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S.B. 41






Sponsor: Mike Dmitrich

             7      LONG TITLE
             8      General Description:
             9          This bill modifies mineral leasing procedures on school and institutional trust lands.
             10      Highlighted Provisions:
             11          This bill:
             12          .    defines "mineral" in the School and Institutional Trust Lands Management Act to
             13      include oil, gas, and hydrocarbons;
             14          .    reduces the maximum length of the primary term of certain mineral leases;
             15          .    removes a requirement that, under certain circumstances, a mineral lease must be
             16      extended after the primary term has expired;
             17          .    allows an oral auction to be conducted when identical lease bids are submitted; and
             18          .    makes technical changes.
             19      Monies Appropriated in this Bill:
             20          None
             21      Other Special Clauses:
             22          None
             23      Utah Code Sections Affected:
             24      AMENDS:
             25          9-9-402, as last amended by Chapter 299, Laws of Utah 1995
             26          17A-2-522, as last amended by Chapter 299, Laws of Utah 1995
             27          17A-2-818, as last amended by Chapters 1 and 254, Laws of Utah 2000

             28          17A-3-805, as last amended by Chapter 299, Laws of Utah 1995
             29          53C-1-103, as repealed and reenacted by Chapter 294, Laws of Utah 1994
             30          53C-2-405, as last amended by Chapter 40, Laws of Utah 2004
             31          53C-2-407, as last amended by Chapter 103, Laws of Utah 1996
             32          57-6-4, as last amended by Chapter 299, Laws of Utah 1995
             34      Be it enacted by the Legislature of the state of Utah:
             35          Section 1. Section 9-9-402 is amended to read:
             36           9-9-402. Definitions.
             37          As used in this part:
             38          (1) "Burial site" means any natural or prepared physical location, whether originally
             39      below, on, or above the surface of the earth, into which as a part of the death rite or ceremony
             40      of a culture individual human remains are deposited.
             41          (2) "Cultural affiliation" means that there is a relationship of shared group identity that
             42      can be reasonably traced historically or prehistorically between a present day Indian tribe and
             43      an identifiable earlier group.
             44          (3) "Division" means the Division of Indian Affairs.
             45          (4) "Indian tribe" means any tribe, band, nation, or other organized group or
             46      community of Indians that is recognized as eligible for the special programs and services
             47      provided by the United States to Indians because of their status as Indians.
             48          (5) "Lineal descendant" means the genealogical descendant established by oral or
             49      written record.
             50          (6) "Native American" means of or relating to a tribe, people, or culture that is
             51      indigenous to the United States.
             52          (7) "Remains" means all or part of a physical individual and objects on or attached to
             53      the physical individual that are placed there as part of the death rite or ceremony of a culture.
             54          (8) "State lands" means any lands owned by the state or its subdivisions, except [those]
             55      school and institutional trust lands as defined in [Subsection] Section 53C-1-103 [(6)].
             56          Section 2. Section 17A-2-522 is amended to read:
             57           17A-2-522. State lands subject.
             58          (1) All lands in the state now owned or hereafter acquired by the state, other than

