Arizona § 27-272 - Common variety mineral leases; terms and conditions; rules

§ 27-272. Common variety mineral leases; terms and conditions; rules

A. The state land department may dispose of common variety minerals at auction and may execute common variety mineral leases offered at auction for the severance, extraction or disposal of common variety minerals.

B. A lease shall be comprised of not more than one legal section of six hundred forty acres, more or less, or lot of the public land survey and shall provide for:

1. A term of not more than ten years unless the commissioner considers a longer term to be necessary, but in no event may the lease issue for a term longer than twenty years.

2. A rental based on a percentage of the appraised land value, payable before the commissioner executes the lease and at the beginning of each subsequent annual period.

3. The right of the lessee:

(a) To use as much of the surface of the premises as is reasonably necessary to extract, sever, temporarily store, remove and dispose of common variety minerals.

(b) To wash, screen, crush, sort or otherwise mechanically process.

(c) Of ingress to and egress from the premises across other state lands along designated routes approved by the department.

(d) To assign the lease, provided that such assignment shall not become effective until a copy of the lease is filed with the department and is approved by the commissioner as being in the best interests of the state.

4. Other terms and conditions as the department may deem for the best interests of the state and that are not in conflict with the enabling act, constitution and laws of this state.

C. The department shall establish in the lease the terms of the royalty to be paid for all common variety minerals severed or extracted from the leased land and disposed of by the lessee. The royalty rate shall be established by auction, but it shall be at least the minimum royalty established by the department based on the appraised value of the common variety minerals. The lease shall provide for:

1. Payment of a minimum annual royalty due and payable on the anniversary date of the lease. The minimum annual royalty shall be based on a minimum annual production rate and shall be applied as a credit to payment for common variety minerals extracted or severed from the land. Royalty for any common variety mineral extracted, severed or disposed of in excess of the minimum annual production is due and payable monthly, within thirty days after billing.

2. The application of minimum annual royalty payments as a credit for payment of common variety minerals for which payment must be made. Monies so advanced and not credited against payments for common variety minerals become the sole property of this state on termination or expiration of the agreement.

D. Common variety minerals are not subject to lease as provided by articles 3 and 4 of this chapter.

E. The department shall adopt rules necessary for the administration of this article.