27-234

27-234. Rent; royalty; appeal; interest;
penalty; lien

A. Before issuing a mineral lease the state land commissioner shall establish the
annual land rental for the mineral lease. The rental shall be based on an appraisal of
the land that, for purposes of establishing the rent, shall not include the contributory
value of mining. The annual rental:

1. Shall be at least the average rental assessed per acre by the states of
Colorado, New Mexico and Utah. If a state assesses a range of rental rates rather than a
single rental rate, the median of the range of rental rates assessed by that state shall
be used in calculating the average under this paragraph.

2. Is payable in advance of executing the mineral lease agreement by the
commissioner and at the beginning of each annual period thereafter.

B. In addition to the annual rental, a production royalty of at least two per cent
is assessed against the gross value of all minerals produced and sold from the mineral
lease. Where processing is performed after the mineral is extracted, the mineral shall be
deemed produced and sold when the concentrate or cathode results from that processing.
The royalty rate for each mineral lease shall be based on an appraisal of this state's
interest as a lessor in the mineral and shall be established according to the appraisal
standard prescribed by subsection C of this section. The gross value shall be based on
the monthly average price of the mineral as quoted by the mineral commodities market and
industry trade journals as determined by the commissioner and specified in the lease. If
a mineral does not have a published price quotation, the gross value shall be based on an
appraisal that establishes the fair market price of the mineral. The royalty shall not be
based on any hedging or price protection arrangements that may be entered into by the
lessee and any of these arrangements shall not be considered in any appraisal that
established the fair market price of the mineral.

C. The commissioner shall appraise this state's interest as a lessor in the mineral
according to standard appraisal methodology and, to the extent feasible, shall base the
appraisal on market royalty rates. The appraisal shall be completed in order to determine
whether a royalty rate greater than two per cent of the gross value is required in order
to obtain a fair market value for this state's interests as a lessor in the mineral. The
appraisal shall be completed before issuing a mineral lease, at the end of the first year
of commercial production and again for each renewal of the lease. If, during the term of
the lease, new minerals are produced and sold from the mineral lease, or changes in
technology substantially affect the value of this state's interest as a lessor, the
commissioner at that time may reappraise that interest and, if appropriate, adjust the
royalty rate.

D. For mines existing on state lands on June 8, 1989, the royalty paid under this
section shall not be less than the royalty which would have been paid under statutes in
effect immediately before June 8, 1989.

E. The costs of all appraisals conducted under this section shall be assessed
against the lessee and added to the amount due as rental under this section.

F. The department shall review all property tax assessment information relevant to
the mineral lease. The department shall maintain that information on a confidential
basis as prescribed by title 42, chapter 2, article 1.

G. Every mineral lease of state land shall require the lessee to make the following
records available on an annual basis:

1. Itemized statements of mineral production.

2. Relevant tax records.

3. Additional relevant records pertinent to appraisal, compliance with the lease
and mineral production deemed necessary by the commissioner.

H. The information obtained under subsection G, paragraph 2 of this section and any
trade secrets are confidential. For purposes of this subsection, trade secrets are
information to which all of the following apply:

1. A person has taken reasonable measures to protect the information from
disclosure and the person intends to continue to take those measures.

2. The information is not and has not been reasonably obtainable by legitimate
means by other persons without the person's consent, other than by governmental entities
and other than in discovery based on a showing of special need in a judicial or
quasi-judicial proceeding.

3. A statute does not specifically require disclosure of the information to the
public.

4. The person has satisfactorily shown that disclosure of the information is likely
to cause substantial harm to the person's competitive position.

I. Mineral lessees shall make monthly royalty payments based on the mineral
production activity of the previous month.

J. Appeals of the appraisal decision of the commissioner may be taken pursuant to
section 37-215 to the board of appeals, established by section 37-213, which shall
affirm, modify or reverse the decision of the commissioner within one hundred eighty
days. Except as provided in section 41-1092.08, subsection H, decisions of the board of
appeals under this subsection are subject to judicial review pursuant to title 12,
chapter 7, article 6. As a condition of the appeal, the lessee must continue to make all
rental and royalty payments due based on the commissioner's final appraisal decision, and
the court shall not stay the commissioner's decision, in whole or in part, pending a
final disposition of the case. The state shall segregate rents and royalties paid while
an appeal is pending and shall not distribute such monies to the state general fund or to
the trust beneficiaries until the appeal is completed.

K. If a lessee fails to pay rent or royalty, including appraisal costs under
subsection C of this section, on or before the date the payment is due, the amount due
accrues interest at the rate and in the manner determined pursuant to section 42-1123.
In addition, if it is determined that the failure to pay is not due to reasonable cause,
a penalty of five per cent of the amount found to be remaining due shall be added to the
rent or royalty for each month or fraction of a month elapsing between the due date and
the date on which it is paid. The total penalty shall not exceed one-third of the rent or
royalty remaining due. The penalty so added to the rent or royalty is due and payable on
notice and demand from the commissioner.

L. If any rent, royalty, appraisal assessment, interest or penalty is not paid by
the lessee when due, the unpaid amounts constitute a lien from the date the amounts
become due on all property and rights to property that belong to the lessee and that are
located on state land.