             59      [those lands] school and institutional trust lands as defined in [Subsection] Section
             60      53C-1-103 [(6)], which are located within any drainage district now organized under the laws of
             61      the state, or to be hereafter organized, are hereby made and declared to be subject to all the
             62      provisions of the laws of the state relating to the drainage of lands for agricultural purposes to
             63      the same extent and in the same manner in which lands of like character held in private
             64      ownership are or may be subject to those laws, except as hereinafter provided.
             65          (2) The state, and all persons legally holding unpatented state lands under entries or
             66      contracts of purchase from the state, are accorded all the rights, privileges, and benefits given
             67      by the state's drainage laws to persons holding lands of like character in private ownership.
             68          (3) No provision of this part may be applied to, or enforced against, school or
             69      institutional trust lands without the consent of the director of the School and Institutional Trust
             70      Lands Administration acting in accordance with Sections 53C-1-102 and 53C-1-303 .
             71          Section 3. Section 17A-2-818 is amended to read:
             72           17A-2-818. Powers of incorporated districts -- Preferential right of city to
             73      purchase water.
             74          (1) (a) Any district incorporated as provided in this part may:
             75          (i) have perpetual succession;
             76          (ii) sue and be sued in all actions and proceedings and in all courts and tribunals of
             77      competent jurisdiction;
             78          (iii) adopt a corporate seal and alter it;
             79          (iv) take by grant, purchase, bequest, devise, or lease, and hold, enjoy, lease, sell,
             80      encumber, alienate, or otherwise dispose of, water, waterworks, water rights, and sources of
             81      water supply, and any real and personal property of any kind within or without the district and
             82      within and without Utah necessary or convenient to the full exercise of its powers;
             83          (v) acquire, construct, or operate, control, and use works, facilities, and means
             84      necessary or convenient to the exercise of its powers, both within and without the district and
             85      within and without Utah; and
             86          (vi) perform any and all things necessary or convenient to the full exercise of the
             87      powers granted under this section.
             88          (b) (i) Any district incorporated as provided in this part may have and exercise the
             89      power of eminent domain and, in the manner provided by law for the condemnation of private

             90      property for public use, take any property necessary to the exercise of the powers granted under
             91      this section.
             92          (ii) In any proceeding relative to the exercise of the power of eminent domain, the
             93      district has the same rights, powers, and privileges as a municipal corporation.
             94          (2) (a) Any district incorporated as provided in this part may:
             95          (i) construct and maintain works and establish and maintain facilities across or along
             96      any public street or highway and in, upon, or over any vacant public lands, that are now, or may
             97      become, the property of the state, other than [those lands] school and institutional trust lands as
             98      defined in [Subsection] Section 53C-1-103 [(6)]; and
             99          (ii) construct works and establish and maintain facilities across any stream of water or
             100      watercourse if the district promptly restores the street or highway to its former state of
             101      usefulness as nearly as may be and does not use the street or highway in a manner that
             102      completely or unnecessarily impairs the usefulness of it.
             103          (b) (i) In the use of streets, the district is subject to the reasonable rules and regulations
             104      concerning excavations and the refilling of excavations, the relaying of pavements and the
             105      protection of the public during periods of construction of the county or municipality in which
             106      the streets are located.
             107          (ii) The county or municipality may not require the district to pay any license or permit
             108      fees, or file any bonds.
             109          (iii) The county or municipality may require the district to pay reasonable inspection
             110      fees.
             111          (3) (a) Any district incorporated as provided in this part may borrow money, incur
             112      indebtedness, and issue bonds and other obligations.
             113          (b) A district may not issue bonds that pledge the full faith and credit of the district for
             114      payment if those bonds, in the aggregate, exceed 10% of the fair market value, as defined under
             115      Section 59-2-102 , of the taxable property in the district as computed from the last equalized
             116      assessment roll for county purposes before the issuance of the bonds.
             117          (c) For purposes of this Subsection (3), the district shall include the fair market value
             118      of all tax equivalent property, as defined under Section 59-3-102 , as a part of the fair market
             119      value of taxable property in the district.
             120          (4) Contracts and agreements with the United States of America, and with any water

