CCLME.ORG - DIVISION 3. STATE PROPERTY OPERATIONS
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State
California Regulations
TITLE 2 ADMINISTRATION DIVISION 3 STATE PROPERTY OPERATIONS
database is current through 09/29/06, Register 2006, No. 39





<<(Chapter Originally Printed 1-22-45)>>




s 1900. Definitions.
The following definitions shall apply to this Chapter unless otherwise provided.
(a) The term "applicant" includes any person who files an application under these regulations.
(b) The term "person" includes any individual, firm, partnership, business entity, business trust, association, corporation, or governmental entity or agency.
(c) The term "lease" includes a permit, right-of-way, easement, license, compensatory agreement, or other entitlement of use.
(d) The term "structure" means any manmade construction.
(e) The term "submerged lands" means the area lying below the elevation of ordinary low water in the beds of all tidal and nontidal navigable waters.
(f) The term "tidelands" means the area lying between the elevations of ordinary low water and ordinary high water on lands subject to tidal action.
(g) The term "uplands" shall mean lands bordering on navigable waterways.
(h) The term "school lands" refers to all Sections 16 and 36 granted to the State for the benefit of common schools by Chapter 145 of the Federal Statutes of 1853.
(i) The term "lieu or indemnity lands" refers to those lands acquired by the State in place of school lands it previously acquired or school lands to which it did not receive title because they were either mineral in character, had not been sectionalized, or were subject to prior established rights.
(j) The terms "merchandise," "product" and "commodity" are interchangeable and shall include, goods, wares, chattels, personal property of every description, cargo, freight, mail, vessel's stores and supplies, articles, matter and material.


Note: Authority cited: Sections 6002, 6105, 6108, 6301, and 6501, Public Resources Code; and 3 Cal. 3d 462, 478 (tide and submerged lands). Reference: Sections 6301 and 6501, Public Resources Code.


s 1901. Office of Commission.
The principal office of the Commission is 100 Howe Avenue, Suite 100-South, Sacramento, California 95825, telephone (916) 574-1900. The Commission's Mineral Resources Management Division is located at 200 Oceangate, Suite 1200, Long Beach, California 90802, telephone (310) 590-5201. Applications for exploration or extraction of minerals, oil and gas, or geothermal resources shall be sent to the Mineral Resources Management Division. All other applications shall be sent to the principal office.


Note: Authority cited: Sections 6102, 6103.2, 6105, 6108, and 6216, Public Resources Code. Reference: Section 6102, Public Resources Code.


s 1902. Meetings of the Commission.
The commission shall meet at Sacramento on the last Thursday of each month unless, upon due notice, the date and place of meeting are otherwise designated by at least two members.


Note: Authority cited: Sections 6104, 6105, and 6108, Public Resources Code. Reference: Section 6104, Public Resources Code.



s 1904. Application Requirements and Priority.
Application requirements and priority shall be as set forth in Public Resources Code Sections 6801 and 6223 respectively.


Note: Authority cited: Sections 6105, 6108, 6216, 6223, 6301, 6501.2, and 6801, Public Resources Code; and Section 65940, Government Code. Reference: Sections 6223 and 6501.2, Public Resources Code.



s 1905. Filing and Processing Fees.
Filing and processing fees shall be paid by applicants at the time of filing an application as follows:
(a) Filing fee $25.00
(b) Processing fee for Commission services computed and charged as follows:
(1) A non-refundable expense deposit for routine or uncomplicated services based on an average cost of such services; or
(2) A refundable expense deposit for non-routine and complicated services based on the estimated costs of such services. Any unexpended portion of such expense deposit shall be refunded to the applicant;
(3) An additional expense deposit for additional or unanticipated services, to be paid within 21 days of written notice being mailed to the applicant. Any unexpended portion of such expense deposit shall be refunded to the applicant.


Note: Authority cited: Sections 6105, 6108, 6214, 6218, 6309, 6321, 6502, 6503.5, 6703, and 7706, Public Resources Code. Reference: Sections 6214, 6218, and 7706, Public Resources Code.



s 1906. Guaranty Deposits.
The Commission may require deposits of either bond, cash or other acceptable security to insure compliance with terms and conditions of bids, leases, contracts, or any other agreements.


Note: Authority cited: Sections 6005, 6105, 6108, 6301, 6405, 6501.2, 6829(d), and 6899, Public Resources Code. Reference: Sections 6501.2, and 6829(d), Public Resources Code.



s 1907. Insurance.
The Commission may require insurance against such risks and in such amounts that it may determine to be within the best interests of the state.


