Wyo. Code R. 060-0002-6
Land Commissioners, Board of
Chapter 6: Leasing of Subsurface Resources
Effective Date: 04/28/1993 to 05/06/1996
Rule Type: Superceded Rules & Regulations
Reference Number: 060.0002.6.04281993
Date Filed 04/28/93
Expr Date
Supr Date
Repeal Date
Document Type RULES
Section 1. Authority. These rules are issued pursuant to the authority of Article 18, Sections 2 and 3 of the Wyoming Constitution and Title 36, Chapters 2,3,5 and 6 of the Wyoming Statutes insofar as they affect lands administered by the
Board of Land Commissioners and of 11-34-120 W.S. insofar as they affect lands administered by the Farm Loan Board.
Nothing in these rules shall be construed as either enlarging or diminishing the constitutional or statutory authority, duty, or responsibility of either board, or of the Director.
Section 2. Principal Reasons for Adoption of Rules-Scope and Effect. These rules and regulations set forth the procedures which are established by the Board of Land Commissioners and the Wyoming Farm Loan Board for the leasing of lands belonging to the State of Wyoming for the development, production, and utilization of all subsurface resources under the lands.
The reasons for promulgating these rules are: (1) To update leasing policies and procedures so that the best interests of the State are served; (2) To produce a fair and equitable income to the state, public schools, and institutions; and (3) To establish uniform leasing and administrative procedures which give all qualified applicants equal opportunity to lease state lands for development of the subsurface resources and assure all persons equal treatment under the rules.
These rules are effective March 1, 1982 and govern the granting of permits and leases authorizing exploration for and production of all subsurface resources owned by the State of Wyoming and administered by the Board of Land Commissioners and the Wyoming Farm Loan Board.
They also govern the keeping of records pertaining to such permits and leases; the payment of rentals and royalties; and all operations carried out under the authority of a permit or lease.
These rules supersede all other rules dealing with the same subject matter. If there is a conflict between a general rule applicable to all subsurface resources and a special rule applicable to a specific subsurface resource or class of subsurface resources, the special rule shall control. If there is a conflict between either a general or a specific rule and a lease provision, the provision of the rule shall prevail unless the Board by specific action has determined that the lease provision should prevail.
STATE - State of Wyoming, including all agencies or institutions owning or benefiting from the ownership of state lands.
STATE LANDS - All land under jurisdiction of the boards and shall include, but not be limited to school land, institutional land, and university land. The use of the words 'state lands' in the broad sense herein shall also include farm loan land.
MINERAL - Coal, uranium and associated minerals, clays, stones of various sorts, salts, and any and all substances formed by nature in or as rocks of the earth and recognized in law, geology, or by the courts as minerals.
OIL AND GAS - Includes oil and gas and such other kindred hydrocarbons as are present in the earth and produced therefrom in a gaseous or liquid form, and shall include such other gaseous or liquid form in association with oil and gas. It shall not include, coal, lignite, oil shale or similar solid hydrocarbons.
LANDS - The term lands as used in these rules means that it includes the subsurface resource or resources only - surface lands are leased under separate rules and regulations.
(a) The board and the director are required to carry out their statutory duties in a manner which assures that the granting of leases and all operations conducted thereunder produce the greatest benefit to the state and which affords all persons fair and equal treatment.
(b) The right to produce or utilize oil, gas, minerals, or any other subsurface resources under state lands may be acquired only by a lease secured in accordance with these rules. Placer or lode mining claims on state lands may not be filed and are void and of no effect.
(c) The board may, without prior notice, withdraw specific lands or subsurface resources from leasing when it appears reasonably necessary to protect the interest of the state. Any party desiring to lease lands or subsurface resources which have been withdrawn shall have the right to request that a withdrawal be rescinded in whole or in part, and shall have the right to appear before the board and present arguments and evidence in support of his request.
(d) The board may condition the issuance of any lease upon specific stipulations for the protection of the public, the environment, the waters of the state, historical, archeological or paleontological materials, the wildlife resources, or any of the subsurface or surface resources of the state, if the board finds that special circumstances or conditions require such stipulations.
(e) The board may deny a lease to any person or legal entity which has willfully and in a manner detrimental to the state failed to comply with any rules of the board or any terms and conditions of any lease or other agreement entered into by the board.
(f) Leases shall be on such terms and conditions and for such period of time, not exceeding the statutory limitations as the board may from time to time prescribe. The standard lease form adopted by the board for the class of subsurface resource being leased and then currently in use will be used unless special circumstances or conditions require that it be amended. The board, with the consent of the lessee, may amend any of the terms of an existing lease if such amendment is reasonably necessary to secure a greater benefit to the state from the utilization of its subsurface resources.
(g) A lease shall include only one class of lands. i.e.: state, school, farm loan, or individual institutional lands.
Lands under a single lease shall be lying or touching within an area six (6) miles square or within an area not exceeding six (6) surveyed sections in length or width, and shall consist of not more than 1280 acres.
(h) The board may refuse to issue a lease of subsurface resources or approve an assignment of an interest in an existing lease if the issuing of the lease or the approval of the assignment will create or tend to create a monopoly.
