27.23-12 - Metallic Minerals Leasing Policy – State-Owned Lands
(Revised:  10/29/2009)

Contact Division/Office – Section

             Forest, Mineral and Fire Management, Mineral and Land Management Section 

 Telephone No.

             517-335-3251 

Fax No. 

            517-373-2443  

Mineral and Land Management Section (MLMS) Staff 

1.      Sets a proposed lease auction date and associated nomination period for the nomination of state-owned minerals to be considered for offering for lease through the public oral or sealed bid auction (lease auction) process.  Lease auction type to be determined by MLMS. 

2.      Secures suitable location for a lease auction to be held.  Staff should try to use no cost public facilities, if possible. 

3.       Makes arrangements for the services of a contract auctioneer and recording contractor, if applicable. 

4.      Publishes notice of open nomination period and nomination requirements/procedures through advertisement published in trade journals, and through the posting of the information on the DNR Business Calendar, DNR web site, and using appropriate DNR mailing lists. 

Nominators 

5.      Nominate state-owned minerals rights to be offered for lease through the lease auction process by submitting nominations to MLMS, Forest, Mineral and Fire Management (FMFM), through the Cashier’s Office, by letter or on a form approved by the DNR with nomination fees of $300.00 per 640 acres in up to four contiguous sections.  

Cashier Office 

6.      Applies the process date and control number to the application letter and forwards the original documentation and a copy of the check submitted for nomination fees to MLMS staff. 

MLMS Staff 

7.      Reviews the nomination to determine identity of nominator, description of land nominated, and to ensure that the proper fee has been paid.  Enters this information into the Land Ownership Tracking System (LOTS), including the process date and control number applied by the Cashier’s Office.  The names and addresses of all severed surface owners of state mineral rights must be furnished to MLMS staff for notification, at the time of nomination. 

8.      Nominations that are incomplete and not corrected by the end of the nomination period or are submitted after the nomination period will be returned to the nominator.  Nomination fees are not refundable. 

9.       Provides a list of parcels to nominator to check for accuracy. 

10.   Coordinates the field review/lease classification process as outlined in the lease classification process, listed below. 

11.   Compiles a list of leasable lands and associated classifications. 

12.   Creates an auction list. 

13.   Mails out notification of intent to lease to township supervisors and county clerks of affected township and counties. 

14.   Publishes a notice of lands and their classifications considered for leasing, to provide for public comment and review.  This notice is published in newspapers circulated in the counties where the lands are located, or in the major regional newspapers at least 30 days in advance of the DNR Director’s decision to hold a lease auction. 

15.   Following a public comment period, prepares memo, for the Director, to hold a lease auction and approve parcel classification. 

MLMS Staff and Management Assistant 

16.   Publishes a notice in the DNR Calendar notifying the public that the DNR is seeking comments from the public and the Director’s approval of a lease auction and parcel classifications.  The lease auction must be published in the DNR Business Calendar for a period of at least seven days prior to Director’s approval. 

17.   Types and reviews memo for Director’s approval and forwards to MLMS Section Manager for review and approval. 

MLMS Section Manager 

18.   Reviews memo, makes any necessary changes and forwards to the Executive Assistant to the Division Chief. 

FMFM Executive Assistant to the Division Chief 

19.   Reviews and forwards memo to the Resource Management Chiefs and Deputy for review and signature. 

Resource Management Bureau 

20.   Reviews, signs and forwards memo to the Director of the DNR for action at the Natural Resources Commission meeting. 

DNR Director 

21.   Approves parcel classifications and the lease auction. 

MLMS Staff 

22.   Mails or emails lease auction book or parcel list to nominators. 

23.   Publishes lease auction book or parcel listing on the DNR website. 

24.   Publishes advertisement of lease auction in selected industry trade publications and sends copy of advertisement to interested parties. 

