BILL ANALYSIS �
AB 2267
Page 1
Date of Hearing: April 24, 2012
ASSEMBLY COMMITTEE ON WATER, PARKS AND WILDLIFE
Jared Huffman, Chair
AB 2267 (Hall) - As Introduced: February 24, 2012
SUBJECT : Marine Resources; Decommissioned Oil Rigs
SUMMARY : Revises requirements of an existing program governing
partial removal of offshore oil structures by modifying the
calculation of cost savings which are to be shared with the
state, the determination of net environmental benefit, and
requirements for indemnification of the state from liability.
Specifically, this bill :
1)Revises the calculation of "cost savings" for purposes of the
partial oil structure removal program to include consideration
of all costs to the applicant of participation in the program,
including the costs of providing an indemnification agreement,
and the costs of providing surety bonds or other assurances to
ensure the applicant will cover the Department of Fish and
Game's (DFG) costs of environmental review and other program
costs.
2)Provides that the Department of Fish and Game's (DFG's)
start-up costs paid by the first applicant for a permit to
partially remove an oil structure shall be included in the
calculation of the first applicant's cost savings.
3)Revises the factors to be taken into account in determining
"net benefit to the marine environment" to include air quality
impacts.
4)Narrows the scope of the indemnification protection the
applicant is required to provide to the state and DFG by
excluding indemnification for intentional misconduct and active
negligence, and if DFG fails to carry out and comply with the
management plan prepared to manage the structure after its
partial removal.
5)Makes other technical changes.
EXISTING LAW :
1)Authorizes partial removal of a decommissioned offshore oil
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platform, as an alternative to full removal, if specified
conditions are met, including but not limited to, a finding by
the Ocean Protection Council (OPC) that partial removal would
result in a net environmental benefit to the marine environment
as compared to full removal.
2)Requires that a portion of the cost savings to the applicant be
shared with the state, with the state's share ranging from 55
to 80% based on the date of application. Requires that the
state's share be apportioned as follows: 10% to the state
General Fund, 2% to the Fish and Game Preservation Fund, 85% to
the California Endowment for Marine Preservation, 2% to the
Coastal Act Services Fund, and 1% to the board of supervisors
of the local county.
3)Requires an applicant for partial removal of an offshore oil
structure, as a condition for approval, to enter into an
agreement with the state to indemnify the state and DFG from
liability, to the extent permitted by law, for any claims
against the state for actions the state undertakes in
implementing the program. Among other things, the program
requires DFG to take over title to, and responsibility for,
management of the remaining structure.
FISCAL EFFECT : Unknown; provisions changing the calculation of
cost savings the applicant is required to share with the state
would reduce the amount of revenue the state could anticipate
receiving, and the amount of revenue available for marine
preservation by an unknown amount.
COMMENTS : AB 2503 (J. Perez), Chapter 687, statutes of 2010,
enacted the California Marine Life Legacy Act, authorizing
partial removal as an alternative to full removal of
decommissioned offshore oil structures if certain conditions are
met. Conditions include a finding that conversion to an
artificial reef would provide a "net benefit" to the marine
environment as compared to complete removal of the facility from
the marine environment, and requires a portion of the cost
savings to the operator be shared with the state, with a portion
being credited to the state General Fund, and a portion to a
California Endowment for Marine Preservation created by the bill.
This bill makes revisions to several of the provisions of AB
2503.
Calculation of cost savings : The calculation of the cost savings
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to the applicant is significant because it determines the amount
of funds that the applicant will be required to share with the
state as a condition of approval of partial removal. The
amendments in this bill revise the calculation to include all
costs to the applicant for participation in the partial removal
program, which include the costs of regulatory compliance, in
calculating the cost difference. Committee staff suggests a
revision to this language to ensure that the costs to the
applicant of participation in both the full and partial program
are included in calculating the cost savings. Revise page 3
lines 8 and 9 to read as follows:
"applicant of partial removal of the oil platform , including all
costs to the applicant of participation in the program pursuant
to this chapter , including all costs to the applicant of
participation in either program."
The existing program requires that the startup costs incurred by
DFG or the OPC be paid by the first applicant for partial
removal, and also provides that the payment of those startup
costs shall be reimbursed by DFG to the applicant from the share
of the cost savings received into the Fish and Game Preservation
Fund. This bill would require that the startup costs paid by the
first applicant be included in the calculation of the first
applicant's cost savings. The problem with this provision is
that it effectively gives the applicant credit for costs that
will be reimbursed. Committee staff therefore recommends that
either this proposed provision be deleted, or, alternatively,
that the requirement for reimbursement of these costs be deleted,
so there is not a double-counting.
The existing law also specifically prohibits the costs to the
applicant of providing the surety bonds or other assurances the
applicant is required to provide to ensure they will cover DFG's
costs from being included in the calculation of the cost savings
that is shared with the state. This bill would reverse that
provision and specifically require that those costs be included.
