BILL ANALYSIS �
AB 1601
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator S. Joseph Simitian, Chairman
2011-2012 Regular Session
BILL NO: AB 1601
AUTHOR: Huffman
AMENDED: June 28, 2012
FISCAL: Yes HEARING DATE: July 6, 2012
URGENCY: No CONSULTANT: Randy Pestor
SUBJECT : OIL SPILL PREVENTION AND RESPONSE
SUMMARY :
Existing law , under the Lempert-Keene-Seastrand Oil Spill and
Response (OSPR) Act:
1) Requires the Governor to establish a state oil spill
contingency plan (Government Code �8574.1 et seq.),
establishes oil spill response and contingency planning
requirements (�8670.1 et seq.), and establishes oil spill
prevention, response, containment, and cleanup programs
(Public Resources Code �8750 et seq.).
2) Requires the OSPR administrator to adopt and implement
regulations governing the adequacy of oil spill contingency
plans to be prepared and implemented, taking into
consideration marine facility or vessel contingency plan
requirements of the national and California contingency
plans, the State Lands Commission, State Fire Marshal, and
California Coastal Commission. The regulations must, among
other things: a) ensure that standards set for response,
containment, and cleanup equipment are maintained and
regularly improved to protect state resources; and b)
ensure that each oil spill contingency plan demonstrates
that all protection measures are being taken to reduce the
possibility of an oil spill occurring as a result of the
operation of the marine facility or vessel. (Government
Code �8670.28). The oil spill contingency plan must be
submitted to the OSPR administrator at least 5 working days
prior to entering marine waters. (14 Cal. Code of Regs.
826.01(b)(1)(A)).
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3) Creates the Oil Spill Prevention and Administration Fund to
be used for the above purposes, requires the OSPR
administrator to administer the fund, and requires the
State Board of Equalization to collect a fee in an amount
determined by the administrator to be sufficient to carry
out certain purposes. The amount of the fee cannot exceed
$0.065 per barrel of crude oil or petroleum products, and
$0.05 per barrel beginning January 1, 2015. The fee is
collected by marine terminal operators from the owner of
crude oil or petroleum products based on each barrel of
those products received by means of a vessel operating in,
through, or across marine waters of the state. (��8670.38,
8670.39, and 8670.40).
4) Requires the OSPR administrator to charge a nontank vessel
owner or operator a reasonable fee with each application to
obtain a certificate of financial responsibility in an
amount that is based on the administrator's costs in
implementing the above requirements relating to nontank
vessels. Before January 1, 2005, the fee must be $2,500 or
less per vessel. (�8670.41).
5) Prohibits a nontank vessel that is required to have an oil
spill contingency plan from entering marine waters of the
state unless the vessel owner or operator has provided
evidence of financial responsibility to the administrator
that demonstrates the ability to pay at least $300 million
to cover damages caused by a spill, and the vessel owner or
operator has obtained a certificate of financial
responsibility from the administrator. The administrator
may establish a lower financial responsibility standard for
a nontank vessel that has a carrying capacity of 6,500
barrels of oil or less. (�8670.37.58). Evidence of
financial responsibility must be received by the OSPR
administrator at least 10 calendar days prior to operating
or entering marine waters. (14 Cal. Code of Regs.
791.6(b)).
This bill :
1) Revises the nontank fee (#4 above) by adding a $3,250
nontank vessel fee cap that may be annually increased based
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on the California Consumer Price Index.
2) Sunsets the above $3,250 nontank vessel fee cap and CPI
adjustment authorization January 1, 2018, when it will
revert to being based on the administrator's costs in
implementing the above requirements relating to nontank
vessels.
COMMENTS :
1) Purpose of Bill . According to the author, "Nontank vessels
are vessels of 300 gross tons or greater that carry oil,
but do not carry that oil as cargo. Examples of nontank
vessels include container ships, cargo ships, cruise ships,
and barges."
The author notes that "Oil spills from nontank vessels pose a
serious threat to California's marine environment and
nontank vessels constitute a signification portion of the
Office of Spill Prevention and Response's (OSPR) workload.
Several significant spills in California waters were from
nontank vessels including the M/V Stuyvesant and M/V Kure
spills in Humboldt Bay, and the M/V Cosco Busan spill in
San Francisco Bay."
According to the author regarding the allowed fee adjustment:
"Statutory mandates (SB 1644, 1998) require OSPR to
review
nontank vessel oil spill contingency plans and provide
certification
of financial responsibility (COFR) for nontank vessels.
Nontank
vessels are also covered by OSPR's drills and exercises
program.
OSPR processes more than 950 nontank vessel contingency
plans annually.
