27-235

27-235. Offering leases at auction; terms of
lease; financial security termination

A. The state land commissioner may offer mineral leases at public auction, after
advertising, for state lands on which a mineral exploration permit or mineral lease has
been terminated or not been renewed by the lessee or permittee. The commissioner may
establish by rule the procedure for conducting the auction, but bidding is limited to a
cash bonus to be paid in full before the commissioner executes the lease documents. The
land rental and royalty rate are not subject to bidding.

B. Every mineral lease of state lands shall be for a term of twenty years.

C. The lease shall confer the right:

1. To extract and ship minerals from the leased land located within planes drawn
vertically downward through the exterior boundary lines of the leased land.

2. To use as much of the surface as required for purposes incident to mining.

3. Of ingress to and egress from other state lands, whether or not leased for
purposes other than mining.

D. Every mineral lease of state lands shall provide for:

1. The development and use of the property according to the lessee's general mining
plan approved by the commissioner.

2. The fencing of all shafts, exploration holes, adits, tunnels and other dangerous
mine workings for the protection of public health and safety and livestock.

3. The construction of necessary improvements and installation of necessary
machinery and equipment with the right to remove it upon expiration, termination or
abandonment of the lease, if the lessee is not in default of the terms and conditions of
the lease.

4. The right of the lessee and the lessee's assigns to transfer the lease.

5. Termination of the lease by the commissioner upon written notice specifically
setting forth the default for which forfeiture is declared, and preserving the right to
cure the default within a stated period of not less than thirty days.

E. If financial security is required under this subsection, it shall be in the form
of a cash deposit, a certificate of deposit, a surety bond or any other form of financial
assurance acceptable to the commissioner. On default, the commissioner may use the
proceeds of the financial security for the purposes described in paragraph 1, 2 or 3 of
this subsection. Financial security may be required in the following circumstances:

1. The commissioner may require financial security to guarantee the payment of all
monies due under the lease as royalty to this state.

2. The commissioner shall require financial security in a reasonable amount to be
fixed by the commissioner conditioned on the lessee's reclaiming the surface of the land
described in the lease to a reasonable condition in accordance with the reclamation
measures approved by the commissioner. The commissioner may enter into agreements
pursuant to title 11, chapter 7, article 3 with the state mine inspector's office, United
States bureau of land management, United States forest service and other agencies that
manage public lands and take other appropriate measures to coordinate the review and
approval of reclamation plans, including designating a lead agency for reclamation plan
review and action. The commissioner shall avoid redundant, inconsistent or contradictory
reclamation, inspection, administration, enforcement and financial assurance requirements
unless such requirements are necessary as a result of the commissioner's trust
obligations.

3. The commissioner shall require financial security conditioned on the lessee's
prompt payment to the owner or lessee of the surface of the state land described in the
lease, or across which the lessee exercises the right of ingress, for any loss to the
owner or lessee from damage or destruction caused by the lessee or the lessee's agents or
employees to grass, forage, crops or improvements on the land.

F. The lessee of any mineral lease who has met the applicable terms and conditions
of the lease from the time of issuance to the time of termination, as determined by the
commissioner, may terminate the lease at any time during its term by giving the
commissioner thirty days' written notice of the termination.