BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1966| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1966 Author: Ma (D) Amended: 6/21/12 in Senate Vote: 21 SENATE JUDICIARY COMMITTEE : 3-0, 7/3/12 AYES: Evans, Corbett, Leno NO VOTE RECORDED: Harman, Blakeslee ASSEMBLY FLOOR : 63-0, 5/31/12 - See last page for vote SUBJECT : Natural resources: oil and gas drilling SOURCE : Pacific Ag Management DIGEST : This bill requires a mineral rights owner to provide specified notices to the owner of real property if the mineral rights owner intends to enter the real property to undertake surface-disrupting or non-surface-disrupting activities. ANALYSIS : Existing law requires the owner of mineral rights in real property to give written notice to the owner of the real property listed on the current local assessment roll or lessee prior to the first entry upon the real property to prospect for, mine, or extract any mineral. (Civil Code (CIV) Section 848) Existing law requires the owner of mineral rights to give the written notice by certified mail or have the notice CONTINUED AB 1966 Page 2 personally delivered to the real property owner, the owner's representative, or lessee, and that the real property owner, representative or lessee acknowledge in writing the receipt of the notice. (CIV Section 848) Existing law provides that if the mineral rights owner has not complied with the notice requirement, the owner of the real property may request a court to enjoin the prospecting, mining, or extraction operation until the mineral rights owner has complied with the notice requirement. (CIV Section 848) Existing law defines mineral rights as an interest in minerals, regardless of character, whether fugacious or nonfugacious, organic or inorganic, that is created by grant or reservation, regardless of form, whether a fee or lesser interest, mineral, royalty, or leasehold, absolute or fractional, corporeal or incorporeal, and includes express or implied appurtenant surface rights. Minerals include oil, gas, in-place minerals such as ores, metals, and coal, and geothermal resources. (CIV Section 883.110; In re Waltz, 197 Cal. 263 (1925); Geothermal Kinetics, Inc. v. Union Oil Co. of California, 75 Cal.App.3d 56 (1977).) Existing law defines "acknowledged personal delivery" as written notice that is personally delivered to the owner, the owner's representative, or lessee, and the owner, the owner's representative or lessee acknowledges, in writing, receipt of the notice. (CIV Section 848) This bill repeals the existing requirement to provide written notice upon first entry upon the real property to prospect for, mine, or extract any mineral, and instead require the owner of mineral rights to provide written notice under the following circumstances: 1. If the mineral rights owner or its agent intends to enter real property for the purpose of undertaking non-surface-disrupting activities such as surveying, water and mineral testing, and removal of debris and equipment not involving use of an articulated vehicle on the real property, the owner or agent shall provide a minimum of five days' notice. Reasonable attempts shall be made to deliver the notice by acknowledged personal CONTINUED AB 1966 Page 3 delivery, but if that cannot occur, the notice shall be delivered by registered letter and be received a minimum of five days prior to the entrance on the property. The notice shall specify the date of entry, estimated length of time the property will be occupied, and the general nature of the work; and 2. If the mineral rights owner or its agent intends to enter real property for the purpose of excavation or other surface-disrupting activities such as drilling new wells, constructing structures, bringing articulated vehicles or excavation equipment on the real property, or reclamation of the real property after the surface has been disturbed, the owner or agent shall provide a minimum of 60-days' notice. The notice shall specify the extent and location of the prospecting, mining, or extraction operation, and the approximate time or times of entry and exit upon the real property. This bill provides that, if a mineral owner has been authorized by the Division of Oil, Gas, and Geothermal Resources to drill a relief well or to take other immediate actions in response to an emergency incident, the notice provisions in this bill shall be waived. Under this bill, an "emergency" means a sudden, unexpected occurrence, involving a clear and imminent danger, demanding immediate action to prevent or mitigate loss of, or damage to, life, health, property, or essential public services. "Emergency" includes occurrences such as fire, flood, earthquake, or other soil or geologic movements, as well as occurrences such as riot, accident, or sabotage. Background Throughout California, oil, gas, geothermal resources, and other minerals are extracted from the ground. In many cases, ownership of mineral rights in these natural resources and ownership of the real property from which the minerals are extracted have been either partially or wholly severed. The owner of the mineral rights (subsurface owner) generally seeks to extract the valuable resources from the earth, and the real property owner (surface owner) generally desires to utilize land and the resources necessary for his or her enjoyment of the land. In CONTINUED AB 1966 Page 4 instances where the surface ownership