Crosscutting Issues


Fund Conditions for
Resources Programs

The state uses a variety of special and bond funds to support the departments, conservancies, boards, and programs that regulate and manage the state's natural resources. In this section, we provide a status report on selected special funds and bond funds supporting these programs. For purposes of this review, we divided the funds into three categories: (1) resources special funds, (2) park-related bonds, and (3) bonds for water programs. (We discuss the condition of various environmental protection funds in the write-ups of the individual departments and boards.)

Resources Special Funds

The budget proposes to spend most of the special funds projected to be available in 1999-00 for resources protection. Approving the Governor's spending proposal will leave up to $30 million for legislative priorities. However, the use of some of these remaining funds may be statutorily restricted to specific purposes.

Figure 1 (see next page) summarizes the total amount of funds available for expenditure in 1999-00 for selected special funds, the Governor's proposed expenditures from these funds, and the balances available after the Governor's proposed expenditures. Approval of the Governor's spending proposals would leave limited funds available for legislative priorities. This is especially the case because the Legislature may wish to retain some of the projected reserves in the accounts to meet contingencies such as revenue shortfalls or unanticipated expenditures. However, this would reduce the amount of funds available for appropriation by the Legislature in 1999-00. Furthermore, some of the remaining funds can only be used for specific purposes, as required by statute. For instance, about $9.8 million of the projected balance in the Fish and Game Preservation Fund is dedicated statutorily and can only be used for activities related to certain species. As a result, the Legislature's flexibility in expending these funds for resources projects is limited.
Figure 1
Selected Special Funds

Resources Programsa

1998-99 and 1999-00

(In Millions)

Special Funds 1998-99 Expenditures 1999-00
Resources Expenditures Balance
Salmon and Steelhead Trout Restoration Account $6.5 $8.0 $8.0 --
Marine Life and Reserve Management Account -- 1.9 -- $1.9
State Parks System Deferred Maintenance Account -- -- -- --
Natural Resources Infrastructure Fund 1.1 -- -- --
Environmental License Plate Fund 26.0 27.3 26.6 0.7
Public Resources Account 24.2 19.5 18.7 0.7
Habitat Conservation Fund 29.5 18.1 9.6 8.5
Fish and Game Preservation Fund 72.6 97.4 79.6 17.8b
a Based on Governor's budget.
b Includes reserve for dedicated accounts ($9.8 million) and nondedicated accounts ($8 million).

Resources Trust Fund. The Resources Trust Fund (RTF) was created by Chapter 293, Statutes of 1997 (SB 271, Thompson). Funds in RTF are to be allocated to preserve and protect the natural and recreational resources of the state. The RTF is funded from the tidelands revenues remaining after specified amounts are deposited into the General Fund and the California Housing Trust Fund. (Please see Analysis of the 1998-99 Budget Bill, page B-17.)

Chapter 293 split the trust fund into two separate accounts: the Salmon and Steelhead Trout Restoration Account (SSTRA) and the Natural Resources Infrastructure Fund (NRIF). Chapter 293 also required that the first $8 million from RTF be deposited into SSTRA to be appropriated to the Department of Fish and Game (DFG) for the recovery of salmon and steelhead trout. Of the $8 million, at least 87.5 percent ($7 million) must be allocated as project grants through DFG's fisheries management grant program. The grants are to be awarded for activities that improve fish habitat in coastal water utilized by salmon and anadromous trout, and are to emphasize the development of coordinated watershed improvement activities. The remaining 12.5 percent may be used for project administration costs incurred by DFG.

Chapter 326, Statutes of 1998 (AB 2784, Strom-Martin) created two additional accounts within RTF. First, Chapter 326 created the Marine Life and Marine Reserve Management Account (MLMRMA) and allocated $2.2 million annually through 2005-06, from RTF to the account for expenditure by DFG for marine life management. Second, Chapter 326 created the State Parks System Deferred Maintenance Account (SPSDMA) within RTF and allocated $10 million annually through 2005-06, from RTF to the account for expenditure by the Department of Parks and Recreation (DPR) for deferred maintenance expenses.

The remaining RTF money is to be deposited in NRIF for preserving and protecting natural and recreational resources. Chapter 293 identified four priorities for the use of NRIF. These priorities are: environmental review and monitoring by DFG, Natural Community Conservation Plan (NCCP) acquisitions, Habitat Conservation Fund (HCF) funding requirements, and expenditure for nonpoint source pollution control programs. Funds not appropriated to these priorities will be spent on natural and recreational resources.

Because of the recent drop in oil prices, tidelands oil revenues to the state have dropped significantly. As a result, it is estimated that SSTRA will receive only $6.5 million in the current year, and NRIF will receive no tidelands oil revenues. As Figure 1 shows, for 1999-00, the budget projects total RTF revenues to be slightly higher, including $8 million to be available to fund SSTRA, and $1.9 million for the newly created MLMRMA. However, neither NRIF nor SPSDMA would receive tidelands oil revenues in 1999-00.

