By Olman Valverde, Esq.
Changes to Oil Spill Prevention and Response Act
A “trailer bill” that was signed by the Governor on June 20, 2014 contained many provisions that affect the oil and gas industry, including substantial changes to the the Lempert-Keene-Seastrand Oil Spill Prevention and Response Act.
Whereas the Act initially applied to oil spills in marine waters of the state, the Act now covers all waters.
The changes also expanded the number of persons and business that are required to pay fees into the Oil Spill Prevention and Administration Fund.
Enhanced Regulatory Authority
When it was enacted in 1990, the Oil Spill Act was intended to cover all aspects of marine oil spill prevention and response in California. The Oil Spill Act established an Administrator who is given very broad powers to implement the provisions of the Act. In 1991, the Office of Spill Prevention and Response (“OSPR”) opened, headed by the Administrator. The Administrator must be a Chief Deputy Director of the California Department of Fish & Wildlife.
SB 861 expanded the Oil Spill Act and the authority of the Administrator relating to oil spills to cover all waters of the state. Whereas the Act initially applied to oil spills in marine waters of the state, the Act now covers all waters.
SB 861 directs the Governor to require the Administrator to amend the California oil spill contingency plan to provide for the best achievable protection of all state waters, not solely coastal and marine waters, and to submit the plan to the Governor and the Legislature on or before January 1, 2017.
Under SB 861, the regulations will provide for the best achievable protection of all waters and natural resources of the state.
As a result of SB 861, the Oil Spill Act, for purposes of administrative civil penalties, would no longer distinguish between an oil spill and an inland oil spill, subjecting all persons to the oil spill provisions.
Existing law imposes an oil spill prevention and administration fee in an amount determined by the administrator to be sufficient to implement oil spill prevention activities, but not to exceed 6.5 cents per barrel of crude oil or petroleum products and, beginning January 1, 2015, to an amount not to exceed 5 cents per barrel, on persons owning crude oil or petroleum products at a marine terminal. The fee is deposited into the Oil Spill Prevention and Administration Fund in the State Treasury.
SB 861 deleted a provision that would have reduced the fee to 5 cents beginning on January 1, 2015. As a result, the fee will remain at 6.5 cents.
The Oil Spill Act will now impose the fee on persons owning crude oil or petroleum products at the time the crude oil or petroleum products are received at a refinery by any mode of delivery that passed over, across, under, or through waters of the state, whether from within or outside the state. Prior law imposed the fee only on crude oil arriving at a marine terminal via tanker.
The Oil Spill Act will create a rebuttable presumption that crude oil or petroleum products received at a marine terminal or refinery passed over, across, under, or through waters of the state, as specified. The Act prohibits the State Board of Equalization from accepting or considering a petition for redetermination of fees or a claim for refund of fees if the claim is founded upon grounds the crude oil or petroleum products did or did not pass over, across, under, or through waters of the state, as specified.
The Oil Spill Act will require every person who operates an oil refinery, marine terminal, or a pipeline to register with the State Board of Equalization.
SB 861 deleted the fee exception for independent crude oil producers, and deleted the provision authorizing the moneys in the fund to be used to pay for the costs of rescue, medical treatment, rehabilitation, and disposition of oiled wildlife.
Also, the oil spill prevention fee will be imposed on pipeline operators transporting petroleum products into the state by means of a pipeline operating across, under, or through any waters of the state.
Senate Bill 861, which went into effect July 1, significantly expanded the scope of OSPR. OSPR has previously worked to prevent, prepare for, and respond to oil spills, but only in California’s coastal waters. OSPR activities will now also cover the state’s inland waters.
The expanded authority and activities of OSPR will be funded by a 6.5 cent fee on every barrel on oil entering California. Previously, fees were levied only on oil arriving at a marine terminal (i.e., via tanker). SB 861 expanded the fee to all oil as it enters California refineries, whether by tanker, pipeline, or rail.
Olman J. Valverde is an oil and gas lawyer with the law firm of Luna & Glushon.