1. (a) A petroleum lease may not be issued on land that has not been classified by the commission as proven territory. With regard to proven territory to which no permit holder is entitled to a lease, the commission shall, in areas to be determined by the commission, lease any of the land in the proven territory to the responsible person offering the greatest consideration for the lease if the person files with the commission five (5) days before:

   1. (1) the opening of the sealed bids; or

   2. (2) the auction;

      as provided in this chapter, a bid bond in an amount fixed by the commission to guarantee the posting of a performance bond if the person is the successful bidder.

2. (b) To obtain the best possible consideration for a lease the commission may offer leases under the following conditions:

   1. (1) The commission may call for competitive offers by prospective lessees as to the royalty rate to be included as a term of the lease. The commission may call for sealed bids as to the leases, but may temporarily reject all sealed bids and immediately offer the property for competitive bidding at public auction. If none of the bids received at public auction exceed the highest sealed bid received by the commission, the lease shall immediately be granted to the responsible person making the highest sealed bid.
   2. (2) The commission may, with regard to any lease the commission offers, set a minimum acceptable royalty rate, which may not be less than twelve and one-half percent (12 1/2%) and call for competitive offers by prospective lessees for cash bonuses in addition to the set royalty provision. This competition may be conducted in the alternative manners provided for in subdivision (1).

   3. (3) A permittee who qualifies for a lease of one (1) section, or an equivalent area, of the land embraced by the permittee's prospecting permit has a preferential right to leases on the remainder of the land embraced by the permittee's prospecting permit upon meeting the highest bid for royalty or bonus that the commission receives. The commission may reject any bid if the rejection of the bid of a permittee, if the permittee would otherwise be the successful bidder, is accompanied by a statement to the permittee of the reasons for the rejection.

      [Pre-1995 Recodification Citation: 14-4-3-10.]

As added by P.L.1-1995, SEC.31.