BILL ANALYSIS AB 23 X4 Page 1 (Without Reference to File) CONCURRENCE IN SENATE AMENDMENTS AB 23 X4 (DeVore) As Amended July 24, 2009 Majority vote ----------------------------------------------------------------- |ASSEMBLY: | |(July 9, 2009) |SENATE: | |(July 24, | | | | | | |2009) | ----------------------------------------------------------------- (vote not relevant) (vote not available) Original Committee Reference: RLS. Summary : Makes statutory changes necessary for the state to proceed with the reconsideration of a lease to drill for oil in the Tranquillon Ridge Field from an existing platform in federal waters of the California Coast near Santa Barbara. Specifically, this bill : The Senate amendments delete the Assembly version of this bill, and instead: 1)Makes findings and declarations stating that due to the budgetary crisis, it is in the public's best interest to reconsider the issuance of a lease to drill for oil in the state tidelands in Santa Barbara County. 2)Creates an Interim Resources Management Board (IRMB) for the sole purpose of reconsidering the Tranquillon Ridge Field proposed lease and development project that was rejected by the State Lands Commission (SLC) on January 29, 2009. The IRMB will be chaired by the Secretary for the Natural Resources Agency (Resources) with the Secretary of the California Environmental Protection Agency, and the State Controller serving as additional voting members. 3)Requires that the IRMB hold at least one public hearing to reconsider the proposed lease within 30 days of enactment of the act. 4)Authorizes the chair of the IRMB to execute the lease on behalf of the state of California once approved by the board by a majority vote. Once executed, the lease will be AB 23 X4 Page 2 administered by the SLC. 5)Requires that the proposed lease contain the following conditions that are enforceable by the Attorney General prior to approval: a) The lease will be terminated in no more than 14 years; b) The lessee will make a single pre-paid royalty payment to the State Treasury of $100 million and will provide, at a minimum, the same royalty payments to the state that were proposed when this was before the SLC in January, 2009; c) The lessee will avoid, reduce, or offset all potential greenhouse gas emissions resulting from project operations; d) Upon termination of the lease, all offshore oil and gas production operations will be terminated and all related onshore processing facilities that are owned, controlled, or operated by the lessee will be removed. e) Upon termination of the lease, the lessee will clean up, restore and donate a minimum of 3,900 acres of land, including land formerly used to house processing facilities, for public use and conservation. f) The lessee will use all feasible efforts to remove four of its platforms on the outer continental shelf in federal water that are currently in production. Additionally, the lessee will provide funds in an escrow account, in an amount to be determined by the IRMB, to decommission four platforms or for the mitigation of adverse environmental effects of offshore oil drilling; and g) All other terms and agreements entered into between the lessee and non governmental third party will be included as a condition in a proposed lease. Such agreements will be provided to the IRMB, made public and posted on the Resources Agency's website at least 30 days prior to the consideration of the lease by the IRMB. 6)Requires that any legal challenges to the act must be filed and served within 60 days of the effective date. 7)Requires that any lease executed pursuant to the bill must be filed and served within 60 days following execution and AB 23 X4 Page 3 notification of its execution. 8)Sunsets the act on January 1, 2011. AS PASSED BY THE ASSEMBLY , this was a vehicle for the budget trailer bill. FISCAL EFFECT : Approval of a lease will provide $100 million in revenue in 2009-10. Depending on price of oil, over its life the lease would generate from $1 billion to $4 billion in royalties for the state. The royalty revenue estimates for this bill were from a prior lease proposal that was presented before the SCL. This bill uses these royalty rates estimates as a minimum and do not preclude the IRMB from negotiating a higher rate of return for the state. Analysis Prepared by: Keali'i Bright / BUDGET / (916) 319-2099 FN: 0002110