Note: Authority cited: Sections 6005, 6105, 6108, 6301, 6405, 6501.2, 6829, and 6899, Public Resources Code. Reference: Sections 6501.2, 6829, and 6899, Public Resources Code.



s 1909. Bidding Procedure.
(a) Except as otherwise provided in this chapter, when competitive bidding is required, it shall be conducted generally as follows:
(1) The Commission shall cause a notice of intent to receive bids to be published at least once in a newspaper of general circulation in the county in which the lands, interest or project is located and may have such notice published at least once in a newspaper of general circulation in the City of Los Angeles, or San Francisco, or Sacramento. Such notice shall specify the lands or interest (oil, gas or mineral lease; easement; timber; land; etc. for sale or project (public works or consultant contracts, oil, gas or mineral exploration, etc.) for bid, the time and place for the receipt and opening of bids, and the availability of appropriate approved bid packages and forms at the office of the Commission.
(2) The Commission shall at the specified time and place publicly open or have opened the sealed bids and shall award the highest or lowest responsible bidder, as appropriate, unless, in the opinion of the Commission such award is not in the best interest of the State, in which case the Commission may reject all existing bids and call for new ones or terminate bidding.
(3) The Commission shall have broad discretion as to whether a bidder is "responsible" based on what it deems to be in the best interest of the State.
(4) Except as otherwise provided in the bid instructions specifying a shorter period, and/or limiting the firm bid requirement to a specific number of high or low bidders as appropriate, each bid shall be a firm bid, irrevocable for a period not to exceed ninety (90) days from the date of bid opening.
(b) Bidders shall bear all reasonable expenses incurred by the Commission for bid processing and award including costs of approval, advertising and environmental review, in accordance with terms set forth in the approved bid package.


Note: Authority cited: Sections 6005, 6105, 6108, 6218, 6405, 6406, 6501.2, 6811, 6815.2, 6827, 6834, 6835, 6836, 6852, 6871.3, 6874, 6900, 6992, 6993, 7052, 7301, 7361, 7501, and 7604, Public Resources Code. Reference: Sections 6005, 6811, 6827, 6834, 6835, 6836, 6852, 6871.3, 6912, 6992, and 7059, Public Resources Code.



s 1910. Execution and Delivery of Documents.
All documents to be executed by applicant shall be signed by the applicant and certified, witnessed or acknowledged as required, prior to their execution and delivery by the Commission.


Note: Authority cited: Sections 6105, 6106, 6108, and 6504, Public Resources Code. Reference: Sections 6106 and 6108, Public Resources Code.



s 1911. Interest and Penalty Payments.
(a) Time of Payment
(1) Any payment pursuant to any permit, lease, contract, or other agreement due the Commission shall be paid on or before the date specified in the instrument.
(2) If the date that a sum becomes due and payable to the Commission is a Saturday, Sunday, Federal or State holiday, the due date is extended to the next business day.
(3) Timeliness of receipt of remittances sent by mail to the Commission shall be governed by the postmark date as described in Government Code Section 11002.
(4) In case of a postmark by a private postage meter, the date specified thereon shall be considered as the date of payment. Where a payment is received after the due date and where a question arises as to the actual date of mailing, a declaration executed under penalty of perjury by the person responsible for the mailing of payment to the State specifying the date of mailing shall be considered as evidence of the date of actual mailing.
(b) Interest and Penalty
Unless otherwise provided in the permit, lease, contract, or other agreement:
(1) Simple interest shall be calculated at the rate of one and one-half percent (1 1/2 %) per month on the amount due the Commission from the date payment was due the Commission until the date the payment is received.
(2) Penalties shall be calculated at the rate of five percent (5%) on the principal sum due the Commission.
(3) Interest and penalty shall be charged for failure to make a timely payment; or the mode of payment is not honored by a bank, savings and loan, post office, or other financial institution.
(c) Exemption from Interest and Penalty
(1) The Commission may waive the assessment of interest and/or penalty where:
(A) Incorrect instructions were rendered to a party by the Commission's staff, or use by the party of an accounting procedure pursuant to an agreement with a member of the Commission staff; or
(B) Notwithstanding the provisions of paragraph (2) infra, negotiated settlements are approved by the Commission and provide for a waiver of penalty and/or interest.
(2) Penalty only shall be excused where failure to make a timely payment was due to one of the following:
(A) The death or serious illness of a natural party;
(B) Catastrophe, such as fire, flood, theft, vandalism, or riot;
(C) The fact the books and records of a party were impounded by court order, or were in the hands of a Federal or State agency, and unavailable for use by the party;
(D) The discovery by a party, before that of the Commission staff, of the erroneous amount of a party's original payment and the prompt tender by the party of the balance due.
(d) Payments
Payments shall be applied to retire obligations in the following order:
(1) interest and penalty
(2) past principal
(3) current principal
(e) Any person who uses or occupies any lands owned or controlled by the State under the jurisdiction of the Commission without a lease, permit or other agreement and who subsequently obtains a lease, permit or other agreement providing for the payment of back rent, shall pay penalty and interest in accordance with the provisions in (b), (c), and (d) above.


Note: Authority cited: Sections 6108 and 6224, Public Resources Code. Reference: Section 6224, Public Resources Code; and Section 11002, Government Code.





Note: Authority cited: Section 6108, Public Resources Code. Reference: Division 6, Public Resources Code.


s 2000. General.
(a) This article applies to the leasing of all lands under the Commission's jurisdiction for all surface uses except the exploration for or extraction of natural resources including minerals, oil, gas or other hydrocarbons, or geothermal resources or any other natural resources, excluding timber.
(b) Leases or permits may be issued to qualified applicants and the Commission shall have broad discretion in all aspects of leasing including category of lease or permit and which use, method or amount of rental is most appropriate, whether competitive bidding should be used in awarding a lease, what term should apply, how rental should be adjusted during the term, whether bonding and insurance should be required and in what amounts, whether an applicant is "qualified," etc. based on what it deems to be in the best interest of the State.
(c) Leases or permits for tide or submerged lands shall generally only be issued to riparian or littoral upland owners or use right holders, provided however that such leases or permits may be granted to the best qualified applicant irrespective of riparian or littoral status.
(d) Leases or permits for school, lieu or indemnity lands shall be for value or value enhancement purposes.


