R850-26-300. Coal Lease Provisions

1. Royalty and Minimum Royalty.

(a) The director shall establish the production royalty rate, not to be less than 8%.

(b) The director shall establish the annual minimum royalty rate(s) at the time the lease is offered.

2. Size of Leaseable Tract.

A lease shall not be issued for a parcel less than a quarter-quarter section or surveyed lot unless approved by the director.

3. Primary Coal Lease Term.

The primary lease term for any lease may not exceed ten (10) years.

4. Continuance of Coal Lease After Expiration of Primary Term.

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

(a) coal is being produced in paying quantities from the lease or an approved mining unit; or

(b) the agency determines that the lessee:

(i) is engaged in diligent operations, exploration, or development which is reasonably calculated to advance development or production of the coal resource; or

(ii) has made substantial financial investments for the direct purpose of advancing development or production of the coal resource; and

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

5. Readjustment of Coal Lease.

All leases shall contain a provision setting forth the agency's right to readjust the terms and provisions of the lease on a periodic basis, and such readjustment shall be made in accordance with R850-24-1000. A lease continued after expiration of its primary term shall be subject to such readjustment provision(s).

6. Other Lease Provisions.

(a) The agency may require, in addition to the lease provisions required by these rules, any other provisions to be included in the lease as it deems necessary.