HF 5350

as introduced - 93rd Legislature (2023 - 2024) Posted on 04/24/2024 05:12pm

A bill for an act
relating to natural resources; facilitating carbon sequestration and oil and gas
exploration and production leases on state-owned land; authorizing rulemaking;
appropriating money; amending Minnesota Statutes 2022, sections 92.50,
subdivision 1; 93.25, subdivisions 1, 2; proposing coding for new law in Minnesota
Statutes, chapters 92; 93.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2022, section 92.50, subdivision 1, is amended to read:

Subdivision 1.

Lease terms.

(a) The commissioner of natural resources may lease land
under the commissioner's jurisdiction and control:

(1) to remove sand, gravel, clay, rock, marl, peat, and black dirt;

(2) to store ore, waste materials from mines, or rock and tailings from ore milling plants;

(3) for roads or railroads;

(4) to compensate the permanent school fund according to section 92.122; deleted text begin or
deleted text end

new text begin (5) for geologic carbon sequestration; or
new text end

deleted text begin (5) deleted text end new text begin (6) new text end for other uses consistent with the interests of the state.

(b) The commissioner shall offer the lease at public or private sale for an amount and
under terms and conditions prescribed by the commissioner. Commercial leases for more
than ten years and leases for removal of peat that cover 320 or more acres must be approved
by the Executive Council.

(c) The lease term may not exceed 21 years except:

(1) leases of lands for storage sites for ore, waste materials from mines, or rock and
tailings from ore milling plants or for the removal of peat for nonagricultural purposes may
not exceed a term of 25 years; and

(2) leases for commercial purposes, including major resort, convention center, or
recreational area purposes, may not exceed a term of 40 years.

(d) Leases must be subject to sale and leasing of the land for mineral purposes and
contain a provision for cancellation for just cause at any time by the commissioner upon
six months' written notice. A longer notice period, not exceeding three years, may be provided
in leases for storing ore, waste materials from mines, or rock or tailings from ore milling
plants. The commissioner may determine the terms and conditions, including the notice
period, for cancellation of a lease for the removal of peat and commercial leases.

(e) Money received from leases under this section must be credited to the fund to which
the land belongs.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

new text begin [92.504] LEASING FOR GEOLOGIC CARBON SEQUESTRATION.
new text end

new text begin Subdivision 1. new text end

new text begin Authority to lease. new text end

new text begin With the approval of the Executive Council, the
commissioner of natural resources may enter into leases for geologic carbon sequestration
on lands belonging to the state or in which the state has an interest.
new text end

new text begin Subd. 2. new text end

new text begin Application. new text end

new text begin An application for a lease under this section must be submitted
to the commissioner of natural resources. The commissioner must prescribe the information
to be included in the application. The applicant must submit with the application a certified
check, cashier's check, or bank money order payable to the Department of Natural Resources
in the sum of $100 as a fee for filing the application. The application fee must not be refunded
under any circumstances. The right is reserved to the state to reject any or all applications
for a lease.
new text end

new text begin Subd. 3. new text end

new text begin Lease terms. new text end

new text begin The commissioner must negotiate the terms of each lease entered
into under this section on a case-by-case basis, taking into account the unique geological
and environmental aspects of each proposal. The commissioner may require an applicant
to provide financial assurance to ensure payment of any damages resulting from geologic
carbon sequestration.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2022, section 93.25, subdivision 1, is amended to read:

Subdivision 1.

Leases.

The commissioner may issue leases to prospect for, mine, and
remove new text begin or extract gas, oil, and new text end minerals other than iron ore deleted text begin upon deleted text end new text begin from new text end any lands owned by
the state, including trust fund lands, lands forfeited for nonpayment of taxes whether held
in trust or otherwise, and lands otherwise acquired, and the beds of any waters belonging
to the state. For purposes of this section, iron ore means iron-bearing material where the
primary product is iron metal. new text begin For purposes of this section, "gas" includes both hydrocarbon
and nonhydrocarbon gases.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

Minnesota Statutes 2022, section 93.25, subdivision 2, is amended to read:

Subd. 2.

Lease requirements.

