Existing law authorizes the State Lands Commission to issue prospecting permits and leases for the extraction and removal of minerals, other than oil and gas or other hydrocarbon substances, from specified lands. Existing law prohibits the commission from issuing a permit or lease until it has been submitted to, and approved by, the Attorney General, as specified.

This bill would delete the provision relating to Attorney General approval and would authorize the commission to grant nonexclusive geological or geophysical exploration permits for minerals upon those terms and conditions as the commission may prescribe, without giving the permittee any preferential treatment.

Existing law requires an applicant to mark each of the corners of the tract described in the permit, as provided, within 90 days after receiving the permit, unless the tract consists of tide or submerged lands. Existing law grants an applicant preferential right to a permit if the applicant erects a monument on that land, as provided.

This bill would repeal these provisions.

Existing law grants a permittee entitlement to a lease for not more than 960 acres of land included in a prospecting permit if the presence of commercially valuable deposits of minerals has been discovered to the satisfaction of the commission. Existing law requires the permittee to pay an annual rental of not less than $1 per acre.

This bill would delete that entitlement and instead grant the permittee priority over other applicants for 365 days, unless the permittee submits a complete lease application, in which case the priority will expire upon the commissions consideration or applicants withdrawal of the application. The bill would also instead require the permittee to pay an annual rental of not less than fair market value.

Existing law requires a permittee to pay the state 20% of the gross value of the minerals the permittee secures from the land included in the permit until the permittee applies for a lease for the same land.

This bill would instead require the permittee to pay the state 20% of the gross value of all minerals secured from the land included in the permit until the permittee applies for a lease for the same land.

Existing law limits the term for a lease to 20 years or less and grants the lessee preferential right to renew the lease for successive periods not to exceed 10 years each.

This bill would delete that preferential right to renew the lease.

Existing law requires the commission to prescribe additional terms, covenants, and conditions to permits and leases as in its opinion will effectually protect the interests of the state in the mineral deposits.

This bill would delete covenants from that requirement.

Existing law authorizes the State Lands Commission to issue prospecting permits and leases for the extraction and removal of minerals, other than oil and gas or other hydrocarbon substances, from specified lands. Existing law prohibits the commission from issuing a permit or lease until it has been submitted to, and approved by, the Attorney General, as specified.

This bill would delete the provision relating to Attorney General approval and would authorize the commission to grant nonexclusive geological or geophysical exploration permits for minerals upon those terms and conditions as the commission may prescribe, without giving the permittee any preferential treatment.

Existing law requires an applicant to mark each of the corners of the tract described in the permit, as provided, within 90 days after receiving the permit, unless the tract consists of tide or submerged lands. Existing law grants an applicant preferential right to a permit if the applicant erects a monument on that land, as provided.

This bill would repeal these provisions.

Existing law grants a permittee entitlement to a lease for not more than 960 acres of land included in a prospecting permit if the presence of commercially valuable deposits of minerals has been discovered to the satisfaction of the commission. Existing law requires the permittee to pay an annual rental of not less than $1 per acre.

This bill would delete that entitlement and instead grant the permittee priority over other applicants for 365 days, unless the permittee submits a complete lease application, in which case the priority will expire upon the commissions consideration or applicants withdrawal of the application. The bill would also instead require the permittee to pay an annual rental of not less than fair market value.

Existing law requires a permittee to pay the state 20% of the gross value of the minerals the permittee secures from the land included in the permit until the permittee applies for a lease for the same land.

This bill would instead require the permittee to pay the state 20% of the gross value of all minerals secured from the land included in the permit until the permittee applies for a lease for the same land.

Existing law limits the term for a lease to 20 years or less and grants the lessee preferential right to renew the lease for successive periods not to exceed 10 years each.

This bill would delete that preferential right to renew the lease.

Existing law requires the commission to prescribe additional terms, covenants, and conditions to permits and leases as in its opinion will effectually protect the interests of the state in the mineral deposits.

This bill would delete covenants from that requirement.

Existing law authorizes the State Lands Commission to issue prospecting permits and leases for the extraction and removal of minerals, other than oil and gas or other hydrocarbon substances, from specified lands. Existing law prohibits the commission from issuing a permit or lease until it has been submitted to, and approved by, the Attorney General, as specified.

This bill would delete the provision relating to Attorney General approval and would authorize the commission to grant nonexclusive geological or geophysical exploration permits for minerals upon those terms and conditions as the commission may prescribe, without giving the permittee any preferential treatment.

Existing law grants a permittee entitlement to a lease for not more than 960 acres of land included in a prospecting permit if the presence of commercially valuable deposits of minerals has been discovered to the satisfaction of the commission. Existing law requires the permittee to pay an annual rental of not less than $1 per acre.

This bill would delete that entitlement and instead grant the permittee priority over other applicants for 365 days, unless the permittee submits a complete lease application, in which case the priority will expire upon the commissions consideration or applicants withdrawal of the application. The bill would also instead require the permittee to pay an annual rental of not less than fair market value.

Existing law requires a permittee to pay the state 20% of the gross value of the minerals the permittee secures from the land included in the permit until the permittee applies for a lease for the same land.

This bill would instead require the permittee to pay the state 20% of the gross value of all minerals secured from the land included in the permit until the permittee applies for a lease for the same land.

Existing law limits the term for a lease to 20 years or less and grants the lessee preferential right to renew the lease for successive periods not to exceed 10 years each.

This bill would delete that preferential right to renew the lease.

Existing law authorizes the State Lands Commission to issue prospecting permits and leases for the extraction and removal of minerals, other than oil and gas or other hydrocarbon substances, from specified lands. Existing law prohibits the commission from issuing a permit or lease until it has been submitted to, and approved by, the Attorney General, as specified.

This bill would delete the provision relating to Attorney General approval and would authorize the commission to grant nonexclusive geological or geophysical exploration permits for minerals upon those terms and conditions as the commission may prescribe, without giving the permittee any preferential treatment.

Existing law grants a permittee entitlement to a lease for not more than 960 acres of land included in a prospecting permit if the presence of commercially valuable deposits of minerals has been discovered to the satisfaction of the commission. Existing law requires the permittee to pay an annual rental of not less than $1 per acre.

This bill would delete that entitlement and instead grant the permittee priority over other applicants for 365 days, unless the permittee submits a complete lease application, in which case the priority will expire upon the commissions consideration or applicants withdrawal of the application. The bill would also instead require the permittee to pay an annual rental of not less than fair market value.

Existing law requires a permittee to pay the state 20% of the gross value of the minerals the permittee secures from the land included in the permit until the permittee applies for a lease for the same land.

This bill would instead require the permittee to pay the state 20% of the gross value of all minerals secured from the land included in the permit until the permittee applies for a lease for the same land.

Existing law limits the term for a lease to 20 years or less and grants the lessee preferential right to renew the lease for successive periods not to exceed 10 years each.

This bill would delete that preferential right to renew the lease.

