2010 Wyoming Statutes
Title 36 - Public Lands
Chapter 6 - Mineral Leases

CHAPTER 6 - MINERAL LEASES

 

ARTICLE 1 - IN GENERAL

 

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.

 

36-6-102. Submission, custody and confidentiality of subsurface log reports.

 

(a) Contingent upon the leasing of any state or state school lands for coal, uranium or other mineral exploration, the board of land commissioners shall require copies of all electrical, gamma-ray neutron, resistivity or other types of subsurface log reports, and all assay reports for any rock cores or cuttings to be submitted to the office of the state geologist within ninety (90) days after completion of drilling and completion of associated reports. Reports submitted to the oil and gas conservation commission are deemed to satisfy the requirements of this subsection.

 

(b) All subsurface log reports and assay reports will be held confidential for a period of three (3) years after initial receipt by the state geologist. Confidentiality may be extended in one (1) year increments upon receipt by the state geologist of a written request by certified mail, return receipt requested, from the person or legal entity requesting that confidentiality be extended. All requests must be received prior to the expiration of the period of confidentiality. All reports filed under this section shall become the property of the state to be retained within the permanent files of the Wyoming geological survey board for the use of the office and public after the period of confidentiality has expired.

 

36-6-103. Existing oil and gas leases ratified.

 

The issuance of all oil and gas leases upon any state or school lands heretofore issued by the board of land commissioners for primary terms up to ten (10) years and as long thereafter as oil or gas may be produced in paying quantities, and the granting of all extensions heretofore granted by the board of land commissioners of the terms of existing oil and gas leases upon any state or state school lands for as long after the primary term as oil or gas may be produced in paying quantities, are hereby ratified, confirmed, and validated. Each joinder by the board of land commissioners on behalf of the state of Wyoming in any cooperative or unit plan of development or operation of any oil or gas pool, and all modifications and changes in any of the terms or conditions of any oil or gas lease arising from any such joinder, or incident thereto, and all thereof, are hereby ratified, confirmed, and validated.

 

36-6-104. Payment for improvements; "improvements" defined.

 

If mineral lands upon which improvements have been made shall be sold or if such lands shall be leased to other than the owner of the improvements thereon, then such purchaser or such new lessee shall pay to the owner thereof the value of said improvements, at an agreed price with the owner thereof; or if such agreement cannot be reached, then at such price as shall be fixed by appraisement under the authority of the board of land commissioners. The word "improvements" shall be construed to mean surface improvements, machinery and other equipment used and necessary for the operation of the plant on such land, and work performed in the development of the property for operation and mining when such development work is of practical use in future mineral operations on such land. Wells drilled for oil which do not produce oil in commercial quantities, shafts, tunnels or drifts from which coal or other minerals have been practically exhausted, shall not be considered as improvements.

 

36-6-105. Inspection reports.

 

The state geologist or any state coal mine inspector shall, when requested by the board of land commissioners, visit and make a report upon any lands held under coal and mineral leases. Such report shall be made without any fee to the officer making same.

 

ARTICLE 2 - COUNTIES, CITIES, TOWNS AND SCHOOL DISTRICTS

 

36-6-201. Authority to lease or otherwise contract.

 

The governing body of any county, city, town or school district authorized to acquire and hold real property, may, upon determining that such action will be in the best interests of such county, city, town or school district, lease any lands owned in fee by such county, city, town or school district, for the exploration for and development and production of oil, gas or other hydrocarbons, and otherwise contract for such exploration, development and production, upon such terms as such governing body may determine and as are not inconsistent with the provisions of this act; providing the exploration for, development and production of oil, gas or other hydrocarbons shall in no way interfere with the public use of said lands or the purpose for which said lands were acquired.

 

36-6-202. Power to modify or change leases or contracts.

 

Any such governing body may, by such lease or contract or by other agreement, include, or provide for the inclusion of, the lands of such county, city, town or school district, or any part or portion of such lands, with other lands in any plan or agreement for cooperative or unit development or operation for oil, gas or other hydrocarbons, and modify and change any and all terms of any lease or contract heretofore entered into or hereafter entered into under the provisions of this act, including the extension of the term of any such lease or contract for the full period of time such cooperative or unit plan or agreement may remain in effect, as required to conform the terms of any such lease or contract to such cooperative or unit plan or agreement.

 

36-6-203. Rules and regulations; requisites of leases or contracts.

 

 

(a) Any such governing body may, in its discretion, make and establish such rules and regulations governing the issuance of such leases and contracts as are not inconsistent with the provisions of this act. Any such lease or contract:

 

(i) Shall be entered into pursuant to resolution duly adopted by the governing body;

 

(ii) May cover parcels of land of such size and shape as the governing body may determine;

 

(iii) May be for a term not exceeding ten (10) years and as long thereafter as oil, gas or other hydrocarbons shall be, or can be, produced in commercial quantities from the lands included in such lease, except as such term may be extended pursuant to the provisions of W.S. 36-6-202; and

 

(iv) Shall reserve to the governing body a royalty of not less than one-eighth of all oil, gas or other hydrocarbons produced from said lands.

 

36-6-204. Existing leases, contracts and agreements validated.

 

Nothing in this act contained shall operate or be construed as in anywise limiting or affecting the power or authority of the governing body of any county, city, town, or school district, to have entered into any lease or contract for the exploration for the development and production of oil, gas or other hydrocarbons, or any agreement for cooperative or unit development or operation for oil, gas or other hydrocarbons, entered into by such governing body prior to the passage of this act, and all such leases, contracts and agreements previously entered into in substantial compliance with the above provision are hereby validated and confirmed.

 

ARTICLE 3 - CALCULATION OF ROYALTIES ON OIL, NATURAL GAS AND ASSOCIATED NATURAL RESOURCE PRODUCTION

 

36-6-301. Definitions.

 

 

(a) As used in this article:

 

(i) "Associated natural resource" means any substance, element or compound, either gaseous, liquid or solid, associated with the production, refining or processing of oil or gas. The term includes, but is not limited to, propane, butanes, ethane, methane, carbon dioxide, sulphur, helium, nitrogen and natural gas liquids;

 

(ii) "Natural gas" means hydrocarbons or nonhydrocarbons which at atmospheric conditions of temperature and pressure are in a gaseous phase;

 

(iii) "Oil" means crude petroleum and other hydrocarbons regardless of gravity which are produced at the wellhead in liquid form, and the liquid hydrocarbons known as distillate or condensate recovered or extracted from gas, other than gas produced in association with oil and commonly known as casinghead gas;

 

(iv) "Processing plant" means a plant to remove liquefiable hydrocarbons from a gas stream or to separate natural gas into physically or chemically distinct marketable associated natural resources;

 

(v) "Return on investment" means a percentage rate applied over a period of years to the equity investment for construction of transportation facilities or processing plants for oil, natural gas or associated natural resources. This percentage rate represents the rate a lessee or successor in interest supposedly could have received from investment of equity in some other commercial or financial undertaking. "Return on investment" also means a percentage of earnings or profitability ratio which a lessee, producer or successor in interest anticipates or desires to receive on the equity investment in transportation facilities or processing plant;

 

(vi) "Transportation facilities" means those facilities constructed for moving any oil, natural gas or associated natural resource from the place of production to the closest point of sale or to a processing plant.

 

36-6-302. "Return on investment" deduction not allowed for calculation of royalty.

 

 

(a) For state lease royalty and overriding royalty, other than royalty owing to the United States of America, calculations for oil, natural gas and associated natural resources, neither lessee nor any successor in interest will be allowed any deduction for any "return on investment cost."

 

(b) This article applies to all state leases of oil, natural gas or associated natural resources.