Note: Authority cited: Sections 6005, 6105, 6108, 6216, 6301, 6309, 6321, 6501, 6501.1, and 6501.2, Public Resources Code. Reference: Sections 6216, 6501.1, and 6501.2, Public Resources Code.


s 2001. Applications Forms.
Applications for leases or permits under this article are available from and shall be submitted to the principal office of the Commission.


Note: Authority cited: Sections 6105, 6108, 6223, 6321, 6501, 6501.2, and 6502, Public Resources Code. Reference: Sections 6321 and 6502, Public Resources Code.



s 2002. Categories of Leases or Permits.
(a) General Lease: Uses may include the following:
(1) Commercial: Income producing uses such as marinas, restaurants, clubhouses, recreation piers or facilities, docks, moorings, buoys, helicopter pads, decks or gas service facilities.
(2) Industrial: Uses such as oil terminals, piers, wharves, warehouses, stowage sites, moorings, dolphins and islands; together with necessary appurtenances.
(3) Right of Way: Uses such as roadways, power lines, pipelines or outfall lines, except when used only as necessary appurtenances.
(b) General Permit: Uses may include the following:
(1) Public agency uses such as public roads, bridges, recreation areas or wildlife refuges having a statewide public benefit;
(2) Public Resources Code Section 6321 protective structures such as groins, jetties, sea walls, breakwaters and bulkheads;
(3) Non income producing uses such as piers, buoys, floats, boathouses, docks, waterski facilities, and campsites not qualifying for a private recreational pier permit under 2002(f). Other uses may include campsites, cabins, dwellings, arks, houseboats, or boathouses provided that when such uses are located on sovereign lands that such uses are not found to be inconsistent with public trust needs.
(c) Grazing Lease: Use includes the feeding of livestock on forage.
(d) Agricultural Lease: Uses may include farming, silviculture and horticulture.
(e) Forest Management Agreement: Uses may include reforestation, improvement of timber growth and soil productivity, vegetation control, reduction of fire and erosion hazards, insect or disease control or any other use that enhances the value of lands subject to the agreement.
(f) Private Recreational Pier Permit: Use is limited to any fixed facility for the docking or mooring of boats constructed for the use of the littoral landowner, as specified in Public Resources Code Section 6503.5, and does not include swimming floats or platforms, sun decks, swim areas, fishing platforms, residential, recreational dressing, storage or eating facilities or areas attached or adjacent to recreational piers, or any other facilities not constructed for the docking or mooring of boats.
(g) Salvage Permit: Use includes the salvage of all abandoned property over and upon ungranted tide and submerged lands of the State which property belongs to the State and is under the Commission's jurisdiction pursuant to Public Resources Code Section 6309. The Commission may retain or sell any or all salvaged property or may allow the permit applicant to retain it.


Note: Authority cited: Sections 6105, 6108, 6201, 6210.3, 6221, 6309, 6321, 6322, 6501, 6501.1, and 6501.2, Public Resources Code. Reference: Sections 6201, 6309, 6321, 6501.1, and 6503.5, Public Resources Code.



