Review of Oil Spill Risk and Comparison to Funding Mechanism Proposed Final Report Joint Legislative...

Review of Oil Spill Risk and Comparison to Funding

MechanismProposed Final Report

Joint Legislative Audit & Review Committee

January 7, 2009

Elisabeth Donner and John Woolley JLARC Staff

January 7, 2009 2

Statutory Directive Guides Oil Spill Program Activities

“The legislature finds that prevention is the best method to protect the unique and special marine environments in this state…”

And

“…that the primary objective of the state is to achieve a zero spills strategy to prevent any oil or hazardous substances from entering waters of the state.”

RCW 90.56.005(2)Review of Oil Spill Risk and Comparison to Funding Mechanism

BACKGROUND

Report Page 6

January 7, 2009Review of Oil Spill Risk and Comparison to Funding Mechanism 3

Report Looks at Three Key Oil Spill Questions

1.What are the sources of oil spill risk into Washington’s waters?• Spills occur across the state from many

different sources.

2.Do the sources of revenue (funding for oil spill activities) align with the sources of risk?• No.

3.Are there alternative funding methods?• Other states have broader/different tax bases.• Aligning funding with risk faces practical

hurdles.Report Page 10

BACKGROUND


Consultants Identified 23 Risk Sources: Modes of Transportation & Activities

AirportFacility-MillingFacility-OtherGas StationOil TerminalPower UtilityRefineryResidentialAircraftRailroadTanker TruckVehicle-Other

FerryFishing VesselNon-Tank VesselPassenger VesselPleasure CraftTank BargeTank ShipTow/Tug Boat

PipelineMilitaryUnknown

Fac

ilitie

sM

obile

Ves

sels

Oth

er

SOURCES

OF

OIL

SPILL

RISK

Report Pages 35-37

January 7, 2009 5

Relative Oil Spill Risk = Probability Impact:Calculating Relative Risk

Review of Oil Spill Risk and Comparison to Funding Mechanism

Multiply per-gallon impact scores by probability

Final risk score: provides indicator for relative measure of oil spill risk for each source category and geographic location

SOURCES

OF

OIL

SPILL

RISK

Report Pages 9-11, Appendix 7

January 7, 2009 6

Analysis Uses Four Approaches for Estimating Relative Risk


• Approach #1: based on actual spill history into Washington waters from 1995 through 2007.

• Approach #2: incorporates into historic data range of potential spill volumes.

• Approach #3: incorporates into historic data known and projected changes in regulations, industry operation, and traffic for the year 2015.

• Approach #4: incorporates into potential spill volumes known and projected changes in regulations, industry operations, and traffic for year 2015.

SOURCES

OF

OIL

SPILL

RISK

Report Page 13

Facil

ity-O

ther

Pipe

line

Refin

ery

Railr

oad

Oil T

erm

inal

Tank

er Tr

uck

Gas S

tatio

nPo

wer U

tility

Tank

Bar

geVe

hicle

-Oth

erNo

n-Ta

nk V

esse

lM

ilitar

yFis

hing

Ves

sel

Facil

ity-M

illing

Resid

entia

lPl

easu

re C

raft

Tank

Ship

Towbo

at/T

ugbo

atAi

rpor

tAi

rcra

ftPa

ssen

ger V

esse

lUn

know

nFe

rry

0

10

20

30

40

50

60

70

80

90

100

17.9

0

15.7

6

15.5

7

8.66

7.35

6.55

6.29

4.33

3.66

3.51

1.89

1.85

1.56

1.42

1.41

1.18

0.50

0.31

0.12

0.10

0.06

0.02

0.01

Approach #1 – Historic Spill DataM

easu

re o

f R

elat

ive

Ris

k

Rank-Ordered Risk Sources

• Risk is spread across all sources.• Assumes what has happened since

1995 continues into future.• Even those sources with low relative

risk are still sources of risk.

Note: Scores represent relative risk across all waters of the state. Scores add to 100. Numbers may not total due to rounding.Data Source: JLARC consultants, Applied Science Associates (ASA).

