BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 233


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          Date of Hearing:  July 14, 2015 


                  ASSEMBLY COMMITTEE ON WATER, PARKS, AND WILDLIFE


                                 Marc Levine, Chair


          SB  
          233 (Hertzberg) - As Amended July 7, 2015


          SENATE VOTE:  37-2 


          SUBJECT:  Marine resources and preservation.


          SUMMARY:  Amends the California Marine Resources Legacy Act  
          regarding requirements of applications for partial removal of an  
          offshore oil structure.  Specifically, this bill:


          1)Requires the State Lands Commission (Commission) instead of  
            the Natural Resources Agency to serve as the lead agency for  
            purposes of the environmental review required under the  
            California Environmental Quality Act (CEQA) for a proposed  
            project to partially remove an offshore oil structure.   
            Requires the Commission, as lead agency, to begin the  
            environmental review as soon as feasible after the applicant  
            provides required financial assurances.


          2)Allows a prospective applicant, before the first application  
            for partial removal of an offshore oil structure is filed, to  
            elect to pay a portion of the startup costs rather than all  









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            startup costs, in an amount the Department of Fish and  
            Wildlife (DFW) determines to be necessary for staff and other  
            costs in anticipation of receipt of the first application.


          3)Authorizes an applicant to withdraw an application at any time  
            before final approval, and requires the DFW, upon notification  
            that the applicant has withdrawn the application, to return to  
            the applicant any unexpended funds.


          4)Requires the criteria developed by the Ocean Protection  
            Council (OPC) for evaluating the net environmental benefit of  
            full removal versus partial removal of offshore oil structures  
            to be based on best available science.  Requires the OPC to  
            consult with the State Air Resources Board, in addition to  
            other specified entities, in determining the criteria.  Adds  
            to the factors the OPC is required to take into account in  
            making the determination of net environmental benefit, any  
            adverse impacts to air quality or greenhouse gas emissions.   
            Requires the OPC to determine the appropriate weight to be  
            assigned adverse impacts to air quality or greenhouse gas  
            emissions as compared to adverse impacts to biological  
            resources or water quality.  Requires the OPC to take all  
            feasible steps to complete its determination in a timely  
            manner that accommodates the DFW's schedule for consideration  
            of the application.


          5)Clarifies that the purpose of the opportunity for public  
            comment and public hearings that the DFW is required to  
            provide and hold are to receive public comment on the  
            application and environmental document pursuant to CEQA.


          6)Modifies the timelines that trigger the percentage of the cost  
            savings that an applicant is required to share with the state  









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            for the first applicant to partially remove an offshore oil  
            structure only.  Provides that the applicant who files the  
            first application to partially remove an offshore oil  
            structure shall apportion and directly transmit a portion of  
            the total amount of cost savings resulting from the first  
            application to DFW as follows:


               a)     55% if the application was submitted before January  
                 1, 2017;


               b)     65% if the application was submitted on or after  
                 January 1, 2017, and before January 1, 2023; and


               c)     80% if the application was submitted on or after  
                 January 1, 2023.



            Requires DFW to return the cost savings paid by the first  
            applicant to the applicant if any approvals required for  
            partial removal are permanently enjoined, vacated,  
            invalidated, rejected, or rescinded as a result of litigation,  
            and the applicant is required to carry out full removal.  


          7)Provides that the total percentage of the cost savings  
            required to be shared shall be transmitted by the applicant to  
            DFW.  Requires DFW, upon final, nonappealable judicial  
            decisions upholding DFW's final approval and all permits and  
            approvals required for partial removal, or the running of the  
            statute of limitations, whichever is later, to transmit the  
            specified percentages of the total to the California Endowment  
            for Marine Preservation, the General Fund, and Fish and Game  
            Preservation Fund, the Coastal Act Services Fund, and the  









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            County adjacent to the facility, as specified.    


          EXISTING LAW: 


          1)   Under the California Marine Resources Legacy Act,  
            establishes a program to allow partial removal of  
            decommissioned offshore oil structures as an alternative to  
            full removal if specified conditions are met.  Authorizes the  
            DFW to approve partial removal if specified conditions are  
            met, including that:  the removal would be consistent with all  
            applicable state, federal and international laws; the partial  
            removal provides a net benefit to the marine environment as  
            compared with full removal; the cost savings that would result  
            have been determined; the applicant has provided required  
            financial assurances; DFW and the applicant have entered into  
            a contractual agreement that will provide sufficient funds for  
            overall management of the remaining structure; and federal  
            approvals have been received.


          2)   Requires the OPC to establish criteria for determining net  
            environmental benefit and to consult with the DFW, the  
            Commission, the California Coastal Commission and the  
            California Ocean Science Trust.  Requires the OPC in  
            determining whether partial removal would provide a net  
            benefit to the marine environment, to take into account, among  
            other things, any adverse impacts to biological resources or  
            water quality, or any other marine environmental impacts.


