19.2.2 NMAC

TITLE 19 NATURAL RESOURCES AND WILDLIFE

CHAPTER 2 STATE TRUST LANDS

PART 2 LEASING FOR GENERAL MINING

19.2.2.1 ISSUING AGENCY: Commissioner of Public Lands - New Mexico State Land Office - 310 Old Santa Fe Trail - P. O. Box 1148 - Santa Fe, New Mexico 87501.

[9.2.2.1 NMAC - N, 03/14/2001]

19.2.2.2 SCOPE: Pursuant to Article XIII, Section 2, of the New Mexico State Constitution, the commissioner has jurisdiction over all lands and related resources that the United States granted and confirmed to the state of New Mexico under the New Mexico Enabling Act. This rule, 19.2.2 NMAC, governs the exploration for and development of minerals, as defined herein, within the commissioner’s constitutional jurisdiction. This rule also governs reclamation of trust lands affected by mining. This rule does not apply to mining activity authorized and carried out pursuant to other rules of the commissioner of public lands.

[19.2.2.2 NMAC - N, 03/14/2001]

19.2.2.3 STATUTORY AUTHORITY: N.M. Const. Art. XIII; Section 19-1-1 et seq. NMSA 1978; Section 19-6-1 et seq. NMSA 1978; Section 19-7-1 et seq. NMSA 1978; Section 19-8-1 et seq. NMSA 1978; Section 19-14-1 et seq. NMSA 1978.

[19.2.2.3 NMAC - N, 03/14/2001]

19.2.2.4 DURATION: Permanent.

[19.2.2.4 NMAC - N, 03/14/2001]

19.2.2.5 EFFECTIVE DATE: March 14, 2001, unless a later date is cited at the end of a section.

[19.2.2.5 NMAC - N, 03/14/2001; A, 06/30/2016]

19.2.2.6 OBJECTIVE: The objectives of 19.2.2 NMAC are to obtain revenues from production of minerals; to assure protection and maintenance of trust surface estate and minerals; to provide standard lease terms and conditions; and to provide an efficient process for mineral leasing.

[19.2.2.6 NMAC - N, 03/14/2001]

19.2.2.7 DEFINITIONS: As used in 19.2.2 NMAC, the following terms have the meaning set forth in this section unless otherwise indicated in the text of this rule.

A. “Arm’s-length sales price” means the sales price resulting from a good faith sale of minerals between an unaffiliated seller and buyer who have comparable negotiating power, the seller being under no obligation to sell and the buyer being under no obligation to purchase. Where minerals are not actually sold in an arm’s-length transaction, the arm’s-length sales price shall be estimated by the lessee, using methods approved by the commissioner, in accordance with Sections 55-2-723 & 724, NMSA 1978 of the New Mexico Uniform Commercial Code or other comparable method.

B. “Commissioner” means the commissioner of public lands. The commissioner is the executive officer of the NMSLO and may delegate to NMSLO staff the performance of duties required of the commissioner under this rule.

C. “Comparable law” means a federal, state or local regulatory program that the commissioner determines, in writing, is applicable to mining activity and which will, as a practical matter, assure reclamation of trust surface estate to substantially the same standard required under the New Mexico Mining Act. The issue of whether a given regulatory program constitutes comparable law will arise only where the mining activity in question is not regulated under the New Mexico Mining Act.

D. “Contiguous” means adjoining and having at least one common side or boundary.

E. “Financial assurance” means a bond, surety, letter of credit, certificate of deposit or other instrument obtained for the purpose of guarantying performance of an obligation.

F. “Lease or mineral lease” means a lease issued under this 19.2.2 NMAC that must be obtained prior to exploring for, extracting or producing minerals.

G. “Legal subdivision” means legal subdivision as used and recognized by the federal bureau of land management and the NMSLO, ordinarily consisting of forty acres, more or less, or one sixteenth part of a standard section, including lots as designated by the U.S. survey plats.

H. “Lessee” means the persons who, according to the records of the NMSLO, are contractually obligated to the commissioner under a mineral lease. “Lessee” includes the lessee’s successors in interest and approved assignees of the lease.

I. “Mine development plan” means a written plan that provides for the efficient and orderly development of mineral reserves and prevention of waste of surface and subsurface resources within the commissioner’s jurisdiction.

J. “Minerals” means all natural substances within the commissioner’s jurisdiction that can be extracted, taken or otherwise derived from the earth, except as expressly excluded hereunder. Exclusions: For purposes of 19.2.2 NMAC, “mineral” does not include potassium, sodium, sulfur, phosphorus, common salt, oil and gas, coal, shale, clay, gravel, building stone, and building materials, including gypsum, timber or any material leased or disposed of under another rule issued by the commissioner.

K. “Mining activity” means, except as excluded hereunder, any activity that satisfies the following two-part test. First, the activity physically or chemically disturbs or alters lands, minerals or other resources within the commissioner’s jurisdiction. Second, the purpose of the activity is to explore for, extract and/or produce minerals, or the activity is incidental to or related to such exploration, extraction and/or production. Exclusions: “mining activity” does not include any activity authorized and carried out pursuant to other rules issued by the commissioner.

L. “Mining and minerals division or MMD” means the mining and minerals division of the New Mexico department of energy, minerals and natural resources, or any successor agency that may become responsible for enforcing the New Mexico Mining Act.

M. “New Mexico Mining Act or Mining Act” means the New Mexico Mining Act, Section 69-36-1 et seq. NMSA 1978.

N. “NMSLO” means the state land office created by Section 19-1-1 NMSA 1978, the executive officer of which is the commissioner.

O. “Paying quantities” means the quantity of minerals that must be produced from the premises and sold in a given lease year to carry on a profitable mining operation on the premises. For purposes of this rule, “paying quantities” does not include minerals extracted from outside the premises, even though such lands may comprise part of the same overall mining operation.

P. “Permitting agency” means MMD or, if the New Mexico Mining Act is not applicable to the mine site at issue, the government agency or agencies responsible for enforcing comparable law, if any.

Q. “Premises” means the lands encumbered by the mineral lease as originally issued and described therein.

R. “Production” means any extraction of minerals by any means whatsoever, except as expressly excluded hereunder. Exclusions: “production” does not include: (1) the extraction of minerals for the purpose of exploring, testing or sampling, unless these minerals are beneficially used or sold or otherwise disposed of for value; or (2) the removal of overburden, waste rock, matrix or host rock, soil or the like, unless minerals derived from these materials are beneficially used, sold or otherwise disposed of for value.

