R850-30. Special Use Leases, 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

R850-30-100. 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 Sections 53C-1-302(1)(a)(ii) and 53C-4-101(1) which authorize the director to establish criteria for the leasing of trust lands.

R850-30-150. Planning

Latest version.

In addition to those other planning responsibilities described herein, the agency shall:

1. Submit proposals to lease trust lands to the Resource Development Coordinating Committee (RDCC) unless the proposal is exempt from such review;

2. Evaluate and respond to comments received through the RDCC process; and

3. Evaluate and respond to any comments received through the request for proposal process pursuant to R850-30-310 or the solicitation process pursuant to R850-30-500(2), as applicable.

R850-30-200. Terms of Leases

Latest version.

1. The agency may issue special use leases for surface uses of trust lands, excluding grazing, for terms of up to 51 years.

2. In exceptional cases, the agency may issue leases for a term of up to 99 years when it has been determined that such a term would be in the best interest of the trust beneficiaries.

3. The agency shall issue leases for the term most consistent with land management objectives found in R850-2. The term of a lease shall not normally be for a period longer than specified below for a particular lease type.

(a) Military: 10 years

(b) Agricultural: 20 years

(d) Commercial: 51 years

(e) Industrial: 51 years

(f) Residential: 51 years

(g) Governmental (Other than Military): 51 years.

R850-30-300. Categories of Special Use Leases

Latest version.

Special use leases are classified according to the following categories.

1. Commercial: use of trust land for a restaurant, service station, boating facilities, motels, retail businesses and similar uses may be included in this category.

2. Industrial: use of trust land for testing sites, mining or extraction facilities, manufacturing plants and similar uses may be included in this category.

3. Residential: use of trust land for a private, permanent home and legal domicile may be included in this category.

4. Agricultural: use of trust land for crop production, improved pasture lands, irrigation improvements and similar uses, excluding grazing, may be included in this category.

5. Telecommunications: use of trust land for the operation of towers and building for telecommunication purposes may be included in this category.

6. Governmental: use of trust land for water storage tanks, well sites, reservoirs, gun ranges and similar uses by a governmental agency may be included in this category.

R850-30-310. Requests for Proposals

Latest version.

1. The agency may issue a request for proposals (RFP) for any lands on which the director has determined the potential for development exists.

2. A proposal submitted in response to the RFP may be for sale, lease, joint development, or exchange and shall receive protected records status until the director selects the preferred proposal.

3. Proposals may be evaluated using the following criteria:

(a) Income potential;

(b) Ability of proposed use to enhance adjacent trust lands;

(d) Ability of applicant to perform satisfactorily;

(e) Desirability of proposed use; and

(f) Any other criterion deemed appropriate by the director.

4. Requests for proposals shall be advertised through publication of a notice at least once a week for three consecutive weeks in one or more newspapers of general circulation in the county where the subject property is located as well as any other advertising methods the director determines will increase exposure of the subject property to qualified applicants. The advertisement shall indicate where a person interested in submitting a proposal may obtain an information packet.

5. Proposals shall contain a non-refundable application and review fee as specified in the RFP.

6. Applicants selected in an RFP process shall be exempt from the application process set forth in R850-30-500.

R850-30-400. Lease Rates

Latest version.

1. Lease rates shall be based on the market value and income producing capability of the subject property and may be determined by:

(a) multiplying the market value of the subject property by the current agency-determined interest rate;

(b) the evaluation and use of comparable lease data; or

(c) using either a fixed rate per acre or a crop-share formula for agricultural leases providing that the rental rate is customary and reasonable.

2. The agency may base lease rentals on a value other than the market value of the subject property, provided that the director determines such is in the best interest of the beneficiaries and provided that the lease contains a clause whereby the agency may terminate the lease prior to the end of the lease term.

3. In addition to lease rental, the agency may require the payment of percentage rents.

4. The agency, pursuant to board policy, may establish a minimum lease rental based on the costs incurred in administering the leases, and a desired minimum rate of return.

5. Lease Review Procedures and Rental Adjustments for Special Use Leases.

(a) Special use leases shall be reviewed by the agency as of the effective date specified in the respective lease and such review may result in an adjustment of base rental.

