BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        SB 233|
          |Office of Senate Floor Analyses   |                              |
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                                    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  








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          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  







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               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.







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          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  







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          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  







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          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  







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          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







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          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  







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          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


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