S. “Reclamation plan” means a written document approved by the commissioner that consists of: (1) the mining permit(s) issued by the permitting agency, and (2) any additional requirements deemed necessary by the commissioner. As used herein, “reclamation plan” includes the original reclamation plan and any additional plans approved by the commissioner.

T. “Schedule of fees” means a list of fees that must be paid for performance of certain administrative functions. The schedule of fees shall be published on the state land office website and is subject to change at the discretion of the commissioner. Unless otherwise noted in the schedule of fees or in this rule, the fee shall be non-refundable.

U. “Special minerals” means rare earth minerals, precious and semi-precious stones, uranium, thorium or any other minerals which have been or may hereafter be determined to be essential to the production of fissionable materials.

V. “Trust” means the trust created by congress under the New Mexico Enabling Act of June 20, 1910, and accepted by the state of New Mexico under Articles XIII and XIV of the New Mexico Constitution.

W. “Trust surface estate” means “public lands of the state,” as identified in Article XIII, Section 1 of the New Mexico Constitution, in which the state holds legal title to the surface estate. “Trust surface estate” includes “public lands of the state” that are subject to a purchase contract until the commissioner issues the patent conveying the state’s legal interest therein to the contract purchaser.

[19.2.2.7 NMAC - N, 03/14/2001; A, 06/30/2016]

19.2.2.8 PROHIBITIONS:

A. No person shall explore for, extract or produce minerals unless authorized by a mineral lease issued under this rule.

B. Notwithstanding the issuance of a mineral lease or special use permit, no person shall conduct any mining activity unless such activity is authorized under a permit or other authorization issued pursuant to the New Mexico Mining Act or comparable law.

[19.2.2.8 NMAC - N, 03/14/2001]

19.2.2.9 THE NMSLO IS A LAND MANAGEMENT AGENCY: The NMSLO constitutes a “land management agency” within the meaning of the regulations promulgated under the New Mexico Mining Act by the mining and minerals division.

[19.2.2.9 NMAC - N, 03/14/2001]

19.2.2.10 RECREATION PERMITS: The premises shall not be open to recreational access under Title 19 Chapter 2 Part 19, Relating to Recreational Access to State Trust Lands.

[19.2.2.10 NMAC - N, 03/14/2001]

19.2.2.11 GENERAL PROCESS FOR OBTAINING A MINERAL LEASE: The general process for obtaining a mineral lease is as follows: First, the area where the minerals are located is shown as open to general mining on the tract books of the NMSLO (see 19.2.2.12 NMAC). Second, the commissioner, after determining that development of minerals in the area appears to be in the best interest of the trust, publishes notice of a mineral lease sale (see 19.2.2.14 NMAC). Third, the commissioner conducts a public auction at which bidders compete for a mineral lease by seeking to offer the highest bonus (see 19.2.2.15 NMAC, 19.2.2.16 NMAC and 19.2.2.17 NMAC). The bonus is the amount the bidder offers to pay the trust in return for obtaining a mineral lease and is in addition to other payments that may be required under the mineral lease or this rule, such as royalties, rents and fees. Fourth, the highest bidder (the one offering the highest bonus) submits a disclosure statement to the commissioner (see 19.2.2.19 NMAC, 19.2.2.20 NMAC and 19.2.2.21 NMAC). Fifth, unless the commissioner declares the sale void or withdraws the subject area from general mining, the commissioner and the highest bidder will enter into a mineral lease (see 19.2.2.22 NMAC and 19.2.2.23 NMAC).

[19.2.2.11 NMAC - N, 03/14/2001]

19.2.2.12 LANDS OPEN TO GENERAL MINING: Mineral leasing under 19.2.2 NMAC will be considered only in areas shown as open for general mining upon the tract books of the NMSLO. The commissioner may designate areas for mineral leasing based upon the recommendations of the commissioner’s staff or upon nomination submitted to the commissioner.

[19.2.2.12 NMAC - N, 3/14/2001; A, 6/11/2019]

19.2.2.13 COMMISSIONER MAY WITHHOLD LANDS: Notwithstanding any other provision of 19.2.2 NMAC, and at any time prior to execution of a mineral lease, the commissioner may, at the commissioner’s discretion, withhold from mineral leasing any area subject to the commissioner’s jurisdiction.

[19.2.2.13 NMAC - N, 03/14/2001]

19.2.2.14 NOTICE OF SALE: Prior to holding a competitive bid sale for mineral leasing under 19.2.2 NMAC, the commissioner will provide notice to the public. The notice will set forth the place, date and time of the sale. The notice will describe the area to be covered by the mineral lease and the royalty amount and provide any other necessary details of the sale, including whether there shall be a minimum bid and whether the sale shall be by sealed or oral bid. At least ten days prior to the date of sale, NMSLO will post the notice in a conspicuous place in the New Mexico state land office building in Santa Fe, New Mexico, publish it in a paper of local circulation where the minerals are located and mail it to all persons who have requested such notice in writing.

[19.2.2.14 NMAC - N, 03/14/2001]

19.2.2.15 APPLICATION AND BIDDING PROCESS: When the commissioner decides to offer a mineral lease for sale, the commissioner will auction the lease by requesting sealed or oral bids in accordance with the notice of sale. Persons shall bid by offering to pay a bonus for the mineral lease. Unless the commissioner declares the sale void or withholds the subject area from general mining, the commissioner and the highest bidder will enter into a mineral lease after payment in full of the bonus and first-year’s rent. (The “highest bidder” is the person who offers the highest bonus.)

[19.2.2.15 NMAC - N, 03/14/2001]

19.2.2.16 SEALED BIDS: If the commissioner decides to conduct the public auction by sealed bid, this section shall govern the bidding process.

A. Bidders shall submit their bid to the commissioner in a sealed envelope pursuant to the instructions provided in the notice of sale. The sealed envelope shall include a completed mineral lease application, which shall be in a form prescribed by the commissioner; and payment of the non-refundable application fee as set forth in the schedule of fees. Bidders shall offer and set out the amount of their bid on the mineral lease application.

B. Bids shall be received up to the hour set in the notice of sale, and all bids will be opened at the appointed hour.

C. The bidder offering the highest bonus shall be deemed the highest bidder.

D. Subject to 19.2.2.13 NMAC and 19.2.2.22 NMAC, the commissioner shall enter into a mineral lease with the highest bidder pursuant to 19.2.2.23 NMAC.

