fran Pavley, Chair 2015 - 2016 Regular Bill No: AB 815 Hearing Date: June 9, 2015 ----------------------------------------------------------------- |Author: |Ridley-Thomas | | | ----------------------------------------------------------------- ----------------------------------------------------------------- |Version: |February 26, 2015 Introduced | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Katharine Moore | | | | ----------------------------------------------------------------- Subject: Oil spill prevention and response fees: collection. BACKGROUND AND EXISTING LAW 1. 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. 2. 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. 3. The act established 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 certain other items. 4. Prior to the passage of the Resources budget trailer bill last year (SB 861, c. 35, Statutes of 2014), OSPAF was primarily funded by a per barrel fee of 6.5[ assessed on each barrel of crude oil or petroleum products received at marine oil terminals or from offshore production facilities. The AB 815 (Ridley-Thomas) Page 2 of ? owner of the crude oil or petroleum products is responsible for the fee. SB 861 substantially revised the act to address, in part, the potential growth of crude oil transport into and in California by rail. The OSPAF fee is now assessed upon receipt of crude oil and petroleum products at refineries too. The fee is remitted to the State Board of Equalization (BOE). 5. SB 861 provides for the OSPAF fee to be collected once only (GOV §8670.40(b)(5)) in order to address, for example, the situation where a barrel of crude oil refined into petroleum products exported via a marine terminal. In this instance, the barrel would pass through two fee collection points but should be assessed only once. 6. OSRTF is funded by an (up to) 25[ per barrel fee on crude oil and petroleum products. This fee is assessed on the owner of the products, pipeline operators, refiners, and marine terminal operators until the fund balance reaches its statutory target of about $55 million, as specified. PROPOSED LAW This bill would make clarifying and technical changes to OSPAF fee collection necessary following the passage of SB 861 last year. Specifically this bill would: authorize a marine terminal or refinery operator receiving petroleum products derived from crude oil refined in the state to presume the fee has already been collected. state legislative intent that the BOE collect the OSPAF fee only upon first delivery to a refinery or a marine terminal. delete the requirement that the owner of crude oil/petroleum products remit the fee directly to the BOE, and make additional clarifying and technical changes. ARGUMENTS IN SUPPORT According to the author, "While SB 861 expanded the [OSPAF] fee to crude oil and petroleum products received at the refinery, the bill also added provisions that prevent the fee from being imposed or paid twice on the same crude oil or petroleum products. However, current law is not clear that petroleum products derived from fee-paid crude oil, once refined, are not subject to the fee." AB 815 (Ridley-Thomas) Page 3 of ? "BOE staff believes that legislative intent language alone may be ineffective to relieve industry from the requirement to document that the [OSPAF] fee previously was paid on petroleum products derived from fee-paid crude oil. Therefore, statutory guidance is necessary to clarify the issue." The BOE in its support letter indicates that the benefits of the bill include "reduced confusion," "improved method for preventing [the] double fee," and "ease of administration." ARGUMENTS IN OPPOSITION None received COMMENTS This is clean-up legislation that clarifies OSPAF fee collection . For example, the refinery operator or the marine terminal owner who collects the fee from the owner can remit them to the board, not the owner of the crude oil/petroleum products. The act and its fees implicitly depend upon the existing California market . The OSPAF fees are collected upon arrival at marine terminals or at refineries. This presumes that all/most of the crude oil and petroleum products pass through either a marine terminal or refinery at least once. Crude oil produced in California, but refined elsewhere, could potentially bypass the OSPAF fee. This does not currently occur -- according to the CEC, no California crude oil has been exported from the state in 2014 or 2015, the most recent data available. Should energy policy and the California crude oil/petroleum products market change in the future, these implicit assumptions may no longer remain true. For example, there has been a recent push to change federal energy policy to lift the ban on crude oil exports (see S.1312, the Energy Supply and Distribution Act of 2015, introduced with bipartisan support last month in the U.S. Congress). Recent related legislation SB 861 (Committee on Budget and Fiscal Review, chapter 35, Statutes of 2014) This Resources trailer bill substantially amended the act to address the growth/potential growth of crude AB 815 (Ridley-Thomas) Page 4 of ? oil transport by rail in California. AB 2678 (Ridley-Thomas, 2014) This bill was an earlier attempt at OSPAF fee Resources trailer bill clean-up language. (died on the Unfinished Business file on the Assembly floor with the concurrence vote pending) SUPPORT State Board of Equalization (sponsor) California Chamber of Commerce OPPOSITION None Received -- END --