BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON NATURAL RESOURCES AND WATER
                             Senator Fran Pavley, Chair
                                2015 - 2016  Regular 

          Bill No:            AB 815          Hearing Date:    June 9,  
          2015
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          |Author:    |Ridley-Thomas          |           |                 |
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          |Version:   |February 26, 2015    Introduced                      |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Katharine Moore                                      |
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            Subject:  Oil spill prevention and response fees: collection.


          BACKGROUND AND EXISTING LAW
          1.   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 Wildlife.

          2.   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.

          3.   The act established the Oil Spill Prevention and  
            Administration Fund (OSPAF) which finances oil spill  
            prevention and planning programs and the Oil Spill Response  
            Trust Fund (OSRTF) which is used to provide the cash flow for  
            the response to and clean-up of California's oil spills and  
            certain other items.

          4.   Prior to the passage of the Resources budget trailer bill  
            last year (SB 861, c. 35, Statutes of 2014), OSPAF was  
            primarily funded by a per barrel fee of 6.5[ assessed on each  
            barrel of crude oil or petroleum products received at marine  
            oil terminals or from offshore production facilities.  The  







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            owner of the crude oil or petroleum products is responsible  
            for the fee.  SB 861 substantially revised the act to address,  
            in part, the potential growth of crude oil transport into and  
            in California by rail.  The OSPAF fee is now assessed upon  
            receipt of crude oil and petroleum products at refineries too.  
             The fee is remitted to the State Board of Equalization (BOE).

          5.   SB 861 provides for the OSPAF fee to be collected once only  
            (GOV 8670.40(b)(5)) in order to address, for example, the  
            situation where a barrel of crude oil refined into petroleum  
            products exported via a marine terminal.  In this instance,  
            the barrel would pass through two fee collection points but  
            should be assessed only once.

          6.  OSRTF is funded by an (up to) 25[ per barrel fee on crude  
            oil and petroleum products. This fee is assessed on the owner  
            of the products, pipeline operators, refiners, and marine  
            terminal operators until the fund balance reaches its  
            statutory target of about $55 million, as specified.



          PROPOSED LAW
          This bill would make clarifying and technical changes to OSPAF  
          fee collection necessary following the passage of SB 861 last  
          year.  Specifically this bill would:

              authorize a marine terminal or refinery operator receiving  
            petroleum products derived from crude oil refined in the state  
            to presume the fee has already been collected.
             state legislative intent that the BOE collect the OSPAF fee  
            only upon first delivery to a refinery or a marine terminal.
             delete the requirement that the owner of crude oil/petroleum  
            products remit the fee directly to the BOE, and
             make additional clarifying and technical changes.

          ARGUMENTS IN SUPPORT
          According to the author, "While SB 861 expanded the [OSPAF] fee  
          to crude oil and petroleum products received at the refinery,  
          the bill also added provisions that prevent the fee from being  
          imposed or paid twice on the same crude oil or petroleum  
          products.  However, current law is not clear that petroleum  
          products derived from fee-paid crude oil, once refined, are not  
          subject to the fee."








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          "BOE staff believes that legislative intent language alone may  
          be ineffective to relieve industry from the requirement to  
          document that the [OSPAF] fee previously was paid on petroleum  
          products derived from fee-paid crude oil.  Therefore, statutory  
          guidance is necessary to clarify the issue."

          The BOE in its support letter indicates that the benefits of the  
          bill include "reduced confusion," "improved method for  
          preventing [the] double fee," and "ease of administration."

          ARGUMENTS IN OPPOSITION
          None received

          COMMENTS
           This is clean-up legislation that clarifies OSPAF fee  
          collection  .  For example, the refinery operator or the marine  
          terminal owner who collects the fee from the owner can remit  
          them to the board, not the owner of the crude oil/petroleum  
          products.

           The act and its fees implicitly depend upon the existing  
          California market  .  The OSPAF fees are collected upon arrival at  
          marine terminals or at refineries.  This presumes that all/most  
          of the crude oil and petroleum products pass through either a  
          marine terminal or refinery at least once. Crude oil produced in  
          California, but refined elsewhere, could potentially bypass the  
          OSPAF fee.  This does not currently occur -- according to the  
          CEC, no California crude oil has been exported from the state in  
          2014 or 2015, the most recent data available. Should energy  
          policy and the California crude oil/petroleum products market  
          change in the future, these implicit assumptions may no longer  
          remain true.  For example, there has been a recent push to  
          change federal energy policy to lift the ban on crude oil  
          exports (see S.1312, the Energy Supply and Distribution Act of  
          2015, introduced with bipartisan support last month in the U.S.  
          Congress).


           Recent related legislation
           
          SB 861 (Committee on Budget and Fiscal Review, chapter 35,  
          Statutes of 2014) This Resources trailer bill substantially  
          amended the act to address the growth/potential growth of crude  








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          oil transport by rail in California.

          AB 2678 (Ridley-Thomas, 2014) This bill was an earlier attempt  
          at OSPAF fee Resources trailer bill clean-up language. (died on  
          the Unfinished Business file on the Assembly floor with the  
          concurrence vote pending)

          SUPPORT
          State Board of Equalization (sponsor)
          California Chamber of Commerce

          OPPOSITION
          None Received
          
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