No. 27607 (New Rule): R850-24. General Provisions: Mineral and Material Resources, Mineral Leases and Material Permits

DAR File No.: 27607
Filed: 12/23/2004, 02:55
Received by: NL

 

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule is to provide the general provisions that apply to multiple commodities in one "umbrella-type" rule. This should provide greater clarity for the community that is subject to these processes.

 

Summary of the rule or change:

All of the general provisions that apply to mineral leases and mineral material permits, coal, and geothermal resources have been combined together into one rule in order to provide greater clarity. A new definitions section has been incorporated, insurance provisions that reflect prior agency policy but were missing from Rule R850-20, revised wording for provisions dealing with multiple mineral and material development, and bonding provisions for subleased and assigned leases have been incorporated into this rule. This rule is based on pre-existing, current agency practices which were not explicitly set out in Rule R850-20. (DAR NOTE: The proposed repeal of Rule R850-20 is under DAR No. 27611 in this issue.)

 

State statutory or constitutional authorization for this rule:

Subsection 53C-1-302(1)(a)(ii), 53C-2-201(1)(a), and 53C-2-402(1)

 

Anticipated cost or savings to:

the state budget:

It is not anticipated that there will be any additional cost or savings to the state budget as a result of this rule because it contains the general provisions that apply to a group of commodities. If there is any savings at all, it would be in the area of administrative costs due to a greater simplification of the management process.

 

local governments:

It is not anticipated that there will be any additional cost or savings to local government because of implementation of this rule as it basically just sets forth the general provisions that apply to the management of multiple commodities.

 

other persons:

The implementation of this rule is not anticipated to bring any additional cost or savings to other persons due to the nature of this rule being more of an "umbrella-type" rule which contains general provisions that apply to multiple commodities.

 

Compliance costs for affected persons:

It is not anticipated that there should be any additional compliance costs for affected persons because this rule contains the general provisions that apply to multiple commodities. The provisions of this rule are for clarification purposes of current agency practices.

 

Comments by the department head on the fiscal impact the rule may have on businesses:

This rule reproduces material from a rule which is being repealed. It presents it in a clearer, generic form which will serve as an umbrella rule for commodity-specific rules which are also being promulgated concurrently.

 

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

School and Institutional Trust Lands
Administration
675 E 500 S
SALT LAKE CITY UT 84102-2818

 

Direct questions regarding this rule to:

Thomas B. Faddies at the above address, by phone at 801-538-5150, by FAX at 801-355-0922, or by Internet E-mail at [e-mail]

 

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

02/14/2005

 

This rule may become effective on:

04/01/2005

 

Authorized by:

Kevin S. Carter, Director

 

 

RULE TEXT

R850. School and Institutional Trust Lands, Administration.

R850-24. General Provisions: Mineral and Material Resources, Mineral Leases and Material Permits.

R850-24-100. Authorities.

This rule implements Sections 6, 8, 10, and 12 of the Utah Enabling Act, Articles X and XX of the Utah Constitution, and Subsections 53C-1-302(1)(a)(ii) and 53C-2-402(1) of the School and Institutional Trust Lands Management Act which authorize the Director of the School and Institutional Trust Lands Administration to establish rules for the issuance of mineral leases or material permits and management of trust lands and mineral and material resources.

 

R850-24-125. Planning.

Pursuant to Subsection 53C-2-201(1)(a), this category of activity carries no planning obligations by the agency beyond existing rule-based analysis and approval processes. Mineral and material development activities are regulated pursuant to R645, R647, and R649.

 

R850-24-150. Scope - Mineral Estate Distinctions.

1. For purposes of this section, mineral and material resources include all hardrock minerals and building stone; coal; and geothermal resources. Additional rules specific to these categories are found in section R850-25 for hardrock and material resources; section R850-26 for coal; and section R850-27 for geothermal resources. These general provisions do not cover oil, gas and hydrocarbons; bituminous-asphaltic sands and oil shale; or sand, gravel and cinders.

