BILL ANALYSIS
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|Hearing Date:April 13, 2009 |Bill No:SB |
| |260 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC
DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: SB 260Author:Wiggins
As Introduced: February 24, 2009 Fiscal:Yes
SUBJECT: Petroleum products: motor oil.
SUMMARY: Increases the maximum fee paid to the Department
of Food and Agriculture's Division of Measurement Standards
from $0.02 to $0.05 for each gallon of motor oil sold or
purchased on or after January 1, 2010. Provides that a fee
of $0.03 for each gallon of motor oil sold or purchased may
be applied by the Secretary prior to the adoption of
regulations.
Existing law:
1)Jointly regulates and enforces the sale of and
measurement standard of petroleum products, by the
Department of Food and Agriculture (DFA) acting through
its Division of Measurement Standards (DMS) and by each
County Office of Weights and Measures, acting through the
county sealer.
2)Authorizes DMS and each sealer to inspect the petroleum
products and to enter any place where petroleum products
are kept, and take any samples necessary for inspection.
3)Prohibits any person from selling or delivering any
petroleum product, as specified, which fails to meet the
required specifications.
4)Establishes a motor oil fee to be used for the
administration and enforcement of the petroleum and
automotive products provisions, and requires persons
involved in the sale of motor oil to pay a maximum fee of
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$0.02 for each gallon of motor oil sold or purchased on
or after July 1, 1980.
5)Provides that the fee shall be paid only once on any
particular motor oil and that it shall not apply to motor
oil exported for sale outside of California.
6)Provides the fee may be established at a lower rate by
the Secretary of Food and Agriculture and that the
Secretary may, by regulation, prescribe the frequency of
payments, the procedures for such payment, the procedures
for refunds, and penalties for late payment.
This bill:
1)Increases the maximum fee from $0.02 to $0.05 for each
gallon of motor oil sold or purchased on or after January
1, 2010.
2)Provides that a fee of $0.03 for each gallon of motor oil
sold or purchased may be applied by the Secretary prior
to the adoption of regulations.
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal"
by Legislative Counsel.
COMMENTS:
1.Purpose. This California Agricultural Commissioners and
Sealers Association (CACASA) is the Sponsor of this
measure and indicates that the source of the bill is the
California Department of Food and Agriculture, Division
of Weights and Measures . According to CACASA, the bill
ensures that valuable consumer protection programs that
reinforce both the quality of petroleum products on the
market and the accuracy of the volume distributed to the
buyer will continue to safeguard the public and provide
adequate oversight.
The Sponsor states that the current fee is capped at two
cents ($0.02) per gallon and is not sufficient to cover
the current program requirements. Revenues are used to
perform octane testing, viscosity tests, and other
quality analysis on fuels, oils and engine additives. A
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portion of the funding is also used to ensure compliance
with labeling standards. The Sponsor states that these
programs ensure that petroleum products adhere to strict
quality standards, ensuring fair competition among
producers as well as protecting the public from
substandard or contaminated fuels and automotive
products.
According to the Sponsor, the current cost of the
inspection and enforcement program is $4.4 million and
annually exceeds the revenue generated by fees. The fee
generates $2.9 million and fuel levels have been
relatively stable for the last several years. Estimates
show that without an increase, the funding for this
program will run out by March, 2010. For several years
the Division has been spending down a reserve that built
up in the petroleum account. That reserve is now
exhausted and the program will no longer be able to carry
out its mission under the existing fee structure,
according to the Sponsor.
2.Background. The California Oil Substitution Act of 1931,
established statewide minimum quality standards for
petroleum and other automotive products as well as
prohibited false or misleading advertising and labeling
of those products. The California Department of Food and
Agriculture's Division of Measurement Standards and
California County Sealers of Weights and Measures are
charged with enforcing the provisions of this Act.
The DMS is mandated by both state and federal law to
enforce the standards. This oversight promotes
uniformity of products and transactions throughout the
state. According to DMS, the enforcement program is
staffed with special investigators who train and
coordinate county inspectors, coordinate special
investigations involving cases of fraud, contamination
and misbranded products, and has two laboratories with
highly trained chemists. The program is dedicated to
ensuring only quality fuels and automotive products are
sold and distributed to the motoring public.
In 1979, legislation was enacted that replaced the funding
for the Department's Petroleum Products Program (Program)
from a pump registration fee to a fee assessed on each
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gallon of motor oil manufactured or imported into
California. In 1979, the maximum fee was set at two
cents ($0.02) per gallon with the provision that the
Department could, by regulation, establish a lower rate
when the funds collected were more than necessary for
administration and enforcement of the code. This fee has
not been increased in 29 years. The County Sealers are
reimbursed for their enforcement through contracts with
each county. The funding available for these contracts
has been set at between $500,000 and $527,000 since the
early 1980's.