[19.2.2.16 NMAC - N, 03/14/2001; A, 06/30/2016]

19.2.2.17 ORAL BIDS: If the commissioner decides to conduct the public auction by oral bid, this section shall govern the bidding process.

A. Bidders shall register with NMSLO and obtain an identification number pursuant to the instructions in the notice of sale.

B. Bidders shall make their bids orally at the time and place specified in the notice of sale.

C. The bidder offering the highest bonus shall be deemed the highest bidder. Provided, however, that before close of business on the day of the auction, the highest bidder must submit a completed mineral lease application to the commissioner and pay the non-refundable application fee as set forth in the schedule of fees.

D. Subject to 19.2.2.13 NMAC and 19.2.2.22 NMAC, the commissioner shall enter into a mineral lease with the highest bidder pursuant to 19.2.2.23 NMAC.

[19.2.2.17 NMAC - N, 03/14/2001; A, 06/30/2016]

19.2.2.18 TIE BIDS: In the event the sale is by sealed bids and two or more bidders submit the highest bonus, then the commissioner may provide written notice of a tie to all bidders for the tract. Such notice may request the bidders to offer an additional bonus in the manner specified in the notification letter. Alternatively, the commissioner may declare the sale void.

[19.2.2.18 NMAC - N, 03/14/2001]

19.2.2.19 DISCLOSURE STATEMENT REQUIRED:

A. Within fifteen days of being notified that it is the highest bidder, the highest bidder shall either submit a new disclosure statement to NMSLO or supplement an active disclosure statement previously submitted to NMSLO under 19.2.2.21 NMAC.

B. A person with personal knowledge of the information supplied shall sign and acknowledge the disclosure statement under oath.

C. The highest bidder shall assure that its disclosure statement is correct, accurate and complete. Before issuing a mineral lease, the commissioner may require the highest bidder to provide additional information or clarification. The highest bidder may be disqualified if the commissioner determines that the disclosure statement substantially misrepresents the highest bidder’s qualifications or environmental compliance history. If such misrepresentation is discovered after the lease is executed, then the commissioner may cancel the lease and the lessee shall forfeit all rent, bonus and all other sums paid on account of the lease. However, in determining the correctness, accuracy and completeness of the disclosure statement, the commissioner will not consider new or changed circumstances occurring after the mineral lease is issued.

D. Pursuant to Section 19-1-2.1 NMSA 1978, the commissioner shall hold confidential “any confidential contract, reserve data or other confidential information” in the disclosure statement that is clearly marked as “confidential”. Only information that is actually covered under Section 19-1-2.1 NMSA 1978 will be held as confidential.

[19.2.2.19 NMAC -N, 03/14/2001]

19.2.2.20 CONTENTS OF DISCLOSURE STATEMENT: The highest bidder shall provide the following information in its disclosure statement:

A. identity of the highest bidder’s predecessor and parent organizations and affiliates, if any;

B. description of the highest bidder’s previous mining experience, including a list of mines currently or previously operated by the highest bidder;

C. list of any and all financial assurances designed to assure performance of an obligation that the highest bidder has forfeited in the past ten years; (If the highest bidder is a corporation, partnership, limited liability company or the like, include in the list all forfeitures of entities identified in Subsection A);

D. list of any and all penalties and fines in excess of five hundred dollars that the highest bidder has paid in the past ten years for violating or allegedly violating any permit or law whose primary purpose is to protect or assure reclamation of the environment;

E. list of all persons who could exercise management control over how the highest bidder conducts mining activity;

F. type of minerals (if known) and basis for believing a successful mine can be established in the area of interest;

G. proposed methods of exploration and extraction (if known);

H. descriptions of any mitigating circumstances that may help explain negative information (such as payment of penalties, etc); and

I. other information requested by the commissioner that is pertinent to assessing the highest bidder’s qualifications, environmental track record and intentions regarding the area to be covered by the mineral lease.

[19.2.2.20 NMAC - N, 03/14/2001]

19.2.2.21 PRE-QUALIFICATION: Any person may apply to become pre-qualified to be eligible to obtain a mineral lease by submitting a disclosure statement to the commissioner. Unless submitted for the purpose of obtaining the commissioner’s approval for assignment of a particular lease, the disclosure statement need not reference any particular sale, tract or proposed mining project. The commissioner shall evaluate the disclosure statement as soon as practicable and notify the person, in writing, whether or not the person would be considered a qualified potential lessee. Pre-qualification under this section shall lapse automatically two years after it is submitted, at which time another disclosure statement may be submitted. Notwithstanding a person’s pre-qualification under this section, the commissioner reserves the right to require submission of additional information.

[19.2.2.21 NMAC - N, 03/14/2001]

19.2.2.22 COMMISSIONER’S RIGHT TO DECLARE SALE VOID: Prior to execution of a lease, the commissioner may determine that the mineral sale is not in the best interest of the trust and declare the sale void. The commissioner may declare a sale void if the commissioner determines that the bids are too low, not in accordance with law or otherwise not in the best interest of the trust. The commissioner may declare a sale void based on the disclosure statement or other information available to the commissioner. Prior to declaring a sale void under this section, the commissioner may provide the highest bidder with an opportunity to submit additional or new information, explanation or argument as to why the sale should not be declared void.

[19.2.2.22 NMAC - N, 03/14/2001]

19.2.2.23 MINERAL LEASE:

A. Unless the commissioner declares the sale void or withholds the lands from mining, the commissioner and the highest bidder shall enter into a mineral lease. The commissioner shall prepare a proposed mineral lease in accordance with this rule, in triplicate, and mail all three originals to the highest bidder. If the highest bidder agrees to all terms and conditions of the proposed mineral lease, the highest bidder shall sign the originals and return all three to the commissioner, together with a certified check or money order covering the offered bonus and first-year’s rent. The commissioner shall thereafter sign the mineral lease and return one fully executed original to the highest bidder.

B. Mineral leases are to be made upon forms prescribed and furnished by the commissioner and shall, in addition to the terms set out in this rule, contain such terms as the commissioner deems necessary.

