BILL ANALYSIS �
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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2011-2012 Regular Session |
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BILL NO: AB 1601 HEARING DATE: June 26, 2012
AUTHOR: Huffman URGENCY: No
VERSION: June 20, 2012 CONSULTANT: Katharine Moore
DUAL REFERRAL: Environmental QualityFISCAL: Yes
SUBJECT: Oil spill prevention: nontank vessel: certification of
financial responsibility
BACKGROUND AND EXISTING LAW
In response to concern following significant oil spills, the
Legislature passed the Lempert-Keene-Seastrand Oil Spill
Prevention and Response Act (Act) (SB 2040, c. 1248, Statutes of
1990) (Government Code (GOV) �8670.1 et seq., and others). The
Act created the Office of Spill Prevention and Response (OSPR)
in the Department of Fish and Game (department). OSPR's mission
is to provide the best achievable protection (GOV �8670.3) of
California's natural resources and the public health and safety
by preventing, preparing for, and responding to spills of oil
and other deleterious materials; and to restore and enhance
affected resources. The act provides for an administrator to be
appointed for OSPR and establishes the Oil Spill Prevention and
Administration Fund (OSPAF) which finances oil spill prevention
and planning programs. In addition to OSPR, the State Lands
Commission (commission) is also charged by the act to adopt
rules, regulations, guidelines and leasing policies with respect
to the state's marine terminals - facilities where oil is
transferred - to minimize the possibility of an oil spill.
The act has been amended numerous times since its inception. SB
849 (Torlakson, c. 514, Statutes of 2002) added a nontank vessel
fee of $2,500 for each application for a certificate of
financial responsibility (COFR), although reduced fees were
available in some instances (GOV �8670.41). Nontank vessels,
such as container or cruise ships, do not carry oil as cargo and
are larger than 300 gross tons in size. The fee was instituted
to pay for the costs to OSPR of the state's oil spill prevention
and planning activities related to nontank vessels. In order to
enter California waters, nontank vessels have to have a COFR
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(renewed every other year), and an approved oil spill
contingency plan. As of, January 1, 2005, there has been no
statutory cap on the fee, although the maximum fee was unchanged
until recently (described below). A COFR shows that the owner
or operator has the financial ability to pay for clean-up and
other costs arising from an oil spill. Oil spill prevention and
planning programs for tank vessels and oil transfer facilities
are supported through a per barrel fee.
As OSPR and the commission have developed their programs in an
attempt to provide the best achievable protection, the costs to
implement the act have increased. The OSPR Technical Advisory
Committee (TAC) has repeatedly raised concerns about the
significant deficits projected to occur in OSPAF starting in the
fiscal year (FY) 2011/12 and to increase thereafter. Prior to
the passage of AB 1112 (described below), recent 2011 projects
show a projected deficits of approximately $2.3 million, $10.8
million and $18 million in FY 2011/12 through FY 2013/14,
respectively. The TAC's fear was that the projected deficits
will most likely lead to substantial cuts in both OSPR and
commission programs. Focusing specifically on OSPR's nontank
vessel related program, in FY 2010/11 department expenses were
approximately $7.3 million and the nontank vessel free program
fee did not raise sufficient funds to cover them (approximately
$5.6 million with a then-existing maximum fee of $2,500).
AB 1112 (Huffman, c. 583, Statutes of 2011) sought to address
the OSPR funding problem. It allowed the per barrel fee to be
increased to cover necessary program expenses for marine
facilities and tank vessels. The fee, capped at $0.065, is
imposed on each barrel of crude oil or petroleum product
received at a marine terminal. This fee will be decreased to
$0.05 per barrel beginning on January 1, 2015. The Governor's
signing message stated "I am signing Assembly Bill 1112 with the
direction to the �department] to increase the nontank vessel fee
and reduce continued program expenditures in order to address
the structural imbalance of the Oil Spill Administration Fund."
Following the Governor's signing statement, the department
sought and received emergency regulations providing for a new
base fee of $3,250 (approximately the original 2002 fee adjusted
for inflation) as of January 1, 2012 and the normal regulatory
process is underway to retain it. According to OSPR, increasing
the fee to $3,250 will not have a significant statewide adverse
economic impact directly affecting California businesses,
including the ability of California businesses to compete with
businesses in other states. The additional $750 every two years
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would have a minimal financial impact on affected businesses
based on the size and scope on the nontank vessel industry.
Importantly, the increase in the nontank vessel fee to $3,250 is
projected - at current activity levels - to generate $7.2
million which is more closely aligned with current costs. The
regulatory filing states that "OSPR believes that the additional
revenue generated more appropriately approximates OSPR's costs
to fully implement a comprehensive nontank vessel program."
PROPOSED LAW
This bill would:
Require, rather than authorize, that COFR fees be spent
only on specified oil spill prevention activities.
