Code Section Group

Public Resources Code - PRC

DIVISION 6. PUBLIC LANDS [6001 - 8558]

  ( Division 6 added by Stats. 1941, Ch. 548. )

PART 2. LEASING OF PUBLIC LANDS [6501 - 7062]

  ( Part 2 added by Stats. 1941, Ch. 548. )

CHAPTER 3. Oil and Gas and Mineral Leases [6801 - 6932]

  ( Chapter 3 added by Stats. 1941, Ch. 548. )

ARTICLE 1. Provisions Relating to All State Lands [6801 - 6819]
  ( Article 1 added by Stats. 1941, Ch. 548. )

6801.
  

A lease or prospecting permit under this chapter shall be issued only to and held by:

(a) Persons or associations of persons who are citizens of the United States or who have declared their intention of becoming such, or who are citizens of any country, dependency, colony, or province, the laws, customs, and regulations of which permit the grant of similar or like privileges to citizens of the United States.

(b) Any corporation or corporations organized and existing under and by virtue of the laws of the United States or of any state or territory thereof; or any corporation or corporations 90 percent or more of the shares of which are owned by persons eligible to hold a lease or permit under subdivision (a) or (c) of this section; or any corporation or corporations 90 percent or more of the shares of which are owned either by a corporation eligible to hold a lease or permit hereunder, or by any combination of such eligible persons or corporations, or both.

(c) Any alien person entitled thereto by virtue of any treaty between the United States and the nation or country of which the alien person is a citizen or subject.

(d) In every case of joint bidding, the names of all persons, firms, or corporations interested in a particular joint bid shall be specified.

(Amended by Stats. 1955, Ch. 1724.)

6802.
  

Any interest held in violation of this chapter shall be forfeited to the State by appropriate proceedings for that purpose brought by the State in the superior court for the county in which the property or some part thereof is located, except that any ownership or interest forbidden in this chapter which is acquired by descent, will, judgment, or decree may be held for two years and not longer after its acquisition.

(Added by Stats. 1941, Ch. 548.)

6803.
  

The commission, in issuing any lease under this chapter, may reserve to the State the right to lease, sell, or otherwise dispose of the surface of the lands embraced within the lease, in so far as the surface is not required by the lessee. If such a reservation is to be made, however, it shall be so determined before the offering of the lease.

(Added by Stats. 1941, Ch. 548.)

6804.
  

A lease or permit issued under this chapter may be assigned, transferred or sublet as to all or any part of the leased or permitted lands, and as to either a divided or undivided interest therein, or as to any separate and distinct zone or geological horizon or portion thereof, subject to approval by the commission, to any person, association of persons, or corporation, who at the time of the proposed assignment, transfer, or sublease, possesses the qualifications provided in this chapter. Any assignment, transfer or sublease shall take effect as of the first day of the month following the approval by the commission and filing with the commission of an executed counterpart thereof, together with any required bond and proof of the qualification, under this act and the rules and regulations of the commission, of the assignee, transferee or sublessee to take or hold such lease or permit or interest therein. Unless approved by the commission no assignment, transfer or sublease shall be of any effect. Upon approval of any assignment, transfer or sublease the assignee, transferee or sublessee shall be bound by the terms of the lease or permit to the same extent as if such assignee, transferee or sublessee were the original lessee or permittee, any conditions in the assignment, transfer or sublease to the contrary notwithstanding. Any assignment or transfer of a separate portion of any lease or permit or of a separate and distinct zone or geological horizon, or a portion thereof, shall segregate the assigned, transferred or subleased portion thereof from the retained portion thereof, and such approval shall release and discharge the assignor or transferor from all obligations thereafter accruing under said lease or permit with respect to the assigned or transferred lands or zones or horizons, and such segregated leases or permits shall continue in full force and effect for the primary term of the original lease or permit, but, in the case of any lease, for not less than two (2) years after the date of discovery of oil or gas in paying quantities, or commercially valuable deposit of minerals, upon any segregated portion of the lands or zones or horizons originally subject to such lease, and so long thereafter as oil or gas is produced in paying quantities. Assignments or transfers under this section may also be made with the approval of the commission of parts of leases which are in their extended term because of production, and the segregated lease of any undeveloped lands or zones or horizons shall continue in full force and effect for two (2) years and so long thereafter as oil or gas or minerals are produced in paying quantities from the segregated lease lands or zones or horizons.

