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STATE OF CALIFORNIA 
CALIFORNIA STATE LANDS COMMISSION 
100 Howe Avenue, Suite 100-South 
Sacramento, CA 95825-8202 
Michael Jenkins, City Attorney 
Jenkins & Hogin, LLP 
September 16, 2014 
1230 Rosecrans Avenue, Suite 110 
Manhattan Beach, CA 90266 
EDMUND G. BROWN JR., Governor 
JENNIFER LUCCHESI, Executive Officer 
(916) 574-1800 Fax (916) 574-1810 
California Relay Service TOO Phone 1-800-735-2929 
from Voice Phone 1-800-735-2922 
Contact Phone: (916) 574-1800 
Contact Fax: (916) 574-1810 
File Ref: G 05-02.1 
Re: City of Hermosa Granted Public Trust Lands - Oil and Gas Operations 
Dear Mr. Jenkins: 
This letter is in response to the September 2, 2014, request from your office on 
behalf of the City of Hermosa Beach (City) memorializing the request made by the City 
Council during its July 8, 2014 Council meeting for information from the California State 
Lands Commission (Commission) staff regarding the City's responsibilities as a trustee 
of granted public trust lands. 
As general background, the State of California acquired sovereign ownership of 
all tidelands and submerged lands and beds of navigable lakes and waterways upon its 
admission to the United States in 1850. The State holds these lands for the benefit of all 
people of the State for public trust purposes, which include but are not limited to 
waterborne commerce, navigation, fisheries, water-related recreation, habitat 
preservation, and open space. On tidal waterways, the State's sovereign fee ownership 
extends landward to the mean high tide line, except for areas of fill or artificial accretion 
or where the boundary has been fixed by agreement or court decision. On navigable 
non-tidal waterways, including lakes, the State holds fee ownership of the bed of the 
waterway landward to the ordinary low water mark and a Public Trust easement 
landward to the ordinary high water mark, except where the boundary has been fixed by 
agreement or court decision. Such boundaries may not be readily apparent from 
present day site inspections. 
The Commission has jurisdiction and management authority over all ungranted 
tidelands, submerged lands, and the beds of navigable lakes and waterways. The 
Commission also has residual and review authority for tidelands and submerged lands 
legislatively granted in trust to local jurisdictions (Public Resources Code (PRC) §§ 
6301, 6306). All tidelands and submerged lands, granted or ungranted, as well as
Michael Jenkins 
September 16, 2014 
Page 2 
navigable lakes and waterways, are subject to the protections of the common law Public 
Trust Doctrine. 
Granted Public Trust Lands 
As you are aware, the City is a local trustee of granted public trust lands, 
pursuant to Chapter 479, Statutes of 1919.1 As general background, commencing in 
1851 and continuing to the present, the California Legislature has periodically 
transferred portions of the State's prime waterfront lands to local governmental entities 
for management purposes (generally referred to as grantees or trustees). The terms 
and conditions applicable to granted public trust lands vary and are governed by the 
specific granting statutes, the common law Public Trust Doctrine; the California 
Constitution, and case law. Granting statutes typically convey, in trust, the State's right, 
title, and interest to the applicable public trust lands to the grantee. Grantees have a 
fiduciary duty, as trustees for the people of the State, to manage their trust lands and 
assets in a manner that is consistent with their statutory trust grant, the Public Trust 
Doctrine and the California Constitution. The State remains the trustor of the grant and 
the people of the State are the beneficiaries. 
Grantee/Irustee Responsibilities 
Except as required or permitted by certain statutory authorizations, the 
Commission is not involved in day-to-day management operations for granted public 
trust lands. The grantee has the primary responsibility of administering the trust within 
the parameters of its granting statutes. It is therefore imperative that as trustees, local 
jurisdictions, like the City of Hermosa Beach, manage its public trust lands with a 
fiduciary's care to allow this unique and limited resource to continue to provide 
enjoyment and benefit to the statewide public for generations to come. 
While local trustees retain responsibility for managing their granted public trust 
lands, the Commission has the statutory responsibility to oversee the management of 
sovereign public trust lands and assets.2 The Commission and its staff exercise this 
responsibility and authority through various mechanisms, including advising trustees 
about the trust consistency of proposed uses and expenditures. 
In 2012, Chapter 206 (copy attached) was signed into law to improve the 
administration of granted public trust lands by organizing, listing, and describing the 
myriad fiduciary duties required of local trustees. As described in Chapter 206, local 
trustees are required to manage their granted public trust lands for the benefit of all of 
the people of California. As part of its duties, trustees are required to take reasonable 
1 All of the State's 300 plus granted land statutes, including the City of Hermosa Beach, may be found on 
the CSLC's website (www.slc.ca.gov). organized by region, county, and grantee. 
2Public Resources Code section 6301; State of California ex reI. State Lands Commission v. County of 
O ""ng~ (~Q02) 1"4 I"'~I A ~p "d 2n 2" let I c::;  I;;JU J val"t-' . v v, J.
Michael Jenkins 
September 16,2014 
Page 3 
steps under the circumstances to take and keep control of and preserve the trust 
property. Other fiduciary duties include the duty of loyalty, the duty of care, and the duty 
to not delegate to others the performance of acts that the trustee can reasonably be 
required to perform, and to not transfer the administration of the trust to a co-trustee.3 
City's Granted Lands - Oil and Gas Lease Background 
In or about 1984, a City initiative was passed that authorized the tideland and 
upland drilling activities to occur from the City'Maintenance Yard (Initiative Ordinance 
No. 84-758). Subsequently in 1986, the City entered into Oil and Gas Lease No.1, also 
referred to as the "Upland Lease". This lease was amended later in 1986, as well as in 
1988 and 1991. The Uplands Lease was for oil and gas development landward of the 
granted trust landS. At around the same time the Upland Lease was entered into, the 
City was also negotiating an oil and gas lease for the City's granted lands.4 After much 
negotiation, in 1992, the City issued Oil and Gas Lease No.2, referred to as the 
"Tidelands Lease" for the City's granted lands. The Tidelands Lease was amended in 
1993. 
In order for the City's Tidelands Lease to be effective, the Commission was 
required by statute to make certain findings. Under former PRC 68725 
, the Commission 
was required to find that (1) oil or gas deposits are believed to be contained within the 
lands proposed to be leased; (2) that the same lands are being drained by means of 
wells upon adjacent lands; and, (3) the leasing of the same for the production of Oil and 
gas will be in the best interests of the state. In addition, the Commission had to make 
findings relating to the bidding process and the form of the proposed lease. 
