Mining Activities on State Trust Land

Exploration Permits - Mineral Leases - Oil & Gas Leases - Common Variety Mineral Leases

Arizona State Land Department www.land.state.az.us
Adapted from: PubASLD.MIN 101 Rev.09-2003 Brochure.wpd

Introduction

Leaseable minerals

refer primarily to base and precious metals as well as industrial minerals that are unique and distinct.

Common variety minerals,

also referred to as salable minerals or mineral materials, include construction and landscaping materials (cinders, sand, gravel, boulders, loose rock and common clay) and minerals of similar occurrence commonly used as aggregate, rip-rap, ballast, borrow or fill.

Energy minerals

(also leaseable) refer primarily to oil, gas, and geothermal resources.

The right to explore for and produce mineral commodities on State Trust land is accomplished by obtaining one of the following mineral-related permit / leases:

• Mineral Exploration Permit
• Mineral Lease
• Common Variety Mineral Lease / Sale
• Oil and Gas Lease

Details for each mineral category can be obtained from ASLD's Minerals Section.

Mineral Exploration Permits

A mineral exploration permit is permission from ASLD to prospect and explore for minerals on State Trust land. Exploration is any activity conducted for the purpose of determining the existence of a valuable mineral deposit, such as: geologic mapping, drilling, geochemical sampling, and geophysical surveys. Prior to exploration, the Plan of Operations must be approved.

• The permitting process for an exploration permit takes a minimum of sixty (60) days.
• If the application is approved, the initial rent is $2 per acre. If renewed, no additional rents are due for the second year. Rents are set at $1 per acre for years 3 thru 5.
• Work expenditure requirements are: $10 per acre for years 1-2; and $20 per acre for years 3-5.

The permit is valid for one year from the due date of the rental and bond. If renewal requirements are met, the permit can be renewed annually for up to five years.
If discovery of a valuable mineral deposit is made, the permitee must apply for a mineral lease before actual mining activities can begin.

Mineral Leases

A mineral lease permits the mining of minerals discovered under the exploration permit.

• The approval process takes a minimum of six (6) months.
• The mineral lease is issued for a term of twenty (20) years. Leases may be renewed for an additional term.
• Both rents and royalties are determined by appraisal. Royalties may be based on: 1) a fixed rate subject to annual adjustment; or 2) a sliding-scale rate which is linked to a commodity index price and the operation's break-even price. There is a statutory minimum royalty rate of 2% of gross value.

Common Variety Minerals Lease/Sale Agreement

This agreement is for the purchase, mining and processing of common variety minerals (sand & gravel, and other construction and landscape materials). Statutes require these mineral commodities to be sold at public auction. It is the auction process which determines the market value (royalty rate) of the commodity.

Statutes require that the sale be advertised for ten (10) weeks prior to the auction. Advertising costs are paid by the applicant. However, should the applicant not be the successful bidder, advertising costs and certain other costs are reimbursable.

• The application approval process takes a minimum of six (6) months.
• An agreement is issued initially for a ten (10) year term with provisions to extend up to a maximum of twenty (20) years.
• Rents are based on a percentage of the appraised surface value.
• Royalty rates are determined at public auction. A minimum annual production guarantee is assessed for each agreement.

Oil and Gas Leases

The oil and gas lease is for the development and production of oil and gas resources. All drilling must be approved by the Oil and Gas Commission (through the Arizona Geological Survey) as well as the ASLD.

• The permitting process for an oil and gas lease takes a minimum of one (1) month.
• Leases are issued for a primary term of 5 years. A secondary term of 5-years may be requested prior to the expiration of the first term for a maximum of ten (10) years, or so long as production continues.
• Annual rents are payable in advance at $1 per acre for the primary term, and $2 per acre if extended for a secondary term.
• Royalties: 12.5% of the value for all products sold or removed from the lease.

Applicable State Laws

ARIZONA REVISED STATUTES
Title 27: Minerals, Oil and Gas
Title 37: Public Lands
Title 41: State Government
A.R.S. § 41-844 requires parties in charge of ground-disturbing projects on State [Trust] land to promptly report the discovery of any archaeological, paleontological or historic site or object to the director of the Arizona State Museum.

ARIZONA ADMINISTRATIVE CODE
Title 12: Natural Resources, Chapter 5

General Requirements

APPLICATION FEE There is a non-refundable filing fee of $100 per application.

OTHER FEES

Rental fees are required on all agreements. Royalties are paid on all recovered mineral products. Additional fees, such as appraisal or administrative fees, may also be required.

REQUIRED MAPS

A USGS topographic map showing lease boundaries, access routes, roads, utilities, etc., must be submitted with the application. Other detailed maps, related to your operation will be required in a Mineral Development Report.

MINERAL DEVELOPMENT REPORT (MDR)

All mining-related operations require a detailed MDR which includes: 1) geologic assessment, 2) economic feasibility, 3) environmental assessment, 4) mine operations plan, and 5) reclamation and closure plans. Detailed requirements for the MDR are available upon request.

OTHER NECESSARY DOCUMENT

Exploration permits require a plan of operations. Aerial photos, contour maps and registered surveys may also be required. Surveys of cultural resources, native plants, wildlife, and endangered species are required components.

RECLAMATION BOND

The minimum bond required is $3,000. The actual bond amount is based upon the type of operation and the degree of disturbance.

INDEMNITY INSURANCE

Indemnity insurance will be required for most operations.

OTHER PERMITTING REQUIREMENTS

The applicant is responsible for determining permitting requirements from other regulatory agencies and to be in compliance.

For more information:

Arizona State Land Department
Minerals Management Section
1616 West Adams Street
Phoenix, Arizona 85007
602-542-4628
fax 602-542-3507
www.land.state.az.us

Other Useful Contacts:
Department of Mines and Mineral Resources
602-771-1600
mines.az.gov

Arizona Geological Survey
520-770-3500
www.azgs.state.az.us

Arizona Mine Inspector
602-542-5971
www.asmi.az.gov

Arizona State Museum
520-621-4011
www.statemuseum.arizona.edu

Bureau of land Management
Land and Mineral Records
602-417-9200
www.blm.gov

U.S. Geological Survey
520-670-6671 ex. 221
www.usgs.gov