2. Common varieties of sand and gravel and volcanic cinder are not considered part of the mineral estate on trust lands in Utah. These commodities may only be obtained through a sand and gravel or volcanic cinder permit approved by the agency, pursuant to Section R850-23.

 

R850-24-175. Definitions.

The following words and terms, when used in sections R850-24 through R850-27 of this chapter shall have the following meanings, unless otherwise indicated:

1. Act: the School and Institutional Trust Lands Management Act, Utah Code Sections 53C-1 et seq.

2. Agency: School and Institutional Trust Lands Administration or its predecessor agency.

3. Anniversary Date: the same day and month in succeeding years as the effective date of the lease or permit.

4. Assignments and Transfers of Interest:

(a) Assignment: a transfer of all or a portion of the lessee's/permittee's record title interest in a mineral lease or material permit.

(b) Assignment of Overriding Interests: a transfer of an interest in a mineral lease or material permit that creates a right to share in the proceeds of production from the lease or permit, but confers no right to enter upon the leased or permitted lands or to conduct exploration, development or mining operations on the lands.

(c) Partial Assignment: an assignment of the lessee's record title interest in a part of the lands in a mineral lease or material permit and a segregation of the assigned lands into a separate lease or permit.

(d) Sublease/Operating Rights Assignment: a transfer of a non-record title interest in a mineral lease or materials permit, which authorizes the holder to enter upon the leased or permitted lands to conduct exploration, development and mining operations, but does not alter the relationship imposed by a lease on the lessor and the lessee.

(e) Transfer of Interest: any conveyance of an interest in a mineral lease or material permit by assignment, partial assignment, sublease, operating rights assignment, or other agreement.

5. Beneficiaries: the public school system and other institutions for whom the State of Utah was granted lands in trust by the United States under the Utah Enabling Act.

6. Board of Trustees: the board created under Utah Code Section 53C-1-202.

7. Bonus Bid: a payment reflecting an amount to be paid by the applicant in addition to the rentals and royalties set forth in a lease or permit as consideration for the issuance of such lease or permit.

8. Designated Operator: the person or entity that has been granted authority by the record title interest owner(s) in a lease or permit and has been approved by the agency to conduct operations on the lease, permit or a portion thereof.

9. Director: the director as defined in Utah Code Subsection 53C-1-103(3) and Sections 53C-1-301 - 303, or a person to whom the director has delegated authority.

10. Effective Date: unless otherwise defined in the lease or permit, the effective date shall be the first date of the month following the date a lease or permit is executed. An amended, extended, segregated or readjusted lease or permit will retain the effective date of the original lease or permit.

11. Lessee: a person or entity holding a record title interest in a mineral lease under R850-25, coal lease under R850-26, or geothermal steam lease under R850-27.

12. Mining Unit: a consolidation of trust mineral lands approved by the director forming a logical exploration, development, or mining operation.

13. Other Business Arrangement (OBA): an agreement entered into between the agency and a person or entity consistent with the purposes of the Act and approved by the Board of Trustees. By way of example, but not of limitation, OBAs may be for farmout agreements or joint venture agreements. An agreement for an OBA may be initiated by the agency or by a proponent of an agreement by filing a proposal for an OBA with the agency's assistant director for minerals or other designated person.

14. Over-the-Counter Permits: the issuance of a material permit through open sales on a first-come, first-served basis.

15. Permittee: a person or entity holding a record title interest in a material permit under R850-25.

16. Record Title Interest: a lessee's/permittee's interest in a lease/permit which includes the obligation to pay rent, the rights to assign or relinquish the lease/permit, and the ultimate responsibility to the agency for obligations under the lease or permit.

17. Sublease: a transfer of a non-record title interest in a mineral lease or material permit.

18. Surveyed Lot: an irregular part of a section identified by cadastral survey and maintained in the official records of the agency.