C. Leases issued under 19.2.2 NMAC shall cover a specified area conforming to a legal subdivision or subdivisions. The area covered shall not exceed sixteen subdivisions, being six hundred and forty acres more or less, all of which shall be contiguous. Provided, however, that leases issued in exchange for existing permits as provided by Section 19-8-17 NMSA 1978 need not be contiguous if all legal subdivisions are located within the same township and range.

D. The commissioner will not issue a mineral lease in the name of more than two persons. The commissioner will recognize only those persons named on the lease, or an approved assignment of a lease, as the lessee of record. In the case of a trust, the trust must be express and in writing, and a copy of the declaration of trust must be filed with the commissioner. If more than two trustees are named, the lease shall be granted in the names of no more than two trustees acting as attorneys-in-fact for all trustees.

[19.2.2.23 NMAC - N, 03/14/2001]

19.2.2.24 RECLAMATION PLAN REQUIRED: Notwithstanding the issuance of a mineral lease, no mining activity shall be conducted on trust surface estate except in accordance with a written reclamation plan approved by the commissioner. Reclamation plans consist of the mining permit or other authorizations issued by the permitting agency and any supplemental requirements deemed necessary by the commissioner to assure adequate protection and reclamation of trust surface estate. Upon approval by the commissioner, the reclamation plan shall automatically be incorporated into the mineral lease without the necessity of further agreement between the lessee and the commissioner. A violation of the reclamation plan shall constitute a violation of the mineral lease.

[19.2.2.24 NMAC - N, 03/14/2001]

19.2.2.25 OBTAINING PERMIT FROM THE PERMITTING AGENCY:

A. The lessee shall apply for a permit from the permitting agency in accordance with the New Mexico Mining Act or comparable law, whichever applies. The lessee shall submit copies of its permit application and all supporting documents to the commissioner at the same time that it submits these materials to the permitting agency. The lessee shall also promptly submit copies to the commissioner of all correspondence, reports and other documents regarding the lessee’s permit application.

B. The lessee’s permit application and supporting documents shall fully disclose the intended mining activity to the permitting agency and the commissioner. The commissioner will review the lessee’s application and supporting documents and participate in the permitting process.

C. If the permitting agency requires the land management agency or landowner to approve a proposed permit prior to issuance, the commissioner may withhold such approval if the commissioner determines that a proposed mining activity is not in the best interest of the trust. At the written request of the commissioner, the lessee shall withdraw any such proposed mining activities from its permit application.

[19.2.2.25 NMAC - N, 03/14/2001]

19.2.2.26 SUPPLEMENTAL REQUIREMENTS:

A. After the lessee obtains the permit or other final authorization from the permitting agency in accordance with 19.2.2.25 NMAC, the lessee shall submit a complete and accurate copy of the permit or other authorization to the commissioner. The commissioner will review the permit or other authorization to determine whether to include any supplemental requirements in the reclamation plan.

B. If the commissioner determines that supplemental requirements are needed, the commissioner will notify the lessee of the specific areas of concern, and the lessee shall thereafter propose supplemental requirements to address these concerns. The commissioner will review the lessee’s proposal and notify the lessee of any deficiencies, which the lessee shall address in a subsequent submittal. The process of submittal and review shall be repeated until the commissioner approves the lessee’s proposed supplemental requirements.

[19.2.2.26 NMAC - N, 03/14/2001]

19.2.2.27 ISSUANCE OF RECLAMATION PLAN: After the permitting agency issues the mining permit or other authorization and commissioner reviews the permit and approves any supplemental requirements, the commissioner will prepare a reclamation plan. The reclamation plan will consist of the permit or other authorization issued by the permitting agency, incorporated by reference, and any supplemental requirements imposed by the commissioner. The lessee shall sign and acknowledge the plan, in triplicate, and return all three originals to the commissioner. The commissioner shall thereafter approve the reclamation plan by signing the plan, in triplicate, and returning one fully executed original to the lessee.

[19.2.2.27 NMAC - N, 03/14/2001]

19.2.2.28 STRICT COMPLIANCE WITH RECLAMATION PLAN: The lessee shall conduct mining activity in strict compliance with an approved reclamation plan. The reclamation plan in effect at any given time authorizes only such mining activity as is authorized under the permit or other authorization issued by the permitting agency and expressly incorporated by reference into the plan.

[19.2.2.28 NMAC - N, 03/14/2001]

19.2.2.29 ADDITIONAL RECLAMATION PLANS: The lessee shall obtain an additional reclamation plan before conducting any mining activity that is not authorized under its existing reclamation plan. The lessee shall obtain the additional reclamation plan to cover the new mining activity by following the procedure set out in 19.2.2.25 NMAC through 19.2.2.27 NMAC. The original and all additional reclamation plans approved by the commissioner shall remain in full force and effect unless otherwise provided in the latest plan approved by the commissioner. In the event of a direct conflict between the most current reclamation plan and any earlier plan, the most current plan shall govern.

[19.2.2.29 NMAC - N, 03/14/2001]

19.2.2.30 SURVIVAL OF RECLAMATION PLAN REQUIREMENTS: The lessee’s obligation to reclaim the trust surface estate in accordance with the reclamation plan in effect at the time the mineral lease is suspended, relinquished or otherwise terminated for any reason shall survive such suspension, relinquishment or termination and continue so long thereafter as lessee’s liability under the Mining Act or comparable law continues. In the event of such suspension, relinquishment or termination of the mineral lease, the commissioner will provide the lessee with written authorization to enter the premises to carry out the reclamation plan.

[19.2.2.30 NMAC - N, 03/14/2001]

19.2.2.31 MINE DEVELOPMENT PLAN REQUIRED: No minerals shall be produced except in substantial compliance with a written mine development plan approved by the commissioner. The mine development plan shall provide for efficient and orderly development of mineral reserves and prevention of waste. The mine development plan shall be consistent with the lessee’s obligation to reclaim the premises. The requirements of the mine development plan shall, upon approval by the commissioner, be incorporated automatically into the mineral lease without the necessity of further agreement between the lessee and the commissioner. Failure to substantially comply with the mine development plan shall constitute a violation of the mineral lease.

[19.2.2.31 NMAC - N, 03/14/2001]

19.2.2.32 OBTAINING A MINE DEVELOPMENT PLAN: The lessee shall submit a proposed mine development plan to the commissioner, who shall review the plan and thereafter notify the lessee, in writing, of any deficiencies. The lessee shall then submit a modified proposal addressing the deficiencies and any other issues raised by the commissioner. This process of submittal and review shall be repeated until the commissioner and lessee reach agreement on the plan. Once agreement is reached, the lessee shall sign and acknowledge the mine development plan, in triplicate, and return all originals to the commissioner. The commissioner shall thereafter approve the plan by signing all three originals and returning one original to the lessee.