 CONSENT  

Bill No: AB 706

Author: Luz Rivas (D)

Amended: 5/15/23 in Assembly

Vote: 21

SENATE NATURAL RES. & WATER COMMITTEE: 11-0, 6/22/23

AYES: Min, Seyarto, Allen, Dahle, Grove, Hurtado, Laird, Limón, McGuire, Padilla, Stern

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 77-0, 5/22/23 - See last page for vote

SUBJECT: Leasing of public lands: minerals other than oil and gas

SOURCE: California State Lands Commission

DIGEST:

This bill makes various changes to the statutes governing the State Lands Commission’s authority to grant permits and leases for mineral extraction and removal, including to make these statutes consistent with a prohibition on extracting or removing hard minerals, as defined, from state waters subject to tidal influence and to create a new type of permit for nonexclusive geological or geophysical exploration for minerals.

ANALYSIS:

Existing law:

1. Establishes the State Lands Commission (SLC) in the California Natural Resources Agency (CNRA), consisting of the State Controller, the Lieutenant Governor, and the Director of Finance. Public Resources Code (PRC) §6101.
2. Grants SLC sole responsibility for and jurisdiction over the administration, management, and disposal of all minerals reserved to the state. Further, authorizes SLC to lease all or part of the property represented by such mineral reservations, as specified. PRC §6405.
3. Prohibits, pursuant to Chapter 433, Statutes of 2022, SLC or a local trustee of granted lands from granting leases or issuing permits for the extraction or removal of hard minerals, as defined, from state waters subject to tidal influence, except for waters situated east of the Carquinez Bridges on Interstate 80. PRC §6900.
4. Authorizes SLC to lease lands belonging to the state that contain commercially valuable deposits of minerals, as specified, with an annual rent of not less than $1 per acre, as specified, in addition to the payment of a royalty or a percentage of net profits, as specified. PRC §6897.
5. Provides that an applicant shall be entitled to a preferential right over others to a permit for 30 days, as specified, if the applicant provides specified notice, including if the applicant erects a monument on the land for which a permit is sought, as specified, with written notice posted thereon or near the monument stating that an application for a permit will be made within 30 days after the date of posting the notice, as specified. PRC §6892.
6. Requires a permittee, within 90 days of receiving a permit, to mark each of the corners of the tract described in the permit upon the ground with substantial monuments, as specified, and to post in a conspicuous place upon the lands a notice that such permit has been granted, as specified. PRC §6894.
7. Provides for the issuance of prospecting permits and leases for the extraction and removal of minerals, other than oil and gas or other hydrocarbon substances, from lands, including tide and submerged lands belonging to the state, as specified.
   1. Prohibits SLC from issuing a permit or lease until it has been submitted to and approved by the Attorney General as to compliance with the applicable law and rules and regulations of SLC.
   2. Prohibits issuing a lease or permit which results in any net adverse impact to wetlands or riparian habitat. PRC §6890.
8. Entitles a permittee, upon establishing to SLC’s satisfaction that commercially valuable deposits of minerals have been discovered within the limits of any permit, to a lease for not more than 960 acres of the land included in the prospecting permit, if there is that number of acres within the permit. Further requires, among other things, that the lease include similar requirements as prescribed in (4), including an annual rent of not less than $1 per acre and payment of either a royalty or a percentage of the net profits derived from mineral extraction operations under the lease, as specified. PRC §6895.
9. Provides that the leases described above shall be for terms not to exceed 20 years with the lessee having a preferential right to renew the lease for successive periods not to exceed 10 years each, upon such reasonable terms and conditions as SLC may prescribe. PRC §6898.
10. Directs SLC to prescribe such additional terms, covenants and conditions, as specified, for the permits and leases described above that will effectually protect the interests of the state in its mineral deposits. PRC §6899.

This bill makes various changes to the statutes governing SLC’s authority to grant permits and leases for mineral extraction and removal, including to make these statutes consistent with a prohibition on extracting or removing hard minerals, as defined, from state waters subject to tidal influence and to create a new type of permit for nonexclusive geological or geophysical exploration for minerals.

Specifically, this bill:

1. Makes prospecting permits and leases for mineral extraction from lands belonging to the state consistent with the prohibition on extracting or removing hard minerals, as defined, from state waters subject to tidal influence.
2. Removes the requirement that the Attorney General first review and approve a permit or lease for mineral extraction before SLC issues the permit or lease.
3. Authorizes SLC to grant nonexclusive geological or geophysical exploration permits for minerals, as specified, upon terms and conditions that SLC may prescribe. Further, clarify that such a permit does not give the permittee any preferential treatment.
4. Removes outdated laws that (a) grant an applicant a preferential right to a permit if the applicant first erects a monument and provides written notice on the land for which a permit is sought, as specified, and (b) require a permittee, within 90 days of receiving a permit, to mark each of the corners of the tract described in a permit with substantial monuments and post a notice of receiving the permit to demonstrate that such permit has been granted.
5. Removes a permittee’s entitlement to a lease if commercially valuable deposits of minerals are found within the limits of that permit and instead provide that a permittee shall receive priority for a mining lease over any other applicant under such circumstances. Further:
   1. Provide that this priority would expire after 365 days unless the permittee submits a complete lease application to mine the discovered minerals, in which case the priority would expire upon SLC’s consideration or the applicant’s withdrawal of the application.
   2. Clarify that the applicable section shall not be construed to require SLC to issue a mineral lease.
   3. Remove the requirement that such lease cover not more than 960 acres of land and instead provide that mineral leases shall be limited to the minimum area required for mining.
   4. Eliminate the requirement that the rent associated with a lease total at least $1 per acre and instead provide that the rent shall be based on fair market value.
   5. Remove other obsolete requirements.
6. Limits mineral extraction leases to no more than 20 years, with no preferential right to renew the lease.
7. Removes “covenants” from the requirement that SLC prescribe additional terms, covenants, and conditions to permits and leases that will effectually protect the interests of the state in its reserved mineral deposits.
8. Makes non-substantive and conforming changes.

Background

The State Lands Commission. Established in 1938, SLC manages four million acres of tide and submerged lands and the beds of natural navigable rivers, streams, lakes, bays, estuaries, inlets, and straits. These lands are often referred to as sovereign or Public Trust lands. SLC also manages about a half-million acres of lands known as school lands. Further, SLC has sole jurisdiction over state-owned mineral reservations and may issue leases to mine these lands, even if the lands themselves are under the jurisdiction of another state agency.

SLC permits and leases for mineral extraction. Under Article 5 (commencing with Section 6890) of Chapter 3 of Part 2 of Division 6 of the Public Resources Code, SLC may issue, with certain limitations, prospecting permits and leases for the extraction and removal of minerals (not including hydrocarbons) from lands that belong to the state, including tide and submerged lands. The Attorney General first must review and approve the permit or lease as to its compliance with state law and regulation before SLC can take action.

SLC may only issue prospecting permits for lands which have not already been confirmed or known to have mineral deposits. A prospecting permit gives the permittee the exclusive right to prospect for minerals (not including hydrocarbons) for up to two years, although SLC may extend this term in one-year increments.

An applicant may gain a preferential right to a permit under existing law if the applicant first takes certain steps, including by erecting a monument upon the land for which a permit will be sought and posting a written notice on or near the monument of the individual’s intention to apply for a permit within a specified time period. If a permit is granted, within 90 days, the permittee must mark each of the corners of the tract described in the permit upon the ground with substantial monuments and post in a conspicuous place upon the lands a notice that such permit has been granted, as specified.

