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California Budget Includes Climate, Oil Rail Issues

California Gov. Jerry Brown on Thursday outlined a multi-billion-dollar state budget that includes $850 million of revenues from the state's cap-and-trade auction for greenhouse gas (GHG) emissions credits, a preparedness program for increased rail shipments of oil into the state from Wyoming, and additional spending to implement new rules on hydraulic fracturing (fracking).

Parts of the proposal include an eventual fee for oil/gas operators to pay for the implementation of the state's new fracking rules, and a stepped-up plan for anticipating and responding to spills due to the increased use of rail for shipments of crude oil.

With stops in Sacramento, Los Angeles and San Diego, Brown went on the road to roll out his fiscal 2014-2015 budget, including a proposal to invest $850 million of cap-and-trade auction proceeds to "support efforts to reduce greenhouse gases, with an emphasis on assisting disadvantaged communities." Those efforts will focus on both energy production and transportation, which produce the majority of the state's GHG emissions.

Natural Resources Secretary John Laird, whose departments will focus on implementing the bulk of the climate change mitigation efforts, said that for one of his agencies -- the Department of Fish and Game, which has responsibility for responding to oil spills -- Brown's proposed budget includes funds "for a proactive effort to guard California's inland waterways on what is expected to be a very large increase in rail shipments of crude oil from Wyoming."

During a press conference with Brown's cabinet secretaries, the question of the state adopting rules on oil rail transport was raised, but Laird said the federal government holds the primary responsibility for rail safety, and the state has the responsibility to respond if something goes wrong.

"Domestic production of crude oil has increased greatly during the past three years, and that increase has exceeded the nation's pipeline capacity, so that it is causing a shift to moving more oil by rail," said Charlton Bonham, state fish/game director. "These added funds are to prepare an integrated, comprehensive strategy for oil spill preparedness and response. All of this is to begin to prepare for the shift in the transportation of oil."

Brown talked about the changing energy landscape that is impacting California at his first of three budget press conferences, Thursday morning in Sacramento. But there were hardly any direct references to energy in his budget proposal.

So far, the state has collected $532 million in revenue from the cap-and-trade auction, which is administered by the California Air Resources Board (CARB). The latest state budget assumes "conservatively" that another $750 million of auction revenues will be obtained this coming fiscal year.

Part of the budget affecting Laird's Conservation Department and its Division of Oil, Gas and Geothermal Resources (DOGGR) is aimed at the implementation of a state law (SB 4) mandating new rules to cover fracking. Additional engineering positions and a potential surcharge on oil/gas production are outlined, but the details won't be available until later in the budget process in the first half of this year, Laird said.

"While we haven't set a fee [for oil/gas operations] yet, there are some additional positions already in place [in DOGGR]. Some things are still to be determined, but it doesn't mean that there will not be money or that there aren't additional positions to implement SB 4."

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