25.   Conducts a public lease auction of state metallic mineral leases through the open oral auction or sealed bid process, as determined by the DNR.  Auctions are held under the following standard terms and conditions: 

A.      Registration of bidders 

1)                   Only qualified bidders may participate in the lease auction. 

a)       Parties interested in bidding, or their authorized representative, must be present at the oral auction. 

b)       Bids may be submitted by individuals of legal age, a partnership, corporation or other entity qualified to do business in the state of Michigan.  All prospective bidders must submit proof as follows: 

i.         Corporations or partnerships must provide MLMS with a copy of “Certificate of Good Standing” or “Certificate of Limited partnership.” 

ii.       Persons doing business under an assumed name must provide MLMS with a copy of “Certificate of Persons Conducting Business Under Assumed Name.” 

iii.      Individuals must provide MLMS with proof of legal age.  This can be in the form of a birth certificate or valid driver’s license. 

iv.      Entities listed on the Department’s Hold Action List are ineligible to participate in any lease auction as long as they remain in violation of lease terms. 

B.      Bidding (to determine the one time bonus payment). 

1)               The minimum bonus bid shall be $3.00 per acre. 

2)               Bid increments must in whole dollar values. 

C.      Successful bidders. 

1)               Successful bidders must pay the entire bonus bid, plus the first year rental payments, at check out on the day of the lease auction.  Payment can be made by cash, certified check, cashier’s check, money order, or company check.  Site drafts, in any format, will not be accepted. 

2)               Sealed bid lease auction successful bidders will be notified by mail and will need to pay the entire bonus payment plus the first year rental payment within 10 business days of notification.  If payment is not received as requested, the opportunity to lease will be passed on to the next highest bidder, at the option of the DNR. 

3)               Successful bidders must designate at check out, the name of the individual or company to whom the lease will be issued.  Leases will be issued to legal entities only. 

26.   Prepares lease auction summary. 

27.   Lease terms and rates. 

A.      The lease shall have a primary term of ten years and will continue so long thereafter as metallic minerals are produced in paying quantities. 

B.      The one time lease bonus shall be at a minimum of $3.00 per acre, for direct lease, bid amount at lease auction, or as approved by the Director.   

C.      The lease shall provide for a royalty to the state of not less than two percent nor more than 10.5 percent, and shall vary with the adjusted sales value per ton.  Production royalties shall be paid on a quarterly basis.  

D.      Lease rental is $3.00 per acre for the first through fifth year, and $6.00 per acre for the sixth through the tenth year. 

E.      At the option of the Lessee, the lease may be extended for an additional ten years.  Lease rental for the tenth year shall be $10.00 per acre and for each year thereafter, the payment shall increase an additional $5.00 per acre per year. 

F.      A lease performance bond shall be required of each Lessee of state metallic lease rights in order to assure faithful compliance with the terms and conditions of the lease.  No lease will be issued without the minimum lease performance bond in place.  The minimum bond to be maintained by each Lessee, and the form of bond accepted, is determined as follows: 

1)                   Bond types accepted: 

a)                   Surety Bond

b)                   Irrevocable Letter of Credit from a financial institution.

c)                   Cash bond.

d)                   Certificate of Deposit

2)                   Amount of bonding required:

G.     Lessee must obtain and maintain liability and worker’s compensation insurance. 

H.      The lease shall contain a maximum of one section (approximately 640 acres). 

MLMS Staff 

28.   Publishes a notice in the DNR Business Calendar of intent to issue lease(s). 

29.   Prepares memo to the Director for approval of leases, and inserts DNR calendar/approval eligibility dates. 

MLMS Management Assistant 

30.   Submits memo to MLMS Section Manager for review and approval. 

Note:  Direct leases can be approved by FMFM Chief as delegated by the DNR Director. 

MLMS Section Manager 

31.   Reviews memo, makes any necessary changes and forwards to FMFM Chief’s Executive Assistant. 

MLMS Chief’s Executive Assistant 

32.   Reviews and forwards memo to the Division Chiefs and Resource Management Deputy within the Resource Management Bureau for review and approval. 

