BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 233| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 233 Author: Hertzberg (D), et al. Amended: 6/2/15 Vote: 21 SENATE NATURAL RES. & WATER COMMITTEE: 6-1, 4/28/15 AYES: Stone, Allen, Hertzberg, Hueso, Monning, Wolk NOES: Jackson NO VOTE RECORDED: Pavley, Vidak SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15 AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen SUBJECT: Marine resources and preservation SOURCE: Coalition for Enhanced Marine Resources Sport Fishing Conservancy DIGEST: This bill modifies the rigs-to-reefs program by requiring that the decision to allow partial decommissioning consider air quality or greenhouse gas emissions (GHGs), designating the State Lands Commission (commission) as the lead agency for the purposes of California Environmental Quality Act (CEQA), and makes other clarifying and technical changes. ANALYSIS: Existing federal law requires that "decommissioned" oil and gas platforms be removed at the end of production, and the surrounding marine environment be cleaned up and restored to a natural condition. Existing state and federal offshore oil leases generally require the removal of decommissioned oil SB 233 Page 2 platforms after the lease ends. Both federal regulations and provisions in state and federal leases allow the federal government to consider and approve alternative decommissioning methods other than complete removal. "Rigs-to-reefs" programs are widely used in the Gulf of Mexico, and Louisiana, Texas and Mississippi. Existing state law: 1)Establishes the California Marine Resources Legacy Act (Fish and Game Code §§ 6600 et seq.) which established state policy to allow, on a case-by-case basis, the partial decommissioning of offshore oil and gas platforms. Partial decommissioning means removing the top part of the platform while leaving the lower portion behind to act as a subsurface "reef." Not all platforms may qualify for partial decommissioning, however, as certain conditions must be met. These include, among others, that there be a net environmental benefit from the "reef" and that a portion of the cost savings to the platform owner from partial, as opposed to full, decommissioning be shared with the state and deposited in an endowment whose moneys would be used to the benefit of coastal marine resources. This "rigs-to-reefs" program is voluntary and platforms in both state and federal waters are eligible to participate. The legislative findings for the bill that established the "rigs-to-reefs" program (AB 2503, Perez, Chapter 687, Statutes of 2010) included that the costs of the program should be borne by the applicants. 2)Recognizes the multi-jurisdictional nature of platform decommissioning and the need for a viable rigs-to-reefs program to utilize the established expertise and authority of different state entities. AB 2503 split up program responsibilities between different regulators as follows: a) The Department of Fish and Wildlife (department) has the primary authority, as specified, for carrying out the program, b) The Natural Resources Agency serves as lead agency under CEQA, c) The Ocean Protection Council (council) determines whether a net benefit to the marine environment from SB 233 Page 3 partial decommissioning exists, d) The State Lands Commission (commission) determines the cost savings, and e) The authority of the California Coastal Commission is acknowledged and information sharing, coordination and communication between the different entities is emphasized. 3)Provides that a rigs-to-reef application is complete when the applicant provides certain financial assurances that ensures that sufficient funds are available to pay for the cost of processing the application. The first AB 2503 applicant will also be required to pay the program's set-up costs, although those are reimbursable. 4)Provides that conditional approval of a rigs-to-reef application may be provided when certain criteria, as specified, are met. When conditional approval is received, the owner or operator of the structure must transmit a portion of the total cost savings to the state on the following schedule: 55% by January 1, 2017, 65% between January 1, 2017 - January 1, 2023 and 80% after January 1, 2023. This bill modifies the existing rigs-to-reefs program. Specifically, this bill: 1)Replaces the Natural Resources Agency as CEQA lead with the commission; 2)Allow the applicant to withdraw its rigs-to-reef application at any time and clarifies payment for start-up costs and reimbursement procedures, if applicable, for applicants; 3)Adds consultation with the Air Resources Board, as specified, in the calculation of net benefits to the marine environment; 4)Adds air quality or GHGs to the determination of the net benefit to the marine environment; 5)Adds a public meeting to review the environmental documents to the one already required on the application, as specified; and 6)Makes additional technical and clarifying changes. SB 233 Page 4 Background There are 27 oil and gas platforms offshore California. Four of these platforms are in state waters at relatively shallow depths (approximately 200 feet or less). The remaining 23 platforms are over three miles from shore at depths reaching nearly 1,200 feet. Additionally, there are five more offshore "islands" (which are also platforms) in state waters. The platforms are located off the coasts of Los Angeles, Ventura and Santa Barbara