BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing: June 24, 2004

                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES
                             Hannah-Beth Jackson, Chair
                   SB 429 (Torlakson) - As Amended:  June 22, 2004

           SENATE VOTE  : Not relevant
           
          SUBJECT  :  Energy resources: petroleum infrastructure projects

           SUMMARY  :  This bill requires the Governor to appoint a statewide  
          petroleum infrastructure facilitator (facilitator) to the State  
          Energy Resources and Conservation Commission (CEC) to  
          investigate and intervene in rulemaking, permitting, and other  
          proceedings by state agencies that affect petroleum  
          infrastructure projects in the state and to suggest best  
          practices and procedures for permit streamlining, requires the  
          State Air Resources Board (ARB) to undertake a number of permit  
          streamlining measures, and requires the California Energy  
          Commission Commissioners to investigate permit streamlining  
          activities relating to petroleum infrastructure facilities and  
          report to the Governor and Legislature by December 31, 2005.
           
           EXISTING LAW  : 

          1)Requires the CEC to biennially report to the Governor and  
            Legislature regarding the state's petroleum supply and  
            pricing.

          2)Establishes the Air Pollution Permit Streamlining Act  
            (commencing with Health and Safety Code Section 42320), which  
            requires every air district to establish by regulation, a  
            program to provide for the expedited review of permits.

          3)Requires individual air districts with a population of 500,000  
            or more to implement additional measures to assist applicants  
            with expedited permitting.

          4)Under the California Environmental Quality Act (CEQA),  
            requires an environmental impact report to be completed and  
            certified within one year, and requires a negative declaration  
            to be completed and adopted within 180 days.  

          5)Under the Permit Streamlining Act, sets deadlines for public  
            agencies to determine the completeness of a development  








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            application, for a lead agency to approve or disapprove a  
            project (e.g., 180 days from the date the lead agency  
            certifies an environmental impact report, 60 days from the  
            date the lead agency adopts a negative declaration or  
            determines that the project is exempt from CEQA) and for a  
            responsible agency to approve or disapprove a development  
            project.


           THIS BILL  :

          1)Requires the Governor to appoint a facilitator in the CEC to  
            investigate and intervene in rulemaking, permitting, and other  
            proceedings by state agencies that affect petroleum  
            infrastructure projects in the state and to suggest best  
            practices and procedures for permit streamlining.

             a)   Requires, not more than 90 days after the facilitator is  
               appointed, any state agencies involved in rulemaking,  
               permitting, and other proceedings that affect petroleum  
               infrastructure projects to do all of the following:

               i)     Identify and list all permits required by the agency  
                 for petroleum infrastructure projects and related  
                 facilities in the state.

               ii)    Describe all current procedures utilized in practice  
                 for streamlining and expediting permitting for petroleum  
                 infrastructure projects.

               iii)   Identify and list all laws, rules, regulations,  
                 policies, guidelines, and permit conditions that inhibit  
                 or restrain petroleum infrastructure prospects.

             b)   Requires the facilitator to do the following, not more  
               than 120 days after receiving information from state  
               agencies:

               i)     Compile and, upon request, make available to persons  
                 proposing to modify, construct, or operate petroleum  
                 infrastructure projects, all available guidance documents  
                 and other information on permitting petroleum projects.

               ii)    Upon request of applicants, provide permitting  
                 assistance to persons proposing to modify, construct, or  








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                 operate petroleum infrastructure projects, including, but  
                 not limited to, assistance in working with local  
                 governments in ensuring that local permits, land use  
                 authorizations, and other approvals made at the local  
                 level are undertaken in the most expeditious manner  
                 feasible without compromising public participation or  
                 environmental protection.

               iii)   Upon request of applicants, intervene and  
                 participate as a party in rulemaking, permitting, and  
                 other proceedings by a state agency that affect petroleum  
                 infrastructure projects, to streamline the process, to  
                 preserve existing petroleum infrastructure efficiencies  
                 and capacity, and to increase petroleum infrastructure  
                 efficiencies and capacity.

          2)Provides the Governor may authorize and direct the chair of  
            the CEC to designate individual members of the CEC to  
            investigate and intervene in agency rulemaking, permitting and  
            other proceedings affecting petroleum infrastructure projects  
            in the state and to suggest best practices and procedures for  
            permit streamlining.  

          3)Requires the facilitator to work with the Legislature to  
            introduce and enact legislation as expeditiously as possible  
            to streamline and expedite permitting for petroleum  
            infrastructure projects in the state.