and subsurface ownership is different, existing law provides that the subsurface owner may enter the surface owner's property at any point after providing an initial notice upon entry at the first instance to prospect for or extract any mineral. SB 550 (Florez, 2010) would have required an oil or gas mineral rights owner to provide to the surface owner a ten-day written notice of intent to enter the surface owner's property for the purpose of the extraction of underlying oil or gas. SB 550 was vetoed by Governor Schwarzenegger due to concerns that the Department of Conservation would have to resolve mineral rights or surface rights disputes, which it would not otherwise be required to do. Unlike SB 550, this bill does not provide its notice requirements under the Public Resources Code, which implicated the Governor's concerns regarding Department of Conservation enforcement, but instead amends the CIV. This bill, sponsored by Pacific Ag Management, requires subsurface owners to provide specified notices to surface owners prior to entering the surface owner's property for the purpose of undertaking surface-disrupting or non-surface-disrupting activities. Prior legislation . SB 550 (Florez, 2010) passed the Senate Floor (37-0) on 8/30/12. The bill was vetoed by the Governor. His veto message states, "This bill would provide a notice requirement similar to that contained in SB 550 (Florez, 2010). In vetoing SB 550, Governor Schwarzenegger stated: The Department of Conservation (Department) does not currently resolve mineral rights or surface rights disputes. But this bill would create an expectation on the part of the landowner that the Department will now regulate in this arena. This means that violations of the provisions of the bill could be subject to the imposition of penalties by the Department. In essence, this bill creates a regulatory program in search of a problem. These disputes should be resolved in the courts, not through the Department's enforcement processes." FISCAL EFFECT : Appropriation: No Fiscal Com.: No CONTINUED AB 1966 Page 5 Local: No SUPPORT : (Verified 7/6/12) Pacific Ag Management (source) California Cotton Ginners and Growers Associations California Farm Bureau Federation Western Agricultural Processors Association OPPOSITION : (Verified 7/6/12) California Independent Petroleum Association Calpine Corporation Independent Oil Producers Agency Western States Petroleum Association ARGUMENTS IN SUPPORT : According to the author: Farmers who are the surface owners have experienced losses as a result of lack of notification from sub-surface owners. With notice from the oil company and a plan of operations, this may open a dialogue such that the surface owner could negotiate more accommodation on their property to limit and/or reduce the damage to the entire operation- like relocating a well in order to not disrupt the irrigation system and render the remainder of the property un-useable. In addition notification would ensure the surface owner/farmer is aware when there is to be ingress and egress so the safety of workers, both mineral and farmer can be accommodated. ARGUMENTS IN OPPOSITION : Several stakeholder groups are in opposition to this bill because of the length of the notice requirement for surface-disrupting activities. Additionally, concern has been raised regarding whether this requirement should be placed on geothermal mineral rights owners. California Independent Petroleum Association, Independent Oil Producers Agency and the Western States Petroleum Association oppose this bill's 60-day notice requirement to be provided before entering with the intent to extract CONTINUED AB 1966 Page 6 minerals. They contend that a "sixty day notification can cause idle time for a rig and crew that could otherwise be put to work." Further, this extended notification period will disproportionately hurt small oil and gas producers as drilling rigs are in high demand and large operators dominate the scheduling often for months. These operators argue that the state risks hampering the production of "energy needed to fuel our economy, create jobs, and provide an adequate tax base." They further argue that a notification period twice as long as any other state "would be onerous, cause a less efficient use of resources, and in some instances do harm to the surface rights owner." Moreover, they contend that it is in the best interest of the driller, operator, surface rights owner and the state for the scheduling of drilling rigs to be as flexible as possible. They propose amending this bill to instead provide a 20-day notification period before entering a project for surface disruptive activities. ASSEMBLY FLOOR : 63-0, 5/31/12 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Campos, Carter, Cedillo, Chesbro, Davis, Dickinson, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, Galgiani, Garrick, Gatto, Gorell, Grove, Hagman, Halderman, Hall, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mitchell, Monning, Morrell, Nestande, Nielsen, Pan, V. Manuel Pérez, Portantino, Silva, Skinner, Smyth, Solorio, Swanson, Torres, Wieckowski, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Charles Calderon, Conway, Cook, Donnelly, Beth Gaines, Gordon, Harkey, Jeffries, Jones, Mansoor, Mendoza, Miller, Norby, Olsen, Perea, Valadao, Wagner RJG:k 7/6/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED AB 1966 Page 7 CONTINUED