s 2003. Rental.
(a) Rental for the various categories of uses shall be generally as follows:
(1) Commercial Use: An annual rental based on any one or combination of the following rental methods, with a minimum rental of $250:
(A) A percentage of annual gross income (the percentage being based on an analysis of the market for like uses and other relevant factors);
(B) 9% of the appraised value of the leased land;
(C) The volume of commodities passing over the lease premises.
(2) Industrial Use: An annual rental based on any one or combination of the following rental methods with a minimum rental of $250:
(A) 9% of the appraised value of the leased land together with 2H per diameter inch per lineal foot of pipelines and conduits on the leased premises;
(B) The volume of commodities passing over the lease premises.
(3) Right-of-Way Use: An annual rental based on any one or combination of the following rental methods with a minimum rental of $100:
(A) 9% of the appraised value of the leased lands, together with compensation for any damage caused to such lands;
(B) 2 per diameter inch per lineal foot;
(C) The volume of commodities passing over the lease premises.
(4) General Permits: Annual rental shall be based on 9% of the appraised value of the leased lands with a minimum rental of $50.
(A) No rental shall be charged for public agency use of tide and submerged lands if the Commission at its sole discretion, determines that a statewide public benefit accrues from such use.
(B) Monetary rental for Public Resources Code Section 6321 protective structures may be waived if the Commission determines that a public benefit accrues from the installation of such structures.
(5) Private Recreational Pier Permits: Pursuant to Public Resources Code Section 6503.5 a rent free permit shall be issued to those applicants demonstrating their qualifications under that section as implemented by 2002(f).
(6) Grazing: An annual rental based on appraised value for the intended use.
(7) Agricultural: An annual rental based on any one or a combination of the following rental methods with a minimum rental of $250:
(A) A percentage of annual gross income (the percentage being based on analysis of the market for like uses and other relevant factors);
(B) 9% of appraised value of the leased lands.
(8) Forest Management Agreements: Rental shall constitute enhancement of the land's value resulting from the use.
(9) Salvage Permit: Rental shall be as follows:
(A) A rental of $25.00 per annum per acre, computed on a whole or fractional basis, for the total acreage of the permit area; and
(B) 25% of the net salvage value up to $25,000 and 50% of all such value over that amount for all salvaged property the salvor is permitted to retain; or
(C) The net salvage value of any property the State retains less any rental to which it is entitled; and
(D) Such other consideration as may be deemed by the Commission to be in the best interest of the State.
(b) The following factors shall be considered by the Commission in determining which rental method should apply:
(1) The amount of rental the State would receive under various rental methods;
(2) Whether relevant, reliable and comparable data is available concerning the value of the land proposed to be leased;
(3) Whether a particular method or amount of rental would effectively cause an applicant to use more competitive substitute land or to abandon its project altogether;
(4) Whether the land proposed to be leased has been classified as environmentally significant pursuant to Public Resources Code Section 6371.
(5) The monetary value of actual or potential environmental damage anticipated from an applicant's proposed use to the extent such damage is quantifiable;
(6) Other factors relating to the appropriateness of the proposed rental method.
(c) The following limitations shall apply to rental based on the volume of commodities passing over State lands:
(1) Rental shall not be imposed more than once for the identical commodity passing over the same State land if the ownership of that commodity has not changed.
(2) The rental rate for a right-of-way for passage of a commodity across State lands shall be made proportional to the percentage of the total length of the pipeline or conduit that such right-of-way comprises. For the purposes of this section, the total length of a pipeline or conduit shall be the length of the pipeline or conduit between two facilities, uninterrupted by another facility . "Facility" includes terminal, production, storage, refining, manufacturing, processing, mixing or intermixing facilities.
(d) Rental adjustment during the lease term shall be provided for as appropriate.


Note: Authority cited: Sections 6105, 6108, 6309, 6321.2, 6503, 6503.5, and 6504, Public Resources Code. Reference: Sections 6321.2, 6503, 6503.5, and 6504, Public Resources Code.




s 2004. Term.
(a) The term for leases and permits including any optional renewal periods shall be no longer than necessary to accomplish the intended use or purpose.
(b) The term shall be limited according to standard commercial practices with maximum terms as follows:
(1) General Lease 49 years
General Permit
Forest Management Agreement
(2) Agricultural Lease 25 years
(3) Grazing Lease 10 years
Private Recreational Pier Permit
General Permit Recreational Use
(4) Salvage Permit 1 year but
extendable for
one additional
year.



Note: Authority cited: Sections 6008, 6105, 6108, 6309, 6321, 6501, 6501.2, and 6505.5, Public Resources Code. Reference: Sections 6501.2 and 6505.5, Public Resources Code.



s 2030. Sale Restrictions.
(a) Sales of tide and submerged lands are prohibited.
(b) Sales of school, lieu or indemnity lands are restricted as follows:
(1) No new purchase applications shall be accepted except those from public agencies, entities or utilities or under the circumstances determined by the Commission to be in the best interest of the State. Such sales may be accomplished with or without competitive bidding.
(2) The Commission on a selective basis may offer individual parcels for sale to the general public pursuant to competitive bidding on terms and conditions set forth in an approved bid package.
(3) An existing lessee on any parcel offered for sale shall have the right to match the highest bid.


Note: Authority cited: Sections 6005, 6105, 6108, 6210.2, 6216, 6301, 7301, 7351, 7352, 7357, 7405, 7406, 7409, 7410, and 7418, Public Resources Code. Reference: Sections 6216, 7301, 7352, 7357, and 7410, Public Resources Code.


s 2031. Applications.
Applications for purchase of lands or interests under this article shall be available from and shall be filed with the principal office of the Commission. Purchase applications shall be processed according to the date the application is accepted as complete by the State.


Note: Authority cited: Sections 6105, 6108, 6223, 6301, 7301, 7352, 7353, 7355, 7356, 7358, and 7410, Public Resources Code. Reference: Sections 6223 and 7356, Public Resources Code.



s 2032. Sales Price.
The sale price of lands sold under this article shall be equal to or greater than the appraised fair market value of such lands.


Note: Authority cited: Sections 6105, 6108, 7301, 7305, 7352, 7410, and 7413, Public Resources Code. Reference: Section 7305, Public Resources Code.



s 2034. Timber Sales.
(a) Timber sales shall be conducted pursuant to competitive bidding, on terms and conditions set forth in an approved bid package for a price of no less than appraised fair market value except that:
(1) Sales of small volumes of timber valued at $25,000 or less or emergency salvage sales of fire, insect or disease damaged timber may be sold by direct solicitation of bids; and
(2) The removal of pre-commercial or dead or down trees for the purpose of stimulating the growth of residual trees or to reduce fire, insects, disease or other hazards may be conducted without charge.
(b) Payment shall be:
(1) Based on an estimated volume of standing timber or when appropriate by log scale of the timber designated for sale by species; and
(2) Made in cash in full at the time of bidder award for sales having a price of $25,000 or less, and
(3) Made in two or more installments covering separate cutting blocks for sales having a price greater than $25,000, the first payment to be made at the time of bidder award and subsequent payments to be made at specified times.
(c) Reforestation or rehabilitation may be required as a condition of sale.