             121      users' association or any other public, cooperative, or private entity from which the district
             122      procures water, and bonds payable solely from revenues of the district other than from the
             123      proceeds of ad valorem taxes, are not within the limitation established by Subsection (3).
             124          (5) (a) Any district incorporated as provided in this part may fix and determine the
             125      funds required for district purposes of every nature and apportion and charge the same against
             126      the area of each city within the district by following the procedures and requirements of this
             127      Subsection (5).
             128          (b) As to the costs of all water, water rights, reservoirs, canals, conduits, and other
             129      works for which the district as a whole receives the benefit, and because of which the district is
             130      indebted or because of which the district has made payment without any previous
             131      apportionment and charge having been made, and the charges made against the district because
             132      of its ownership of stock in any water users' association, in the same proportion as the water
             133      and water rights set apart or allotted to each area bear to the total water and water rights owned
             134      or held by the district.
             135          (c) As to that portion of these funds required for operation, maintenance, and the cost
             136      of construction of distributing systems, the district shall equitably apportion these costs and
             137      determine and base them on the benefits and the relative cost of service provided by the district
             138      to each respective area.
             139          (6) (a) Any district incorporated as provided in this part may:
             140          (i) levy and collect taxes for the purposes of carrying on the operations and paying the
             141      obligations of the district; and
             142          (ii) in any year, levy a tax sufficient to cover in full any deficit that may have resulted
             143      from tax delinquencies for any preceding year.
             144          (b) (i) Taxes levied under this Subsection (6) for administering the district and
             145      maintaining and operating its properties may not exceed .0005 per dollar of taxable value of
             146      taxable property in the district.
             147          (ii) Taxes levied to pay principal of and interest on the bonds of the district, to pay
             148      indebtedness and interest owed to the United States of America, or to pay assessments or other
             149      amounts due any water users' association or other public cooperative, or private entity from
             150      which the district procures water are not subject to the limitation established by [this]
             151      Subsection (5)(b).

             152          (c) (i) The district shall:
             153          (A) levy taxes for the payment of principal of and interest on the bonds of the district
             154      as separate and special levies for that specific purpose; and
             155          (B) apply the proceeds from them solely to the payment of this principal and interest.
             156          (ii) As separate and special levies, these levies are not subject to any priorities in favor
             157      of obligations of the district in existence at the time the bonds were issued.
             158          (d) (i) The district may not levy any of the taxes authorized by this Subsection (6)
             159      unless it has conducted, at its regular place of business, a public hearing on the purposes and
             160      necessities of the taxation.
             161          (ii) The board of trustees of the district shall publish notice of the public hearing at
             162      least seven days prior to the hearing in a newspaper of general circulation published in the
             163      county or counties in which the district is located.
             164          (e) Any district incorporated as provided in this part may:
             165          (i) enter into contracts, employ and retain personal services, and employ laborers;
             166          (ii) create, establish, and maintain and elect, appoint, and employ necessary and
             167      convenient:
             168          (A) officers, attorneys, and agents convenient for the transaction of the business of the
             169      district;
             170          (B) officers and positions as necessary; and
             171          (C) employees.
             172          (7) (a) Any district incorporated as provided in this part may:
             173          (i) join with one or more other corporations, public or private, for the purpose of
             174      carrying out any of its powers;
             175          (ii) contract with any other corporation or corporations for the purposes of financing
             176      acquisitions, constructions, and operations;
             177          (iii) in the contract, obligate itself severally or jointly with the other corporations; and
             178          (iv) secure, guarantee, or become surety for the payment of any indebtedness, or the
             179      performance of any contract or other obligation that may be, or has been, incurred or entered
             180      into by any corporation in which the district has acquired shares of stock by subscription or
             181      otherwise.
             182          (b) The contracts may provide for:

             183          (i) contributions to be made by each party to them;
             184          (ii) the division and apportionment of the expenses of the acquisitions and operations;
             185          (iii) the division and apportionment of the benefits, the services, and the products from
             186      them; and
             187          (iv) an agency to effect the acquisitions and carry on these operations.
             188          (c) The contracts shall provide the powers and the methods of procedure for the agency
             189      the method by which the agency may contract.
             190          (d) The contract may contain further covenants and agreements as necessary and
             191      convenient to accomplish its purposes.
             192          (8) Any district incorporated as provided in this part may:
             193          (a) acquire water and water rights within or without Utah;
             194          (b) develop, store, and transport water;
             195          (c) subscribe for, purchase, and acquire stock in canal companies, water companies,
             196      and water users' associations;
             197          (d) provide, sell, lease, and deliver water within or outside of the district for municipal
             198      and domestic purposes, irrigation, power, milling, manufacturing, mining, and metallurgical
             199      and any and all other beneficial uses;
             200          (e) fix the rates;
             201          (f) acquire, construct, operate, and maintain any works, facilities, improvements, and
             202      property that are necessary or convenient; and
             203          (g) in the doing of all of these things:
             204          (i) obligate itself jointly with other persons and corporations, public and private; and
             205          (ii) execute and perform these obligations according to their tenor.
             206          (9) (a) Any district incorporated as provided in this part may invest any surplus money
             207      in the district treasury, including any money in any sinking fund established for the purpose of
             208      providing for the payment of the principal or interest of any bonded contract or other
             209      indebtedness or for any other purpose, not required for immediate necessities of the district, by
             210      following the procedures and requirements of Title 51, Chapter 7, State Money Management
             211      Act.
             212          (b) The district shall ensure that the sales of any bonds or treasury notes purchased and
             213      held are made in season so that the proceeds may be applied to the purposes for which the

