R850-22. Bituminous-Asphaltic Sands and Oil Shale Resources, R850. School and Institutional Trust Lands, Administration, Utah Administrative Code

Utah Administrative Code (Current through November 1, 2019)

R850. School and Institutional Trust Lands, Administration

R850-22. Bituminous-Asphaltic Sands and Oil Shale Resources

R850-22-100. Authorities

Latest version.

This rule implements Sections 6, 8, 10, and 12 of the Utah Enabling Act, Articles X and XX of the Utah Constitution, and Utah Code Title 53C et seq. which authorize the Director of the School and Institutional Trust Lands Administration to establish rules for the management of bituminous-asphaltic sands and oil shale resources and for the issuance of leases for such resources on trust lands.

R850-22-150. Planning

Latest version.

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. Bituminous-asphaltic sands and oil shale development activities are regulated pursuant to R649.

R850-22-175. Definitions

Latest version.

The following words and terms, when used in Section R850-22 shall have the following meanings, unless otherwise indicated:

1. Act: Utah Code 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. 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.

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

6. Assignment(s): a conveyance of all or a portion of the lessee's record title interest or royalty interest in a lease.

(a) Certification of Net Revenue Interest: the certification by oath of an assignor to the agency that the total net working revenue interest (NRI) in the lease which the assignment affects has not been reduced to less than 80 per cent of 100 per cent NRI. Certification shall only be required for leases issued after April 1, 2005.

(b) Mass Assignment: an assignment that affects more than one lease, including assignments which affect record title, working or non-working interests.

(c) Non-Working Interest Assignment: an assignment of interest in production from a lease other than the agency's royalty, the record title, or the working interest including but not limited to overriding royalties, production payments, net profits interests, and carried interests assignments but excluding liens and security interests.

(d) Record Title Assignment: an assignment of the lessee's interest in a lease which includes the obligation to pay rent, the rights to assign or relinquish the lease, and the ultimate responsibility to the agency for obligations under the lease.

(e) Working Interest Assignment: a transfer of a non-record title interest in a lease, including but not limited to wellbore assignments, but excepting overriding royalty, oil payment, net-profit, or carried interests or other non-working interests.

7. Board of Trustees: the School and Institutional Trust Lands Board of Trustees created under Section 53C-1-202.

8. Committed Lands: a consolidation of all or a portion of lands subject to a lease approved by the director for unitization which forms a logical unit for exploration, development or drilling operations.

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

10. Director: the person designated within the agency who manages the agency in fulfillment of its purposes as set forth in the Act.

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

12. Lease: a bituminous-asphaltic sands or oil shale lease covering the commodities defined in R850-22-200 issued by the agency.

13. Lease Year: the twelve-month period commencing at 12:01 a.m. on the month and day of the effective date of the lease and ending on the last day of the twelfth month at 12 midnight.

14. Leasing Unit: a parcel of trust land lying within one or more sections that is offered for lease as an indivisible unit through a competitive lease application process which would constitute one lease when issued.

15. Lessee: a person or entity holding a record title interest in a lease.

16. 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.

17. Over-the-Counter Lease: the issuance of a lease through application on a first come, first served basis.

18. Production in Paying Quantities (also referred to in older mineral leases as Production in Commercial Quantities): production of the leased substance in quantities sufficient to yield revenue in excess of operating costs.

19. Rental: the amount due and payable on or before the anniversary date of a lease to maintain the lease in full force and effect for the following lease year.

20. Record Title: the legal ownership of a mineral lease as established in the records of the agency.

21. Sub-lease: a transfer of a non-record title interest in a mineral lease.

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

23. 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.

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

25. Except as specifically defined above, the definitions set forth at R850-1-200 shall also be applicable.

R850-22-200. Classification of Bituminous-Asphaltic Sands and Oil Shale

Latest version.

1. The term "bituminous-asphaltic sands" means rock or sand impregnated with asphalt or heavy oil and is synonymous with the term "tar sands." This category does not cover any substances, either combustible or non-combustible, which are produced in a gaseous or rarefied state at ordinary temperature and pressure conditions other than gas which results from artificial introduction of heat. Nor does this category embrace any liquid hydrocarbon substance which occurs naturally in a liquid form in the earth regardless of depth, including drip gasoline or other natural condensate recovered from gas. The bituminous-asphaltic sands category does not include coal, oil shale, or gilsonite.