At the Commission's June 30, 1992, meeting (Minute Item No. 41), the 
Commission, overruling the staff recommendation, found that drainage was occurring 
and directed staff to work with the City to resolve the remaining lease issues. A finding 
of drainage was necessary for the City to issue the Tidelands Lease. At the April 28, 
1993 Commission meeting, the Commission: (1) approved the April 28, 1993 
Memorandum of Understanding between the City and the Commission (MOU); (2) 
determined that the requirements of PRC § 6872 had been met; (3) determined that 
pursuant to PRC § 7061, the City was exempt from the formal bidding requirements of 
PRC §§ 7058.5 and 7059; and, (4) approved both the January 14,1992, Tidelands 
Lease and its April 28, 1993, amendment. 
3 Trustee duties are referenced in case law, the California Constitution, granting statutes and PRC §§ 
6009, 6009.1, 6306, and 6305. Seminal cases that can be referenced are: Mallon v. City of Long Beach, 
(1955) 44 Cal.2d 199; State of California v. County of Orange, (1982) 143 Cal. App.3d. 20; City of Long 
Beach v. Morse (1947) Cal.2d 254, and City of Coronado v. San Diego Unified Port District (1964) ~27 
Cal. App. 455. . 
4 Based on a preliminary review of the Commission files, it appears that the City began working with 
Commission staff to determine if drainage was occurring as early as 1977. 
5 Former PRC 6872 was repealed in 1994 pursuant to AB 2444. The current PRC 6872 addresses the 
withdrawing of an incomplete application.
Michael Jenkins 
September 16, 2014 
Page 4 
Subsequently in August 1993, the Hermosa Beach Stop Oil Coalition filed suit 
challenging the Commission's April 28, 1993, action. In November 1993, the suit was 
amended to include Santa Monica Baykeeper, Heal the Bay and American Oceans 
Campaign as additional petitioners. The trial court found that the Commission had 
properly interpreted PRC § 6872, but found that the Commission failed to provide an 
analysis to support the determination that the lease was in the best interest of the state 
as required by PRC § 6872. On January 14, 1994, the trial court issued a writ directing 
the Commission make the necessary findings. In response, the Commission, on March 
8, 1994, again overruling staff's recommendation: (1) determined that oil and gas were 
believed to be present, that the oil and gas were being drained and that a lease for the 
production of said oil and gas was in the best interest of the state; (2) determined that, 
pursuant to PRC § 7057 the City could issue a lease because PRC § 6872 conditions 
had been met; and, (3) approved, pursuant to PRC § 7054.5 the proposal by the City to 
lease the granted tide and submerged lands for purposes of oil and gas production. This 
approval was submitted to the trial court on March 15, 1994. The case was closed by 
formal order on July 6, 1994. 
Proposition E, which was approved in November 1995, overturned the 1984 
voter initiative. After the passage of Proposition E, Hermosa Beach Stop Oil Coalition, 
Heal the Bay, Santa Monica Baykeeper and American Oceans Campaign (the sa'me 
parties that had sued the Commission the prior year) filed suit to stop the City from 
continuing to perform under the two leases. This litigation continued until around 2001 
and resulted in, among other things, a declaration by the Court of Appeals, Second 
Appellate District, that Proposition E did apply to the two leases. 
In 1998 Macpherson Oil Company (Macpherson), both lessee and a real party in 
interested to the above-described lawsuit, filed a cross-complaint alleging breach of 
contract. That action was severed and became its own litigation. In 2008, a trial court 
ruled that the adoption of Proposition E was a breach of contract for which 'damages 
were owed. On appeal, it was ruled that a 1998 determination that the operation may 
pose a health and safety risk may provide a defense such that the City would not have 
to pay damages. That litigation continued until 2012, at which point the City, 
Macpherson, and third party, E&B Natural Resources Management Corporation (E&B), 
entered into a "Settlement Agreement and Release" (Settlement). The City Council 
unanimously voted to approve the settlement on March 2, 2012. 
September 2nd Letter from the City of Hermosa Beach 
At the July 8, 2014 City Council meeting, the City Council requested the opinion 
of Commission staff concerning two questions. Commission staff responses to the two 
questions as described in the City's September 2nd letter are below: 
1) Pursuant to the Oil and Gas Lease No.2 (the "Subject Lease") and the Grant 
Deed from the City of Hermosa Beach ("City") to Macpherson Oil Company
Michael Jenkins 
September 16, 2014 
Page 5 
--~-~-.--.-----.-.- -----, 
("Macpherson"), and as to hydrocarbons produced from the Tidelands, is the 
City authorized to deduct the 3.33% non-participating royalty due to 
Macpherson from the Tidelands Trust Fund by designating it as an 
"expense"? 
Currently, the Tidelands Lease includes a royalty rate of 18%%, all of which is 
required to go in the Special Tidelands Trust. (MOU Paragraph 4) According to the 
MOU, 7% could be paid to the City's General Fund. (MOU Paragraph 3) The remaining 
royalty, 11%%, would be placed into the Special Tidelands Trust Fund. (MOU 
Paragraph 3) In approving the MOU, the Commission did not contemplate that the 
effective royalty rate for the Special Tidelands Trust Fund would be less than 62.5% of 
the 18%%. For this reason, staff does not believe that deducting any portion of the 
3.33% non-participating royalty payment from the portion of the 18%% royalty under the 
Tidelands Lease that was not released into the City's General Fund is consistent with 
the Commission's prior authorization or the City's obligations as a trustee for the state. 
As such, while Commission staff has significant concerns about deducting any portion 
of the 3.33% non-participating royalty payment from the royalty due the Special 
Tidelands Trust Fund, staff does not object to the City paying the entire 3.33% of the 
non-participating royalty payment due from the Uplands royalties or the City's General 
Fund. 
2) Is the City authorized to utilize the Tidelands Trust Fund to repay advances to 
the lessees under the Subject Lease for environmental remediation of the 
City's Maintenance Yard for advances exceeding $100,000 and up to $3.7 
million? 
The Commission's approval of the MOU did not put an upper limit on the amount 
that could be reimbursed, but instead refers to the Tidelands Lease to determine 
whether the category of costs is appropriate for reimbursement. Pursuant to Paragraph 
7 of the MOU, the Commission has previously agreed that the tideland revenues can be 
used to pay 70% of the "advance" as specified in Section 13.d.(4) of the Tidelands. 
Lease. Section 13.d (4) authorizes the repayment of an advance by the Lessee to cover 
certain costs related to City's relocation of the Maintenance Yard and also refers to the 
reimbursement of the advance to cover related activities in Sections 13.a, 13.c, and 
20.e. Environmental remediation costs is a cost category.in Section 13.c. that the 
Commission, pursuant to the MOU, already authorized to be reimbursed. In summary, 
yes, the City is authorized to utilize the Tidelands Trust Fund to repay advances to the 
extent provided in Paragraph 7 of the MOU. 
