BILL ANALYSIS
AB 2503
Page 1
ASSEMBLY THIRD READING
AB 2503 (John A. Perez)
As Amended May 28, 2010
Majority vote
WATER, PARKS & WILDLIFE 11-0
APPROPRIATIONS 17-0
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|Ayes:|Huffman, Fuller, Bill |Ayes:|Fuentes, Conway, Ammiano, |
| |Berryhill, Arambula, Tom | |Bradford, Charles |
| |Berryhill, Blumenfield, | |Calderon, Coto, Davis, |
| |Caballero, Ruskin, | |Monning, Ruskin, Harkey, |
| |Fletcher, Bonnie | |Miller, Nielsen, Norby, |
| |Lowenthal, Salas | |Skinner, Solorio, |
| | | |Torlakson, Torrico |
| | | | |
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SUMMARY : Enacts the California Marine Life Legacy Act,
authorizing conversion of decommissioned offshore oil platforms
or production facilities into artificial reefs if specified
criteria are met, including a finding that conversion to an
artificial reef would provide a "net benefit" to the environment
as compared to removal, and creates the California Endowment for
Marine Preservation. Specifically, this bill :
1)States various legislative findings and declarations regarding
the benefits and need for an artificial reef research and
development program, the benefits and cost savings that may
result if decommissioned offshore oil platforms are allowed to
be converted to artificial reefs, and the need for a mechanism
to ensure that those savings are shared with the citizens of
the state and used to benefit coastal marine resources.
2)Defines various terms for purposes of the California Marine
Life Legacy Act (the Act).
3)Repeals, reenacts and expands the California Artificial Reef
Program (CARP), as part of the Act, to be administered by the
Department of Fish and Game (DFG), to include all the
following:
a) Placement of artificial reefs, including decommissioned
offshore oil platforms allowed to remain in place as
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artificial reefs in state or federal waters;
b) Study of existing successful reefs and all new reefs to
determine the design criteria needed to increase marine
biomass and biodiversity;
c) Determination of the requirements for reef siting and
placement; and,
d) Consideration of modification and use of existing marine
structures in both state and federal waters as artificial
reefs.
4)Authorizes DFG to serve as the primary authority for managing
and operating artificial reefs created from offshore oil
platforms, to obtain funds for these purposes from any lawful
source, and to adopt regulations to implement the Act.
5)Authorizes DFG to conditionally approve conversion of an
offshore oil platform or facility to an artificial reef only
if all the following criteria are satisfied:
a) The alternative of conversion provides a "net benefit"
to the environment compared to the alternative of removing
the oil platform or facility. Requires DFG in determining
net benefit to take into account certain factors;
b) The artificial reef will be consistent with state and
federal water quality control laws, navigational safety,
the California Coastal Management Program, the Marine Life
Management Act, the Marine Life Protection Act, the federal
Magnuson-Stevens Fishery Conservation and Management Act,
the National Fishing Enhancement Act, and all applicable
state, federal and international laws;
c) The cost savings that will result from conversion are
determined;
d) The owner or operator of the oil platform provides
sufficient funds to DFG to cover all costs of evaluation of
the benefits of the artificial reef, including any
necessary research, costs of reviewing, approving, and
permitting the project, and for overall management of the
reef, including enforcement, research, monitoring, and
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long-term management, operations and maintenance;
e) The owner or operator of the oil platform indemnifies
the state against any and all liability that may result;
f) The owner or operator applies for and receives all
required government permits, including a permit from the
United States (U.S.) Army Corps of Engineers; and,
g) For facilities in federal waters, DFG may approve
conversion to an artificial reef if DFG agrees to take
title, DFG obtains the U.S. Army Corps of Engineers permit,
and the conversion is approved by the U.S. Minerals
Management Service.
1)Requires the owner or operator of an oil platform or facility,
upon conditional approval of conversion of the platform or
facility to an artificial reef, to immediately transmit an
amount equal to 50% of the cost savings the owner or operator
receives from voluntarily converting the facility to an
artificial reef instead of removing the facility, to be
apportioned as follows:
a) 90% to be deposited in the California Endowment for
Marine Preservation (CEMP), which this bill would create;
and,
b) 10% to be deposited with the board of supervisors of the
county immediately adjacent to the facility. Requires the
county to use these funds for projects within coastal lands
and waters.
1)Provides that moneys deposited pursuant to this bill in the
CEMP and with the board of supervisors of the county shall be
held in trust for the purposes described.
2)Prohibits DFG from granting final approval of a conversion
until the cost savings that will result from the conversion
are determined and 50% of the cost savings are transmitted by
the owner or operator, as specified. Requires DFG to ensure
the accuracy of the cost savings calculated or to contract
with another entity for this purpose. Requires DFG to use and
consider estimates of cost savings provided by any other
governmental agency, or if DFG disagrees with the estimate
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used by another agency, to prepare a public report explaining
the reasons for the differences.
3)Authorizes DFG to take title to a decommissioned oil platform
in open coastal waters only if the conversion is approved by
DFG pursuant to the requirements of this bill and the state is
indemnified from any liability that may result.
4)Requires DFG, for each application received for conversion of
an oil platform to an artificial reef, to determine criteria
for biological evaluation of the facility for use as an
artificial reef. Requires DFG to consult with and advise the
California Coastal Commission (CCC), the State Lands
Commission (SLC) and other responsible agencies as to the
criteria. Requires the criteria to include consideration of
the depth and location of the reef.
5)Authorizes an oil platform owner, at any time prior to
transfer of title to the state, at its sole discretion, to
cease participation in the artificial reef conversion and
pursue full decommissioning, subject to reimbursement to the
state of all reasonable costs and expenses.
6)Provides that nothing in this bill shall limit or affect
authority or duties of any state or local agency including but
not limited to the SLC and the CCC.
7)States that nothing in this bill shall be construed to do any
of the following:
a) Relieve the prior owner or operator of an offshore oil
platform or facility from any continuing liability under
existing laws associated with seepage or release of oil
from the platform or facility;
b) Establish any new liability on the part of the state;
c) Require any agency to approve an artificial reef
conversion;
d) Promote or encourage offshore oil exploration in
California coastal waters;
e) Require the U.S. Department of Interior or SLC to modify
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an existing oil and gas lease;
f) Alter any existing law that establishes liability for
damages arising from artificial reefs;
g) Alter any existing law that protects natural reefs;
h) Alter the authority of any state or local agency; or,
i) Approve any particular method of abandonment.
1)Prohibits any conversion of an oil platform or facility to an
artificial reef from being used or counted as mitigation for
any environmental impacts to natural resources.
2)Establishes the Accelerated Existing Platform Decommissioning
Program (AEPDP) as an expedited program for meeting the
requirements for conversion of an oil platform or facility to
an artificial reef. Provides that proposed conversions
pursuant to the AEPDP are projects subject to the California
Environmental Quality Act (CEQA) and qualify for expedited
review under CEQA. Authorizes an owner or operator of an oil
platform to apply to enroll the platform in the AEPDP, and
authorizes DFG to require the application to include a reefing
plan, a management plan, a proposed determination of the net
environmental benefit, and a proposed determination of the
cost savings. Provides that this information shall be for
advisory purposes only, and that DFG shall maintain sole
authority to make final determinations based on its
independent review and judgment.
3)Requires DFG, for project applications filed under the AEPDP,
to complete the CEQA review, consult with other responsible
agencies, provide opportunity for public comment, hold a
public hearing, make a final determination whether a project
meets program requirements, determine if there is a net
environmental benefit, and determine the cost savings, all
within one year if certification for an Environmental Impact
Report (EIR) is required, or within 180 days for a negative
declaration. Provides that if DFG does not complete the
review within these time frames then the application shall be
considered under the non-accelerated program.
4)Authorizes DFG and the applicant, if DFG determines that the
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project meets all program requirements, to enter into an
agreement to enroll the facility in the AEPDP and to require
the applicant to perform decommissioning and conversion in
accordance with a reefing plan approved by DFG. Requires the
applicant, upon execution of an agreement to enroll the
facility in the AEPDP, to transmit 50% of the cost savings,
apportioned as follows: 85% shall be deposited in the CEMP,
5% shall be deposited with the board of supervisors of the
county immediately adjacent to the facility, and 10% shall be
deposited in the General Fund.