Place a $3,500 cap on the maximum fee for a certificate
of financial responsibility for a nontank vessel (payable
every two years) and allow for the maximum fee to be
adjusted annually based upon the California Consumer Price
Index
Beginning January 1, 2018, remove the cap and annual
inflation escalator.
ARGUMENTS IN SUPPORT
According to the Pacific Merchant Shipping Association, they
supported the act and the later adoption of the nontank vessel
fee. They state that we "understand and support the need for
non-tank vessels to share in the cost of funding this important
�oil spill and prevention] program. Unfortunately the existing
funding mechanisms for the OSPAF place the non-tank industry in
an unfair situation in regards to the process of adjusting the
fees. There are two primary funding streams for the OSPAF - the
per-barrel fee on oil and the COFR fee on non-tank vessels. The
former has a statutory cap while the latter does not."
The California Coastkeeper Alliance also writes in support and
points out that sufficient resources are necessary for OSPR and
the commission to fulfill statutory responsibilities with
respect to oil spill prevention and reponse.
ARGUMENTS IN OPPOSITION
According to the Department of Fish and Game, "existing law in
our state currently provides the Administrator of the Office of
Spill Prevention and Response the authority to adjust the
nontank vessel fee in regulation, commensurate with the costs of
running the nontank vessel program. To fully fund the nontank
vessel program and pursuant �to] Governor Brown's direction in a
signing message from AB 1112 (Huffman, Ch. 583, Statutes of
2011) the OSPR Administrator recently enacted emergency
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regulations that set the fee at $3,250. Non-emergency
regulations making the fee permanent are in process now.
Because the fee adjustment has already occurred, this bill is
unnecessary."
COMMENTS
Proposition 26 ? In November 2010, California voters passed
Proposition 26 which effectively reclassified some fees as
taxes. Existing fees, such as the nontank vessel fee, are not
subject to Proposition 26. However, in addition to capping the
fee, the terms of the fee are changed by this bill raising the
possibility that Proposition 26 may apply. The Committee may
wish to amend the bill to retain the original terms and direct
staff to continue to work with the author's office to resolve
this issue (Amendment 1).
Existing law already requires that "a reasonable fee" be
charged . As noted above, current law (GOV �8670.41) requires
that a "reasonable fee" be collected to obtain a certificate of
financial responsibility based upon the administrator's costs in
implementing the nontank vessel portion of the Act. Arbitrarily
capping the fee - even at $250 higher than the current fee -
could result in others subsidizing costs associated with the
nontank vessels. Bill proponents argue that the fee must be
capped for "parity" with the per barrel fee for the tank vessel
and related marine terminal and oil transfer programs. It is
not clear how a "parity" of this form provides for anything
other than for others to potentially subsidize the nontank
vessel program.
Is the California Consumer Price Index appropriate? The
California Consumer Price Index (Revenue and Tax Code � 2212) is
a measure of the average change over time in the prices paid by
specific urban consumers in the state for a "market basket of
consumer goods and services". The market basket includes food
and beverages, housing, apparel, transportation, medical care,
recreation, education and communication and other. It is not
clear that this market basket is as strong a driver of the costs
associated with the nontank vessel program as trying to meet the
oil spill prevention efforts required under law.
Nontank vessels and oil spills. According to the department,
"oil spills from nontank vessels pose a serious threat to
California's marine environment and nontank vessels constitute a
significant portion of OSPR's workload. As an example, in the
last five years roughly 2300 nontank vessels each year paid for
a COFR. Several significant spills in California waters were
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from nontank vessels including the M/V Stuyvesant (1997) and M/V
Kure (1999) spills in Humboldt Bay, and the M/V Cosco Busan
(2007) spill in San Francisco Bay." According to a recent
report from the Pacific States - British Columbia Oil Spill Task
Force, California experienced 12 tank-related spills and 43
nontank vessel spills since the start of 2010. (Data were not
available on the relative size of these spills.)
Related legislation
SB 1192 (Evans, 2012) would set a $3,500 minimum nontank vessel
fee, among other provisions. Currently pending before Assembly
Natural Resources Committee.
AB 1112 (Huffman, c. 583, Statutes of 2011) raised the per
barrel fee from $0.05 to $0.065 until January 1, 2015 to support
the marine facilities and tank vessel programs under OSPR (a
provision to set the nontank vessel fee cap at $3,000 was
removed in the Senate).
AB 234 (Huffman, 2010) would have, among other provisions,
raised the nontank vessel fee to exactly $3,000 (vetoed by
Governor Schwarzenegger (the nontank vessel fee was not
mentioned in the veto message.))
SUGGESTED AMENDMENTS:
AMENDMENT 1
Page 2, lines 23 and 24 & Page 3, lines 11 and 12:
Delete "shall" and replace with "may"
SUPPORT
Pacific Merchant Shipping Association
California Coastkeeper Alliance
OPPOSITION
Department of Fish and Game
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