BILL ANALYSIS
AB 368
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Date of Hearing: April 13, 2009
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Nancy Skinner, Chair
AB 368 (Skinner) - As Introduced: February 23, 2009
SUBJECT : State lands: oil, gas, and mineral leases.
SUMMARY : Delays the effective date of a quitclaim deed filed to
terminate all or a portion of any lease with the State Lands
Commission (Commission) until such time that the lessee reclaims
or restores the lease premises as approved by the Commission.
EXISTING LAW :
1)Requires a lease for the extraction of oil, gas, and mineral
resources on state lands from the Commission.
2)Authorizes a lessee at any time to file with the Commission a
quitclaim deed or relinquishment of all rights under an oil,
gas or geothermal lease or any portion of a lease comprising a
10-acre parcel. The quitclaim deed is effective when it is
filed provided that all accrued rent and royalties are paid
and all wells are suspended or abandoned consistent with the
terms of the lease.
3)Pursuant to the Surface Mining and Reclamation Act of 1975
(SMARA), requires mine operators to obtain a mining permit
from a lead agency, submit a reclamation plan, and provide
financial assurances to the lead agency in the event that they
are unable to reclaim or restore the mined land.
4)Pursuant to the School Land Bank Act (Act), Chapter 879,
Statutes of 1984, lands granted to the state by Congress, to
be managed and enhanced to provide for an economic base in
support of the public school system, were placed into a
statutory trust and the Commission was designated trustee of
the School Land Bank Fund.
THIS BILL :
1)Delays the effective date of a quitclaim deed filed to
terminate all or a portion of any lease (including oil, gas,
geothermal or mineral lease) with the Commission until such
time that the lessee reclaims or restores the lease premises
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as approved by the Commission.
2)Upon Commission approval, releases the lessee from all
obligations with respect to the lands quitclaimed.
3)Generalizes this authority so that it applies to any land
lease regardless of size or resource extracted.
FISCAL EFFECT : Unknown.
AB 368
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COMMENTS : According to the author's office, this bill authorizes
the state to collect rent from lessees of mining operations
until the land underlying those operations is reclaimed or
restored consistent with existing law. Currently, any lessee
can quitclaim or relinquish all rights or legal claims to a
lease at any time. This quitclaim is effective upon filing with
the Commission. Practically speaking, a lessee is then under no
obligation to pay rent during the time in which it restores or
reclaims the leases premises. This issue is most relevant
during the reclamation of sand and gravel pits on "school
lands," which can take many years. The Commission, sponsors of
this bill, state that at least two lessees currently fall into
this category.
1)Reclamation of mining operations can take many years, leading
to foregone revenue
Prior to conducting surface mining operations, the Surface
Mining and Reclamation Act of 1975, administered by the
Department of Conservation and local governments, requires
mining operators to obtain a mining permit from a lead agency
and develop a reclamation plan. This plan must include measures
to restore water quality, stream banks, wildlife habitat, slope
stability, and vegetation, among other things. This plan may be
in place for about 15 years or more during which time the state
may be unable to collect rent or manage its lands for other
uses, forgoing any potential revenues from those uses.
2)Bill would result in modest revenues to the Teachers'
Retirement Fund
The Commission manages approximately 496,000 acres of "school
lands" held in fee ownership by the state. Most of these lands
are isolated, landlocked parcels in the desert regions of the
state; about a quarter of these lands, however, are leased for
revenue generating purposes. These school lands are what remain
of the nearly 5.5 million acres originally granted to the state
by Congress in 1853 to benefit public education. The School
Land Bank Act requires the Commission to manage and enhance
school lands to provide an economic benefit to the public school
system. All revenues generated from the use of school lands
must be deposited into the Teachers' Retirement Fund (TRF),
which benefits the California State Teachers' Retirement System.
This bill is entirely consistent with this mandate.
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The Commission states that this bill would result in a modest
increase in rental revenue to the TRF. Quantifying this
increase is difficult since this bill would only apply to new
leases, the acreage of which cannot be predicted. It is
similarly challenging to predict when new leases may terminate
since they are dependent on economical returns dedicated by
market forces. During FY 2007-08, the Commission collected
$738,471 in rent; $143,745 of this was deposited into the TRF
from roughly 140 leases. Since 1997, $3.5 million in revenue
has been generated from surface leasing activities on school
lands.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
California State Teachers' Retirement System
State Lands Commission
AB 368
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Opposition
None one file
Analysis Prepared by : Dan Chia / NAT. RES. / (916) 319-2092