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AB-16 Long Beach tidelands: gas reserves: exploration and development.(2001-2002)

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Amended  IN  Assembly  March 22, 2001
Amended  IN  Assembly  April 16, 2001

CALIFORNIA LEGISLATURE— 2001–2002 1st Ext.

Assembly Bill
No. 16

Introduced  by  Assembly Member Lowenthal, Oropeza
 (Coauthor(s): Senator Karnette)

January 25, 2001

An act relating to energy.


LEGISLATIVE COUNSEL'S DIGEST


AB 16, as amended, Lowenthal. Long Beach tidelands: gas reserves: exploration and development.
(1) Existing law grants to the City of Long Beach certain tidelands and submerged lands in trust under prescribed conditions.
This bill would authorize the State Lands Commission to negotiate and execute, on behalf of the state, a contract or agreement with the City of Long Beach and any contractor operating under an oil operating contract with the City of Long Beach, that will provide a financial incentive for such a contractor to explore for, and develop, additional gas reserves in the Long Beach tidelands, but would provide that nothing in the bill or any contract or agreement that may be entered into pursuant to provisions of the bill shall supercede or amend, in any respect, specified contracts and agreements governing the drilling, developing, extracting, processing, taking, or removal of oil, gas, and other hydrocarbons from the Long Beach tidelands, as defined. The bill would require that any contract or agreement so authorized pursuant to those provisions of the bill specify that the contractor and the City of Long Beach, either directly or indirectly, shall bear the costs of the exploration and development of additional gas reserves in the Long Beach tidelands, as specified. The bill would provide that the state shall not bear any of the cost associated with the exploration and development of those additional gas reserves, nor shall it pay any abandonment costs with respect to those exploration and development activities.

The bill would authorize the City of Long Beach to retain out of specified oil revenues, as defined, received by the city each month, an amount to be placed in a fund to be used solely to pay that portion of the costs of plugging and abandoning oil and gas production facilities from the Long Beach tidelands that are not the contractual responsibility of the contractor, except as provided.

The bill would require all net revenue derived by the City of Long Beach from the disposition of its allocated share of the additional gas reserves that are a product of the exploration and development undertaken pursuant to such a contract or agreement to be used by the City of Long Beach for specified purposes.(2) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) The State of California is in the midst of a severe energy crisis and increased production of natural gas reserves in the state will help to alleviate this crisis.
(b) There may be untapped natural gas reserves in the Long Beach tidelands, but contractors operating under existing oil operating contracts with the City of Long Beach need financial incentives to explore for and develop those reserves.
(c) There are currently no financial incentives provided for by existing laws governing oil operations in the Long Beach tidelands.

SEC. 2.

