37-231

37-231. State lands subject to sale; rights
reserved in lands sold; state lands not subject to sale;
development agreements

A. All state lands, except as otherwise provided for in this title, including all
improvements made or placed on or connected with state lands, shall be subject to
appraisal and sale as provided in this title.

B. Any person over eighteen years of age is entitled to purchase any of the state
lands.

C. All sales, grants, deeds or patents to any state lands sold between July 9, 1954
and March 18, 1968 shall be subject to and shall contain a reservation to the state of an
undivided one-sixteenth of all oil, gases and other hydrocarbon substances, coal or
stone, metals, minerals, fossils and fertilizer of every name and description, together
with all uranium, all thorium, or any other material which is or may be determined by the
laws of the state or the United States or decisions of courts to be peculiarly essential
to the production of fissionable materials, whether or not of commercial value, subject
to the following:

1. For the purpose of promoting the sale of state lands and the more active
cooperation of the owner of the soil, and to facilitate the development of its mineral
resources, the state constitutes the purchaser of the land its agent for the purposes
specified in this section, and in consideration hereof, relinquishes to and vests in the
purchaser of the state land an undivided fifteen-sixteenths of all oil, gas and the value
thereof which may be upon or within any state land purchased after July 9, 1954 and
before March 18, 1968.

2. The purchaser of the soil may sell or lease to any person, firm or corporation
the oil and gas and other minerals which may be on or in the land, upon terms and
conditions the purchaser and the owner deem best, subject to the provisions and
reservations of this section, but the lessee or purchaser shall pay to the state an
undivided one-sixteenth of the mineral produced or the value of the mineral produced at
the well or mine as determined by the state land department.

3. Upon discovery of oil and gas in paying quantities on land adjoining state lands
purchased under the authority of this section, the purchaser or the purchaser's lessee
shall drill and produce all wells necessary to protect the land so purchased from
drainage by wells on lands in which the state has no royalty interest, or has a lesser
royalty interest. If the purchaser or the purchaser's lessee fails to protect against
such drainage, the state, acting through the state land department, may, three months
after demand therefor in writing by the state land department to such purchaser and the
purchaser's lessee, enter upon such lands and drill all wells necessary to protect the
state against such drainage.

4. The interest reserved by the state in any state lands sold may be committed to a
drilling unit or cooperative or unit plans of development and operation of oil and gas
pools with the United States, its agencies and its and their lessees and permittees, and
with private owners and persons holding oil and gas leases on private lands or on state
lands. The state land department may, insofar as the interest of the state may be
affected thereby, join in and consent to any such plan on behalf of the state. Such
agreements shall provide for the equitable division on an agreed basis of the oil and gas
produced from the unit, but no such agreement shall relieve any operator from the
obligation to develop reasonably the lands and leases as a whole committed thereto. The
royalties to which the state is entitled on production from land purchased under this
section shall be computed only on that part of the production allocated to such
tract. When the agreements made under this section provide for the return of gas to a
formation underlying the unit, they may provide that no royalties are required to be paid
on the gas so returned.

D. State lands known to contain oil, gases and other hydrocarbon substances,
geothermal resources, coal or stone, metals, minerals, fossils and fertilizer of every
name and description, in paying quantities, or uranium, thorium or any other material
which is or may be determined by the laws of the state the United States or decisions of
court to be peculiarly essential to the production of fissionable materials, whether or
not of commercial value, and state lands adjoining lands upon which there are producing
oil, gas or geothermal wells or adjoining lands known to contain any of such substances
in paying quantities, or uranium, thorium or any other material peculiarly essential to
the production of fissionable materials, whether or not of commercial value, shall not be
sold. The prohibition against sale shall not operate to prevent the sale of lands known
to contain, in paying quantities, common variety minerals as defined in section 27-271 or
to prevent the sale of lands where the state does not own such substances, minerals or
metals in the lands sought to be sold. The provisions of this subsection shall not
prohibit the sale of such lands located within the exterior boundaries of an incorporated
city or town, in which case the commissioner may offer the land for sale, provided the
land shall be used solely for a public purpose. Such land shall revert to the state if
it is used other than for a public purpose.

E. Notwithstanding the provisions of subsection C of this section, all state lands
sold after March 18, 1968 shall be sold with the reservation that all oil, gas, other
hydrocarbon substances, helium or other substances of a gaseous nature, geothermal
resources, coal, metals, minerals, fossils, fertilizer of every name and description,
together with all uranium, all thorium or any other material which is or may be
determined by the laws of the United States or of this state, or decisions of court, to
be peculiarly essential to the production of fissionable materials, whether or not of
commercial value, and the exclusive right thereto, on, in, or under such land, shall be
and remain and be reserved in and retained by the state, regardless of any sale under
this section and the issuance of any certificate of purchase to any purchaser of state
lands pursuant to this section, provided, that the reservation shall not include common
variety minerals as defined in section 27-271, subject to the following:

1. The state land department shall adopt rules providing for the protection of the
patentee or contract purchaser of state lands, or their successors in interest, and the
state of Arizona, against damage to the lands, livestock, water, crops, or other tangible
improvements on lands held by such patentee or contract purchaser, and suffered by reason
of the use or occupation of such lands by lessees or permittees engaged in mining and
oil, gas and geothermal resource exploration and development under leases or permits
executed by the department. The state land department may, at any time, require each of
its lessees or permittees to execute a bond in a reasonable principal amount conditioned
upon payment for all such damages.

2. The mineral rights reserved to the state in the lands sold shall be closed to
entry and location as a mineral claim or claims, but the department may issue, upon
application, mineral exploration permits embracing the reserved mineral rights when such
issuance is deemed in the best interest of the state, provided that the surface owner or
owners shall have the first right of refusal to acquire such mineral exploration permits.