19. Trust Lands: those lands and mineral resources granted by the United States in the Utah Enabling Act to the State of Utah in trust, and other lands and mineral resources acquired by the trust, which must be managed for the benefit of the state's public education system or the institutions designated as beneficiaries.

20. UDOGM: the Division of Oil, Gas and Mining of the Utah Department of Natural Resources.

 

R850-24-200. Insurance Requirements.

Prior to the issuance of a permit for sand, gravel and cinders, the applicant may be required to obtain insurance of a type and in an amount acceptable to the agency. Proof of insurance shall be in the form of a certificate of insurance containing sufficient information to satisfy the agency that insurance provisions of the permit have been complied with.

1. Such insurance, if required, shall be placed with an insurer with a financial rating assigned by the Best Insurance Guide of A:X or higher, unless this requirement is waived in writing by the agency.

2. The agency shall retain the right to review the coverage, form, and amount of the insurance required at any time and to require the permittee to obtain insurance sufficient in coverage, form, and amount to provide adequate protection upon 30 days written notice.

 

R850-24-300. Failure of Agency's Title.

Should an application be rejected or an existing mineral lease or material permit be terminated due to failure of the agency's title, then only rental paid for the year in which title failure is discovered shall be refunded. All other rentals and fees paid on the application, mineral lease, or material permit shall be forfeited to the agency.

 

R850-24-400. Preference Rights for Unleased Mineral or Material.

1. Any lessee or permittee who discovers any mineral or material on lands leased or permitted from the agency which are not included within that lease or permit shall have a preference right to a lease or permit covering the unleased mineral or unpermitted material, provided the unleased mineral or unpermitted material at the time of discovery is not included within a lease or permit application by another party.

2. The preference right lease or permit is subject to the rental, royalty, and development requirements provided in these rules and in the lease or permit form.

3. The preference right shall not extend to any unleased mineral or unpermitted material which have been withdrawn from leasing or permitting.

4. The preference right shall continue for a period of 60 days after the discovery of the unleased mineral or unpermitted material, provided the applicant notifies the agency within ten (10) days after the discovery and makes application to lease the unleased mineral or permit the unpermitted material within the sixty (60) day period after date of discovery.

 

R850-24-500. Multiple Mineral and Material Development (MMD) Area.

The agency may designate any land under its authority as a multiple mineral development area (MMDA).

1. In designated MMDAs, the agency may require, in addition to all other terms and conditions of a mineral lease or material permit, that the lessee or permittee in an area capable of multiple mineral or material development furnish a bond beyond that required in subsection R850-24-600(1)(a) or evidence of financial responsibility as specified by the agency, to assure that the agency and other mineral lessees, material permittees, sand & gravel permittees under R850-23, or bituminous-asphaltic sands lessees under R850-22 be indemnified and held harmless from and against all unreasonable and unnecessary damage to the leased resource, mineral or material deposits or improvements caused by the conduct of the lessee/permittee on trust lands.

2. Where a lessee/permittee intends to conduct multiple mineral or material development activities, the lessee/permittee shall:

(a) submit advance written notice to the agency and to other lessees/permittees holding a lease or permit for any mineral commodity within the MMDA of any activities that are to occur within the multiple mineral or material development area.

3. All activities within the MMDA are to be deferred until the agency has specified the terms and conditions under which the mineral activity is to occur and has granted specific written permission to conduct the activity.

4. To preserve the value of the mineral or material resources, the agency may impose additional requirements upon any lessee/permittee, or designated operator who intends to conduct any multiple mineral or material development activity within a multiple mineral or material development area.

5. The agency may hold public meetings regarding the mineral or material development in a multiple mineral or material development area.

6. The agency may grant an extension to a mineral lease or material permit in a multiple mineral or material development area provided that the mineral lessee, material permittee, or designated operator requests an extension prior to the expiration date of the lease or permit, and that the lessee, permittee, or designated operator would have otherwise been able to request a mineral lease or material permit extension as provided in the Act.