(i) All leases of subsurface resources are initially issued for a fixed primary term of years. A lease will be renewed or extended only if operations have been conducted by the lessee which, under the law, these rules, or the specific terms of the lease, qualify the lease for extension or renewal.
(j) On lands on which the state leases less than the entire interest in the subsurface resource, a lease will be issued by the board covering the state's interest independent of the joinder of the other cotenants.
(k) Escheat Lands - If an applicant for a lease on lands not shown by the records of the office to be owned by the state, submits evidence showing that it is probable that the lands applied for, or any interest therein, have escheated to the State of Wyoming, a lease will be issued as provided in Section 7, subject to a stipulation showing that the state does not represent that the lands have in fact escheated to it, or assume any responsibility for defending its alleged title.
Upon termination of any such lease, the lands or interest purported to have been leased will not be made available for lease as provided by Section 8, unless the fact that the lands or interest have escheated to the state has been established as required by law. The lands or interest may, however, again be leased under the provisions of Section 7.
Section 5. Qualified Lessee. Any citizen of the United States, 19 years old, or older, is qualified to apply for, acquire, and hold leases of subsurface resources.
A corporation or other similar legal entity organized under the laws of the United States, or one of the states is qualified to apply for leases of subsurface resources, but before a lease will be issued, or an assignment or other conveyance to it will be approved, it must be shown by the records of the Secretary of State to be qualified to do business in the State of Wyoming.
A trust or other legal entity which would hold leases in its name for the sole or principal benefit of persons not themselves qualified to hold leases, is not a qualified lessee.
(a) These rules are intended to make all subsurface resources owned by the state available in a manner which gives each qualified applicant an equal opportunity to apply or bid for a lease covering a subsurface resource or resources underlying any specific tract or tracts of land.
(b) The multiple use and development of the subsurface resources of the state, to the fullest extent practicable, is permitted and encouraged. Separate leases are issued as to each tract of land covering each class of subsurface resources. The classes for which leases are currently issued are: Bentonite-Zeolite-Coal-Geothermal Resources-Gold, Silver, Diamonds, and Precious Minerals or Metals-Metallic and Non-metallic rocks (This includes trona, uranium, and most other minerals for which no separate lease is available. It does not include oil shale which is currently withdrawn from leasing.)-Oil and Gas.
Leases for a resource or class of resources not included in the above list, may be authorized by the board if it determines it to be in the best interest of the state that the resources be leased. If this is done, the lands shall be made available to all potential applicants in accordance with the requirements of Section 8.
Water, soil, sand and gravel, and other surface resources are leased or disposed of under the rules governing such resources.
Removal of historical material or archaeological or paleontological deposits from state lands is governed by W.S. 36-1-114, 115, 116 (Antiquities Act). Such operations are permitted only if recommended by the Department of Commerce, the State Archaeologist or the State Geologist.
(c) Subsurface resources covered by a lease are not available for lease for the same resource until the lease is terminated, and such resources are first made available for leasing under these rules as provided in Section 8. If no new lease is awarded pursuant to either the simultaneous filing or competitive bid procedure, the subsurface resource then becomes 'open lands' and available for lease under the procedure set out in Section 7.
Upon termination of a withdrawal, applications pending at the time of the withdrawal and which are still pending shall have the same right and priority as though the withdrawal had not been made, but any lease issued shall be on the form in effect when the lease is issued. Lands not subject to a pending application on the date of the withdrawal shall be made available in the same manner as lands subject to a lease which has terminated.
(d) If any subsurface resource under a specific tract of land is not subject to an outstanding lease, and neither the tract, nor the class of resource sought to be leased have been withdrawn from leasing by the board, that resource is available for leasing as provided in Section 7 of these rules.
(e) Permanent plat books are kept in the office in which are shown by section, township and range each tract of land owner by the State of Wyoming and the class of each tract (i.e. state, school, individual institutional, or farm loan lands).
The plat book shows as to each tract whether any or all subsurface resources have been reserved in the conveyance to the state; have been conveyed to the state; or are subject to an outstanding lease which has not terminated. The plat book should show withdrawals or other restrictions applicable to specific tracts of land. It will not always show state-wide withdrawals or withdrawals covering large areas of the state.
The serial number of each lease issued covering subsurface resources is entered in the plat book as to each legal subdivision or tract subject to the lease. If a lease becomes an operating lease, that fact is noted on the plat book and the lease file is transferred to the operating lease files. Termination or cancellation of a lease is also noted.
(f) A separate file is established and maintained for each lease issued covering subsurface resources. Files for exploratory leases and for operating leases may be kept in separate locations. The file contains a copy of the original lease, copies of each document affecting the title, including assignments subleases, or other conveyances of the lease or any interest therein which have been submitted for approval; each request for change of address for notice purposes; and all correspondence concerning the lease; and any decision of either the Director or the Board affecting the lease.
The files are public records, available for inspection and copying during regular business hours. No document may be removed from an active lease file except temporarily for copying. No active lease file may be removed from the office unless the file is in the custody of an authorized employee.
Upon termination of a lease, the lease file will be kept for a reasonable period of time, and it may thereafter be transferred to the Archives Department; be microfilmed in whole or in part; or destroyed in whole or in part, if it is determined the information it contains is no longer meaningful.