2. The oil shale category shall include any sedimentary rock containing kerogen.

R850-22-300. Lease Application Process

Latest version.

1. The agency may issue leases competitively, non-competitively or enter into OBAs with qualified interest owners for the development of bituminous-asphaltic sands and oil shale resources.

(a) Competitive Bid Offering: when the agency designates leasing units for competitive bidding it shall award leases on the basis of the highest bonus bid per acre made by qualified application.

(i) Minimum Bonus Bid Amount: the minimum acceptable bonus bid for competitive bid offering for leasing units shall be not less than $1.00 per acre, or fractional acre thereof, which will constitute the (advance) rental for the first year of the lease.

(ii) Notice of Offering: notices of the offering of lands for competitive bid shall:

(A) run for a period of not less than fifteen (15) consecutive days after the notice is posted in the agency's office;

(B) describe the leasing unit;

(D) state the last date on which bids may be received.

(iii) Opening of Bid Applications: bid applications shall be opened in the agency's office at 10 a.m. of the first business day following the last day on which bids may be received.

(iv) Content of Applications: each application shall be submitted in a sealed envelope which clearly identifies:

(A) the competitive bid;

(B) leasing unit number; and,

(v) The application envelope must:

(A) describe only one leasing unit per application; and,

(B) contain one check for the application fee and a separate check for the amount of the bonus bid.

(vi) Withdrawal of Applications: applicants desiring to withdraw an application which has been filed under these competitive bid filing rules must submit a written request to the agency. If the request is received before sealed bids have been opened, all money tendered by the applicant, except the filing fee, shall be refunded. If a request is received after sealed bids have been opened, and if the applicant is awarded the bid, then unless the applicant accepts the offered lease, all money tendered shall be forfeited to the agency.

(vii) Non-Complying Applications: if the agency determines prior to lease issuance that an application did not comply with these rules at the time of bid opening, the application fee shall be retained by the agency and the application returned to the applicant without further consideration by the agency.

(viii) Identical Bids: in the case of identical successful bids, the agency may award the lease by public drawing or oral auction between the identical bidders, held at the agency's offices.

(b) Non-Competitive Leasing By Over-The-Counter Filing.

(i) The director may designate lands for non-competitive leasing by over-the-counter application if the lands have been offered in a competitive offering and have received no bids.

(ii) The minimum acceptable offer for over-the-counter applications to lease designated lands shall be not less than $1 per acre, or fractional acre thereof.

(iii) Applications for over-the-counter leases, when authorized, shall be filed on approved forms received from the office of the agency or as made available on its web site and delivered for filing in the main office of the agency during office hours. Except as provided, all over-the-counter applications received by personal delivery over the counter, are to be immediately stamped with the date and time of filing. All applications presented for filing at the opening of the office for business on any business day are stamped received as of 8 a.m., on that day. All applications received in the first delivery of the U.S. Mail of each business day are stamped received as of 8 a.m. on that day. The time indicated on the time stamp is deemed the time of filing unless the director determines that the application is materially deficient in any particular way. If an application is determined to be deficient, it will be returned to the applicant with a notice of the deficiency.

If an application is returned as deficient and is resubmitted in compliance with the rules within fifteen (15) days from the date of the determination of deficiency, it shall retain its original filing time.

If the application is resubmitted at any later time, it is deemed filed at the time of resubmission.

(iv) Where two or more applications for the same lease contain identical bids and bear a time stamp showing the said applications were filed at the same time, the agency may award the lease by public drawing or oral auction between the identical bidders, held at the agency's office.

(v) If an application or any part thereof is rejected, any money tendered for rental of the rejected portion shall be refunded or credited to applicant, minus the application fee.

(vi) An applicant who desires to withdraw its application must submit a written request to the agency. If the request is received prior to the time the agency approves the application, all money tendered by the applicant, except the application fee, shall be refunded. If the request is received after approval of the application, then, unless the applicant accepts the offered lease, all money tendered is forfeited to the agency.

R850-22-400. Availability of Lands for Lease Issuance

Latest version.

