BILL ANALYSIS Ó Bill No: AB 982 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Roderick D. Wright, Chair 2011-2012 Regular Session Bill Analysis AB 982 Author: Skinner As Amended: June 23, 2011 Hearing Date: June 28, 2011 Consultant: Paul Donahue SUBJECT : State land exchange for renewable energy projects SUMMARY : Directs the State Lands Commission to arrange land exchanges with the federal government in order to consolidate non-contiguous parcels owned by the state for development of large-scale renewable energy projects. Existing law : 1) Designates administrative control of specified state lands to the State Lands Commission (SLC), including property the federal government granted to the state to be held in trust for the benefit of California public schools. 2) Vests the SLC, as a trustee, with the exclusive jurisdiction and authority to administer the School Land Bank Fund and the interest in land acquired pursuant to that act. 3) The School Land Bank Act authorizes the SLC acting as a trustee, to acquire interest in real property for the purposes of facilitating the management of school lands to generate income, for the benefit of the California State Teachers' Retirement System. This bill : 1) Requires SLC to enter into a memorandum of agreement (MOA) by April 1, 2012, with the U. S. Secretary of the Interior to facilitate land exchanges that consolidate school land parcels into contiguous holdings that are AB 982 (Skinner) continued PageB suitable for renewable energy-related projects, contingent upon the cooperation of Interior. 2) States that, to the extent feasible, the MOA shall be tailored to prioritize land exchanges that are best suited for large-scale commercial renewable energy project development, including for mitigation of its effects. 3) Requires that within 240 days of the execution of the MOA, SLC shall prepare and submit to the Dept. of Interior a proposal for land exchanges that consolidate all school land parcels in the California desert into contiguous holdings that are suitable for renewable energy-related projects. 4) Requires SLC, in developing the land exchange proposal, to give priority to land exchanges that will facilitate the development of large-scale commercial renewable energy projects. 5) Requires the land exchange proposal to be based on an acre-for-acre exchange with the U.S. unless SLC reasonably believes, based on existing and reliable information, that an acre-for-acre exchange would not provide the state with compensation that is equal to or greater than fair market value. 6) Requires SLC to consult with the California Energy Commission (CEC) to identify areas that are best suited for renewable energy projects. 7) Requires SLC to consult with the Department of Fish and Game (DFG) to identify areas that are best suited for renewable energy projects because they do not support direct habitat or habitat corridor values or that serve as potential mitigation area to offset environmental impacts of renewable energy projects. 8) Requires SLC to report to the Legislature by January 1 of each year on the status of the MOA and school land consolidation efforts in the California desert. COMMENTS : 1) Rationale : The author states that large-scale renewable AB 982 (Skinner) continued PageC projects are a primary source of renewable energy that can be used to meet California's renewable portfolio standard, which requires retail sellers of electricity to procure at least 33% of electricity delivered to retail customers from renewable energy resources by the year 2020. The author notes that, according to the U.S. Department of Energy, California has some of the best locations on which to produce renewable energy, but much of this public land is not contiguous. This bill is intended to help consolidate some of this land so that large-scale renewable projects can be built on the lands. 2) Background : After California achieved statehood, the federal government granted approximately 5.5 million acres of land to California to be used for the support of schools. This land consisted of the sixteenth and thirty-sixth section of each township.<1> Approximately 90 percent of the school lands were sold prior to the creation of the State Lands Commission (SLC) in 1938. Proceeds were used primarily to pay for school construction. In 1984, the California Legislature directed that school lands be retained and managed by the SLC to generate revenue to provide COLAs for retired teachers. The school lands are difficult to manage because they are broken up into noncontiguous, square-mile parcels. The Legislature found the "consolidation of school land parcels into contiguous holdings is essential to sound and effective management."<2> The law authorizes SLC to sell the isolated, non-economic school lands and use the funds from the sales to purchase real property that will generate additional revenues to benefit California's retired teachers. Proceeds from sales are required to be held in trust by the Commission for the teachers and are deposited in the School Land Bank Fund (SLBF). Over time, the state sold several millions of acres of school lands, but the state owns surface and mineral rights on approximately 468,600 acres of school lands, and retains the mineral rights to an additional 790,000 acres. Approximately 370,000 acres of these state lands are ------------------------- <1> A township is 36 square miles, containing 36 sections. Each section within a township is one square mile, or 640 acres. <2> Pub. Res. Code § 8702 AB 982 (Skinner) continued PageD located in the California desert and are landlocked, remote, and non-revenue generating. Under the School Land Bank Act, the SLC may take all action necessary to fully develop school lands into a permanent and productive revenue source. Revenues generated are deposited in the State Treasury to the credit of the Teachers' Retirement Fund. The money collected from the Pre-1984 sale of school lands was deposited into the SLBF. SLC is required to use this money to make investments that produce revenue for CalSTRS. In 2008, the state borrowed $59 million from the SLBF to deal with the state's budget issues. The loan is technically scheduled to be paid back into the fund by fiscal year 2012-2013. 3) Desert Protection Act : The federal California Desert Protection Act (CDPA) became law in 1994. The CDPA designates 3.6 million acres in southern California as wilderness lands, administered primarily by the Bureau of Land Management (BLM), and designated an additional four million acres in southern California as national park lands. There are large sections of the desert that are optimal for large-scale commercial renewable energy related projects. Renewable energy developers are interested in leasing desert school lands for their projects, but school lands are generally scattered across the desert in 640 acre sections- large-scale commercial renewable energy projects generally require thousands of acres. Several school land parcels are surrounded by BLM lands that are not protected by the CDPA. Land exchanges with BLM could consolidate school land parcels into large contiguous holdings that would be useful for substantial renewable energy development. 4) Purpose of the bill : This bill requires SLC to enter into a MOA with the Secretary of the Interior to facilitate land exchanges that consolidate school land parcels into contiguous holdings that are suitable for renewable energy related projects and the associated mitigation. The Secretary of the Interior is currently authorized to enter into an MOA with SLC pursuant to the CDPA; however, there is no current MOA between the parties that focuses on renewable energy related projects. AB 982 (Skinner) continued PageE This bill requires SLC to make every effort to consolidate school land parcels in the California desert into contiguous holdings for use in developing renewable energy related projects. The bill authorizes an acre-for-acre exchange unless SLC reasonably believes, based on existing and reliable information, that an acre-for-acre exchange would not provide the state with compensation that is equal to or greater than the fair market value of a parcel. Additionally, SLC will be required to work with CEC and DFG to establish a state coordinated effort to obtain desert lands that are optimal for renewable energy projects without significantly impacting the environment. Senator Diane Feinstein has introduced the California Desert Protection Act of 2011 that includes provisions to facilitate land exchanges between SLC and BLM for renewable energy related projects. 5) Support : Supporters believe that large-scale renewable projects are an essential component to satisfying the state's renewable energy procurement mandate. They believe that AB 982 will help to establish renewable energy parks on government land on parcels that are large enough for developers to build, and provide meaningful mitigation lands in the process. 6) Related legislation : SB 1272 (Harman) Chapter 701, Statutes of 2005 authorizes the sale of school lands trust mineral rights beneath a proposed landfill in Riverside County at full market value. SUPPORT: BrightSource Energy California Retired Teachers Association OPPOSE: None on file DUAL REFERRAL: Senate Energy, Utilities and Communications Committee FISCAL COMMITTEE: Senate Appropriations Committee AB 982 (Skinner) continued PageF *********