Note: Authority cited: Sections 6105, 6108, 6211, 6216, 6301, and 7361, Public Resources Code. Reference: Sections 6216 and 7361, Public Resources Code.






Note: Authority cited: Section 6108, Public Resources Code.


s 2100. Application for Exploration Permits.
General permits are required for the conduct of geophysical surveys and geological surveys on State lands.
(a) Any person who meets the requirements of Section 6801 of the Public Resources Code may apply to the Commission for a geophysical survey or geological survey general permit. Such application shall contain the following:
(1) A description and map of the State lands involved.
(2) Name, address, and status of citizenship of applicant; if the applicant is a corporation, the corporate name and status, the name of the president, the secretary, and an officer authorized to execute contracts and leases and receive service of process.
(3) A description of the proposed survey methods.
(4) The dates when the survey will be commenced and completed.
(5) The purpose for conducting the survey.


Note: Authority cited: Section 6108, Public Resources Code. Reference: Sections 6212.2, 6801 and 6826, Public Resources Code.


s 2101. Records.


s 2102. Alteration of Facilities.
Any proposed change in, or addition to, pipe line systems or any proposed installation or removal of equipment which can result in a different routing of production to or from the gauge tanks shall be reported to the state inspector giving the reason for such proposed change, addition, installation or removal at least 24 hours prior thereto. Plats and drawings showing the change shall be furnished to the Division of State Lands upon request.




s 2103. Tankage.
(a) All oil shall be stored in tanks suitable for accepted methods of calibration, gauging and sampling as expressed by the American Petroleum Institute Code.
(b) Tanks shall be equipped with such safety devices and fire walls as are required in the area in which such tanks are located.
(c) Sufficient tankage shall be provided by the lessee.
(d) No tank trucks, trailers, tank cars, or vessels will be gauged unless proper certified gauge tables or other adequate evidence of container capacity is presented to the inspector and approved by him in advance of use.
(e) Sediment and other material deposited on or near the bottom of tanks shall be removed to permit proper gauging and sampling at the request of the inspector.
(f) All gauge tanks shall be strapped and calibrated by a disinterested party. The process shall be in accordance with that expressed in the American Petroleum Institute Code. Strapping and calibration of gauge tanks by a representative of an interested party may be permitted only upon advance notification of such action to and approval by the Division of State Lands.
(g) When tanks are to be strapped or restrapped, the inspector shall be notified at least 24 hours in advance to permit him to be a witness to the procedure.
(h) All tanks shall be calibrated in barrels (of 42 gallons per barrel) and the volume expressed in gauge tables computed to the nearest one-hundredth of a barrel for each one-eighth of an inch in tank height, or in accordance with the procedure expressed in the American Petroleum Institute Code.
(i) Gauge tables in duplicate for each gauge tank shall be furnished to the Division of State Lands immediately upon preparation. Additional sets of gauge tables shall be furnished to the Division of State Lands upon request.


s 2104. Sealing of Tanks.
(a) At the time of taking the high gauge of a tank the inspector shall seal or lock all inlet lines to the tank and any seals on the tank outlet line shall be removed.
(b) At the time of taking the low gauge of a tank the inspector shall seal or lock all outlet lines from the tank and any seals on the inlet line shall be removed.
(c) In the event any such state tank seal is removed, except by those authorized to do so, payments shall be made to the State for the run as estimated by the inspector at the rate then prevailing for oil of the highest gravity run from the tank during the previous 30 days.
(d) Under no circumstances shall any person other than the inspector remove, break, or alter, any seal or lock installed by the State unless the consent of the inspector in charge of the field is first obtained. Such consent must be confirmed by the inspector in writing, otherwise the procedure specified in Section 2104(c) will govern. Where operations require, seals on bleeder valves and meter by-passes may be removed on the condition that such removal and the time thereof are reported on the applicable daily operating reports. Failure to report such removal may result in the recession of permission to the operator to remove seals from bleeder valves and meter by-passes under any operating conditions.




s 2105. Shipments from Sumps or Pits.
Before any shipment of fluid is made any sump or pit, notice shall be given to the inspector. The quantity of the fluid shipped from any sump or pit shall be determined by the inspector and the quality shall be fixed by laboratory tests made pursuant to Section 2108 hereof. In the event that any fluid is shipped from any sump or pit without such determination by the inspector, the full capacity of the sump or pit will be considered to have been run and payments shall be made to the State for this presumed run at the rate then prevailing for oil of the highest gravity run from the lease during the previous 30 days.