Continuing Obligations Under the MOU 
Finally, I would like to take this opportunity to remind the City that the MOU 
imposed some continuing obligations. In the event the voters authorize E&B to perform 
under the terms of the Tidelands Lease, pursuant to Paragraph 8, the City is required to
Michael Jenkins , 
September 16, 2014 
Page 6 
request that the Commission be named as an additional insured on any insurance 
coverage provided by the Operator under the Lease. In addition, pursuant to Paragraph 
10, it was agreed that the 1957 plat was to serve as the baseline for the allocation of 
production and that the City would survey the mean high tide line periodically during the 
lease term. 
If you have additional questions or if Commission staff can be a helpful resource 
in any manner, please do not hesitate to contact me or Reid Boggiano, Granted Lands 
Representative, at (916) 574-1800. 
Sincerely, 
~ [(HERI PE~BERTON 
Chief of External Affairs 
Attachment 
cc: Jessica Rader, Senior Counsel
I-----~-- 
i 
Assembly Bill No. 2620 
CHAPTER 206 
An act to amend Sections 6305 and 6306 of, to add Section 6009.1 to, 
. and to add and repeal Section 6320 of, the Public Resources Code, relating 
to tidelands and submerged lands. 
[Approved by Governor August 27, 2012. Filed with 
Secretary of S tate August 27, 2012.] 
LEGISLATIVE COUNSEL'S DIGEST 
AB 2620, Achadjian. Tidelands and submerged lands: granted public 
trust lands. 
(1) Existing law grants to various local entities the right, title, and interest 
of the state in and to certain tidelands and submerged lands in trust generally 
for purposes of commerce, navigation, and fisheries, and for other public 
trust purposes. Existing law vests the State Lands Commission with all 
jurisdiction and authority remaining in the state as to tidelands and 
submerged lands as to which grants have been or may be made. 
This. bill would make various legislative declarations and findings 
regarding granted public trust lands, the duties of a trustee of state lands, 
and the prohibition against common trust principles nullifying an act ofthe 
Legislature or modifying its duty under the California Constitution to do 
all things necessary to execute and administer the public trust. The bill 
would declare that those findings and declarations are declaratory of existing 
law. 
(2) Existing law confers upon counties and cities certain powers granted 
to the commission with regard to the leasing or granting of rights or 
privileges with relation to the lands owned by the state. 
This bill would instead confer these powers upon the local trustee of 
granted public trust lands, as defined; 
(3) Existing law requires local and state agencies that have been granted 
sovereign trust lands to provide accurate records of all revenues received 
from the trust lands and trust assets and of all expenditures of those revenues 
and requires all revenues received or generated from trust lands to be 
expended only for those uses and purposes, consistent with the public trust 
for commerce, navigation, and fisheries, and the applicable statutory grant. 
Existing law requires a trustee to annually file a detailed statement of 
revenues and expenditures with the commission. 
This bill would instead require the local trustee of granted public trust 
lands to undertake those duties and would require all funds received or 
generated from trust lands or trust assets to be segregated in separate 
accounts from nontrust received or generated funds. The bill would require 
the annual statement required to be filed with the commission to include a 
95
Ch.206 -2- 
standardized reporting form, and would provide that the information in the 
statement and form is a public record, to be made available on the 
commission's Internet Web site. 
The bill would provide that all costs incurred by a local trustee of granted 
public trust lands to implement the bill be paid from the revenues derived 
from its granted public trust lands and assets. The bill would require the 
commission to exempt a local trustee of granted public trust land from the . 
duties imposed by the bill if the revenues derived from its granted public 
trust lands and assets are not sufficient to pay for those costs, as specified. 
The bill would create a state-mandated local program by imposing new 
duties with regard to the duties that the bill would impose upon local agencies 
that are local trustees of granted public trust lands.· 
(4) The bill would require the commission to prepare a workload analysis 
and implementation plan by September 1,2013, and to submit the plan to 
specified committees of the Legislature and the Department of Finance. The 
bill would make the report provision inoperative September 1,2017, and 
would repeal it on January 1,2018. 
(5) The California Constitution requires the state to reimburse local 
agencies and school districts for certain costs mandated by the state. Statutory 
provisions establish procedures for making that reimbursement. 
This bill would provide that no reimbursement is required by this act for 
a specified reason. 
The people a/the State a/California do enact as/allows: 
SECTION 1. The Legislature finds and declares all ofthe following: 
(a) Upon admission to the United States, and as an incident of its 
sovereignty, the State of California received title to the tidelands, submerged 
lands, and beds of navigable waterways within its borders to be held subject 
to the public trust doctrine for statewide public purposes, including 
commerce, navigation, fisheries, preservation oflands in their natural state, 
and other recognized public trust uses. 
(b) The state has made grants of public trust lands to over 80 local public 
entities, each of which manages the state's public trust lands as trustee-· 
pursuant to the public trust doctrine, legislative grants, the California 
Constitution, and other laws governing the trust and the trustee's fiduciary 
responsibilities. 
(c) A local trustee of granted public trust lands is charged with managing 
the state's granted public trust lands on behalf of the state for the benefit of 
all the people of California. 
(d) As part of its fiduciary duty, a local trustee of granted public trust 
lands is required to take reasonable steps under the circumstances to take 
and keep control of and preserve the tnist property. 
( e) All jurisdiction and authority remaining in the state as to tidelands 
and submerged lands as to which grants have been or may be made is vested 
in the State Lands Commission. 
95
-3- Ch.206 
(f) The use of revenues received from trust lands and trust assets by a 
local trustee of granted public trust lands is limited by the legislative grant, 
the public trust doctrine, and other laws governing the trust. An evaluation 
ofthe proper use of granted public trust lands necessarily includes evaluating 
whether the operation and management of these resources managed on 
behalf of the state by local trustees is consistent with the public trust for 
commerce, navigation, and fisheries, and the applicable legislative grants. 
(g) According to the State Auditor's report of August 2011, the State 
Lands Commission "has not developed an audit plan designed to ensure 
that the revenues generated on these granted lands are used properly," and 
that "without oversight of granted lands, the commission is neglecting its 
responsibility to protect the public trust and risks having to address additional 
ongoing abuses offunds dedicated for public trust uses." 
(h) As a result of the August 2011 review, the State Auditor concluded 
that the State Lands Commission should establish a monitoring program to 
ensure that the funds generated· from granted lands are expended in 
accordance with the public trust. The State Auditor further concluded that, 
despite current understaffing concerns, "the commission should perform a 
workload analysis t6 determine the staffing levels it needs to fulfill its 
oversight responsibilities of granted lands." 
(i) A local trustee of granted public trust lands holds and manages its 
public trust property, including the lands and revenue derived from that 
property, as a state asset for the benefit of the people of California and 
cannot use the trust corpus for general municipal purposes or other purposes 
not consi,stent with the public trust doctrine and its legislative grant. Because 
the costs that may be incurred by a local trustee of granteELilUblic trust lands 
to implement this act are required to be paid solely from the revenues derived 
from that property, and because the State Lands Commission is required by 
this act to exempt a local trustee that does not derive sufficient funds from 
those assets to pay for the costs imposed by this act, the state would not be 
required to reimburse a trustee for the implementation of this act. 