(Amended by Stats. 1955, Ch. 1724.)

6804.1.
  

Notwithstanding any provisions of this code to the contrary, a lessee may at any time make and file with the commission a written quitclaim or relinquishment of all rights under any lease or of any portion thereof comprising a 10-acre parcel or multiple thereof in a compact form, or of any separate or distinct zone or geological horizon or portion thereof underlying such 10-acre parcel or multiple thereof. Such quitclaim or relinquishment shall be effective as of the date of its filing, subject to the continued obligation of the lessee and his surety to make payment of all rentals and royalties theretofore accrued and to place all wells on the lands or in the zones or horizons to be quitclaimed or relinquished, in condition for suspension or abandonment in accordance with the applicable lease terms and regulations; thereupon the lessee shall be released from all obligations thereafter accruing under said lease with respect to the lands, zones or horizons quitclaimed or relinquished, but no such quitclaim or relinquishment shall release such lessee or his surety from any liability for breach of any obligation of the lease with respect to which such lessee is in default at the time of the filing of such quitclaim or relinquishment.

(Added by Stats. 1955, Ch. 1724.)

6805.
  

The commission shall reserve and may exercise the authority to cancel any prospecting permit or lease upon which a commercially valuable deposit of minerals or geothermal resources other than oil or gas has not been discovered or upon which oil or gas has not been discovered in paying quantities upon failure of the permittee or lessee (after 30 days’ written notice and demand for performance) to exercise due diligence and care in the prosecution of the prospecting or development work in accordance with the terms and conditions of the permit or lease. After discovery of a commercially valuable deposit of minerals or geothermal resources other than oil or gas on lands subject to any permit or lease issued pursuant to this chapter, or after discovery of oil or gas in paying quantities on lands subject to any lease, the permit or lease may be forfeited and canceled only upon failure of the lessee after 90 days’ written notice and demand to comply with any of the provisions of the permit or lease or of the regulations applicable thereto and in force at the date of the permit or lease. However, in the event of any cancellation the lessee under any oil or gas lease or the permittee or lessee under any geothermal resource permit or lease shall have the right to retain under the permit or lease any and all drilling or producing wells as to which no default exists, together with a parcel of land surrounding any well or wells and any rights-of-way through the lands, under permit or lease, as may be reasonably necessary to enable the permittee or lessee to drill and operate the retained well or wells. In the event of the cancellation of any permit or lease the permittee or lessee shall have a reasonable time within which to remove any and all property, equipment and facilities owned or used by the permittee or lessee in connection with operations under the permit or lease. The commission shall insert in every permit or lease issued under this chapter appropriate provisions for its cancellation in accordance with the provisions of this section.

(Amended by Stats. 1980, Ch. 676, Sec. 276.)

6806.
  

Any permit or lease under this chapter shall reserve to the commission the right to allow, upon such terms as the commission may determine to be just, the joint or several use of such easements or rights of way, including easements in tunnels, upon, through, or in the lands leased or permitted, as may be necessary or appropriate for the working of such lands or of other lands containing the deposits described in this chapter.

(Added by Stats. 1941, Ch. 548.)

6807.
  

The commission, in the name of the State, may purchase or receive by donation or lease any right of way or easement in real property, or any real property in fee simple, necessary or proper for sites for drilling operations, storage of oil, dehydration plants, absorption plants, or other operations necessary or proper under this chapter.

(Added by Stats. 1941, Ch. 548.)

6808.
  

The commission, if it deems such action for the best interests of the state, may condemn, acquire, and possess in the name of the state any right-of-way or easement, including surface rights, for any operation authorized or contemplated under this chapter, that may be necessary for the development and production of oil and gas from state-owned land and for their removal, transportation, storage, and sale.

(Amended by Stats. 1975, Ch. 1239.)

6809.
  

Any interests in lands, or lands in fee simple, acquired by the commission by purchase, donation, lease, condemnation, or otherwise, may be made available to any lessee of the State for the purposes contained in this chapter and upon such terms and conditions as may be determined by the commission.

(Added by Stats. 1941, Ch. 548.)