The projected drop in tidelands oil revenues to RTF severely limits the Legislature's ability to fund various resources programs, without looking to other funding sources. For example, because of the absence of NRIF money, various programs--including DFG environmental review activities, in particular--would have to be funded with alternative sources, including the Environmental License Plate Fund or the General Fund.

Environmental License Plate Fund (ELPF). The ELPF derives its funding from the sale of personalized motor vehicle license plates by the Department of Motor Vehicles. Funds from ELPF can be used for the following purposes:

The budget proposes expenditures totaling $26.6 million from ELPF, an increase of $580,000 (2.2 percent) over estimated current-year spending. About 57 percent ($15.2 million) of total proposed ELPF expenditures would go to support DFG. About 20 percent of the proposed expenditures would be for local assistance and capital outlay projects by the California Tahoe Conservancy.

The proposed ELPF expenditures will leave a balance of $660,000 at the end of 1999-00.

Public Resources Account, Cigarette and Tobacco Products Surtax Fund (PRA). The PRA receives 5 percent of the Cigarette and Tobacco Products Surtax Fund (C&T Fund) revenues. Generally, PRA funds must be used in equal amounts for (1) park and recreation programs at the state or local level and (2) habitat programs and projects.

The budget projects $19.5 million in PRA resources in 1999-00 and proposes expenditures from PRA for the various departments totaling $18.7 million. This is a decrease of $5.5 million (23 percent) from the estimated current-year expenditure level. The decrease is mainly due to a continued drop in cigarette tax revenues and the drawing down of prior reserves in the account. About 64 percent ($11.9 million) of the proposed expenditures would be for the support of the DPR, and 17 percent ($3.2 million) would support the operations of DFG.

The budget proposes a reserve of $729,000 in PRA at the end of 1999-00.

Habitat Conservation Fund (HCF). The HCF was created by Proposition 117, the California Wildlife Protection Act of 1990. The proposition requires that the fund receive annual revenues of $30 million primarily for wildlife habitat acquisitions and improvements. To provide this funding level, Proposition 117 requires transfers of (1) 10 percent of the funds in the Unallocated Account, C&T Fund; and (2) additional funds from the General Fund in order to provide a total of $30 million. Proposition 117 allows the Legislature to substitute for the General Fund the transfer of other appropriate funds.

The budget proposes total HCF expenditures of $30 million in 1999-00. The amount would be funded with $9.6 million to be transferred from the Unallocated Account, C&T Fund, and $20.4 million from the General Fund. The budget projects a $8.5 million reserve in HCF for 1999-00.

Fish and Game Preservation Fund (FGPF). The FGPF derives most of its revenues from fishing and hunting licenses, tags, and permits. Money in FGPF is used to support DFG activities to protect and preserve fish and wildlife, including the acquisition and construction of projects for these purposes. Certain revenues are restricted to be used for specific purposes or species. For instance, the cost of hunting and sport fishing programs is to be financed out of hunting and sport fishing revenues. The costs of commercial fishing programs are to be paid solely out of revenues from commercial fishing taxes and license fees.

For 1999-00, the budget proposes FGPF expenditures of $79.6 million, almost entirely for the support of DFG. This amount is $7 million (or 9.6 percent) more than estimated current-year expenditures. Of the amount, $64.9 million is proposed to be spent from nondedicated funds and the remaining $14.7 million from dedicated revenues.

With the proposed expenditures, the budget projects a reserve of $17.8 million in FGPF for 1999-00.

(Please see Item 3790, Department of Parks and Recreation for a discussion of the condition of the State Parks and Recreation Fund.)

Park-Related Bonds

There will be almost no park bond funds available for park projects in 1999-00.

Park development projects and land acquisitions have traditionally been funded by various bonds passed by the voters. The availability of bond funds has contributed to the Legislature's flexibility in funding its priorities in past years. This is because the Legislature has been able to free up funds in ELPF and PRA by using bond funds to the greatest extent possible to fund various projects.

Figure 2 shows that essentially all park bond funds have been depleted. The budget projects minimal bond funds available for park projects in 1999-00.
Figure 2
Selected Park Bond Funds

Resources Programsa

1998-99 and 1999-00

(In Millions)

Bond Funds 1998-99 Expenditures 1999-00
Resources Expenditures Balances
Parklands Fund of 1980 $2.6 -- -- --
Parklands Fund of 1984 1.7 -- -- --
Recreation and Fish and Wildlife Enhancement Fund -- $0.5 $0.5 --
State Coastal Conservancy Fund of 1984 0.6 -- -- --
California Wildlife, Coastal Parkland Conservation Fund of 1988 15.4 3.7 0.8 2.9
a Based on Governor's budget.