SEC. 2. Section 6009.1 is added to the Public Resources Code, to read: 
6009.1. The Legislature finds and declares all of the following: 
(a) Granted public trust lands remain subject to the supervision of the 
state and the state retains its duty to protect the public interest in granted 
public trust lands. 
(b) The state acts both as the trustor and the representative of the 
beneficiaries, who are all of the people of this state, with regard to public 
trust lands, and a grantee of public trust lands, including tidelands and 
submerged lands, acts as a trustee, with the granted tidelands and submerged 
lands as the corpus of the trust. 
(c) A grantee may fulfill its fiducimy duties as trustee by determining 
the application of each of the following duties, all of which are applicable 
under common trust principles: 
(1) The duty ofloyalty. 
(2) The duty of care. 
(3) The duty of full disclosure. 
95
Ch.206 -4- 
(4) The duty to keep clear and adequate records and accounts. 
(5) The duty to administer the trust solely in the interest of the 
beneficiaries. 
(6) The duty to act impartially in managing the trust property. 
(7) The duty to not use or deal with trust property for the trustee's own 
profit or for any other purpose unconnected with the trust, and to not take 
part in a transaction in ,which the trustee has an interest adverse to the 
beneficiaries. 
(8) The duty to take reasonable steps under the circumstances to take 
and keep control of and to preserve the trust property. ' 
(9) The duty to make the trust property productive under the 
circumstances and in furtherance of the purposes of the trust. 
(10) The duty to keep the trust property separate from other property not 
subject to the trust and to see that the trust property is designated as property 
of the trust. 
(11) The duty to take reasonable steps to enforce claims that are part of 
the trust property. 
(12) The duty to take reasonable steps to defend actions that may result 
in a loss to the trust. 
(13) The duty to not delegate to others the performance of acts that the 
trustee can reasonably be required to perform and to not transfer the 
administration of the trust to a cotrustee. If a trustee has properly delegated 
a matter to an agent, the trustee has a duty to exercise direct supervision 
over the performance ofthe delegated matter. . 
(d) All duties endowed upon a trustee of state lands shall depend upon 
the terms of the trust, and ifthere is no provision, express or implied, within 
the terms of the trust, a statute, or a grant, the trustee's duties shall be 
interpreted and determined by principles and rules evolved by courts of 
equity with respect to common trust principles. 
(e) Common trust principles do not nullify an act of the Legislature or 
modify its duty under the California Constitution to do all things necessary 
to execute and administer the public trust. 
SEC. 3. Section 6305 of the Public Resources Code is amended to read: 
6305. The powers granted by this chapter to the commission as to leasing 
or granting of rights or privileges with relation to the lands owned by the 
state are hereby conferred upon the local trustee of granted public trust lands 
to which those lands have been granted. 
SEC. 4. Section 6306 ofthe Public Resources Code is amended to read: 
6306. (a) For purposes ofthis division, "local trustee of granted public 
trust lands" means a cOlmty, city, or district, including a water, sanitary, 
regional park, POlt, or harbor district, or any other local, political, or 
corporate subdivision that has been granted, conveyed, or transferred by 
statute, public trust lands, including tidelands, submerged lands, or the beds 
of navigable waters, through a legislative grant. A local trustee of granted 
public trust lands is a trustee of state lands. 
(b) Notwithstanding any other law, every local trustee of granted public 
trust lands shall establish and maintain accounting procedures, in accordance 
95
-5- Ch.206 
with generally accepted accounting principles, providing accurate records 
of all revenues received from the trust lands and trust assets and of all 
expenditures ofthose revenues. If a trust grantee has several trust grants of 
adjacent lands and operates the granted lands as a single integrated entity, 
separation of accounting records for each'trust grant is not required. 
( c) All revenues received from trust lands and trust assets administered 
or collected by a local trustee of granted public trust lands shall be expended 
only for those uses and purposes consistent with the public trust for 
commerce, navigation, and fisheries, and the applicable statutory grant. ' 
(d) All funds received or generated from trust lands or trust assets shall 
be segregated in separate accounts from nontrust received or generated 
funds. ' 
(e) (1) Unless otherwise prescribed by an applicable statutory grant, on 
or before October 1 of each year, each local trustee of granted public trust 
lands shall file with the commission a detailed statement of all revenues 
and expenditures relating to its trust lands and trust assets, including 
obligations incurred but not yet paid, covering the fiscal year preceding 
submission of the ~tatement. 
(2) The statement shall be prepared in accordance with generally accepted 
accounting principles and may take the form of an annual audit prepared 
by or for the local trustee of granted public trust lands. 
(3) (A) The detailed statement shall be submitted along with a 
standardized reporting form developed by the commission. 
(B) The commission shall use an existing reporting form previously 
developed for purposes' of this paragraph, if a finding is made by the 
commission that it is generally responsive to the needs of the commission 
as prescribed in this section. Alternatively, the commission may develop a 
reporting form that requires a local trustee of granted public lands to report 
on all ofthe following: 
(i) A summary of all funds received or generated from trust lands or trust 
assets. 
(ii) A summary of all spending offunds received or generated from trust 
lands or trust assets. 
(iii) Any other disposition of funds received or generated from trust lands 
or trust assets or of the trust lands or trust assets themselves. 
(iv) A description of the nianner in which the statement required by this 
subdivision and accompanying the reporting form is organized. 
(v) Any other information that the cOITnnission deems to be ineluded in 
an accounting of granted public trust lands. 
(C) The adoption of the form by the commission pursuant to this 
subdivision is the prescription of a form for purposes of subdivision ( c) of 
Section 11340.9 of the Government Code. 
(4) All forms and supporting statements submitted pursuant to this section 
shall be public records and be made available on the commission's Internet 
Web site. 
(f) (1) The costs that may be incurred by a local trustee of granted public 
trust lands that result from any new duties imposed upon that trustee by the 
95
Ch.206 -6- 
act amending this section in the 20 JI-12 Regular Session ofthe Legislature, 
including the requirement to submit a standardized reporting form required 
by paragraph (3) of subdivision (e), shall be paid from the revenues derived 
from its granted public trust lands and assets specified in subdivision (b). 
(2) If the revenues derived from the granted public trust lands and assets 
specified in subdivision (b) are not sufficient to pay the costs for the duties . 
specified in paragraph (1), the commission shall exempt the local trustee of 
granted public trust lands from performing those duties for which the 
revenues are not sufficient, or grant a deadline extension from the 
performance of those duties until sufficient funds are available. 
SEC. 5. Section 6320 is added to the Public Resources Code, to read: 
6320. (a) On or before September 1,2013, the commission shall prepare 
a workload analysis that summarizes the resources necessary for the 
commission to fulfill its oversight responsibilities with respect to all 
legislatively granted public trust lands. 
