Arizona Revised Statutes
Title 27 - Minerals, Oil and Gas
§ 27-235 - Offering permits and leases at auction; terms of lease; financial security termination

27-235. Offering permits and leases at auction; terms of lease; financial security termination
A. The state land commissioner may offer mineral exploration permits or mineral leases at public auction, after advertising, for state lands on which a mineral exploration permit or mineral lease has been cancelled, terminated or not been renewed by the lessee or permittee, or may offer mineral exploration permits at public auction, after advertising, for state trust lands that have been closed by commissioner's order. The commissioner may establish by rule the procedure for conducting the auction, but bidding is limited to a cash bonus to be paid in full before the commissioner executes the permit or the lease documents. The land rental and royalty rate are not subject to bidding.
B. Every mineral lease of state lands shall be for a term of twenty years.
C. The lease shall confer the right:
1. To extract and ship minerals from the leased land located within planes drawn vertically downward through the exterior boundary lines of the leased land.
2. To use as much of the surface as required for purposes incident to mining.
3. Of ingress to and egress from other state lands, whether or not leased for purposes other than mining.
D. Every mineral lease of state lands shall provide for:
1. The development and use of the property according to the lessee's general mining plan approved by the commissioner.
2. The fencing of all shafts, exploration holes, adits, tunnels and other dangerous mine workings for the protection of public health and safety and livestock.
3. The construction of necessary improvements and installation of necessary machinery and equipment with the right to remove it upon expiration, termination or abandonment of the lease, if the lessee is not in default of the terms and conditions of the lease.
4. The right of the lessee and the lessee's assigns to transfer the lease.
5. Termination of the lease by the commissioner upon written notice specifically setting forth the default for which forfeiture is declared, and preserving the right to cure the default within a stated period of not less than thirty days.
E. If financial security is required under this subsection, it shall be in the form of a cash deposit, a certificate of deposit, a surety bond or any other form of financial assurance acceptable to the commissioner. On default, the commissioner may use the proceeds of the financial security for the purposes described in paragraph 1, 2 or 3 of this subsection. Financial security may be required in the following circumstances:
1. The commissioner may require financial security to guarantee the payment of all monies due under the lease as royalty to this state.
2. The commissioner shall require financial security in a reasonable amount to be fixed by the commissioner conditioned on the lessee's reclaiming the surface of the land described in the lease to a reasonable condition in accordance with the reclamation measures approved by the commissioner. The commissioner may enter into agreements pursuant to title 11, chapter 7, article 3 with the state mine inspector's office, the United States bureau of land management, the United States forest service and other agencies that manage public lands and take other appropriate measures to coordinate the review and approval of reclamation plans, including designating a lead agency for reclamation plan review and action. The commissioner shall avoid redundant, inconsistent or contradictory reclamation, inspection, administration, enforcement and financial assurance requirements unless such requirements are necessary as a result of the commissioner's trust obligations.
3. The commissioner shall require financial security conditioned on the lessee's prompt payment to the owner or lessee of the surface of the state land described in the lease, or across which the lessee exercises the right of ingress, for any loss to the owner or lessee from damage or destruction caused by the lessee or the lessee's agents or employees to grass, forage, crops or improvements on the land.
F. The lessee of any mineral lease who has met the applicable terms and conditions of the lease from the time of issuance to the time of termination, as determined by the commissioner, may terminate the lease at any time during its term by giving the commissioner thirty days' written notice of the termination.

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