6810.
  

The provisions of this chapter authorizing the commission to acquire interests in real property include the acquisition of structures and improvements situated on lands sold by the State subject to the reservations provided herein. Such structures and improvements shall be acquired, however, only upon the written request of a lessee under this chapter, to whom the State has granted the right to extract the oil and gas or other minerals from such lands, and only upon the agreement by the lessee to reimburse the State for the cost and expense of such acquisition and the deposit by the lessee with the commission of such security as it may require.

(Added by Stats. 1941, Ch. 548.)

6811.
  

The commission may, prior to the receipt of any bid for a lease under this chapter, withdraw any offer to receive bids therefor, and it may reject all bids therefor filed pursuant to invitation of the commission. At any time before the awarding of a lease thereon, all or any portion of a tract proposed to be leased may be withdrawn by the commission and eliminated from the proposal.

(Added by Stats. 1941, Ch. 548.)

6812.
  

Whenever by the terms of this chapter the commission may grant a lease of State lands, the commission may make and execute an easement of surface or subsurface rights, or both, in lieu thereof and upon the same terms and conditions and subject to the same limitations and prohibitions as are provided for a lease of such lands.

(Added by Stats. 1941, Ch. 548.)

6813.
  

For the purpose of this chapter, the commission may enter into agreements with any person, association of persons, corporation, city, or county, the United States or any agency thereof, or any of them, claiming the oil and gas in lands adversely to the State of California, which agreements may:

(a) Establish the respective interests of the parties to the agreement in the oil and gas underlying such land.

(b) Establish the boundary line between lands claimed by the State and other parties to the agreement in those cases in which oil or gas is known or believed to exist in such lands or in the vicinity thereof, and, pending the establishment of any such boundaries, provide for the administration, exploration and development of any lands embraced within the conflicting boundary claims.

(c) Fix the amount of damages for past or future production of oil and gas from wells drilled under color of title on or into land claimed by the State.

Any agreement entered into by the commission with the United States or any agency thereof under this section shall first be approved by the Governor in order to make it effective.

(Amended by Stats. 1951, Ch. 686.)

6814.
  

The commission, in the name of the people of the State, may bring action to determine the title to oil and gas in land against persons, associations of persons, and corporations claiming the oil and gas adversely and to recover damages for oil and gas removed therefrom. Any person, association of persons, corporation, or city not a party to such a suit and claiming the oil or gas in the land, or any part thereof, may intervene in such an action and have his rights adjudicated. The State hereby consents to be sued by any person, association of persons, corporation, or city for the purpose of quieting title to the right to oil or gas, or both, in any land, claimed by the State and by such person, association of persons, corporation, or city. Any other person, association of persons, corporation, or city not made a party to such an action but claiming any interest in the oil or gas may intervene in such suit.

All such actions shall be brought and tried in the county where the land or some part thereof is situated.

(Added by Stats. 1941, Ch. 548.)

6815.
  

(a) Notwithstanding any other provision of law to the contrary, the commission may negotiate and enter into agreements for compensation for drainage or oil and gas leases on state-owned lands, other than those not available for lease pursuant to Section 6871.1 and that are described in Section 6871.2, if any of the following circumstances exist:

(1) Wells drilled upon private or public lands, including state-owned lands, are draining or may drain oil or gas from state-owned lands, provided that where wells are drilled on state-owned lands and other state-owned lands are or may be subject to drainage, the development is allowed only by drilling from already developed state lands.

(2) The lands are determined by the commission to be unsuitable for competitive bidding because of such factors as their small size or irregular configuration, or their inaccessibility from surface drill sites reasonably available or obtainable.

(3) The state owns a fractional interest in the lands.

(4) The lease or agreement is determined by the commission to be in the best interests of the state.

(b) Whenever wells drilled upon private or public lands, including state-owned lands, are draining or may drain oil or gas from state-owned lands not available for lease pursuant to Section 6871.1 and that are described in Section 6871.2, the commission may negotiate and enter into agreements for compensation for drainage or oil and gas leases, provided that the development of those lands shall be allowed only by drilling from adjacent lands.

(Repealed and added by Stats. 1983, Ch. 1171, Sec. 3.)

6815.1.
  