Resource Management Bureau 

33.   Reviews, signs and forwards memo to Director for action. 

MLMS Staff 

34.   Publishes a notice in the DNR Calendar notifying the public that the DNR is seeking comments from the public, and Director’s approval of metallic mineral lease issuance.  Notice must be published in DNR Business Calendar for a period of at lease seven days prior to Director’s approval. 

DNR Director 

35.   Approves issuance of metallic mineral leases. 

MLMS Management Assistant 

36.   Upon Director approval: 

A.      Prepares Transportation and Natural Resources (TNR) Committee agenda. 

B.      Forwards TNR Committee agenda and memos to board members, secretary, and other parties requiring copies. 

C.      Places copy of agenda and memo in pending file with copies to appropriate MLMS staff. 

MLMS Staff 

D.      Attends TNR Committee meeting to present proposed items and address any questions raised by committee members. 

E.      Notifies MLMS Management Assistant of TNR Committee’s decision. 

TNR 

37.   Approves metallic mineral leases, and presents to State Administrative Board, for approval. 

State Administrative Board 

38.   Approves metallic mineral leases. 

MLMS Staff or Management Assistant  

39.   Generates metallic mineral lease documents by completing the following steps: 

A.      Establishes the effective date, to be 30 days after Board approval. 

B.      Enters lease term information into LOTS and creates lease document(s). 

C.      Inserts the Director approval date at the top of the signature page for each lease. 

D.      Prepares cover letter and sends leases to the proposed Lessees for execution. 

Lessee 

40.   Signs and obtains signature from notary for each lease signed. 

41.   Returns lease to MLMS, within 30 days, along with any other requested information or material.

MLMS Staff 

42.   Reviews lease documents for any changes made, and ensures that signature pages have been properly signed and notarized. 

43.   Reviews Lessee bond information to ensure proper bonding is in place. 

44.   Reviews Hold Action List to determine if any proposed Lessee is on the List.  No leases will be granted to entities on the Hold Act List. 

MLMS Management Assistant 

45.   Finalizes lease by obtaining signature from MLMS Section Manager and notary. 

46.   Applies stamp reflecting Board approval date to lease signature pages. 

47.   Makes copy for MLMS files. 

48.   Finalizes cover letter(s) to Lessee. 

49.   Mails original lease and cover letter to Lessee. 

50.   Prepares lease file and files a copy of the fully executed lease in file.
 

DIRECT LEASE PROCESS 

Nominators 

1.      Nominate state-owned lands to be offered for the direct lease process by submitting a nomination to MLMS, Forest, Mineral and Fire Management (FMFM), through the Cashier’s Office, by letter or on a form approved by the DNR with nomination fees of $300.00 per 640 acres in up to four contiguous sections.

Cashier’s Office 

2.      Applies the process date and control number to the application letter and forwards the original documentation and a copy of the check submitted for nomination fees to MLMS staff.

MLMS Staff 

3.      Reviews the nomination to determine identity of nominator, description of land nominated, and to ensure the proper nomination fee has been paid.  Enters this information into LOTS, including the process date and control number applied by the Cashier’s Office.  The names and addresses of all severed surface owners of state mineral rights must be furnished to MLMS staff for notification at the time of nomination. 

4.       Nominations that are not complete are returned to the nominator for correction.  Nomination fees are not refundable. 

5.       Provides a list of parcels to nominator to check for accuracy. 

6.       Coordinates the field review/lease classification process as outlined in the lease classification process, listed below. 

7.       Compiles a list of leasable lands and associated classifications. 

8.       Mails out notification of intent to lease to township supervisors and county clerks of affected townships and counties. 

9.       Prepares and requires applicant to publish a notice of lands and their classifications considered for leasing, to provide for public comment and review.  This notice is published in newspapers circulated in the counties where the lands are located, or in the major regional newspapers at least 30 days in advance of the DNR Director’s decision to issue direct leases. 

Note:  Noncontroversial direct leases may be approved by the FMFM Chief as delegated by the DNR Director. 

See steps 27 through 50 from Auction Section above. 

