BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 233|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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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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