Current law authorizes the OSPR Administrator to adjust
the
nontank fee to cover the office's cost to regulate
nontank vessels.
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OSPR filed emergency regulations with the Office of
Administrative Law to increase the nontank vessel fee
from $2,500 to $3,250. The emergency regulations were
approved on November 22, 2011 and
the increase went into effect on January 1, 2012. The
emergency regulations will remain in effect for 180
days. Notice for a regular rulemaking to increase the
fee was filed with OAL on January 10,
2012. An increase in the nontank vessel fee to $3,250
will generate approximately an additional $1.5 million
annually to be deposited
into the Oil Spill Prevention Administration Fund along
with
revenues generated from the per-barrel of oil fee.
However, the OSPAF is projected to face significant
budget
deficits after 2015 when a temporary fee increase on the
per-barrel fee sunsets. The per-barrel fee has a
statutory cap, while the nontank vessel fee does not.
This presents a perverse incentive for OSPR to increase
the nontank vessel fee to balance the OSPAF.
AB 1601 would increase the nontank fee from $2,500 to
$3,250
and allow the OSPR Administrator to adjust the maximum
fee based
on the rate of inflation.
By including the reference to the Consumer Price Index
on the
maximum amount of the fee, this bill creates a ceiling
on the
amount the fee can be raised. This approach maintains
OSPR's
ability to adjust the fee administratively, but creates
parity with the
per-barrel fee."
Finally, the author recognizes that "While the nontank
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vessel fee, since its inception in 2002, has not been
inappropriately adjusted, the nontank vessel industry that
pays the fee has concerns the state will spike the rate of
the fee to replenish the OSPAF when the OSPAF is running a
deficit in future years. The per-barrel fee is capped in
statute and, given OSPR's lack of administrative authority
over the fee, is much more challenging to increase."
2) Background . The Lempert-Keene-Seastrand Oil Spill
Prevention and Response Act requires the Governor to
establish a state oil spill contingency plan (Government
Code �8574.1 et seq.), establishes oil spill response and
contingency planning requirements (Government Code �8670.1
et seq.), and establishes oil spill prevention, response,
containment, and cleanup programs (Public Resources Code
�8750 et seq.). SB 1644 (Thompson) Chapter 964, Statutes
of 1998, added a provision to the oil spill response and
contingency planning requirements for "nontank" vessels.
3) Background on fee - and fee cap issues . SB 849 (Torlakson)
Chapter 514, Statutes of 2002, increased the oil spill fee
from $0.04 per barrel set in 1990 to $0.05 per barrel.
According to the California Research Bureau at that time,
the inflation-adjusted value of the $0.04 fee declined by
over 20% since 1990 so that it was worth slightly more than
$0.03. The Research Bureau also noted that OSPR
responsibilities increased significantly, noting in
particular the contingency plan requirements for nontank
vessels and review of those plans (where the number of
nontank vessels exceeded tankers by four or five times).
Based on these increased responsibilities, AB 849, as
approved by the Environmental Quality Committee April 16,
2001, increased the fee cap by $0.02 to 0.06 per barrel,
and authorized the OSPR administrator to adjust that amount
based on changes to the Consumer Price Index (CPI), but
subsequent amendments reduced this to $0.05 per barrel
without any provisions for CPI adjustments.
Each $0.01 per barrel increase in the OSPR fee results in
about a $5.4 million revenue increase to fund certain OSPR
programs. Each $0.01 per barrel increase in this fee could
reflect about a $0.00024 increase per gallon of gasoline,
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or about $0.0048 for 20 gallons of gasoline.
AB 1112 (Huffman) Chapter 583, Statutes of 2011, among
other things, increased the Oil Spill Prevention and
Administration Fund fee from $0.05 to $0.065 per barrel of
crude oil or petroleum products, and reverts to $0.05 per
barrel beginning January 1, 2015.
Increasing the OSPR per barrel fee cap from $0.05 to $0.065
would result in increased revenues of about $8.1 million
per year, and reflect a $0.00036 increase per gallon of
gasoline, or about $.0072 for 20 gallons of gasoline.
According to the Department of Fish and Game when the
Committee heard AB 1112 last year, "The �Oil Spill
Prevention and Administration Fund] is currently facing a
significant fiscal crisis. If the fee is not increased
there will be a shortfall of approximately $8 million for
FY 2011/12 which will adversely impact OSPR functions as
well as state entities that get funding from OSPR,
including the State Lands Commission, California Coastal
Commission, Bay Area Conservation and Development
Commission, and the Office of Environmental Health Hazard
Assessment."