[19.2.2.32 NMAC - N, 03/14/2001]

19.2.2.33 MODIFICATION OF MINE DEVELOPMENT PLAN: If the lessee determines that it is no longer feasible or economically prudent to follow the approved mine development plan, the lessee shall submit a proposed modification of the plan to the commissioner, together with the reasons that modification is required. The lessee shall seek the commissioner’s approval for the modification by following the procedure set out in 19.2.2.32 NMAC. The lessee shall continue to comply with the existing mine development plan until the commissioner approves the modification. The commissioner may refuse to approve any modification that the commissioner determines is not in the best interest of the trust.

[19.2.2.33 NMAC - N, 03/14/2001]

19.2.2.34 RESTRICTION ON PERMANENT PITS, PILES AND IMPOUNDMENTS: No permanent pit, pile, impoundment or any other permanent manmade feature or improvement shall be placed on trust surface estate unless specifically approved by the commissioner. The commissioner may refuse to approve any such permanent feature or improvement that would prevent productive post-mining use of the affected land, as determined by the commissioner, unless the lessee fully compensates the trust for the loss of such land through purchase or other arrangement approved by the commissioner.

[19.2.2.34 NMAC - N, 03/14/2001]

19.2.2.35 NO PROCESSING OR STOCKPILING OF OFF-LEASE MATERIALS: A mineral lease issued under this rule grants the lessee the right to enter the premises for mining purposes, together with the right to use and occupy so much of the premises as may be necessary or convenient to carry out such mining purposes. A mineral lease does not authorize the lessee to process or stockpile minerals, waste rock, ore, overburden or other materials obtained from off-lease sources. Therefore, unless authorized under a separate commercial lease issued by the commissioner, no minerals, waste rock, ore, overburden or other materials obtained from off-lease sources shall be processed or stockpiled on the trust surface estate covered by a mineral lease.

[19.2.2.35 NMAC - N, 03/14/2001]

19.2.2.36 FINANCIAL ASSURANCE FOR ROYALTIES: Unless waived by the commissioner in writing, and before the commencement of mining activity, the lessee shall provide financial assurance to guarantee payment of royalties and to comply with the terms and conditions of the mineral lease other than reclamation, which is covered under 19.2.2.39 NMAC. The commissioner will determine the amount of financial assurance required.

[19.2.2.36 NMAC - N, 03/14/2001]

19.2.2.37 FINANCIAL ASSURANCE FOR SURFACE IMPROVEMENTS: Before commencement of mining activity, the lessee shall execute and provide financial assurance to secure payment for potential injuries to tangible improvements upon the trust surface estate covered by a mineral lease that may result from the lessee’s mining activity. The commissioner shall fix financial assurance under this section in an amount not less than five thousand dollars. The financial assurance shall be in favor of the state of New Mexico, but held for the benefit of the state’s contract purchasers, patentees and surface lessees with pre-existing rights to the trust surface estate. Provided that, in lieu of said financial assurance, the commissioner may accept a waiver of financial assurance, duly executed or acknowledged by the owners of the improvements.

[19.2.2.37 NMAC - N, 03/14/2001]

19.2.2.38 CONSOLIDATION OF FINANCIAL ASSURANCE FOR MULTIPLE LEASES: Lessees having multiple leases with the commissioner may, with the approval of the commissioner, provide one instrument to fulfill their total financial assurance obligations under all such leases regarding the protection of tangible surface improvements. The commissioner shall fix the amount of the lessee’s consolidated financial assurance obligation, which amount shall not be less than twenty-five thousand dollars. The lessee’s obligation to provide financial assurance for payment of royalties and reclamation of trust surface estate is not eligible for coverage under this section.

[19.2.2.38 NMAC - N, 03/14/2001]

19.2.2.39 FINANCIAL ASSURANCE FOR RECLAMATION: The financial assurance required under 19.2.2.36 NMAC, 19.2.2.37 NMAC and 19.2.2.38 NMAC is in addition to that which the permitting agency may require pursuant the New Mexico Mining Act or comparable law, whichever applies. If the commissioner determines that the amount or coverage of financial assurance required by the permitting agency is insufficient to adequately protect and reclaim trust surface estate, the commissioner may require the lessee to provide additional financial assurance as a supplemental requirement under 19.2.2.26 NMAC.

[19.2.2.39 NMAC - N, 03/14/2001]

19.2.2.40 FORM OF FINANCIAL ASSURANCE: Forms for all financial assurance instruments required by the commissioner shall either be prescribed by the commissioner or be in a form approved by the commissioner. In addition, the permitting agency must approve the form of financial assurance required for reclamation in accordance with that agency’s governing law and regulations.

[19.2.2.40 NMAC - N, 03/14/2001]

19.2.2.41 INSPECTIONS:

A. The commissioner has the right to inspect all records and books of account pertaining to the operations under a mineral lease, including records and books relating to mining, production, extraction, processing, transportation, reduction, returns and reclamation. At the request of the commissioner, the lessee shall furnish such reports, books, records, samples, logs, assays or cores, as the commissioner deems reasonably necessary to the proper administration of the lease.

B. The commissioner has the right to enter the premises and the facilities located thereon to inspect operations thereon, to conduct a field audit and to inspect the records and books referred to in Subsection A of this section. To facilitate field audits and inspections under this subsection, the lessee shall keep originals or true and accurate copies of all of the foregoing records, books, documents and sample materials on the premises unless otherwise approved by the commissioner in writing.

C. The lessee shall allow the permitting agency, the New Mexico environment department, and any government agency to enter the premises and the facilities located thereon to conduct activities or inspection consistent with such agencies’ regulatory jurisdiction over lessee’s operations or mining activity.

D. No prior notice is required under this section. Failure to timely comply with this section by the lessee, and failure to correct violations noted as a result of site inspections provided hereunder, shall constitute a breach subjecting the lease to cancellation.

[19.2.2.41 NMAC - N, 03/14/2001]

19.2.2.42 STATUTORY COVENANTS: All mineral leases made under 19.2.2 NMAC shall include and be subject to the statutory covenants to operate and develop the premises and minerals under lease in a workmanlike manner, as set forth at Section 19-8-13 NMSA 1978 and to market and develop, as set forth at Section 19-8-23 NMSA 1978. These covenants are in addition to those that may be implied under the common law.

