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 5.5. Geothermal Resources [6901 - 6925.2]
  ( Article 5.5 added by Stats. 1967, Ch. 1398. )

6901.
  

This article shall be known and may be cited as the Geothermal Resources Act.

(Added by renumbering Section 6902 by Stats. 1978, Ch. 1139.)

6902.
  

The Legislature hereby finds and declares that development of geothermal resources beneath state lands is an essential element in the development of additional energy sources for the State of California. It is further recognized by the Legislature that different parcels of state lands have varying degrees of potential for the successful development of geothermal resources. As some parcels display strong indications of geothermal resources and likelihood of commercially producible energy which could be let at competitive lease sale, and other parcels indicate potential but need additional exploration, and still other parcels have never been explored, the flexible leasing program established by this chapter is necessary to promote more rapid and extensive geothermal development on state lands.

(Added by Stats. 1978, Ch. 1139.)

6903.
  

For the purposes of this chapter, “geothermal resources” shall mean the natural heat of the earth, the energy, in whatever form, below the surface of the earth present in, resulting from, or created by, or which may be extracted from, such natural heat, and all minerals in solution or other products obtained from naturally heated fluids, brines, associated gases, and steam, in whatever form, found below the surface of the earth, but excluding oil, hydrocarbon gas or other hydrocarbon substances.

(Added by Stats. 1967, Ch. 1398.)

6904.
  

Permits and leases for exploration and development of geothermal resources on lands belonging to the state and leases for the development of geothermal resources reserved by the state may be issued by the commission as provided in this article. For purposes of this article, state lands shall be defined as all lands owned by the state, including school lands, lieu lands, proprietary lands, tidelands, submerged lands, swamp and overflowed lands, and beds of navigable rivers and lakes, and lands in which geothermal resources have been reserved to the state.

(Amended by Stats. 1978, Ch. 1139.)

6905.
  

Permits and leases may be issued pursuant to this article only to those who qualify for permits and leases under Section 6801.

(Amended by Stats. 1978, Ch. 1139.)

6906.
  

Administration of this article shall be under the principle of multiple use of public lands and resources, and shall allow coexistence of other permits or leases of the same lands for deposits of other minerals under applicable laws, and the existence of permits or leases issued pursuant to the provisions of this article shall not preclude other uses of the areas covered thereby. However, operations under such other permits or leases or such other uses shall not unreasonably interfere with or endanger operations under any permit or lease issued pursuant to this article, nor shall operations under permits or leases issued pursuant to the provisions of this article unreasonably interfere with or endanger operations under any permit or lease issued pursuant to the provisions of any other act. Nor shall this article be construed as superseding the authority which the head of any state department or agency has with respect to the management, protection, and utilization of the state lands and resources under his jurisdiction. The commission may prescribe in its rules and regulations those conditions it deems to be necessary for the protection of other resources.

(Added by Stats. 1967, Ch. 1398.)

6907.
  

Where it is determined by the commission that the production or use of geothermal resources is also susceptible of economically producing other of the geothermal resources in commercially valuable quantities, and a market therefor exists, production of such other geothermal resources may be required by the commission.

(Amended by Stats. 1983, Ch. 369, Sec. 18.)

6909.
  

The commission may grant nonexclusive geological or geophysical exploration permits for geothermal resources upon such terms and conditions as the commission may prescribe, but any such permit shall not give the permittee any preferential right to a geothermal resources lease.

(Repealed and added by Stats. 1978, Ch. 1139.)

6910.
  

(a) Subject to the provisions of Section 6906, the commission may issue a prospecting permit to the first qualified applicant therefor under such rules and regulations as it may prescribe for lands which have not been selected by the commission for lease by competitive public bid. An application for a permit shall be denied if, prior to the issuance of the permit, the lands are selected by the commission for lease by competitive public bid.