(a) Application - Time of Filing. Applications for leases on 'open lands' and subsurface resources available for lease to the first qualified applicant will be received for filing in the office during the office hours of any business day. The office hours are from 8:00 A.M. to 5:00 P.M. - Monday through Friday (except for official state holidays).
Except as hereinafter specifically provided, all such applications received, whether by United States mail or by personal delivery over the counter, shall have noted on them, the exact date and time of filing. All applications presented for filing at the opening of the office for business on any business day or received in the first delivery of United State mail of that business day shall be noted as filed as of 8:00 A.M. of that day. The time of filing indicated on each application evidences the priority of the applicant.
(b) Remittances. Each application must be accompanied by the required filing fee of $25.00. THIS FILING FEE WILL NOT BE REFUNDED ON ANY APPLICATION. An application under this section must also be accompanied by a remittance for the advance rental for the first year, at the rental per acre specified for the resource applied for. Separate remittances should be made for filing fees and advance rentals.
(c) Conflicting Application. If two or more applications having equal priority are filed for the same lands and subsurface resources, the applications are in conflict.
An application which is in conflict as to only a part of the lands applied for will be processed as to the lands not in conflict, in the same manner as a separate application for such lands.
The priority of applications which are in conflict as to all or any part of the lands applied for shall, as to the lands in conflict, be determined by lot as provided in Section 8.
(d) Refund - Filing Fees are not Refunded. When an application filed under section 7 is rejected in its entirety, advance rentals paid by the applicant will be refunded. When rejected in part, the unused portion of the advance rental payment will be refunded.
If rentals are not remitted separately from the filing fees and it is necessary to refund all or any part of the advance rental, the amount of the filing fee, and a service charge equal to the filing fee will be deducted from each refund.
(e) Withdrawal of Application. An application may be withdrawn, in whole or in part, at any time prior to issuance of lease. The advance rental and all fees transmitted with said application applicable to the lands and resources withdrawn will be forfeited to the state as penalty for failure to fulfill the obligations of the lease offer, provided however, if this withdrawal was for the purpose of removing a conflict-rentals applicable to the withdrawn lands will be refunded, if a lease on the withdrawn lands is issued to another applicant whose application was in conflict as to the withdrawn lands.
Section 8. Leasing of Lands Becoming Available for Lease. Subsurface resources subject to an existing lease which has been terminated or cancelled for any cause, or which have been subject to a withdrawal which has been terminated, shall be made available for leasing as follows:
(a) Determination of Lands to be Made Available. No less than thirty (30) days nor more than ninety (90) days following the effective date of the termination or cancellation, the director shall advise the board of each lease which has been terminated or cancelled, and of each tract of land on which a withdrawal of subsurface resource from leasing has been terminated.
He shall identify each tract of land by subdivision, section, township, and range and identify the subsurface resource or resources thereunder which have become available for leasing. He shall recommend as to each tract and resource whether it should be withdrawn for leasing; be made available to all qualified applicants who file a proper application therefor during a simultaneous filing period; or offered for lease by competitive bidding. The board shall determine as to each tract, whether it should be made available for leasing by simultaneous filing, by competitive bidding, or should be withheld from leasing.
(b) Posting of Lands for Simultaneous Filing.
(i) The board's decision shall designate by appropriate description, the parcel of lands made available for simultaneous filing that must be included in each offer to lease. Separate applications shall be filed for each parcel. No parcels can be either combined or subdivided.
(ii) Lands made available for simultaneous filing shall be posted on the last business day of each month and remain open for filing from the 1st through the 14th day of the following month. If the last day of filing falls on a week-end or legal holiday, the filing period will be extended through the next full business day. All applications received during designated filing period shall be considered as having been filed simultaneously.
(iii) Each offer to lease shall be made by filing of an oil and gas drawing application card. Only one application card may be filed by each applicant for each parcel. The applicant is responsible for the accuracy of information furnished on the application card, the application to lease, and for the proper payment of the amount due.
In case of error in completing the application card, or failure to comply with any requirement stated on the application card, or contained in the law or these regulations, the application card will be rejected, not included in the drawing, and filing fees will be forfeited.
(iv) Application cards will be furnished to prospective applicants in reasonable quantities and upon payment of a reasonable charge to cover their cost. Facsimiles or unofficial copies of the application card will be accepted provided they cannot be distinguished from the official application card.
Applicants must submit payment of the required filing fee of $25.00 for each application card. Separate checks are not necessary for each application card filed, but if the total amount remitted with the application card is less than the required filing fee for all application cards submitted, all application cards will be rejected, and filing fees forfeited. Filing fees must be paid by certified check, cashier's check, money order, or postal money order.
(v) If more than one application card offering to lease a parcel, is filed during the filing period, the priorities of such offers will be determined by lot in a public drawing in which all application cards shall participate.
If only one offer is filed, the lease will be awarded to the applicant filing the offer. If no offers are received, the lands for which no offers are received will be subject to lease to the first qualified applicant in accordance with Section 7.