1. A lease shall not be issued for lands comprising less than a quarter-quarter section or surveyed lot, unless the trust land managed by the agency within any quarter-quarter section or surveyed lot is less than the whole thereof, in which case the lease will be issued only on the entire area owned and available for lease within the quarter-quarter section or surveyed lot.

2. Leases shall be limited to no more than 2560 acres or four sections and must all be located within the same township and range unless a waiver is approved by the director.

3. Any lease may be terminated by the agency in whole or in part upon lessee's failure to comply with any lease term or covenant or applicable laws and rules. Subject to the terms of any lease issued hereunder, any final agency action is appealable pursuant to Section 53C-2-409, in accordance with the provisions of the rules of the agency.

R850-22-500. Bituminous-Asphaltic Sands and Oil Shale Lease Provisions

Latest version.

The following provisions, terms and conditions shall apply to all leases granted by the agency:

1. Rentals and Rental Credits.

(a) The rental rate shall not be for less than $1 per acre, or fractional acre thereof, per year at the time the lease is offered.

(b) The minimum annual rental on any lease, regardless of the amount of acreage, shall in no case be less than $500.

(c) Rental payments shall be paid in advance each year on or before the lease anniversary date, unless otherwise stated in the lease.

(d) Any overpayment of rental occurring from the lease applicant's incorrect calculation of acreage of lands described in the lease may, at the option of the agency, be credited toward the applicant's rental account.

(e) The agency may accept lease payments made by any party provided, however, that the acceptance of such payment(s) shall not be deemed to be recognition by the agency of any interest of the payee in the lease. Ultimate responsibility for such payments remains with the record title interest owner.

(f) Rental credits, if any, shall be governed by the terms of the lease which provide for such credits.

2. Royalty Provisions: during the primary term of the lease, the lessee shall pay lessor a production royalty on the basis of eight percent (8%) of the gross value, including all bonuses and allowances received by lessee, of each marketable product produced from the leased substance and sold under a bonafide contract of sale. The royalty may, at the discretion of the lessor, be increased after the ten (10) year primary term at a rate not in excess of one percent (1%) per annum to a maximum of twelve and one-half percent (12.5%).

3. Primary Lease Term: no lease shall establish a primary term in excess of ten (10) years.

4. Continuance of a Lease after Expiration of a Primary Term.

(a) A lease shall be continued after the primary term has expired so long as:

(i) the leased substance is being produced in paying quantities from the leased premises or from other lands communitized or unitized with committed lands; or

(ii) the agency determines that the lessee or designated operator:

(A) is engaged in diligent operations which are determined by the director to be reasonably calculated to advance or restore production of the leased substance from the leased premises or from other lands communitized, or unitized with committed lands; and

(B) pays the annual minimum royalty set forth in the lease.

5. Communitization or Unitization of Leases.

(a) Lessees, upon prior written authorization of the director, may commit leased trust lands or portions of such lands to unit, cooperative or other plans of development with other lands.

(b) The director may, with the consent of the lessee, modify any term of a lease for lands that are committed to a unit, cooperative, or other plan of development.

(c) Production allocated to leased trust lands under the terms of a unit, cooperative, or other plan of development shall be considered produced from the leased lands whether or not the point of production is located on the leased trust lands.

(d) The term of all leases included in any cooperative or unit plan of development or operation in which the agency has joined, or shall hereafter join, shall be extended automatically for the term of the unit or cooperative agreement. Rentals on leases so extended shall be at the rate specified in the lease, subject to change in rates at the discretion of the director or as may be prescribed in the terms of the lease.

(e) Any lease eliminated from any cooperative or unit plan of development or operation, or any lease which is in effect at the termination of a cooperative or unit plan of development or operation, unless relinquished, shall continue in effect for the fixed term of the lease, or for two (2) years after its elimination from the plan or agreement or the termination thereof, whichever is longer, and so long thereafter as the leased substances are produced in paying quantities. Rentals under such leases shall continue at the rate specified in the lease.

6. When the agency approves the amendment of an existing lease by substituting a new lease form for the existing form(s), the amended lease will retain the effective date of the original lease.

7. Other Lease Provisions.

The agency may require, in addition to the lease provisions required by these rules, any other reasonable provisions to be included in the lease as it deems necessary, but which does not substantially impair the lessees' rights under the lease.