 

R850-24-600. Bonding.

1. Bond Obligations.

(a) Prior to commencement of any operations which will disturb the surface of the land covered by a mineral lease or material permit, the lessee, permittee, or designated operator shall post with the Utah Division of Oil, Gas and Mining a bond in the form and in the amount set forth in R647-3-1 et seq. and approved by UDOGM to assure compliance with those terms and conditions of the mineral lease or material permit involving costs of reclamation, damages to the surface and improvements on the surface, and all other requirements and standards set forth in the mineral lease, material permit, rules, procedures, and policies of the agency and the Utah Division of Oil, Gas, and Mining.

(b) A separate bond may be posted with the agency by the lessee or the designated operator to assure compliance with all remaining terms and conditions of the lease or permit not covered by the bond to be filed with UDOGM, including but not limited to payment of rentals and royalties.

(c) These bonds shall remain in effect even if the mineral lessee, material permittee, or designated operator has conveyed all or part of the leasehold interest to a sublessee(s), assignee(s), or subsequent operator(s), until the bond is released by UDOGM or the agency either because the lessee, permittee, or designated operator has fully satisfied the bonding obligations set forth in this section or the bond is replaced with a new approved bond posted by a sublessee, assignee, or new designated operator.

(d) The agency may waive the filing of a bond for any period during which a bond meeting the requirements of this section is on file with another agency.

(e) Bonds held by the agency shall be in the form and subject to the requirements set forth herein:

(i) Surety Bonds: shall be issued by a qualified surety company, approved by the agency and registered in the state of Utah;

(ii) Lessee/Permittee Bonds: shall be accompanied by:

(A) a cash deposit to the School and Institutional Trust Lands Administration. The agency will not be responsible for any investment returns on cash deposits. Such interest will be retained in the account and applied to the bond value of the account unless the agency has approved the payment of interest to the operator; or

(B) a cashier's check made payable to the School and Institutional Trust Lands Administration; or

(C) negotiable bonds of the United States, a state, or a municipality. The negotiable bond shall be endorsed only to the order of, and placed in the possession of, the agency. The agency shall value the negotiable bond at its current market value, not at the face value; or

(D) negotiable certificates of deposit. The certificates shall be issued by a federally insured bank authorized to do business in Utah. The certificates shall be made payable or assigned only to the agency both in writing and upon the records of the bank issuing the certificate. The certificates shall be placed in the possession of the agency or held by a federally insured bank authorized to do business in Utah. If assigned, the agency shall require the banks issuing the certificates to waive all rights of setoff or liens against those certificates; or

(E) an irrevocable letter of credit. Letters of credit shall be issued by a federally insured bank authorized to do business in Utah and will be irrevocable during their terms. Letters of credit shall be placed in the possession of and payable upon demand only to the agency. Letters of credit shall be automatically renewable or the operator shall ensure continuous bond coverage by replacing letters of credit, if necessary, at least thirty (30) days before their expiration date with other acceptable bond types or letters of credit; or

(F) any other type of surety approved by the agency.

2. Increased amount of bonds.

The agency may increase the required bond amount at any time. The lessee, permittee, or designated operator shall be given thirty (30) days written notice stating the reason(s) for the increase and the new bond amount.

3. Bond Default.

(a) Where, upon default, the surety makes a payment to the agency of an obligation incurred under the terms of a mineral lease or material permit, the face of the bond and the surety's liability shall be reduced by the amount of such payment.

(b) After default, where the obligation in default equals or is less than the face amount of the bond(s), the lessee, permittee, or the designated operator, shall either post a new bond, restore the existing bond to the amount previously held, or post an adjusted amount as determined by the agency. Alternatively, the lessee, permittee, or designated operator, shall make full payment to the agency for all obligations incurred that are in excess of the face amount of the bond and shall post a new bond in the amount previously held or such other amount as determined by the agency. Operations shall be discontinued until the restoration of a bond or posting of a new bond occurs. Failure to comply with these requirements may subject all mineral leases or material permits covered by such bond(s) to be cancelled by the agency.