The permittee may gain an entitlement to a lease under existing law if the permittee finds, to SLC’s satisfaction, commercially valuable deposits of minerals via the prospecting permit. The lease for mineral operations may not exceed 960 acres of land included within the original prospecting permit and must include certain requirements, including an annual rent of at least $1 and payment of either royalties or a percentage of the net profits derived from mineral extraction operations under the lease.

For lands known to contain commercially valuable deposits of minerals, SLC may offer leases for the mineral deposits via a competitive bid process or via a negotiated lease or other agreement if the lands are unsuitable for competitive bidding, as determined by SLC. Again, the lessee must agree to pay an annual rent of not less than one dollar per acre and either a royalty or a percentage of the profits derived from mineral extraction operations.

Generally, lease terms may not exceed 20 years, but the lessee has a preferential right to renew the lease for successive periods of up to 10 years. Further, existing law directs SLC to prescribe additional terms, covenants, and conditions for the permits and leases for mineral extraction to effectually protect the interests of the State, as specified.

Prohibition on mineral extraction in tidal waters. In recent years, there has been increased interest in the mining of certain minerals found in or on the deep sea floor. Thirty years ago, scientists tested the potential effects of seabed mining by dragging a plow over the ocean floor in the eastern Pacific Ocean. This created a sediment plume that buried the study area. The tracks of the plow from the 1989 experiment remain visible today, illustrating the lasting potential damage from seabed mining to the surrounding environment. Additionally, the sediment plumes can harm or destroy fish, invertebrates, corals, and habitat. The sediment plume can, in addition to smothering marine life, potentially expose them to re-suspended toxic materials and increased local turbidity. Mining is also disruptive to the marine environment through its associated increase in oceanic noise and thermal pollution associated with the return of wastewaters to marine waters, among other concerns.

According to the Pew Charitable Trust, California state waters do not include a commercially-viable source of battery metals, which is the current focus of most seabed mining operations. There is some potential for precious metals, such as gold, and phosphorites offshore.

Last year, the Legislature took a proactive approach to this issue by passing AB 1832 (L. Rivas, Chapter 433, Statutes of 2022), which generally prohibits SLC or a local trustee of granted lands from granting leases or issuing permits for the extraction or removal of hard minerals, as defined, from state waters subject to tidal influence, except for waters situated east of the Carquinez Bridges on Interstate 80. Note that prohibition does not apply to permits and leases for mineral extraction in Delta waters subject to tidal influence east of the Carquinez Bridge. The law seeks to protect California’s coastal and ocean ecosystems from seabed mining. However, other existing laws have provisions that are inconsistent with this law, including the subject of this bill, Article 5 (commencing with Section 6890) of Chapter 3 of Part 2 of Division 6 of the Public Resources Code.

Comments

Last year, the Legislature enacted AB 1832 to repeal SLC's authority to grant leases or issue permits for the extraction or removal of hard minerals from tidelands and submerged lands located west of the Carquinez Bridges. Under that bill, SLC may issue permits and leases for mineral extraction on/in tide and submerged lands, as follows:

• For scientific research.
• East of the Carquinez Bridges for any minerals, although hydrocarbons are covered under a different article of the law.
• West of the Carquinez Bridges, but only for non-hard minerals, including rock, gravel, sand, silt, coal, oyster shells, or hydrocarbons. Again, leases and permits for hydrocarbons are covered under a different article of the law.

This bill makes technical and conforming changes to SLC’s statutes related to mineral extraction permits and leases to conform to that law. This bill also repeals or updates outdated provisions, like changing rental rates from at least $1 per acre to market value.

Further, this bill removes a provision that would grant a permittee a preferential right to a lease if that individual discovered commercially valuable quantities of minerals while prospecting under a permit. This bill instead grants the permittee priority for a mining lease over any other applicant under such circumstances with certain limitations, like a requirement to apply for the lease within one year. This change will eliminate concerns that existing law requires SLC to grant the lease without any review, like CEQA, or conditions to protect the state’s interests.

Related/Prior Legislation

AB 1832 (L. Rivas, Chapter, 433, Statutes of 2022) repealed SLC's authority to grant leases or issue permits for the extraction or removal of hard minerals from tidelands and submerged lands located west of the Carquinez Bridges.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 7/3/23)

California State Lands Commission (source)

Office of Lieutenant Governor Eleni Kounalakis

County of Napa

OPPOSITION: (Verified 7/3/23

None received

ARGUMENTS IN SUPPORT: According to the author, “California's world-leading and cutting edge clean energy goals are driving interest in procuring materials that could help California meet its goals, including minerals such as lithium ion. Many of the applicable prospecting and leasing laws in California originated before the nineteen-forties, during an era when mineral exploration was widespread and environmental protections were scant. This bill seeks to eliminate and modernize antiquated provisions from a bygone era, such as a preferential right to a lease, will ensure that the state's decision-making process is transparent and inclusive and that it provides meaningful opportunity for public engagement and tribal consultation.”

ASSEMBLY FLOOR: 77-0, 5/22/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO VOTE RECORDED: Chen, Lackey, Quirk-Silva

Prepared by: Catherine Baxter / N.R. & W. / (916) 651-4116

7/5/23 14:50:49

**** END ****

SENATE COMMITTEE ON NATURAL RESOURCES AND WATER

Senator Dave Min, Chair

2023 - 2024 Regular

Bill No: AB 706 Hearing Date: June 22, 2023

Subject: Leasing of public lands: minerals other than oil and gas

BACKGROUND AND EXISTING LAW

Existing law:

1. Establishes the State Lands Commission (SLC) in the California Natural Resources Agency (CNRA), consisting of the Controller, the Lieutenant Governor, and the Director of Finance. Public Resources Code (PRC) §6101.
2. Grants SLC sole responsibility for and jurisdiction over the administration, management, and disposal of all minerals reserved to the state. Further, authorizes SLC to lease all or part of the property represented by such mineral reservations, as specified. PRC §6405.
3. Chapter 433, Statutes of 2022 generally prohibits SLC or a local trustee of granted lands from granting leases or issuing permits for the extraction or removal of hard minerals, as defined, from state waters subject to tidal influence, except for waters situated east of the Carquinez Bridges on Interstate 80. PRC §6900.
4. Authorizes SLC to lease lands belonging to the state that contain commercially valuable deposits of minerals, as specified, with an annual rent of not less than one dollar ($1) per acre, as specified, in addition to the payment of a royalty or a percentage of net profits, as specified. PRC §6897.
5. Provides that an applicant shall be entitled to a preferential right over others to a permit for 30 days, as specified, if the applicant provides specified notice, including if the applicant erects a monument on the land for which a permit is sought, as specified, with written notice posted thereon or near the monument stating that an application for a permit will be made within 30 days after the date of posting the notice, as specified. PRC §6892.
6. Require a permittee, within 90 days of receiving a permit, to mark each of the corners of the tract described in the permit upon the ground with substantial monuments, as specified, and to post in a conspicuous place upon the lands a notice that such permit has been granted, as specified. PRC §6894.
7. Provides for the issuance of prospecting permits and leases for the extraction and removal of minerals, other than oil and gas or other hydrocarbon substances, from lands, including tide and submerged lands belonging to the state, as specified.
   1. Prohibits SLC from issuing a permit or lease until it has been submitted to and approved by the Attorney General as to compliance with the applicable law and rules and regulations of SLC.
   2. Prohibits issuing a lease or permit which results in any net adverse impact to wetlands or riparian habitat. PRC §6890.
8. Entitles a permittee, upon establishing to SLC’s satisfaction that commercially valuable deposits of minerals have been discovered within the limits of any permit, to a lease for not more than 960 acres of the land included in the prospecting permit, if there is that number of acres within the permit. Further requires, among other things, that the lease include similar requirements as prescribed in (4), including an annual rent of not less than one dollar ($1) per acre and payment of either a royalty or a percentage of the net profits derived from mineral extraction operations under the lease, as specified. PRC §6895.
9. Provides that the leases described above shall be for terms not to exceed 20 years with the lessee having a preferential right to renew the lease for successive periods not to exceed 10 years each, upon such reasonable terms and conditions as SLC may prescribe. PRC §6898.
10. Directs SLC to prescribe such additional terms, covenants and conditions, as specified, for the permits and leases described above that will effectually protect the interests of the state in its mineral deposits. PRC §6899.

