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State
California
PRC Sec 6901-6925.2 Geothermal Resources OIL AND GAS AND MINERAL LEASES (PUBLIC LANDS)


PUBLIC RESOURCES CODE
SECTION 6901-6925.2





6901. This article shall be known and may be cited as the
Geothermal Resources Act.



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.



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.



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.



6905. Permits and leases may be issued pursuant to this article
only to those who qualify for permits and leases under Section 6801.



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.



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.




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.



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.



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.



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.


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).



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.



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.




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.



6917. A permit or lease may be terminated by the commission only
pursuant to the provisions of Section 6805 of this code.



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.



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.



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.



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.



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.


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.



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.



6925. A permit or lease under this article may be assigned,
transferred, or sublet as provided for in Section 6804 of this code.



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.



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, royalities, drilling requirements, and
development programs of such leases shall be as determined by the
commission. If there is an existing geothermal resources lease or
permit for such land, the applicant shall obtain the permission of
the lessee or permittee.