(b) Adjustments in base rentals may be based upon changes in market value including appreciation of the subject properties, changes in established indices, or other methods which may be appropriate and in the best interest of the trust beneficiaries. The determination of which method to use may be based upon an analysis of the cost effectiveness of performing the review.

(c) When using established indices, the rate of adjustment shall be based on the indices established for the years involved in the review period, unless the rate of adjustment exceeds a maximum adjustment rate, or fails to reach a minimum rate of adjustment as specified in the respective lease. If no maximum adjustment rate or minimum rate of increase is specified in the lease, then the percent change will increase or decrease according to the above described rate of adjustment.

(d) The index used in the review may be the applicable component of the CPI-U or any other index determined by the agency to be appropriate.

(e) The adjusted rental amount as determined pursuant to this rule shall be rounded to the nearest number evenly divisible by 10 unless:

(i) the lease contains a fee schedule or other adjustment provisions which require a payment in an amount not evenly divisible by 10;

(ii) the lessee requests otherwise; or

(iii) the lease was acquired from the United States, Department of Interior, Bureau of Land Management, or other governmental agency and contains terms which do not allow rounding.

(f) The director may suspend, defer, or waive the adjustment of base rentals in specific instances, based on a written finding that the suspension, deferral, or waiver is in the best interest of the trust beneficiaries.

R850-30-500. Application Procedures

Latest version.

1. Applications for special use leases shall indicate the appropriate lease category, as set forth in R850-30-300.

2. Solicitation of Competing Applications.

(a) Upon acceptance by the director of a completed special use lease application, the agency shall solicit competing lease applications and, if appropriate, sales applications. The solicitation of competing applications may be waived by the director based on a written finding that the waiver is in the best interest of the trust beneficiaries.

(b) The following classes of leases are exempt from the requirements of R850-30-500(2):

i) Communication sites.

ii) Mineral and oil and gas extraction facilities when the agency does not own the mineral estate.

(c) Competing applications shall be solicited through publication of a notice at least once a week for three consecutive weeks in one or more newspapers of general circulation in the county where the subject property is located.

(d) Copies of the notice shall be sent by certified mail at least 30 days prior to the selection of the successful applicant to lessees/permittees of record on the subject property and adjoining landowners as shown on county records.

(e) Notices shall also be sent to the appropriate county authority in which the subject property is located with a request to have the notice posted in the local governmental administrative building or courthouses.

(f) Notification and advertising shall include a general description of the parcel including township, range, and section, and any other information which may create interest in the parcel that does not violate the confidentiality of the initial application. The successful applicant shall bear the cost of the advertising.

(g) The agency may solicit applications on trust lands when no application has been received by advertising a parcel pursuant to the process described in R850-30-500(2) or any other means, when in the best interest of the trust beneficiaries.

R850-30-510. Preferred Application Determination

Latest version.

1. At the conclusion of the advertising and notification process conducted pursuant to R850-30-500(2), the agency may select the preferred application using either of the following processes. The director shall have full discretion to select which process to use:

(a) Sealed Bid Process.

i) The agency shall allow all applicants at least 20 days from the date of the agency's mailing of notice, as evidenced by the certified mail posting receipt (Postal Service Form 3800), within which to submit a sealed bid containing a proposal to lease, purchase or exchange the subject parcel.

ii) The agency may reject those applications for which a proposal is not submitted within the prescribed time period.

iii) A sealed bid proposal for a lease shall contain the first year's rental unless such requirement is waived by the director. A sealed bid proposal for a sale shall contain funds in the amount of 10% of the offer to purchase. These deposits are refundable if the applicant is not the successful applicant or if the applicant withdraws the application prior to an agency decision.

iv) Competing proposals may be evaluated using the following criteria:

A) Income potential;

B) Ability of proposed use to enhance adjacent trust lands;

C) Proposed timetable for development;

D) Ability of applicant to perform satisfactorily;

E) Desirability of proposed use; and

F) Any other criterion deemed appropriate by the director.

b. Negotiation Process.

i) The director or his designee may invite each qualified applicant or interested person to meet with the agency and present its proposal for the use of the subject property. The director or his designee may also invite persons other than those responding to the initial solicitation to meet with the agency for the purpose of providing information or making a proposal. The director shall have full authority to:

A) offer counter-proposals;

B) negotiate with any or all of the applicants or interested persons to create a proposal which best satisfies the objectives of R850-2-200;

C) terminate the negotiation process entirely; or

D) require the applicants or interested persons to proceed through the process described in R850-30-500(2).