          3)   Provides that a proposed project to partially remove an  
            offshore oil structure is a project for purposes of CEQA, and  
            the Natural Resources Agency shall serve as the lead agency  
            for the environmental review.










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          4)   Requires the first person to file an application for  
            partial removal of an offshore oil structure to pay the  
            startup costs incurred by the DFW or Commission to implement  
            the Act, including the costs of developing and adopting  
            regulations.  Requires the DFW to reimburse the payment of  
            startup costs from cost savings subsequently deposited into  
            the Fish and Game Preservation Fund from future applicants.


          5)   Requires the DFW, prior to granting conditional approval of  
            an application for partial removal to prepare a management  
            plan, as specified, and to provide an opportunity for public  
            comment and hold a public hearing in the county nearest to the  
            location of the structure.


          6)   Requires the applicant, upon receipt of conditional  
            approval for partial removal of the structure, to apportion  
            and directly transmit a portion of the total amount of the  
            cost savings to specified entities as follows:


            a) 55% if the application was transmitted before January 1,  
            2017;


            b) 65% if transmitted on or after January 1, 2017, and before  
            January 1, 2023;


            c) 80% if transmitted on or after January 1, 2023.


          7)   Requires, of the amount of the cost savings required to be  
            submitted in 6) above, that the applicant shall directly  
            transmit the following percentages to the identifed funds: 85%  









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            to be deposited into the California Endowment for Marine  
            Preservation; 10% to be deposited into the General Fund; 2% to  
            be deposited into the Fish and Game Preservation Fund; 2% to  
            be deposited into the Coastal Act Service Fund; and 1% to be  
            deposited with the board of supervisors of the county  
            immediately adjacent to the location of the facility prior to  
            its decommissioning.


          FISCAL EFFECT:  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 DFW and the Air Resources Board for new responsibilities in  
          considering a partial decommissioning application.


          COMMENTS:  This bill makes several changes to an existing law,  
          enacted in 2010, that allows for owners or operators of  
          decommissioned offshore oil structures, to apply to the state  
          for permission to partially remove the oil structure instead of  
          fully removing the structure, if certain criteria are met.  To  
          date, no applications have been filed under the law, but it is  
          anticipated that one or more offshore oil structures may be  
          scheduled for decommissioning in the next few years. 


          1)Author's Statement:  The author states that "California's  
            coast is home to more than two dozen oil platforms that have  
            been extracting fossil fuels for, in many cases, more than  
            fifty years.  Built in the 1960s, the half century oil  
            construction technology poses a threat to California's coast  
            as these platforms age and continue to be battered by ocean  
            forces.  At the same time, these oil rigs are home to decades  
            of accumulated and valuable marine life that have made a home  
            of the massive structures.  Across the globe and in places in  
            the United States, like the Gulf of Mexico, artificial reefs  
            have been created from ships, subway cars and decommissioned  









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            oil rigs.  However, in California the permitting process for  
            partial removal of rigs under the California Marine Resources  
            Legacy Act is so cumbersome and opaque that no operator has  
            applied for a permit under [the Act].  As long as oil and gas  
            are being extracted from the waters off California, this state  
            will continue to face a grave environmental threat in that of  
            oil spills or leaks.  SB 233 seeks to improve the permitting  
            process to convert an oil rig into an artificial reef and end  
            off-shore oil production."  



          The Senate analysis of this bill cites the author as further  
            stating that "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.  SB  
            233 is intended to make the current rigs-to-reefs permitting  
            process more pragmatic without sacrificing any of the  
            environmental review."  The author indicates an intent to work  
            on amendments that are "both workable and protective of the  
            environment."  The author adds that this "bill adds impact of  
            greenhouse gas emissions that should be considered in weighing  
            the removal options for offshore oil rigs" in the calculation  
            of the net environmental benefit, and that "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."
          2)Background:  AB 2503 (John Perez), Chapter 687, Statutes of  
            2010, enacted the California Marine Resources Legacy Act,  









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            which, under specified conditions, allows for the partial  
            removal of a decommissioned offshore oil platform, as an  
            alternative to full removal.  The law is commonly known as the  
            "Rigs-to-Reefs" program, since the structure of the remaining  
            platform can serve as an artificial reef providing some  
            habitat for fish and other marine organisms.  The criteria for  
            approval of partial removal is that there must be a scientific  
            finding that there would be a net benefit to the marine  
            environment from partial removal versus full removal.  The  
            additional public policy rationale behind the program is that  
            since there would be significant cost savings to the applicant  
            from partial removal, the law requires that the cost savings  
            be shared with the state.  The current program, as enacted by  
            AB 2503, provides that a portion of the cost savings would go  
            to an endowment for marine conservation created by the bill, a  
            portion would go to the state General Fund, a portion would go  
            to the DFW to cover state review and management costs, and a  
            portion would go to the county located nearest to the offshore  
            oil platform.  The earlier that the offshore oil facility is  
            decommissioned, the larger the percentage of the cost savings  
            that the applicant is allowed to retain.  Thus far, no  
            entities have submitted applications under the Act for partial  
            removal of a decommissioned offshore oil facility.  Other  
            issues include how the start-up costs should be funded for the  
            DFW to develop the resources and expertise to review and  
            evaluate the applications, and whether air quality and climate  
            change impacts should be considered in the determination of  
            "net environmental benefit," and if so, what weight these  
            impacts should be given versus other impacts to the marine  
            environment.  