(b) The workload analysis shall be submitted, in compliance with Section 
9795 of the Government Code, to the Assembly Committee on Natural 
Resources, the Senate Committee on Natural Resources and Water, the Joint 
Legislative Budget Committee, and the Department of Finance. 
(c) This section shall become inoperative on September 1,2017, pursuant 
to Section 10231.5 of the Government Code, and, as ofJanuary 1,2018, is 
repealed, unless a later enacted statute, that becomes operative on or before 
January 1,2018, deletes or extends the dates on which it becomes inoperative 
and is repealed. 
SEC. 6. The addition of Section 6009.1 to the Public Resources Code 
by Section 2 of this act does not constitute a change in, but is declaratory 
of, existing law. 
SEC. 7. No reimbursement is required by this act pursuant to Section 6 
of Article XIII B of the California Constitution because the costs incurred 
by a local agency to pay for the program or level of service mandated by 
this act, within the meaning of Section 17556 ofthe Government Code, will 
be paid solely from the revenues derived from the public trust lands and 
assets that are granted to that local agency by the state. 
o 
95

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California State Lands Commission - City of Hermosa Beach State Tidelands Trust

  • 1. STATE OF CALIFORNIA CALIFORNIA STATE LANDS COMMISSION 100 Howe Avenue, Suite 100-South Sacramento, CA 95825-8202 Michael Jenkins, City Attorney Jenkins & Hogin, LLP September 16, 2014 1230 Rosecrans Avenue, Suite 110 Manhattan Beach, CA 90266 EDMUND G. BROWN JR., Governor JENNIFER LUCCHESI, Executive Officer (916) 574-1800 Fax (916) 574-1810 California Relay Service TOO Phone 1-800-735-2929 from Voice Phone 1-800-735-2922 Contact Phone: (916) 574-1800 Contact Fax: (916) 574-1810 File Ref: G 05-02.1 Re: City of Hermosa Granted Public Trust Lands - Oil and Gas Operations Dear Mr. Jenkins: This letter is in response to the September 2, 2014, request from your office on behalf of the City of Hermosa Beach (City) memorializing the request made by the City Council during its July 8, 2014 Council meeting for information from the California State Lands Commission (Commission) staff regarding the City's responsibilities as a trustee of granted public trust lands. As general background, the State of California acquired sovereign ownership of all tidelands and submerged lands and beds of navigable lakes and waterways upon its admission to the United States in 1850. The State holds these lands for the benefit of all people of the State for public trust purposes, which include but are not limited to waterborne commerce, navigation, fisheries, water-related recreation, habitat preservation, and open space. On tidal waterways, the State's sovereign fee ownership extends landward to the mean high tide line, except for areas of fill or artificial accretion or where the boundary has been fixed by agreement or court decision. On navigable non-tidal waterways, including lakes, the State holds fee ownership of the bed of the waterway landward to the ordinary low water mark and a Public Trust easement landward to the ordinary high water mark, except where the boundary has been fixed by agreement or court decision. Such boundaries may not be readily apparent from present day site inspections. The Commission has jurisdiction and management authority over all ungranted tidelands, submerged lands, and the beds of navigable lakes and waterways. The Commission also has residual and review authority for tidelands and submerged lands legislatively granted in trust to local jurisdictions (Public Resources Code (PRC) §§ 6301, 6306). All tidelands and submerged lands, granted or ungranted, as well as
  • 2. Michael Jenkins September 16, 2014 Page 2 navigable lakes and waterways, are subject to the protections of the common law Public Trust Doctrine. Granted Public Trust Lands As you are aware, the City is a local trustee of granted public trust lands, pursuant to Chapter 479, Statutes of 1919.1 As general background, commencing in 1851 and continuing to the present, the California Legislature has periodically transferred portions of the State's prime waterfront lands to local governmental entities for management purposes (generally referred to as grantees or trustees). The terms and conditions applicable to granted public trust lands vary and are governed by the specific granting statutes, the common law Public Trust Doctrine; the California Constitution, and case law. Granting statutes typically convey, in trust, the State's right, title, and interest to the applicable public trust lands to the grantee. Grantees have a fiduciary duty, as trustees for the people of the State, to manage their trust lands and assets in a manner that is consistent with their statutory trust grant, the Public Trust Doctrine and the California Constitution. The State remains the trustor of the grant and the people of the State are the beneficiaries. Grantee/Irustee Responsibilities Except as required or permitted by certain statutory authorizations, the Commission is not involved in day-to-day management operations for granted public trust lands. The grantee has the primary responsibility of administering the trust within the parameters of its granting statutes. It is therefore imperative that as trustees, local jurisdictions, like the City of Hermosa Beach, manage its public trust lands with a fiduciary's care to allow this unique and limited resource to continue to provide enjoyment and benefit to the statewide public for generations to come. While local trustees retain responsibility for managing their granted public trust lands, the Commission has the statutory responsibility to oversee the management of sovereign public trust lands and assets.2 The Commission and its staff exercise this responsibility and authority through various mechanisms, including advising trustees about the trust consistency of proposed uses and expenditures. In 2012, Chapter 206 (copy attached) was signed into law to improve the administration of granted public trust lands by organizing, listing, and describing the myriad fiduciary duties required of local trustees. As described in Chapter 206, local trustees are required to manage their granted public trust lands for the benefit of all of the people of California. As part of its duties, trustees are required to take reasonable 1 All of the State's 300 plus granted land statutes, including the City of Hermosa Beach, may be found on the CSLC's website (www.slc.ca.gov). organized by region, county, and grantee. 2Public Resources Code section 6301; State of California ex reI. State Lands Commission v. County of O ""ng~ (~Q02) 1"4 I"'~I A ~p "d 2n 2" let I c::; I;;JU J val"t-' . v v, J.