Whenever the commission exercises a right to take oil, gas, or other hydrocarbons in kind pursuant to any lease the commission shall make and enter into contracts or agreements for the disposition and sale of such oil, gas, or other hydrocarbons only with the highest responsible bidder upon competitive bidding, and in accordance with procedures set forth in rules and regulations adopted by the commission. All specifications and forms for the purpose of inviting bids in connection with such disposition and sale shall be adopted by the commission prior to publication of notice to bidders. Should no bids be received, or should the commission determine to reject any and all bids because of the insufficiency thereof, the commission may negotiate and enter into agreements for such disposition and sale under terms and conditions deemed by the commission to be in the best interests of the State.

(Added by Stats. 1963, Ch. 1429.)

6815.2.
  

(a) Notwithstanding Section 6815.1, the commission may take any oil, gas, or other hydrocarbons taken in kind by it, pursuant to any lease or agreement, and exchange it, by competitive bidding, for refined products which shall be allocated to state agencies and to other public agencies, if the State Energy Resources Conservation and Development Commission, established pursuant to Division 15 (commencing with Section 25000), after a public hearing, finds, in its judgment, that such retention and allocation is necessary to alleviate fuel shortage conditions or will effect a substantial cost saving to the state.

(b) The commission may make and enter into contracts or agreements for exchange of such oil, gas, and other hydrocarbons taken in kind for finished products required for use by state and other public agencies. Such contracts or agreements shall be entered into by competitive bids. The commission may reject all bids, if it determines that they are not in the public interest.

(c) The commission shall charge the state or other public agencies allocated refined products the current market price of these products including all applicable taxes. This price shall not be less than the value of the oil, gas, or other hydrocarbons which would have been received by the state if not taken in kind. The revenue shall be subject to the terms and conditions enumerated in Section 6217. The taxes generated by these sales shall be distributed according to applicable provisions of the Revenue and Taxation Code.

(d) The refined products obtained from such exchange contracts or agreements shall be allocated to state agencies and to other public agencies in accordance with the regulations which shall be adopted, after a public hearing, by the State Energy Resources Conservation and Development Commission.

(e) Notwithstanding Section 6815.1, if the commission determines that it is in the best interests of the state, it may allow another state or public agency to take in kind oil, gas, or other hydrocarbons acquired by the commission.

The commission shall charge the state or other public agencies allocated in kind oil, gas, or other hydrocarbons the current market price of these products, including all applicable taxes. This price shall not be less than the value of the oil, gas, or other hydrocarbons which would have been received by the state if not taken in kind. The commission may also charge for any transportation, treatment, or other costs associated with taking the in kind royalty. The revenue shall be subject to the terms and conditions enumerated in Section 6217. The taxes generated by these sales shall be distributed according to applicable provisions of the Revenue and Taxation Code.

(Amended by Stats. 1983, Ch. 1171, Sec. 4.)

6817.
  

(a) The Controller shall annually as of June 30 apportion, for the fiscal year ending on that date, to each city or county having within its boundaries ungranted tide and submerged lands or other tide and submerged lands granted to it by the state, in which the state has reserved the rights to the mineral deposits contained therein, 1 percent of the revenues paid to the state under Article 4 (commencing with Section 6870) from those tide and submerged lands that are within the limits of the particular county or city, except that the total amount apportioned to each city or county in each year shall not exceed one hundred thousand dollars ($100,000) per mile, or fraction of a mile, of ocean frontage that is within, and owned or operated as a park by, that city or county and leased by the commission for the production of oil, gas, and other hydrocarbons, and which ocean frontage is available to the public free of charge for recreational purposes. However, that limitation on the amount that may be apportioned to each city or county in each year does not apply to revenues from leases within the limits of the particular county or city that exceed the revenues paid to the state during the 1983–84 fiscal year. Any city that is fronted, in whole or in part, by a state oil and gas lease shall be qualified to receive an apportionment under this section based on the formula contained in this section. For purposes of this section, tide and submerged lands within the limits of a city shall not be deemed to be within the boundaries of a county except in the case of a city and county. The commission shall, at the time of remitting revenues to the State Treasury received under Article 4 (commencing with Section 6870), report to the Controller the total amount of the revenue paid from the tide and submerged lands to the state, shown with respect to each city or county to which that amount is applicable. The apportionment for any given fiscal year shall be based upon the physical facts with respect to each city or county existing on June 30 of the next preceding fiscal year. The report of the commission and the apportionments of the Controller shall be final.

