BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 1966 (Ma)
As Amended June 21, 2012
Hearing Date: July 3, 2012
Fiscal: No
Urgency: No
ME/TW
SUBJECT
Natural Resources: Oil and Gas: Drilling
DESCRIPTION
This bill would require 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.
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 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
(more)
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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 Civil Code.
This bill, sponsored by Pacific Ag Management, would require
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.
CHANGES TO EXISTING LAW
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. (Civ. Code Sec. 848.)
Existing law requires the owner of mineral rights to give the
written notice by certified mail or have the notice 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. Code Sec. 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. Code Sec. 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. Code
Sec. 883.110; In re Waltz, 197 Cal. 263 (1925); Geothermal
Kinetics, Inc. v. Union Oil Co. of California, 75 Cal.App.3d 56
(1977).)
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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. Code Sec. 848.)
This bill would repeal 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 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 would provide 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
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occurrences such as riot, accident, or sabotage.
COMMENT
1. Stated need for the bill
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.
2. Enhanced notice requirements
Under existing law, the owner of mineral rights in real property
(subsurface owner) is required to give written notice to the
owner of the real property (surface owner) 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.
(Civ. Code Sec. 848.) This bill would instead require the
subsurface owner or its agent, who intends to enter real
property for the purpose of undertaking non-surface-disrupting
activities to provide a minimum of five days' notice of this
intent to the surface owner. This bill would also require the
subsurface owner, who intends to enter real property for the
purpose of excavation or other surface-disrupting activities to
provide a minimum of 60-days' notice of this intent to the
surface owner.
The author asserts that farmers, who are surface owners, have
reported losses to their crops and/or livestock because they are
not being provided adequate notice from subsurface owners
regarding entry and engagement in surface disrupting and
non-surface-disrupting activities. They have also raised
concerns regarding the safety of their workers when there is no
notification. The author argues these farmers are in an unequal
bargaining position and can do very little to ensure that the
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subsurface owners engage in their activities in a manner that
least disrupts the surface.
The California Farm Bureau (CFB), in support, argues that this
bill "will bring clarity to the relationship between surface
landowners and the owners of mineral rights" and "enhance
communication" and "reduce conflicts" between them. CFB asserts
that this bill will remedy the problem their members face when
well operators enter their property without prior notice to the
landowner and begin operation. CFB argues that this bill will
serve as a discussion tool for minimizing disagreements between
landowners and mineral rights owners.
The Western Agricultural Processors Association and California
Cotton Ginners and Growers Associations, also in support, assert
that the bill "properly and fairly addresses the necessary goals
to accomplish a more equal, productive and consistent
relationship regarding surface rights for both the surface and
mineral rights owners."
At least three states have more stringent notice requirements
than California. North Dakota requires at least seven-days'
written notice be given to the surface owner prior to entry by
the subsurface owner to conduct activities that do not disturb
the surface and 20-days' notice before oil and gas drilling
operations. New Mexico requires at least five business days'
written notice prior to entry to conduct activities that do not
disturb the surface and no less than 30-days' notice for planned
oil and gas operations. Wyoming requires at least five-days'
notice prior to entry for non-surface-disturbing oil and gas
activities and no less than thirty but no more than 180-days'
notice before the commencement of oil and gas operations. It is
important to note that all three of these states limit notice
requirements to oil and gas subsurface owners. However, this
bill would apply not only to oil and gas mineral rights owners
but would apply to all mineral rights owners.
3. Opposition's concerns
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.
a. 60-day notice requirement
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California Independent Petroleum Association (CIPA),
Independent Oil Producers Agency (IOPA) and the Western States
Petroleum Association (WSPA) oppose this bill's 60-day notice
requirement to be provided before entering with the intent to
extract 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 the bill to instead provide a 20-day
notification period before entering a project for surface
disruptive activities.
In response, the author argues that the 60-day period is
necessary to ensure that surface owners have sufficient
bargaining power to ensure that the subsurface owners conduct
themselves in ways that are less disruptive. Staff notes that
an alternate way to provide flexibility in the notice period
while preserving the bargaining power of the property owner
would be to allow the surface owner and the subsurface owner
to mutually agree on a different notice period. Accordingly,
the author should continue to work with interested parties to
address these notice period concerns.
b. Geothermal rights concerns
As discussed above, North Dakota, New Mexico, and Wyoming have
notice requirements for subsurface owners, but these notice
requirements only apply to oil and gas operations. This bill
would not only apply to oil and gas operations. Instead, this
bill applies to all minerals being extracted. California
defines mineral resources to include oil, gas, in-place
minerals such as ores, metals, and coal, and geothermal
resources. (Civ. Code Sec. 883.110; In re Waltz, 197 Cal. 263
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(1925); Geothermal Kinetics, Inc. v. Union Oil Co. of
California, 75 Cal.App.3d 56 (1977).)
Calpine Corporation, in opposition, requests an amendment to
exempt geothermal mineral rights and associated geothermal
facilities from the notification requirements. Calpine argues
that while the focus and debate on the bill has been on the
oil and gas industry, they believe the bill as currently
drafted applies to geothermal operations "since geothermal
resources are defined as a mineral resource under both state
and federal law." They argue that the complexities of their
operations at The Geysers make the notice requirements
unworkable because the "ownership of the mineral rights and
real property" are very complex. Calpine states that they
hold approximately 110 geothermal mineral rights leases with
300 real property owners at the Geysers. Further, Calpine
states that:
Calpine supplies up to 725 megawatts or approximately 22
�percent] of California's consumed renewable power from our
15 geothermal power plants at The Geysers in Lake and
Sonoma counties. Calpine's geothermal operations are
massive and complex. We have operations personnel onsite
24 hours a day, seven days a week, 365 days a year.
Calpine's Geysers are located on 29,000 acres (45 square
miles) of land and contain 333 steam wells, 45 injection
wells, 80 miles of steam pipelines, 69 miles of injection
water lines, 70 miles of 21kV power lines and 167 miles of
roads. As you can imagine, this complicated operation
requires an extensive and ongoing operating and maintenance
program, including such ordinary activities as cleaning out
trenches, re-grading roads, to well sampling.
Accordingly, the author should continue to work with Calpine
and other interested parties to see if their concerns about
the notice can be addressed.
4. Governor Schwarzenegger's veto of SB 550
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
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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.
Support : California Farm Bureau Federation; Western
Agricultural Processors Association; California Cotton Ginners
and Growers Associations
Opposition : California Independent Petroleum Association;
Calpine Corporation; Independent Oil Producers Agency; Western
States Petroleum Association
HISTORY
Source : Pacific Ag Management
Related Pending Legislation : None Known
Prior Legislation : SB 550 (Florez, 2010) See Background and
Comment 4.
Prior Vote :
Assembly Floor (Ayes 63, Noes 0)
Assembly Committee on Natural Resources (Ayes 8, Noes 0)
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