School and Institutional Trust Lands, Administration

Section R850-21-300

Lease Application Process

Notice of Proposed Rule

(Amendment)

DAR File No.: 36279
Filed: 05/24/2012 03:59:41 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The agency currently leases most of its oil and gas properties through a competitive, sealed-bid auction process in an effort to obtain the highest bid from prospective bidders in our area. There is a new web-based technology now available that allows bidding through the Internet which was only in its infancy in 2005 when the oil and gas rules were amended. This new technology of Internet bidding opens up a much larger bidder base as the clientele can be nationwide, while still preserving some of the competitiveness of the sealed bid auction. The rule is being amended to add electronic bidding as a method to lease trust lands for oil and gas.

Summary of the rule or change:

A clause is being added to the lease application process to allow electronic bidding as a method the agency may use to lease trust lands for oil and gas.

State statutory or constitutional authorization for this rule:

• Title 53C, Chapter 2 et seq.
• Subsection 53C-1-302(1)(a)(ii)

Anticipated cost or savings to:

the state budget:

There will be no additional costs or savings to the state as a result of this rule amendment as any potential costs for using this service would be charged to the successful bidder. This amendment simply opens an additional method to the agency for offering oil and gas leases.

local governments:

It is not anticipated that local government will be affected as a result of this rule amendment because local governments typically do not participate in oil and gas leasing.

small businesses:

The purpose of this rule amendment is to establish the potential for future electronic bidding processes. Until such time as the agency decides to enter into a contract using this method, there are no costs or savings to small businesses. If at some time in the future, the agency offers oil and gas leases by electronic bidding, the costs incurred by the contractor hosting the web-based auction would be passed along to the successful bidder of the lease. At this time, those costs are unknown as the agency has not entered into any contracts and the costs could vary from one contract to another.

persons other than small businesses, businesses, or local governmental entities:

The purpose of this rule amendment is to establish the potential for future electronic bidding processes. Until such time as the agency decides to enter into a contract using this method, there are no costs or savings to persons other than small businesses, businesses, or local government entities. If at some time in the future, the agency offers oil and gas leases by electronic bidding, the costs incurred by the contractor hosting the web-based auction would be passed along to the successful bidder of the lease. At this time, those costs are unknown as the agency has not entered into any contracts and the costs could vary from one contract to another.

Compliance costs for affected persons:

The purpose of this rule amendment is to establish the potential for future electronic bidding processes. Until such time as the agency decides to enter into a contract using this method, there are no costs for compliance. If at some time in the future, the agency offers oil and gas leases by electronic bidding, the costs incurred by the contractor hosting the web-based auction would be passed along to the successful bidder of the lease. At this time, those costs are unknown as the agency has not entered into any contracts and the costs could vary from one contract to another.

Comments by the department head on the fiscal impact the rule may have on businesses:

The intent of this rule is to provide another mechanism for offering trust lands minerals for lease by the private sector. As such, no adverse fiscal impact for business is anticipated.

Kevin S. Carter, Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

School and Institutional Trust Lands
AdministrationRoom 500
675 E 500 S
SALT LAKE CITY, UT 84102-2818

Direct questions regarding this rule to:

• LaVonne Garrison at the above address, by phone at 801-538-5197, by FAX at 801-355-0922, or by Internet E-mail at lavonnegarrison@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/16/2012

This rule may become effective on:

07/23/2012

Authorized by:

Kevin Carter, Director

R850. School and Institutional Trust Lands, Administration.

R850-21. Oil, Gas and Hydrocarbon Resources.

R850-21-300. Lease Application Process.

1. The agency may issue leases competitively, non-competitively or enter into OBAs with qualified interest owners for the development of oil, gas and hydrocarbon resources.

(a) Competitive Bid Offering: when the agency designates leasing units for competitive bidding it shall award leases on the basis of the highest bonus bid per acre made by qualified application.

(i) Minimum Bonus Bid Amount: the minimum acceptable bonus bid for competitive bid offering for leasing units shall be not less than $1.00 per acre, or fractional acre thereof, which will constitute the (advance) rental for the first year of the lease.

