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STAFF REPORT




CONSIDER APPLICATION FOR RENEWAL

OF A MINERAL EXTRACTION LEASE FOR MINERALS

OTHER THAN OIL, GAS, OR GEOTHERMAL RESOURCES



APPLICANT:

U.S. Borax Inc.

AREA, LAND TYPE, AND LOCATION:

Approximately 15,534 acres of State sovereign land located on the dry lakebed

of Owens Lake in western Inyo County. This sovereign land is located east of

U.S. Highway 395, and approximately 10 miles south of the city of Lone Pine

(see Exhibits A and B, attached).

AUTHORIZED USE:

Extraction of industrial minerals, a sodium carbonate mineral (trona), and any

other mineral deposits except oil, gas, other hydrocarbons, and geothermal

resources.

LEASE TERM:

This is the second renewal with a lease term of 10 years, effective August 1,

2018, through July 31, 2028, with a preferential right to renew for two additional

terms, not to exceed 10 years each, upon such reasonable terms and conditions

as may be prescribed by the Commission.

CONSIDERATION:

The State’s royalty is 10 percent for unprocessed trona and 7 percent for

processed trona.

Annual rent of $2.50 per acre or $38,858 for a total of 15,543 acres and a

minimum annual royalty of $120,000.

INSURANCE:

In an amount not less than $2,000,000.

BOND:

In an amount of $60,000 to guarantee the faithful performance of Lessee’s lease

requirements.



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STAFF REPORT NO. C80 (CONT'D)

BACKGROUND:

In 1978 (Item C26, March 30, 1978), the Commission approved issuance of State

Mineral Extraction Lease (Lease) PRC No. 5464.1, through a competitive bid

sale, to Lake Minerals Corporation for a primary term of 20 years, with an option

to renew for three successive terms, not to exceed 10 years each.

In 1980 (Item C18, June 26, 1980), the Lease was amended to increase the

leased acreage from 7,440 acres to 16,120 acres, increase the performance

bond to $30,000, and to increase the minimum annual royalty from $80,000 to

$120,000.

In 1998 (Item C116, June 19, 1998), the Commission approved Lake Minerals

Corporation’s assignment to U.S. Borax Inc.(Lessee), and the Lease was

renewed for a 10-year term through July 31, 2008.

On April 28, 2004, the Inyo County Planning Commission (County) certified an

Environmental Impact Report to construct a wash plant, calcining and drying

facility (State Clearinghouse No. 2003041127). In 2004 (Item C52, October 6,

2004), the Commission approved a lease amendment allowing construction of

the wash plant, calcining and drying facility. The permitted activities are limited to

the County issued Conditional Use Permit No. 2002-13/U.S. Borax and

Reclamation Plan No. 2002-1/U.S. Borax, with conditions and mitigation

measures, approved by the County on the same date. These documents

authorized the drilling and completion of a water well, wash plant, and

calcining/drying facility (also known as the Trona Processing Upgrade Project).

However, these facilities have yet to be constructed. The 2004 amendment also

increased the financial security to $60,000 and provided for four successive 10year lease terms following July 31, 2008. The lease terms are as follows:











1st renewal - August 1, 2008 through July 31, 2018

2nd renewal - August 1, 2018 through July 31, 2028

3rd renewal - August 1, 2028 through July 31, 2038

4th renewal - August 1, 2038 through July 31, 2048



On August 1, 2008, the Lease was placed in holdover status pending

negotiations of a lease amendment, and the Lessee’s request to exercise its

option to renew the Lease for another 10-year term.



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STAFF REPORT NO. C80 (CONT'D)

Concluding the lease holdover, in 2009 (Item C35, December 17, 2009), the

Commission approved the Lease’s first of four possible 10-year renewals,

extending the existing Lease for a 10-year term, retroactive from August 1, 2008

through July 31, 2018. The Commission also approved a lease amendment to

reduce the leased acreage by approximately 420 acres, from 16,120 to 15,700

acres. The acreage was reduced to allow the City of Los Angeles Department of

Water and Power to mitigate those lands for dust abatement.

The 2009 lease amendment also resulted in a modification of the State’s royalty.

The State’s royalty calculation is based upon the carbon dioxide (CO2) content

found in the trona (Na2CO3∙NaHCO3∙2H2O). The CO2 content is determined by

complex laboratory analysis in the Lessee’s laboratory located in Lone Pine. For

Lease quarter beginning August 1, 2017, the value of CO2 per ton was $198.97.

The price of CO2 per ton is adjusted yearly on August 1, in accordance with the

Bureau of Labor Statistics, Producer Price Index by Commodity for Special

Indexes: natural sodium carbonate and sulfate. The Lessee pays the State a

royalty of 10 percent of the gross value of the CO2 content in the trona. Per the

amendment, all processed trona, including use of the calcining and drying facility,

not yet constructed, is subject to a 7 percent royalty of the gross sales price.

In 2015 (Item C72, August 19, 2015), the Commission approved a partial

quitclaim deed for approximately 157 acres of the remaining 15,700 acres.

Following the acceptance of the quitclaim, the amended Lease area contained

approximately 15,543 acres of State sovereign land. Once again, the acreage

was reduced to allow the City of Los Angeles Department of Water and Power to

mitigate those lands for dust abatement.

