SLC Sponsors Legislation to Change Quitclaim Requirements
Monday Morning Report, February 6, 2012
Assemblymember Nancy Skinner has moved forward a bill requiring quitclaim of leases on state land to be heard before the State Lands Commission (SLC) for their approval.
AB 1054 was previously an alternative energy bill and has been amended to address quitclaim of state lands at the first of the year and has moved into the Senate where it is awaiting a committee destination.
Existing law allows lessees of oil and gas and mineral leases to make and file with the commission a written quitclaim or relinquishment of all rights under a lease comprising a particular parcel. The quitclaim or relinquishment becomes effective as of the date of its filing subject to specified conditions.
AB 1054 would require a lessee to file a written request for the commission to approve a quitclaim or relinquishment of all rights under an oil and gas and mineral lease subject to any required abandonment of facilities and required reclamation of the lease premises. The bill would also require the request to approve a quitclaim to be heard at a commission meeting.
The proposed legislation eliminates the ability to partial quitclaim a lease in such a way that the lessee is left with an all or nothing approach. This will have a negative impact on the development of the state’s resources. Changes provided in this bill would eliminate the flexibility that is sometimes needed in order for the appropriate development of the state’s resources. Current language contained in standard oil and gas leases allows for the partial quitclaim of a lease in 10 acre blocks. It applies to situations wherein a lessee wants to quitclaim a portion of a lease because (1) the geologic target has been produced and depleted on one portion of the lease, but further exploration will occur on remaining acreage, (2) the geologic target did not exist on one portion of the lease but may on other portions, or (3) exploration activity is occurring on adjacent lands that may set up an offset well obligation to a geologic play that is not deemed viable on the affected portion of the leased land.
The proposed language also would tend to reward those oil and gas operators who like to lease and hold protection acreage that they do not intend to explore and punishes those operators (typically the small independents) that for efficiency sake tend to quitclaim those portions of leases that they do not intend to further explore.
The Commission has apparently had a problem with owners of mines failing to restore lands following mining operations which then prevents the state from utilizing those lands for other purposes. It is unclear if State Lands Commission understands completely the Division of Oil, Gas and Geothermal Resources (DOGGR) plug and abandonment enforcement requirements. Many leases with State Lands involve waterways wherein the State owns the minerals under a river or other body of water. Thus, there are no surface operations at all, yet these situations are captured in this bill as well.
This bill was previously introduced, passed through the legislature and vetoed by the previous administration citing the lack of need for the legislation. AB 1054 is currently in the Senate awaiting a committee destination. CIPA is actively opposing AB 1054.