Metallic Mineral Lease Classification Process 

Classification categories recognize the Department’s proprietary rights over the land surface and take into account the effects metallic mineral exploration and potential development could have on current and future land uses and other resource values.   

Classification categories are: 

1.      Nonleasable:  No mineral rights are to be leased.  This classification should be only used where the greatest emphasis is on protection of surface resources. 

Criteria and examples include: 

A.      Lands with specific deed or other legal restrictions prohibiting leasing or mineral development. 

B.      Certain islands where mineral production facilities would be undesirable. 

C.      Certain unique or sensitive areas (e.g. designated or critical dunes). 

2.       Nondevelopment:  Leasable mineral rights where no surface disturbance will be allowed.  These leases allow underground development while protecting significant other resources from the impacts of surface development.  This category shall be applied to a variety of culturally or ecologically sensitive lands or areas where no development is acceptable. 

The nondevelopment lease classification shall apply to lands meeting the following criteria or reasons for nondevelopment, and other lands as designated by the Department: 

A.      Public parks and recreation areas, campgrounds, fish hatcheries, and research areas; lands dedicated under Part 351, Wilderness and Natural Areas, of the Natural Resources Environmental Protection Act 1994 PA 451, as amended (NREPA); and similar facilities and sites.  This may include up to a one-half mile buffer around the boundaries of such facilities, as appropriate. 

B.      Wetlands, sand dunes, steep slopes, highly erodible soils and other natural features and areas that are ecologically sensitive, special or unusual. 

C.      Unique biotic communities as listed or verified by the Natural Heritage Program. 

D.      Critical habitat for endangered, threatened, special-concern or sensitive species that cannot be accommodated by a Development lease with special conditions. 

E.      Special or unusual recreation or scenic areas, including designated Natural Rivers. 

F.      Islands. 

G.     Areas with archaeological or historical features. 

H.      All Great Lakes inland lake or stream bottomlands. 

I.         Lands with likely dispersed occurrences of any of the above. 

J.       State lands with deed or other legal restriction that prohibit surface development  This may include military lands where the leasing for mineral exploration or development is at the option of the Department of Military and Veterans Affairs. 

K.      Blocks of land with significant contiguous acreage which are unusual or valuable for one or more of the following characteristics: 

1)       Limited accessibility by vehicles

2)       Relatively low-level of current development (roads, facilities, etc.).

3)       Important for maintaining the continuity of wildlife travel corridors.

4)       Important to diverse plant and animal communities by limiting isolation and fragmentation of forest/wildlife habitats.

L.      Buildings, surface uses, or developments of a nature or located so as to preclude the location of a mining operation area. 

3.      Development with Restriction:  Leasable mineral rights on which surface use is available and allowed under specific conditions.  In some cases where issues of concern, such as those listed under nondevelopment classification, can be sufficiently protected with special development conditions.  Such conditions would be included in the lease.  These development leases may include language pertaining to, for example: limited surface disturbance (nondevelopment areas within the leased parcel), access locations, seasonal use restrictions, or other criteria.  Special conditions would be in addition to standard provisions of the lease, and should be specified in the classification process. 

4.      Development:  Leasable mineral rights on which surface use is available and allowed.  Standard lease provisions and conditions would apply to this category.   

All lands considered for leasing shall be thoroughly reviewed by the DNR for classification.  Such classification should also proceed in cooperation with relevant federal land managing agencies whenever action of one might directly affect the mineral or surface interests of the other.

MLMS Staff

1.       Receives nominations of state-owned lands to be offered for lease.

      (See Metallic Mineral Leasing process above for nomination procedures)

2.       Enters the nomination parcels into LOTS, which: 

A.      Completes a check on all nominated lands to ensure that the mineral rights are state-owned and that the metallic minerals are not currently leased. 

B.      Reviews the DNR database to determine if nominated lands have been previously classified as nonleasable, and reviews them to see if they should be removed from consideration. 