The existing law attempts to encourage operators to decommission
aging oil structures sooner by providing that if the structure is
decommissioned and the application for partial removal submitted
before January 1, 2017, the percentage of the cost savings that
the operator is required to share with the state is only 57%,
whereas for applications submitted between 2017 and 2023 the cost
share requirement is 65%, and for those submitted after 2023,
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80%. The provisions governing what is included in the cost
savings calculations, and the percentage of the savings that is
shared with the state, were negotiated as a package. The
committee may therefore wish to consider an amendment providing
that the adjustments to the cost calculation proposed by this
bill apply only to applications that are submitted before January
1, 2017.
Determination of Net Benefit to the Marine Environment : The
existing law authorizes approval of partial removal of an oil
structure if the OPC determines that partial removal would
provide a net benefit to the marine environment, and requires
that adverse impacts to biological resources, water quality or
other marine environmental impacts be taken into account in
making the net benefit determination. This bill would add air
quality impacts to the determination as well. The existing law
requires that the OPC in determining the criteria for evaluating
net environmental benefit consult with DFG, the State Lands
Commission, the Coastal Commission and the Ocean Science Trust.
Committee staff recommends that if air quality impacts are
included that the Air Resources Board also be added to the
entities the OPC is required to consult with in making the
determination, by amending subsection (3) on page 5, lines 34
through 37, to read as follows:
"In determining the criteria, the council shall consult with
appropriate entities, including, but not limited to, the
department, the commission, the Air Resources Board, the
California Coastal Commission, and the California Ocean Science
Trust."
Indemnification Requirement : Existing law requires the applicant
to enter into an indemnification agreement with the state which
obligates the applicant to indemnify the state and DFG against
any and all liability, to the extent permitted by law, including
but not limited to active negligence, and to defend the state
against claims. This bill proposes to amend this provision to
narrow the scope of the indemnification to exclude intentional
misconduct and active negligence. Since intentional acts are
generally not legally insurable, and since the statute already
requires that indemnification be provided only to the extent
permitted by law, the exclusion for intentional misconduct is
arguably unnecessary and redundant. The exclusion for active
negligence, however, would significantly narrow the
indemnification protection for the state. "Active negligence" as
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defined in Black's law dictionary and various court cases is
described as "want of care in performing an act, as distinguished
from inaction." Active negligence may include failure to perform
a precise duty which a person has agreed to perform, and is
described as a term embracing many occurrences that fall short of
willful wrongdoing, for example, inadvertent acts causing injury
to others and all acts the effects of which are misjudged or
unforeseen through want of proper attention. Active negligence
denotes some positive act or failure of duty. The difference
between active or passive negligence is also described such that
one is only passively negligent if one merely fails to act in
fulfillment of the duty of care which the law imposes, while one
is actively negligent if one participates in some manner in
conduct or omission which caused injury.
In summary, it is difficult to discern a real distinction between
active negligence and ordinary negligence, and the term appears
to describe the very kinds of liability risks for which the state
would want to be assured it would be indemnified before agreeing
to assume the risk of ongoing management and ownership of oil
structures the state has allowed to remain in place, effectively
relieving the owner of the structure of responsibility for full
removal. For these reasons, committee staff recommends that this
bill be amended to remove the proposed revisions to the
indemnification requirement and leave the requirement as it is
under existing law.
This bill would also further narrow the indemnification
requirement by providing that it does not apply to the extent DFG
fails to carry out actions required by, or alters the structure
or its use in a manner inconsistent with, the management plan
developed under the program. It is unclear what the effect of
this exclusion would be since the management plan may require
actions such as ongoing monitoring, or adaptive management of
marine species that inhabit the structure, or DFG may be limited
in its abilities to carry out provisions of the management plan
due to lack of future funding. For all these reasons, committee
staff recommends that this exclusion also be deleted and the
liability indemnification provision be retained as is under the
existing law.
Support Arguments : Supporters emphasize this bill is needed to
ensure that all actual costs incurred by applicants are
considered in determining the cost savings that are shared with
the state and the environmental endowment. Supporters also
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assert that all environmental impacts, including air quality
impacts and the carbon footprint of removal, should be considered
in determining the net environmental benefit of partial versus
full removal. Finally, while supporting a broad indemnification
the supporters assert the owner of the oil structure should not
be required to indemnify the state for misconduct or active
negligence.
REGISTERED SUPPORT / OPPOSITION :
Support
Coalition for Enhanced Marine Resources (sponsor)
Sportfishing Conservancy (sponsor)
California Ships to Reefs, Inc.
Opposition
None on file.
Analysis Prepared by : Diane Colborn / W., P. & W. / (916)
319-2096