Cal. PRC § 6895

(a) Upon establishing to the satisfaction of the commission that commercially valuable deposits of minerals have been discovered within the limits of any permit, the permittee shall receive priority for a mining lease over any other applicant seeking a lease for the land included in the prospecting permit. This priority shall expire after 365 days unless the permittee submits a complete lease application to mine the discovered minerals, in which case the priority shall expire upon the commission’s consideration or applicant’s withdrawal of the application. Mineral leases shall be limited to the minimum area required for mining. Nothing in this section shall be construed to require the commission to issue a mineral lease.

(b) The lease shall provide for the payment of an annual rental of not less than fair market value, as determined by the commission. The lease shall also provide for payment, which may be taken in kind, of either a royalty, to be taken in money or in kind, at the option of the commission, of not less than 10 percent of the gross value of all mineral production from the leased lands, less any charges approved by the commission that were made or incurred with respect to transporting or processing the state’s royalty share of production, or a percentage, to be determined by the commission, of the net profits derived from mineral extraction operations under the lease. Payment as a royalty or as a percentage of net profits shall be specified in the permit or lease.

(c) If the lands for which a lease is sought are tide and submerged lands, the commission, in accordance with Section 6900, may divide the lands into the size and number of parcels as the commission determines will not substantially impair the public rights to navigation and fishing or interfere with the trust upon which the lands are held.