  • 3. Michael Jenkins September 16,2014 Page 3 steps under the circumstances to take and keep control of and preserve the trust property. Other fiduciary duties include the duty of loyalty, the duty of care, and the duty to not delegate to others the performance of acts that the trustee can reasonably be required to perform, and to not transfer the administration of the trust to a co-trustee.3 City's Granted Lands - Oil and Gas Lease Background In or about 1984, a City initiative was passed that authorized the tideland and upland drilling activities to occur from the City'Maintenance Yard (Initiative Ordinance No. 84-758). Subsequently in 1986, the City entered into Oil and Gas Lease No.1, also referred to as the "Upland Lease". This lease was amended later in 1986, as well as in 1988 and 1991. The Uplands Lease was for oil and gas development landward of the granted trust landS. At around the same time the Upland Lease was entered into, the City was also negotiating an oil and gas lease for the City's granted lands.4 After much negotiation, in 1992, the City issued Oil and Gas Lease No.2, referred to as the "Tidelands Lease" for the City's granted lands. The Tidelands Lease was amended in 1993. In order for the City's Tidelands Lease to be effective, the Commission was required by statute to make certain findings. Under former PRC 68725 , the Commission was required to find that (1) oil or gas deposits are believed to be contained within the lands proposed to be leased; (2) that the same lands are being drained by means of wells upon adjacent lands; and, (3) the leasing of the same for the production of Oil and gas will be in the best interests of the state. In addition, the Commission had to make findings relating to the bidding process and the form of the proposed lease. At the Commission's June 30, 1992, meeting (Minute Item No. 41), the Commission, overruling the staff recommendation, found that drainage was occurring and directed staff to work with the City to resolve the remaining lease issues. A finding of drainage was necessary for the City to issue the Tidelands Lease. At the April 28, 1993 Commission meeting, the Commission: (1) approved the April 28, 1993 Memorandum of Understanding between the City and the Commission (MOU); (2) determined that the requirements of PRC § 6872 had been met; (3) determined that pursuant to PRC § 7061, the City was exempt from the formal bidding requirements of PRC §§ 7058.5 and 7059; and, (4) approved both the January 14,1992, Tidelands Lease and its April 28, 1993, amendment. 3 Trustee duties are referenced in case law, the California Constitution, granting statutes and PRC §§ 6009, 6009.1, 6306, and 6305. Seminal cases that can be referenced are: Mallon v. City of Long Beach, (1955) 44 Cal.2d 199; State of California v. County of Orange, (1982) 143 Cal. App.3d. 20; City of Long Beach v. Morse (1947) Cal.2d 254, and City of Coronado v. San Diego Unified Port District (1964) ~27 Cal. App. 455. . 4 Based on a preliminary review of the Commission files, it appears that the City began working with Commission staff to determine if drainage was occurring as early as 1977. 5 Former PRC 6872 was repealed in 1994 pursuant to AB 2444. The current PRC 6872 addresses the withdrawing of an incomplete application.
  • 4. Michael Jenkins September 16, 2014 Page 4 Subsequently in August 1993, the Hermosa Beach Stop Oil Coalition filed suit challenging the Commission's April 28, 1993, action. In November 1993, the suit was amended to include Santa Monica Baykeeper, Heal the Bay and American Oceans Campaign as additional petitioners. The trial court found that the Commission had properly interpreted PRC § 6872, but found that the Commission failed to provide an analysis to support the determination that the lease was in the best interest of the state as required by PRC § 6872. On January 14, 1994, the trial court issued a writ directing the Commission make the necessary findings. In response, the Commission, on March 8, 1994, again overruling staff's recommendation: (1) determined that oil and gas were believed to be present, that the oil and gas were being drained and that a lease for the production of said oil and gas was in the best interest of the state; (2) determined that, pursuant to PRC § 7057 the City could issue a lease because PRC § 6872 conditions had been met; and, (3) approved, pursuant to PRC § 7054.5 the proposal by the City to lease the granted tide and submerged lands for purposes of oil and gas production. This approval was submitted to the trial court on March 15, 1994. The case was closed by formal order on July 6, 1994. Proposition E, which was approved in November 1995, overturned the 1984 voter initiative. After the passage of Proposition E, Hermosa Beach Stop Oil Coalition, Heal the Bay, Santa Monica Baykeeper and American Oceans Campaign (the sa'me parties that had sued the Commission the prior year) filed suit to stop the City from continuing to perform under the two leases. This litigation continued until around 2001 and resulted in, among other things, a declaration by the Court of Appeals, Second Appellate District, that Proposition E did apply to the two leases. In 1998 Macpherson Oil Company (Macpherson), both lessee and a real party in interested to the above-described lawsuit, filed a cross-complaint alleging breach of contract. That action was severed and became its own litigation. In 2008, a trial court ruled that the adoption of Proposition E was a breach of contract for which 'damages were owed. On appeal, it was ruled that a 1998 determination that the operation may pose a health and safety risk may provide a defense such that the City would not have to pay damages. That litigation continued until 2012, at which point the City, Macpherson, and third party, E&B Natural Resources Management Corporation (E&B), entered into a "Settlement Agreement and Release" (Settlement). The City Council unanimously voted to approve the settlement on March 2, 2012. September 2nd Letter from the City of Hermosa Beach At the July 8, 2014 City Council meeting, the City Council requested the opinion of Commission staff concerning two questions. Commission staff responses to the two questions as described in the City's September 2nd letter are below: 1) Pursuant to the Oil and Gas Lease No.2 (the "Subject Lease") and the Grant Deed from the City of Hermosa Beach ("City") to Macpherson Oil Company
  • 5. Michael Jenkins September 16, 2014 Page 5 --~-~-.--.-----.-.- -----, ("Macpherson"), and as to hydrocarbons produced from the Tidelands, is the City authorized to deduct the 3.33% non-participating royalty due to Macpherson from the Tidelands Trust Fund by designating it as an "expense"? Currently, the Tidelands Lease includes a royalty rate of 18%%, all of which is required to go in the Special Tidelands Trust. (MOU Paragraph 4) According to the MOU, 7% could be paid to the City's General Fund. (MOU Paragraph 3) The remaining royalty, 11%%, would be placed into the Special Tidelands Trust Fund. (MOU Paragraph 3) In approving the MOU, the Commission did not contemplate that the effective royalty rate for the Special Tidelands Trust Fund would be less than 62.5% of the 18%%. For this reason, staff does not believe that deducting any portion of the 3.33% non-participating royalty payment from the portion of the 18%% royalty under the Tidelands Lease that was not released into the City's General Fund is consistent with the Commission's prior authorization or the City's obligations as a trustee for the state. As such, while Commission staff has significant concerns about deducting any portion of the 3.33% non-participating royalty payment from the royalty due the Special Tidelands Trust Fund, staff does not object to the City paying the entire 3.33% of the non-participating royalty payment due from the Uplands royalties or the City's General Fund. 2) Is the City authorized to utilize the Tidelands Trust Fund to repay advances to the lessees under the Subject Lease for environmental remediation of the City's Maintenance Yard for advances exceeding $100,000 and up to $3.7 million? The Commission's approval of the MOU did not put an upper limit on the amount that could be reimbursed, but instead refers to the Tidelands Lease to determine whether the category of costs is appropriate for reimbursement. Pursuant to Paragraph 7 of the MOU, the Commission has previously agreed that the tideland revenues can be used to pay 70% of the "advance" as specified in Section 13.d.(4) of the Tidelands. Lease. Section 13.d (4) authorizes the repayment of an advance by the Lessee to cover certain costs related to City's relocation of the Maintenance Yard and also refers to the reimbursement of the advance to cover related activities in Sections 13.a, 13.c, and 20.e. Environmental remediation costs is a cost category.in Section 13.c. that the Commission, pursuant to the MOU, already authorized to be reimbursed. In summary, yes, the City is authorized to utilize the Tidelands Trust Fund to repay advances to the extent provided in Paragraph 7 of the MOU. Continuing Obligations Under the MOU Finally, I would like to take this opportunity to remind the City that the MOU imposed some continuing obligations. In the event the voters authorize E&B to perform under the terms of the Tidelands Lease, pursuant to Paragraph 8, the City is required to