R850-22-600. Transfer by Assignment or Operation of Law

Latest version.

1. Any lease may be assigned as to all or part of the acreage, to any person, firm, association, or corporation qualified to hold a lease provided, however, that all assignments must be approved by the director. No assignment is effective until approval is given. Any attempted or purported assignment made without approval by the director is void.

2. Transfer by Assignment.

(a) An assignment of either a record title, working or non-working interest in a lease must:

(i) be expressed in a good and sufficient written legal instrument;

(ii) be properly executed, acknowledged and clearly set forth:

(A) the serial number of the lease;

(B) the land involved;

(D) the name of the assignor;

(E) the interest transferred;

(iii) be accompanied by a certification that the assignee is a qualified interest owner; and

(iv) include a certification of net revenue interest.

(b) Lessees who are assigning a lease shall:

(i) prepare and execute the assignments in duplicate, complete with acknowledgments;

(ii) provide that each copy of the assignment have attached thereto an acceptance of assignment duly executed by the assignee; and

(iii) provide that all assignments forwarded to or deposited with the agency be accompanied by the prescribed fee.

(c) The director shall approve any assignment of interest which has been properly executed; if the required filing fee is paid for each separate lease in which an interest is assigned, and the assignment complies with the law and these rules, so long as the director determines that approval would not be detrimental to the interests of the trust beneficiaries.

(d) If approval of any assignment is withheld by the director, the transferee shall be notified of such decision and its basis. Any decision to withhold approval may be appealed pursuant to Rule R850-8 or any similar rule in place at the time of such decision.

(e) Any assignment of a portion of a lease, whether of a record title, working or non-working interest, covering less than a quarter-quarter section, a surveyed lot, or an assignment of a separate zone or a separate deposit, shall not be approved.

(f) An assignment shall be effective the first day of the month following the approval of the assignment by the director. The assignor or surety, if any, shall continue to be responsible for performance of any and all obligations as if no assignment had been executed until the effective date of the assignment. After the effective date of any assignment, the assignee is bound by the terms of the lease to the same extent as if the assignee were the original lessee, any conditions in the assignment to the contrary notwithstanding; provided, however, that the approved record title interest owner(s) shall retain ultimate responsibility to the agency for all lease obligations.

(g) A record title assignment of an undivided 100% record title interest in less than the total acreage covered by the lease shall cause a segregation of the assigned and retained portions. After the effective date of the approved assignment, the assignor shall be released or discharged from any obligation thereafter accruing to the assigned lands. Segregated leases shall continue in full force and effect for the primary term of the original lease or as further extended pursuant to the terms of the lease. 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 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 number.

(h) Any assignment which would create a cumulative royalty and other non-working interest in excess of twenty per cent (20%) thereby reducing the net revenue interest in the lease to less than eighty per cent (80%) NRI shall not be approved by the agency.

(i) Mass assignments are allowed, provided:

(i) the requirements set forth in paragraph R850-22-600(2) are met;

(ii) the serial number, the lands covered thereby, and the percent of interest assigned therein are expressly described in an attached exhibit;

(iii) the prescribed fee is paid for each lease affected; and

(iv) a separate mass assignment is filed for each type of interest (record title, working or non-working interest) that is assigned.

(j) The agency shall not accept for filing, mortgages, deeds of trust, financing statements or lien filings affecting leases. To the extent a legal foreclosure upon interests in leases occurs under the terms of such agreements, assignments must be prepared as set forth in this section and filed with the agency, which will then be reviewed and approved in due course.

(k) The agency by approving an assignment does not adjudicate the validity of any assignment as it may affect third parties, nor estop the agency from challenging any assignment which is later adjudicated by a court of competent jurisdiction to be invalid or ineffectual.

3. Transfer by Operation of Law.

(a) Death: if an applicant or lessee dies, his/her rights shall be transferred to the heirs, devisees, executor or administrator of the estate, as appropriate, upon the filing of:

(i) a certified copy of the death certificate together with other appropriate documentation to verify change of ownership as required under the probate laws of the state of Utah (Section 75-1-101 et seq.);

(ii) a list containing the serial number of each lease interest affected;

(iii) a statement that the transferee(s) is a qualified interest owner;

(iv) the required filing fee for each separate lease in which an interest is transferred; and

(v) a bond rider or replacement bond for any bond(s) previously furnished by the decedent.