Facil

ity-O

ther

Tank

Ship

Railr

oad

Towbo

at/T

ugbo

atOi

l Ter

min

alRe

finer

yPi

pelin

eTa

nker

Truc

kNo

n-Ta

nk V

esse

lGa

s Sta

tion

Power

Util

ityFa

cility

-Milli

ngTa

nk B

arge

Fishi

ng V

esse

lVe

hicle

-Oth

erPl

easu

re C

raft

Milit

ary

Resid

entia

l

Pass

enge

r Ves

sel

Airc

raft

Airp

ort

Ferry

Unkn

own

0

10

20

30

40

50

60

70

80

90

100

21.2

1

16.9

6

10.2

4

8.10

8.04

7.88

5.58

3.84

2.83

2.54

2.48

2.20

1.88

1.75

1.49

0.73

0.66

0.57

0.51

0.27

0.19

0.05

0.01

21.2

1

16.9

6

10.2

4

8.10

8.04

7.88

5.58

3.84

2.83

2.54

2.48

2.20

1.88

1.75

1.49

0.73

0.66

0.57

0.51

0.27

0.19

0.05

0.01

0

10

20

30

40

50

60

70

80

90

100

Approach #2 – Potential Spillage

• Risk is spread across all sources.• By assuming small probability of worst-

case discharge, rank orders change.• Even those sources with low relative

risk are still sources of risk.


Mea

sure

of

Rel

ativ

e R

isk


Pipe

line

Facil

ity-O

ther

Refin

ery

Railr

oad

Tank

er Tr

uck

Oil T

erm

inal

Gas S

tatio

nTa

nk B

arge

Vehi

cle-O

ther

Power

Util

ityNo

n-Ta

nk V

esse

lM

ilitar

yFis

hing

Ves

sel

Resid

entia

lPl

easu

re C

raft

Facil

ity-M

illing

Tank

Ship

Towbo

at/T

ugbo

atAi

rcra

ftAi

rpor

tPa

ssen

ger V

esse

lUn

know

nFe

rry

0

10

20

30

40

50

60

70

80

90

100

18.1

6

15.4

7

13.4

5

9.97

7.54

6.35

5.43

4.21

4.04

3.74

2.40

2.13

1.80

1.62

1.37

1.23

0.46

0.35

0.11

0.10

0.06

0.03

0.01

Approach #3 – Projected Changes in 2015 Based on Historic Data

• Risk is spread across all sources.• Adjusting historic data for changes in

regulations, industry operations, and vessel traffic changes rank order.

• Even those sources with low relative risk are still sources of risk.


Mea

sure

of

Rel

ativ

e R

isk

Note: Scores represent relative risk across all waters of the state. Scores add to 100. Numbers may not total due to rounding.Data Source: JLARC consultants, Applied Science Associates (ASA).18

.16

15.4

7

13.4

5

9.97

7.54

6.35

5.43

4.21

4.04

3.74

2.40

2.13

1.80

1.62

1.37

1.23

0.46

0.35

0.11

0.10

0.06

0.03

0.01

0

10

20

30

40

50

60

70

80

90

100

Facil

ity-O

ther

Tank

Ship

Railr

oad

Towbo

at/T

ugbo

atOi

l Ter

min

alRe

finer

yPi

pelin

eTa

nker

Truc

kNo

n-Ta

nk V

esse

lGa

s Sta

tion

Power

Util

ityTa

nk B

arge

Fishi

ng V

esse

lFa

cility

-Milli

ngVe

hicle

-Oth

erPl

easu

re C

raft

Milit

ary

Resid

entia

l

Pass

enge

r Ves

sel

Airc

raft

Airp

ort

Ferry

Unkn

own

0

10

20

30

40

50

60

70

80

90

100

18.7

3

15.1

0

12.0

6

9.54

7.10

6.96

6.57

4.53

3.67

2.24

2.19

2.10

2.06

1.94

1.75

0.86

0.77

0.67

0.60

0.32

0.16

0.05

0.01

21.2

1

16.9

6

10.2

4

8.10

8.04

7.88

5.58

3.84

2.83

2.54

2.48

2.20

1.88

1.75

1.49

0.73

0.66

0.57

0.51

0.27

0.19

0.05

0.01

0

10

20

30

40

50

60

70

80

90

100

Approach #4 – Projected Changes in 2015 Based on Potential Spillage

• Risk is spread across all sources.• Adjusting potential spillage for changes

in regulations, industry operations, and vessel traffic changes rank order.

• Even those sources with low relative risk are still sources of risk.



Mea

sure

of

Rel

ativ

e R

isk

18.7

3

15.1

0

12.0

6

9.54

7.10

6.96

6.57

4.53

3.67

2.24

2.19

2.10

2.06

1.94

1.75

0.86

0.77

0.67

0.60

0.32

0.16

0.05

0.01

0

10

20

30

40

50

60

70

80

90

100

January 7, 2009 11

No One Approach is “Better”

• Multiple ways of analyzing risk: this study uses four.

