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Legislature passes refined fuel surcharge Intent of House Bill 158 is to spread response costs to wider range of users, reflecting number of refined fuel spills in the state Kristen Nelson Petroleum News
The Alaska Legislature has passed a refined fuel surcharge, updating funding for the Department of Environmental Conservation’s Division of Spill Prevention and Response.
SPAR has been funded from the Oil and Hazardous Substance Release Prevention and Response Fund, which comes from the 5 cents per barrel surcharge on crude oil produced - 4 cents of which goes into the prevention account.
SPAR Division Director Kristin Ryan told the Senate Resources Committee in a February hearing that the division is funded by cost recovery, fines, investment income and a surcharge on each barrel of crude oil produced in the state, and with both oil production and interest rates down, the division is underfunded.
Department of Environmental Conservation Commissioner Larry Hartig said the response fund is critical, providing more than 50 percent of SPAR’s funding. The fund was established in 1989 and the 5 cents per barrel rate hasn’t changed, Hartig said.
Previous attempts to increase the 5 cents going into the fund from crude oil production faced objection from the oil industry, which argued it cleans up its own spills and that funds it provided were used for non-crude oil spills.
Both bodies pursued funding Two bills, House Bill 158, sponsored by Rep. Cathy Munoz, R-Juneau, and Senate Bill 86, sponsored by Sen. Peter Micciche, R-Soldotna, had the same goal of increasing SPAR funding. HB 158, as amended in the Senate, was the bill that the Legislature passed April 18.
Munoz said in March hearings that SPAR faces a $1.9 million projected shortfall in fiscal year 2016, assuming receipt of a $5 million federal settlement related to a site in Aniak and budget reductions including deletion of four positions and consolidation of programs. After FY 2016, Munoz said, the estimated budget shortfall without additionally funding is $7 million annually.
Micciche said in a statement on SB 86 that a variety of industries and individuals spill oil and hazardous substances and a majority of spills to which the state responds are refined oil spills. The bill “distributes prevention and response costs across all users of refined fuel,” he said.
Munoz had proposed a 1 cent per gallon surcharge; Micciche proposed 0.8 cents per gallon; the amended HB 158 provides for a surcharge of 0.95 cents per gallon.
Funding spill response “HB 158 is critical to the state’s ability to fund the response of fuel spills in our communities, along our roads and in our rivers and lakes,” Micciche said in an April 18 statement after passage of the bill.
“Most spills result from refined fuels, not crude oil; but in the past all spills cleaned up by the fund were paid for by a fee on the producers of crude oil. They will continue to pay their share, however this legislation apportions clean-up costs more equitably. The lion’s share of new costs will be covered by mid-sized industries. For the small proportion passed down to the consumer, the average driving Alaskan family will likely spend less than a penny a day,” he said.
Munoz said following passage of the bill that “Alaskans value a healthy environment” and many remember the devastation of the Exxon Valdez spill in 1989. “That event demanded a long-term funding solution to prevent and respond to not only large scale spills but also smaller scale contaminated sites, marine spills, and other fuel releases. The Legislature enacted a surcharge on oil production to fund prevention and response activities.”
Collected from qualified fuel dealers A fiscal note from the Department of Revenue’s Tax Division said the surcharge will be collected from qualified fuel dealers, who generally import and wholesale fuel oil, as well as from some in-state refiners, the same group of companies currently filing Alaska’s motor fuel excise tax. The motor fuel excise tax, which varies from 3.2 to 8 cents per gallon, in only paid on certain types of fuel, the division said, with exemptions defined in statute.
The surcharge under HB 158 will be applied to a wider range of refined fuel, including some products exempted from the motor fuel tax.
Exemptions from the new surcharge include sales to federal and state government, fuel exported out of the country, fuel used in aviation and transfers among qualified dealers.
The division said it is estimated that, with those adjustments, the surcharge will apply to approximately 785 million gallons of refined fuel in the first year, and at 0.95 cents per gallon, will represent annual revenue of some $7.45 million in fiscal year 2016, with an estimated 2 percent increase per year afterward.
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