California independent producers are squaring off against major oil companies and importing refiners in a squabble over who will fund the state's proposed $150 million emergency oil spill response fund.
California Independent Petroleum Association is lobbying to kill legislative efforts to extend a fund buildup fee of 25/bbl to independents' production. CIPA contends the fee would shut in many independents' wells in California.
Further, the fund created by the state legislature would be in addition to a similar oil spill fund to be created under the proposed Big Green initiative on this November's ballot in California plus any federal legislation (OGJ, June 11, p. 22). Oil industry lobbyists are seeking a compromise between California senate and assembly bills to avoid further duplication.
LEGISLATION UPDATE
State Sen. Barry Keene (D-Vallejo) last month introduced amendments to his oil spill fund bill, SB-2040, to include all California onshore producers as liable parties for offshore oil spills.
Prior to those amendments, Keene's bill applied the 25/bbl fee only to oil produced or transported off the California coast. His first version of the bill hit all production in the state, but he later included an exemption for small independents' onshore production.
A similar bill in the state assembly, introduced by Assemblyman Ted Lempert (D-San Mateo), applies the fee only to crude produced or transported offshore.
The fee in both cases would be assessed at the refinery gate.
Keene's bill was approved by the senate 34-3 and went to the assembly's natural resources committee late last month. If both bills clear, their differences will be worked out in a conference committee.
CIPA won an early victory in the legislative battle after Keene further amended the bill to exclude independents with onshore production of less than 500 b/d. Presumably, independents with any offshore production or with more than 500 b/d of onshore production would be hit with the fee.
CIPA'S STANCE
In planned testimony on the bill, CIPA said members will tell the state senate appropriations committee Keene's bill "protects big oil importing companies who will be only too happy to let the independents help subsidize their costs for cleaning up spills (offshore)."
A CIPA official explained that while majors and importing refiners are not lobbying to target independents for the fee, "they are not doing anything to help us."
"it is patently unfair to consider financially burdening small independent producers for marine transportation risks they don't pose," said Tom Hunt, CIPA executive vice-president. "CIPA members don't own tankers, they don't import foreign crude, and they aren't threatening our coastline. They shouldn't be forced to pay for perils they don't pose. If independents were taxed 25/bbl, many would be forced to shut in their wells because it would be economically disastrous to keep them open. Their hardship would, in turn, cause the state to import more foreign oil via tanker along the state's coastline."
CIPA estimates California independents are receiving on average $9.50-9.75/bbl for their crude at present.
CALIFORNIA SPILL BILL
Sponsors of the California Oil Spill Prevention and Response Act this spring amended the legislation to double the bill's fines for spills involving a single hulled vessel in California waters.
California Lt. Gov. Leo McCarthy and State Controller Gray Davis sponsored the amendments as well as the original legislation, which Lempert introduced in the state legislature last summer. Big Green's spill provision was backed by state Atty. Gen. John Van de Kamp and Assemblyman Tom Hayden (D-Santa Monica).
The fine for an oil spill from a double hulled vessel remains $10/gal spilled or $30/gal if the spill involves gross negligence. The fines for a single hulled vessel jump to $20/gal and $60/gal.
Had the bill been in effect at the time of the American Trader spill Feb. 7 off Huntington Beach, fines could have totaled at least $8 million, McCarthy said.
In addition, sponsors are amending the bill to require ships without double hulls to carry 50% more liability insurance to pay for any damages caused by a spill.
The measure, approved in the spring by the assembly natural resources committee, covers other oil tanker and terminal safety rules, industry financial responsibility, and state spill response (OGJ, Sept. 18, 1989, p. 35).
McCarthy noted there are 2,500 oil tanker trips/year to and from California. Of that, 73% of the tankers have single hulls or single bottoms.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.