s 2106. Condition of Oil.
(a) Previous to high or opening gauge all free water shall be drawn from the tank until the maximum level of nonmerchantable oil and water shall be at least four inches below the bottom of the outlet connection.
(b) All oil to be gauged and shipped shall be in a marketable condition, i.e., the percentage of bottom sediment and water as shown on test shall not exceed 3 percent, if dehydration or cleaning costs are to be allowed.
(c) Where a tank sample shows a bottom sediment and water content greater than 3 percent and the contents are shipped, the gravity of the wet oil shall be reduced to 3 percent wet gravity and such gravity shall form the payment of the state royalty.
(d) Where an adjustment is made from a wet gravity to another wet gravity or to a dry gravity, the adjustment shall be made by the calculation of the American Petroleum Institute gravity of the oil in the mixture or emulsion or by means of the correction chart published by the Division of State Lands for that purpose, such chart being known as "Gravity of Oil in Mixtures or Emulsions of Oil and Water." In all adjustments of gravity by calculation, or the use of a correction chart, the specific gravity of the water in the mixture or emulsion shall be considered as 1.0000 at 60 degrees F. unless prior written approval has been secured for another value of specific gravity as determined by tests of the water produced.




s 2107. Gauging and Sampling.
(a) Gauges shall be taken by an inspector in the presence of a representative of the lessee. In the event of disagreement, gauges shall be retaken, the average of which shall be binding. In the event that a representative of the lessee is not present after having been given an opportunity to be present, gauges taken by the State shall be binding on the lessee.
(b) Gauges shall be taken as specified in the American Petroleum Institute Code.
(c) Temperature of the oil in a tank shall be taken at the time of gauging with a standard thermometer which shall be immersed not less than two minutes at or about the midpoint of the column of oil, not less than 12 inches from the tank shell, and in the manner expressed in the American Petroleum Institute Code.
(d) Samples for laboratory testing shall be taken at the time of the high or opening gauge.
(e) The method of sampling shall correspond with the method expressed in the American Petroleum Institute Code.
(f) A sample shall consist of one liquid quart and the means for taking such sample shall be furnished by the lessee.




s 2107.5. Automatic Custody Transfer.
(a) Any applicant holding a lease may submit an application to install lease automatic custody transfer equipment. The application shall include (1) a schematic drawing of the proposed system, and (2) specifications of the major equipment components. The lessee shall afford access to any manufacturer's drawings and equipment specifications of the major equipment components which the commission may deem necessary.
(b) Positive displacement meter installations in lease automatic custody transfer equipment shall comply with specifications outlined in the latest revision of American Petroleum Institute Code No. 1101, unless specifically modified with the approval of the State Lands Division. The equipment shall include a means for proportional sampling for securing laboratory test samples, or a means for quality measurement.
(c) Upon determination that acceptable standards of accuracy for measuring oil shipments have been obtained, the commission will approve oil shipments by lease automatic custody transfer.
(d) The equipment shall be maintained and operated in a manner so as to meet the accepted standards of accuracy for the measurement of oil shipments. Use of this equipment shall be discontinued at any time upon determination by the lessee or the inspector that the standards of measurement of accuracy or quality are not being obtained.
(e) The opening and closing meter readings shall be made with a state gauger present.
(f) A memorandum of transfer (run ticket) shall be furnished the State for each run of oil within 24 hours of the completion of such run.
(g) For each run of oil, a copy of official "Gauger's Report of Oil Run" will be furnished to the lessee.
(h) Where approved lease automatic custody transfer equipment is in operation, the provisions of Sections 2104, 2106(d), 2107 and 2109 of this title are not applicable. Where circumstances require conventional gauging for custody transfer, the aforesaid sections shall apply.


s 2108. Laboratory Tests.
(a) All laboratory tests shall be made in accordance with the procedure expressed in the American Petroleum Institute Code and shall consist primarily of the gravity and bottom sediment and water content determination. Samples for laboratory tests shall be furnished by the lessee as required by the State.
(b) Laboratory tests shall be run not later than 24 hours after the time of taking the samples.
(c) The readings and results of tests of oil samples made by the State shall be binding upon the lessee.
(d) Lessee may furnish necessary laboratory equipment to American Petroleum Institute standards, in which event the inspector may make use thereof.




s 2109. Record of Oil Run.
(a) A memorandum of transfer shall be furnished the State for each run of oil from lessee's gauged tanks within 24 hours of the completion of such run.
(b) For each run of oil from the lessee's gauged tanks a copy of an official "Gauger's Report of Oil Run" will be furnished to the lessee.




s 2110. Quantity Determination.
The volume of oil run shall be the volume corrected to 60 degrees F. according to the schedule "American Petroleum Institute Standard 2540, Table 6 (ASTMD-1250, Tables 6 and 24)."


s 2111. Tests and Measurements of Gas.
(a) Gasoline content tests shall be made by or for the lessee at least once a month and at such other intervals as appear to be necessary in the opinion of the inspector.
(b) An inspector shall be permitted to witness any tests for the gasoline content of casinghead gas.
(c) All tests and measurements of gas shall be in accordance with the procedure expressed by the California Natural Gas Association in Bulletins T.S. 351, T.S. 353, T.S. 354, and any revisions thereof.




s 2112. Production Reports.
(a) A daily report in the form prescribed by the Division of State Lands shall be furnished as required.
(b) Monthly reports shall be furnished to the Division of State Lands as required.