5)Requires the state, if an agreement under the AEPDP or any
required permit for the project is challenged in court and
found to be invalid or unenforceable, to repay any funds the
applicant has paid for deposit into the General Fund within 90
days.
6)Requires the applicant to provide sufficient funds to cover
all of DFG's costs for projects enrolled in the AEPDP.
7)Sunsets the AEPDP on January 1, 2014.
8)Establishes the CEMP, which shall be subject to the Nonprofit
Public Benefit Corporation Law, and governed by a board of
directors consisting of nine members appointed by the
Governor. Specifies criteria for each member and term of
office.
9)Authorizes the members of the initial board to serve as
incorporators, and states legislative intent that the CEMP not
be incorporated until funds are made available pursuant to the
Act.
10)States that the purpose of the CEMP is to create a permanent
source of funding for projects to conserve, protect, restore
and enhance open coastal marine resources, as specified.
11)Authorizes the CEMP board to obtain grants, make contracts,
loan funds, hire employees and obtain legal counsel.
Prohibits an employee of the CEMP from also being an employee
of the state, and requires that employees of the CEMP shall
have the right to representation under the National Labor
Relations Law.
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12)Requires the CEMP board to create a 5 year business plan and
to update the plan annually. Requires the CEMP board to
submit a report to the Legislature by February 1 of each year
that includes the business plan, a comprehensive report of all
activities, grants and loans, and any independent audits
required.
13)Prohibits the CEMP board from making political contributions.
Requires the CEMP to coordinate with specified state and
federal agencies. Authorizes the CEMP to receive charitable
contributions and loans from the state.
14)Requires the CEMP to invest and manage funds it receives in
order to provide income in perpetuity, prohibits expenditure
of the principal amount, and authorizes expenditure only of
returns on investment. Requires that the funds be invested
and managed in accordance with the Nonprofit Public Benefit
Corporation law, requires annual independent audits of the
funds, and authorizes the Bureau of State Audits to audit the
CEMP. Requires that a report of each audit be made to the
Legislature and Governor. Further requires that recipients of
assistance from the CEMP comply with record keeping
requirements, and that the CEMP and the Bureau of State Audits
be given access to the records of recipients.
15)Requires CEMP funds to be administered and managed in
accordance with reasonably prudent investor standards,
generally accepted accounting practices, the Uniform Prudent
Investor and Uniform Management of Institutional Funds Acts,
and provides for reversion of the funds to the state in the
event of a cessation or failure to perform.
16)States legislative intent that the findings and
recommendations of a specified study on oil rig
decommissioning being coordinated by the California Ocean
Science Trust and due to be released in June 2010 be taken
into account in determining the process for evaluation and
proposed conversion of decommissioned oil rigs to artificial
reefs.
EXISTING LAW :
1)Establishes CARP to research the construction and placement of
artificial reefs in California waters to enhance marine fish
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species.
2)Generally requires, pursuant to existing state and federal
offshore oil leases, removal of decommissioned oil platforms
after the lease ends, though federal regulations and state and
federal lease provisions allow the federal government to
consider and approve decommissioning methods other than
complete removal.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1) Ongoing annual costs to DFG of an unknown amount, but at
least approximately $1 to $2 million, for the equivalent of a
nine-person unit of varying classifications, to evaluate
proposed oil facility conversions.
2) Ongoing annual costs to DFG of at least $200,000 for
consulting costs related to evaluation of proposed
conversions.
3) Cost pressures of approximately $1 to $2 million to provide
start-up funds to the CEMP, to be repaid from later revenue
received from oil facility owners or operators seeking to
convert their oil facilities.
4) Potential revenue to the CEMP of an unknown but substantial
amount, likely in the millions of dollars annually.
5) Potential revenue to the General Fund, of an unknown but
substantial amount, likely in the millions of dollars
annually.
