Background:

The 2014 Supplemental Operating Budget included a proviso directing the Department of Ecology (ECY) to study program gaps and public health and safety risks associated with oil transport over water and by rail. The ECY was directed to work with the Utilities and Transportation Commission (UTC), the Emergency Management Division of the Military Department, and other stakeholders in carrying out the study. In December 2014 the ECY issued a draft study featuring 43 recommended changes to federal, state, and local oil-transportation policies and programs.

Modes of Oil Transportation.

Oil, including crude oil and refined petroleum products, is sometimes transported by vessel, pipeline, or train between the point of extraction, processing facilities, and other destinations. The types of vessels used to transport oil include oil tankers, tank barges towed by tugs, and articulated tug barges that feature a structural connection from the tug providing propulsion for the barge. Oil transported by rail is carried in individual tank cars; oil-carrying tank cars may comprise part or all of the cargo of a train.

Definition of Oil.

For the purposes of state laws regarding oil spill prevention, planning, and financial responsibility, oil is defined in state law as any kind or distillate of oil that is liquid at atmospheric temperature. Specific types of oil are explicitly included within this definition.

Financial Assurance Requirements for Facilities and Vessels.

Facilities such as oil refineries and terminals must demonstrate the financial ability to compensate the state and local governments for damages from a worst-case spill. Likewise, certain vessels including barges and tank vessels that use state waters or ports must also document their financial ability to pay for oil spill removal costs, natural-resource damages, and related expenses. Financial responsibility must be demonstrated to the ECY in one of several ways, including providing evidence of insurance or surety bonding.

Oil Spill Prevention Plans and Oil Spill Contingency Plans.

The ECY administers an oil spill preparedness, prevention, and response program. Among other statutes administered by the ECY's Oil Spills Program, state law directs facilities including oil refineries, terminals, pipelines, and vessel operators involved in the bulk transfer of oil to put in place oil spill contingency plans that outline containment and remediation responses to potential oil spills from the vessel. Contingency plans approved by the ECY must identify personnel, materials, and equipment capable of promptly and properly removing oil with minimal environmental damage. Railroad cars are not considered facilities for purposes of state spill contingency planning, but do conduct certain oil spill response planning under federal law.

In addition to, or as part of, state spill contingency plans, onshore facilities must submit oil spill prevention plans to the ECY. The ECY may only approve these plans if they incorporate measures providing for the best achievable protection of public health and the environment, which means that the plans must provide the highest level of protection through the best achievable technology and the most protective staffing levels, training procedures, and operational methods. Best achievable protection is also the standard established by the ECY rules that address operations of refineries, terminals, and other facilities.

Other Maritime Safety Provisions: Oil Tanker Tug Escorts and the Emergency Response Towing Vessel.

Tug escorts can be a tool to assist vessels in distress that have lost control of their power or steering. State law requires oil tankers of greater than 40,000 deadweight tons entering Puget Sound to have one tug escort with a minimum horsepower equivalent to 5 percent of the deadweight tonnage of the vessel the tug is escorting. The Board of Pilotage Commissioners (Pilotage Commission) has adopted rules regarding the applicability of oil tanker tug escort requirements. Violation of oil tanker escort requirements is a gross misdemeanor and may also trigger civil penalties of up to $10,000 per day. Civil penalties may be sought by a county prosecutor or the Washington Attorney General upon the request of the Pilotage Commission.

Federal law prohibits oil tankers larger than 125,000 deadweight tons from entering Puget Sound. Federal law also requires that single-hulled oil tankers weighing above 5,000 gross tons entering Puget Sound be escorted by two tugs; however, the federal Oil Pollution Act of 1990 also phases out single-hulled oil tankers in American waters by 2015.

All vessels operating in the Strait of Juan de Fuca must file with the ECY evidence of an emergency-response system that provides for the operation of an emergency-response towing vessel capable of response to vessel oil spill threats stationed at Neah Bay on the Olympic Peninsula.

