(Nov. 13, 2007) -- A spokesman for the U.S. Coast Guard has told LBReport.com that the container ship which struck part of the SF-Oakland Bay Bridge and spilled an estimated 58,000 gallons of bunker fuel into San Francisco Bay, loaded up on bunker fuel in Long Beach.

Photo source: US Coast Guard

U.S. Coast Guard Public Affairs Specialist/Petty Officer David Marin told LBReport.com that the container vessel ["Cosco Busan," leased to Hanjin] took on bunker fuel in Long Beach, then headed up the coast to the Bay Area.

Asked by LBReport.com for additional details, USGC spokesman Marin cited representations by an on site industry rep that the bunkering took place in Long Beach in an amount of roughly 1,500 tons [caveat, tons not gallons; proportion of full load uncertain].

Photo source: US Coast Guard

On Nov. 7, the vessel made contact with the lower structure of the SF-Oakland Bay bridge, creating a gaping hole in her side.

Bunker fuel spilled into SF Bay, affecting one of CA's and the nation's most treasured ecosystems as well as commercial fishing...and variously dismaying and angering residents of the Bay Area and beyond.

Photo source: US Coast Guard

On Nov 8, the San Francisco Chronicle reported on its website, www.sfgate.com, that environmentalists and oil spill activists said bunker fuel breaks down slowly, is difficult to clean up...and could affect marine life for some time.

The SF Bay oil spill prompted a visit by CA Governor Arnold Schwarzenegger, charges by State Senate President Pro Tem Don Perata (D., Oakland) that the Governor undermined disaster preparedness, questions on why the Coast Guard didn't grasp the magnitude of the problem sooner...and calls for federal investigations from U.S. Senators Barbara Boxer (D., CA) and Dianne Feinstein (D., CA).

A prominent environmental group has called for ending the use of high polluting bunker fuel entirely. "The dirty fuel that was spilled literally comes from the bottom of the barrel when oil is refined and is more than 1,000 times dirtier than the diesel fuel used in trucks and buses. This bunker fuel -- which powers many cruise and cargo ships -- pollutes the air, threatens human health, and causes global warming. And, as the accident in the San Francisco Bay demonstrates, this fuel also endangers marine life," said the web site of Friends of the Earth...which has launched an internet petition campaign urging Congress to require a complete phase-out on the use of bunker fuel.

As reported over two years ago by LBReport.com, CA taxpayers are currently encouraging the purchase of high-polluting bunker fuel in the state, the result of an industry-sought exemption from part of CA's sales/use tax enacted by state lawmakers in 2003.

The measure was advanced by then-Senator (now Ass'ywoman) Betty Karnette (D., LB) and Senator (now Senate President Pro Tem) Don Perata (D., Oakland).

Assemblywoman (former Senator) Betty Karnette	State Senate President Pro Tem Don Perata (at podium)
Photos from lawmakers' respective websites

State Sen. Alan Lowenthal

Its Assembly co-author was then-Assemblyman (now Senator) Alan Lowenthal. (Photo from the Assemblyman's website.)

The three lawmakers (representing CA's two major metropolitan port areas) used Sacramento's much-criticized "gut and amend" procedure near the end of the 2003 legislative year which avoided hearings required for most bills. Verbiage from an unrelated bill (SB 808) was removed and the bunker fuel tax exemption was inserted in its place.

The bill effectively reinstated a bunker fuel tax exemption that had been in effect for several years but had expired. Industry interests argued that without the tax exemption container ships (which have the capacity to travel long distances between bunkering stops) would simply schedule their stops to purchase their bunker fuel outside CA, costing CA jobs.

How much was the proposed exemption from state sales/use tax expected to cost CA taxpayers? A 2003 Senate Rules Committee analysis said:

The fiscal effect of the bunker tax exemption has been the subject of great controversy. At issue is the degree to which the imposition of sales tax on bunker fuel causes water common carriers to fuel out-of-state rather than in California. An analysis of this bill was not available from the State Board of Equalization (BOE) at the time this committee analysis was prepared. However, in an analysis of a similar bill, SB 145 (Perata), from the 2001-02 Legislative Session, BOE estimated that repealing the sunset date on the bunker fuel exemption would result in a total state and local sales and use tax loss of between $22 and $36 million (between $13.5 and $21.5 million General Fund losses and between $8.9 and $14 million local revenue losses). The range in BOE's estimates reflects uncertainty over the degree to which the sales tax causes water common carriers to fuel out-of-state.

According to this bill's proponents, the bill should result in relatively minor sales tax revenue losses, because the taxation of bunker fuel suppresses sales at California ports. This bill's proponents also assert that the imposition of sales tax on bunker fuel reduces overall economic activity at California ports. They argue that restoring the sales tax exemption will bolster economic activity, both by increasing sales of products purchased by vessels that choose to bunker and by reversing employment losses among businesses that serve bunkering ships (e.g., ports, pilots, barge operators, boom operators, and marine suppliers).

The bunker fuel tax exemption (which has a sunset date of 2014) passed with little, if any, discussion and Gov. Gray Davis signed it into law. State lawmakers have the power to repeal it; Gov. Schwarzenegger has the power to sign or veto their action.