(b) Corporate Merger: if a corporate merger affects any interest in a lease because of the transfer of property of the dissolving corporation to the surviving corporation by operation of law, no assignment of any affected lease is required. A notification of the merger, together with a certified copy of the certificate of merger issued by the Utah Department of Commerce, shall be furnished to the agency, together with a list by serial number of all lease interests affected. The required filing fee must be paid for each separate lease in which an interest is transferred. A bond rider or replacement bond conditioned to cover the obligations of all affected corporations will be required as a prerequisite to recognition of the merger.

(c) Corporate Name Change: if a change of name of a corporate lessee affects any interest in a lease, the notice of name change shall be submitted in writing with a certificate from the Utah Department of Commerce evidencing its recognition of the name change accompanied by a list of lease serial numbers affected by the name change. The required filing fee must be paid for each separate lease in which an interest is transferred. A bond rider or replacement bond, conditioned to cover the obligations of all affected corporations, is required as a prerequisite to recognition of the name change.

R850-22-700. Operations Plan and Reclamation

Latest version.

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.

R850-22-800. Bonding

Latest version.

1. Bond Obligations.

(a) Prior to commencement of any operations which will disturb the surface of the land covered by a lease, the lessee or designated operator shall post with UDOGM, a bond in a 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 lease and these rules, involving costs of reclamation, damages to the surface and improvements on the surface and all other related requirements and standards set forth in the lease, rules, procedures and policies of the agency and UDOGM.

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

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

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

(i) Surety Bonds.

Surety bonds shall be issued by a qualified surety company, approved by the agency and registered in the state of Utah.

(ii) Personal Bonds.

Personal 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 or certified 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. Bond Amounts.

The bond amount required for an exploration or development project to be held by the agency for those lease obligations not covered by the bond held by UDOGM shall be:

(a) a project bond covering an individual, single- exploration project involving one or more leases. The amount of the project bond will be determined by the agency at the time lessee gives notice of proposed operations.

3. Bond Default.

(a) Where, upon default, the surety makes a payment to the agency of an obligation incurred under the terms of a lease, the face of the bond and 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 or 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 UDOGM or the agency. Alternatively, the lessee 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 leases 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 with UDOGM or the agency, or until all terms and conditions of the lease and all reclamation obligations of UDOGM have been met.

(d) Any lessee or designated operator forfeiting a bond is denied approval of any future oil, gas or hydrocarbon exploration on agency lands except by compensating the agency for previous defaults and posting the full bond amount for reclamation or lease performance on subsequent operations as determined by the agency.

4. Bonds may be increased at any time in reasonable amounts as the agency may order, providing the agency first gives lessee thirty (30) days written notice stating the increase and the reason for the increase.

5. 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.

R850-22-1000. Multiple Mineral Development (MMD) Area Designation

Latest version.

1. The agency may designate any land under its authority as a multiple mineral development area. In designated multiple mineral development areas the agency may require, in addition to all other terms and conditions of the lease, that the lessee furnish a bond or evidence of financial responsibility as specified by the agency, to assure that the agency and other lessees shall be indemnified and held harmless from and against unreasonable and all unnecessary damage to mineral deposits or improvements caused by the conduct of the lessee on trust lands. Written notice shall be given to all lessees holding a lease for any mineral commodity within the multiple mineral development area. Thereafter, in order to preserve the value of mineral resources the agency may impose any reasonable requirements upon any mineral lessee who intends to conduct any mineral activity within the multiple mineral development area. The lessee is required to submit advance written notice of any activities to occur within the multiple mineral development area to the agency and any other information that the agency may request. All activities within the multiple mineral development area 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 permission to conduct the activity. The agency may hold public meetings regarding the mineral development within the multiple mineral development area.

2. The agency may grant a lease extension under a multiple mineral development area designation, providing that the lessee or designated operator requests an extension to the agency prior to the lease expiration date, and that the lessee or designated operator would have otherwise been able to request a lease extension as provided in Subsection 53C-2-405(4).