          4)Provides that the facilitator shall consult with all of the  
            following:

             a)   The Chair of the CEC;

             b)   The Chair of the ARB;

             c)   The Secretary for Environmental Protection;

             d)   The Secretary of the Resources Agency;

             e)   The Director of the Governor's Office of Planning and  
               Research;

             f)   Representatives from the United States Environmental  
               Protection Agency, the U.S. Department of Energy, the U.S.  
               Department of the Interior, and other affected federal  








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               agencies, as appropriate; and, 

             g)   Representatives of local and regional agencies,  
               including air pollution districts and air quality  
               management districts.

          5)Sunsets the facilitator's position January 1, 2010.

          6)Requires the ARB to, on or before February 1, 2005, consult  
            with the California Air Pollution Control Officers  
            Association, the California Environmental Protection Agency,  
            the Resources Agency, the CEC, the U.S. Environmental  
            Protection Agency, other states, private and publicly  
            regulated entities, and other interested parties regarding  
            successful methods and best practices for streamlining air  
            quality permits and other permits that may be required for  
            petroleum infrastructure projects.

          7)Requires the ARB, on or before June 30, 2005, to identify  
            streamlining practices, including, but not limited to,  
            successful practices implemented by air districts and may  
            adopt a complete list of permit streamlining techniques,  
            including, but not limited to all of the following:

             a)   Provisions for same-day permit issuance for qualified  
               petroleum infrastructure projects;

             b)   Streamlined procedures for hiring and relying on  
               certified permit application reviewers for petroleum  
               infrastructure projects;

             c)   Requiring that the air districts determine whether an  
               application for a petroleum infrastructure is complete, not  
               more than 15 days after receiving the application; and, 

             d)   Review, avoidance, and deletion of involuntary  
               limitations on the throughput of any components of the  
               state petroleum infrastructure.

          8)Provides that the ARB may require the air districts to adopt,  
            not later than May 1, 2005, and implement not later than July  
            1, 2005, the permit provisions and procedures identified by  
            the ARB.

          9)Provides the ARB may continuously identify permit streamlining  








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            practices to preserve the efficiencies and capacity of  
            existing petroleum infrastructure and to increase the  
            efficiencies and capacity of petroleum infrastructure in the  
            state, and may require the air districts to adopt and  
            implement all other best practices identified by the ARB on an  
            expeditious basis.

          10)Provides the ARB may waive the requirements for a district to  
            implement a best practice if the air district can demonstrate  
            both of the following:

             a)   That its existing district program performs at least as  
               effectively as a streamlining practice, as specified; and, 

             b)   That the air district program has, in actual practice,  
               resulted in simplifying and expediting permitting for  
               petroleum infrastructure projects.

          11)Requires the ARB to revise its best practices list after  
            holding a public meeting, and the air districts shall adopt  
            the revised practices at least annually.

          12)Sunsets the ARB provisions on January 1, 2010.

          13)Defines "petroleum infrastructure projects" as marine  
            terminals, port facilities, product storage facilities,  
            pipelines, land terminals, refinery projects, and related  
            kinds of facilities identified by the CEC as being necessary  
            to assure a consistent and reliable supply of cleaner burning  
            gasoline, ultra low sulfur diesel fuel, and other petroleum  
            products to California consumers.

          14)Requires the CEC, on or before February 1, 2005, to initiate  
            consultations regarding successful methods and best practices  
            for streamlining permits, leases and other government  
            authorizations and entitlements that may be required by  
            petroleum infrastructure projects, with the following:

             a)   The facilitator;

             b)   The California Environmental Protection Agency; 

             c)   The Resources Agency;

             d)   The U.S. Environmental Protection Agency; and, 








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             e)   Other states, air districts, public and privately  
               regulated entities, California ports, and other interested  
               persons.

          15)Requires the above consultations to include a complete report  
            of agencies' and the regulated entities' experiences with  
            facility siting conducted by the CEC, similar process in other  
            states, and similar processes in this state.

          16)Requires, on or before June 30, 2004, the CEC to identify  
            permit streamlining practices, including successful practices  
            by the ARB, and shall publish for comment a complete list of  
            permit streamlining techniques for petroleum infrastructure  
            projects including all of the following:

             a)   Developing and implementing partially or fully  
               consolidated permit programs for petroleum infrastructure  
               projects;

             b)   Adopting criteria for the types of permitting actions  
               for petroleum infrastructure projects eligible for  
               streamlining and for a simplified permitting process;

             c)   Adopting streamlined lists and criteria for application  
               completeness determinations for petroleum infrastructure  
               projects;

             d)   Adopting mandatory deadlines for actions on permits for  
               petroleum infrastructure projects;

             e)   Avoiding and eliminating limitations on the throughput  
               of components of the California petroleum infrastructure;  
               and,

             f)   Relying on actual emissions performance standards that  
               allow the maximum flexibility in utilizing existing  
               efficiencies and capacity and increasing efficiencies and  
               capacity of the California petroleum infrastructure.