• Each is different—one approach is not “better” than another.

• Fundamentally, all approaches attempt to predict the future, which is uncertain.

• Risk will change over time—one large spill might change ranking.


SOURCES

OF

OIL

SPILL

RISK

Report Page 13-14

January 7, 2009 12

Do Oil Spill Taxes Directly Align With the Sources of Risk?

Two Major Sources of Revenue: Oil Spill Taxes

Based on ownership of oil when it is first received

in a storage tank at a marine terminal,

from a waterborne vessel or barge

Sources of Risk

Based on transportationmode or activity such as:

Pipeline

Tank Barge

Manufacturing Facility

Review of Oil Spill Risk and Comparison to Funding MechanismReport Page 27

ALIGNMENT

January 7, 2009 13

Oil Spill Taxes Not Directly Aligned With Risk Sources


Two Major Sources of Revenue: Oil Spill TaxesSources of Risk

Report Page 27

≠Transportation Mode or Activity

Ownership of oil in storage tank

ALIGNMENT

January 7, 2009

Three Additional Considerations When Funding Oil Spill Programs

1.Attributes of a high-quality tax structure• Equitable, inexpensive and efficient to

administer, with minimal impacts on economic decision making

2. Impacts of U.S. Constitution on Washington tax law• U.S. Constitution’s Interstate Commerce Clause

3.Practices of other coastal states• May not align with risk, but provide alternatives:

Oregon taxes each vessel trip New Hampshire includes pipelines

Review of Oil Spill Risk and Comparison to Funding Mechanism 14

FUNDING

CONSIDERATIONS

Report Pages 29-31


Summary of Answers to Three Key Questions

1. Sources and risks?• Spills occur across the state from many

different sources.

2. Alignment with funding?• Current sources of oil spill revenues do not

align with sources of risk.

3. Alternative funding sources?• While not necessarily risk based, some

other states have broader or different tax bases.

Report Pages 33-34

PRESENTATION

SUMMARY

January 7, 2009 16

Consider Practical Issues if Goal is Aligning Risk With Funding

• Multiple transportation modes and activities across the state associated with oil spill risk

• Risk changes over time

• Develop data system for risk assessment

• Select specific risk assessment approach


PRESENTATION

SUMMARY

Report Pages 34


No Recommendations in Report: Agencies Provided Opportunity to Comment

• OFM and the Department of Revenue had no specific comments.

• The Department of Ecology, the Department of Fish and Wildlife, and the Oil Spill Advisory Council provided detailed comments.

AGENCY

RESPONSES

Appendix 2


Department of Ecology’s Response Addresses Workload and Funding

• Ecology states that JLARC identifies sources of risk not regulated by Ecology’s Spills Program. If the Legislature wants them regulated, additional funding and authority is required.

• Ecology states that the Spills Program needs a fully reliable, equitable, and sustainable funding mechanism.

• Ecology states that any new fee should be:−Proportionate to current program workload; −Based on industry sectors the Spills Program

currently regulates; and−Administratively efficient and legally sustainable.

AGENCY

RESPONSES

Appendix 2


Fish And Wildlife’s Response Addresses Methodology and Funding

• Department of Fish and Wildlife cautions policy makers against attaching too much accuracy to actual numbers in the report. Near misses are not included in JLARC’s data.

• The Department points out that: sources of risk are diverse; the presence of oil creates risk; a funding solution based on each exchange of oil and petroleum products might be more practical.

• The Department states that the spills program has been instrumental in reducing spill risk; gains will be diminished if programs are reduced due to a lack of funding.

AGENCY

RESPONSES

Appendix 2


• Based on indications in the report, the Council states that it would be almost impossible to directly align revenue with percentage of risk posed.

• According to the Council, the Legislature should consider:−Charging a fee or tax related to oil itself or

commodity activity, and as close to the well head as possible;

−Eliminating the barrel tax, replace with fee on all bulk transfers of oil products on, over, or within a distance that could drain to waters of state; and

−Ecology’s proposed oil handling fee.

Oil Spill Advisory Council’s Response Addresses Funding and Alignment

AGENCY

RESPONSES

Appendix 2

January 7, 2009 21

Contact Information

Elisabeth [email protected]

John Woolley [email protected]

www.jlarc.leg.wa.gov


Review of Oil Spill Risk and Comparison to Funding Mechanism Proposed Final Report Joint Legislative...

Documents

Transcript of Review of Oil Spill Risk and Comparison to Funding Mechanism Proposed Final Report Joint Legislative...