  • 6. Michael Jenkins , September 16, 2014 Page 6 request that the Commission be named as an additional insured on any insurance coverage provided by the Operator under the Lease. In addition, pursuant to Paragraph 10, it was agreed that the 1957 plat was to serve as the baseline for the allocation of production and that the City would survey the mean high tide line periodically during the lease term. If you have additional questions or if Commission staff can be a helpful resource in any manner, please do not hesitate to contact me or Reid Boggiano, Granted Lands Representative, at (916) 574-1800. Sincerely, ~ [(HERI PE~BERTON Chief of External Affairs Attachment cc: Jessica Rader, Senior Counsel
  • 7. I-----~-- i Assembly Bill No. 2620 CHAPTER 206 An act to amend Sections 6305 and 6306 of, to add Section 6009.1 to, . and to add and repeal Section 6320 of, the Public Resources Code, relating to tidelands and submerged lands. [Approved by Governor August 27, 2012. Filed with Secretary of S tate August 27, 2012.] LEGISLATIVE COUNSEL'S DIGEST AB 2620, Achadjian. Tidelands and submerged lands: granted public trust lands. (1) Existing law grants to various local entities the right, title, and interest of the state in and to certain tidelands and submerged lands in trust generally for purposes of commerce, navigation, and fisheries, and for other public trust purposes. Existing law vests the State Lands Commission with all jurisdiction and authority remaining in the state as to tidelands and submerged lands as to which grants have been or may be made. This. bill would make various legislative declarations and findings regarding granted public trust lands, the duties of a trustee of state lands, and the prohibition against common trust principles nullifying an act ofthe Legislature or modifying its duty under the California Constitution to do all things necessary to execute and administer the public trust. The bill would declare that those findings and declarations are declaratory of existing law. (2) Existing law confers upon counties and cities certain powers granted to the commission with regard to the leasing or granting of rights or privileges with relation to the lands owned by the state. This bill would instead confer these powers upon the local trustee of granted public trust lands, as defined; (3) Existing law requires local and state agencies that have been granted sovereign trust lands to provide accurate records of all revenues received from the trust lands and trust assets and of all expenditures of those revenues and requires all revenues received or generated from trust lands to be expended only for those uses and purposes, consistent with the public trust for commerce, navigation, and fisheries, and the applicable statutory grant. Existing law requires a trustee to annually file a detailed statement of revenues and expenditures with the commission. This bill would instead require the local trustee of granted public trust lands to undertake those duties and would require all funds received or generated from trust lands or trust assets to be segregated in separate accounts from nontrust received or generated funds. The bill would require the annual statement required to be filed with the commission to include a 95
  • 8. Ch.206 -2- standardized reporting form, and would provide that the information in the statement and form is a public record, to be made available on the commission's Internet Web site. The bill would provide that all costs incurred by a local trustee of granted public trust lands to implement the bill be paid from the revenues derived from its granted public trust lands and assets. The bill would require the commission to exempt a local trustee of granted public trust land from the . duties imposed by the bill if the revenues derived from its granted public trust lands and assets are not sufficient to pay for those costs, as specified. The bill would create a state-mandated local program by imposing new duties with regard to the duties that the bill would impose upon local agencies that are local trustees of granted public trust lands.· (4) The bill would require the commission to prepare a workload analysis and implementation plan by September 1,2013, and to submit the plan to specified committees of the Legislature and the Department of Finance. The bill would make the report provision inoperative September 1,2017, and would repeal it on January 1,2018. (5) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. The people a/the State a/California do enact as/allows: SECTION 1. The Legislature finds and declares all ofthe following: (a) Upon admission to the United States, and as an incident of its sovereignty, the State of California received title to the tidelands, submerged lands, and beds of navigable waterways within its borders to be held subject to the public trust doctrine for statewide public purposes, including commerce, navigation, fisheries, preservation oflands in their natural state, and other recognized public trust uses. (b) The state has made grants of public trust lands to over 80 local public entities, each of which manages the state's public trust lands as trustee-· pursuant to the public trust doctrine, legislative grants, the California Constitution, and other laws governing the trust and the trustee's fiduciary responsibilities. (c) A local trustee of granted public trust lands is charged with managing the state's granted public trust lands on behalf of the state for the benefit of all the people of California. (d) As part of its fiduciary duty, a local trustee of granted public trust lands is required to take reasonable steps under the circumstances to take and keep control of and preserve the tnist property. ( e) All jurisdiction and authority remaining in the state as to tidelands and submerged lands as to which grants have been or may be made is vested in the State Lands Commission. 95
  • 9. -3- Ch.206 (f) The use of revenues received from trust lands and trust assets by a local trustee of granted public trust lands is limited by the legislative grant, the public trust doctrine, and other laws governing the trust. An evaluation ofthe proper use of granted public trust lands necessarily includes evaluating whether the operation and management of these resources managed on behalf of the state by local trustees is consistent with the public trust for commerce, navigation, and fisheries, and the applicable legislative grants. (g) According to the State Auditor's report of August 2011, the State Lands Commission "has not developed an audit plan designed to ensure that the revenues generated on these granted lands are used properly," and that "without oversight of granted lands, the commission is neglecting its responsibility to protect the public trust and risks having to address additional ongoing abuses offunds dedicated for public trust uses." (h) As a result of the August 2011 review, the State Auditor concluded that the State Lands Commission should establish a monitoring program to ensure that the funds generated· from granted lands are expended in accordance with the public trust. The State Auditor further concluded that, despite current understaffing concerns, "the commission should perform a workload analysis t6 determine the staffing levels it needs to fulfill its oversight responsibilities of granted lands." (i) A local trustee of granted public trust lands holds and manages its public trust property, including the lands and revenue derived from that property, as a state asset for the benefit of the people of California and cannot use the trust corpus for general municipal purposes or other purposes not consi,stent with the public trust doctrine and its legislative grant. Because the costs that may be incurred by a local trustee of granteELilUblic trust lands to implement this act are required to be paid solely from the revenues derived from that property, and because the State Lands Commission is required by this act to exempt a local trustee that does not derive sufficient funds from those assets to pay for the costs imposed by this act, the state would not be required to reimburse a trustee for the implementation of this act. SEC. 2. Section 6009.1 is added to the Public Resources Code, to read: 6009.1. The Legislature finds and declares all of the following: (a) Granted public trust lands remain subject to the supervision of the state and the state retains its duty to protect the public interest in granted public trust lands. (b) The state acts both as the trustor and the representative of the beneficiaries, who are all of the people of this state, with regard to public trust lands, and a grantee of public trust lands, including tidelands and submerged lands, acts as a trustee, with the granted tidelands and submerged lands as the corpus of the trust. (c) A grantee may fulfill its fiducimy duties as trustee by determining the application of each of the following duties, all of which are applicable under common trust principles: (1) The duty ofloyalty. (2) The duty of care. (3) The duty of full disclosure. 95
