BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 368|
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THIRD READING
Bill No: AB 368
Author: Skinner (D)
Amended: 7/23/09 in Senate
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE : 8-4, 6/23/09
AYES: Wright, Florez, Negrete McLeod, Oropeza, Padilla,
Price, Wiggins, Yee
NOES: Harman, Benoit, Denham, Wyland
NO VOTE RECORDED: Calderon
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 48-30, 5/11/09 - See last page for vote
SUBJECT : State lands: oil, gas, and mineral leases
SOURCE : State Lands Commission
DIGEST : This bill makes various modifications to an
existing provision of law relating to quitclaim or
relinquishment of rights under oil and gas and mineral
leases.
Senate Floor Amendments of 7/23/09 provide that upon
completion of any required abandonment or reclamation, a
lessee's request for State Lands Commission approval of a
quitclaim or relinquishment of all rights under a lease or
a portion of a lease of land must be heard at the next
regularly scheduled State Lands Commission meeting for
CONTINUED
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which the request can be properly noticed.
ANALYSIS : Existing law grants the State Lands Commission
(SLC) the authority to issue mining leases on state
sovereign and school lands. The law provides that revenues
generated from leases on sovereign lands are to be
deposited into the General Fund. Revenues generated from
school lands are deposited into the California State
Teachers' Retirement Fund.
Existing law allows a state leaseholder at any time to make
and file with the SLC a written quitclaim deed or
relinquishment of all rights under any lease or of any
portion of a lease with the SLC to be released. Existing
law provides that such quitclaim or relinquishment shall be
effective as of the date of its filing, subject to the
continued obligation of the lessee to make payment of all
rentals and royalties in accordance with the applicable
lease terms and regulations.
This bill:
1.Prevents a quitclaim of a mining lease from taking effect
until the lessee has completed any required abandonment
of all facilities and any required reclamation of the
lease premises, as approved by the SLC.
2.Provides that the lessee shall be released from all
obligations accruing under the lease upon approval of the
SLC and contingent upon any other agreement between the
lessee and the SLC.
3.Requires a lessee's request for commission approval of a
quitclaim or relinquishment of all rights under a lease
or portion of a lease of land to be heard at the next
regularly scheduled commission meeting for which the
request can be properly noticed.
4.Provides that the quitclaim or relinquishment shall not
release the lessee or the lessee's surety from liability
for the breach of an obligation of the lease if the
lessee is in default at the time of the approval, rather
than the filing of the quitclaim or relinquishment.
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Comments
Current law permits a mining lessee to quitclaim at anytime
all or a portion of its mining lease with the SLC. As a
result, according to the author's office, certain mining
lessees quitclaim their leases once production is concluded
but before reclamation is completed in order to release
themselves of their lease obligations, which includes the
obligation to pay rent to the State. The author's office
maintains that reclamation can take years to complete and
the SLC cannot lease these mining lands to other parties
during this period. Thus, the SLC is precluded from
generating revenue from these lands until reclamation is
completed. The State is also put at risk of liability for
personal injuries and property damages because the lessee
would no longer be obligated to maintain insurance and
bonding.
This bill amends existing law so that a quitclaim of a
mining lease could not become effective until the lessee
completes any required abandonment of all facilities and
any required reclamation of the leased premises as approved
by the SLC. The author's office points out that the
essence of this proposed change in law would be that mining
lessees would have to continue to pay rent before and
during the reclamation process which would bring additional
revenue to the California Teachers' Retirement Fund and
potentially the State's General Fund. Additional benefits
come to the State as a result of the lessee continuing to
maintain insurance and bonding.
Example of the Current Problem . SLC staff offers the
following as an example of a mining lease that was
quitclaimed before reclamation was completed involving the
lessee "Homestake Mining" and school lands located in Lake
County. Homestake Mining entered into a lease with the SLC
in 1994 and was to pay the State $4,577 in annual rent as
well as a four percent royalty rate, which was to be
deposited in the California Teachers' Retirement System
Fund. The lease also included a provision that would have
increased annual rent to $18,300 on the eleventh year of
the lease. In 2002, Homestake Mining quitclaimed its lease
pursuant to Public Resources Code Section 6804.1 despite
the fact that reclamation was not completed. As a result
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of the quitclaim, Homestake Mining stopped paying its
annual rent and maintaining insurance and bonding in favor
of the State. Homestake Mining is still going through the
reclamation process which prevents the SLC from leasing the
land to another party.
According to SLC staff, if this bill had been enacted a few
years ago, it would have applied to the Homestake Mining
lease, and the California Teachers' Retirement System Fund
would have received $4,577 in 2002 and 2003 and $18,300 a
year from 2004 until the end of the reclamation process.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/17/09)
State Lands Commission (source)
American Federation of State, County and Municipal
Employees
California Retired Teachers Association
California State Teachers' Retirement System
ASSEMBLY FLOOR :
AYES: Arambula, Beall, Block, Blumenfield, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Coto, Davis, De La Torre, De Leon, Eng, Evans, Feuer,
Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi,
Hernandez, Hill, Huffman, Jones, Krekorian, Lieu, Bonnie
Lowenthal, Ma, Mendoza, Monning, Nava, John A. Perez, V.
Manuel Perez, Portantino, Price, Ruskin, Salas, Saldana,
Skinner, Solorio, Swanson, Torlakson, Torres, Torrico,
Yamada
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Blakeslee, Conway, Cook, DeVore, Duvall, Emmerson,
Fletcher, Fuller, Gaines, Garrick, Gilmore, Hagman,
Harkey, Huber, Jeffries, Knight, Logue, Miller, Nestande,
Niello, Nielsen, Silva, Smyth, Audra Strickland, Tran,
Villines
NO VOTE RECORDED: Ammiano, Bass
TSM:nl 8/17/09 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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