All leases for nonferrous metallic minerals deleted text begin or petroleum deleted text end new text begin ,
gas, or oil new text end must be approved by the Executive Council, and any other mineral lease issued
pursuant to this section that covers 160 or more acres must be approved by the Executive
Council. The rents, royalties, terms, conditions, and covenants of all such leases shall be
fixed by the commissioner according to rules adopted by the commissioner, but no lease
shall be for a longer term than 50 years, and all rents, royalties, terms, conditions, and
covenants shall be fully set forth in each lease issued. No lease shall be canceled by the
state for failure to meet production requirements prior to the 36th year of the lease. The
rents and royalties shall be credited to the funds as provided in section 93.22. new text begin For purposes
of this section, "gas" includes both hydrocarbon and nonhydrocarbon gases.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

new text begin [93.513] PROHIBITION ON COMMERCIAL EXTRACTION OF GAS OR
OIL WITHOUT PERMIT.
new text end

new text begin Except as provided in section 103I.681, a person must not engage in or carry out
commercial extraction of gas or oil from consolidated or unconsolidated formations in the
state unless the person has first obtained a permit for the commercial extraction of gas or
oil from the commissioner of natural resources. Any permit under this section must be
protective of natural resources and require a demonstration of control of the proposed
extraction area through ownership, lease, or agreement. For purposes of this section, "gas"
includes both hydrocarbon and nonhydrocarbon gases.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 6.

new text begin [93.514] CARBON SEQUESTRATION AND GAS PRODUCTION
RULEMAKING.
new text end

new text begin (a) The following agencies may adopt rules governing geologic carbon sequestration,
gas, or oil exploration or production, as applicable:
new text end

new text begin (1) the commissioner of the Pollution Control Agency may adopt or amend rules
pertaining to both geologic carbon sequestration and gas production;
new text end

new text begin (2) the commissioner of health may adopt or amend rules pertaining to both geologic
carbon sequestration and exploration of gas or oil;
new text end

new text begin (3) the Environmental Quality Board must consider whether new or amended rules are
needed pertaining to environmental review for both geologic carbon sequestration and gas
production;
new text end

new text begin (4) the commissioner of revenue may adopt rules pertaining to the taxation of both
geologic carbon sequestration and gas production; and
new text end

new text begin (5) the commissioner of natural resources must adopt or amend rules pertaining to
permitting and reclamation for geologic carbon sequestration and production of gas or oil.
new text end

new text begin (b) An agency adopting rules under this section must publish the notice of intent to adopt
rules within 36 months of the effective date of this section. The 18-month time limit under
section 14.125 does not apply to rules adopted under this section. For purposes of this
section, "gas" includes both hydrocarbon and nonhydrocarbon gases.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

new text begin [93.516] LEASING TO PROSPECT FOR GAS AND OIL.
new text end

new text begin Subdivision 1. new text end

new text begin Authority to lease. new text end

new text begin With the approval of the Executive Council, the
commissioner of natural resources may enter into leases for gas or oil exploration and
production from lands belonging to the state or in which the state has an interest. For purposes
of this section, gas or oil exploration and production includes the exploration and production
of nonpetroleum gas.
new text end

new text begin Subd. 2. new text end

new text begin Application. new text end

new text begin An application for a lease under this section must be submitted
to the commissioner of natural resources. The commissioner must prescribe the information
to be included in the application. The applicant must submit with the application a certified
check, cashier's check, or bank money order payable to the Department of Natural Resources
in the sum of $100 as a fee for filing the application. The application fee must not be refunded
under any circumstances. The right is reserved to the state to reject any or all applications
for an oil or gas lease.
new text end

new text begin Subd. 3. new text end

new text begin Lease terms. new text end

new text begin (a) The commissioner must negotiate the terms of each lease
entered into under this section on a case-by-case basis, taking into account the unique
geological and environmental aspects of each proposal. A lease entered into under this
section must be consistent with the following:
new text end

new text begin (1) the primary term of the lease may not exceed five years plus the unexpired portion
of the calendar year in which the lease is issued. The commissioner and applicant may
negotiate the conditions by which the lease may be extended beyond the primary term, in
whole or in part;
new text end