          17)Requires the CEC, on or before December 31, 2005, to submit a  
            report to the Governor and Legislature describing the results  
            of the consultation along with detailed recommendations for  
            establishing new, streamlined processes for permitting  
            petroleum infrastructure projects in California.








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          18)Provides the Governor, or one or more officials designated by  
            the Governor, may identify existing or proposed rules,  
            regulations, plans, policies, guidelines, permit conditions,  
            or other requirements affecting petroleum infrastructure  
            facilities and refer them to the CEC.

          19)Requires the Chair of the CEC to designate a single CEC  
            Commissioner to review requirements and issue findings  
            affecting petroleum infrastructure facilities.

           FISCAL EFFECT  : Unknown.

           COMMENTS  :   

           1)Background  

          According to the author's office, a hearing of the Senate Select  
          Committee on Bay Area Infrastructure was conducted in December  
          2003 to examine the reasons behind the rapid rise in motor  
          vehicle fuel in California.  At that hearing, several witnesses  
          testified that limited gasoline production in California  
          contributes to price increases and that California's supply of  
          transportation fuel is not keeping pace with growing demand.   
          Because of this, California faces potentially serious  
          transportation fuel imbalances over the next several years,  
          which require immediate, statewide attention.  This bill will  
          expedite processing of permits for gasoline production at oil  
          refineries in California.

           2)Supply and Demand  

          This bill addresses the increasing need for additional  
          transportation fuel in California in the next several years and  
          provides a number of opportunities to expedite the permitting of  
          petroleum infrastructure facilities to accomplish that.   
          However, the bill does not address any alternatives to  
          increasing capacity and efficiencies of petroleum  
          infrastructure.  

          In a recent report by both the CEC and the ARB on reducing  
          California's petroleum fuel dependence, "Reducing Petroleum  
          Dependence" (August, 2003), the report recommended that  
          California adopt a policy to reduce gasoline and diesel fuel  
          demand to 15% below 2003 demand levels by 2020, and to maintain  








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          that level thereafter.  A number of options are suggested in the  
          report for meeting the goal, including using more fuel efficient  
          replacement tires, improving private vehicle maintenance,  
          doubling the fuel efficiency of light duty vehicles, using  
          natural-gal derived fuels as blending agents in diesel fuel, and  
          implementing fuel cell-powered vehicles.  

           3)Air Pollution Permit Streamlining Act  

          Existing law establishes the Air Pollution Permit Streamlining  
          Act that requires every air district to establish, by  
          regulation, a program to provide for the expedited review of  
          permits in California.  The regulations are required to include  
          the following: 

             a)   A precertification program for equipment that is  
               mass-produced (to allow permit applicants who purchase that  
               equipment to receive permits in an expedited fashion); 

             b)   A consolidated permitting process for any source that  
               requires more than one permit;

             c)   An expedited permit review schedule, based upon the  
               types and amounts of pollution emitted from sources;

             d)   A training and certification program for private sector  
               personnel, in order to establish a pool of professionals  
               who can certify businesses as being in compliance with  
               district rules and regulations;

             e)   The development of a standardized permit application  
               forms that are written in clear and understandable language  
               and provide applicants with adequate information to  
               complete and return the forms; and, 

             f)   An expedited appeals process.

          In addition, air districts with over 500,000 people must  
          implement additional permit streamlining measures including  
          applicant meetings to expedite the permit process and  
          flexibility measures for permit streamlining.  

          This bill requires the ARB to take a number of measures to  
          address permit streamlining at both the state and air district  
          level in addition to the facilitator's responsibilities of  








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          looking at the overall issue of permit streamlining. The  
          Committee may wish to consider whether this language is  
          necessary, given that the air districts already have permit  
          streamlining measures in place. 

           4)CEC Investigation of the State's Petroleum Infrastructure  

          On May 19th, the CEC opened a proceeding to investigate the  
          state's petroleum infrastructure, specifically looking at  
          increasing demand of petroleum products and decreasing supply of  
          petroleum in California along with what strategic improvements  
          can be made to the petroleum infrastructure in California.  The  
          proceeding was preceded with several months of informal meetings  
          with state, regional and local agency representatives regarding  
          the petroleum infrastructure.  The first formal meeting will be  
          Monday, June 28, 2004.  The Committee may wish to consider  
          whether this bill will produce duplication of efforts for CEC  
          staff that are already working on investigating the state's  
          petroleum infrastructure.
             