Vessel operators are also required to provide an advanced notice to the ECY that includes time, location, and volume information prior to certain transfers of oil involving a vessel.

The Puget Sound Partnership, with input from the ECY and other maritime stakeholders, recently completed a vessel traffic risk assessment study of spill risks associated the movement of vessels in Puget Sound under various scenarios.

Emergency Response Planning.

Within the State Military Department, the Governor-appointed Emergency Management Council acts as the State Emergency Response Commission that the federal Emergency Planning and Community Right to Know Act (EPICRA) requires the state to establish. The EPICRA requires states to oversee hazardous-chemical emergency planning and requires the formation of local emergency planning committees to develop and annually review emergency-response plans that identify the transportation routes of extremely hazardous substances.

Barrel Tax and Uses of Oil Spill Prevention Account and Oil Spill Response Accounts.

Crude oil and petroleum products that are transported by vessel on state waters are subject to an oil spill administration tax (administration tax) and an oil spill response tax (response tax) at the time of the product's initial receipt by a marine terminal. A credit is allowed against taxes imposed on oil that is initially received in Washington, but subsequently exported from the state.

The administration tax is 4 cents per 42-gallon barrel and is deposited in the Oil Spill Prevention Account (Prevention Account), while the response tax is 1 cent per barrel and is deposited in the Oil Spill Response Account (Response Account). If the Office of Financial Management determines that there is in excess of $9 million in the Response Account, then the 1 cent response tax is no longer levied until the Response Account balance falls below $8 million.

The Response Account is used for the costs associated with the response to oil spills into state waters that the ECY determines are likely to incur in excess of $50,000 in response costs and for the emergency towing vessel stationed at Neah Bay. The Prevention Account is used for the administration of several ECY Oil Spill Program activities.

Utilities and Transportation Commission Regulation of Railroads.

The UTC administers a railroad safety program (Program). The activities of this Program include:

the approval of petitions to open, close, or reconfigure railroad crossings of public roads, except within cities of over 10,000 in population; and
inspections of public road-railroad crossings to ensure state and federal standards are met.

In addition, the UTC inspectors operate under delegated authority from the Federal Railroad Administration (FRA) to support the FRA oversight of railroad compliance with the FRA safety regulations. The UTC inspectors are restricted from conducting inspections at crossings between a private roadway and a railroad. The UTC inspectors are restricted, without accompaniment by a FRA inspector, from accessing private property for hazardous material transport inspections.

The UTC's Railroad regulatory activities are funded by a fee on railroads set at 1.5 percent of a railroad's gross operating revenue from intrastate operations.

Oil Facility Siting Processes.

The Energy Facility Site Evaluation Council (EFSEC) is responsible for making certification recommendations to the Governor for certain new energy facility construction or existing facility expansion proposals. Among the types of projects that the EFSEC has jurisdiction to review are proposals to construct or expand facilities that process or receive oil in an amount above certain defined size thresholds.

Oil facility projects which do not meet the size criteria meriting a review by the EFSEC are instead subject to the permitting processes established by the local jurisdiction in which the project is proposed. Certain state agencies, including the ECY, may also have a role in administering air, water, hazardous waste management, and other permits that oil processing or storage facilities may need to operate.

Summary of Engrossed Substitute Bill:

Oil Definition.

Oil is redefined in oil-spill prevention, cleanup, and financial responsibility laws to mean any kind of oil that is liquid at 25 degrees Celsius and 1 atmosphere of pressure, including any distillate of that oil. This definition also explicitly covers the following types of oil:

bitumen, which is a heavy oil that will not flow until heated or diluted;
synthetic crude, which results from the processing of bitumen; and
natural gas well condensate, which is a liquid hydrocarbon mixture recovered at natural gas extraction wellheads.

Disclosure of Information about Oil Transportation.

