• DNR Department Procedure 2312.12 - Metallic Minerals Leasing Policy – State-Owned Lands, Issued Issued 03/11/1999.

NOTE: The content of this document has not been revised since Issued 03/11/1999. 
The only change involves the conversion and numbering to the current DNR Policies & Procedures Manual Structure.

Supersedes

• Natural Resources Commission Policy 2312 (dated October 1, 1996)

Preamble:

The State of Michigan owns over 3.8 million acres of combined surface and  mineral. rights, and an additional 2.1 million acres of mineral rights only. In addition, the State owns 25 million acres of Great Lakes bottomlands.  Under the provisions of Section 502, Act 451, P.A. 1994, as amended, the Natural Resources Commission is responsible for managing these land and mineral resources to ensure protection and enhancement of the public trust.  In this context the following policy statements provide the framework for development of metallic mineral resources on State-owned lands.

POLICY:

GENERAL POLICY:

It shall be the policy of the Natural Resources (Commission) to provide for orderly development of State-owned metallic mineral resources, to encourage the private sector rather than the State to risk capitol in exploration and development, and to optimize revenue from State-owned metallic minerals consistent with other natural resource management objectives, and to provide for regular and systematic review of the metallic minerals leasing program.

Metallic minerals leasing and development on public lands shall be established in a manner to assure (1) optimum economic return to the State, (2) competition for the acquisition of leases, and (3) protection of the environmental, recreational and other uses of the land, including lake bottomlands and connecting bays, harbors and waterways.

SPECIFIC POLICY:

Applications to Offer State Lands at Public Auction

Land may be identified for leasing by the Department of Natural Resources (Department), or nominated by qualified parties.  The Department shall establish a processing fee to be paid by each applicant when requesting State lands to be offered at public auction.

Field Review for Classification of Lands Considered for Leasing

All lands considered for leasing shall be thoroughly reviewed by the Department for classification as either leasable, leasable with restrictions or non-leasable in order to assure proper protection of lands having unique surface values or other areas of special environmental or unusual natural resource values

The non-leasable classification shall apply to lands in the following categories and to other lands designated by the Department.

Dedicated Natural and Wilderness Areas

Areas of special environmental or unusual natural resource values, state parks, or recreational lands as determined by the Department of Natural Resources, (i.e., those land descriptions where (1) the presence of wetlands, rare and endangered species, historical and archaeological features which are dispersed and/or utilize the acreage in such a manner that the location of a mine and associated roads and facilities is precluded, and (2) undedicated State land that has unusual value other than the above, based on site-specific written documentation).

The conclusions and recommendations of the Department as to the appropriate classification shall be based on an evaluation of the effects metallic mineral exploration and potential development would have on current and future uses of lands, and shall be recorded on a field report form signed by the appropriate land managers—including Forest Management, Wildlife, Parks and Fisheries—and others involved in the field review process.  Final field recommendations shall be made and submitted by the Field Deputy.  All classifications are subject to Department approval.

Public Review of Proposed Classification of Lands Considered for Leasing

The Department shall publish a notice of proposed classifications of lands considered for leasing and provide the public adequate opportunity to review land comment on the classification of the lands.  In the event anyone disagrees with the proposed classification of any description, that person shall have the opportunity to appear before the Department to request a change in classification.  The classification of any description shall be determined by the Department.

Change of Classification

The classification of any land under public review may be reclassified by the Department, upon submission of additional information, based on field review conducted by the Department following receipt of requests for reclassification, and on additional information submitted by the applicant.  The Department will notify interested parties of the request for change of classification at the same time field review is requested.

If the Department determines that a classification is no longer applicable, the land may be reclassified.

Any proposed change of classification shall be on the regular printed agenda of the Department.

Public Notice of Scheduled Lease Sales

The Department shall publish a notice of all scheduled lease sales for the purpose of promoting interest and participation in the lease sales.

