Any coal lease issued by the commissioner of public lands shall:

A. provide for a primary term of five years;

B. provide that, if, at the end of the primary term, the lessee has submitted a mine plan to the commissioner of public lands for approval delineating how and when the leased land will be developed and has either incorporated the leased land with adjacent land into a logical mining unit which can be developed and operated as a single operation or has shown to the satisfaction of the commissioner that the adjacent land is federal land which has not been available for coal leasing but that the lessee has incurred substantial costs in developing the leased land, then the coal lease shall not expire at the end of the primary term but shall continue for a secondary term of an additional five years;

C. provide that, if, at the end of the secondary term, the lessee is producing coal at an average annual rate of either one percent of the estimated recoverable reserves from the leased lands or one percent of the estimated recoverable reserves from the logical mining unit, then the lease shall not expire but shall continue as long as the one percent average production is maintained over any consecutive three year period;

D. provide that, in lieu of any actual production requirement, expiration of the lease may be prevented by payment of an advance royalty equal to an estimated royalty obligation as contemplated by the approved mine plan and commercial production criteria. Any credit later taken for advance royalties against actual production royalties due shall not exceed fifty percent of the total royalty due and the lease shall not be extended for more than ten years by payment of advance royalties;

E. provide for a royalty of twelve and one-half percent of the proceeds received from the sale of all surface-mined coal or, at the option of the commissioner, the market value of the surface-mined coal and eight percent of the proceeds received from the sale of all underground-mined coal or, at the option of the commissioner, the market value of the underground-mined coal. The royalty rate may be reduced by the commissioner upon a showing that the leases for the nonstate lands in the same logical mining unit provide for a lower rate or that the leased lands will be bypassed and not mined without a rate reduction;

F. provide for an annual rental rate of five dollars ($5.00) per acre of the leased lands, to be paid throughout the effective period of the lease;

G. provide that, except for small incidental quantities which may be vented or flared to achieve access to the coal, any coalbed methane gas is excluded and reserved from the coal lease. A coal lessee may engage in in situ coal gasification provided that such gasification does not disturb or diminish commercial quantities of coalbed methane gas; and

H. contain other provisions prescribed by regulation of the commissioner.

History: Laws 1989, ch. 200, § 2.