Water Bonds

The budget proposes expenditures of about $169 million from various water bonds for water quality, water supply, and ecosystem restoration projects. No bond funds are available in the budget year for (1) state matching funds for federal safe drinking water loans and grants and (2) the state's unmet share of costs for federally authorized, local flood control projects. While the budget proposes $15.1 million from the General Fund to match federal safe drinking water funds, no funding is proposed from other sources for flood control subventions.

As indicated in Figure 3, the budget reflects expenditures totaling $169.3 million in 1999-00 from various water bonds for (1) safe drinking water; (2) water supply, including water conservation, water recycling, and groundwater recharge; (3) wastewater treatment and other water quality projects; and (4) Bay-Delta improvements, including fish and wildlife restoration and delta levee rehabilitation. This is a decrease of $92.2 million, or 35 percent, from estimated current-year expenditures from bonds for these purposes. Most of this decrease reflects a depletion or near depletion of some of the Proposition 204 bond fund accounts (such as funds for specific Bay-Delta ecosystem restoration purposes and the river parkway program) at the end of 1998-99. Proposition 204--the Safe, Clean, Reliable Water Supply Act of 1996--provides $995 million for various water-related purposes, including habitat restoration in the Bay-Delta, wastewater treatment, water recycling and conservation, and local flood control and prevention.
Figure 3
Selected Water Bond Fundsa

(In Millions)

Resources Expenditures Balances
Safe drinking water
1986 California Safe Drinking Water Fund $32.5 $5.2 $27.3
1988 California Safe Drinking Water Fund 32.3 10.8 21.5
Subtotals ($64.8) ($16.0) ($48.8)
Water supply/water recycling
1986 Water Conservation and Water Quality Fund $26.1 $23.7 $2.4
1988 Clean Water and Water Reclamation Fund 7.3 4.2 3.1
1988 Water Conservation Fund 22.0 5.8 16.2
Safe, Clean, Reliable Water Supply Fundb 106.6 56.2 50.4
Subtotals ($162.0) ($89.9) ($72.1)
Wastewater treatment/water quality
1984 State Clean Water Fund $31.2 $6.8 $24.4
Safe, Clean, Reliable Water Supply Fundb 113.2 37.2 76.0
Subtotals ($144.4) ($44.0) ($100.4)
Bay-Delta improvements
Safe, Clean, Reliable Water Supply Fundb $451.0 $19.4 $431.6
Flood control and prevention
Safe, Clean, Reliable Water Supply Fundb --c -- --
Totals $822.2 $169.3 $652.9
a Based on Governor's budget.
b Proposition 204.
c Funds in Proposition 204 subaccount depleted at end of 1997-98.

Safe Drinking Water. The budget projects total expenditures of $16 million in 1999-00, leaving a balance of $48.8 million at the end of 1999-00. There are pending grant applications that would spend much of this balance in future years. About $463 million in federal loans and grants will be available over the next six years to public water systems in the state for upgrades to meet safe drinking water standards if matched by a 20 percent state contribution. However, existing safe drinking water bond funds are not authorized to serve as a state match for these federal funds. The budget proposes $15.1 million from the General Fund to match $75.7 million of federal funds in 1999-00. Our review finds that an additional $78.5 million of federal funds would be available in 1999-00 if the state were to provide an extra $15.7 million in matching funds. We discuss this issue in greater detail in our write-up under Item 4260, the Department of Health Services.

Water Supply. The budget projects total expenditures of $89.9 million, including $56.2 million from Proposition 204 funds, for water supply and recycling projects. This leaves a balance of $72.1 million, mainly for new projects.

Wastewater Treatment and Other Water Quality Projects. The budget proposes $44 million in expenditures to fund wastewater treatment, agricultural drainage treatment, seawater intrusion control, and other water quality projects in 1999-00. This leaves a balance of $100.4 million. Pending grant and loan applications for wastewater treatment projects would spend much of this balance in future years.

Bay-Delta Improvements. Proposition 204 bond funds provide a total of $583 million for projects specifically related to the Bay-Delta, mainly for ecosystem restoration. The budget proposes expenditures of $19.4 million in 1999-00, leaving a balance of $431.6 million. Of this remaining balance, $390 million would be available for expenditure only upon federal and state approval of environmental impact reports being developed by the "CALFED" Bay-Delta Program. Such approval is not expected until sometime in the year 2000.

Flood Control and Prevention. The costs of federally authorized, locally sponsored flood control projects are shared by the federal government (50 to 75 percent), state government (17.5 to 35 percent), and local government (7.5 to 15 percent). Due to the state's budget condition in recent years, however, the state has been unable to pay fully its share of costs for these flood control projects. Proposition 204 provided $60 million to pay some of the arrears owed to local agencies; however, these funds were depleted by the end of 1997-98.