(c) The agency will not give consent to termination of the period of liability of any bond unless an acceptable replacement bond has been filed or until all the terms and conditions of the mineral lease or material permit have been met.

(d) Any lessee, permittee, or designated operator forfeiting a bond shall be denied approval of any future exploration or mining on trust-owned lands, except by compensating the agency for previous defaults and posting the full bond amount required by the agency.

 

R850-24-700. Operations Plan and Reclamation.

1. All lessees, permittees or designated operators shall submit to the agency, and receive approval for, a plan of operations prior to any surface disturbance, drilling or other operations which disturb the surface of trust lands subject to a lease or permit. The operations plan shall include at a minimum proposed access and infrastructure locations and proposed site reclamation. Prior to approval, the agency may require the lessee, permittee or designated operator to adopt a special rehabilitation program for the particular property in question. Before the lessee, permittee or designated operator shall commence actual operations or prior to commencing any surface disturbance associated with the activity on lands subject to a lease or permit, the permittee, lessee or designated operator shall provide a plan of operations to the agency simultaneously with the filing of any required plan of operations or permit application with UDOGM. The agency will review any request for approval of operations and will grant approval providing that the proposed location and operations are not in violation of any rules or order of the agency. Before operations can commence, approval must be granted by the UDOGM, if required by statute, and by the agency. Notice of approval by the agency shall be given in an expeditious manner to UDOGM.

2. Prior to approval of any surface disturbing operation, the agency may require the lessee, permittee or designated operator to:

(a) provide when requested, a cultural, paleontological and biological survey on lands under lease or permit, including providing the agency a copy of any survey(s) required by other governmental agencies;

(b) provide for reasonable mitigation of impacts to other trust resources occasioned by surface or sub-surface operations on the lease;

(c) negotiate with the agency a surface use agreement, right-of-way agreement, or both for trust lands other than the leased or permitted lands, where the surface of said lands are necessary for the development of the lease or permit.

3. Maintain a record of geologic data accumulated or acquired by the lessee, permittee or designated operator concerning the land described in the lease or permit. This record shall show the formations encountered and any other geologic or development information reasonably required by the agency and shall be available upon request by the agency. A copy of the record, as well as any other data related to geologic exploration or resource development on trust lands shall be deposited with the agency at the agency's request.

4. All operation which disturbs the surface of lands contained within or on trust lands shall be required to be reclaimed by rehabilitation of the disturbed area as described in the plan of operations approved by the agency, and as required by the laws administered by the UDOGM or as required by any other state or federal agency.

(a) In all cases, at a minimum, the lessee, permittee or designated operator shall agree to establish a slope on all excavations to a ratio not steeper than one foot vertically for each two feet of horizontal distance, unless otherwise approved by the agency and UDOGM prior to commencement of operations. The establishment of a stable slope shall be a concurrent part of the operation of the leased or permitted premises such that operations shall at no time constitute a hazard. All pits, excavations, roads and pads shall be shaped to facilitate drainage and control erosion by following the best management practices.

(b) In no case shall the pits or excavations be allowed to become a hazard to persons or livestock. All material removed from trust lands shall be stockpiled and be used to fill the pits and for leveling and reclamation of roads and pads unless consent of the agency, and if applicable of UDOGM, to do otherwise is obtained, so at the termination of the lease, the land will as nearly as practicable approximate its original horizontal and vertical configuration. All drill holes must be plugged in accordance with rules promulgated by UDOGM.

(c) The agency shall require of the lessee, permittee or designated operator that all topsoil in the area of surface disturbance be removed, stockpiled, and stabilized on the trust lands until the completion of operations and satisfactory use in reclamation. At the time of reclamation, the stockpiled topsoil shall be redistributed on the area of surface disturbance and the land revegetated as prescribed by the UDOGM and the agency. All mud pits and temporary debris and settlement basins shall be filled and materials and debris removed from the site.