Background

The State Lands Commission. Established in 1938, SLC manages four million acres of tide and submerged lands and the beds of natural navigable rivers, streams, lakes, bays, estuaries, inlets, and straits. These lands are often referred to as sovereign or Public Trust lands. SLC also manages about a half-million acres of lands known as school lands. Further, SLC has sole jurisdiction over state-owned mineral reservations and may issue leases to mine these lands, even if the lands themselves are under the jurisdiction of another state agency.

SLC permits and leases for mineral extraction. Under Article 5 (commencing with Section 6890) of Chapter 3 of Part 2 of Division 6 of the Public Resources Code, SLC may issue, with certain limitations, prospecting permits and leases for the extraction and removal of minerals (not including hydrocarbons) from lands that belong to the state, including tide and submerged lands. The Attorney General first must review and approve the permit or lease as to its compliance with state law and regulation before SLC can take action.

SLC may only issue prospecting permits for lands which have not already been confirmed or known to have mineral deposits. A prospecting permit gives the permittee the exclusive right to prospect for minerals (not including hydrocarbons) for up to two years, although SLC may extend this term in one-year increments.

An applicant may gain a preferential right to a permit under existing law if the applicant first takes certain steps, including by erecting a monument upon the land for which a permit will be sought and posting a written notice on or near the monument of the individual’s intention to apply for a permit within a specified time period. If a permit is granted, within 90 days, the permittee must mark each of the corners of the tract described in the permit upon the ground with substantial monuments and post in a conspicuous place upon the lands a notice that such permit has been granted, as specified.

The permittee may gain an entitlement to a lease under existing law if the permittee finds, to SLC’s satisfaction, commercially valuable deposits of minerals via the prospecting permit. The lease for mineral operations may not exceed 960 acres of land included within the original prospecting permit and must include certain requirements, including an annual rent of at least $1 and payment of either royalties or a percentage of the net profits derived from mineral extraction operations under the lease.

For lands known to contain commercially valuable deposits of minerals, SLC may offer leases for the mineral deposits via a competitive bid process or via a negotiated lease or other agreement if the lands are unsuitable for competitive bidding, as determined by SLC. Again, the lessee must agree to pay an annual rent of not less than one dollar per acre and either a royalty or a percentage of the profits derived from mineral extraction operations.

Generally, lease terms may not exceed 20 years, but the lessee has a preferential right to renew the lease for successive periods of up to 10 years. Further, existing law directs SLC to prescribe additional terms, covenants, and conditions for the permits and leases for mineral extraction to effectually protect the interests of the State, as specified.

Prohibition on mineral extraction in tidal waters. In recent years, there has been increased interest in the mining of certain minerals found in or on the deep sea floor. Thirty years ago, scientists tested the potential effects of seabed mining by dragging a plow over the ocean floor in the eastern Pacific Ocean. This created a sediment plume that buried the study area. The tracks of the plow from the 1989 experiment remain visible today, illustrating the lasting potential damage from seabed mining to the surrounding environment. Additionally, the sediment plumes can harm or destroy fish, invertebrates, corals, and habitat. The sediment plume can, in addition to smothering marine life, potentially expose them to re-suspended toxic materials and increased local turbidity. Mining is also disruptive to the marine environment through its associated increase in oceanic noise and thermal pollution associated with the return of wastewaters to marine waters, among other concerns.

According to the Pew Charitable Trust, California state waters do not include a commercially-viable source of battery metals, which is the current focus of most seabed mining operations. There is some potential for precious metals, such as gold, and phosphorites offshore.

Last year, the Legislature took a proactive approach to this issue by passing AB 1832 (L. Rivas, Chapter 433, Statutes of 2022), which generally prohibits SLC or a local trustee of granted lands from granting leases or issuing permits for the extraction or removal of hard minerals, as defined, from state waters subject to tidal influence, except for waters situated east of the Carquinez Bridges on Interstate 80. Note that prohibition does not apply to permits and leases for mineral extraction in Delta waters subject to tidal influence east of the Carquinez Bridge. The law seeks to protect California’s coastal and ocean ecosystems from seabed mining. However, other existing laws have provisions that are inconsistent with this law, including the subject of this bill, Article 5 (commencing with Section 6890) of Chapter 3 of Part 2 of Division 6 of the Public Resources Code.

PROPOSED LAW

This bill would make various changes to the statutes governing SLC’s authority to grant permits and leases for mineral extraction and removal, including to make these statutes consistent with a prohibition on extracting or removing hard minerals, as defined, from state waters subject to tidal influence and to create a new type of permit for nonexclusive geological or geophysical exploration for minerals.

Specifically, this bill would:

1. Make prospecting permits and leases for mineral extraction from lands belonging to the state consistent with the prohibition on extracting or removing hard minerals, as defined, from state waters subject to tidal influence.
2. Remove the requirement that the Attorney General first review and approve a permit or lease for mineral extraction before SLC issues the permit or lease.
3. Authorize SLC to grant nonexclusive geological or geophysical exploration permits for minerals, as specified, upon terms and conditions that SLC may prescribe. Further, clarify that such a permit does not give the permittee any preferential treatment.
4. Remove outdated laws that (1) grant an applicant a preferential right to a permit if the applicant first erects a monument and provides written notice on the land for which a permit is sought, as specified, and (2) require a permittee, within 90 days of receiving a permit, to mark each of the corners of the tract described in a permit with substantial monuments and post a notice of receiving the permit to demonstrate that such permit has been granted.
5. Remove a permittee’s entitlement to a lease if commercially valuable deposits of minerals are found within the limits of that permit and instead provide that a permittee shall receive priority for a mining lease over any other applicant under such circumstances. Further:
   1. Provide that this priority would expire after 365 days unless the permittee submits a complete lease application to mine the discovered minerals, in which case the priority would expire upon SLC’s consideration or the applicant’s withdrawal of the application.
   2. Clarify that the applicable section shall not be construed to require SLC to issue a mineral lease.
   3. Remove the requirement that such lease cover not more than 960 acres of land and instead provide that mineral leases shall be limited to the minimum area required for mining.
   4. Eliminate the requirement that the rent associated with a lease total at least $1 per acre and instead provide that the rent shall be based on fair market value.
   5. Remove other obsolete requirements.
6. Limit mineral extraction leases to no more than 20 years, with no preferential right to renew the lease.
7. Remove “covenants” from the requirement that SLC prescribe additional terms, covenants, and conditions to permits and leases that will effectually protect the interests of the state in its reserved mineral deposits.
8. Make non-substantive and conforming changes.