6) This bill specifies that all costs are to be covered by
owners or operators of oil facilities proposed for conversion.
DFG expresses concern, however, that it would need staff in
place at the time it receives the first application for
conversion of an oil facility and that this bill makes no
provision for these start-up costs.
COMMENTS : The purpose of this bill is to provide a process by
which an oil company wishing to decommission an offshore oil
platform can apply to the state to leave it in place, with the
top removed, and split the savings incurred from not having to
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remove it with the state and with a nonprofit trust fund that
will be created. According to the author and sponsor, this
bill is necessary to create a legal framework for the conversion
of offshore oil rigs to artificial reefs, and to determine how
the revenue generated will be spent.
Currently, there are 27 offshore oil and gas platforms located
1.2 to 10.5 miles off the southern California coast, at depths
ranging from 35 to 1,198 feet. Four of the platforms are in
state waters and 23 in federal waters. Several of these rigs
are expected to be decommissioned in the next decade. The
options for dealing with a platform after decommissioning are to
leave it in place, partially remove it, or completely remove it.
In the Gulf of Mexico, 85% of decommissioned oil platforms have
been partially removed or toppled, providing aquatic habitat.
Most of these are in much shallower water than the rigs in
California. In California, six platforms have been
decommissioned, all by removal. Oil companies stand to gain
substantial cost savings (by some estimates in the tens of
millions to hundreds of millions of dollars per platform) if
they are allowed to leave some or all of the platform in place.
Several scientific arguments have been offered in support of
re-using decommissioned oil rigs as artificial reefs. The
platforms may provide breeding, rearing and refuge habitat for
fish and invertebrates. In California, 32 out of 52 federally
managed rockfish species have been documented at the platforms.
If the platforms are removed this fish habitat will be lost,
and the attached invertebrates will be killed. Approximately
900 tons of invertebrates were estimated destroyed when two
platforms were removed in 1986, and over 2,000 tons when four
platforms were removed in 1996. Biological surveys conducted in
southern California found the platforms tended to have higher
abundances of large fishes, particularly declining but
economically important species, than did most natural reefs.
Scientific researchers M.S. Love and D.M. Shroeder concluded
this is likely due to the relatively low fishing effort around
many platforms in southern California, thus the platforms are
acting as de-facto mini-marine protected areas for fish. These
same researchers also found the platforms served as nurseries
harboring higher densities of young fish. The platforms occupy
a relatively small space and so contribute little additional
habitat relatively speaking. However, their importance as fish
nurseries and refuges may be more significant than otherwise
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suggested by their size, since the off shore position makes them
less susceptible to coastal pollution.
Another reason given for keeping the rigs in place is the
environmental destruction caused by their removal. Removal
kills the organisms attached to the platform, and fish are
killed by the underwater explosions used to remove the platforms
from the sea floor.
Information from DFG indicates that offshore platforms do
support abundant populations of fish and invertebrates, but
their actual habitat value and contribution to increased
production of marine life is under study. DFG is part of an
Inter-agency Decommissioning Working group composed of federal,
state and local agencies. While some earlier studies questioned
the contributions of oil platforms to reef habitat in the
southern California region, in 2003 the California Artificial
Reef Enhancement Program, a non-profit group sponsored by
Chevron, published a report which concluded, based on peer
reviewed science, that some platforms may be important to
regional fish production. This bill requires DFG to study each
oil platform proposed to be allowed to stay in place as an
artificial reef to determine whether there would be a net
environmental benefit.
Arguments against conversion of oil rigs to reefs generally
raise three concerns: 1) that the oil industry agreed to remove
these platforms as a condition of the lease and should be held
accountable for the full costs of removal, clean up, and return
of the ocean environment to its natural condition; 2) that the
abandoned oil platforms present a safety hazard for navigation
and an obstacle to commercial fishing, especially trawling; and,
3) that if oil companies are allowed to leave the oil rigs in
place, a greater share of the cost savings should inure to the
state.
Analysis Prepared by : Diane Colborn / W., P. & W. / (916)
319-2096
FN: 0004701