s 2113. Redrilling Operations.
No oil or gas well shall be redrilled except upon prior approval of the Division of State Lands. No application to redrill a well shall be approved unless it is shown that such redrill is necessary and in the public interest, and then only provided that:
(a) No point in the redrilled portion of the well, including the bottom thereof, shall be more than 100 feet from the original hole;
(b) No point in the redrilled hole shall be closer than 50 feet to the blanked off portion of any well not under the control of the drilling operator, other than the well to be redrilled;
(c) All redrilling within an oil zone shall be done with any standard circulating medium as used in good engineering practice and as approved specifically by the Division of State Lands.
(d) In case any point in the redrilled hole may come within 200 feet of the portion open to production of any well, other than the well to be redrilled, the applicant shall file with the Division of State Lands:
(1) Written consent from the operator of each well within said 200 feet, waiving any objection to the proposed redrilling operations;
(2) For each well, within said 200 feet, a surety bond, in an amount and for a period to be fixed by the commission, indemnifying the State against any loss, damage, claim, demand or action caused by or connected with the redrilling operations.




s 2114. Drilling Operations.
(a) No lessee shall drill an oil or gas well on state lands except on prior approval of the Division of State Lands and subject to the terms of the enabling statute and lease and then only provided that any well so drilled within any oil zone, shall be at least 50 feet away from the blanked off portions of any well not within control of the lessee and at least 200 feet away from the perforated section of any well not within the control of the lessee.
(b) As a preliminary condition to approval of the drilling of a well, the lessee shall submit the proposed course of the well with vertical and horizontal projections of said course drawn upon graph paper to a scale of 100 feet to the inch. Upon completion of the well, the lessee shall file with the Division of State Lands a complete survey of the well, electric log, well history, driller's log and all core data.




s 2115. Perforations, Plug Backs and Reperforations.
For any well to be perforated or plugged back and reperforated within 200 feet of any well not within the control of the lessee, lessee shall file with the Division of State Lands:
(a) Written consent from any lessee having a well within said 200 feet, waiving any objection to the proposed plug back and reperforating operations, or;
(b) For each well within 200 feet of any well or wells a corporate surety bond in an amount and for a period to be fixed by the commission, for each application, indemnifying the State against any loss, damage, claim, demand or action, caused by or connected with the plug back, perforation or reperforation operations.




s 2116. Drilling Fluid.
All drilling, redrilling, perforating, or reperforating operations within any oil zones shall be done with any standard circulating medium as used in good engineering practice and as approved specifically by the Division of State Lands. Whenever, in the opinion of the inspector, circulation is lost the lessee shall immediately start pumping into the hold such circulation regaining media as are approved in good engineering practice and are most applicable, in the opinion of the inspector, to the zone in which the hole is located.




s 2117. Washing Perforations.
Whenever the production of a well is determined to have been decreased because of the plugging of the well's perforations, the inspector may require the lessee to wash the well with a suitable perforation washing fluid.




s 2118. Accounting for Royalty.
(a) No allowance shall be made for cost of dehydration unless specifically authorized in an existing lease, in which event the allowance shall be the actual cost of dehydration not to exceed 5 cents per net barrel of oil so dehydrated, or the allowance as specified in the lease, whichever is the lesser. Allowance for dehydration will be granted only after lessee has filed with the Division of State Lands an application in duplicate requesting the right to make deduction for dehydration, setting forth the method proposed to be employed and listing the equipment and value thereof installed exclusively for the dehydration of the oil produced from state oil and gas leases. After approval of the application, each operator shall file with the Division of State Lands before the tenth of the month subsequent to that for which dehydration deduction is requested, a detailed statement of the actual cost of dehydration proposed to be deducted from the gross royalty payable for the preceding month.
(b) Tank bottoms and sump oil shipments are to be reported on the following value basis:
Shipments of 0.0 percent to 3.0 percent cut -quoted market price for applicable dry gravity.
Shipments of 3.1 percent to 15.0 percent cut -quoted market price for applicable dry gravity less 5 cents per gross barrel at 60 degrees F.
Shipments of 15.1 percent cut and up -quoted market price for applicable dry gravity less 15 cents per gross barrel at 60 degrees F.
(c) All transfers of dry gas "Returned to Lease" or elsewhere, made by an operator for the use or benefit of other leases or of third parties, will be considered as sales under the terms of the lease.
(d) Whenever under Section 2116 crude oil is used as a circulating medium, the operator shall be allowed a credit of 25 percent of the volume of any foreign circulating oil used. This credit shall be deducted from the total number of barrels produced from the well during the 30-day period immediately following the well's completion.
(e) Whenever the State shall require the operator to use foreign oil to wash perforations of a producing well (Section 2117), the operator shall be allowed credit of 50 percent of the volume of the oil used in such washing as a deduction from the total number of barrel's produced from the well during the period of 30 days immediately succeeding such operations.
(f) Subsection (d) and (e) shall not apply to cases where the volume of circulating oil lost exceeds 5,000 barrels for any one operation. Such cases will be the subject of specific determinations as to periods and the amount of credit to be allowed.
(g) The value of oil used as a circulating medium or for washing perforations shall be that fixed by the lease for the quality and gravity of the oil so produced. Foreign oil is any oil not produced from the specific lease of the affected lessee.




s 2119. Diligence of Operation.
All wells capable of producing oil, gas or other petroleum products in commercial quantities shall be operated continuously at the maximum efficient rate of recovery as determined by recognized engineering standards and in accordance with field production schedules acceptable to the Division of State Lands, unless written authorization is otherwise granted.




s 2120. Conformance to Rules.
All offshore filled lands or piers or other structure or structures constructed for operations on a state oil and gas lease and all operations including drilling, whether from upland, littoral or offshore locations, shall conform with the rules and regulations of the commission in effect at the time of invitation for bids, in pursuance of which the lease may be awarded, and with the conditions as specified in the bid-lease form.