             214      money, with which the bonds or treasury notes were originally purchased, was placed in the
             215      treasury of the district.
             216          (c) The treasurer and controller, with the approval of the attorney, shall perform the
             217      functions and duties authorized by this Subsection (9) under rules adopted by the board of
             218      trustees of the district.
             219          (10) Each city, the area of which is a part or all of any district incorporated under this
             220      part, has a preferential right to purchase from the district, at rates determined by the board of
             221      trustees of the district, for distribution by the city, or any public utility empowered by the city
             222      for the purpose, for domestic, municipal, and other beneficial uses within the city, a portion of
             223      the water served by the district which shall bear the same ratio to all of the water supply of the
             224      district as the total accumulation of amounts levied as taxes by the district against the property
             225      of the city which is within the area of the district shall bear to the total of all taxes levied by the
             226      district against the property in all of the cities in the areas of which are within the area of the
             227      district.
             228          Section 4. Section 17A-3-805 is amended to read:
             229           17A-3-805. District a political subdivision -- Functions, powers, and duties.
             230          Each district organized under this part is a political subdivision of the state and has and
             231      shall exercise the following functions, powers, and duties to:
             232          (1) employ, subject to available funds, clerical and staff personnel, including legal
             233      staff;
             234          (2) conduct surveys, investigations, and research relating to soil erosion, floodwater,
             235      nonpoint water pollution, flood control, water pollution, sediment damage, and watershed
             236      development;
             237          (3) devise and implement measures for the prevention of soil erosion, floodwater and
             238      sediment damages, nonpoint water pollution, and for the conservation, development, utilization
             239      and disposal of water on state or private lands with the consent of the land occupier, and in the
             240      case of school and institutional trust lands as defined in [Subsection] Section 53C-1-103 [(6)],
             241      with the consent of the director of the School and Institutional Trust Lands Administration,
             242      acting in accordance with Sections 53C-1-102 and 53C-1-303 ;
             243          (4) construct, improve, operate, and maintain any structures considered necessary or
             244      convenient for the performance of any operation authorized by this part, and acquire property,

             245      both real and personal, through purchase, or otherwise, and maintain, improve, and administer
             246      such property consistent with the purposes of this part;
             247          (5) enter into contracts or agreements in the name of the district, and sue and be sued;
             248          (6) receive funds from any federal or state agency or from any county, city, or other
             249      political subdivision within the state or from any private source;
             250          (7) annually submit to the commission on or before January 30, of each year, a copy of
             251      the minutes of each district meeting, a copy of its annual work plan, and an accounting of the
             252      district's financial affairs. The accounting shall be prepared by a disinterested person and show
             253      the district's debits and credits including accounts payable and accounts receivable, the purpose
             254      of each debit, the source of each credit, and the actual cash balance on hand; and
             255          (8) do all other things necessary or convenient for the efficient and effective
             256      administration of the district.
             257          Section 5. Section 53C-1-103 is amended to read:
             258           53C-1-103. Definitions.
             259          As used in this title:
             260          (1) "Administration" means the School and Institutional Trust Lands Administration.
             261          (2) "Board" or "board of trustees" means the School and Institutional Trust Lands
             262      Board of Trustees.
             263          (3) "Director" or "director of school and institutional trust lands" means the chief
             264      executive officer of the School and Institutional Trust Lands Administration.
             265          (4) "Mineral" includes oil, gas, and hydrocarbons.
             266          [(4)] (5) "Nominating committee" means the committee [which] that nominates
             267      candidates for positions and vacancies on the board.
             268          [(5)] (6) "Policies" means statements applying to the administration that broadly
             269      prescribe a future course of action and guiding principles.
             270          [(6)] (7) "School and institutional trust lands" or "trust lands" means those properties
             271      granted by the United States in the Utah Enabling Act to the state in trust, and other lands
             272      transferred to the trust, which must be managed for the benefit of:
             273          (a) the state's public education system; or
             274          (b) the institutions of the state which are designated by the Utah Enabling Act as
             275      beneficiaries of trust lands.