(ii) Notice of Offering: notices of the offering of lands for competitive bid shall:

(A) run for a period of not less than fifteen (15) consecutive days after the notice is posted in the agency's office;

(B) describe the leasing unit;

(C) indicate the resource available for leasing; and

(D) state the last date on which bids may be received.

(iii) Opening of Bid Applications: bid applications shall be opened in the agency's office at 10 a.m. of the first business day following the last day on which bids may be received.

(iv) Content of Applications: each application shall be submitted in a sealed envelope which clearly identifies:

(A) the competitive bid;

(B) leasing unit number; and,

(C) the date of offering for which the bid is submitted.

(v) The application envelope must:

(A) describe only one leasing unit per application; and,

(B) contain one check for the application fee and a separate check for the amount of the bonus bid.

(vi) Withdrawal of Applications: applicants desiring to withdraw an application which has been filed under these competitive bid filing rules must submit a written request to the agency. If the request is received before sealed bids have been opened, all money tendered by the applicant, except the filing fee, shall be refunded. If a request is received after sealed bids have been opened, and if the applicant is awarded the bid, then unless the applicant accepts the offered lease, all money tendered shall be forfeited to the agency.

(vii) Non-Complying Applications: if the agency determines prior to lease issuance that an application did not comply with these rules at the time of bid opening, the application fee shall be retained by the agency and the application returned to the applicant without further consideration by the agency.

(viii) Identical Bids: in the case of identical successful bids, the agency may award the lease by public drawing or oral auction between the identical bidders, held at the agency's offices.

(b) Non-Competitive Leasing By Over-The-Counter Filing.

(i) The director may designate lands for non-competitive leasing by over-the-counter application if the lands have been offered in a competitive offering and have received no bids. Designated lands may be offered for a period of three (3) months from the date of the opening of bids for which no bid was received for said lands under the competitive bid offering.

(ii) The minimum acceptable offer for over-the-counter applications to lease designated lands shall be not less than $1 per acre, or fractional acre thereof, which will constitute the delay rental for the first year of the lease.

(iii) Applications for over-the-counter leases, when authorized, shall be filed on approved forms received from the office of the agency or as made available on its web site and delivered for filing in the main office of the agency during office hours. Except as provided, all over-the-counter applications received by personal delivery over the counter, are to be immediately stamped with the exact date and time of filing. All applications presented for filing at the opening of the office for business on any business day are stamped received as of 8 a.m., on that day. All applications received in the first delivery of the U.S. Mail of each business day are stamped received as of 8 a.m. on that day. The time indicated on the time stamp is deemed the time of filing unless the director determines that the application is materially deficient in any particular way. If an application is determined to be deficient, it will be returned to the applicant with a notice of the deficiency.

If an application is returned as deficient and is resubmitted in compliance with the rules within fifteen (15) days from the date of the determination of deficiency, it shall retain its original filing time. If the application is resubmitted at any later time, it is deemed filed at the time of resubmission.

(iv) Where two or more applications for the same lease contain identical bids and bear a time stamp showing the said applications were filed at the same time, the agency may award the lease by public drawing or oral auction between the identical bidders held at the agency's office.

(v) If an application or any part thereof is rejected, any money tendered for rental of the rejected portion shall be refunded or credited to the applicant minus the application fee.

(vi) An applicant who desires to withdraw its application must submit a written request to the agency. If the request is received prior to the time the agency approves the application, all money tendered by the applicant, except the application fee, shall be refunded. If the request is received after approval of the application, then, unless the applicant accepts the offered lease, all money tendered is forfeited to the agency.

(c) Competitive Leasing by Electronic Leasing.

(i) The director may designate leasing units for bidding by electronic means as a vehicle for competitive leasing. Leases will be awarded to the highest bonus bid per acre made by a qualified application. Electronic leasing may be in addition to or in place of the bidding processes set out at R850-21-300(1)(a) or (b) at the discretion of the director. A list of available leasing units and a link to the bidding form will be provided at the agency website.

 

KEY: oil gas and hydrocarbons, administrative procedures, lease provisions, operations

Date of Enactment or Last Substantive Amendment: [March 20, 2006]July 23, 2012

Notice of Continuation: April 1, 2010

Authorizing, and Implemented or Interpreted Law: 53C-1-302(1)(a)(ii); 53C-2 et seq.