According to the Department of Water Resources (DWR), the unpaid amount on the state's share of costs will be about $132 million at the end of 1998-99, after the expenditure of $40 million provided for this purpose in the current-year budget. Chapter 326 appropriated $44 million from the General Fund for each of 1999-00 and the subsequent two fiscal years for local flood control subventions. However, the budget proposes to revert the $44 million appropriated for 1999-00 to the General Fund, pending the enactment of legislation to authorize the reversion. With the reversion and no additional funding provided in the budget, DWR projects the arrearages to increase to about $189 million by the end of the budget year. According to DWR, the failure of the state to pay its share owing to local agencies has caused construction to stop on a number of flood control projects. We discuss this issue in greater detail in our write-up under Item 3860, the DWR.

Headwaters Purchase:
An Update

Chapter 615, Statutes of 1998, appropriated funds for the purchase of the Headwaters Forest and certain other forest properties, under specified conditions. The Wildlife Conservation Board plans to authorize the purchase of the Headwaters in late February 1999, provided that the conditions of Chapter 615 are met. The acquisition of this property, however, could be delayed by legal challenges.


The Headwaters Forest, located in Humboldt County, is one of the largest stands of old-growth redwoods left in private ownership. Environmentalists, the state and federal governments, and PALCO (the current landowner) have been at loggerheads over its fate for over a decade. In September of 1996, the state and federal governments and PALCO entered into an agreement which committed the state and federal governments to provide $380 million ($250 million from the federal government and $130 million in state funds) for the purchase of the Headwaters Forest.

State Committed Funding and Specified Conditions for Purchase of Headwaters Forest. In 1998-99, the Legislature enacted Chapter 615, Statutes of 1998 (AB 1986, Migden), which appropriated the following from the General Fund:

Under Chapter 615, the state funds are available only if the following conditions are met. First, the federal government provides $250 million as matching funds for the Headwaters purchase. Second, the final approved federal environmental document issued for other PALCO-owned lands, specifically a Habitat Conservation Plan (HCP) must include certain restrictions established in Chapter 615. The HCP would allow PALCO to log on the approximate 200,000 acres it owns outside of the Headwaters Forest, with certain restrictions to ensure the long-term preservation of endangered species. Chapter 615 specifies additional restrictions relating primarily to the establishment of no-cut buffer zones along watercourses in order to protect fish and birds.

The Wildlife Conservation Board (WCB) is the state agency responsible for acquiring the properties. However, Chapter 615 does not specify which state agency is responsible for determining whether the final HCP approved by federal authorities meets the specified conditions.

Current Status of HCP. On January 22, 1999, the final Environmental Impact Statement/Environmental Impact Report on the HCP was put on public review for a 30-day comment period. It is anticipated that the plan will be approved by federal authorities at the end of that period. The federal approval of the HCP would make federal funds available for the acquisition of the forest.

At the time this analysis was prepared, WCB indicated that it plans to authorize the $130 million expenditure for the Headwaters purchase (provided the conditions of Chapter 615 are met) at a February 24, 1999 board meeting following federal approval of the final HCP. This action will also make $32 million dedicated for Humboldt County and for the Grizzly Creek property available in the current year, and $80 million for the Owl Creek purchase available beginning July 1, 1999.

Implications for State

Legal Challenge Could Delay Acquisition. While both the state and federal governments are proceeding with the Headwaters purchase, the final HCP could be challenged in court, thereby delaying or derailing the acquisition of the forest. Because the $250 million in federal funds is available only until March 1, 1999, if the final approval of the HCP is delayed past that time, then the federal funds would expire. (However, the federal budget for the 2000 fiscal year--proposed in early February 1999--provides that the previously appropriated funds for the Headwaters purchase remain available for expenditure.) If the federal funds expire, the state funds would also revert to the General Fund. If the final HCP is successfully challenged after WCB has taken action to purchase Headwaters, it is unclear how this would affect the validity of any previous disbursement of funds for the Owl Creek and Grizzly Creek properties and for economic assistance to Humboldt County.

State Will Bear Some Ongoing Costs When Properties Are Acquired. According to WCB, upon the acquisition of Headwaters, the federal Bureau of Land Management will take title of the property and will be responsible for the operations and maintenance of the property. PALCO has agreed to pay $250,000 annually for the state to monitor the company's compliance with the HCP. However, given the number of requirements specified in Chapter 615 and the potential number of requirements in the HCP, it is not clear whether this amount would be sufficient to accommodate the enforcement workload to the state.

Upon purchase of the Owl Creek and Grizzly Creek properties, the state as sole owner would be responsible for the operation and maintenance of these properties. At this time, the magnitude of these costs has not been determined.

State Regulation of Petroleum
Pipelines Still Evolving

Commercial oil production began in California in 1876. Since that time, California has become the nation's fourth largest oil-producing state. The state has an estimated reserve of about three billion barrels, and produces almost one million barrels each day.

Despite the maturity and scale of California's petroleum industry, state regulation of pipelines and associated infrastructure was minimal until the early 1980s. Most pipelines were operated and maintained largely at the discretion of private operators. While many operators employed what were at the time considered to be prudent industry practices, there have been numerous instances of petroleum leaks and spills contaminating groundwater, damaging wildlife habitats, and washing onto shores. The full extent of damage caused by these past incidents is unknown, as some underground spills can go undetected for decades.