ARGUMENTS IN SUPPORT

According to the author, “California's world-leading and cutting edge clean energy goals are driving interest in procuring materials that could help California meet its goals, including minerals such as lithium ion. Many of the applicable prospecting and leasing laws in California originated before the nineteen-forties, during an era when mineral exploration was widespread and environmental protections were scant. This bill seeks to eliminate and modernize antiquated provisions from a bygone era, such as a preferential right to a lease, will ensure that the state's decision-making process is transparent and inclusive and that it provides meaningful opportunity for public engagement and tribal consultation.”

ARGUMENTS IN OPPOSITION

None received.

COMMENTS

Cleanup and conforming changes. Last year, the Legislature enacted AB 1832 (Luz Rivas, Chapter 433, Statutes of 2022) to repeal SLC's authority to grant leases or issue permits for the extraction or removal of hard minerals from tidelands and submerged lands located west of the Carquinez Bridges. Under that bill, SLC may issue permits and leases for mineral extraction on/in tide and submerged lands, as follows:

• For scientific research.
• East of the Carquinez Bridges for any minerals, although hydrocarbons are covered under a different article of the law.
• West of the Carquinez Bridges, but only for non-hard minerals, including rock, gravel, sand, silt, coal, oyster shells, or hydrocarbons. Again, leases and permits for hydrocarbons are covered under a different article of the law.

This bill makes technical and conforming changes to SLC’s statutes related to mineral extraction permits and leases to conform to that law. The bill also repeals or updates outdated provisions, like changing rental rates from at least $1 per acre to market value.

Further, the bill removes a provision that would grant a permittee a preferential right to a lease if that individual discovered commercially valuable quantities of minerals while prospecting under a permit. The bill would instead grant the permittee priority for a mining lease over any other applicant under such circumstances with certain limitations, like a requirement to apply for the lease within one year. This change would eliminate concerns that existing law requires SLC to grant the lease without any review, like CEQA, or conditions to protect the state’s interests.

Prospecting and exploration permits. Existing law authorizes one type of permit for mineral extraction – the prospecting permit. This permit authorizes exploration of a defined area to locate, remove, and extract minerals to determine whether the area might offer mineral deposits in commercially valuable quantities. In reality, this type of prospecting takes two forms: innocuous, low impact activities, such as hand rock collection or shallow hand auguring or more intensive exploration including boring and core sampling with a rig to depth.

This bill would acknowledge the two types of mineral extraction activities by creating another permit type – a geological or geophysical exploration permit for minerals. The exploration permit proposed by the bill would provide for a simple class of permits for hand sampling, like hand rock collection or shallow hand auguring. This permit would cover any low intensity activity that is not intensive enough to prove the existence of minerals in commercial quantity. The prospecting permit, in contrast, would be for more intensive exploration activities sufficient to prove the existence of minerals in commercial quantity, like coring and drilling. This type of permit would trigger an extraction lease and require the applicant to develop a detailed exploration plan.

The intent of both permits is to locate minerals. Most applicants would probably prefer a prospecting permit due to the priority treatment of any associated lease application, as proposed by the bill. However, while the new class of exploration permits proposed by the bill would not grant any priority status or rights to a lease, there are practical reasons for an applicant to seek them. SLC could more quickly issue an exploration permit because it allows only a low level of exploration activity. The exploration permit could include a one-time permit fee versus an annual rent and royalty under the prospecting permit. Further, applicants could seek to reduce time and costs by seeking an exploration permit instead of a prospecting permit. Lastly, SLC may be unwilling to issue a prospecting permit without better understanding the natural resources located on a parcel. In such instances, an exploration permittee could use information gathered from exploration to support a subsequent prospecting permit application.

Prior legislation.

AB 1832 (L. Rivas, Chapter, 433, Statutes of 2022) repeals SLC's authority to grant leases or issue permits for the extraction or removal of hard minerals from tidelands and submerged lands located west of the Carquinez Bridges.

SUPPORT

California State Lands Commission (sponsor)

County of Napa

Office of Lieutenant Governor Eleni Kounalakis

OPPOSITION

None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 706

Author:(Luz Rivas)

As Amended Ver:May 15, 2023

Majority vote

SUMMARY

Makes various changes to the statutes governing the State Lands Commission's (SLC) authority over granting geological or geophysical exploration permits for minerals.

Major Provisions

1. Delete the requirement for the Attorney General to review a prospective permit or lease for compliance with applicable laws and regulations before the SLC may issue the permit or lease.
2. Authorize the SLC to grant nonexclusive geological or geophysical exploration permits for minerals upon such terms and conditions as SLC may prescribe. Provides that any such permit shall not give the permittee any preferential rights to a lease.
3. Delete the entitlement for mining leases and replaces with prioritization over other applicants for mining leases for permittees of prospecting permits upon discovery of commercially valuable deposits of minerals within the limits of the permit. Provides that prioritization shall expire after 365 days unless the permittee submits a complete lease application to mine the discovered minerals.
4. Require that mineral leases be limited to the minimum area required for mining.
5. Delete the requirement that the lease shall provide for the payment of an annual rental of not less than one dollar ($1) per acre and replaces it payment of fair market rental value, as determined by SLC.
6. Require the permittee to pay the state 20% of the gross value of all minerals secured from the land included in the permit until the permittee applies for a lease for the same land.
7. Delete the preferential right to renew a lease for successive periods up to 10 years.
8. Make other technical changes.

COMMENTS

SLC manages roughly four million acres of tide and submerged lands and the beds of navigable waterways. SLC protects and enhances these lands and natural resources by issuing leases, ensuring and expanding public access, and resolving boundary disputes. Through its actions, SLC secures and safeguards the public's access rights to waterways and the coastline and preserves irreplaceable natural habitats for wildlife, vegetation, and biological communities.

Last year, the Legislature enacted AB 1832 (Luz Rivas), Chapter 433, Statutes of 2022 to repeal SLC's authority to grant leases or issue permits for the extraction or removal of hard minerals from tidelands and submerged lands of the state. AB 706 makes technical changes to statute to conform to AB 1832, among other changes.

According to the Author

California's world-leading and cutting edge clean energy goals are driving interest in procuring materials that could help California meet its goals, including minerals such as lithium ion. Many of the applicable prospecting and leasing laws in California originated before the nineteen-forties, during an era when mineral exploration was widespread and environmental protections were scant. This bill will make important updates to current law, equipping California with the necessary tools to ensure that decisions about the use of public lands and resources are in the state's best interest as California continues to make strides in moving away from fossil fuels and toward clean energy. Eliminating and modernizing antiquated provisions from a bygone era, such as a preferential right to a lease, will ensure that the state's decision-making process is transparent and inclusive and that it provides meaningful opportunity for public engagement and tribal consultation.