The applicant shall submit for the commission’s approval a prospecting program, including a time schedule, which may include, but not be limited to, the conduct of surveys, tests, or experiments using geological, geophysical, or other exploratory methods, including exploration drilling. Such prospecting program shall be specified in the terms and conditions of the prospecting permit. At a minimum, each prospecting permit issued under this article shall provide that the permittee is required to drill a geothermal well during the term of the permit, and such term shall not be extended pursuant to subdivision (b) unless the permittee has commenced the drilling or applied for the necessary permits to drill such a well. Rental shall escalate each year until a well is drilled, whereupon the rental, royalties, and other terms shall be as specified in Section 6913. The escalating rental shall be one dollar ($1) per acre during the first year, not more than five dollars ($5) per acre during the second year, and not more than twenty-five dollars ($25) per acre during the third year and every year thereafter. In the event the permittee elects to quitclaim its interest in a permit prior to the expiration of the initial two-year term, its obligation to drill a geothermal well shall thereupon terminate.

(b) A prospecting permit shall give to the permittee the exclusive right for a term of two years to prospect for geothermal resources upon lands included within such prospecting permit. The commission may, in its discretion, extend the term of any prospecting permit for a period not exceeding two years; provided that the combination of the term and extension of any prospecting permit shall not exceed a total of four years. The commission may amend or terminate any permit issued by it within the term or within the extension, if any, with the consent of the permittee.

(c) Upon the discovery of geothermal resources in commercial quantities within the prospecting permit area, the permittee shall be entitled to a lease by the commission if provided as a term of the permit, for such lands within the permit area. The terms of such lease shall include the royalties and other terms contained in Section 6913.

(d) Obligations imposed by a prospecting permit or lease pursuant to this section may be suspended during such time as a lessee is prevented from complying therewith by wars, riots, acts of God, laws, rules and regulations from any federal, state, county or municipal agency, or by such other unusual conditions as are beyond the control of the lessee.

(Repealed and added by Stats. 1978, Ch. 1139.)

6911.
  

(a) Lands may be selected for lease by the commission and shall be leased by competitive bid on the basis of a cash bonus, net profit, or other single biddable factor.

(b) In leasing lands the commission may prescribe in the lease document an exploration and development program. The commission shall consider all applicable economic factors, including market conditions, and the cost of drilling for, producing, and utilizing geothermal resources.

(c) Lands so selected for lease by the commission shall be leased to the highest responsible qualified bidder under such rules and regulations as the commission may prescribe for notice to the public of terms and conditions of the sale, receipt of bid, and awarding of the lease.

(Repealed and added by Stats. 1978, Ch. 1139.)

6912.
  

(a) In case of an application for a permit or lease covering lands which have been sold by the state, subject to a reservation by the state of the geothermal resources thereof, by any person other than the owner of the surface of those lands, the owner may, within four months from the date of service of notice of the application, file an application for a permit or lease. The notice, with a copy of the application, shall be served by the commission, by registered mail. If the owner files an application and is a qualified person and the commission determines that the permitting or leasing of the lands is in the best interest of the state, the owner’s application shall be granted subject to all the provisions of this article. If the owner fails to exercise the rights granted by this section, those rights shall terminate and the applicant shall be permitted to proceed with the application.

(b) In the event of a competitive lease sale, after the commission has determined the highest competitive bid thereon, the owner of the surface of those lands may within 30 days after notification by the commission, by registered mail, submit a bid identical to the highest acceptable bid, in which case the commission shall issue a lease to the owner. If the owner fails to file a bid within that time, the commission may proceed with the award of the bid to other than the owner.

(Amended by Stats. 1983, Ch. 617, Sec. 1.)

6913.
  

Each prospecting permit and lease issued under this article shall provide for the following rentals and royalties with respect to geothermal resources produced, saved and sold from the lands included within said permit or lease:

(a) Prospecting permits and the leases which result therefrom shall include but not be limited to a royalty of not less than 10 percent of the gross revenue, exclusive of charges, approved by the commission, made or incurred with respect to transmission or other services or processes, received from the sale of steam, brines, from which no minerals have been extracted, and associated gases at the point of delivery to the purchaser thereof. Leases issued pursuant to a competitive lease sale may include in addition to the biddable factors a royalty of not more than 162/3 percent of the gross revenue, exclusive of charges, approved by the commission, made or incurred with respect to transmission or other services or processes, received from the sale of steam, brines, from which no minerals have been extracted, and associated gases at the point of delivery to the purchaser thereof.