             276          Section 6. Section 53C-2-405 is amended to read:
             277           53C-2-405. Mineral leases -- Multiple leases on same land -- Lease terms.
             278          (1) (a) Mineral leases, including oil, gas, and hydrocarbon leases, may be issued for
             279      prospecting, exploring, developing, and producing minerals [covering] described by rule as
             280      available for lease on any portion of trust lands or the reserved mineral interests of the trust.
             281          (b) (i) Leases may be issued for different types of minerals on the same land.
             282          (ii) If leases are issued for different types of minerals on the same land, the leases shall
             283      include stipulations for simultaneous operations.
             284          (c) [No more than one lease] Leases may not be issued for the same resource on the
             285      same land.
             286          (2) (a) Each mineral lease issued by the administration shall provide for an annual
             287      rental of not less than $1 per acre per year.
             288          (b) However, a lease may provide for a rental credit, minimum rental, or minimum
             289      royalty upon commencement of production, as prescribed by rules of the director.
             290          (3) The primary term of a mineral lease may not exceed[:] ten years.
             291          [(a) 20 years for oil shale or tar sands; or]
             292          [(b) ten years for oil, gas, or any other mineral.]
             293          (4) The director shall make rules regarding the continuation of a mineral lease after the
             294      primary term has expired[, which shall provide that a mineral lease shall continue so long as:].
             295          [(a) the mineral covered by the lease is being produced in paying quantities from:]
             296          [(i) the leased premises;]
             297          [(ii) lands pooled, communitized, or unitized with the leased premises; or]
             298          [(iii) lands constituting an approved mining or drilling unit with respect to the leased
             299      premises; or]
             300          [(b) (i) the lessee is engaged in diligent operations, exploration, or development which
             301      is reasonably calculated to advance development or production of the mineral covered by the
             302      lease from:]
             303          [(A) the leased premises;]
             304          [(B) lands pooled, communitized, or unitized with the leased premises; or]
             305          [(C) lands constituting an approved mining or drilling unit with respect to the leased
             306      premises; and]

             307          [(ii) the lessee pays a minimum royalty.]
             308          [(5) For the purposes of Subsection (4), diligent operations with respect to oil, gas, or
             309      other hydrocarbon leases may include cessation of operations not in excess of 90 days in
             310      duration.]
             311          Section 7. Section 53C-2-407 is amended to read:
             312           53C-2-407. Mineral lease application procedures.
             313          (1) Lands that are not encumbered by a current mineral lease for the same resource, a
             314      withdrawal order, or other rule of the director prohibiting the lease of the lands, may be offered
             315      for lease as provided in this section or may, with board approval, be committed to [other]
             316      another contractual arrangement under Subsection 53C-2-401 (1)(d).
             317          (2) (a) A notice of the land available for leasing shall be posted in the administration's
             318      office.
             319          (b) The notice shall:
             320          (i) describe the land;
             321          (ii) indicate what mineral interest in each tract is available for leasing; and
             322          (iii) state the last date, which shall be no less than 15 days after the notice is posted, on
             323      which bids may be received.
             324          (3) (a) Applications for the lease of lands filed before the closing date stated in the
             325      notice shall be considered to be filed simultaneously.
             326          (b) The applications shall be:
             327          (i) submitted in sealed envelopes; and
             328          (ii) opened in the administration's office at 10:00 a.m. of the first business day
             329      following the last day on which bids may be received.
             330          (c) Leases shall be awarded to the highest responsible, qualified bidder, in terms of the
             331      bonus paid in addition to the first year's rental, who submitted a bid in the manner required.
             332          (d) [(i)] In cases of identical bids of successful bidders[, the]:
             333          (i) the right to lease shall be determined by drawing[.] or oral auction;
             334          (ii) the determination of whether to award the lease by drawing or oral auction shall be
             335      made at the sole discretion of the director; and
             336          [(ii)] (iii) [The] the drawing or oral auction shall be held in public at the
             337      administration's office in a manner calculated to optimize the return to the trust land