C.      Automatically flags lands acquired with federal funding (Dingell Johnson, Pittman Robertson, Land and Water Conservation Funds, State Wildlife Grants, North American Conservation Act, National Wetlands Conservation Grant, Endangered Species Section 6 Land Acquisition Funds or Landowner Incentive Programs) with a nondevelopment classification. 

D.      Enters eligible nominations into the Parcel Review System (PRS). 

3.      Generates a list of eligible nominations from LOTS.  Sends the list to all nominators to verify that all nominations have been entered correctly into the system. 

4.       Generates a list of all nominated lands acquired with federal aid funding or other federal interest.  Forwards this list to Wildlife.

Wildlife Division 

5.      Sends the list of nominated lands acquired with federal funding to the U.S. Fish and Wildlife Service, along with a request to that agency for approval to lease the lands with the nondevelopment classifications.
 

MLMS Staff

6.       Sends a request to review and classify lands for leasing to non-DNR reviewing agencies: 

A.      Department of Military and Veterans Affairs (if applicable)

B.      Natural Heritage Program Specialist

C.      Office of the State Archeologist

D.      USDA Forest Service (if applicable)

Non-DNR Reviewing Agencies 

7.      Reviews lists of nominated parcels relative to the programs that they administer.  Either enters classification and comments into PRS or returns classification recommendations and supporting background information to MLMS, within the time period specified.

MLMS Staff 

8.      Reviews information submitted by non-DNR reviewers to ensure that classification reviews have been submitted by all non-DNR agencies by the due date.  Contacts non-DNR reviewers if there is a question regarding the classification recommendations submitted.  Enters data into PRS, if needed. 

9.      Mails individual notifications to severed mineral surface owners whose lands are underlain by state-owned mineral rights which are nominated for lease with specified time frame and contact information.  Forwards all comments to Upper Peninsula (UP) Field Coordinator, or Lower Peninsula (LP) Field Coordinator, if in the LP. 

10.   Makes PRS available to all DNR reviewers.  The identity of DNR reviewers is set in advance by the DNR Land Administering Divisions (LAD).  Changes in the identity of DNR reviewers are provided to MLMS by the Chiefs of the LAD’s as need arises.

DNR Reviewers 

11.   Checks parcel acquisition funding source, review lands, and enters preliminary classification recommendations and comments in PRS.

DNR Field Coordinators 

12.   Reviews classification recommendations entered by DNR reviewers, and 

A.      Changes classifications and adds comments where appropriate.

B.      Resolves any classification disputes.

C.      Designates a classification recommendation in PRS.

MLMS Staff 

13.   Uploads final field classifications from PRS for metallic mineral exploration and development purposes into LOTS. 

14.   Offers the lands for lease as applicable, through the public lease auction or direct lease process. 

(See Leasing Process above.)

Metallic Mineral Reclassification Procedures 

Lessee 

1.      Submits to MLMS an application to change classification of a portion of an existing metallic mineral lease, or an entire existing state metallic mineral lease (application for amendment to state of Michigan metallic mineral lease for the purpose of parcel reclassification). 

Application contains: 

A.      Legal description of lands requested for reclassification.

B.      Desired classification.

C.      Supporting information, including proposed location of mining exploration development and reason for reclassification.

D.      Non-refundable application fee of $2,000.00.

E.      Name and address of severed surface owner(s), if applicable.

MLMS Staff 

2.       Sends letter of acknowledgement to applicant indicating time frame of reclassification process. 

3.       Reviews title information to determine if lands were acquired with federal aid funds (including Dingell Johnson, Pittman Robertson, and Land and Water Conservation Funds and others listed previously in 2C (page 9) 

A.      If yes, reclassification to anything other than nondevelopment is denied.  Letter explaining denial of reclassification is sent to applicant. 

B.      If yes, and reclassification is to the nondevelopment classification, send notification to Wildlife Division so that they can notify US Fish and Wildlife Service of classification change. 

C.      If lands were not acquired with federal aid funds, proceed to next step. 

4.    Reviews classification history to determine if current classification is a result of recommendations from non-DNR reviewers.

5.    Sends notice to severed surface owner, if applicable, of possible reclassification of parcel with specified time and contact for comments. 