(b) A royalty of not less than 2 percent of the gross revenue received from the sale of mineral products or chemical compounds recovered from geothermal fluids in the first marketable form as to each such mineral product or chemical compound for the term of the lease.

(c) An annual rental payable in advance of not less than one dollar ($1) per acre or fraction thereof for each year of a lease. Annual rental for prospecting permits shall be subject to the provisions of subdivision (a) of Section 6910.

(d) If, after the discovery of geothermal resources in commercial quantities, the total royalties due to the state during any calendar year do not equal or exceed a sum equal to two dollars ($2) per acre for each acre or fraction thereof then included in the permit or lease, the permittee or the lessee shall, within 60 days after the end of the year, pay such sum as is necessary to equal a minimum royalty of two dollars ($2) per acre.

(e) For leases and prospecting permits which may be converted into a lease, in existence prior to January 1, 1979, the royalties specified herein shall be subject to renegotiation after 30 years from the effective date of the lease and at 10-year intervals thereafter. The first renegotiated royalty rate shall not exceed 30 percent royalty, and in subsequent renegotiations the royalty rate shall not increase by more than 50 percent over the royalty rate of the prior period. In no case shall the lessee’s liability for renegotiated royalties exceed 50 percent of its net profits, nor shall the lessee’s renegotiated royalty be less than the royalty rate under which the lease was issued except as provided for in Section 6916. Net profits for the purposes of this subdivision shall be calculated from the effective date of the negotiated royalties. For leases entered into on and after January 1, 1979, the royalties shall be subject to renegotiation not sooner than 20 years nor later than 30 years from the initial commercial operation, which shall be 30 days after the first generating unit has operated for a consecutive 24-hour period, and at 10-year intervals thereafter. Such renegotiations shall not increase by more than 50 percent the maximum royalties due during the immediately preceding period. The time of first renegotiation for leases entered into after January 1, 1979, shall reflect the Public Utility Commission’s policy on accelerating rates of amortization of facilities utilizing geothermal resources and approval of terms for producer-utility supply contracts.

(f) The commission may, in lieu of payment due the state, exercise the right to take its share of geothermal resources in kind as specified in a lease agreement. If additional facilities are necessary to enable the state to take its royalty share of geothermal resources in kind, the state or its purchaser of geothermal resources shall provide such additional facilities at its own expense, or if the lessee agrees to provide such additional facilities, the lessee shall be compensated for all direct labor and material costs in providing such additional facilities by the state’s purchaser or, if the state elects, by deduction from royalties due the state. Whenever the commission exercises the right to take geothermal resources in kind, the commission shall make and enter into contracts or agreements for the disposition and sale of such geothermal resources 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.

(g) Royalty payments shall be made pursuant to the provisions of subdivisions (a) and (b). However, for all geothermal resources used by the permittee or lessee and not sold, the gross revenue therefrom shall be determined as though said geothermal resources had been sold to a third person at the then prevailing market price, in the same market area, and under the same marketing conditions; provided, however, that royalties shall not be payable for geothermal resources used by the permittee or lessee in prudent business operations associated with the development and utilization of the resource or in the production of any geothermal mineral products or chemical compounds recovered from geothermal fluids in first marketable form which are subject to the payment of royalties under subdivision (a) or (b).

(Amended by Stats. 1978, Ch. 1139.)

6914.
  

The holder of any geothermal resources permit or lease may quitclaim or relinquish his rights under such permit or lease pursuant to the provisions of Section 6804.1 of this code.

(Added by Stats. 1967, Ch. 1398.)

6915.
  