On March 6, 2018, before the Lease’s expiration date, the Lessee applied for

their second Lease renewal to continue mining trona. If the Lease renewal is

approved, the Lessee will continue their trona extraction operation. The trona is

stockpiled, allowed to dry, and is trucked to Boron. At Boron, the trona is used as

a chemical reagent in the processing of sodium and calcium borates at the U.S.

Borax’s operation site. One percent of the trona is added to 99 percent of the

borates at Boron to stop the precipitation of probertite, a mineral, which forms

scaling in the pipes and is difficult to remove. In addition, the Lessee also sells a

smaller portion of their product to Western Milling for commercial animal feed.

Pursuant to the Surface Mining and Reclamation Act (SMARA), counties or cities

are the lead agency for a Conditional Use Permit and Mining and Reclamation

Plan that provides for how mining is to occur and how and when the land will be

reclaimed to a usable form. Under the SMARA, annual inspections are required

to be performed by the lead agency to determine the progress of mining and

reclamation and to ensure that all the terms and conditions of the Conditional

Use Permit are met.



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STAFF REPORT NO. C80 (CONT'D)

STAFF ANALYSIS AND RECOMMENDATION:

Authority:

Public Resources Codes sections 6005, 6216, 6301, 6890, 6895 and

6898; California Code of Regulations, title 14, section 15096; California

Code of Regulations, title 2, section 2200 et seq.

Public Trust and State’s Best Interests Analysis:

The leased lands are located on the dry lakebed of Owens Lake. The

long-established mining activities have not been known to interfere with

Public Trust needs or uses.

The Lease contains restrictions that protect public rights and

environmental resources. The County also regulates the leased land while

protecting public health and safety. The County approved an

Environmental Impact Report and a Mitigation Monitoring and Compliance

Program for implementation of the mitigation measures. The Mitigation

Monitoring Program imposes feasible measures to avoid or substantially

reduce any significant environmental impacts.

This mine has an approved reclamation plan, approved financial

assurance, filed annual reports, paid reporting fees, and is inspected

annually by the lead agency, Inyo County.

The Lease also provides that the Lessee shall deliver to staff quarterly

royalty statements, which include the amount, quantity and value of all

minerals resources produced, extracted, shipped, and sold. This lease has

generated approximately $5.9 million in royalties for the State’s general

fund since 1981.

The Lessee has submitted the financial liability insurance in an amount of

not less than $2,000,000 and added the Commission to its policy as an

additional insured. The document is on file at the Commission’s Long

Beach office.

Conclusion:

Staff believes that approving the lease renewal will not substantially

interfere with Public Trust needs and uses at this time, and for the

foreseeable term of the Lease. For all the reasons above, staff believes

approval of the lease renewal is in the State’s best interests. Staff

recommends approval of the Lease renewal.



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STAFF REPORT NO. C80 (CONT'D)

OTHER PERTINENT INFORMATION:

1.

Staff recommends that the Commission find that this activity is exempt

from the requirements of the California Environmental Quality Act (CEQA)

as a categorically exempt project. The project is exempt under Class 1,

Existing Facilities; California Code of Regulations, title 2, section 2905,

subdivision (a)(2).

Authority: Public Resources Code section 21084; California Code of

Regulations, title 14, section 15300; California Code of Regulations, title 2,

section 2905.

2.



The Lessee will continue to mine trona consistent with the conditions

approved in the Environmental Impact Report (State Clearinghouse No.

2003041127), the Conditional Use Permit No. 2002-13 and the Mining

and Reclamation Plan No. 2002-1/U.S. Borax, approved by Inyo County

pursuant to the California Surface Mining and Reclamation Act of 1975.

The Environmental Impact Report was prepared and circulated to revise

the Conditional Use Permit and Reclamation Plan to add the trona

Processing Upgrade Project, which has not been built.



3.



The Lessee has submitted the required filing fee and the approximate

expense deposit.



4.



This action is consistent with the Strategy 1.1 of the Commission’s

Strategic Plan to deliver the highest levels of public health and safety in

the protection, preservation and responsible economic use of the lands

and resources under the Commission’s jurisdiction.



EXHIBITS:

A.

B.



Land Description

Site and Location Map



RECOMMENDED ACTION:

It is recommended that the Commission:

CEQA FINDINGS:

Find that the activity is exempt from the requirements of CEQA pursuant

to California Code of Regulations, title 14, section 15061 as a categorically

exempt project, Class 1, Existing Facilities; California Code of

Regulations, title 2, section 2905, subdivision (a)(2).



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STAFF REPORT NO. C80 (CONT'D)

PUBLIC TRUST AND STATE’S BEST INTERESTS:

Find that this lease renewal will not substantially interfere with Public Trust

needs and values; and is in the State’s best interests.

AUTHORIZATION:

Authorize the renewal of the existing Mineral Extraction Lease No. PRC

5464.1 to U.S. Borax Inc., for a term of 10 years beginning August 1,

2018, for all minerals other than oil, gas, other hydrocarbons, or

geothermal resources on sovereign lands described in Exhibit A and

shown on Exhibit B (for reference purposes only).



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EXHIBIT B

PRC 5464.1

U.S. BORAX INC.

OWENS LAKE

MINERAL LEASE –

SOVEREIGN LANDS

INYO COUNTY