[19.2.2.42 NMAC - N, 03/14/2001]

19.2.2.43 COMPLIANCE WITH LAWS: The lessee shall be responsible for compliance with all laws, regulations, rules, ordinances, permits, licenses and other requirements applicable to the leasehold estate and the operations thereon. Upon receiving notice from a government agency of an actual, potential or alleged violation of law, the lessee shall promptly notify the commissioner of the alleged violation and provide copies of all related documents to the commissioner.

[19.2.2.43 NMAC - N, 03/14/2001]

19.2.2.44 PRIMARY TERM OF MINERAL LEASE:

A. All mineral leases shall be for a primary term of three years and so long thereafter as minerals are produced or mined in paying quantities.

B. Annual rent during the primary term shall be one dollar per acre, which amount shall be paid in advance each year.

[19.2.2.44 NMAC - N, 03/14/2001]

19.2.2.45 SECONDARY TERM OF MINERAL LEASE:

A. If minerals are not produced or mined in paying quantities during the primary term, then the lessee may continue the lease in full force and effect through a secondary term. The secondary term shall be two years and so long thereafter as minerals are produced or mined in paying quantities.

B. Annual rent during the secondary term shall be ten dollars per acre, which amount shall be paid each year in advance.

[19.2.2.45 NMAC - N, 03/14/2001]

19.2.2.46 TERTIARY TERM OF MINERAL LEASE:

A. If minerals are not produced or mined in paying quantities during the primary or secondary term, then the lease may be continued into the tertiary term. The tertiary term shall be five years and so long thereafter as minerals are produced or mined in paying quantities.

B. Annual rent during the tertiary term shall be three dollars per acre, which amount shall be paid each year in advance.

[19.2.2.46 NMAC - N, 03/14/2001]

19.2.2.47 QUATERNARY TERM OF MINERAL LEASE:

A. If minerals are not produced or mined in paying quantities during the primary, secondary or tertiary term, then the lease may be continued into the quaternary term. The quaternary term shall be five years and so long thereafter as minerals are produced or mined in paying quantities.

B. Annual rent during the quaternary term shall be ten dollars per acre, which amount shall be paid each year in advance.

[19.2.2.47 NMAC - N, 03/14/2001]

19.2.2.48 ADVANCE ROYALTY DURING QUATERNARY TERM:

A. In the eleventh year of the lease, the lessee shall pay, in addition to rent, ten dollars per acre as an advance royalty.

B. In the twelfth year of the lease, the lessee shall pay, in addition to rent, twenty dollars per acre as an advance royalty.

C. In the thirteenth year of the lease, the lessee shall pay, in addition to rent, thirty dollars per acre as an advance royalty.

D. In the fourteenth year of the lease, the lessee shall pay, in addition to rent, forty dollars per acre as an advance royalty.

E. In the fifteenth year of the lease, the lessee shall pay, in addition to rent, fifty dollars per acre as an advance royalty.

[19.2.2.48 NMAC - N, 03/14/2001]

19.2.2.49 CREDIT FOR ADVANCE ROYALTIES: Upon the commencement of production of minerals in paying quantities, the principal sum paid as an advance royalty for the year in which such production commences, and the principal sums so paid for the two previous years, shall be credited against the royalty otherwise payable to the commissioner.

[19.2.2.49 NMAC - N, 03/14/2001]

19.2.2.50 Cessation of Production Before Expiration of Set Terms: If production in paying quantities commences during the primary or any subsequent term and thereafter ceases before the quaternary term would have expired had there been no such production, then the lease shall be deemed a “non-producing” lease on the date that production in paying quantities ceases. Notwithstanding such cessation of production in paying quantities, a non-producing lease shall not expire if the lessee continues to pay rent and, if the lease is in its quaternary term, advanced royalties. The lessee may maintain the mineral lease in effect under this section until the end of the quaternary term and so long thereafter as minerals are produced in paying quantities.

[19.2.2.50 NMAC - N, 03/14/2001]

19.2.2.51 Cessation of Production after Expiration of Set Terms: If for any reason beyond the lessee’s control, production in paying quantities ceases after the quaternary term would have expired, then the lessee may, with the written approval of the commissioner, continue the lease from year to year for an additional period not to exceed three years. The lessee shall continue to pay in advance the annual rental at the rate provided in the quaternary term and an advance royalty of sixty dollars per acre per each year of the extended term.

[19.2.2.51 NMAC - N, 03/14/2001]

19.2.2.52 SUSPENSION OF MINERAL LEASE: After notice and hearing, the commissioner shall suspend a mineral lease for a period not exceeding five years if the commissioner finds:

A. the lessee is not in default;

B. suspension of the lease will not affect compliance with safety, reclamation or environmental requirements;

C. the lessee submitted a written request for suspension to the commissioner prior to expiration of the lease;

D. the lessee submitted adequate evidence, as determined by the commissioner, to prove that the discovery on the premises of an ore body containing valuable mineral deposits in merchantable quality and quantity; and

E. temporary conditions beyond the lessee’s control have precluded mining on the premises except at an economic loss or at an unreasonable threat to safety.

[19.2.2.52 NMAC - N, 03/14/2001]

19.2.2.53 LESSEE’S OBLIGATIONS DURING SUSPENSION OF MINERAL LEASE: All lease obligations, including the obligation to pay rent and royalties, shall be suspended during the period the mineral lease is suspended. Provided, however, that the lessee shall pay the annual rental required in Section 19-8-19.1 NMSA 1978 for each year of suspension. Suspension of a mineral lease shall not operate to relieve the lessee from its obligations under the New Mexico Mining Act.

[19.2.2.53 NMAC - N, 03/14/2001; A, 06/30/2016]

19.2.2.54 NOTICE OF COMMENCEMENT OF PRODUCTION: Within five days after commencing production, the lessee shall notify the commissioner of such production in writing, giving the date that production commenced, and stating specifically the legal subdivision, section, township and range where production occurred. The lessee shall provide the same notice where production re-commences after a period of cessation lasting three consecutive months or longer.

