Pub. Resources Code, § 6805

The commission shall reserve and may exercise the authority to cancel any prospecting permit or lease upon which a commercially valuable deposit of minerals or geothermal resources other than oil or gas has not been discovered or upon which oil or gas has not been discovered in paying quantities upon failure of the permittee or lessee (after 30 days’ written notice and demand for performance) to exercise due diligence and care in the prosecution of the prospecting or development work in accordance with the terms and conditions of the permit or lease. After discovery of a commercially valuable deposit of minerals or geothermal resources other than oil or gas on lands subject to any permit or lease issued pursuant to this chapter, or after discovery of oil or gas in paying quantities on lands subject to any lease, the permit or lease may be forfeited and canceled only upon failure of the lessee after 90 days’ written notice and demand to comply with any of the provisions of the permit or lease or of the regulations applicable thereto and in force at the date of the permit or lease. However, in the event of any cancellation the lessee under any oil or gas lease or the permittee or lessee under any geothermal resource permit or lease shall have the right to retain under the permit or lease any and all drilling or producing wells as to which no default exists, together with a parcel of land surrounding any well or wells and any rights-of-way through the lands, under permit or lease, as may be reasonably necessary to enable the permittee or lessee to drill and operate the retained well or wells. In the event of the cancellation of any permit or lease the permittee or lessee shall have a reasonable time within which to remove any and all property, equipment and facilities owned or used by the permittee or lessee in connection with operations under the permit or lease. The commission shall insert in every permit or lease issued under this chapter appropriate provisions for its cancellation in accordance with the provisions of this section.