3.Clarification: The bill raises the fee only once. As
introduced the bill would increase the maximum fee from
$0.02 to $0.05 for each gallon of motor oil, and
additionally provide that a fee of $0.03 for each gallon
of motor oil sold or purchased may be applied prior to
the adoption of regulations. It is important to note
that these are not two separate fees. The legislation
simply authorizes a total fee cap of five cents per
gallon. The specific level of the fee must be set by
agency regulations. However, the bill would provide that
until those regulations are adopted, a fee of three cents
per gallon may be charged. These are not two separate
fees, but are all part of the one motor oil fee which
would not total more than five cents per gallon.
The purpose of specifically authorizing the Secretary of
the Department of Food and Agriculture to charge a fee of
three cents per gallon, prior to the adoption of
regulations, is to ensure that the funding for the
program will not be depleted prior to the March 2010 date
when the current fund is projected to become insolvent.
4.Expansion of Regulatory Duties. According to the Fee
Bill Worksheet (see Comment 6, below), prepared by the
Department of Food and Agriculture's Division of Weights
and Measures and the Sponsor, there has been an expansion
of regulatory duties for the DMS over the years which is
part of the reason why the current fee structure is
inadequate to appropriately fund the inspection program
operations. The worksheet states:
In 1999, legislation passed the Provision of, Air,
Water, and Pressure Gauge law (Section 13651 of the
B&P Code) for service stations and required the
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Division to monitor and enforce it. Originally the
Legislature provided general funds to enforce this
function of the program, but these funds have been
cut.
In 2001 the Division was tasked with oversight of
the Developmental Engine Fuels (Section 13405 of the
B&P Code) variance program. This program requires
the Division to monitor entities that sell engine
fuels that have no ASTM International
specifications.
In 2005, Senate Bill 76 was passed (Section 13446 of
the B&P Code) to adopt a hydrogen fuel quality
standard. Since no standard existed, the Division
of Measurement Standards (Division) in cooperation
with the California Air Resources Board was charged
with the task. The Division received one time
funding from CARB, but this was discontinued before
regulations were adopted in 2008.
5.Arguments in Support. The Author argues that this bill
is necessary to establish and ensure statewide minimum
quality standards for fuels and other automotive products
are being met, as well as preventing false or misleading
advertising and labeling of those products. According to
the Author, a rigorous program of sampling, testing, and
vigilant oversight of the marketplace is critical for
California. Experience shows that substandard products
will be sold, with potential costly damage to vehicles
leading to a lack of confidence in the marketplace and
unsafe conditions for motorists on busy streets and
highways. As the price of fuel continues to rise, so
does the consumer's demand to ensure they are receiving
the quality and quantity of what they are paying for and
DMS has noted a significant increase in the number of
complaints registered for low octane and inaccurate
dispensers.
6.Arguments in Opposition. California Taxpayers
Association opposes the bill arguing that the recently
approved state budget included more than $12 billion in
new taxes, and with Californians paying more at seemingly
every turn, now is not the time to propose additional
costs on California businesses.
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7.Committee Fee Bill Worksheet. Included with this
analysis is a Fee Background Information Questionnaire
which was completed by the Author's office and the agency
requesting a fee increase. This Questionnaire is
required by the Committee to justify any fee increases
and provide background information on requested fee
increases. The Questionnaire is to include fund
condition statements displaying five years of actual and
five years of projected expenditures and revenues with
(a) current statutory maximum fee amounts and (b)
proposed statutory maximum fee amounts. It also is to
include a schedule of fee revenue by various fee
"categories" displaying five years of actual and five
years of projected revenue based on (a) current fees and
(b) proposed fees and includes the workload (e.g., number
of licensees) and fee charged per category. It is to
provide a schedule displaying two years of expenditures
by program component. It is to provide a table of
comparison of existing and proposed fees which includes
the percentage by which the fee will change. Lastly, it
should provide the history for the past 10 years of
legislative fee increase authorizations.
The Worksheet shows that at the current rate the program
funds will be depleted by April 2010. The requested fee
increase is not to carry out new functions, but to
maintain the existing inspection program.
The Worksheet further indicates that the motor oil
assessment fee is the sole source of funding for the
program.
The major components of this program include field
activities, laboratory services, and administrative
functions. Field activities include investigations,
sampling, training county and industry, county
oversight and coordination, enforcement and legal
actions. County sealers perform routine inspections
of fueling stations for labeling, advertising,
signage requirements, air and water compliance and
assist in investigations and case preparations.
Laboratory services include analysis of routine,
complaint and follow-up samples submitted by state
and county staff. Administrative functions include
personnel, accounting, collections and refunds, air
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and water complaint response, promulgating
regulations, legislative bill analysis, developing
reports and notices, and other general
administrative services.
SUPPORT AND OPPOSITION:
Support:
California Agricultural Commissioners and Sealers
Association
Opposition:
California Taxpayers Association
Consultant:G. V. Ayers