When Assemblymember Huffman sought to cap the nontank
vessel fee last year, the Senate Committee on Natural
Resources and Water rejected the cap. The Senate
Environmental Quality Committee agreed that it was not
appropriate to cap the nontank vessel fee.
As noted above, current law already requires the
administrator to charge a nontank owner or operator a
reasonable fee that is based on the administrator's costs
in implementing the Act relating to nontank vessels.
Increasing the nontank fee based on the consumer price
index may not relate to these costs. The author also
agrees, as noted above, that the nontank vessel fee, since
its inception, has not been inappropriately adjusted.
It is also noteworthy that according to a recent report by
the Pacific States - British Columbia Oil Spill Task Force,
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there have been 12 tank-related spills and 43 nontank
vessel spills in California since the beginning of 2010.
4) Risk of Proposition 26 impacts ? Proposition 26 broadens
the definition of a state or local tax to include payments
considered to be fees or charges, and thereby has the
effect of increasing revenue proposals subject to higher
approval requirements.
Generally, fees and charges that could be taxes under
Proposition 26 are those that address environmental and
health concerns. According to a July 15, 2010, LAO report
on Proposition 26, "most other fees or charges in existence
at the time of the November 2, 2010 election would not be
affected unless: The state or local government later
increases or extends the fees or charges (In this case, the
state or local government would have to comply with the
approval requirements of Proposition 26.)�;] The fees or
charges were created or increased by state law - passed
between January 1, 2010 and November 2, �2010] - that
conflicts with Proposition 26 . . ."
The Proposition 26 impacts of the OSPR administrator adjusting
the fee in the future - after a statutory fee with a cap
and CPI adjustment sunsets - is uncertain. Given the
potential risk of not being able to fund nontank vessel
programs in the future, it may be most prudent to not amend
current law.
5) Support and opposition concerns . According to the Pacific
Merchant Shipping Association (PMSA) in supporting AB 1601,
there are two funding sources for the OSPAF - the
per-barrel fee on oil and the nontank vessel fees - the
former has a statutory cap while the later does not. PMSA
asserts that this provides a "perverse incentive to fund
OSPAF shortfalls by increasing �nontank vessel fees]."
PMSA notes that it removed its opposition to AB 1112
(Huffman) with a fee increase and cap last year, and that
the fee cap was pulled from that bill. PMSA notes that "AB
1601 addresses that discrepancy, and in seeking a level
playing field in the funding of the OSPAF . . ."
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According to the Department of Fish and Game in opposing AB
1601, "Existing law in our state currently provides the
�administrator] 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)] the OSPR
Administrator recently enacted emergency regulations that
set the fee at $3,250. Non-emergency regulations making
the fee permanent are in process now."
6) Related legislation . AB 2032 (Hancock) of 2008 increased
the per barrel fee cap from $0.05 to $0.08 and was vetoed
by Governor Schwarzenegger because "The per-barrel fee was
increased in 2002, and OSPR is currently using those
increased funds to implement a number of strategies to
improve preparedness and operations that will not result in
costs above what is included in the 2008 Budget bill."
AB 234 (Huffman) of 2010 addressed "pre-booming" issues and
increased the per barrel fee cap from $0.05 to $0.06. In
vetoing AB 234, Governor Schwarzenegger asserted that "the
magnitude of the fee increase proposed to fund OSPR's
regulatory activities per this bill far exceeds what OSPR
estimates it would cost to promulgate the 'pre-booming'
regulations this bill would require."
AB 1112 (Huffman) Chapter 583, Statutes of 2011, among other
things, increased the Oil Spill Prevention and
Administration Fund fee from $0.05 to $0.065 per barrel of
crude oil or petroleum products, and reverts to $0.05 per
barrel beginning January 1, 2015.
SB 1192 (Evans) of 2012 increases the Oil Spill Prevention and
Administration Fund fee from $0.065 to $0.068 per barrel of
crude oil or petroleum products, and $0.053 per barrel
beginning January 1, 2015; requires a $3,500 minimum
nontank vessel fee; and requires the OSPR administrator to
submit a proposed Budget appropriation of no more than $2
million for Oiled Wildlife Care Network purposes. SB 1192
will be heard by the Assembly Natural Resources Committee
July 2, 2012.
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AB 2005 (Garrick) allows a nontank vessel that is not used for
commercial purposes and that weighs between 300 and 400
gross tons to submit a certificate of financial
responsibility and certain other information later than is
currently required, and sunsets January 1, 2015. AB 2005
will be heard by the Senate Environmental Quality Committee
July 2, 2012.
SOURCE : Pacific Merchant Shipping Association
SUPPORT : California Coastkeeper Alliance
OPPOSITION : Department of Fish and Game