(vi) Successful applicants will be notified by certified mail. The office will prepare and submit a lease to the successful applicant for execution. The applicant must within 15 days remit payment for first year's rental and execute and return the lease for execution by the State of Wyoming. The director is specifically delegated the authority to execute on behalf of the State of Wyoming, any lease approved by the board. Failure to remit rental payment and executed copy of the lease within 15 days after receipt of notice will automatically result in rejection of the application.
The application will also be rejected if it is determined that the applicant is not a qualified applicant.
(c) Competitive Bidding. If the board determines that any lands should be offered for lease by competitive bidding, it shall enter an order setting a time and place for the sale; describing each tract to be offered; setting the terms of the leases to be issued; the terms and conditions of sale; the procedure to be followed in conducting the sale; and any other necessary information. Notice of sale shall be given in such form and manner as the board shall direct.
Section 9. Rentals. The annual rental payments on all leases shall be as follows:
| Type of Lease | 1-5 yrs. | 6-10 yrs. | ||
|---|---|---|---|---|
| Bentonite | $1.00/acre | $2.00/acre | Zeolite | |
| $2.00/acre | $1.00/acre | |||
| Coal | $1.00/acre | $2.00/acre | ||
| Geothermal Resources | $1.00/acre | $2.00/acre | ||
| Gold, silver, diamonds and precious minerals | $1.00/acre | $2.00/acre | ||
| Metallic and Non-metallic Rocks | $1.00/acre | $2.00/acre | ||
| Oil and Gas | $1.00/acre per year-5 year term |
Rentals on leases for underground storage or disposal may be either a fixed sum, payable annually, or an amount based upon the quantity of the substance being stored or disposed of, payable in the same manner and subject to the same requirements applicable to royalty payments. Such rentals shall be in lieu of royalty.
Annual rentals on all leases shall be payable in advance for the first year and each year thereafter. No notice of rental due shall be sent to the lessee. If the rental is not paid on or before the date it become due, notice of default will be sent to the lessee, and a penalty of $0.50 per acre for late payment will be assessed.
The lessee is not legally obligated to pay either the rental or the penalty, but if the rental and penalty are not paid within 30 days after the notice of default has been received, the lease will terminate automatically by operation of law. Termination of the lease shall not relieve the lessee of any obligation incurred under the lease other than the obligation to pay rental or penalty. The lessee shall not be entitled to a credit on royalty due for any penalty paid for late payment of rental on an operating lease
Section 10. Royalties. Leases of subsurface resources shall provide for payment of the following royalty unless a different rate is specifically authorized by the board.
Oil and Gas - 16 2/3% Bentonite/Zeolite - 10%, but not less than 30¢ per ton. Coal - 8% (underground) and 12½ (surface) Sulphur - 8% or \$1.00 per ton, whichever is greater. Uranium - 5% of the value of ore mined. Trona, Potash, Phosphate, etc. - 5%
Other Unspecified Minerals - Unless a lower royalty is fixed by the Board, in order to allow the economic mining or development of a particular mineral deposit, royalty shall be based on Adjusted Sales Value per ton as follows:
| Adjusted Sales Value per Ton | Percentage Royalty $ 00.00 to $ 50.00 | 5 |
|---|---|---|
| $ 50.01 to $100.00 | 7 $100.01 to $150.00 | 9 $150.01 and up |
| 10 |
(a) Determine the Gross Sales Value of all such minerals and/or mineral products from this lease sold during the past calendar month. Such sales value shall be based upon the actual sales value of marketable products as shown by sales receipts. If sales should occur within a company, then prices as published by the Engineering and Mining Journal in the 'E' and 'MJ' Markets section, or other mutually agreed upon prices shall prevail for determining Gross Sales Value. The Gross Sales Value shall then be divided by the tons of ore processed in that production of mineral and/or mineral products sold to determine the Gross Sales Value per ton.
(b) Determine the Price Index Factor by dividing the Constant Price Index by the Current Price Index. Both prices indices shall be obtained from the Producer Price Index for all commodities, or its successor index, as published monthly by the U.S. Department of Labor, Bureau of Labor Statistics. The Constant Price Index shall be the index for the month and year of the lease and the Current Price Index shall be the index for that month for which royalty is being calculated.
(c) Determine the Adjusted Sales Value per ton by multiplying the Gross Sales Value per ton by the Price Index Factor.
(d) The amount of Production Royalty is then the product of the Royalty Rate expressed in decimals to five (5) places and the Gross Sales Value.
The board recognized that it is difficult or impossible to set forth in these rules, specific royalties for resources for which there is little or no production experience in Wyoming - such as geothermal energy and minerals produced by in-situ or other newly developed technology. In such cases, the board may set royalty rates when lands are made available for leasing. The royalty rate will be set at a rate which will encourage the production or utilization of the resources and produce a reasonable income for the state.
In cases in which it is difficult or impossible to determine what a fair royalty rate should be, the board may offer to lease subsurface resources by a competitive bidding procedure in which the bid variable will be either the royalty payable to the state, or a share of the net profits.