Subject to the other provisions of this article, the permittee or lessee shall be entitled to use so much of the surface as is reasonably necessary as determined by the commission for the production and conservation of geothermal resources.

(Added by Stats. 1967, Ch. 1398.)

6916.
  

(a) The commission may issue leases for direct heat application of geothermal resources for nonelectrical purposes for a royalty of less than 10 percent of gross revenue if it determines that such a royalty would be in the best interests of the state.

(b) The commission may also waive, suspend, or reduce the rental or minimum royalty for the lands included in any permit or lease, or any portion thereof, and waive, suspend, alter, or amend the operating requirements contained in the lease or regulations adopted pursuant to this section affecting operations of the lease or permit, in the interests of conservation, and to encourage the greatest ultimate recovery of geothermal resources if the commission determines that the action is necessary or beneficial to promote development or finds that the permit or lease cannot be successfully operated under the permit or lease terms or under the regulations.

(Amended by Stats. 2001, Ch. 745, Sec. 180. Effective October 12, 2001.)

6917.
  

A permit or lease may be terminated by the commission only pursuant to the provisions of Section 6805 of this code.

(Added by Stats. 1967, Ch. 1398.)

6918.
  

Leases under this article shall be for a primary term not to exceed 10 years and so long thereafter as geothermal resources are being or capable of being produced or utilized in commercial quantities, if the lessee is in compliance with the terms and conditions of an exploration and development program specified in the lease pursuant to Section 6911.

(Repealed and added by Stats. 1978, Ch. 1139.)

6919.
  

Notwithstanding any other provision of law to the contrary, the commission may negotiate and enter into agreements for compensation for drainage or geothermal leases of state-owned lands if any of the following conditions exist:

(a) Wells drilled upon private or public lands, including state-owned lands, are draining or may drain geothermal resources 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.

(b) 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.

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

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

(Repealed and added by Stats. 1983, Ch. 1171, Sec. 7.)

6920.
  

Any person engaged in the production of geothermal resources under a lease issued by the commission may commingle geothermal resources from any two or more wells without regard to whether such wells are located on the lands for which such lease was issued or elsewhere, provided, however, that said lessee shall install and maintain meters or other measuring devices satisfactory to the commission to measure the amount of geothermal resources produced from lands for which leases were issued by the commission.

(Added by Stats. 1967, Ch. 1398.)

6921.
  

A permittee or lessee may, upon the approval of the commission and pursuant to the provisions of Chapter 4 (commencing with Section 3700) of Division 3, drill special wells, convert producing wells or reactivate and convert abandoned wells for the sole purpose of reinjecting geothermal resources or the residue thereof. If the lessee realizes a profit on such operations or if the geothermal resources proposed for reinjection are produced from other than state leased lands, then the commission may charge such consideration as is determined to be in the public interest, not to exceed the net profits or royalties payable under the lease.

(Amended by Stats. 1978, Ch. 1139.)

6922.
  

No prospecting permit or lease shall be made for less than 640 acres nor more than 5,760 acres and the permit or lease shall embrace a reasonably compact area. A prospecting permit or lease may be issued for a parcel less than 640 acres if the parcel is isolated from or not contiguous with other parcels of land available for a prospecting permit or lease hereunder or if the parcel would otherwise be subject to leasing rights as provided in subdivision (b) of Section 6912 by more than one surface owner. No person, association, or corporation shall take, hold, own, or control at one time, whether acquired directly from the commission under this article or otherwise, any direct or indirect interests in state geothermal leases or prospecting permits exceeding 25,600 acres. In computing acreage holdings or control, the accountable acreage of a party owning an undivided interest in a lease or prospecting permit shall be the party’s proportionate part of the total lease or prospecting permit acreage. Likewise, the accountable acreage of a party owning an interest in a corporation or association shall be his proportionate part of the corporation’s or association’s accountable acreage, except that no person shall be charged with his pro rata share of any acreage holdings of any association or corporation unless he is the beneficial owner of more than 10 percent of the stock or other instruments of ownership or control of the association or corporation. Parties owning a royalty or other interest determined by or payable out of a percentage of production from a lease or prospecting permit will be charged with a similar percentage of the total acreage. No limitation shall apply to the number of prospecting permits or leases granted under this article. In the unitizing of acreage by two or more lessees pursuant to a cooperative or unit plan of development or operation approved by the commission, accountable acreage of a party owning an interest shall be his pro rata share and any lease or portion so committed shall continue in force so long as committed to the plan beyond the expiration date of its primary term. Any lease eliminated from any approved cooperative plan of development shall continue in effect for the original term of the lease or for two years after its elimination from the plan or the termination thereof, whichever is longer, and so long thereafter as geothermal resources are being produced or utilized in commercial quantities. A purchaser of geothermal resources pursuant to a sales contract approved by the commission shall not be deemed to have a direct or indirect interest in geothermal leases or prospecting permits.