[19.2.2.54 NMAC - N, 03/14/2001]

19.2.2.55 AMOUNT OF ROYALTY: In addition to annual rentals, the lessee shall pay royalty on production as determined by the commissioner and as specified in the notice of sale and the lease. For all minerals except special minerals, the royalty shall be no less than two percent of the gross returns less the actual and reasonable transportation and smelting or reduction costs up to fifty percent of the gross returns. Gross returns shall be based on the arm’s-length sales price of the produced minerals and shall include, if applicable, all premiums, bonuses and other consideration of any kind received by the lessee for the minerals produced from the premises. The lessee shall calculate royalty for special minerals in exactly the same manner as for other minerals, except that the royalty percentage shall be no less than five percent of the gross returns.

[19.2.2.55 NMAC - N, 03/14/2001]

19.2.2.56 PAYMENT OF ROYALTY AND ACCOUNTING: The lessee shall pay the correct amount of royalty to NMSLO on the twentieth day of the month following the month of use, sale or other disposal of minerals. On the same day, the lessee shall submit to NMSLO a production and royalty statement, accounting for the production and royalty for the previous calendar month. Such statements shall be prepared upon forms prescribed and furnished by the commissioner and in accordance with instructions accompanying the forms.

[19.2.2.56 NMAC - N, 03/14/2001]

19.2.2.57 LEASE ASSIGNMENTS MUST BE APPROVED BY COMMISSIONER: The lessee may assign a mineral lease, in whole or in part, only if the commissioner approves the assignment. No purported assignment will bind the state of New Mexico, or change the lessee of record, unless approved in writing by the commissioner. Provided, however, that a mere change in the name of the mineral lessee will not constitute an assignment requiring approval by the commissioner. The lessee shall promptly notify the commissioner, in writing, of any change in name or mailing address.

[19.2.2.57 NMAC - N, 03/14/2001]

19.2.2.58 APPROVAL OF LEASE ASSIGNMENTS: The commissioner will approve an assignment of mineral lease, in whole or in part, if the commissioner finds:

A. the assignment does not create an undivided interest in the lease or any part thereof;

B. the assigned portion of the premises is not less than a legal subdivision;

C. the assignment is executed in the proper form and by the proper person;

D. the lease is in good standing as to the assigned portion of the premises;

E. no litigation is pending that could affect the lease or the interest of any person therein;

F. the assignee has been pre-qualified pursuant to 19.2.2.21 NMAC; and

G. the assignment will not adversely affect the interests of the trust.

[19.2.2.58 NMAC - N, 03/14/2001]

19.2.2.59 form of assignments: Assignments of mineral leases shall be upon forms prescribed and furnished by the commissioner. The commissioner’s approval of an assignment shall be noted on all copies of the assignment. Assignments shall be executed and acknowledged in the same manner prescribed for conveyance of real estate and shall be filed in triplicate with the commissioner. One original shall be recorded permanently, the second filed and the third returned to the assignee.

[19.2.2.59 NMAC - N, 03/14/2001]

19.2.2.60 ASSIGNMENT FEE: The non-refundable fee for filing an assignment of a mineral lease shall be set forth in the schedule of fees.

[19.2.2.60 NMAC - N, 03/14/2001]

19.2.2.61 effect of assignment: Upon approval by the commissioner of a valid mineral lease assignment, the assignor shall stand relieved from all lease obligations to the commissioner with respect to the state trust resources embraced in the assignment. The state shall likewise be relieved from all obligations to the assignor as to such resources. Upon assignment, the assignee shall succeed to all of the rights and privileges of the assignor with respect to the assigned lease and shall, upon assignment, be liable for all obligations of the assignor as to the commissioner. Nothing in this section shall relieve any person from liability under the New Mexico Mining Act, comparable law, or any permit or authorization issued thereunder.

[19.2.2.61 NMAC - N, 03/14/2001]

19.2.2.62 PRODUCTION IN PAYING QUANTITIES HOLDS LEASE AND ALL ASSIGNMENTS: Production of minerals in paying quantities from anywhere on the premises, as defined by the original lease, will continue the term of the lease and all assignments thereof.

[19.2.2.62 NMAC - N, 03/14/2001]

19.2.2.63 SUBLEASING PROHIBITED: The lessee shall not sublease the mineral lease.

[19.2.2.63 NMAC - N, 03/14/2001]

19.2.2.64 SIDE AGREEMENTS: Notwithstanding any other provision herein, side agreements that do not constitute assignments but which define or set out the various interests of other parties in a mineral lease may be filed with the commissioner as miscellaneous instruments upon payment of the filing fee set out in the schedule of fees. Such filing shall constitute constructive notice to the world of the existence and the contents thereof. Side agreements are not binding upon the commissioner and do not change the lessee’s obligations under any mineral lease. The lessee of record shall remain responsible for compliance with the terms and conditions of the mineral lease.

[19.2.2.64 NMAC - N, 03/14/2001]

19.2.2.65 TRANSFER OF RESIDENT DECEDENT’S LEASE: To transfer an interest in a lease owned by a deceased resident of New Mexico to the decedent’s heirs or devisees, proper probate proceedings must be held in accordance with the New Mexico Probate Code. Certified copies of such proceedings showing proper legal authority to transfer shall be filed with the commissioner. Provided, however, that where lawful transfer occurs outside of probate, the purported transferee shall file with the commissioner the death certificate of the lessee and all instruments effecting transfer of the lease.

[19.2.2.65 NMAC - N, 03/14/2001]

19.2.2.66 TRANSFER OF NON-RESIDENT DECEDENT’S LEASE: To transfer an interest in a lease owned by a nonresident decedent (a person who was not a resident of New Mexico at the time of the person’s death) to the decedent’s heirs or devisees, the decedent’s estate must be probated in the state of such decedent’s residence and ancillary proceedings conducted in the proper New Mexico court. Certified copies of the proceedings showing proper legal authority to transfer shall be filed with the commissioner. Provided, however, that where lawful transfer occurs outside of probate, the purported transferee shall file with the commissioner the death certificate of the lessee and all instruments effecting transfer of the lease.