After a lease becomes an operating lease, the board may reduce the royalty payable to the state as to all or any of the lands, formations, deposits, or resources covered by the lease, if it determines that such a reduction is necessary to allow the lessee to undertake operations or to continue to operate with a reasonable expectation that the operations will be profitable. Such a reduction in the royalty payable to the state shall in all cases be conditioned upon the cancellation of all cost-free interests in excess of 5% and the reduction of all other cost-free interests in the same proportion as the state's royalty is reduced. The board may also make other requirements as a condition to the reduction in royalty.
(a) Oil and gas leases shall be for a primary term of five (5) years and as long thereafter as oil or gas may be produced in paying quantities. A lease covering other subsurface resources shall be for a primary term not exceeding ten (10) years. The board may at the time it makes lands available for leasing in accordance with Section 8 of these rules, specify a primary term of less than ten (10) years for the leases on the lands being made available.
(b) The board may extend the term of an existing oil and gas lease for a period not to exceed one (1) year, if it determines that the lessee has been prevented from drilling because of governmental action or regulation or other causes beyond the lessee's reasonable control. Such an extension shall be on the express condition that the lessee commence drilling operations on the leased lands within the extended term and drill the well diligently to completion.
As a further condition, the lessee shall agree to pay liquidated damages in an appropriate amount if the well is not commenced and completed in accordance with the terms of the extension. The lessee shall furnish an adequate bond or other security in an amount approved by the board to secure the payment of such liquidated damages.
(c) The term of a lease may be extended beyond its primary term or renewed only as provided by law, by these rules, or by a specific lease provision. A lessee may at any time apply for a formal determination by the board that a lease has been or should be extended or renewed. Such applications shall be filed with the director and referred by him to the board with a recommendation as to the action to be taken. If the board determines that the lease has been or should be extended or renewed, the lease will be classified as an operating lease. The change in status will be noted in the plat book. A copy of the decision will be placed in the lease file.
(a) The board is authorized to join, on behalf of the state, in cooperative or unit plans for exploration, development, operation and production of subsurface resources pursuant to W.S. 36-6-101. All subsurface resource leases are issued subject to the right of the board to require cooperative plan or agreement if the board determines such participation is necessary to protect the state's interest. Unless the board specifically requires a lessee to participate, execution by the state of the form of approval certification-determination does not become effective as to the state lands described therein until the lessee(s) of those lands has also executed the unit agreement.
(b) Commitment of state lands and leases to cooperative or unit plans shall be conditioned on the following procedure and requirements:
(i) There shall be submitted to the office through the office of the State Oil and Gas Supervisor as to oil and gas leases and as to other leases, directly to the office or to such other office as may be designated by the board, for exclusive use and approval, two copies of a plat showing the area to be unitized, together with such geological and other information in support of the delineation of the area. The information so furnished shall be held confidential until released by the applicant.
(ii) Two copies of the preliminary draft of the agreement shall be submitted to the office for approval as to form. A filing fee shall accompany the agreement.
(iii) If the form is acceptable to the office, the agreement will be submitted to the board for approval. If approved, it will be duly executed, using the state's form of approval-certification-determination. The proponent of the agreement shall submit for execution as many counterpart copies as are required for all parties in interest, including one copy to be delivered when fully executed to the office for the state's records.
(iv) When only part of the land under a non-producing lease is committed to a unit, it shall be considered that there has been an assignment of that part of said lease not committed to the unit and Section 14(b) shall apply.
(v) Unless the state has conditioned its approval of a cooperative or unit agreement or mining plan upon a waiver of the provisions of W.S. 36-6-101(e), when a cooperative or unit agreement ceases to be effective as to an oil and gas lease covering state lands upon which there is no production sufficient to maintain the lease in effect, the state lease covering such lands shall remain in effect for a new primary term of two (2) years from the date such lands ceased to be subject to said agreement, or for the remaining length of the primary term of the original lease, whichever is greater.
An oil and gas lease which has once been extended beyond its primary term under W.S. 36-6-101(e) will be committed to a subsequent unit or cooperative agreement only if the lessee agrees that no further extension will be secured thereby.
(a) An assignment or transfer of a lease or any interest therein, including overriding royalties and other cost-free interests created out of the leasehold estate must be in writing and executed and acknowledged in accordance with the requirements of the law applicable to conveyances of interest in real estate. The instrument must clearly set forth the serial number of the lease, accurately describe the lands affected, the interest being conveyed, and be free of any ambiguity.
(b) No assignment of a lease or any interest therein to any person, corporation, or other legal entity not a qualified lessee as defined in Section 5 will be approved.
(c) Assignments shall be submitted for approval in duplicate. If an assignment transfers an interest in more than one lease, an extra duly executed copy of the assignment or a photostatic copy of the original assignment shall be furnished for each lease in which an interest is transferred. The required filing fee must be paid for each separate lease in which an interest is assigned.
(d) The board, by the adoption of these rules, delegates to the director, authority to approve or to withhold approval of any assignment or other conveyance of a lease or an interest therein. The director shall not withhold approval of an assignment which has been properly executed and appears to comply with the law and these rules, unless he determines that approval would interfere with the development of the subsurface resource or otherwise be detrimental to the interests of the State of Wyoming.
(e) If the assignment is approved by the director, the approval will be noted on each copy submitted and an approved copy will be placed in each lease file affected. The original assignment with the director's approval noted thereon will be returned to the assignee. No separate order or decision of the approval will be entered.
(f) If approval is withheld by the director, he shall advise the assignee by letter of his decision, of the reason therefor, and when possible, advise what action is necessary to secure approval. Any decision of the director withholding approval of an assignment may be appealed to the Board and if no appeal is timely taken, shall be reported to the board at its next regular meeting for its approval or disapproval.
(a) Subject to the requirements of these rules and to the right of the board to refuse to approve an assignment which will prevent or substantially interfere with the development of the subsurface resource being leased or otherwise be detrimental to the interest of the State of Wyoming, a lessee may assign or convey all or part of his interest in the leased acreage as to either a divided or undivided interest therein to any qualified lessee as defined in Section 5. (Including cost-free interest such as overriding royalties and production payments.)
(b) Assignment of a divided interest, i.e. an assignment of the full leasehold or working interest in a lease as to all interest in all deposits or formations below a separate tract of the lands subject to the lease or as to one or more separate deposits or formations below all or a part of the land subject to the lease, segregates the assigned interest from the retained interest and creates new lease obligations as to the lands and the deposits or formations assigned.
The rights and obligations of the lessees under the retained portion and the assigned portion of the original lease are separate and distinct and the same as though two separate leases, one covering only the retained interest and the other the assigned interest had originally been issued on the effective date of the original lease.
The board may refuse approval of any assignment which has the effect of creating separate lease obligations covering the retained and the assigned interest even though it purports to assign less than all of the leasehold or working interest, unless both assignor and assignee agree that separate obligations are created by the assignment.
(c) Upon assignment as to only a part of the lease acreage, including assignment as to separate zones, deposits, or depths, a reissue lease with a new serial number may be issued covering the assigned lands for the unexpired primary term thereof, or in lieu of a reissue lease, appropriate notation of the assignment may be made upon the records of the office and all lands covered by the original lease carried on such records under the original serial number with each separate tract or interest resulting from an assignment being designated by a letter suffix to the original serial number. Each assignee holding a lease on a separate tract or interest may be required to furnish a bond as may be required under Section 16.
(d) Assignments of undivided interests in a lease do not create new leases or new obligations, but the approval of assignments of undivided interests may be withheld if the number of persons holding undivided interest in a lease exceed two (2) in number unless a designation of agent or a power of attorney executed by all lessees is filed with the office which designates one of the lessees as agent or attorney to receive all notices, pay all rentals, and authorized to represent the lessees with the same effect as though the agent or attorney was the sole lessee. Forms of power of attorney or designation of agent will be furnished on request by the office.
For the purposes of this subsection, owners of overriding royalties, production payments, or other cost-free interests are not considered lessees, but owners of carried working interest, net profits owners, and other persons who may be required to bear a share of the cost out of their share of the production are considered lessees.
(e) Leases - Subdivision. The board reserves the right to disapprove assignments which in its opinion result in a subdivision of the lease which would prevent or unreasonably impede that development of the lease.
While no standard can be applicable to all subsurface resources, under all conditions, in general, an assignment of a divided interest in an oil and gas lease of less than 40 acres, or less than the size of the drilling and spacing units established for the land by the Oil and Gas Conservation Commission will not be approved. Assignments of divided interest of leases covering other subsurface resources will not be approved if in the judgment of the board, either the interest acquired by the assignee or retained by the assignor is too small to allow the lessee to produce or utilize the subsurface resource.
Section 15. Cost-free Interests. Assignments or reservations of cost-free interests such as overriding royalties and production payments may be made. No assignment or conveyance which creates a cost-free interest which, when added to cost-free interest previously conveyed or reserved, exceeds 5% of the production will be approved by the director or the board unless the assignee agrees that at least one-half of the overriding royalty so reserved or conveyed will be paid to the State of Wyoming. Any such approval will be subject to the further condition that the overriding royalty may be cancelled by the board if it finds that it creates a burden upon the lease which prevents or unreasonably interferes with development.
Cost-free interests which do not exceed a total of 5% will be approved subject to the condition that they may be reduced in the same proportion as the state agrees to reduce its royalty interest if such a reduction in state royalty is necessary to secure full development and utilization of the subsurface resources.
Purported Assignment of Cost-free Interests. All leases for subsurface resources grant to the lessee, the right to use as much of the surface of the state land as is reasonable necessary to the lessee's operations. For this reason an assignment of a costfree interest will not be approved if the sale or principal consideration for the assignment is the waiver by an owner or lessee of the surface estate of a purported right to compensation for use of the surface by the lessee of the subsurface resources authorized by the lease.
Cost-free interest which violate this rule are not valid, and if payment is made of any share or interest in the production of the subsurface resources or the income realized from its utilization to any person holding a purported cost-free interest which has not been approved, the State of Wyoming may recover from the lessee the amounts so paid and the lease will be subject to cancellation.
Section 16. Bonds. A lessee is not required to post a bond until actual operations are to be commenced on the leased lands. Before commencing such operations, lessor shall advise the office and outline in detail the nature of the operations proposed.
The bond shall be in an amount found by the director sufficient to protect and indemnify the State of Wyoming and shall be upon substantially the following form:
"Corporate Surety Bond"
STATE OF WYOMING
Bond of Lessee
KNOW ALL MEN BY THESE PRESENTS, that we as principal, and , a Surety Company authorized to do business in the State of Wyoming, as surety, are held and firmly bound unto the State of Wyoming in the sum of $ lawful money of the United States, to be paid to the State Land and Farm Loan Office, as agent for the State of Wyoming for the use and benefit of the State of Wyoming, and of any patentee
or purchaser of any portion of the land covered by the hereinafter described lease heretofore sold with a reservation of the minerals to the State of Wyoming, and any lessee under any lease heretofore issued by the State of Wyoming on the surface or of other mineral deposits of any portion of such land, for which payment, will and truly to be made, we bind ourselves, and each of us, and each of our heirs, executors, administrators, successors, and assigns, jointly and severally by these presents.
Signed with our hands and seals this day of in the Year of our Lord .
The condition of the foregoing obligation is such that,
WHEREAS, the State of Wyoming, as lessor, issued an lease, Serial Number and dated to as lessee (and said lease has been fully assigned under date of to ) to drill for, mine, extract and remove all of the deposits in and under the following described lands, to wit:
NOW, THEREFORE, if said principal shall pay all moneys, rentals, and royalties accruing to the lessor under the terms of the above described lease, and shall fully comply with all other terms and conditions of said lease and the rules
and regulations relating thereto established by the Board of Land Commissioners, and shall pay all damages to the surface and improvements thereon, then the above obligation shall be void and of no effect, otherwise to remain in full force and virtue.
Signed, Sealed and Delivered in the presence of:
(SEAL)
Principal
Witness:
Witness:
Witness:
By:
Attest:
Resident Agent:
Corporate Seal of Bonding Company must be affixed
Approved as to form and execution:
Attorney General
Date: '
Two executed copies of the bond are required for state records and as many additional copies should be submitted for approval as may be required by the lessee and the bonding company. All bonds must be approved by the Attorney General. Operations shall not commence until an adequate bond has been furnished and approved.
The furnishing of a bond as required by the Department of Environmental Quality, Oil and Gas Conservation Commission, or some other agency having jurisdiction over the proposed operation shall not relieve the lessee of the duty to furnish bond as required by this section, but such fact shall be taken into account by the director in determining the amount of the bond to be required.
The bond shall be in the form of either a corporate surety bond executed by the lessee and by a surety authorized to do business in the state or cash bond if the lessee is unable to obtain a corporate surety bond and the director consents to the furnishing of cash bond on, or in lieu of individual bonds, the lessee may request and the director may allow the lessee to file a corporate surety bond in the sum of not less than $100,000.00 covering all of the lessee's state leases and operations thereon.
The lessee shall promptly advise the office of any change in operations. The office may at any time reduce or increase the amount of the bond as conditions may require.
Section 17. Relinquishment or Surrender. A lease or any divided interest therein may be relinquished or surrendered by the record title holder to the lessor in the manner described as follows:
(a) If no operations have been conducted under the lease and no surface disturbance or damage has been done on the land to be relinquished, the lessee shall file with the office a written statement on a form provided by the office, that he wishes to surrender or relinquish the lease or interest. The relinquishment shall become effective on the date and hour of receipt thereof in the office or at some later date if specified by the lessee therein.
(b) If operations have been conducted under the lease or surface disturbance or damage has occurred on land proposed to be relinquished, the lessee shall file with the office, a statement duly witnessed or acknowledged on a form provided by the office, that he wishes to surrender or relinquish the land. In the case of oil and gas leases, such relinquishment shall not become effective until the land and the wells thereon shall have been placed in acceptable condition and an inspection report has been completed by the State Oil & Gas Supervisor. As to all other leases, the Department of Environmental Quality or such other agency as may have jurisdiction must certify that the lands have been adequately reclaimed or restored before the relinquishment is effective.
Once a relinquishment on state lands becomes effective, the lease may not be reinstated. The lands shall be made available for lease as provided in Section 8.
(a) A sworn monthly statement showing both production and sales, shall be made in duplicate, the original statement being mailed to the office and in the case of oil and gas, a copy mailed to the State Oil & Gas Supervisor at Casper.
(b) Production statement which are sent to the office must have run statements or settlement statements attached showing the quantity and quality of oil or minerals produced.
(c) All division orders which are sent to the office for approval must state the division of leasehold interest and be executed by the lessees of record.
(d) Royalties shall be paid on the day and at the time specified in the lease. If no time of payment is specified in the lease, payment shall be made on or before the last day of the calendar month succeeding the month in which the subsurface resource was utilized and produced and removed from the premises. Failure to pay the royalty on or before the day it is due shall subject the lessee to a penalty of 5% of the value of the royalty for each month or fraction thereof the royalty payment is delinquent.
Continued and repeated failure to pay royalties within the time provided may subject the lease to cancellation unless the director or the board determines that the failure was not willful.
Section 19. Disposition of State Royalty Oil. New rules adopted effective April 13, 1981 - no change is proposed. (See Chapter XII for Sale of State Royalty Oil).