In November 2006, Long Beach Councilwoman Gerrie Schipske urged repeal of the bunker fuel sales tax exemption...and said so publicly to Sen. Lowenthal at a CSULB conference on the "true cost" of goods movement.

In August 2007, Mary Nichols, CA Governor Arnold Schwarzenegger's appointed chair of the CA Air Resources Board, told LBReport.com that she believes the bunker fuel sales tax exemption "would be a nice thing to repeal." She added that this is her personal view and she wasn't speaking for the Schwarzenegger administration on this [wasn't certain of the administration's position in offering her personal response to our question.].

LBReport.com asked CARB chair Nichols about bunker fuel following her testimony at an August 2007 "informational hearing" convened by U.S. Senator Barbara Boxer (D., CA) at the Port of L.A. to spotlight Boxer's "Marine Vessel Emission Reduction Act" (S. 1499). Sen. Boxer (and multiple local House members) support enacting a federal law to require vessels visiting U.S. ports to use cleaner fuel and cleaner engines.

At the hearing, multiple local elected officials criticized the Bush administration's Environmental Protection Agency for failing to use its current regulatory powers require the use of cleaner fuels. Among them were LB Mayor Bob Foster and L.A. Mayor Antonio Villaraigosa who indicated they supported Sen. Boxer's federal legislation to curtail the use of high polluting bunker fuel in CA Ports.

The 2003 bunker fuel sales tax exemption's northern CA co-author, Senator Perata (whose district includes the Port of Oakland), is now Senate President Pro Tem. He decides (among other things) who chairs Senate committees...and named Sen. Lowenthal to chair the Senate's Transportation Committee which deals with Port, highway, railroad and "goods movement" related legislation.

On Oct. 30, LBReport.com got an opportunity to ask Senator Alan Lowenthal (D., LB-Lakewood-Paramount) about the bunker fuel issue after he finished addressing a LB Jr. Chamber of Commerce-related event held at a local pub. We post audio of his response below (amid pub-related ambient sounds).

In essence, Sen. Lowenthal acknowledged that his earlier vote was a mistake and said he wouldn't repeat it today. He also said that he didn't plan to take the lead on repealing the bunker fuel tax exemption. Among other things, he indicated that passage of his container fee/"port investment" bill (SB (974) is his priority.

Sen. Lowenthal added that he favors using regulatory mechanisms to eliminate the use of bunker fuel in CA (and U.S.) ports entirely.

To launch the audio of Sen. Lowenthal's comments, click here.

About a week after LBReport.com raised the issue with Sen. Lowenthal, a few miles away the Cosco Busan left LB harbor where it took on bunker fuel.

Part of the ship's load now fouls San Francisco Bay.

A 2003 legislative analysis on the bunker fuel tax exemption by the Assembly's Revenue & Taxation Committee listed the following:

SUPPORT:

American Marine Corporation
American Waterways Operators
Bunkerfuels (10 individual letters from different employees)
California Independent Oil Marketers Association
Carlson Mechanical, Inc.
Chemoil Corporation
China Shipping Container Lines Co., Ltd.
China Shipping Development Co., Ltd.
Clean Coastal Waters, Inc.
Compania Chilena de Navegacion Interoceanica
Dan Baker, Councilmember, City of Long Beach
Don Breazeale and Associates, Inc.
Environmental Maritime Services
Evergreen America Corporation (Los Angeles Office)
GP Resources, Inc.
Hapag Lloyd Container Line
International Council of Cruise Lines
Jacobsen Pilot Service, Inc., Los Angeles and Long Beach Harbors
K Line America, Inc.
Marine Chartering Co., Inc.
Marine Energy, United Arab Emirates
Matson Navigation Company, Inc.
Millennium Maritime, Inc.
MOL (America) Inc.
Ngenia, LLC
Northern California District Council - ILWU
Overseas Wiborg Chartering Company
Pacific Horizon Petroleum Services, Inc.
Pacific Merchant Shipping Association
Pan Pacific Surveyors, Inc.
Petro Diamond Incorporated
Port Hueneme Chamber of Commerce
Port of Sacramento
Premier Marine Fuels Ltd.
Princess Cruises and Princess Tours
Public Service Marine, Inc.
Riley Marine Survey and Consultancy
Sailors' Union of the Pacific
San Francisco Bar Pilots
Sanko Steamship Co., Ltd.
Sea Bunkering Americas LLC
Solar International Shipping Agency, Inc.
Star Shipping, Inc.
Timothy Parker, Maritime Consultant
Tom Flahive Trans-Tec Services, Inc. (8 individual letters from different employees)
Weiss Jones
Westar Marine Services
Westoil Marine Services, Inc.
Westport Petroleum, Inc.
Westport Petroleum, Inc. (27 individual letters from different employees)
World Fuel Services Corporation
Yang Ming (America) Corp.
Zim-American Israeli Shipping Co., Inc.

Perhaps due to the "gut and amend" procedure (which circumvented usual hearings) there was no listed opposition.

The votes on passage were: