36-6-101. Terms of leases; extensions; rules and regulations; rent and royalties; assignment of leases; grazing and agricultural leases; cooperation with United States or its lessees, in cooperative or unit plans.

(a) The board of land commissioners may lease any state or state school lands for oil and gas for a primary term up to ten (10) years and as long thereafter as oil or gas may be produced in paying quantities, and may extend the term of existing oil and gas leases in good standing for as long as oil or gas may be produced in paying quantities.

(b) The board is further authorized to make and establish rules and regulations governing the issuance of oil and gas, coal and other mineral leases and covering the conduct of development and mining operations.

(c) Mineral leases may be issued upon such monthly or annual minimum rental payment basis as shall be fixed by the board, which payment shall be annually applied against such royalty as shall accrue for the same lease year by the terms of such lease, which royalty, as to lands leased for oil or gas shall not be less than five percent (5%) of all oil and gas produced and saved from and not used in operations on the lands under the lease, and royalty of not less than five cents ($.05) per ton on coal produced from the lands under any such lease for coal purposes, such royalty to be paid on mine run of coal. No mineral lease issued under the provisions of this section shall be assignable or transferable except with written consent of the director, subject to criteria established by the board, and he shall require the lessee's full compliance with and observance of all rules and regulations adopted by the board and for the lessee's compliance with all other terms of the lease. All mineral leases issued pursuant to this section shall be separate and distinct from each lease of the same land for grazing or agricultural purposes, issued by the board, and rules and regulations adopted by the board as herein authorized, shall provide for joint use of such lands for grazing and agricultural or mineral purposes without undue interference by the lessees under any such class of leases with lessees under any other such class.

(d) The director, subject to criteria established by the board, on behalf of the state, and its lessee or lessees in any such mineral lease are hereby further authorized to join, in the interest of conservation and greater ultimate recovery of oil and gas, in fair and equitable cooperative or unit plans of development or operation of oil and gas pools, with the United States government and its lessees, or permittees, or others, or any of them, and the director, subject to criteria established by the board, is hereby authorized to modify and change any and all terms and conditions of any such oil and gas lease or leases, heretofore or hereafter issued, as mutually agreed by the lessor and lessee in any such lease, as required to conform to the terms of any such lease to such cooperative or unit plan and as required to effectuate proper operations thereunder, which changes may include extension of the term of years otherwise applicable to any such lease, for the full period of time during which such cooperative or unit plan may remain in effect.

(e) When a cooperative or unit agreement is terminated or ceases to be effective as to lands upon which there is no production of oil or gas, the lease covering such lands shall remain in effect for a period of two (2) years from the date such lands ceased to be subject to said agreement, or for the remaining length of the term of the original lease, whichever shall be the greater, and so long thereafter as oil or gas is produced from said lands in accordance with the requirements of the original lease.

(f) The terms of any lease issued under this section for land on which actual drilling operations were commenced prior to the end of its primary term and are being diligently prosecuted at that time shall be extended for one (1) year and so long thereafter as oil or gas is produced in paying quantities.

(g) All natural gas leases executed hereunder shall provide that the state of Wyoming may require the lessee to dedicate all the natural gas produced on lands owned by the state for the use or benefit of the people of the state of Wyoming.

(h) If the state board of land commissioners determines it would benefit the people of the state to have the natural gas dedicated, the board may arrange for the sale of the natural gas for the use of the people of the state or arrange for the exchange of the natural gas produced with producers of natural gas produced from lands not owned by the state if the exchange will benefit the people of the state. If the board determines the dedication would not be in the public interest; or would cause waste as defined by W.S. 30-5-101; or would unreasonably deny the lessee the opportunity to economically market the natural gas, it may waive dedication.

(j) The board shall adopt and promulgate necessary rules and regulations to carry out the provisions of subsections (g), (h) and (j) of this section.

(k) The board, on behalf of the state, and its lessee or lessees in coal and other mineral leases, may approve cooperative mining development plans established for the purpose of development of the mineral resources in an efficient and economical manner and in accordance with sound engineering practice. The board may also modify and change any and all terms and conditions of any coal and other mineral lease or leases, heretofore or hereafter issued, as mutually agreed by the lessor and lessee in the lease. The director, subject to criteria established by the board, may conform the terms of the lease to a cooperative mining development plan required to effectuate proper operations, with changes that may include extension of the term of years otherwise applicable to the lease, for the full period of time during which the cooperative mining development plan may remain in effect. A cooperative development plan may consist of one (1) or more private, state or federal leaseholds or mineral interests. All lands in a cooperative mining development plan shall be under the effective control of a single operator, capable of being developed and operated as a single operation.

(m) The director, subject to criteria established by the board, may lease any state or state school lands for coal and other mineral purposes for a primary term of not exceeding ten (10) years. Lessee shall have the exclusive right to renew the lease for successive terms of ten (10) years each, if at the time application for renewal is filed:

(i) Coal or other minerals covered by the lease are actually being produced from the leased lands and the lessee is complying with all lease terms; or

(ii) The leased lands are committed to a cooperative mining development plan approved by the board and coal or other minerals are actually being produced from the cooperative mining development plan and the lessee is complying with the plan and all lease terms; or

(iii) The lessee is proceeding in good faith to develop the leased lands; or

(iv) If the lessee shows to the satisfaction of the director or the board that production of coal or other minerals has been delayed by the necessity of obtaining licenses, permits, or other approvals from governmental authorities and that the lessee has used reasonable diligence in an effort to obtain the licenses, permits or other required authorizations.

(n) As used in subsection (m) of this section, good faith development means the substantial expenditures or firm commitments for exploration, engineering, environmental studies, hydrological studies or research and development which is required for development of the lease. To assist the lessee in planning for the orderly development of the lease or leases, the lessee may submit to the board at any time during the term of the lease or leases a schedule and discussion of proposed expenditures or commitments for the development of the lease or leases. After reviewing the schedule and discussion, the board shall issue a ruling in writing within ninety (90) days binding upon the state and the lessee, determining whether or not the proposed expenditures or commitments, when and if actually made by lessee, shall qualify as "substantial expenditures or commitments" so as to constitute "good faith development" within the meaning of subsection (m) of this section.

(o) Any mineral lessee or producer shall report all production including total volume, value and disposition of the mineral production under any lease, unit or communitization agreement in a timely manner and in such form as determined by the board. Any person failing to comply with this subsection shall be subject to penalties enacted by the board or the cancellation of the lease or agreement under which they are operating.