(b) In addition to any amounts payable to a city or county pursuant to subdivision (a), 20 percent of revenues paid to the state under Article 4 (commencing with Section 6870) that are derived from the production of oil, gas, and other hydrocarbons from a state tideland lease, not to exceed a total amount of two hundred million dollars ($200,000,000), adjusted annually to reflect increases in the cost of living, as measured by the California Consumer Price Index, shall be paid to the city or county within whose boundaries the lease is located, for a period not to exceed 20 years from commencement of payment, if oil, gas, or other hydrocarbons are extracted under the lease under any of the following circumstances, except as provided in subdivision (c):

(1) The lease was not under production at any time during 1994.

(2) Although the lease was under production at some time during 1994, the lease is subject to a boundary adjustment pursuant to Section 6872.5.

(3) Although the lease was under production in 1994, the lease has new production from a new drilling site constructed after January 1, 1996, including a new offshore platform, an existing offshore platform that has been substantially modified to achieve an increase in production, a subsea well completion, or an upland drilling site where the upland drilling site was constructed pursuant to a development plan approved by the commission after January 1, 1996.

(4) The extraction is from a production zone not under production prior to January 1, 1996.

(5) The extraction is from new wells drilled as a result of a development plan approved by the commission after January 1, 1996.

(c) Subdivision (b) does not apply to any of the following:

(1) Oil and gas development on tide and submerged lands that have been granted by the state to local government without a reservation of the minerals to the state.

(2) The Long Beach Unit operations, notwithstanding the inclusion in those operations of the Alamitos Beach Park Lands as Tract No. 2.

(3) Any upland location or tideflats. “Tideflats” are areas that are marshy, sandy, or muddy and nearly horizontal coastal flatlands that are alternatively covered and exposed as the tide rises and falls, or that are located within 100 feet inland of the mean high tide line of any beach or tideflat.

(4) Any upland drilling site, unless the site requires the use of slant drilling technology to extract oil, gas, or other hydrocarbons.

(5) Leases that do not have either a local or state development plan submitted for consideration on or before January 1, 2002.

(d) (1) The amounts paid to cities and counties shall be deposited in a special tide and submerged lands fund established by the cities or counties, to be held in trust and to be expended only for the promotion and accommodation of commerce, navigation, and fisheries, for the protection of the lands within the boundaries of the cities and counties, for the promotion, accommodation, establishment, improvement, operation, and maintenance of public recreational beaches and coastline for the benefit of all the people of the state, and for the mitigation of any adverse environmental impact caused by exploration for hydrocarbons on state tide and submerged lands within city or county boundaries or caused by production or transportation of hydrocarbons produced on these tide and submerged lands.

(2) The Legislature hereby finds and declares that the purposes specified in paragraph (1) constitute matters of statewide interest and that the expenditure of funds for those purposes will benefit all of the people of the state.

(e) This section applies with respect to all revenues received in the State Treasury on and after October 1, 1963.

(Amended by Stats. 1997, Ch. 17, Sec. 120. Effective January 1, 1998.)

6818.
  

All applications made to the commission pursuant to this chapter for erection of any permanent structure on tidelands or submerged lands or for depositing thereon or removal therefrom of any material shall be submitted by the commission to the Director of Parks and Recreation to make an examination and report concerning possible interference with the recreational use of lands littoral to the tidelands or submerged lands involved in such application. All such applications shall also be submitted by the commission to the Attorney General for approval as to compliance with the applicable provisions of law and of the rules and regulations of the commission. Should it be found by the commission that the action proposed in any such application would unreasonably interfere with the maintenance or use of the lands involved for recreational purposes or protection of shore properties, such application shall not be granted unless modified in a manner which may avoid such interference.

(Amended by Stats. 1965, Ch. 1144.)

6819.
  

The commission shall promulgate rules and regulations to require any person extracting oil or gas or other minerals from lands under the jurisdiction of the commission to remove beach and underwater obstructions.

(Added by Stats. 1973, Ch. 1053.)

PRCPublic Resources Code - PRC1.