HF 5350

1st Engrossment - 93rd Legislature (2023 - 2024) Posted on 04/26/2024 12:30pm

A bill for an act
relating to natural resources; providing for gas or oil exploration and production
leases and permits on state-owned land; creating advisory committee; authorizing
rulemaking; requiring a report; appropriating money; amending Minnesota Statutes
2022, section 93.25, subdivisions 1, 2; proposing coding for new law in Minnesota
Statutes, chapter 93.

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

Section 1.

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

Sec. 2.

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 deleted text begin shall deleted text end new text begin must new text end
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 deleted text begin shall deleted text end new text begin must new text end be fully set forth in each lease issued. No new text begin nonferrous metallic mineral
new text end 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 deleted text begin shall deleted text end new text begin must new text end 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

Sec. 3.

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

new text begin Subdivision 1. new text end

new text begin Permit required. new text end

new text begin Except as provided in section 103I.681, a person must
not engage in or carry out production of gas or oil from consolidated or unconsolidated
formations in the state unless the person has first obtained a permit for the production 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 extraction
area through ownership, lease, or agreement. For purposes of this section, "gas" includes
both hydrocarbon and nonhydrocarbon gases. For purposes of this section, "production"
includes extraction and beneficiation of gas or oil.
new text end

new text begin Subd. 2. new text end

new text begin Moratorium. new text end

new text begin Until rules are adopted under section 93.514, a permit authority
may not grant a permit necessary for the production of gas or oil unless the permit authority
has been given legislative approval to issue the permit.
new text end

Sec. 4.

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

new text begin (a) The following agencies may adopt rules governing gas and 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
regulating air emissions; water discharges, including stormwater management; and storage
tanks as they pertain to gas and oil production;
new text end

new text begin (2) the commissioner of health may adopt or amend rules on groundwater and surface
water protection, exploratory boring construction, drilling registration and licensure, and
inspections as they pertain to the exploration and appraisal of gas and oil resources;
new text end

new text begin (3) the Environmental Quality Board may adopt or amend rules to establish mandatory
categories for environmental review as they pertain to gas and oil production;
new text end

new text begin (4) the commissioner of natural resources must adopt or amend rules pertaining to the
conversion of an exploratory boring to a production well, pooling, spacing, unitization, well
abandonment, siting, financial assurance, and reclamation for the production of gas and oil;
and
new text end

new text begin (5) the commissioner of labor and industry may adopt or amend rules to protect workers
from exposure and other potential hazards from gas and oil production.
new text end

new text begin (b) An agency adopting rules under this section must publish the notice of intent to adopt
rules within 24 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.
new text end

new text begin (c) For purposes of this section, "gas" includes both hydrocarbon and nonhydrocarbon
gases. "Production" includes extraction and beneficiation of gas or oil from consolidated
or unconsolidated formations in the state.
new text end

new text begin (d) Any grant of rulemaking authority in this section is in addition to existing rulemaking
authority and does not replace, impair, or interfere with any existing rulemaking authority.
new text end

Sec. 5.

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

new text begin Subdivision 1. new text end

new text begin Authority to lease. new text end

new text begin (a) 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.
new text end

new text begin (b) For purposes of this section, "gas or oil exploration and production" includes the
exploration and production of both hydrocarbon and nonhydrocarbon gases, including noble
gases. "Noble gases" means a group of gases that includes helium, neon, argon, krypton,
xenon, radon, and oganesson. "Production" includes extraction and beneficiation of gas or
oil from consolidated or unconsolidated formations in the state.
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 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, control of adjacent lands, and the best interests
of the state. 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 gas and oil 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. 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.
new text end

Sec. 6. new text begin MINNESOTA GAS AND OIL RESOURCES TECHNICAL ADVISORY
COMMITTEE.
new text end

new text begin (a) The commissioner of natural resources must appoint a Minnesota Gas and Oil
Resources 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 Office of the Attorney General;
new text end

new text begin (6) the University of Minnesota; and
new text end

new text begin (7) federal agencies.
new text end

new text begin (b) A majority of the committee 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; law; or other areas related to gas or oil production.
new text end

new text begin (c) Members of the technical advisory committee may not be registered lobbyists.
new text end

new text begin (d) The technical advisory committee must make recommendations to the commissioner
relating to the production 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 on statutory and policy changes that govern permitting requirements and
processes, financial assurance, taxation, boring monitoring and inspection protocols,
environmental review, and other topics that provide for gas and oil production to be
conducted in a manner that will reduce environmental impacts to the extent practicable,
mitigate unavoidable impacts, and ensure that the production area is restored to a condition
that protects natural resources and minimizes harm and that any ongoing maintenance
required to protect natural resources is provided. The temporary framework must consider
public testimony from stakeholders and Tribes, and the committee must hold at least one
public meeting on this topic. Recommendations must include draft legislative language.
new text end

new text begin (e) 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 and to support the issuance of temporary permits issued under the
temporary framework in a manner that benefits the people of Minnesota while adequately
protecting the state's natural resources.
new text end

new text begin (f) For purposes of this section, "gas" includes both hydrocarbon and nonhydrocarbon
gases. For purposes of this section, "production" includes extraction and beneficiation from
consolidated or unconsolidated formations in the state.
new text end

Sec. 7. new text begin APPROPRIATIONS; NONPETROLEUM GAS REGULATORY
FRAMEWORK.
new text end

new text begin (a) $768,000 in fiscal year 2024 is appropriated from the minerals management account
in the natural resources fund to the commissioner of natural resources for the Minnesota
Gas and Oil Resources Technical Advisory Committee in section 6. This is a onetime
appropriation and is available until June 30, 2027.
new text end

new text begin (b) $2,406,000 in fiscal year 2024 is appropriated from the minerals management account
in the natural resources fund to the commissioner of natural resources to adopt a regulatory
framework for gas and oil production in Minnesota and for rulemaking. This appropriation
is available until June 30, 2027.
new text end

Sec. 8. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 7 are effective the day following final enactment.
new text end