5. All lessees, permittees or designated operators shall be responsible for compliance with all laws and notification requirements and operating rules promulgated by UDOGM or any other federal or state agency that may have regulatory jurisdiction over mineral development on trust lands or the leased or permitted substance.

 

R850-24-800. Transfer by Assignment, Sublease or Otherwise and Overriding Royalties.

Any mineral lease or material permit may be transferred as to all or part of the acreage, to any person, or entity firm, association, or corporation qualified to hold a lease or permit, provided however, that all transfers of interest are approved by the director. No transfer of interest is effective until written approval is given. Any transfer of interest made without approval is void.

1. The director shall not withhold approval of any transfer of interest which has been properly executed, for which the required filing fee has been paid for each separate lease or permit in which an interest is transferred, and the transfer complies with the law and these rules, unless the director determines that approval would interfere with the development of the mineral or material resources, or be detrimental to the interests of the trust beneficiaries.

(a) If approval of any transfer is withheld by the director, the transferee shall be notified of such decision and the reason(s) therefore. Any decision to withhold approval may be appealed pursuant to R850-8 or any similar rule in place at the time of such decision.

2. Unless otherwise authorized by the agency, a transfer of interest of a portion of a mineral lease or material permit covering less than a quarter-quarter section, a surveyed lot, an assignment of a separate zone or of a separate deposit will not be approved.

3. A transfer of interest shall take effect the first day of the month following the approval of the transfer by the director. The assignor, sublessor or surety, if any, shall continue to be responsible for performance of any and all obligations as if no transfer of interest had been executed until the effective date of the transfer. After the effective date of any transfer, the transferee is bound by the terms of the mineral lease or material permit to the same extent as if the transferee were the original lessee/permittee, any conditions in the transfer agreement to the contrary notwithstanding.

4. A partial assignment of any mineral lease or material permit shall segregate the assigned or retained portions thereof and, after the effective date, release or discharge the assignor from any obligation thereafter accruing with respect to the assigned lands. Segregated leases or permits shall continue in full force and effect for the primary term of the original lease or permit or as further extended pursuant to the terms of the lease or permit.

(a) The agency may re-issue a lease with a new lease number covering the assigned lands for the remaining unexpired primary term. The agency may, in lieu of re-issuing a lease, note the partial assignment in its records with all lands covered by the original lease maintained with the original lease number, and with each separate tract or interest resulting from an assignment with an additional identifying designation to the original lease number.

5. A transfer of interest in a mineral lease or material permit or of an overriding royalty must be a good and sufficient legal instrument, properly executed and acknowledged, and shall clearly set forth the serial number of the lease or permit, the land involved, the name and address of the transferee, and the interest transferred.

6. A transfer of interest must affect or concern only one mineral lease or material permit or a portion thereof.

7. Any transfer of interest which would create a cumulative overriding royalty in excess of 20% will not be approved by the agency. Any agreement to create or any assignment creating overriding royalties or payments out of production removed or sold from the leased or permitted lands is subject to approval by the agency, after notice and hearing, to require the proper parties thereto to suspend or modify the royalties or payments out of production in such a manner as may be reasonable when and during such period of time as they may constitute any undue economic burden upon the reasonable operations of the mineral lease or material permit.

8. Mineral lessees or material permittees who are transferring an interest in their mineral lease or material permit shall:

(a) prepare and execute the transfer of interest agreement(s) in duplicate, complete with acknowledgments;

(b) provide that each copy of the transfer of interest agreement have attached thereto an acceptance of transfer duly executed by the transferee; and

(c) provide that all transfer of interest agreements forwarded to or deposited with the agency be accompanied by the prescribed fee.