The ECY must receive advanced notice of transfers of crude oil between rail facilities and vessels or other facilities, which must include information about oil volume, vapor pressure, gravity, and the 24-hour range of time within which the oil transfer is expected to occur. The ECY must adopt advanced notice rules.

Pipelines must report to the ECY twice per year on the volume of oil they transported through the state, the vapor pressure and gravity of the oil, and any diluting agents used to transport the oil. Pipeline reports due July 31 must contain oil transport information from January 1 to June 30, while pipeline reports due January 31 must contain oil transport data from July 1 to December 31.

The ECY must aggregate pipeline and rail transfer data quarterly on a statewide basis and publish it on its website. The information published by the ECY must include:

the volume and type of oil transferred;
the oil's place of origin;
the mode and route of transport;
the number of rail cars transferring oil; and
information about any spills that occurred during transport or transfer.

Non-aggregated advanced notices submitted to the ECY by railroads, as well as information about diluting agents submitted by pipelines, are exempt from public disclosure under the Public Records Act. However, this unaggregated information may be shared with local emergency planning committees and local government personnel with an official emergency management or emergency response duty.

Financial Assurance Requirements.

Railroads that transport oil as bulk cargo must provide the same financial assurances to the ECY as facilities like oil refineries and terminals. The ECY is directed to adopt a rule setting the amount required for railroads and other facilities to demonstrate financial responsibility; an amount which is to be calculated by multiplying the reasonable anticipated per-barrel cleanup costs by the reasonable worst-case spill volume.

Vessels, railroads, and other facilities may employ new means of demonstrating their financial responsibility, including a letter of credit or protection and indemnity club membership. Documentation of financial responsibility must be in the form of an ECY-issued certificate with a term of one year or less. Owners or operators of multiple vessels or facilities may be covered by a single certificate.

The ECY may reevaluate the validity of a certificate after a spill or potential liability that would jeopardize the certificate holder's ability to meet the financial responsibility requirements necessary to originally obtain the certificate. If a vessel or facility spill incurs potential liability exceeding 5 percent of the certificate's requirements, the certificate becomes inapplicable to other previously covered vessels or facilities, and the owner or operator must redemonstrate an ability to pay all damages.

Oil Spill Prevention Plans and Oil Spill Contingency Plans.

Railroads must submit oil spill contingency plans to the ECY in the same manner as terminals, refineries, and other covered facilities. However, railroads are not made subject to the oil spill prevention planning requirements placed on other facilities.

The oil spill prevention planning standard of best achievable protection is applied to oil spill contingency planning, which must include access to in-state equipment to respond to a worst case spill.

Oil Spill Prevention and Response Taxes and Accounts.

Beginning January 1, 2016, the administration tax is increased to 8 cents per 42-gallon barrel. The administration tax and response tax are levied on oil received by facilities from rail tank cars, pipelines, and vessels.

The Response Account may be used to respond to spills or threatened spills of oil that the ECY anticipates will cost in excess of $1,000. The Response Account may also be used to compensate emergency towing by any tug vessel, in addition to the costs of the emergency response towing vessel stationed at Neah Bay.

Until June 30, 2019, the Prevention Account may be used for oil and hazardous material emergency response planning by local emergency response committees, which the Military Department may employ staff to support. The initial focus of planning must be on communities through which oil-bearing trains travel.

Local Committees must annually review their plans and submit them to the State Emergency Response Commission every five years or whenever they are updated.
The Military Department must report to the Governor and Legislature by March 1, 2018, on the progress of local emergency planning towards meeting EPICRA planning requirements.

Before spending money in the Prevention Account, but without delaying response activities, the ECY must make reasonable efforts to obtain response cost funding from responsible persons or other sources, including the federal government.

Oil-Bearing Vessel Tug Escorts.

The Pilotage Commission must adopt rules designed to achieve a best achievable protection standard by June 30, 2017, for Puget Sound waters, including the narrow channels of the San Juan Island Archipelago. These rules may include tug escort requirements or other safety measures for oil tankers, articulated tug-barges, and towed vessels. The Pilotage Commission may also adopt best achievable protection rules pertaining to the capabilities of the tugs used to escort oil-bearing vessels.