This write-up separately addresses active pipelines and abandoned pieplines. First, we review the current regulatory environment and discuss problems associated with the regulation and permitting process for active pipelines. Second, we discuss the potential threat of abandoned pipelines and undetected past leaks, and provide recommendations on how to reduce them.

Regulation and Permitting of Petroleum Pipelines

Regulatory Environment Recently Developed

Legislation and regulatory changes over the past two decades have greatly enhanced the regulation of pipelines and associated infrastructure.

California's pipeline infrastructure has developed over the past century. Today, the state has about 10,000 miles of various petroleum pipelines. Although much of this infrastructure is modern and well-maintained, the lack of age-based replacement requirements has allowed 50- and even 70-year-old pipeline segments to remain in use. In response to several dramatic spills and growing awareness of the environmental and health risks posed by the transportation of petroleum, the regulation of pipelines was expanded considerably in the 1980s and 1990s. Figure 1 highlights the key provisions of major state laws enacted since 1981.
Figure 1
Key Provisions

Major State Laws Concerning Pipeline Operations

1981 Through 1998
Legislation Key Provisions
Inspection, Testing, and Safety
Chapter 861/1981 (AB 911, Elder)
  • Requires State Fire Marshal (SFM) to adopt pipeline safety regulations to comply with federal requirements.
Chapter 1222/1983 (AB 1171, Elder)
  • Requires new pipelines to include a method of leak detection, and older pipelines to meet certain standards.
  • Assigns penalties for violations of pipeline regulations.
Chapter 1277/1989 (SB 268, Rosenthal)
  • Requires new pipelines to accommodate internal inspection devices.
  • Increases penalties for violations of pipeline regulations.
Chapter 395/1991 (AB 718, Elder)
  • Permits visual inspection for certain above-ground pipelines.
Research and Data Collection
Chapter 1252/1989 (AB 385, Elder)
  • Requires SFM to prepare a report assessing risks associated with pipelines near rail lines.
Chapter 523/1994 (AB 3261, O'Connell)
  • Requires SFM to assess safety of certain low-pressure pipelines, and maintain a database of such pipelines.
  • Requires SFM to investigate barriers and incentives for replacing and improving all hazardous liquid pipelines.
Chapter 731/1994 (AB 3521, McDonald)
  • Requires SFM to report every fifth year (beginning in 1999) on regulatory effectiveness with regard to pipeline safety and make recommendations.
Chapter 611/1996 (SB 562, Thompson)
  • Requires State Water Resources Control Board (SWRCB) to develop database of past underground storage tank leaks.
Chapter 973/1996 (AB 349, Escutia)
  • Requires pipeline operators, by July 1, 2000, to provide SFM with an evaluation of pipelines built before1960, as well as certain high-risk newer pipelines.
Chapter 814/1997 (AB 592, Kuehl)
  • Requires SFM to develop database of pipeline information.
  • Requires SWRCB, by July 1, 1999, to report on the feasibility of a mapping system for underground leak data.
  • Requires SFM at least biennially to identify all pipelines within 1,000 feet of a public drinking water well, and pipeline operators to develop plans to protect those wells.
Chapter 815/1997 (SB 1189, Hayden)
  • Requires an advisory committee to recommend whether MTBE should be listed as a carcinogen or toxin.
Spills and Leaks
Chapter 1248/1990 (SB 2040, Keene)
  • Creates an oil spill response program, funded from fees paid by pipeline and marine terminal operators.
Chapter 979/1995 (AB 1868, Katz)
  • Makes public utilities liable for damages arising from oil leaks from public utility pipelines.
Chapter 605/1996 (AB 1376, Bustamante)
  • Requires minimum volume thresholds be set for oil spills that must be reported to state officials.
Chapter 863/1986 (SB 1978, Campbell)
  • Expands SFM's jurisdiction to interstate pipelines.
Chapter 765/1996 (AB 1487, Pringle)
  • Extends from one to eight miles the maximum length of pipeline that can be installed, repaired, or replaced, without being subject to certain environmental requirements.
Chapter 1068/1998 (SB 1763, Costa)
  • Increases bond requirements for drilling and operating oil wells.
  • Increases the amount the Department of Conservation may spend annually for plugging orphan wells.

These statutes have considerably expanded and strengthened the laws governing pipelines, which previously had tended to be sketchy and haphazard. The statutes establish testing criteria, create monitoring and response programs, impose fees to fund safety and environmental protection efforts, and establish reporting requirements. For instance, Chapter 731, Statutes of 1994 (AB 3521, McDonald) requires the State Fire Marshal (SFM) to issue a report every five years that reviews current regulatory effectiveness with regard to pipeline safety, identifies pipeline leak incident rate trends, and recommends necessary changes to the Legislature. The first such report must be submitted in 1999.