new text begin (2) a bonus consideration of not less than $15 per acre must be paid by the applicant to
the Department of Natural Resources before the lease is executed;
new text end

new text begin (3) the commissioner of natural resources may require an applicant to provide financial
assurance to ensure payment of any damages resulting from the production of gas or oil;
new text end

new text begin (4) the rental rates must not be less than $5 per acre per year for the unexpired portion
of the calendar year in which the lease is issued and in years thereafter; and
new text end

new text begin (5) on leased minerals produced and sold by the lessee from the lease area, the lessee
must pay a production royalty to the Department of Natural Resources of not less than 18.75
percent of the gross sales price of the product sold free on board at the delivery point, and
the royalty must be credited as provided in section 93.22.
new text end

new text begin (b) For purposes of this section, "gross sales price" means the total consideration paid
by the first purchaser that is not an affiliate of the lessee for gas or oil produced from the
leased premises, except that:
new text end

new text begin (1) lessor's royalty bears its proportionate part of severance taxes actually paid by the
lessee attributable to production from the leased premises;
new text end

new text begin (2) no royalty is payable on gas used on the leased premises for production operations
or compression or dehydration of gas produced from the leased premises; and
new text end

new text begin (3) lessor's royalty bears lessor's proportionate part of any costs of transporting oil, gas,
or liquid hydrocarbon products paid to any third party that is not an affiliate of the lessee.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 8. new text begin GAS PRODUCTION TECHNICAL ADVISORY COMMITTEE.
new text end

new text begin (a) The commissioner of natural resources must appoint a technical advisory committee
to develop recommendations according to paragraph (c). The commissioner may appoint
representatives from the following entities to the technical advisory committee:
new text end

new text begin (1) the Pollution Control Agency;
new text end

new text begin (2) the Environmental Quality Board;
new text end

new text begin (3) the Department of Health;
new text end

new text begin (4) the Department of Revenue;
new text end

new text begin (5) the University of Minnesota; and
new text end

new text begin (6) federal agencies.
new text end

new text begin (b) A majority of the members must be from state agencies, and all members must have
expertise in at least one of the following areas: environmental review; air quality; water
quality; taxation; mine permitting; mineral, gas, or oil exploration and development; well
construction; or other areas related to gas or oil production.
new text end

new text begin (c) The technical advisory committee must make recommendations to the commissioner
relating to the exploration of gas and oil in the state to guide the creation of a temporary
regulatory framework that will govern permitting before the rules authorized in Minnesota
Statutes, section 93.514, are adopted. The temporary framework must include
recommendations that govern permitting requirements and processes, financial assurance,
taxation, boring monitoring and inspection protocols, environmental review, and other topics
that provide for gas extraction to be conducted in a manner that will reduce environmental
impacts to the extent practicable, mitigate unavoidable impacts, and ensure that the extraction
area is left in a condition that protects natural resources and minimizes the need for
maintenance. Recommendations must include draft legislative language.
new text end

new text begin (d) By January 15, 2025, the commissioner must submit to the chairs and ranking minority
members of the legislative committees and divisions with jurisdiction over environment
recommendations for statutory and policy changes to facilitate gas and oil exploration and
production in this state in a manner that benefits the people of Minnesota while adequately
protecting the state's natural resources.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 9. new text begin APPROPRIATIONS; CARBON SEQUESTRATION AND NONPETROLEUM
GAS REGULATORY FRAMEWORK.
new text end

new text begin (a) $750,000 in fiscal year 2024 is appropriated from the minerals management account
in the natural resources fund to the commissioner of natural resources for the Gas Production
Technical Advisory Committee. This is a onetime appropriation.
new text end

new text begin (b) $696,000 in fiscal year 2025 is appropriated from the minerals management account
in the natural resources fund to the commissioner of natural resources to adopt a regulatory
framework for subsurface mineral-based sequestration of carbon and nonpetroleum gas
extraction in Minnesota and for rulemaking. The base amount for this appropriation is $0
in fiscal year 2028 and thereafter.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end