 (a) The State Lands Commission may, on behalf of the state, negotiate contracts or agreements with the City of Long Beach, and any contractor operating under an oil operating contract with the City of Long Beach, that provide financial incentives for the contractor to explore for, and develop, additional gas reserves in the Long Beach tidelands, as defined in subdivision (a) of Section 1 of Chapter 138 of the Statutes of 1964, First Extraordinary Session. Neither this act nor any contract or agreement entered into pursuant to this section shall supersede or amend, in any respect, the existing contractors’ agreements for Tracts 1 and 2 of the Long Beach Unit, the Agreement for Implementation of an Optimized Waterflood Program for the Long Beach Unit, the Long Beach Unit Agreement, the Long Beach Unit Operating Agreement, the Long Beach Harbor Tidelands Parcel and Parcel “A” Oil Contract, the Fault Block Unit Agreements, and Unit Operating Agreements, or any other existing contract covering the drilling, developing, extracting, processing, taking, or removal of oil, gas, and other hydrocarbons from the Long Beach tidelands.
(b) Any contract or agreement entered into pursuant to subdivision (a) shall contain a provision specifying that the contractor and the City of Long Beach, either directly or indirectly, shall jointly bear the costs incurred in connection with the exploration and development of additional gas reserves in the Long Beach tidelands. The composition of those additional gas reserves to be developed in the Long Beach tidelands shall be prescribed in any contract or agreement entered into by the State Lands Commission, the City of Long Beach, and the contractor. The state shall not bear any of the cost incurred in connection with the exploration and development of those additional gas reserves, nor shall it pay any abandonment costs related to that gas exploration or development. The state shall receive an expense-free royalty that is payable monthly on all gas produced and sold as a result of this new exploration and development. The City of Long Beach and any contractor entering into a contract or agreement for the exploration or development of gas reserves with the City of Long Beach may determine, in the course of negotiations, how the exploration and development costs will be apportioned between the parties to the contract or agreement, and how the gas produced from this exploration or and development will be allocated between or among each party if, provided that the City of Long Beach has shall have the right, but not the obligation to,, to purchase all such gas produced at a negotiated price that is no greater than the reasonable wholesale commodity market price of dry gas, as defined in subdivision (c) of Section 1 of Chapter 138 of the Statutes of 1964, First Extraordinary Session, sold for residential sold for residential consumption in the Los Angeles Basin. All oil produced in connection with the development and production of these additional gas reserves shall be allocated and accounted for as normal oil production under existing and applicable contracts or agreements governing oil production in the Long Beach tidelands.
(c) The provisions of Chapter 29 of the Statutes of 1956, First Extraordinary Session, and of Chapter 138 of the Statutes of 1964, First Extraordinary Session, relating to the allocation and disposition of Long Beach tidelands dry gas shall remain in effect and continue to be fully applicable to all dry gas produced from the Long Beach tidelands that is not a product of the exploration and development undertaken pursuant to a contract or agreement authorized by subdivision (a).
SEC. 3.

(a)Notwithstanding subdivision (d) of Section 4 of Chapter 138 of the Statutes of 1964, First Extraordinary Session, the City of Long Beach may retain, out of the oil revenues, as defined in subdivision (b) of Section 1 of Chapter 138 of the Statutes of 1964, First Extraordinary Session, received by the city each month, an amount to be deposited in an Abandonment Fund to be used solely to pay that portion of the costs of plugging and abandoning all wells, and removal of all oil and gas production facilities from the Long Beach tidelands that are not the contractual responsibility of the contractor or other parties.

(b)Any revenues that are withheld monthly pursuant to subdivision (a) shall be based on a reasonable and good faith estimate of the remaining life of the oil field, and the amount of money that will be sufficient to cover fully the abandonment and removal costs by the time these costs will be incurred. However, the total amount deposited in the Abandonment Fund shall not exceed one hundred ninety million dollars ($190,000,000), and the amount to be withheld each month shall not exceed 50 percent of remaining oil revenues, as described in subdivision (d) of Section 4 of Chapter 138 of the Statutes of 1964, First Extraordinary Session. If the City of Long Beach retains revenues pursuant to subdivision (a), the city shall invest the money in the Abandonment Fund in investments that are lawful for other city funds. All interest earned on the money in the abandonment fund shall remain in the fund.

The State Lands Commission shall provide written approval to the City of Long Beach before the city may use money in the Abandonment Fund, except that the City of Long Beach may expend those funds without that written approval for purposes authorized by this section relating to the plugging and abandoning of wells, and the removal of oil and gas production facilities. Any moneys remaining in the fund after the completion of plugging and abandoning activities authorized by this section, shall be remitted to the state in accordance with the requirements of subdivision (d) of Section 4 of Chapter 138 of the Statutes of 1964, First Extraordinary Session. The administration of the Abandonment Fund shall be subject to the requirements of Section 10 of Chapter 138 of the Statutes of 1964, First Extraordinary Session.
(d) All net revenue derived by the City of Long Beach from the disposition of its allocated share of the additional gas reserves that are a product of the exploration and development undertaken pursuant to a contract or agreement authorized by subdivision (a) shall be used by the City of Long Beach for the purposes of, and in the manner set forth in, Section 6 of Chapter 138 of the Statutes of 1964, First Extraordinary Session.

SEC. 3.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act, within the meaning of Section 17556 of the Government Code.