2. If the preferred application is for a lease, it shall be reviewed in accordance with R850-30-550. If the preferred application is for a sale, it shall be reviewed pursuant to R850-80-500. If the preferred application is for an exchange, it shall be reviewed pursuant to R850-90-200.

R850-30-550. Lease Determination Procedures

Latest version.

1. The director shall not lease trust lands when such lease:

(a) would be inconsistent with board policy or would not be in the best interest of the trust beneficiaries;

(b) would create significant obstacles to future mineral development; or

(c) would foreclose future development or management options which would likely result in greater long term economic benefit.

R850-30-600. Special Use Lease Provisions

Latest version.

Each lease shall contain provisions necessary to ensure responsible surface management, including those provisions enumerated under Section 53C-4-202 and the following provisions: the rights of the lessee; the rights reserved to the lessor, including the right to review the lease to ensure compliance with the terms and conditions of the lease; the term of the lease; annual rentals and percentage rents, if applicable; reporting of technical and financial data; reservation for mineral exploration and development and other compatible uses; operation requirements; lessee's consent to suit in any dispute arising under the terms of the lease or as a result of operations carried on under the lease; procedures of notification; transfers of lease interest by lessee; terms and conditions of lease forfeiture; and protection of the state from liability associated with the actions of the lessee on the subject property.

R850-30-800. Bonding Provisions

Latest version.

1. At the time of initial lease payment, the lessee may be required to post with the agency performance, payment, and reclamation bonds in the form and amount and subject to any terms and conditions as may be determined by the agency to assure compliance with all terms and conditions of the lease.

2. The bond shall be in effect even if the lessee has conveyed all or part of the leasehold interest to a sublessee, assignee, or subsequent operator until the lessee fully satisfies the lease obligations, or until the bond is replaced with a new bond posted by the sublessee or assignee.

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

4. Bonds may be accepted in any of the following forms at the discretion of the agency:

(a) Surety bond with an approved corporate surety registered in Utah;

(b) Cash deposit. The agency shall not be responsible for any investment returns on cash deposits; or

R850-30-900. Lease Assignments and Subleases

Latest version.

1. Any special use lease may be assigned or subleased to any person or entity qualified to hold a lease on trust land, provided, however, that all assignments and subleases are approved by the director; and no assignment or sublease is effective until approval is given. Any assignment or sublease made without such approval is voidable at the director's option.

2. An assignment or sublease shall take effect the day of the approval of the assignment or sublease. On the effective date of any assignment or sublease, the assignee or sublessee is bound by the terms of the lease to the same extent as if the assignee or sublessee were the original lessee, any conditions in the assignment to the contrary notwithstanding.

3. An assignment shall be a sufficient legal instrument, properly executed and acknowledged, with the lease number, the land involved, and the name and address of the assignee, and the interest transferred clearly indicated.

4. Additional occupants of a telecommunication facility shall abide by all the requirements of this rule. In addition, the agency may charge each communication site sublessee an amount based on the then current market rental value of the premises, and such other factors as may reasonably bear upon the suitability of the sublessee as a tenant of the premises.

5. As a condition of the approval of an assignment or sublease the agency shall require:

(a) The assignee to accept the most current applicable lease form unless continuation of the existing form is clearly in the best interests of the trust beneficiaries; and

(b) The assignee or sublessee to be satisfactory to the agency.

R850-30-1000. Lease Amendments

Latest version.

1. Special use leases may be amended as to the following terms and conditions upon the payment of all appropriate processing and other charges, and based on a written finding that the amendment would be consistent with R850-2.

(a) Purpose of the lease;

(b) Term of the lease;

(d) Due date of rental or percentage rent; and

(e) Decrease or increase in contiguous acreage, provided that total amended acreage cannot exceed 150% of the original acreage. If the total amended acreage exceeds 150% of the original acreage, the amendment shall be advertised pursuant to R850-30-500(2).