BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1054|
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THIRD READING
Bill No: AB 1054
Author: Skinner (D)
Amended: 6/19/12 in Senate
Vote: 21
SENATE NATURAL RESOURCES AND WATER COMM. : 6-2, 6/26/12
AYES: Pavley, Evans, Kehoe, Padilla, Simitian, Wolk
NOES: La Malfa, Cannella
NO VOTE RECORDED: Fuller
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 48-26, 1/26/12 - See last page for vote
SUBJECT : Public lands: oil and gas leases
SOURCE : State Lands Commission
DIGEST : This bill prevents a lessee on State Lands
Commission (Commission) land from relinquishing his/her
duty to pay rent and hold insurance until the lease
premises have been reclaimed or restored.
ANALYSIS :
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
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Commission's jurisdiction.
2. Authorizes, pursuant to the Cunningham-Shell Act of
1955, 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. Requires, pursuant to the Surface Mining and Reclamation
Act of 1975 (SMARA), 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 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.
This bill modifies the existing quitclaim procedure for all
mineral, oil and gas, geothermal and other leases on public
lands authorized by the Commission. The revised process,
for leases entered into on or after January 1, 2013, will
be as follows:
1. The lessee may file a written request with the
Commission at any time to accept a quitclaim for
relinquishment of all or part of the lease premises.
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2. The quitclaim will not go into effect until completion
of any required abandonment or reclamation of lease
premises specified in the lease and accepted by the
Commission, and the lessee must continue to comply with
all provisions of the lease - including paying rents and
royalties.
3. The Commission shall hear the request at a scheduled
meeting in a timely manner. Acceptance of the quitclaim
by the Commission releases the lessee from all
obligations accruing under the lease.
Background
The Commission was established in 1938 with specified
authority (see Division 6 of the Public Resources Code
(PRC)). The Commission has jurisdiction over the state's
sovereign lands - the land underlying the state's navigable
and tidal waterways - which must be used for public
purposes consistent with the public trust, as well as its
school lands. School lands were 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.
Among its responsibilities, the Commission is charged with
managing all mineral, oil and gas and geothermal leases -
required for resource extraction - on these public lands
(PRC Section 6801 et seq.). All revenues generated from
sovereign lands and school lands must be deposited into the
General Fund and the California State Teachers' Retirement
Fund, respectively.
There are different minimum annual lease payments, royalty
payments and other lease terms and conditions for oil and
gas, mineral and geothermal resources on public lands.
Certain basic lease features, however, are common to all,
including the quitclaim procedure (PRC Section 6804.1).
Existing law requires a lessee at any time to file with the
Commission a written quitclaim or relinquishment of all
rights under any lease or part of a lease of specified
size. The quitclaim goes into effect on the date of its
filing, although the lessee must continue to pay any
royalties due, and prepare all wells to be idled or
abandoned. If these conditions are satisfied, the lessee
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is released from future obligations related to the lease,
although the lessee remains liable for any defaults at the
time of the quitclaim filing. Additionally, lessees may
remain liable for certain reclamation obligations pursuant
to the SMARA and the terms of their agreement with the
Commission.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/8/12)
State Lands Commission (source)
California State Teachers' Retirement System
OPPOSITION : (Verified 8/8/12)
California Independent Petroleum Association
ARGUMENTS IN SUPPORT : According to the Commission,
current law "allows a mining lessee to quitclaim at any
time all or a portion of its mining lease once production
is over, but before reclamation is complete, having the
effect of releasing them of their lease obligations,
including their obligation to maintain insurance and bonds
and to pay rent to the state while occupying the land.
Reclamation can take years to complete and the commission
is precluded from leasing these lands to other parties
during this period. Moreover, the state may be subject to
liability after a quitclaim because the lessee is no longer
required to maintain insurance and bonds. AB 1054 makes a
mining lessee's quitclaim effective upon completion of any
required abandonment of facilities and required reclamation
of the lease premises, contingent upon approval by the
commission. Until that time, the mining lessees would have
to continue to pay rent and maintain insurance and bonds.
As such, the state would generate additional revenue and
protect itself from liability until such time as the lessee
reclaims and abandons the lease premises."
ARGUMENTS IN OPPOSITION : Although recent amendments
addressed and removed some concerns, the California
Independent Petroleum Association (CIPA) continues to have
several on-going concerns with this bill. In particular,
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any oil and gas wells have to be prepared for plugging and
abandonment under current law subject to the approval of
the Division of Oil, Gas and Geothermal Resources (DOGGR)
and that obligation is not released by the quitclaim taking
effect. Therefore, "there does not appear to be any
benefit to the state to require the lease operator to seek
additional regulatory approval from the �commission]."
Further, CIPA believes that appropriate requirements
written into the initial lease would be an effective remedy
and that all the examples provided concern mineral, not oil
and gas, resources. CIPA recommends retaining a dual track
quitclaim process with the distinction made between those
with surface facilities and those without.
ASSEMBLY FLOOR : 48-26, 1/26/12
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Campos, Carter, Cedillo, Chesbro, Dickinson, Eng,
Feuer, Fong, Fuentes, Furutani, Gatto, Gordon, Hall,
Hayashi, Roger Hern�ndez, Hill, Hueso, Huffman, Lara,
Bonnie Lowenthal, Ma, Mendoza, Mitchell, Monning, Pan,
Perea, V. Manuel P�rez, Portantino, Skinner, Solorio,
Swanson, Torres, Wieckowski, Williams, Yamada, John A.
P�rez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Fletcher, Beth Gaines, Garrick, Grove, Hagman, Harkey,
Huber, Jeffries, Jones, Knight, Logue, Mansoor, Miller,
Morrell, Nestande, Nielsen, Norby, Olsen, Silva, Valadao,
Wagner
NO VOTE RECORDED: Charles Calderon, Davis, Galgiani,
Gorell, Halderman, Smyth
CTW:k 8/8/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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