          3)Prior and related Legislation:  AB 207 (Rendon) of 2013  
            proposed amendments to the Act that were substantially similar  
            to this bill.  AB 207 was held in the Assembly Appropriations  
            Committee.  AB 2267 (Hall) of the 2012 Session also proposed  
            similar amendments to the Act and was held in the Senate  









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            Appropriations Committee.  Some versions of these prior bills,  
            and earlier versions of this bill, also proposed to alter the  
            time frames and percentages of the cost savings that the  
            applicant is required to share with the state, and provisions  
            relating to liability and indemnity.   


          4)Supporting Arguments:  Supporters indicate this bill will  
            remedy an unworkable permitting process for the partial  
            decommissioning of off-shore oil rigs, with the goal of  
            facilitating the end to off-shore oil drilling off the  
            California coast.  Supporters note this bill would streamline  
            the review process and require that air quality impacts be  
            considered in determining net environmental benefit.  Other  
            supporters emphasize the value of decommissioned oil  
            structures in providing forage and habitat for marine species.


          5)Opposing Arguments:  Opponents assert this bill is unnecessary  
            and would undermine the existing law which requires a  
            balanced, thorough analysis of partial versus full removal,  
            and was passed after extensive debate.  They also assert this  
            bill is premature since no platforms are ready for  
            decommissioning at this point.  Some opponents also note that  
            while they were opposed to the original law as proposed in AB  
            2503 (John Perez), and continue to feel that the oil industry  
            should be required to comply with its original commitment to  
            remove oil platforms in their entirety at the end of their  
            productive life and restore the marine environment to its  
            natural condition, they feel the existing law is adequate to  
            address issues raised by proposals for partial removal.   
            Opponents also identify several issues they assert need to be  
            addressed if oil platforms are not entirely removed, including  
            legacy pollution resulting from residual toxins and  
            contaminated debris, introduction of invasive species,  
            attraction of fish away from more productive natural reefs,  
            safety and navigation issues, and potential increased  









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            liability to the state.



          Some groups opposed this bill unless amended to retain the SLC's  
            responsibility for determining the cost savings (an amendment  
            which was adopted), while others opposed unless amended to  
            delete proposed extensions to the timelines for cost sharing  
            obligations.  This bill was amended in the Senate to delete  
            the earlier proposed timeline extensions, and was amended in  
            the Assembly to modify the timeline just for the first  
            applicant, who bears the responsibility for payment of state  
            startup costs, and to reflect current trends in oil platform  
            economic lifetimes.

          Opposition letters received were to prior versions of this bill.  
             It is unclear whether the subsequent amendments have removed  
            all of the opposition.
          6)Suggested Committee Amendments:  The July 7th amendments to  
            this bill replaced the term "credible science" with the term  
            "best available science."  Since the Fish and Game Code  
            defines credible science to include best available scientific  
            information, and includes standards for determining best  
            available science, it is suggested that this bill be amended  
            to reinsert the term "credible science."



          The July 7th amendments also modified, for the first applicant  
            only, the timelines that trigger the percentage of the cost  
            savings that the applicant is required to share with the  
            state.  The new timelines for the first applicant are based on  
            the date that the application is submitted.  However, until  
            the first application actually goes through the process,  
            questions may exist as to what constitutes a completed  
            application.  To ensure that the applicant is committed to the  
            process, it is recommended that the language in new  









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            subdivision (c) (1) of Section 6618 be modified to read:  "?if  
            the application was submitted and the applicant elected to pay  
            startup costs pursuant to Section 6612 (c) before January 1,  
            2017."  Similar language could also be added to subdivision  
            (c)(2) and (c)(3) of that section.    
          REGISTERED SUPPORT / OPPOSITION:




          Support


          The Sportfishing Conservancy


          Amigos Del Aire Libre


          Get Wet Scuba


          22nd Street Landing Sportfishing


          Big Fish Bait and Tackle


          Harbor Breeze Corporation




          Opposition (to prior version of bill)


          Environmental Action Committee of West Marin (unless amended)









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          Environment California


          Environmental Defense Center


          Ocean Conservancy (unless amended)


          Sierra Club California


          Western Alliance for Nature


          Wholly H2O







          Analysis Prepared by:Diane Colborn / W., P., & W. / (916)  
          319-2096