Section 20. State Auditor - Field Audits. The State Auditor, the director or the duly authorized representative of either, shall have the right at reasonable times and intervals to audit the books and records of any lessees and to inspect the leased premises and conduct field audits for the purpose of determining whether there has been compliance with these rules or the terms of the lease.
The lessee shall not sell or deliver any leased substance to any person who does not agree: to file reports with the office stating the price, quantity, origin and disposition of all production purchased from a state lease; to allow an audit as provided for in Section 20; and who does not agree to require the same agreement from any person to whom he transfers the custody of oil or gas purchased from a state lease.
Section 21. Cancellation for Default. If the lessee defaults in the performance or observance of any of the rules or any of the terms, covenants or conditions of the lease under which it is operating, the board may serve or cause notice to be served of such failure or default either by personal service or by certified or registered mail upon the lessee and if such failure or default continues for a period of thirty (30) days after the service of such notice, may at its option declare a forfeiture and cancel the lease, whereupon all rights and privileges obtained by the lessee thereunder shall terminate and cease and the lessor may re-enter and take possession of the premises.
These provisions shall not be construed to prevent the exercise by the director or the board of any other legal or equitable remedy which the state might otherwise have nor to relieve the lessee from any accrued obligation under the lease. Failure of the lessor to give notice of default in any particular case or waiver of a particular cause of forfeiture shall not prevent the cancellation and forfeiture of the lease for any other cause of forfeiture or for the same default or cause if it continues or occurs at any other time.
Section 22. Land Office Records - Public Inspection. Records of the office are open to public inspection during the regular hours of business and will be made available under reasonable conditions to anyone having a bona fide use of same. 'Board Matters' and director's decisions or recommendations to be considered by the board at its next meeting shall be made available to affected parties, but shall not be available for general public inspection until such meeting shall have adjourned.
(a) Exploratory leases will be issued covering more than one class of subsurface resource under the same tract of land, unless the lands have been withdrawn from leasing as to a particular class or classes of subsurface resources. If all leases of subsurface resources under a tract of land are exploratory leases, each lessee has an equal right to conduct exploratory operations on the land, and each shall conduct such operations in a manner which does not prevent or unduly interfere with the operations of the other.
(b) The first lessee to commence actual producing or utilization operations so that his lease becomes an operating lease shall have the right to continue them without substantial interference from any other lessee of a subsurface resource so long as the lease remains in effect. The lessee may not be deprived of this right in whole or in part without adequate compensation.
(c) If the owner of a lease desires to commence operations on the same tract upon which one or more lessees are already conducting operations, and the lessees can agree that the operations can be conducted at the same time without materially reducing the amount or value of the resources which will be produced or utilized under each lease, and without unduly interfering with or raising the cost of operations of the prior lessee(s), unless he is adequately compensated therefor, the lessees may agree upon a plan of operations and assessment of costs under which the operations may be carried out concurrently. Any such agreement shall be submitted to and be subject to the approval of the board.
(d) If, under the circumstances set out in (c) the lessees either agree that the operations cannot be carried out concurrently, or cannot agree upon a plan of operations and assessment of costs, the director upon request and subject to appeal to the board, and the board subject to appeal to the court, may resolve the conflict.
(i) If the director determines that the operations can be carried out concurrently without materially reducing the quantity or value of the subsurface resources which will be produced or utilized, and either that the costs of operation of any prior lessee(s) will not be increased significantly, or that if they are, such costs are capable of determination and if paid by the subsequent lessee will not constitute an unreasonable burden on the operation, he shall enter his decision approving a plan of operation and assessment of cost under which operations may be carried out concurrently.
(ii) If the director determines that the proposed operations cannot be carried out concurrently and that the value which will be realized by the state from the existing operation is such that the proposed operation should be deferred, he shall enter his decision deferring the development obligations under the lease of the proposing lessee.
The lease will be placed in operating status and remain in effect subject to the requirement that annual rentals will be paid and to the condition that if development is deferred more than five (5) years, the lease may be amended to conform to the lease form in effect upon commencement of production or utilization operations for the class of subsurface resources to be produced or utilized.
(iii) If the director determines that the proposed operations cannot be carried out concurrently and that the benefit which would be realized by the state from initiating the proposed operation so far exceeds that which would be realized from the existing operation that it is clearly more beneficial to the state that the existing operation be terminated or deferred and the proposed operation commenced, he shall enter his decision terminating the existing operation and allowing the commencement of the proposed operation, conditioned upon the payment by the lessee proposing the operation to the lessee whose operations are terminated, of an amount equal to the value of the rights lost by that lessee determined in the same manner as if the right were being condemned in eminent domain proceedings.
(iv) A lease upon which operations are terminated as above provided shall, upon payment to the lessee of the value of the right lost, be assigned to the lessee making the payment, who shall be entitled to hold it subject to the same terms and conditions applicable to a lease upon which operations were deferred under (2) above.
(v) If the proposing lessee disagrees with the director's or the Board's determination, he may refuse to commence the proposed operation. His refusal to do so shall not constitute a violation of any of the covenants for development unless the amounts he would be required to pay to the prior lessee constitute such an insubstantial addition to the cost of operation that a reasonable prudent lessee would assume them.
Board approved: February 4, 1982