9. If an applicant, lessee, or permittee dies, his/her rights shall be transferred to the heirs, devisees, executor or administrator of the estate, as appropriate, upon the filing of a death certificate together with other appropriate documentation as the agency may require to verify change of ownership, and a list, by serial number of all mineral lease or material permit interests affected and a statement that all parties are qualified to do business with the agency. The required filing fee must be paid for each separate mineral lease or material permit in which an interest is transferred. A bond rider or replacement bond may be required by the agency for any bond(s) previously furnished by the decedent.

10. If a corporate merger affects mineral leases or material permits where the transfer of property of the dissolving corporation to the surviving corporation is accomplished by operation of law, no transfer of any affected lease permit is required. A notification of the merger shall be furnished with a list, by serial number of all lease or permit interests affected. The required filing fee must be paid for each separate lease or permit in which an interest is transferred. A bond rider or replacement bond conditioned to cover the obligations of all affected corporations may be required by the agency as a prerequisite to recognition of the merger.

11. If a change of name of a lessee or permittee affects mineral leases or material permits the notice of name change shall be submitted in writing with appropriate documentation evidencing the name change accompanied by a list of leases or permits affected by the name change. The required filing fee must be paid for each separate lease or permit subjected to a transfer of interest. A bond rider or replacement bond to accommodate the name change, conditioned to cover the obligations of all affected corporations may be required by the agency as a prerequisite to recognition of the change of name.

12. Pre-approval by the agency of a transfer of interest may be sought by the lessee/permittee, and if pre-approval is granted in writing by the director, it shall be binding on the agency subject to conclusion of the particular transfer for which such pre-approval was granted.

 

R850-24-900. Lease Non-Execution or Cancellation - Fees Forfeited.

In the event that applicant fails to sign and return a mineral lease or material permit as instructed by the agency, or a lease is cancelled for any other reason, all fees, advance rentals, and advance minimum royalties are forfeited by the applicant, lessee or permittee unless non-forfeiture or a refund is approved by the director.

 

R850-24-1000. Readjustment of Leases and Permits.

1. All mineral leases and material permits shall contain a provision setting forth the agency's right to readjust the terms and provisions of the mineral lease or the material permit on a periodic basis. The director shall establish as a term of the lease or the permit a schedule for readjustment at the time the lease or permit is offered. A mineral lease which is continued beyond its primary term shall remain subject to such readjustment provision(s).

2. All terms and conditions of a mineral lease and a material permit are subject to readjustment by the agency, including the amount of rent, minimum rental, royalty, minimum royalty, or any other provision as provided in the lease or permit.

3. The terms of the mineral lease or material permit, if readjusted, shall become effective as of the anniversary date specified for readjustment set forth in the lease or permit upon written notification of the readjusted terms.

4. Notice of intent to exercise the agency's right to readjust under the terms of the lease or permit as of the specified anniversary date is timely given if given in writing prior to the specified anniversary date set forth in the lease or permit.

5. The agency shall have up to one year after exercising its option to readjust to review and communicate in writing the final terms of the lease or permit as readjusted.

6. Unless otherwise approved by the director, the lease or permit shall incorporate the terms of the current agency mineral lease or material permit form at the time of readjustment.

7. Failure of the lessee or permittee to accept or appeal the terms of any readjustment within 60 days of mailing by the agency to the last known address of the lessee or permittee, as reflected in the records of the agency, shall be considered a violation of the terms of the lease or permit and shall subject the same to forfeiture.

8. In the event of a conflict between this section and the terms of a readjustment provision in any lease or permit, the lease or permit terms shall supersede to the extent of the conflict.

9. A lessee or permittee may request a readjustment of a lease or permit, and if the director finds the readjustment to be in the best interest of the beneficiaries, such readjustment shall be made.

 

KEY: mineral lease, material permit, mineral resources, lease operations

April 1, 2005

53C-1-302(1)(a)(ii)

53C-2-201(1)(a)

53C-2-402(1)