Arguments in Support

The problem with existing law is that it grants prospecting permittees a preferential right to a mineral extraction lease, making the issuance of a mineral extraction lease a ministerial action by SLC. This, in effect, eviscerates Tribal consultation, environmental justice considerations, public participation, and environmental review. If the preferential lease requirement is not removed, SLC may be unable to consider, in a transparent process with public participation, whether a mineral extraction lease is in the best interest of the state. This bill would modernize several solid mineral extraction statutes, align the statutory framework with the recently enacted seabed mining ban (AB 1832, L. Rivas, 2022), and remove a provision in current law that entitles certain prospecting permittees to a mineral extraction lease.

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee, this bill would result in negligible costs. There may be a minor increase in state revenue as a result of changing the requirement for mineral lease rental payment amounts.

VOTES

ASM NATURAL RESOURCES: 11-0-0

YES: Luz Rivas, Flora, Addis, Friedman, Hoover, Mathis, Muratsuchi, Pellerin, Ward, Wood, Zbur

ASM APPROPRIATIONS: 14-0-2

YES: Holden, Megan Dahle, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Robert Rivas, Sanchez, Weber, Wilson

ABS, ABST OR NV: Bryan, Pellerin

UPDATED

VERSION: May 15, 2023

CONSULTANT: Paige Brokaw / NAT. RES. / (916) 319-2092 FN: 0000373

ASSEMBLY THIRD READING

ATR Bill Id:AB 706

Author:(Luz Rivas)

As Introduced Ver:February 13, 2023

Majority vote

SUMMARY

Makes various changes to the statutes governing the State Lands Commission's (SLC) authority over granting geological or geophysical exploration permits for minerals.

Major Provisions

1. Deletes the requirement for the Attorney General to review a prospective permit or lease for compliance with applicable laws and regulations before the SLC may issue the permit or lease.
2. Authorizes the SLC to grant nonexclusive geological or geophysical exploration permits for minerals upon such terms and conditions as SLC may prescribe. Provides that any such permit shall not give the permittee any preferential rights to a lease.
3. Deletes the entitlement for mining leases and replaces with prioritization over other applicants for mining leases for permittees of prospecting permits upon discovery of commercially valuable deposits of minerals within the limits of the permit. Provides that prioritization shall expire after 365 days unless the permittee submits a complete lease application to mine the discovered minerals.
4. Requires that mineral leases be limited to the minimum area required for mining.
5. Deletes the requirement that the lease shall provide for the payment of an annual rental of not less than one dollar ($1) per acre and replaces it payment of fair market rental value, as determined by SLC.
6. Requires the permittee to pay the state 20% of the gross value of all minerals secured from the land included in the permit until the permittee applies for a lease for the same land.
7. Delete the preferential right to renew a lease for successive periods up to 10 years.

COMMENTS

SLC manages roughly four million acres of tide and submerged lands and the beds of navigable waterways. SLC protects and enhances these lands and natural resources by issuing leases, ensuring and expanding public access, and resolving boundary disputes. Through its actions, SLC secures and safeguards the public's access rights to waterways and the coastline and preserves irreplaceable natural habitats for wildlife, vegetation, and biological communities.

Last year, the Legislature enacted AB 1832 (Luz Rivas), Chapter, Statutes of 2022, to repeal SLC's authority to grant leases or issue permits for the extraction or removal of hard minerals from tidelands and submerged lands of the state. This bill, AB 706 makes technical changes to statute to conform to AB 1832, among other changes.

According to the Author

California's world-leading and cutting edge clean energy goals are driving interest in procuring materials that could help California meet its goals, including minerals such as lithium ion. Many of the applicable prospecting and leasing laws in California originated before the nineteen-forties, during an era when mineral exploration was widespread and environmental protections were scant. This bill will make important updates to current law, equipping California with the necessary tools to ensure that decisions about the use of public lands and resources are in the state's best interest as California continues to make strides in moving away from fossil fuels and toward clean energy. Eliminating and modernizing antiquated provisions from a bygone era, such as a preferential right to a lease, will ensure that the state's decision-making process is transparent and inclusive and that it provides meaningful opportunity for public engagement and tribal consultation.

Arguments in Support

The problem with existing law is that it grants prospecting permittees a preferential right to a mineral extraction lease, making the issuance of a mineral extraction lease a ministerial action by SLC. This, in effect, eviscerates Tribal consultation, environmental justice considerations, public participation, and environmental review. If the preferential lease requirement is not removed, SLC may be unable to consider, in a transparent process with public participation, whether a mineral extraction lease is in the best interest of the state. This bill would modernize several solid mineral extraction statutes, align the statutory framework with the recently enacted seabed mining ban (AB 1832 (Luz Rivas) of 2022), and remove a provision in current law that entitles certain prospecting permittees to a mineral extraction lease.

Arguments in Opposition

None on file

FISCAL COMMENTS

According to the Assembly Appropriations Committee, this bill would result in negligible costs. There may be a minor increase in state revenue as a result of changing the requirement for mineral lease rental payment amounts.

VOTES

ASM NATURAL RESOURCES: 11-0-0

YES: Luz Rivas, Flora, Addis, Friedman, Hoover, Mathis, Muratsuchi, Pellerin, Ward, Wood, Zbur

ASM APPROPRIATIONS: 14-0-2

YES: Holden, Megan Dahle, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Robert Rivas, Sanchez, Weber, Wilson

ABS, ABST OR NV: Bryan, Pellerin

UPDATED

VERSION: February 13, 2023

CONSULTANT: Paige Brokaw / NAT. RES. / (916) 319-2092 FN: 0000258

Date of Hearing: April 19, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 706

Author:(Luz Rivas) – As Introduced Ver:February 13, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill makes various changes to the statutes governing the State Lands Commission’s (SLC) authority over granting geological or geophysical exploration permits for minerals.

Specifically, this bill, among other things:

1. Deletes the requirement for the Attorney General (AG) to review a prospecting permit or lease for compliance with applicable laws and regulations before the SLC may issue the permit or lease.
2. Authorizes the SLC to grant nonexclusive geological or geophysical exploration permits for minerals, as specified. Provides that any such permit shall not give the permittee any preferential treatment.
3. Deletes a provision that entitles the holder of a prospecting permit who discovers commercially valuable mineral deposits to a mining lease and, instead, gives the permittee priority for a mining lease over any other applicant seeking a lease.
4. Deletes the reference to the acreage size limit of a prospecting permit.
5. Provides that the prioritization provided in 3) shall expire after 365 days unless the permittee submits a complete lease application to mine the discovered minerals, in which case the priority shall expire upon SLC’s consideration or applicant’s withdrawal of the application.
6. Requires that mineral leases be limited to the minimum area required for mining.
7. Deletes the requirement that the mineral lease shall provide for the payment of an annual rental of not less than one dollar per acre and replaces it with payment of fair market rental value, as determined by SLC.
8. Delete the preferential right to renew a lease for successive periods up to 10 years.

FISCAL EFFECT:

According to State Lands Commission (SLC), there are negligible costs associated with this bill. SLC notes there may be a minor increase in state revenue as a result of changing the requirement that a mineral lease provide for the payment of an annual rental of not less than one dollar per acre and replacing it with payment of fair market rental value; however, SLC notes this increase would likely be extremely minor, particularly because most revenue from mineral leases comes from royalties rather than rent.

