BILL ANALYSIS �
AB 1054
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Date of Hearing: January 9, 2012
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 1054 (Skinner) - As Amended: January 4, 2012
SUBJECT : Public lands: oil and gas leases
SUMMARY : Delays the effective date of a quitclaim filed to
terminate all or a portion of an oil, gas, geothermal, or
mineral 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 person, association, or corporation to obtain a
lease from the Commission to extract oil, gas, geothermal, or
mineral resources on lands under the Commission's
jurisdiction.
2)Pursuant to the Cunningham-Shell Act of 1955, authorizes an
oil, gas, geothermal, or mineral mining lessee on Commission
land to, at any time, file with the Commission a quitclaim or
relinquishment of all rights under the lease or any portion of
the lease. The quitclaim or relinquishment is effective on
the date of filing. The lessee and its surety are subject to
the continued obligation to (a) make payment of all rentals
and royalties accrued before the filing and (b) to suspend or
abandon all wells in accordance with the applicable lease
terms and regulations. The quitclaim or relinquishment does
not release the lessee or its surety from any liability for
breach of any obligation of the lease existing at the time of
the filing.
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)Grants administrative control of "school lands" to the
Commission. School lands are lands granted to the state from
the federal government and held in trust to generate revenues
that benefit public schools. Pursuant to the School Land Bank
AB 1054
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Act, the Commission is required to take all action necessary
to fully develop school lands into a permanent and productive
resource base for the benefit of the California State
Teachers' Retirement System (CalSTRS).
THIS BILL:
1)Delays the effective date of a quitclaim filed to terminate
all or a portion of an oil, gas, geothermal, or mineral lease
with the State Lands Commission until such time that the
lessee reclaims or restores the lease premises 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 clearly applies to any
land lease regardless of size or resource extracted.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. 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. The bill also ensures that lessees are bound to
the insurance and bonding requirements of the lease during
reclamation, which will protect the state from liability.
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 or
maintain liability insurance during the time in which it
restores or reclaims the lease premises. This issue is most
relevant during the reclamation of sand and gravel pits on
"school lands," which can take many years.
This bill is virtually identical to AB 368 (Skinner), which
was vetoed by Governor Schwarzenegger in 2009 with a veto
message that included the following:
"It is unclear why this bill is needed, since I have not
seen, or have been provided, any evidence that would
indicate widespread abuse of mineral extraction leases held
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under existing law by the oil industry, the gas industry,
or the hard rock mining industry. Absent such evidence,
this bill appears to be a "solution" in search of a
"problem."
The Commission staff in 2009, however, offered examples of
leases that were recently quitclaimed before reclamation to
illustrate the problem. Additionally, staff has indicated
that there are new leases on the horizon that will require
significant reclamation. Without this bill, the Commission
will likely receive no revenue from these new leases once they
go into reclamation even though the lessees remain on the
property. What is probably more significant is that when a
quitclaim occurs, the lease's provisions that protect the
Commission and the state from liability arising from, for
example, personal injury or property damage are no longer
enforceable.
2)Bill will result in modest revenues to CalSTRS. The
Commission manages approximately 468,600 acres of school lands
held in fee ownership by the state, and the reserved mineral
interests on approximately 790,000 acres of school lands where
the surface estate has been sold. 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 CalSTRS. This bill is entirely
consistent with this mandate.
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
2010-11, the Commission collected $6,129,476 in rent and
royalties from school lands.
REGISTERED SUPPORT / OPPOSITION :
AB 1054
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Support
None on file
Opposition
None on file
Analysis Prepared by : Mario DeBernardo / NAT. RES. / (916)
319-2092