counties. At least five offshore platforms, including one island, off the coast of California have been "decommissioned" and removed. Rigs-to-reefs programs allow the oil industry to avoid the costs of full decommissioning, although full decommissioning was an agreed-upon lease condition. Estimates of the cost savings associated with partial decommissioning vary from tens of millions to hundreds of millions of dollars per platform. AB 2503 provided a financial incentive to the oil industry to submit partial decommissioning applications by providing that a smaller fraction of the cost savings would be shared with the state in the early years of the program (55%) compared to later (80%). Despite repeated assertions over at least the last 15 years that applications for partial decommissioning were imminent, no applications under AB 2503 have been filed with the state. (It is a fair point that no application has been developed pursuant to AB 2503, which this bill seeks to address.) The economic viability of any offshore platform and its oil and gas wells is a function of many factors. High prices for crude oil the last five years - prices of benchmark crudes often exceeded $100/barrel - compared to approximately $50/barrel in last several months with muted expectations of a substantial price rise in the short term are likely to have affected the outlook for the offshore California platforms. Comments The commission has experience as a CEQA lead agency for platform decommissioning. Even in the event of an application for a rigs-to-reefs conversion in federal waters, it is likely that substantial elements of the decommissioning would be under the SB 233 Page 5 commission's jurisdiction. Air quality and the net environmental benefit. The consideration of air quality, including GHGs, in decommissioning is a required element of the CEQA environmental analysis. The focus on biological resources and water quality - in other words on the proposed reef and its immediate subsurface environment - in the existing calculation of the net environmental benefit to the marine environment seeks to ensure the reef provides lasting benefits. It is highly likely that there will be a significant difference in total air emissions between partial and full decommissioning to the advantage of partial decommissioning. That said, the direct and indirect impacts from air emissions to the proposed reef and their duration are unclear, and the council will have to determine how to appropriately weigh these impacts in its calculations. The rigs-to-reef program is voluntary. Circumstances may arise, such as advances in offshore oil production, where the platform owner may wish to keep the platform in operation despite having applied for partial decommissioning. Existing law is clear that the rigs-to-reefs program is voluntary, and the bill makes explicit that the platform owner may withdraw the program application. AB 2503's division of regulatory effort is appropriate given existing jurisdiction and expertise. Offshore oil platforms operate under the jurisdiction of multiple regulators, as will their eventual partial or full decommissioning. There is substantial existing expertise and experience relevant to decommissioning already extant in state government. Coordination and communication are critical between the relevant entities as they utilize their existing expertise and exercise their independent judgment in processing a rigs-to-reef application. AB 2503 specifically provides for formal agreements to be used to ensure coordination and communication between entities and timely application processing. These have proven successful in many other circumstances. Recent platform decommissioning. According to the commission, Belmont Island off the coast of Los Angeles County was decommissioned in the early 2000s and was the last offshore oil facility to be removed from California's waters. The commission found that complete removal of the island was the SB 233 Page 6 environmentally preferred option because there was no evidence that the island provided unique habitat in the area. Additionally, the Coast Guard determined, given the shallow depth, that leaving the base of the island behind would create a navigational hazard. Prior to the Belmont Island decommissioning, the Chevron 4-H platforms off the coast of Carpenteria and Summerland were decommissioned in 1996. The commission acted as CEQA lead. During the platforms' operation, "shell mounds" built up under each one. The mounds are composed of materials from the periodic cleaning of the platform legs of marine life as well as other marine organisms. Additionally drilling fluids and drill cuttings were deposited on the sea floor underneath the platforms prior to this practice being banned. The drilling materials contain contaminants such as PCBs, hydrocarbons and metals. All of these materials are now bonded together in the mounds which were left in place when the platforms were decommissioned. The mounds are 25 - 28 feet high, and 200 - 250 feet in diameter. Decommissioning requirements included the full removal of the shell mounds and all site debris, and that a "trawl test" with standard equipment be performed. According to reports, the site is untrawlable. A decision has been made to leave the mounds in place, but it is unclear if all the necessary permits have been issued. Most of the offshore platforms are in federal waters and will need federal permits. While close coordination