In addition, the Pilotage Commission may adopt rules to require tug escorts and other safety measures in the Puget Sound, the Columbia River, and Grays Harbor that apply to oil tankers of greater than 40,000 deadweight tons, other towed vessels capable of transporting over 10,000 gallons of bulk petroleum, and articulated tug-barges of all sizes. The Pilotage Commission's authority to adopt tug escort and other maritime safety rules in these areas is contingent on one of the types of events related to oil-handling facilities taking place:

the governor approving a recommendation by the EFSEC to site an oil storage or processing facility;
a state agency or local government issuing a final permit to site a facility required to hold a spill contingency plan, or to approve a facility to newly receive or process crude oil; or
the state of Oregon issuing a final permit to site an oil handling facility in the Columbia River watershed or to newly receive or process crude oil.

These Pilotage Commission maritime safety and tug escort rules may only address the waters directly affected by the facility siting or approval event.

The Pilotage Commission rules must be written in consultation with the ECY and must rely on the results of vessel traffic risk assessments. Any new vessel traffic risk assessments must include a simulation analysis. Prior to rule-making, the Pilotage Commission must also collaborate with maritime professionals and public agencies.

Vessels not bearing bulk oil are not subject to tug escort requirements. Single-hulled oil tankers are subject to federal tug escort requirements in the Puget Sound. The new safety requirement rule-making may not change the pilotage requirements for oil-bearing vessels.

Utilities and Transportation Commission Rail Safety Program.

The regulatory fee paid by railroad companies to the UTC is 0.2 percent of the sum of the company's gross intrastate operating revenue plus the Washington portion of their gross interstate operating revenue.

The UTC inspectors may enter private property to conduct hazardous materials inspections, investigations, and surveillance under the federal partnership that delegates inspection authority to state inspectors.

The UTC must adopt safety standards for private road crossings of railroads used to transport crude oil. These safety standards must include signage requirements, UTC inspection and crossing improvement prioritization criteria, and requirements for railroad companies to pay for and complete improvement projects. The UTC may inspect private crossings and order railroads to improve private crossings.

Cities of over 10,000 people may elect to participate in the UTC public road-railroad crossing safety inspection program. Cities of over 10,000 people must provide a list of existing public crossings to the UTC within 30 days of the act's effective date and must also notify the UTC within 30 days of the opening, closing, or modification of a crossing.

Other.

A severability clause is included.

State-owned railroads are exempted from financial assurance, advanced notice, and contingency spill planning requirements.

Staff Summary of Public Testimony (Environment):

(In support) Over the last several years, there have been rapid changes in how oil is transported through the state. Oil-carrying train traffic has increased dramatically. More action is needed to improve rail transportation safety than marine transportation safety, but improvements are needed in both arenas. This bill applies the same safety requirements to oil moving by train as it does to oil moving by ship. The bill fills in the gap where federal safety requirements are not sufficient, such as for oil spill contingency planning. Prevention, preparedness, and response capacity are all important facets of state agency oil spill programs' ability protect public safety and the environment. Prevention is particularly important, and the state must adopt a zero-spill goal. There are large gaps in the state's knowledge about the oil being transported through our state, and the advanced notice of oil transfer parts of the bill are critical for that reason. Federal oil movement disclosure provisions are not sufficient, and only apply to crude from the Baaken region being moved in 1 million gallon increments. Emergency responders need to have detailed information about when, where, and how oil is moving across the state. In addition to the lack of public information there are gaps in state and local capacity to respond to an accident. The risk posed by spills of flammable types of crude oil from trains are real. An exploding oil train would destroy whole towns and damage the environment. Oil train spills could start wildfires in the Columbia River Gorge. There is no safe way to contain an oil spill fire once it starts, and responders must just wait for it to burn out. The safety improvements in the bill do cost money, which is the reason that the per-barrel tax on oil is increased by the bill. It is equitable to tax oil being received from all means of transport, rather than just by vessel. Oil companies should bear the increased costs to the state to ensure public safety and environmental protection. The UTC needs funding for additional inspectors and additional authority ensure rail crossing and shipment safety. The Pilotage Commission's rules will improve safety without harming commerce. Projects that increase the transportation of crude oil are contrary to recent progress in creating a cleaner economy. Increased rail traffic cuts off access to industrial areas in Columbia River Gorge towns bisected by rail lines, and vehicle traffic is unable to get across an occupied train track, even in an emergency. The oil companies simply want to get their product to market, and are willing to say in public what they think they need to in order to continue to do business. However, the job of the Legislature is to keep people safe, so the Legislature should not let oil companies or railroads cut corners and endanger the public.