COMMENTS:

1) Purpose. According to the author:

California’s world-leading and cutting edge clean energy goals are driving interest in procuring materials that could help California meet its goals, including minerals such as lithium ion…Many of the applicable prospecting and leasing laws in California originated before the nineteen-forties, during an era when mineral exploration was widespread and environmental protections were scant. This bill will make important updates to current law, equipping California with the necessary tools to ensure that decisions about the use of public lands and resources are in the state’s best interest as California continues to make strides in moving away from fossil fuels and toward clean energy. Eliminating and modernizing antiquated provisions from a bygone era, such as a preferential right to a lease, will ensure that the state’s decision-making process is transparent and inclusive and that it provides meaningful opportunity for public engagement and tribal consultation.

2) SLC. Established in 1938, SLC manages four million acres of tide and submerged lands and the beds of natural navigable rivers, streams, lakes, bays, estuaries, inlets, and straits. SLC issues prospecting permits and mineral leases for prospecting, exploring, developing, and producing minerals from lands belonging to the state. Only 20% of the seafloor has been mapped at high resolution, and we have only just begun to understand the resources of this environment. As California strives to meet its clean energy goals, it is likely there will be an increase in interest for geological or geophysical exploration permits for minerals such as lithium.

SLC’s application fees for prospecting permits range from $5,000 to $10,000, and application fees for mineral extraction leases range from $10,000 to $15,000.

3) Updates to Prospecting and Leasing Laws. This bill makes numerous changes to the statutes governing SLC’s authority over granting prospecting permits and mineral leases for minerals.

Under current law, the AG is required to review and approve prospecting permits and mineral leases before SLC can issue the permits and leases. In practice, the AG relies on SLC for subject matter expertise, especially regarding compliance with SLC’s requirements. This bill strikes this requirement, thereby reducing process delays and workload for the AG in having to review lease provisions prior to SLC consideration.

Currently, prospecting permits are exclusive to a prescribed area, meaning SLC cannot issue more than one permit. This bill authorizes SLC to grant nonexclusive exploration permits to allow multiple parties to conduct low-impact exploration. Under current law, after establishing to the satisfaction of SLC that commercially valuable deposits of minerals have been discovered within the limits of a permit, the permittee is entitled to a lease for up to 960 acres of the land included in the prospecting permit. SLC believes the Legislature created this lease entitlement to incentivize miners to prospect for and ultimately extract valuable minerals. Although many minerals are essential to technological development and manufacturing, mineral extraction can cause environmental damage. The Legislature understands these impacts better today than it did at the time it created the lease-entitlement incentive (prior to the 1940s). To avoid the ministerial issuance of a mining lease and to ensure greater harmony with current legal frameworks, this bill provides SLC with discretion on whether to issue a lease.

By instead granting priority to successful prospectors, mining competitors would be unable to seize an unfair advantage, using the fruits of a prospector’s labor. Concurrently, SLC could deny applications for destructive mining projects. Thus, the bill allows SLC to incentivize exploration for valuable minerals that could help meet California’s clean energy goals when it is in the best interests of the state, yet minimize the risk of a ministerial, destructive mining lease.

This bill makes numerous other changes to update and modernize the law governing the issuance of prospecting permits and mineral leases.

Analysis Prepared by: Nikita Koraddi / APPR. / (916) 319-2081

Date of Hearing: March 27, 2023

ASSEMBLY COMMITTEE ON NATURAL RESOURCES

Luz Rivas, Chair

ABPCA Bill Id:AB 706 (

Author:Luz Rivas) – As Introduced Ver:February 13, 2023

SUBJECT: Leasing of public lands: minerals other than oil and gas.

SUMMARY: Makes various changes to the statutes governing the State Lands Commission’s (SLC) authority over granting geological or geophysical exploration permits for minerals.

EXISTING LAW:

1. Authorizes SLC, when a contractor or permittee has a contract with, or a permit from, the federal government or any authorized public agency to dredge swamp, overflowed, marsh, tide or submerged lands or beds of navigable streams, channels, rivers, creeks, bays, or inlets for the improvement of navigation, reclamation, or flood control, to allow the contractor or permittee to have sand, gravel, or other spoils dredged from the sovereign lands of the state located within the areas specified in the contract or permit upon those terms and conditions and for such consideration as will be in the best interests of the state. (Public Resources Code (PRC) § 6303 (a))
2. Authorizes SLC to issue prospecting permits and leases for the extraction and removal of minerals, other than oil and gas or other hydrocarbon substances, from specified lands. Prohibits SLC from issuing a permit or lease until it has been submitted to, and approved by, the Attorney General (AG), as specified. (PRC § 6890 (a))
3. Authorizes the SLC, when it appears to be in the public interest, to grant leases for the extraction of minerals other than oil and gas to the highest responsible bidder by competitive bidding from tide and submerged lands of the state whenever it appears that the execution of such leases and the operations thereunder will not interfere with the trust upon which such lands are held or substantially impair the public rights to navigation and fishing. (PRC § 6900)
4. Grants a permittee entitlement to a lease for not more than 960 acres of land included in a prospecting permit if the presence of commercially valuable deposits of minerals has been discovered to the satisfaction of the commission. Requires the permittee to pay an annual rental of not less than $1 per acre. (PRC § 6895 (a))
5. Requires a permittee to pay the state 20% of the gross value of the minerals the permittee secures from the land included in the permit until the permittee applies for a lease for the same land. (PRC § 6896)
6. Limits the term for a lease to 20 years or less and grants the lessee preferential right to renew the lease for successive periods not to exceed 10 years each. (PRC § 6898)

THIS BILL:

1. Deletes the requirement for the AG to review a prospective permit or lease for compliance with applicable laws and regulations before the SLC may issue the permit or lease.
2. Authorizes the SLC to grant nonexclusive geological or geophysical exploration permits for minerals upon such terms and conditions as SLC may prescribe. Provides that any such permit shall not give the permittee any preferential rights to a lease.
3. Deletes the entitlement for mining leases and replaces with prioritization over other applicants for mining leases for permittees of prospecting permits upon discovery of commercially valuable deposits of minerals within the limits of the permit.
4. Deletes the reference to the acreage size of a prospecting permit.
5. Provides that prioritization shall expire after 365 days unless the permittee submits a complete lease application to mine the discovered minerals, in which case the priority shall expire upon SLC’s consideration or applicant’s withdrawal of the application.
6. Requires that mineral leases be limited to the minimum area required for mining.
7. Deletes the requirement that the area selected by the permittee shall be in compact form and, if surveyed, shall be described by the legal subdivisions of the public lands surveys; if unsurveyed, the area shall be surveyed by SLC at the expense of the applicant for the lease, in accordance with rules and regulations prescribed by SLC, and the lands leased shall be conformed to, and taken in accordance with, the legal subdivisions of the surveys.
8. States that nothing in PRC § 6895 shall be construed to require SLC to issue a mineral lease.
9. Deletes the requirement that the lease shall provide for the payment of an annual rental of not less than one dollar ($1) per acre and replaces it payment of fair market rental value, as determined by SLC.
10. Requires the permittee to pay the state 20% of the gross value of all minerals secured from the land included in the permit until the permittee applies for a lease for the same land.
11. Delete the preferential right to renew a lease for successive periods up to 10 years.
12. Makes code cleanup changes to correct outdated pronouns.