Note: Authority cited for Sections 2120 through 2124; Public Resources Code, Division VI, Sections 6103, 6105, 6108, 6216, 6301, 6873 and 6873.1.



s 2121. Suspension of Operations.
The lessee shall suspend any drilling and production operations, except those which are corrective, protective, or mitigative, immediately in the event of any disaster or of contamination or pollution caused in any manner or resulting from operations under a lease. Such drilling and production operations shall not be resumed until adequate corrective measures have been taken and authorization of resumption of operations has been made by the commission.




s 2122. Lease Operation Offshore.
For all wells drilled from filled land or other drill sites or structure or structures located seaward of the ordinary high water mark, operations that may be conducted shall conform with the following:
(a) The lessee shall remove the derrick from each well within sixty (60) days after lessee has ceased making use of such derrick in its operations on and with respect to such well.
(b) In the discretion of the commission, all permanent operating sites shall be landscaped with shrubbery, or fenced, so as to screen from public view as far as possible the tanks, pumps or other permanent equipment. Such landscaping and shrubbery, or fencing, are to be kept in good condition.
(c) Oil, tar, or other residuary products of oil, or any refuse of any kind from any well or works, shall be disposed of on shore in a dumping area in conformance with local regulatory requirements.
(d) Suitable and adequate sanitary toilet and washing facilities shall be installed and maintained in a clean and sanitary condition at all times for the use of lessee's personnel.
(e) All drilling and production operations shall be conducted in such manner as to eliminate as far as practicable dust, noise, vibration, or noxious odors.
(f) Pollution and contamination of the ocean and tide lands and all impairment of and interference with bathing, fishing, or navigation in the waters of the ocean or any bay or inlet thereof is prohibited, and no oil, tar, residuary product of oil or any refuse of any kind from any well or works shall be permitted to be deposited on or pass into the waters of the ocean or any bay or inlet thereof.
(g) No permanent filled lands, piers, platforms, or other fixed or floating structures in, on, or over the tide and submerged lands covered by the lease or otherwise available to the lessee shall be permitted to be constructed, used, maintained, or operated where service of less than 20 wells is provided for, without specific authority by the commission. Operating wells not meeting the foregoing requirement shall be completed below such elevation as may be required in each case by the United States, the State, or other competent authority, with the production piped along or below the floor of the ocean to such receiving points as the commission may determine or approve. For nonoperative wells the structures or facilities used for their drilling shall be removed to the satisfaction of the commission within ninety (90) days' time after such wells have been determined to be nonoperative unless a longer period is approved by the commission.




s 2123. Lease Operations on Uplands.
For all wells drilled from an upland or littoral drillsite landward of the ordinary high water mark, operations that may be conducted shall conform with the following:
(a) The lessee shall remove the derrick from each well within sixty (60) days after lessee has ceased making use of such derrick in its operations on and with respect to such well.
(b) In the discretion of the commission, all permanent operating sites shall be landscaped with shrubbery, or fenced, so as to screen from public view as far as possible the tanks, pumps, or other permanent equipment. Such landscaping and shrubbery, or fencing, are to be kept in good condition.
(c) All drilling and production operations shall be conducted in such manner as to eliminate, as far as practicable, dust, noise, vibration or noxious odors.
(d) Suitable and adequate sanitary toilet and washing facilities shall be installed and maintained in a clean and sanitary condition at all times for the use of lessee's personnel.
(e) No sign shall be constructed or erected, maintained or placed on the premises except those required by law or ordinance to be displayed in connection with the drilling or maintenance of the well.
(f) Pollution and contamination of the ocean and tide lands and all impairment of and interference with bathing, fishing, or navigation in the waters of the ocean or any bay or inlet thereof is prohibited; and no oil, tar, residuary product of oil or any refuse of any kind from any well or works shall be permitted to be deposited on or pass into the waters of the ocean or any bay or inlet thereof.
(g) Oil, tar, or other residuary products of oil, or any refuse of any kind from any well or works, shall be disposed of onshore in a dumping area in conformance with local regulatory requirements.




s 2124. Surrender of Leased Premises.
Each lease shall provide that at the expiration of the lease or sooner termination thereof the lessee shall surrender the premises leased, with all permanent improvements thereon, in good order and condition, or, at the option of the commission and as specified by the commission, the lessee shall remove such structures, fixtures and other things as have been put on the lease by the lessee, all removal costs to be borne by the lessee, subject to the lessee's right to remove his equipment as provided in the statutes. Notwithstanding any provision of these regulations, the lessee shall have the right to remove any and all drilling and producing platforms and other oil field development and producing equipment having a re-use or salvage value. (continued)