(With concerns) The bill requires some new marine safety rules by 2017, despite the appearance that the rule-making is all discretionary. Increased coordination with Oregon is necessary for any action on the Columbia River. The Columbia River has a robust maritime safety system in place. The ECY's October study did not include any recommendations for additional tug escorts. The actions in the bill should be in response to the data and analysis of issues in the ECY's report.

(Opposed) Major new federal actions to improve oil transportation safety have been put in place in the past year. Providing advanced notice of when and where oil will be delivered poses antitrust, competitive, and homeland security concerns. Parts of this bill are duplicative of federal requirements or international standards, or are preempted by federal laws. Safety is a concern for railroads, who already spend hundreds of millions of dollars annually on safety improvements. Railroads take safety risks seriously, and work to prevent accidents. Railroads have invested in training local first responders for over a decade, and currently give information about hazardous materials moving through communities to first responders who are willing to sign a confidentiality agreement. Marine transport of oil is already the safest way to move oil in the state, and the industry's safety has continued to improve over the years. Many of the vessels used to move oil are state-of-the art, and contain many safety features.

Staff Summary of Public Testimony (Finance):

(In support) The bill provides the funding necessary to implement safety planning to move crude oil throughout the state by all modes of transportation, including funding for contingency plans for spill response. The need to expand the tax to new highly utilized modes of crude oil transportation of rail and pipeline is essential. The new revenue will help fund the steps needed to ensure the same high level of risk mitigation and spill response plans for rail and pipeline to mirror what is in place for water vessel transport of oil. The increase of the oil spill administration tax will help reduce the need to use model toxic control account revenue that has been subsidizing the state's necessary oversight of oil transportation safety, including the establishment of oil spill response plans. The current regulatory structure for crude by rail in our state is not adequate. The bill provides important new tools needed and a new level of transparency for oil transported in the state by water, rail and pipeline. A federal report estimates 10 derailments per year is expected with the increase of rail used to transport oil throughout the United States. Modifying the tax structure to include rail helps local governments know that funding will be available to keep response plans up to date without reliance on revenue from the model toxic account. The current oil transportation system is not adequately equipped to handle the transport of the oil currently being delivered today, including the highly toxic tar-sand oil being transported by rail. This bill is necessary and provides the right tools to improve oil transportation regulations and standards.

(Opposed) The current regulator program for delivery of crude oil is mainly focused on oil transported by vessel. The need to update and expand the regulatory and response program of delivery of crude by rail is important and the expansion of the oil tax to these new modes of transport is understandable. However, the increase of the tax in unnecessary to achieve the levels of funding to do this. The revenues do not line up with the expenditures needed to update the regulatory and response programs. The expansion of the tax to new modes is sufficient to implement the policy portions of the bill. Federal actions to improve the safety of crude oil transportation have been put into place during the past year. The change to the fee calculation for regulatory fees on railroads needs more work. Railroads take safety risks seriously and continually work to prevent accidents on railroads. Railroads have invested hundreds of millions of dollars in Washington to improve railroad safety and the railroad network to ensure safe delivery of all products into the state.