FISCAL EFFECT: Unknown.

COMMENTS:

1. Need for the bill. According to the author,

California’s world-leading and cutting edge clean energy goals are driving interest in procuring materials that could help California meet its goals, including minerals such as lithium ion. A recent report from California’s Blue Ribbon Commission on Lithium Extraction in California provides recommendations to guide the exploration of a lithium industry. Many of the applicable prospecting and leasing laws in California originated before the nineteen-forties, during an era when mineral exploration was widespread and environmental protections were scant. This bill will make important updates to current law, equipping California with the necessary tools to ensure that decisions about the use of public lands and resources are in the state’s best interest as California continues to make strides in moving away from fossil fuels and toward clean energy. Eliminating and modernizing antiquated provisions from a bygone era, such as a preferential right to a lease, will ensure that the state’s decision-making process is transparent and inclusive and that it provides meaningful opportunity for public engagement and tribal consultation.

1. State Lands Commission. Established in 1938, SLC manages four million acres of tide and submerged lands and the beds of natural navigable rivers, streams, lakes, bays, estuaries, inlets, and straits. SLC protects and enhances these public trust lands and their natural resources by issuing leases for use or development, providing public access, resolving boundaries between public and private lands. SLC issues prospecting permits and leases for the extraction and removal of minerals from lands belonging to the state. Only 20% of the seafloor has been mapped at high resolution, and we have only just begun to understand the resources of this environment. As California strives to meet its clean energy goals, it is likely there will be an increase in interest for geological or geophysical exploration permits for minerals.
2. Streamlining permit review. Under current law, the AG is required to review all permits before approval. That requirement was an historic provision added to provide an additional layer of approval to demonstrate the integrity of the process. Today, in practice, the AG relies on SLC for subject matter expertise, especially regarding compliance with requirements that SLC implements. AB 706 strikes that requirement to reduce unnecessary delay and burden on the AG in having to review lease provisions prior to SLC consideration. Given the state’s budget deficit, this streamlining will reduce overall state costs in SLC permit approvals.
3. New permits. AB 706 creates an exploration permit to allow SLC to authorize exploration without the potential of having to grant any preferential rights to mining. Because prospecting permits are exclusive to a prescribed area, SLC could not issue more than one. The exploration permits, however, would be nonexclusive, allowing SLC to authorize multiple parties to conduct low-impact exploration. This approach would allow for more exploration to better understand the geologic nature of California’s lands without the undesirable outcome of issuing mandatory, preferential rights to a mineral lease.
4. Priority permits. Under current law, after establishing to the satisfaction of SLC that commercially valuable deposits of minerals have been discovered within the limits of any permit, the permittee is entitled to a lease for not more than 960 acres of the land included in the prospecting permit, if are that many acres within the permit.

[SLC currently has five solid mineral leases, but only one originated from a prospecting permit (for gold), but that leasee stopped mining the state portion of the lease in 2014.]

SLC believes that the Legislature created this lease entitlement to incentivize miners to prospect for and ultimately extract valuable minerals. Although many minerals are essential to technological development and manufacturing, mineral extraction can cause significant environmental effects. The Legislature understands these impacts better today than it did at the time it created the lease-entitlement incentive (prior to the 1940s). Subsequent legal requirements, like the California Environmental Quality Act, were not contemplated when the previous statute was developed and create confusion on behalf of applicants and SLC on how to best address myriad considerations around these types of leases.

To avoid the ministerial issuance of a mining lease and to ensure greater harmony with current legal frameworks, AB 706 would amend current law so that SLC retains discretion on whether to issue a lease.

By granting priority to successful prospectors, mining competitors would be unable to seize an unfair advantage, using the fruits of a prospector’s labor. Concurrently, SLC could deny applications for destructive mining projects. Thus, the bill would allow SLC to incentivize exploration for valuable minerals that could help meet California’s clean energy goals when it was in the best interests of the state, yet eliminate the risk of a ministerial, destructive mining lease.

1. Permit acreage. Current law limits mining leases to a maximum of 960 acres. Modern mining projects may require lease space greater than 960 acres. However, land banking remains a concern. To address those competing concerns, AB 706 would repeal the reference to 960 acres and, instead limit a lease to “the minimum area required for mining.”

This change will require SLC to evaluate the applied-for lease space and confirm that it is necessary for the proposed mining project. If the applied-for lease space is in excess, SLC could deny the application or offer a lease that better reflects the space needs of the proposed project.

1. Compensation for leasing state lands. Current law requires permittees to pay a minimum rent of $1 per acre to the state for use of public lands. This amount is far below market value of any state lands. Fair market value is the highest price for a property that a willing buyer would have paid in cash to a willing seller, assuming that there is no pressure on either one to buy or sell; and, the buyer and seller know all the uses and purposes for which the property is reasonably capable of being used. Having a set specific rent amount in statute creates challenges because state lands vary greatly in value and because values change over time.

There are currently four leases that pay rent to the state:

Lease 8831: 116 acres at $1 per acre = $116/year (school lands aggregate)

Lease 9451: 80 acres at $1 per acre = $80/year (school lands aggregate)

Lease 8039: 657.87 acres at $5 per acre = $3,289.35/year (school lands precious metals)

Lease 5464: 15,419 acres at $2.50 per acre = $38,547.50/year (sovereign lands lease with US Borax)

AB 706 strikes the $1 amount and instead requires that minimum rent be the fair rental value of the lands prospectively.

This approach better ensures that the state is adequately compensated while also maintaining applicability to any parcel at any time.

1. Lease duration. Under current law, lease terms can go up to 20 years with the preferential right to renew for successive periods up to 10 years.

AB 706 strikes the preferential renewal language and just leaves the cap on the term of the lease at 20 years. AB 706 would override SLC’s regulations which mirror current law authorizing leases to be issued for a term of 20 years, with option of renewal for successive periods of 10 years upon such terms and conditions as may be prescribed by SLC at the time of renewal. (California Code of Regulations, Title 2, Sec. 2201).

1. Technical amendments. AB 706 makes various, technical amendments to clean up the codes.

Current law requires that the “area selected by the permittee shall be in compact form.” It is unclear what “compact form” means. The SLC speculates that the Legislature enacted this requirement so that lease areas would be limited to the space necessary for a mining project. In any case, AB 706 repeals this requirement to be consistent in giving discretion to SLC over the applied-for lease area, and make it clearer that these “leases shall be limited to the minimum area required for mining.”

Last year, the Legislature enacted AB 1832 (L. Rivas, Chapter, Statutes of 2022) to repeal SLC’s authority to grant leases or issue permits for the extraction or removal of hard minerals from tidelands and submerged lands of the state. AB 706 makes technical changes to statute to conform to AB 1832.

REGISTERED SUPPORT / OPPOSITION:

Support

California State Lands Commission

Opposition

None on file.

Analysis Prepared by: Paige Brokaw / NAT. RES. /