  • 10. Ch.206 -4- (4) The duty to keep clear and adequate records and accounts. (5) The duty to administer the trust solely in the interest of the beneficiaries. (6) The duty to act impartially in managing the trust property. (7) The duty to not use or deal with trust property for the trustee's own profit or for any other purpose unconnected with the trust, and to not take part in a transaction in ,which the trustee has an interest adverse to the beneficiaries. (8) The duty to take reasonable steps under the circumstances to take and keep control of and to preserve the trust property. ' (9) The duty to make the trust property productive under the circumstances and in furtherance of the purposes of the trust. (10) The duty to keep the trust property separate from other property not subject to the trust and to see that the trust property is designated as property of the trust. (11) The duty to take reasonable steps to enforce claims that are part of the trust property. (12) The duty to take reasonable steps to defend actions that may result in a loss to the trust. (13) The duty to not delegate to others the performance of acts that the trustee can reasonably be required to perform and to not transfer the administration of the trust to a cotrustee. If a trustee has properly delegated a matter to an agent, the trustee has a duty to exercise direct supervision over the performance ofthe delegated matter. . (d) All duties endowed upon a trustee of state lands shall depend upon the terms of the trust, and ifthere is no provision, express or implied, within the terms of the trust, a statute, or a grant, the trustee's duties shall be interpreted and determined by principles and rules evolved by courts of equity with respect to common trust principles. (e) Common trust principles do not nullify an act of the Legislature or modify its duty under the California Constitution to do all things necessary to execute and administer the public trust. SEC. 3. Section 6305 of the Public Resources Code is amended to read: 6305. The powers granted by this chapter to the commission as to leasing or granting of rights or privileges with relation to the lands owned by the state are hereby conferred upon the local trustee of granted public trust lands to which those lands have been granted. SEC. 4. Section 6306 ofthe Public Resources Code is amended to read: 6306. (a) For purposes ofthis division, "local trustee of granted public trust lands" means a cOlmty, city, or district, including a water, sanitary, regional park, POlt, or harbor district, or any other local, political, or corporate subdivision that has been granted, conveyed, or transferred by statute, public trust lands, including tidelands, submerged lands, or the beds of navigable waters, through a legislative grant. A local trustee of granted public trust lands is a trustee of state lands. (b) Notwithstanding any other law, every local trustee of granted public trust lands shall establish and maintain accounting procedures, in accordance 95
  • 11. -5- Ch.206 with generally accepted accounting principles, providing accurate records of all revenues received from the trust lands and trust assets and of all expenditures ofthose revenues. If a trust grantee has several trust grants of adjacent lands and operates the granted lands as a single integrated entity, separation of accounting records for each'trust grant is not required. ( c) All revenues received from trust lands and trust assets administered or collected by a local trustee of granted public trust lands shall be expended only for those uses and purposes consistent with the public trust for commerce, navigation, and fisheries, and the applicable statutory grant. ' (d) All funds received or generated from trust lands or trust assets shall be segregated in separate accounts from nontrust received or generated funds. ' (e) (1) Unless otherwise prescribed by an applicable statutory grant, on or before October 1 of each year, each local trustee of granted public trust lands shall file with the commission a detailed statement of all revenues and expenditures relating to its trust lands and trust assets, including obligations incurred but not yet paid, covering the fiscal year preceding submission of the ~tatement. (2) The statement shall be prepared in accordance with generally accepted accounting principles and may take the form of an annual audit prepared by or for the local trustee of granted public trust lands. (3) (A) The detailed statement shall be submitted along with a standardized reporting form developed by the commission. (B) The commission shall use an existing reporting form previously developed for purposes' of this paragraph, if a finding is made by the commission that it is generally responsive to the needs of the commission as prescribed in this section. Alternatively, the commission may develop a reporting form that requires a local trustee of granted public lands to report on all ofthe following: (i) A summary of all funds received or generated from trust lands or trust assets. (ii) A summary of all spending offunds received or generated from trust lands or trust assets. (iii) Any other disposition of funds received or generated from trust lands or trust assets or of the trust lands or trust assets themselves. (iv) A description of the nianner in which the statement required by this subdivision and accompanying the reporting form is organized. (v) Any other information that the cOITnnission deems to be ineluded in an accounting of granted public trust lands. (C) The adoption of the form by the commission pursuant to this subdivision is the prescription of a form for purposes of subdivision ( c) of Section 11340.9 of the Government Code. (4) All forms and supporting statements submitted pursuant to this section shall be public records and be made available on the commission's Internet Web site. (f) (1) The costs that may be incurred by a local trustee of granted public trust lands that result from any new duties imposed upon that trustee by the 95
  • 12. Ch.206 -6- act amending this section in the 20 JI-12 Regular Session ofthe Legislature, including the requirement to submit a standardized reporting form required by paragraph (3) of subdivision (e), shall be paid from the revenues derived from its granted public trust lands and assets specified in subdivision (b). (2) If the revenues derived from the granted public trust lands and assets specified in subdivision (b) are not sufficient to pay the costs for the duties . specified in paragraph (1), the commission shall exempt the local trustee of granted public trust lands from performing those duties for which the revenues are not sufficient, or grant a deadline extension from the performance of those duties until sufficient funds are available. SEC. 5. Section 6320 is added to the Public Resources Code, to read: 6320. (a) On or before September 1,2013, the commission shall prepare a workload analysis that summarizes the resources necessary for the commission to fulfill its oversight responsibilities with respect to all legislatively granted public trust lands. (b) The workload analysis shall be submitted, in compliance with Section 9795 of the Government Code, to the Assembly Committee on Natural Resources, the Senate Committee on Natural Resources and Water, the Joint Legislative Budget Committee, and the Department of Finance. (c) This section shall become inoperative on September 1,2017, pursuant to Section 10231.5 of the Government Code, and, as ofJanuary 1,2018, is repealed, unless a later enacted statute, that becomes operative on or before January 1,2018, deletes or extends the dates on which it becomes inoperative and is repealed. SEC. 6. The addition of Section 6009.1 to the Public Resources Code by Section 2 of this act does not constitute a change in, but is declaratory of, existing law. SEC. 7. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the costs incurred by a local agency to pay for the program or level of service mandated by this act, within the meaning of Section 17556 ofthe Government Code, will be paid solely from the revenues derived from the public trust lands and assets that are granted to that local agency by the state. o 95