Public Auction Lease Sales

The Department may approve offering of lease rights at public auction.  Lease sales may be scheduled, subject to demand, with a minimum of one per year as a goal.  The Department shall conduct market studies for the purpose of gathering information to aid in developing sales strategies, analyzing sale results, and optimizing economic return to the State.

The Department may authorize alternative auction methods.

Bids may be rejected by the Department when it has been determined that the successful bidder has failed to maintain good credit, has failed to pay the total bid at time of sale, is in violation of the rules or the terms of State leases previously acquired, or for any other stated reason.

Direct Lease Sales

The Department may enter into direct leases:  (1) when it is determined to be in the best interest of the State, (2) for completion of a mining operation area, and (3) for consolidation of fractional interests owned or controlled by the applicant.  Direct lease sales shall follow the same applicable public notice requirements as for public auction lease sales.

Leasing of Lake Bottomlands

No leases shall be issued which allow exploration or development operations on the bottomlands of the Great Lakes and connecting bays, harbors or waterways.

Exploration or development operations on the bottomlands of inland lakes may be authorized by Department action.

Lease Terms

Public Auction Leases:

Except as hereafter provided, the following standard terms shall apply to leases on lands offered at public auction:

A primary term of 20 years and as to those portions of the leased premises included within a mining operation area, so long thereafter as there is production of mineral and/or mineral products in paying quantities.

A production royalty rate not less than 2% nor more than 7%, and shall vary with the adjusted sales value per ton.  Production royalties shall be paid on a quarterly basis.

Rental of $3 per acre per year for the first through fifth year, and $6 per acre per year for the sixth through the tenth year.  All rental shall be paid annually in advance of the anniversary date of the lease.

Minimum royalty of $10 per acre for the eleventh year of the lease, and for each year thereafter the payment shall increase an additional $5 per acre through the twentieth year.  For the twentieth year of the lease and thereafter for the life of the lease, the minimum royalty shall be $55 per acre per year.  All minimum royalty shall be paid annually in advance of the anniversary date of the lease.

Direct Leases:

No direct lease shall be authorized which provides for less than the standard royalty or rental rates, or for a lease term longer than those prevailing in State leases offered at public auction at the time the direct lease is approved.

Lease Performance Bond

A lease performance bond shall be required of each lessee of State metallic mineral lease rights unless waived by the Department, in order to assure faithful compliance with the terms and conditions of the lease.  The Department shall establish a schedule of the amount of bond to be maintained by each lessee.

Lease assignments

All assignments of leases or interests therein shall be submitted to the Department.  No assignment will be valid without the written consent of the lessor.  The Department shall establish a processing fee to be paid for each lease assignment.

Monitoring of Production

The Department will continue to study and update methods of monitoring production on State leases to assure that the State is receiving just compensation.

Metallic Mineral Leasing Program – Annual Review

Staff will continue to evaluate and review the metallic minerals leasing program.  Market studies and sales analyses will be conducted by the Department in order that trends and patterns can be established as guidelines for policy and management decisions by the Department and staff.

These assessments will be for the purpose of continued improvement in the leasing method and the overall leasing program on State-owned lands, to (1) assure that the State lease is competitive, (2) acquire and maintain expertise in the management of metallic minerals development, and (3) provide that changing conditions are reflected in the overall metallic mineral leasing program.

The Department shall provide to the Department and the Commission in January each year a report of the complete State leasing program activities for the preceding fiscal year which shall include, but not be limited to, (1) the number of leases granted, (2) relevant data obtained by the Department on metallic mineral activities in Michigan, (3) a summary of the revenues generated and their ultimate disposition (4) a summary and forecast of activities for the current fiscal year, and (5) a summary and assessment of any identified problems and any recommendations for changes in the leasing program.

The complete report will be made available to all interested parties and shall be on the regular printed agenda of the Commission.  If there are any recommendations for changes in the leasing program as the result of this report, they will be acted upon no sooner than the following Commission meeting.