BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Gilbert Cedillo, Chair
SB 981 - Soto
Amended: April 24, 2003
Hearing: May 7, 2003 Fiscal: YES
SUBJECT: Children's Health and Petroleum Pollution
Remediation Act of 2003: 30 cents per barrel fee
to fund specified pollution reduction and health
programs
EXISTING LAW requires the Board of Equalization to
collect two different fees on crude oil and petroleum
products transported into or through the state. The oil
spill and prevention fee is imposed at a rate not more than
4 cents per barrel on owners of crude oil when it is
received at a marine terminal. An oil spill response fee
has also been imposed, at a rate of 25 cents per barrel of
oil received at a marine terminal by means of a vessel from
a point outside the state. This latter fee reached it's $50
million maximum level in 1991-92 and no additional fees
have been collected since that time.
THIS BILL enacts the Children's Health and Petroleum
Pollution Remediation Act of 2003 and makes extensive
legislative findings regarding petroleum products and air
pollution.
Beginning in 2004, the bill requires every operator of
a refinery to pay a fee of 30 cents per barrel of crude oil
that is used for the production of gasoline and diesel
fuels for consumption in the state. The Board of
Equalization would administer the fee in accordance with
existing "boiler-plate" administrative provisions for the
administration and collection of fee programs to be
SB 981 - Soto
Page
administered by the board. The fee would be due and payable
to the board by the 25th day of each month following the
month for which the fee is imposed. And each fee payer
would be required to make out a monthly return for the
preceding month, detailing the actual fuel production used
in the calculation of the fee payments, including a
breakdown of amounts of diesel and gasoline produced.
The fees paid to the BOE would be transmitted to the
Children's Health and Petroleum Pollution Remediation Trust
Fund, which the bill creates. Money deposited in the fund
would be used to pay for refunds of overpayments, and for
administrative costs, and the balance would be allocated as
follows: (1) on January 1 of each year the Air Resources
Board would be required to provide a breakdown of each air
quality management district's and each air pollution
control district's contribution to the state emissions
inventory; (2) no later than March 1 of each year the
Controller would allocate money from the fund to each
district in proportion to each district's share of the
state emission inventory as determined by the ARB; (3)
money allocated to each district would be expended by the
district to fund petroleum pollution source reduction
programs and public health remediation programs - the
district would be responsible for establishing that the
programs will be based on a clear nexus regarding the
relevant harm caused, or intended to mitigate or prevent
the relative harm created, by diesel and gasoline fuel in
that district's jurisdiction and the revenue received from
the fee.
FISCAL EFFECT:
Board of Equalization estimates that the fee would
generate about $131 million annually.
COMMENTS:
A. Purpose of the bill
The author indicates that existing resources are
insufficient to mitigate the damaging effects to public
SB 981 - Soto
Page
health and the environment resulting from the combustion of
petroleum products. The bill would authorize local air
districts, under specified conditions, to use the proceeds
of a fee for the treatment of damaging effects to public
health as well as the reduction of emission sources.
Proponents believe that the combustion of petroleum
products, especially gasoline and diesel fuels, is the
major source of ozone precursors, toxic air contaminants,
and particulate matter throughout the state. Such
pollutants are a recognized cause of cancer in humans as
well as being strongly associated with respiratory
diseases. The economic costs to the public are substantial
as measured by lost workdays and school attendance.
B. Sinclair decision
The proposal is based on the Sinclair Paint Co. v.
State Board of Equalization decision of 1997. This decision
permitted limited and specific fees to be assessed against
responsible companies to mitigate costs associated with use
of a company's products. The case requires that fees be
proportionate to resulting damages and restricts use of fee
revenue to mitigation of the harm caused by the responsible
company. California currently has one "Sinclair" mitigation
program that provides remediation of lead paint sources and
services to children affected by lead poisoning.
Legislative Counsel agrees that this bill would meet
the Sinclair tests of a fee, since the bill is not keyed as
a tax increase requiring a Proposition 13-required 2/3
legislative vote.
C. Board of Equalization suggests amendments
Board of Equalization suggests the following technical
amendments:
Clarify definition of "gasoline" to match
definitions in other tax laws
The period for which a computation of the ratio
of gasoline to diesel produced should be specified
SB 981 - Soto
Page
Clarify the term "equivalent" as used in
determining the amount of crude oil used to produce
gasoline and diesel
Provide an appropriation to fund development of
the administration of the fee prior to the effective
date of January 1, 2004, so that the board can
commence the fee program right when it becomes
effective.
Support and Opposition
Support: South Coast Air Quality Management District
(sponsor)
70 health, conservation, education and other
organizations
and companies
37 individuals
Oppose: 10 chambers of commerce, trade associations,
tax reduction
associations, a trucking company and an
airport
---------------------------------
Consultant: Martin Helmke