and communication may be able to facilitate the necessary state permits for partial decommissioning, the state cannot compel the relevant federal entities to issue the applicable federal permits in a timely manner. Do rigs-to-reefs automatically mean there will be more fishing opportunities? Not necessarily. The department is authorized to limit fishing in the vicinity of the reef, if warranted (FGC §6613(c)). FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee, this bill has one-time costs in the low to mid tens of thousands of dollars, reimbursable by the project applicant, to the department and the SB 233 Page 7 Air Resources Board for new responsibilities in considering a partial decommissioning application SUPPORT: (Verified6/1/15) Coalition for Enhanced Marine Resources (co-source) Sport Fishing Conservancy (co-source) Amigos Del Air Libre Big Fish Bait and Tackle Deep Blue Scuba and Swim Center Get Wet Scuba Harbor Breeze Corporation Hubbs-Sea World Research Institute Inland Empire Waterkeeper Orange County Coastkeeper Pierpoint Landing Professional Association of Diving Instructors San Diego County Wildlife Federation 22nd Street Landing Sportfishing United Anglers Valley Industry and Commerce Association OPPOSITION: (Verified6/1/15) Citizens Planning Association of Santa Barbara County Community Environmental Council Environment California Environmental Action Committee of West Marin Environmental Defense Center Food and Water Watch Friends of the Sea Otter Get Oil Out! International Marine Mammal Project of Earth Island Institute Ocean Conservancy Ocean Conservation Research Pacific Coast Federation of Fishermen's Association Santa Barbara Channelkeeper Sierra Club - Los Padres Chapter Sierra Club California The Ocean Foundation SB 233 Page 8 Western Alliance for Nature Wholly H2O Two individuals ARGUMENTS IN SUPPORT: According to the author, "in 2010, the Legislature passed AB 2503 by former Speaker John Perez, which enacted California's rigs-to-reefs program. We are now nearing the point where the first of California's offshore oil rigs will be ready for decommissioning in the next few years. It has become apparent through discussions with the Administration, that the permitting process is unworkable, both for practical reasons involving a lack of expertise and fiscal reasons as well. Senate Bill 233 is intended to make the current rigs-to-reefs permitting process more pragmatic without sacrificing any level of environmental review. As the bill moves along, we intend to work closely with a multi-agency group to review the rigs-to-reefs approval process and make recommendations for changes, the chairs of the policy committees, and stakeholders to make sure that we have a consensus approach to the decommissioning process [that] is both workable and protective of the environment." The author continues, "[t]he bill adds the impact of greenhouse gas emissions [which] should be considered in weighing the removal options for offshore oil rigs" in the calculation of the net environmental benefit and "has left open for negotiation moving back the various cut-off dates which encourage early retirement of oil rigs to accommodate the five years since the passage of AB 2503." "Overall, SB 233 seeks to take a critical look at the rigs-to-reefs program and to work to make the process better. Ultimately, if oil rigs are approved for conversion, a productive marine ecosystem will be saved from destruction and potentially hundreds of millions of dollars will be made available in perpetuity for funding ocean oriented environmental programs." ARGUMENTS IN OPPOSITION: In a joint opposition letter, the Environmental Defense Center and others note that this bill "is unnecessary, premature, and would undermine the provisions in existing law that require a balanced, thorough analysis of SB 233 Page 9 proposal to leave offshore oil platforms at sea. The bill is unnecessary because the legislature already passed AB 2503 in 2010. That bill followed many years of state-wide debate and was fashioned to include relevant agencies and stakeholders in a process that would address the many issues that will be raised if oil platforms are not removed from the ocean environment. These issues include legacy pollution resulting from residual toxins and contaminated debris left in the ocean, introduction of invasive species, attraction of fish away from productive natural reefs, safety and navigational risks, and increased liability to the state." The joint letter continues that this bill is premature because "no platforms are ready for decommissioning. [?] Clearly, there is no need to hasten to amend existing law." While acknowledging that many of the letter signers did not support AB 2503 because "we believe the oil industry should comply with its original commitments to remove oil platforms at the end of their productive life and to restore the marine environment to a natural condition," they note that "[e]xisting law is adequate to address the issues raised by proposals to avoid full decommissioning of offshore oil platforms." The Environmental Action Committee of West Marin identifies several issues in its letter, including, among others, concerns about the length of time considered in the net environmental benefit analysis, and the lack of public participation in the development of net environmental benefit criteria. Prepared by: Katharine Moore / N.R. & W. / (916) 651-4116 6/2/15 20:10:46 **** END ****