           5)Office of Permit Assistance  

          In 1977, when the state enacted the Permit Streamlining Act, it  
          also created an entity within the Governor's Office of Planning  
          and Research known as the Office of Permit Assistance (OPA).   
          That office, though not focused on the petroleum industry, was  
          primarily charged with assisting applicants and state agencies  
          permitting processes in California.  Typically, OPA would meet  
          very early on with project applicants to talk through the  
          project, what permits were going to be needed, by which  
          agencies, and what mitigation might also be needed.

          In 1994, OPA was transferred to the Technology, Trade and  
          Commerce Agency (TTCA) where it sat until last year when the  
          TTCA was abolished, along with OPA.  While this bill requires a  
          number of people to look at how to assist with permitting and  
          streamlining permitting in California, the Committee may wish to  
          consider whether it should also be looking at the type of work  
          OPA did and whether it should be incorporated into this bill.

           6)Duplication of Responsibilities in the Bill  

          This bill requires the facilitator to consult with a wide  
          variety of government agencies, private entities and others  
          while addressing permit streamlining in California.  However,  








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          the bill also has the CEC Commissioners meeting with many of the  
          same people to also address permit streamlining for petroleum  
          infrastructure.  In addition, the bill has a third party, The  
          Governor or a person designated by the Governor, to address  
          permit streamlining.  The Committee may wish to consider whether  
          to delete the overlapping responsibilities in the bill by  
          eliminating the roles of the CEC Commissioners and the Governor  
          and/or his designee.

            7)Who Gets to be the Facilitator  ?

          This bill requires the Governor to appoint a statewide petroleum  
          infrastructure facilitator (facilitator) within the CEC to  
          intervene in rulemaking, permitting, and other proceedings by  
          state agencies that affect petroleum infrastructure projects in  
          the state and to suggest, actively push legislation on, and  
          report to the Governor and Legislature on best practices and  
          procedures for permit streamlining.  The position sunsets under  
          the bill January 1, 2010.  However, the bill does not set out  
          any standards for what experience the facilitator needs or  
          should have, nor does the position have to be accountable to the  
          CEC, the Governor or the Legislature.  Finally, the appointment  
          of the facilitator does not need Senate confirmation, which  
          would be a typical balance on the part of the Legislature.  The  
          Committee may wish to consider whether this position should be  
          better defined, (i.e., a staff person, CEC Commissioner, or  
          designee of the Governor or define what type of qualifications  
          the person should have) and whether the appointment should have  
          Senate confirmation.




            8)Timeline for Agency Response  

          The bill requires state agencies involved in rulemaking,  
          permitting, and other proceedings that affect petroleum  
          infrastructure projects to provide the facilitator with  
          information on permits, streamlining practices, and laws, rules,  
          regulations policies and permit conditions that inhibit or  
          restrain petroleum infrastructure prospects.  However, there is  
          no guidance in the bill as to how soon that information needs to  
          be to the facilitator.  The Committee may wish to add an  
          appropriate timeline for state agencies to respond to the  
          facilitator in the bill.








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            9)Is the Facilitator an Intervenor  ?

          Under the bill, the facilitator can intervene any rulemaking,  
          permitting, or other proceeding by state agencies that affect  
          petroleum infrastructure projects in the state.  Generally, an  
          intervenor, in a rulemaking proceeding by a state agency  
          represents an interested party via comments and is compensated  
          for their activities.  In this case, the facilitator would  
          represent the applicant in the rulemaking process and be able to  
          comment on behalf of the applicant.  The Committee may wish to  
          consider whether this is an appropriate role of the facilitator  
          and whether the facilitator should have the role of the  
          participant on behalf of the applicant at all.  

            10)Does This Bill Apply to Offshore Oil  ?

          As written, it is unclear whether or not this bill would apply  
          to permitting and rulemaking of related offshore oil pipelines  
          and facilities.  Because of this, the Committee may wish to  
          consider language to explicitly exempt any offshore oil  
          facilities, pipelines, and related facilities from this bill.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Western States Petroleum Association

           Opposition 
           
                     American Lung Association 
          California Environmental Rights Alliance
          California League of Conservation Voters
          California State Pipe Trades Council
          California State Association of Electrical Workers
          Coalition for Clean Air
          Coastal Commission
          Environment California
          Planning and Conservation League
          Sierra Club California
          South Coast Air District 
          Western States Council of Sheet Metal Workers
           
          Analysis Prepared by  : Kyra Emanuels Ross / NAT. RES. / (916)  








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          319-2092