6.    Publishes reclassification request on DNR on-line maps. 

7.    Sends a request to review parcels proposed for reclassification to non-DNR reviewing agencies. 

A.      Department of Military and Veterans Affairs (if applicable)

B.      Natural Heritage Program Specialist

C.      Office of the State Archeologist

D.      USDA Forest Service (if applicable)

Non-DNR Reviewing Agencies 

8.      Reviews list of parcels proposed for reclassification relative to the programs that they administer.  Either enters classification and comments into PRS or returns classification recommendations and supporting background information to MLMS, within the time period specified.

MLMS Staff 

9.      Reviews information submitted by non-DNR reviewers to ensure that reclassification reviews have been submitted by all non-DNR agencies by the due date.  Contacts non-DNR reviewers if there is a question regarding the reclassification recommendations submitted.  Enters data into PRS, if needed. 

10.  Forwards all surface owner and public comments to Upper Peninsula (UP) Field Coordinator, or Lower Peninsula (LP) Field Coordinator, if in the LP. 

11.  Makes PRS available to all DNR reviewers.  The identity of DNR reviewers is set in advance by the DNR Land Administering Division (LAD).  Changes in the identity of DNR reviewers are provided to MLMS by the Chiefs of the LAD’s as need arises.

DNR Reviewers 

12.  Checks parcel acquisition funding source, review lands, and enter preliminary reclassification recommendations and comments into PRS.

DNR Field Coordinators 

13.  Reviews reclassification recommendations entered by DNR reviewers, surface owner and other public comments and 

A.      Changes reclassifications and add comments, where appropriate.

B.      Resolves any reclassification disputes.

C.      Designates a reclassification recommendation in PRS.

MLMS Staff 

14.  Uploads final field reclassifications from PRS into LOTS.  If reclassification has been denied, sends applicant a letter explaining denial. 

If reclassification has been approved: 

A.      Determines if any additional bonus must be paid to the DNR.  Additional bonus due for the change in classification is determined by calculating the average per acre difference between development and nondevelopment leases. 

B.      Notifies the applicant of the terms of the change in classification, including any restrictions, additional bonus to be paid, public notice requirements, etc.  If applicant agrees to the terms of the change in classification and submits the required additional bonus, if any, continues the process. 

C.      Prepares and requires applicant to publish notices of lands and proposed reclassifications considered for leasing in newspapers circulated in the counties where the lands are located, or in major regional newspapers, at least 30 days in advance of the FMFM Chief’s decision to reclassify the lands.  The purpose of the notice is to provide the public adequate opportunity to review and comment on the reclassification of the lands.  The classification of any description shall be determined by the DNR. 

D.      Mails notice to the township supervisors in the township offices and to the county clerk in the county where the lands for lease are located, at least 30 days in advance of the FMFM Chief’s decision to reclassify the lands.  This notification will provide local units of government the opportunity to review and comments. 

E.      Mails notice to DNR offices in appropriate locations for posting in public areas. 

F.      Prepares memo to Chief, FMFM for approval of reclassification, 

G.     Submits reclassification information for publication in the DNR Calendar, at least 30 days prior to reclassification approval. 

H.      Prepares lease amendment showing the change in classification. 

1)       Incorporate any special provisions stipulated by DNR staff.

2)       If only part of the lease is being reclassified, lease may need to be split into separate leases.

FMFM Chief 

15.  Approves the amendment reclassifying a portion or all of the leased premises.

MLMS Staff 

16.  Mails amendment to Lessee for execution and return within 30 days.

Lessee 

17.  Executes the amendment and returns it to MLMS.

MLMS Section Manager 

18.  Executes the amendment on behalf of the DNR.

MLMS Staff 

19.   Mails one copy of the fully-executed amendment to the Lessee. 

20.   Posts lease worksheet and LOTS with changes. 

21.   Notifies Revenue Verification Unit of MLMS of amendment and change in lease classification. 

22.   Files fully executed amendment in lease file.