(Amended by Stats. 1983, Ch. 617, Sec. 2.)

6923.
  

For the purpose of more properly conserving the natural resources of any geothermal resources areas, or any part thereof, the lessees thereof may unite with each other or with others in collectively adopting and operating under a cooperative or unit plan of development or operation of such geothermal resources lands, consistent with the provisions of Section 3756 of this code. The commission may, with the consent of the holders of leases involved, establish, alter, change, and revoke any drilling and production requirements of such leases, permit apportionment of production, and may make such regulations with reference to such leases, with like consent on the part of such lessees, in connection with the institution and operation of any such cooperative or unit plan, as the commission deems necessary or proper to secure the proper protection of the interests of the state.

(Added by Stats. 1967, Ch. 1398.)

6924.
  

Where the surface of state-owned lands sought for use or development of geothermal resources or the waters thereon are under the jurisdiction of a state department or agency other than the commission, the commission may issue permits or leases under this article only with the consent of and subject to such reasonable terms and conditions as may be prescribed by that other department or agency to ensure the adequate utilization of the surface of the lands or the waters thereon for the purposes for which they are then being administered or for which they were acquired. The other department or agency shall not prescribe any terms and provisions inconsistent with this article.

Notwithstanding Section 6217, as of June 30th of each year, a sum that is 50 percent of the revenue received by the state for the fiscal year ending on that June 30th, pursuant to leases for the development of geothermal resources on the surface of lands under the jurisdiction of that state department or agency, shall be available for appropriation by the Legislature solely for the programs of that state department or agency.

(Amended by Stats. 1989, Ch. 1017, Sec. 1.)

6925.
  

A permit or lease under this article may be assigned, transferred, or sublet as provided for in Section 6804 of this code.

(Added by Stats. 1967, Ch. 1398.)

6925.1.
  

Whenever, as determined by the commission, any operation conducted under a geothermal exploration permit, prospecting permit, or lease pursuant to this article constitutes an unreasonable risk to the health, safety, or welfare of any human being or of pollution or contamination caused in any manner or resulting from such operations, the commission shall order an immediate suspension of any drilling and production operations, except those which are corrective, protective, or mitigative. Such operations shall not be resumed until the commission determines that adequate corrective measures have been taken. The commission may delegate the power to order a cessation of operations to its executive officer. Resumption of operations shall only be permitted by the commission.

(Added by Stats. 1978, Ch. 1139.)

6925.2.
  

Notwithstanding any other provision of this article, the commission may, at its discretion, issue a lease to the first qualified applicant for a parcel of less than 640 acres if the geothermal resources to be developed on this parcel are utilized entirely for purposes other than electricity generation. The terms, conditions, rentals, royalties, drilling requirements, and development programs of those leases shall be as determined by the commission. If there is an existing geothermal resources lease or permit for the land, the applicant shall obtain the permission of the lessee or permittee.

(Amended by Stats. 2006, Ch. 538, Sec. 573. Effective January 1, 2007.)

PRCPublic Resources Code - PRC5.5.