             338      beneficiary.
             339          (4) (a) At the discretion of the director, mineral leases may be offered at an oral public
             340      auction.
             341          (b) The director may set a minimum bid for a public auction.
             342          (5) The director may award a mineral lease without following the competitive bidding
             343      procedures specified in Subsections (3) and (4) or conducting an oral public auction, if the
             344      mineral lessee waives or relinquishes to the trust a prior mining claim, mineral lease, or other
             345      right which in the opinion of the director might otherwise:
             346          (a) defeat or encumber the selection of newly acquired land, either for indemnity or
             347      other purposes, or the acquisition by the trust of any land; or
             348          (b) cloud the title to any of those lands.
             349          (6) Following the awarding of a lease to a successful bidder, deposits, except filing
             350      fees, made by unsuccessful bidders shall be returned to those bidders.
             351          (7) (a) Lands acquired through exchange or indemnity selection from the federal
             352      government shall be subject to the vested rights of unpatented mining claimants under the
             353      Mining Law of 1872, as amended, and other federal vested rights, both surface and minerals.
             354          (b) Subsection (7)(a) does not prevent the director from negotiating the
             355      accommodation of vested rights through any method acceptable to the parties.
             356          (8) The director may lease lands in the order in which applications are filed if:
             357          (a) the director offers trust lands for lease for mineral purposes according to the
             358      procedures in Subsections (3) through (6) and the lands are not leased; or
             359          (b) a period of time of not less than one year but less than three years has elapsed
             360      following:
             361          (i) a revocation of a withdrawal; or
             362          (ii) the date an existing mineral lease is canceled, relinquished, surrendered, or
             363      terminated.
             364          Section 8. Section 57-6-4 is amended to read:
             365           57-6-4. Certain persons considered to hold under color of title.
             366          (1) A purchaser in good faith at any judicial or tax sale made by the proper person or
             367      officer has color of title within the meaning of this chapter, whether or not the person or officer
             368      has sufficient authority to sell, unless the want of authority was known to the purchaser at the

             369      time of the sale.
             370          (2) (a) Any person has color of title who has occupied a tract of real estate by himself,
             371      or by those under whom he claims, for the term of five years, or who has occupied it for less
             372      time, if he, or those under whom he claims, have at any time during the occupancy with the
             373      knowledge or consent, express or implied, of the real owner made any valuable improvements
             374      on the real estate, or if he or those under whom he claims have at any time during the
             375      occupancy paid the ordinary county taxes on the real estate for any one year, and two years
             376      have elapsed without a repayment by the owner, and the occupancy is continued up to the time
             377      at which the action is brought by which the recovery of the real estate is obtained.
             378          (b) The person's rights shall pass to his assignees or representatives.
             379          (3) Nothing in this chapter shall be construed to give tenants color of title against their
             380      landlords or give any person a claim under color of title to school [or] and institutional trust
             381      lands as defined in [Subsection] Section 53C-1-103 [(6)].

Legislative Review Note
    as of 1-4-05 1:36 PM

Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel

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