We expect that the regulatory framework established by the above statutes will continue to evolve as new pipeline data are made available pursuant to statutory requirements, and as technological improvements allow better testing and maintenance of pipelines. Nevertheless, our review has identified two major regulatory issues which warrant legislative attention: jurisdictional boundaries among regulatory agencies, and consequences of permit requirements imposed on pipeline modification proposals.

Many Regulatory Agencies Have Jurisdiction

The petroleum production and transportation infrastructure is regulated by a multitude of state and federal agencies. We find that this results in jurisdictional conflicts and regulatory ambiguity. To some extent, these problems are being addressed through interagency agreements.

The physical infrastructure of the petroleum industry comprises a range of production and transportation elements. A number of regulatory agencies exercise primary jurisdiction over most of those elements. Figure 2 depicts the major components of the petroleum production and transportation infrastructure, along with the primary state agencies that regulate them. Regulations typically concern scheduled testing and inspection of pipelines for leaks or weakness, operating practices (including operational temperatures and pressures), and installation and maintenance of safety devices.

Three state agencies are most directly involved in the regulation of petroleum pipelines. They are:

Other state agencies become involved in pipeline regulation in less direct ways, such as through the regulation of petroleum storage tanks (State Water Resources Control Board--SWRCB) or in responding to spills (the Department of Fish and Game's Office of Spill Prevention and Response). Federal agencies, such as the U.S. Minerals Management Service and the Department of Transportation, also have roles. Further, various local agencies issue permits for the construction of new pipelines or the modification or repair of existing lines. Figure 3 provides a list of agencies involved in the regulation of pipelines.

Agencies Grapple With Jurisdictional Issues. As Figure 3 shows, there is a large number of local, state, and federal agencies with regulatory responsibilities for different aspects of the oil production and transportation infrastructure. Occasionally, this leads to jurisdictional conflicts and ambiguity. This is partly because the criteria for defining an agency's jurisdiction differ among agencies. Some jurisdictions are based on location of the pipelines (onshore or offshore, for example), some are based on the type of facility being regulated (such as production or storage), and some are based on the type of resource being protected (such as public health or wildlife habitat). As a result, it is not always clear where one agency's jurisdiction begins and another's ends. This can lead to overlapping jurisdictions or jurisdictional "gaps," where no regulatory agency assumes responsibility for particular segments of pipeline infrastructure.

Figure 3
Pipeline Operations and Maintenance

Regulatory Agencies

State Federal Local
  • State Fire Marshal (Department of Forestry and Fire Protection)
  • Minerals Management Service
  • Resources Management Department
  • Division of Oil, Gas, and Geothermal Resources (Department of Conservation)
  • Department of Transportation
  • Environmental Health Department
  • State Lands Commission
  • Environmental Protection Agency
  • Public Works Department
  • State Water Resources Control Board
  • Coast Guard
  • Zoning/Planning Department
  • Coastal Commission
  • National Marine Fisheries Service
  • Fire Department
  • Department of Parks and Recreation
  • Fish and Wildlife Service
  • Systems Safety and Reliability Review Committee
  • Office of Spill Prevention and Response (Department of Fish and Game)
  • Bureau of Land Management
  • Board of Architectural Review
  • Air Resources Board
  • Air Pollution Control District
  • Department of Transportation

Among state agencies, many of these potential conflicts have over the past several years been addressed through the development of memoranda of understanding (MOUs). An MOU signed between SLC and SFM in 1994, for instance, identified the precise points where their respective jurisdictions met at every marine terminal in the state. While MOUs help to better define jurisdictional boundaries, they are administratively inefficient in that they require staff time and costs for their negotiation. In addition, notwithstanding the jurisdictional clarification provided by some MOUs, other areas of jurisdictional ambiguity remain. It is doubtful that all jurisdictional issues could be fully resolved through the development of MOUs.

Another potential problem arising from regulation by multiple agencies concerns inconsistent testing and maintenance standards. For example, our review found examples of pipeline operators having to meet two different sets of testing standards (for example, differences in testing method and frequency of testing) for the same pipeline. Some state and federal agencies have responded to this type of situation by either adjusting their standards so that they are consistent, or by accepting a test certification or inspection by specified regulatory agencies. However, industry still feels that this problem has not been fully addressed.

We believe that state and federal agencies are making good faith efforts to mitigate multijurisdictional problems. We recommend that these efforts continue. In addition, as detailed in a later section of this write-up, we believe multijurisdictional issues could be further mitigated by the designation of a single lead agency to oversee the regulation of pipeline operations.

Permitting Process May Discourage Pipeline Repair and Replacement

Under the existing permitting process, a pipeline operator wishing to modify or replace an oil pipeline may have to wait months or even years and incur substantial costs to be authorized to make such improvements. This may create disincentives to repair pipelines.

As pipelines age they may become more susceptible to leaks, less capable of handling flow demands, and technologically obsolete. However, securing the authorizations necessary to alter or replace pipelines can be expensive and time consuming.

The first step in repairing, replacing, or installing a pipeline or pipeline segment is to ensure that the project complies with the California Environmental Quality Act (CEQA). Projects which involve a segment of pipeline longer than eight miles are subject to CEQA. This involves preparing an environmental impact report, holding public hearings, and providing for necessary environmental mitigation measures. According to representatives from industry, this process generally takes one to three years to complete.

Although projects affecting less than eight miles of pipeline are exempt from CEQA, only one-half mile of pipeline may be excavated at a time. This adds to the time needed to complete a project. It can also add to the costs of the project.

After a project meets CEQA requirements, or is exempted from them, the permitting process begins. Figure 4 highlights some of the permits that may be required of industry in order to install, repair, or replace a pipeline, and the estimated time needed to obtain these permits. The permits and times listed in Figure 4 were provided by various representatives of industry. The number of permits required varies depending on the pipeline's location.
Figure 4
Installation, Repair, or Replacement of Pipelines

State and Local Permitting Agencies

Pipeline Location Permit Agency Estimated Time to Issue Permit
Over 8 miles long Local planning agency, various state agencies (CEQA) 1 - 3 years
In a city Planning department

Public works agency

6 - 12 weeks
In an unincorporated area Planning department

Public works agency

6 - 12 weeks
On the coast California Coastal Commission

and/or local designee

6 - 12 weeks
In a flood control district County flood control district 8 - 12 weeks
Crossing a city/county road City/county transportation department NA
Crossing over aqueducts Department of Water Resources NA
San Francisco Bay Area Bay Area Conservation and Development Commission NA
Ports of Los Angeles/ Long Beach/San Francisco Port authorities 7 - 12 weeks
On state property Affected state agency 2 - 4 weeks
On wildlife habitat Department of Fish and Game 6 - 8 weeks
Railroad rights-of-way Agreement with railroad owners Varies
On private property Agreement with landowners Varies
In state waters State Lands Commission NA
Note: Some permits may be applied for simultaneously.
NA - Not Available.

Permitting Processes Create Disincentives to Repair Pipelines. Pursuant to Chapter 532, Statutes of 1994 (AB 3261, O'Connell), SFM investigated incentives that would encourage pipeline replacement or improvements. The report, which was completed in 1997, surveyed the industry and found that the most commonly cited barriers to replacing or improving pipelines involved the permitting process. Specifically, operators indicated that the permitting process was lengthy and expensive. Additionally, the process could have adverse effects on public safety and health.

In our review of that report and in subsequent discussions with SFM and industry representatives, we found the following to be the most significant barriers presented by the permitting process:

  • Time Delays. Depending on the number of permits required for a given project, the permitting process could take a couple of weeks to several months, or more. In some cases, requirements can be duplicative. In many of those cases, it also appears that the sequencing of the required permits contribute to the length of time required to obtain all permits. For example, one company noted that while the California Coastal Commission's coastal development permit is essentially the same as the County Coastal Development Permit, the state permit cannot be applied for until the county permit is approved. Additionally, the U. S. Army Corps of Engineers would not issue its required permit until after the state's permit was approved. In addition, some permitting agencies may add requirements to the project such as additional mitigation or shut-off valves. Complying with these additional requirements could further delay the project.
  • Increased Costs. In some cases, the cost of repairing pipelines is prohibitive due to the number of permits required, the mitigation efforts required by CEQA, and the necessary planning documents. One company claimed that it had started to abandon some of its pipelines that needed repair because it was too costly to prepare the required development plans and obtain all of the necessary permits. This company found it to be more cost-effective to begin transporting oil via tanker trucks. In addition, some permitting agencies may impose requirements beyond the scope of the immediate project as a condition of issuing a permit. These additional requirements, among other things, could include mitigation beyond CEQA requirements. Additional requirements will increase the cost of the pipeline project as well as cause time delays as mentioned above.

Disincentives to Repair Pipelines Could Jeopardize Public Health. As a result of the length and expense of the permitting process, pipelines are not replaced as quickly as they should be and could pose a health and safety hazard to the public and the environment. A number of representatives from industry have indicated that it often takes one to two years to obtain permits to replace or repair pipeline segments they know to be substandard. This delay presents a risk to the health and safety of the surrounding communities as well as to wildlife habitat. Furthermore, permitting costs increase the expense to repair pipelines, making pipeline transportation more costly than alternative means. As a result, more oil is being transported on the highways. According to the SFM, transporting oil via highways is over 400 times more likely to result in fatalities than via pipelines.

Additionally, many of the permitting agencies do not have the technical expertise to determine the need for certain safety features associated with pressurized pipelines. As a result, some of their efforts to improve the safety of the pipelines could actually increase the health risks to the public and environment. An example of this could be a local fire department requiring shut-off valves to be accessible to them as a condition of receiving a permit. Given that most petroleum pipelines are pressurized, shutting off the flow without notifying the operator could cause elevated pressures, leaks, and even structural damage to the pipelines.

Lead Agency Would Help Resolve Jurisdictional Issues And Streamline Permitting Process

We recommend the enactment of legislation to designate a single lead state agency to (1) coordinate testing and maintenance requirements and (2) streamline the permitting process.

As discussed above, the respective jurisdictions of regulatory agencies are not always clear. Additionally, pipeline operators are subject to inconsistent requirements imposed by these regulatory agencies. In order to help clarify jurisdictions and to make testing and maintenance criteria more consistent, the Legislature should designate a lead agency among pipeline regulators. This lead agency should be responsible for coordinating all state agencies and working with federal and local agencies to better delineate each agency's jurisdiction and how they can work to reduce potential duplication and uncertainty for the regulated community. The lead agency should also be required to make recommendations to the Legislature on statutory changes necessary to address any jurisdictional issues.

Based on our review of the roles of various state agencies in the regulation of pipelines, we believe that it would be reasonable to designate SFM as the lead agency. The SFM's jurisdiction currently covers a larger geographical area than other likely candidates. In addition, SFM is currently required by various statutes to produce reports on pipeline issues and maintain databases of pipeline information. Finally, SFM has already made considerable progress in coordinating jurisdictional issues with other state and federal agencies through MOUs.

The current permitting process creates a number of disincentives to pipeline operators who may otherwise have voluntarily replaced or upgraded pipelines. In order to help eliminate those disincentives associated with cost and time delays, the Legislature should charge the same lead agency to work in partnership with other federal, state, and local permitting agencies. This lead agency should evaluate the current permitting process to standardize and eliminate redundancies where possible. It should also be required to make recommendations to the Legislature on statutory changes that would streamline the permitting process.

Abandoned Petroleum Pipelines

Abandoned Pipelines and Past Leaks Pose Unknown Threat

While the nature, extent, and threat of undetected petroleum leaks are not clear, we find that the potential for long-term damage warrants further investigation of this problem and its implications for the state. We recommend the enactment of legislation appointing a lead agency to collect, integrate, and utilize data to identify sites that are especially likely to have had past petroleum leaks and are unusually susceptible to human health risks or environmental damage.

While the regulation of operational pipelines, as well as the state's ability to respond to new oil spills, has improved markedly in recent years, there is a continuing, unknown threat posed by past leaks and abandoned pipelines. This threat was dramatically illustrated a decade ago, when extensive underground pools of petroleum products were discovered under the town of Avila Beach. (Please see our December 1998 California Update, Oil Pipeline Spills: The Avila Beach and Guadalupe Experience.) The leaks had occurred over many years. The discovery of the leaks has led to a major clean-up effort involving the demolition of at least 21 buildings and the excavation of 100,000 cubic yards of contaminated soil.

As we noted in our December 1998 report, experts in industry and in the regulatory agencies believe that there are additional instances of past leaks still to be discovered in the state. The nature and extent of such leaks are currently unknown, and it is not even clear whether they pose any immediate threats to public health and safety. The level of threat would depend on a number of factors, including the proximity of drinking water supplies, the composition of the surrounding soil, the volume and age of the spill, and other considerations. Notwithstanding this uncertainty, we believe that the potential for long-term damage posed by undetected past leaks warrants further investigation of this problem. Existing data held by industry and governmental agencies will aid this investigation, as will several new reports and databases that SFM and other agencies are required to make available over the next two years.

We recommend, therefore, the enactment of legislation appointing a lead agency to collect, integrate, and utilize available data sources to identify sites that are (1) highly likely to have had past petroleum leaks and (2) unusually susceptible to environmental damage or human health risks. We believe the following data sources, among others, could be helpful in this effort:

  • Comprehensive GIS-compatible database of pipeline information (including pipeline locations, age, reported leak incidences, and inspection history), to be developed by SFM as required by Chapter 814, Statutes of 1997 (AB 592, Kuehl). The SFM expects to make this database available later this year.
  • Database of cases involving discharges of petroleum from underground storage tanks, created and maintained by SWRCB as required by Chapter 611, Statutes of 1996 (SB 562, Thompson) and Chapter 814. The SWRCB is required to report to the Legislature by July 1, 1999 on the feasibility of expanding this database to a statewide GIS system.
  • State Energy Map, developed by DOGGR, identifying locations of known active and abandoned pipelines, as well as other associated infrastructure. The department expects an updated, computer-based map to be available later this year.

After assessing available information, the lead agency should be authorized to obtain other information it deems necessary to complete an inventory of high-risk sites. We further recommend that the Legislature require that a sample of sites from this inventory be tested for evidence of past petroleum leaks. Results of these tests should then be used to determine whether further testing (and possible remediation) is warranted. These conclusions should be submitted in a report to the Legislature and Governor.

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