[19.2.2.66 NMAC - N, 3/14/2001; A, 6/11/2019]

19.2.2.67 CANCELLATION OF MINERAL LEASE AND OPPORTUNITY TO CURE: The commissioner may cancel any mineral lease for non-payment of rentals, non-payment (or underpayment) of royalties and for violation of any of the terms, covenants or conditions of the mineral lease. However, before any such cancellation shall be made, the commissioner shall mail a thirty-day notice of cancellation to the lessee, by registered or certified mail, at the address of the lessee shown by the records of the NMSLO. The thirty-day notice shall specify the default for which the lease is subject to cancellation. If the default is not cured within thirty days after the commissioner mails the notice, then the commissioner may enter cancellation. No proof of receipt of such notice is necessary for cancellation. The lessee shall be liable for all reasonable attorneys fees and costs incurred by the commissioner in enforcing the terms of the lease, including fees and costs incurred in regaining possession of and reclaiming the premises.

[19.2.2.67 NMAC - N, 03/14/2001]

19.2.2.68 RELINQUISHMENT OF MINERAL LEASE: With the consent of the commissioner, a mineral lease in good standing may be relinquished, in whole or in part, upon approval of the commissioner and payment of the non-refundable filing fee in accordance with the schedule of fees. However, the commissioner will not approve relinquishment of an undivided interest in a lease or less than a legal subdivision. Relinquishment does not relieve the lessee from its obligation to reclaim the trust surface estate.

[19.2.2.68 NMAC - N, 03/14/2001]

19.2.2.69 RESERVATIONS: All rights not expressly granted under the mineral lease are reserved to the commissioner. Notwithstanding the issuance of a mineral lease, the commissioner specifically reserves the right to:

A. lease the premises for grazing, agricultural or commercial purposes;

B. lease the premises for oil and gas exploration and extraction;

C. lease the premises for the development of geothermal resources;

D. sell the premises subject to the mineral lease, reserving all minerals of whatsoever kind to the state of New Mexico; and

E. issue rights of way and easements over, upon or across trust surface estate for any purpose, including but not limited to, public highways, railroads, tramways, telegraph, telephone and power lines, pipelines, irrigation works, mining, logging and for exploration and development of geothermal resources.

[19.2.2.69 NMAC - N, 03/14/2001]

19.2.2.70 WAIVER OF RESERVATIONS: The commissioner may, at the commissioner’s discretion, agree not to exercise one or more of the rights reserved under 19.2.2.69 NMAC upon payment of additional consideration determined by the commissioner.

[19.2.2.70 NMAC - N, 03/14/2001]

19.2.2.71 COMMISSIONER’S STATUTORY RIGHT TO PURCHASE PRODUCTION: The commissioner has the right to purchase at any time and from time to time, at the market price prevailing in the area on the date of purchase, all or part of the minerals that may be produced from the premises. (The commissioner may waive this reservation by following the procedure set out in Section 19-14-2 NMSA 1978.)

[19.2.2.71 NMAC - N, 03/14/2001]

19.2.2.72 ROAD DEVELOPMENT: Lessees shall comply with the requirements for development and closure of roads set forth in 19.2.20 NMAC.

[19.2.2.72 NMAC - N, 03/14/2001]

19.2.2.73 TRESPASS AND PREVENTION OF WASTE: Lessees shall protect the premises and mineral estate from waste or trespass in accordance with Sections 19-6-1 et seq. NMSA 1978.

[19.2.2.73 NMAC - N, 03/14/2001]

19.2.2.74 WATER RIGHTS: The lessee shall obtain and exercise water rights on the premises only as approved in writing by the commissioner, in a manner consistent with the mineral lease, the rules issued by the commissioner and New Mexico water law.

[19.2.2.74 NMAC - N, 03/14/2001]

19.2.2.75 Venue and Applicable Law: All legal actions regarding mineral leases issued under 19.2.2 NMAC shall be brought in the First Judicial District, Santa Fe, New Mexico. New Mexico law shall govern.

[19.2.2.75 NMAC - N, 03/14/2001]

19.2.2.76 Joint and Several Liability: Where two persons are both lessees under the same mineral lease, they shall be jointly and severally liable for all obligations imposed by such lease.

[19.2.2.76 NMAC - N, 03/14/2001]

19.2.2.77 No Waiver: The delay of the commissioner in asserting any right of the state under the mineral lease shall under no circumstances constitute a waiver of such right.

[19.2.2.77 NMAC - N, 03/14/2001]

19.2.2.78 INTEREST ON LATE PAYMENTS: Lessee shall pay interest at the rate of one percent per month on any late payment of rents, royalties or other payments required under the mineral lease. If the lessee fails to pay the entire amount owed, then interest shall accrue on the unpaid portion. Interest shall begin to accrue on the day the payment becomes due and continue to accrue daily until payment is made.

[19.2.2.78 NMAC - N, 03/14/2001]

19.2.2.79 REMOVAL OF IMPROVEMENTS: Upon termination of the mineral lease by reason of forfeiture, surrender, expiration of term or for any other reason, lessee may, pursuant to Section 19-8-29, remove all improvements and equipment as can be removed without material injury to the premises; provided, however, that all rents and royalties have been paid and that such removal is accomplished within two years from the termination date or before such earlier date as the commissioner may set upon thirty (30) days' written notice to the lessee. All improvements and equipment remaining upon the premises after the removal date as set in accordance with this section shall be forfeited to the state of New Mexico without compensation, unless such forfeiture is disclaimed by the commissioner. Notwithstanding the foregoing, the commissioner may require the lessee to remove any and all improvements from the premises and to reclaim any surface disturbance caused by such removal in accordance with its reclamation plan.

[19.2.2.79 NMAC - N, 03/14/2001]

19.2.2.80 ADDITIONAL TERMS AND CONDITIONS: The commissioner may include in any mineral lease additional terms and conditions not set out in this rule, as the commissioner deems appropriate.

[19.2.2.80 NMAC - N, 03/14/2001]

HISTORY of 19.2.2 NMAC:

Pre-NMAC History: Material in this part was derived from that previously filed with the State Records Center and Archives:

Rule 2, General Mining Rules Relating To Leasing Of State Lands For Minerals Other Than Potassium, Sodium, Sulphur, Phosphorous & Other Minerals Of Similar Occurrence & Their Salts & Compounds, Salt, Oil & Gas, Coal, Shale, Clay, Gravel, Building Stone & Materials, filed 03/11/81

SLO Rule 2, Relating To Leasing For General Mining Of Minerals Other Than Potassium, Sodium, Sulphur, Phosphorous & Other Minerals Of Similar Occurrence & Their Salts & Compounds, Salt, Oil & Gas, Coal, Shale, Clay, Gravel, Building Stone & Materials, filed 01/20/84.

History of Repealed Material: