(1) "Agricultural land" means land which is principally valuable for the production of crops;

(2) "Animal unit" means 1 cow, 1 horse, 5 sheep, or 5 goats;

(3) "Animal-unit-month carrying capacity" (A.U.M.) means that amount of natural feed necessary for the complete subsistence of one animal unit for one month;

(4) "Best interests of the state" means those considerations that will produce the maximum return to the state with the least damage to the long-term productivity of the land;

(5) "Board" means the board of land commissioners of the state of Montana;

(6) "Cabinsite" means land occupied or to be occupied for a non-commercial use as a temporary or principal place of residence, for a single family, or equivalent of the same, and the supporting buildings, in the immediate vicinity;

(7) "Crop" means such products of the soil as are planted and harvested, including but not limited to cereals, vegetables and grass maturing for harvest or harvested, but not including grass used for pasturage;

(8) "Custom farming" means farming for another at a fixed fee. Such fixed fee may not be based on a crop share percentage.

(9) "Department" means department of natural resources and conservation;

(10) "Director" means director of natural resources and conservation, chief administrative officer of the department of natural resources and conservation;

(11) "Full market value" means the most probable price in terms of money that a property will bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and the seller each acting prudently, knowledgeably, and assuming the price is not affected by undue stimulus;

(12) "Grazing land" means land which is principally valuable for pasturage or the feeding of livestock on growing grass or herbage;

(13) "Handicapped lessee" means a lessee certified by the department of public health and human services to have a physical or mental impairment that substantially limits one or more major activities, such as writing, seeing, hearing, speaking, or mobility, and that limits the lessee's ability to obtain, retain, or advance in employment;

(14) "Land use license" or "license" means a contract by which the department conveys an interest in state lands for a specific term and fee, and for a use other than that for which the land is classified;

(15) "Lease" means a contract by which the board conveys state lands for a term of years for a specified rental, and for the use for which the land is classified;

(16) "Lease fee adjustment" means the process by which the department applies the rental rate contracted in the lease to the most recent appraised market value to determine if it is necessary to alter the annual rental payment. The adjustment will occur at the review period defined in the lease and at the time of renewal;

(17) "Lessee" means the person or persons in whose name a surface lease appears on record in the offices of the department, whether such person or persons be the original lessee or a subsequent assignee. The term "lessee" also includes, where the context of the rule may indicate, any person who is the apparent successful bidder for a surface lease but with whom a formal surface lease has not been completed and finalized;

(18) "Licensee" means the person or persons in whose name a license appears on the record in the offices of the department, whether such person or persons be the original licensee or subsequent assignee;

(19) "Pasturing agreement" means a sublease in which the lessee personally retains full management and control of the land and livestock;

(20) "Person" means any individual, firm, association, corporation, governmental agency or other legal entity;

(21) "Qualified applicant" means any person who has filed an application and who may become a qualified lessee or licensee;

(22) "Standard lease form" means the lease form then currently in use and approved by the board;

(23) "State" means the state of Montana;

(24) "State lands" means all lands for which the surface leasing is under the jurisdiction of the board as defined by 77-1-202, MCA;

(25) "Sublease" means any agreement, written or oral, between a lessee and a third party whereby the third party is accorded the use of all or any part of the lessee's leasehold interest, including pasturing agreements;

(26) "Sublessee" means the person or persons to whom a lessee has leased all or part of the unexpired term of his lease;

(27) "Surface" means the superficial part of land including the soil and waters which lie above any minerals;

(28) "Timber land" means land which is principally valuable for the timber that is on it, for the growing of timber or for watershed protection;

(29) "Tract" means the land or portion thereof as described by a specific lease or license or application for the same;

(30) "Unleased land" means land that is not under lease at the time of an application to lease or land on which the lease has been recently canceled by the department or surrendered by the lessee;

(31) "User" means any lessee, sublessee, licensee, or permittee.

(2) Failure to comply with any provisions contained in any rule is grounds for cancellation of the lease, permit or license, or assessment of any other penalty specified herein or by law. The department has the authority to make management decisions to protect the best interests of the state.

(1) General inquiries, applications for leases, easements, land use licenses or permits, improvements, and any questions regarding the leasing or usage of state land may be directed to any of the department offices.   Payment of all money required or permitted under these rules or pursuant to the provisions of any surface use shall be made to the department. All checks, drafts and money orders shall be made payable to "Montana Department of Natural Resources and Conservation." Sight drafts will not be accepted.

(2) The department shall maintain records of all state land. Such records shall contain all pertinent information concerning a particular tract of state land. Such records shall be open for public inspection at all times during regular business hours.

(3) Any notice or correspondence required to be sent to a lessee or licensee shall be sent to the name and address appearing on the lease, license or permit form filed in the department records. Correspondence sent by the department to such name and address shall be deemed sufficient notice for all purposes. If the lessee or licensee desires to change such address he must notify the department in writing. Any change in name of the lessee shall be made only through assignment procedures in ARM 36.25.118.

(1) In general, a lease or license for agricultural or grazing lands shall be for a five or ten year period and shall expire February 28, ten years or less from the beginning date of the lease or license.

(2) A lease for a use other than agricultural, grazing, cabinsite, or mineral production may be for up to 40 years. Leases for power sites or school sites may be for longer than 25 years.

(3) A land use license may be for a term not to exceed ten years.

(2) Leases shall be issued without bond unless required by the board. Licenses shall be issued without bond unless required by the department. If a bond is required it shall be under such conditions and in a form prescribed by the department.

(3) The department reserves the right to add special conditions to a lease or license to protect the interests of the trust and its resources.

(1) Lands available for leasing or licensing under these rules include any state land under the jurisdiction of the board.

(2) The department shall classify and reclassify land in accordance with its capability to support a particular use. The following classes are established in accordance with 77-1-401, MCA:

(a) class 1 shall be grazing land;

(b) class 2 shall be timber land;

(c) class 3 shall be agricultural land;

(d) class 4 shall be cabinsites and land uses other than grazing, timber or agricultural.

(3) This rule shall not be construed to prohibit multiple use management.

(4) In order to insure that any unleased or unlicensed portion of state land is not made more difficult to lease or license, lands shall be leased or licensed in compact bodies and an attempt will be made not to separate parts of any tract from public highways and available water supplies.

(5) Unsurveyed land, including islands, shall be available for leasing or licensing provided that any applicant for a lease or license on such lands shall supply the department with a legal and sufficient description thereof, by courses and distances (metes and bounds) . The department shall assume no liability or responsibility for the correctness, completeness and validity of such description. The department shall issue all leases or licenses including unsurveyed lands and islands only under such title as the state of Montana then has or thereafter shall acquire. In the event it is established that the state has less than a fee simple title, it shall not be liable for any refunds or damages.

(6) The department does not guarantee that fences or other boundary indicators on site are a true indication of legal property boundaries. The lessee or licensee may be responsible for the cost of any survey which is made necessary by a challenge to the proper boundary of the state-owned land. Such costs may be considered an improvement on the land.

(2) Each tract of land reclassified to be leased for an alternative use shall be subject to the bidding procedures for unleased land as described in ARM 36.25.115, except:

(a) where classified grazing land is reclassified to agricultural land upon application of the existing lessee; or

(b) land upon which a cabinsite was in existence on or before October 1, 1983.

(3) Each tract of land to be licensed for a use other than that for which it is reclassified shall be subject to the bidding procedures for unleased or unlicensed land as set forth in ARM 36.25.115.

(4) Prior to the cultivation of any land leased or licensed for grazing purposes, the lessee must apply and receive permission from the department, for reclassification to agriculture as provided in this rule. Failure to obtain written approval before cultivating state land shall result in either cancellation of the lease or license or a rental of twice the regular agricultural rental on the land illegally cultivated, as provided by 77-6-209, MCA. Such determination shall be subject to the appeal procedures in ARM 36.25.121.

(5) The department reserves the right to reclassify or issue a land use license on, or withdraw all or a portion of land without application which is leased or licensed for grazing, agricultural or timber purposes upon reasonable notice to the user. The lessee shall be entitled to reasonable compensation for any improvements on the withdrawn land and to an adjustment or return payment of rent.

(1) All leases on agricultural lands shall be continued or made upon a crop share rental basis of not less than one-fourth of the annual crops to the state or the usual landlord's share prevailing in the district, whichever is greater. For purposes of this rule, a district means the county or counties where the leased lands are located. The board may approve special crop share rentals of less than one-fourth as per 77-6-501, MCA.

(2) The department may authorize a lease or license upon a basis other than cropshare. In those cases the rental shall at least equal the value of the usual landlord share prevailing in the district.

(a) Such accommodations may occur only once during the term of the lease unless changes in crops are contemplated.

(b) Such rental rate consideration may only be approved by the director upon proper written application by lessee or licensee.

(3) The rental rate for all grazing leases and licenses shall be on the basis of the animal-unit-month (AUM) carrying capacity of the land to be leased or licensed. The minimum annual rental rate per AUM is the weighted average price per pound of beef cattle on the farm in Montana as determined by the Montana Agricultural Statistics Service of the U.S. Department of Agriculture (USDA NASS) for the previous year, multiplied by:

(a) 8.13 in calendar year 2012;

(b) 8.72 in calendar year 2013;

(c) 9.3 in calendar year 2014;

(d) 9.89 in calendar year 2015; and

(e) 10.48 in 2016 and all calendar years thereafter.

(4) A lessee may nominate to the department a tract of land containing grazing acres to be placed into a nonuse category.

(a) In order to qualify for the nonuse category:

(i) the nomination must be for the entire or remaining portion of a lease term, and the lessee must agree that no livestock use shall occur during that time; and

(ii) the grazing lands must be intermingled with agricultural acres in the tract, or otherwise possess characteristics which prohibit livestock use.

(b) All nominations are subject to review and approval by the department. If the nonuse is approved by the department, beginning in 2013 the annual rental rate charged for the grazing acres shall be one-half the amount calculated under (3), and shall become effective in the next billing cycle.

(5) The department shall appraise and reappraise the classified grazing lands and grazing lands within classified forest lands under its jurisdiction in accordance with 77-6-201, MCA, to determine the carrying capacity.

(a) Such determination shall be made from time to time as the department considers necessary, but at least once during the term of every lease or license.

(b) Appraisal records shall be maintained in the department's files.

(6) Summer fallowing shall not entitle any lessee or licensee to a refund or reduction of the rental. The lessee or licensee shall pay a rental price equal to:

(a) the rental price for the entire year when a lease or license term begins after February 28 but before July 1 during the first year of the lease or license; or

(b) the rental price equal to half of the yearly annual rental when the lease or license term begins after June 30 but before February 28 of the next year.

(7) A lessee or licensee who grazes the stubble of harvested crops or hayland, or who grazes unharvested or damaged crops or hayland, shall contact the department regarding payment for such grazing on classified agricultural land.

(a) The department shall determine the number of animal unit months of grazing available on the land and shall bill the lessee or licensee for the grazing use based on the minimum grazing rental established under 77-6-507, MCA.

(b) Failure or refusal to pay the rental or to notify the department of such grazing may be cause for cancellation of the lease.

(8) All other leases of class 4 land, other than cabinsite leases and agriculture and grazing leases, shall be based on a determination of fair market value made by the department. This determination and a record of the determination shall be made at least once during the term of every lease.

(1) All competitive bids for grazing leases or licenses shall be submitted in the form of dollars and cents per AUM.

(a) A bid may not be for less than the minimum rental rate per AUM for that year determined in accordance with ARM 36.25.110. If in any succeeding year of the lease or license the amount bid is less than the minimum for that year, then the rental shall be the minimum.

(b) Bids for any lease or license may only be submitted for the present reclassified use unless the bidder submits a proposed reclassified use in accordance with ARM 36.25.109.

(2) Competitive bidding on agricultural leases or licenses shall be submitted based upon crop share rental. No cash bids will be accepted. In no case may the rate be less than the statutory minimum established by the Legislature for that year.

(3) All competitive bid signatures must be notarized.

(4) Competitive bids on a portion of a lease or license may be allowed upon approval from the department.

(1) For grazing leases and licenses, the grazing portion of leases and licenses containing both agricultural and grazing land, and agricultural leases not based on a crop share:

(a) the department will send written notices to the address on the lease or license beginning in January of each year stating the amount of rental due. The notice shall also state that payment is due by March 1, and if not paid by April 1, the lease or license is cancelled;�

(b) at least two weeks prior to April 1, the department shall send a letter by certified mail notifying each lessee or licensee who has not made a payment that the lease or license is cancelled if payment is not received or postmarked on or before April 1; and

(c) if payment is not received or postmarked by April 1, the entire lease or license is cancelled.

(2) For agricultural leases and licenses, and for the agricultural portion of leases and licenses which contain both grazing and agricultural land, when the rental is paid on a crop share basis or on a crop share/cash basis, whichever is greater;

(a) the rental shall be due immediately after harvesting or before November 15 of the year in which the crop is harvested;

(b) the department shall compile a list as soon as possible after November 15 of those lessees or licensees with agricultural land who have not paid the agricultural rentals;

(c) a notice shall be sent to each lessee or licensee on the list by certified mail at least two weeks prior to December 31 advising that the lease or license is cancelled if payment is not received or postmarked on or before December 31; and

(d) if payment is not received or postmarked by December 31, the entire lease is cancelled. All appropriate seeding and crop reports must be submitted with the payment. Partial payments shall be accepted, however, such payments will not prevent cancellation of the lease or license if full payment as verified on the crop report is not received on the date required by law.

(3) When a lease or license takes effect after July 30 and before February 28 of the next year, the lessee or licensee shall pay both the rental for half of the yearly rental due, and full yearly rental due for the next succeeding year before the lease or license is executed.

(4) If there are special circumstances, a lessee or licensee of agricultural land must write to the department prior to November 1 for an extension of the rental payment beyond the December 31 deadline. All extension requests must set forth the reasons for the extension and verification of those reasons by the appropriate sources. In all cases, permission for an extension may only be given in writing by the department, and such extension may not extend beyond April 1 of the following year.

(5) When the United States is the lessee or licensee of any state land the rental shall not be due until the expiration of each year of the lease or license.

(a) An agricultural seeding report form shall be completed and returned to the department for each section or portion thereof after planting, but not later than June 15, on all agricultural land. This includes all agricultural leases or licenses including those based on a cash lease/crop-share, whichever is greater.

(b) A crop report form shall be completed and returned to the department on each section or portions thereof, immediately after harvest and marketing, but no later than November 15, on all agricultural land. All elevator checks and stubs shall be included with the report. This includes all agricultural leases or licenses including those based on case lease or based on a crop share/cash lease, whichever is greater.

(c) Failure to file seeding and crop report forms by the specified date or failure to supply any otter information pertinent to the lease or license may result in cancellation of the lease or license subject to the appeal procedures set forth in ARM 36.25.121.

(1) A person who desires to lease or license unleased or unlicensed state land may apply on the standard application form prescribed by the department. The application form must be returned to the department and must be accompanied by a nonrefundable application fee. Such application shall be deemed an offer to lease or obtain a license on the land described therein at a rental rate which reflects the fair market value of the lease or license.

(2) When the department receives an application to lease or obtain a license on an unleased or unlicensed tract of land, or on a tract which has been reclassified, it shall advertise for written bids on the tract according to the procedures set forth in (4), except in the following circumstances:

(a) where grazing land is reclassified to agricultural land upon application of the existing lessee; or

(b) where land is reclassified and a licensee applies for a lease on the land for the same use for which he was formerly licensed, or a lessee applies for a license to use the land for the same use for which he formerly leased the land.

(3) The department may advertise for bids according to the procedures set forth in (4) in any of the above circumstances where such procedures are deemed by the department to be in the best interests of the state.

(4) When advertisement for bids is called for under this rule, the department shall advertise for written bids on the tract once a week for two weeks in the official county newspaper of the county in which the tract lies. The tract will be leased or licensed to the highest bidder unless the board determines that the bid is not in the best interests of the state.

(a) All bids shall be sealed bids and will not be opened until a specified time and place.

(b) If the high bid is rejected, the board will issue its reason for the rejection in writing. The lease or license shall then be issued, at the fair market value determined by the board, to the first bidder willing to pay the board-determined rental whose name is selected through a random selection process from all bidders on the tract.

(5) The lessee or licensee shall sign and return the lease or license to the department within 30 days of receipt of the lease or license. If the lease or license is not signed and returned to the department within 30 days, the department may readvertise the lease or license.

(6) When a lease or license is cancelled by the board or department or surrendered by the lessee or licensee, the department shall attempt to release or relicense the land. The department shall:

(a) advertise for written bids on the tract, and application and bid forms will be mailed to all persons who have expressed in writing an interest in leasing or licensing the land; and

(b) receive applications and bid forms from potential lessees or licensees for a reasonable time after the date on which the first such application and bid form is mailed. The land will be leased or licensed in accordance with (1) through (4).

(7) Any person who has had a lease or license cancelled and not reinstated by the board or department for any reason except nonpayment of rentals shall not be allowed to bid upon the lease or license or upon any lease or license for land managed by the department.

(a) If no other bids are received, the former lessee or licensee may be allowed to bid; however, the board may reject any or all bids from a lessee or licensee who has had his lease cancelled in the past.

(2) A person who desires to lease or obtain a license on state land currently under lease or license shall apply for such lease or license in the manner specified in ARM 36.25.115, and the application shall be accepted under the same conditions as specified in that section. An application fee will be required and applications for land currently under lease or license will only be accepted after December 1 of the year preceding the expiration of the current lease. Application forms must be postmarked on or before January 28 of the year in which the lease expires. Only applications on the standard application form will be accepted.

(3) Any person who desires to bid must submit such bid along with his completed application form. The bid shall be in writing on the form prescribed by the department and then in current use. Blank forms may be secured from the department at no cost. Once a bid has been submitted to the department and opened it may not be withdrawn except for good cause as determined by the department. All bids shall be sealed bids and will not be opened until a specified time and place. A certified check, cashier's check, or money order in an amount equal to $1 per acre for each acre of agricultural land and 20% of the annual rental bid for grazing and all other leases or licenses must be submitted as a deposit with any bid along with the nonrefundable lease or license application fee. The deposit of any unsuccessful bidder shall be returned when the lease or license is issued. The deposit or a portion thereof may be forfeited if the department determines that the bid which has been submitted is frivolous, forged, a bad faith bid, or a bid submitted for purposes of harassment.

(4) The high bidder for the lease or license of the land described in the application shall be deemed to have leased or licensed such land at the rental price bid by him, subject to the preference right of the current lessee as described in ARM 36.25.117; however, the board may withdraw any land from further leasing or licensing for such period as the board determines to be in the best interests of the state.

(5) All lessees of licensees shall sign and return the lease to the department within 30 days of receipt of the lease. Failure to return the lease or license within 30 days may be cause for cancellation and re-advertisement.

(1) The board retains the right to select the best lessee possible to fulfill the operating obligations under any lease. In the exercise of the board's discretion to select the best lessees possible for agriculture and grazing leases, the board recognizes that retention of stable, long-term lessees who are familiar with the operating history and characteristics of the leases promotes good stewardship of the land. Such security of land tenure encourages the lessees to place and develop improvements which, in turn, increase the productivity of the land and improve its management. Consequently, it is the board's policy to allow an incumbent lessee in good standing a preference right to meet the high bid and retain the lease.

(2) A current lessee or licensee shall be sent an application to renew the lease or license if all rentals due are paid. The application shall be accepted under the same conditions as specified in ARM 36.25.115; however, applications for renewal will only be accepted after December 1 of the year preceding the expiration of the lease or license and must be postmarked on or before January 28 of the year of expiration of the lease or license. Failure to submit a renewal application by the lessee or licensee postmarked on or before January 28 will result in an unleased or unlicensed tract and the tract will be subject to the requirements for leasing or licensing an unleased or unlicensed tract under ARM 36.25.115.

(a) If competitive bids have been submitted for such tracts before January 28 and the lessee or licensee has not submitted a renewal application, the bids shall remain confidential and may be returned to the bidder. The tract(s) will then be advertised for bids to qualified bidders as provided under ARM 36.25.115.

(3) Unless the board decides on its own volition and sole discretion that a lease should be given to a better qualified applicant, a surface lessee or licensee who has strictly complied with the applicable conditions set forth in 77-6-113(1), MCA, has a preference right to meet the high bid offered for the lease or license and may retain the lease or license subject to the provisions in (9), if all rentals have been paid and appropriate reports submitted, and (4) has not been violated. When an agricultural lessee or licensee meets the high bid and retains the lease or license, the new rental rate must be paid for all crops harvested after the renewal date even if such crops were planted before the lessee met the high bid. The lease or license shall be renewed at the fair market rental provided no other applications for the lease or license have been received by the department within the time limits set forth by ARM 36.25.116(2). Grazing or agricultural uses on classified forest lands may be terminated if it is determined that the resources under that classification are being damaged or not perpetuated

(a) If during the previous lease term, an existing lessee has violated any condition set out within 77-6-113(1), MCA, the lessee shall not have the right to renew the lease or match any other bids submitted. The department shall notify the lessee if it determines that the lessee has failed to comply with the requirements of 77-6-113(1), MCA. The notice shall include the factual basis for that determination.

(b) The lessee may, within 15 days of receipt of the notice, appeal the decision by requesting an informal hearing before the director or the director's designee. Any individual conducting the hearing shall not have been involved in the original determination to revoke the lessee's preference right. If the director, or the director's designee, concludes that the conditions under 77-6-113(1), MCA, have not been met by the lessee during the previous terms, no preference right shall be recognized. The renewal lease shall then be advertised for competitive bids as provided in ARM 36.25.115.

(c) No applicant shall have the right to seek an administrative hearing to challenge the award of a lease to any lessee chosen by the board under this rule or the board's policies.

(4) For leases or licenses issued for a new lease or license term beginning in 1987 and thereafter, a lessee or licensee who subleases more than one-third of the land under the lease or license may not exercise the preference right at lease renewal if he has subleased the land for more than two years during the term of the lease or license. If such lessee or licensee subleases more than one-third of the land for more than three years during the term of the lease, the department shall cancel the lease.

(a) A lessee or licensee may sublease the land within a lease or license for no more than five years without losing the preference right or subjecting the lease to cancellation during the term of the lease if the land is subleased only to a spouse, son, daughter, adopted child, or sibling of the lessee.

(b) For the purposes of these rules, a lessee or licensee who has accorded another the use of all, or a portion of the allowable AUMs during one year will be deemed to have subleased the entire tract for that year.

(c) The provisions of this rule which state that a preference right will be lost, or that a lease will be cancelled for subleasing do not apply in those instances where:

(i) the approved sublease involved one-third or less of the total acreage in the lease or license; or

(ii) the sublease is considered to be a pasturing agreement pursuant to ARM 36.25.120.

(5) If a lease or license is renewed pursuant to the preference right and it is later discovered that the lessee or licensee was not entitled to exercise such preference right pursuant to (4) during the prior lease or license term, then the renewed lease or license shall be cancelled and readvertised for lease or license. However, the department will retain all rentals paid until the time the renewed lease or license is cancelled. The prior lessee or licensee shall be allowed to bid in this instance.

(6) An exchange of use involving state lands is considered to be a sublease and subject to all the provisions of law which apply to other types of subleases.

(7) A surface lessee or licensee who has lost the opportunity to exercise a preference right because of a sublease or other arrangement may apply to the director and set forth the specific grounds why the lessee or licensee is entitled to a hearing.

(a) The hearing application must be submitted in writing to the director within 15 days of receipt of notice of loss of preference right by the lessee or licensee.

(b) The director shall order a hearing within 20 days if the grounds include a bona fide factual dispute. When such a hearing is granted, the contested case provision of the Montana Administrative Procedure Act, Title 2, chapter 4, MCA (MAPA), shall apply.

(c) The board shall make a final decision after considering the entire record, or may delegate such authority to the director. The director may appoint a hearing examiner from the department's staff or from another source to conduct the hearing and produce proposed findings of fact, proposed conclusions of law, and a proposed order.

(8) If a surface lessee or licensee has lost the opportunity to exercise a preference right because of a sublease or other arrangement and disputes only the legal ground upon which the rights were lost, then the lessee or licensee may apply to the director for a declaratory judgment concerning legal grounds. Such application for declaratory judgment must be submitted in writing to the director within 15 days of the receipt of notice of loss of preference right by the lessee or licensee. The application shall specify the legal grounds which the lessee or licensee disputes. The procedure of applying for and issuing such a declaratory judgment shall be that set forth in MAPA.

(9) If other applications are received by January 28 of the year the lease or license expires, and the lessee or licensee has not violated (4) or 77-6-113(1), MCA, the lessee or licensee shall have a preference right to renew the lease or license provided he meets the high bid for such lease or license. Such bid is deemed to be met if the amount of the high bid is received by the department prior to the expiration of the lease or license or, in the case of agricultural land leased solely on a crop share rental basis, if the lessee or licensee agrees in writing to meet the high bid prior to the expiration of the lease or license.

(a) A lessee or licensee who believes the bid to be excessive may request in writing a hearing before the director after meeting the high bid. The request for a hearing must contain a statement of reasons and supporting evidence why the lessee or licensee believes the bid not to be in the state's best interest. Those reasons, with supporting evidence, must support one or more of the following allegations:

(i) that the bid is above community standards for a lease of such land;

(ii) that the bid would cause damage to the tract; or

(iii) that the bid would impair the land's long-term productivity. The lessee or licensee shall also submit evidence of rental rates for similar land in the area with his request.

(b) The director may grant or deny a request for a hearing. If a hearing is granted, the director shall consider testimony and evidence from the lessee and high bidder regarding the rental rate. The lessee and high bidder may also provide a basis for why they should be selected as the best lessee by the board. In order to determine the best lessee possible, the director may request information from the bidder and the current lessee. This information may include:

(i) an intended grazing or cropland management plan for the new term of the lease;

(ii) experience associated with the classified use for the land;

(iii) other nonstate lands that are fenced and managed in common with the state land;

(iv) intended grazing or cropland improvements that will benefit the health and productivity of the state land;

(v) a weed management plan;

(vi) management goals and objectives and monitoring procedures to determine if they are being met;

(vii) the method or route used to access the state land; and

(viii) any other information the director deems necessary in order to provide a recommendation to the board. The department may incorporate all, or part of this information as terms and conditions in the new lease agreement.

(c) The director shall recommend to the board whether there should be a reduction to the bid rate, and who should be selected as the lessee. The director may recommend to the board that the bid be lowered only if the director feels that it is in the best interests of the state to do so. The hearing is not subject to MAPA and the board may accept or reject the director's recommendation.

(d) The lessee is obligated to lease or license the property at the rate determined by the board. The duty of the board is to achieve fair market value. The lease or licensing of such land shall be such so as to generate revenue commensurate with the highest and best use of the land, or portions thereof, as determined by the department.

(10) Regardless of any provision to the contrary in these rules, at renewal time the board may withdraw any land or portion of land from further leasing or licensing for an indefinite period. The department may provide in any lease or license at the time of execution or renewal that the land may be withdrawn from further leasing or licensing after reasonable notice if the department considers such action to be in the best interests of the state.

(11) When land under lease or license has previously been sold and the certificate of purchase has been cancelled, any later reinstatement of the certificate of purchase shall not have the effect of canceling any lease or license except that the current lessee or licensee shall lose the right to renew the lease.

�

(2) No assignment or series of assignments will be recognized by the department if the assignment is solely an attempt to avoid the loss of the preference right.

(2) The sublessee may only compensate the lessee based upon a $/A.U.M. rate for grazing lands, or a crop share, or cash basis on agricultural land depending upon the terms of the state lease.In other words, the lessee may only be compensated upon the same unit of measurement as the lessee's rental to the state is based. Such rate may not exceed the rate charged by the state for such lease.Failure to comply with this provision may be grounds for cancellation of the lease pursuant to ARM 36.25.121.

(3) The subleasing of state land may result in loss of preference right to meet the high bid offered for the lease or license at renewal, as provided in ARM 36.25.117 and 77-6-208 and 77-6-212 , MCA. In addition, pursuant to the same rules and statutes, subleasing may cause the loss of the lease.

(4) A lessee or licensee of state land shall not sublease such land as part of the sale of his own fee lands or the sale of any improvements, crops, or leasehold interest.To transfer such lease or license as part of the sale of lands, improvements, crops, or leasehold interest, the lessee or licensee must assign the lease or license as provided in ARM 36.25.118.Failure to comply with the terms of this rule shall be grounds for cancellation of the lease or license, subject to appeal procedures in ARM 36.25.121.

(5) The lessee or licensee is responsible for the actions of the sublessee. Any action committed by the sublessee which if committed by the lessee or licensee would result in cancellation of the lease or any other penalty will be deemed to have been committed by the lessee or licensee.

(6) Custom farming shall not be considered a subleasing situation for the purposes of these rules. Management of the lease or license must be exercised at all times by the lessee or licensee. Failure to provide such management in the absence of an approved sublease may be sufficient grounds for cancellation of the lease or license and/or loss of the preference right at the time of renewal. The state shall not be subject to any reduction in rentals due to custom farming methods. Lessees engaged in custom farming shall file a copy of the custom farming agreement with the department. Such agreement shall set forth the names of the parties involved, the cost of services rendered, the duration of the agreement, and the state leases or licenses involved. Under no circumstances may the cost of services be based upon a percentage of the crop grown on state lands.

(7) If livestock are present on state land, there will be a presumption that the livestock either belong to the lessee or licensee, or that such livestock were placed on the state land with the lessee's or licensee's permission.

(2) "Management" as used in these rules means (as provided in 77-6-212 , MCA) , but is not limited to:

"(a) providing all costs for improvements, land maintenance, and range renovation, if range renovation is approved by the department;

"(b) making all decisions regarding rotation or other placement of livestock on state land;

"(c) making all decisions regarding turn-in and turnout dates of the livestock on state land; and

"(d) making all decisions regarding proper range management, including placement of water, fencing, and salt."

(3) the lessee or licensee in addition to the lease or license rental rate may charge a management fee when there is an approved pasturing agreement, but may not charge a management fee which exceeds the minimum grazing rental as set forth in 77-6-506 , MCA, for a lease or license of the same type and A.U.M. capacity. In addition, the management fee may only reflect the A.U.M.'s utilized by the sublessee's livestock. All such management fees shall be based upon a per A.U.M. basis. No other basis for payment of management fees will be approved by the department.The owner of the livestock may pay for veterinarian or artificial insemination costs, and such costs shall not be considered part of the management fees. There must be a separate pasturing agreement for each sublessee. The pasturing agreement shall be on a form furnished by the department and shall state the rate charged for grazing on an A.U.M. basis and the amount of the management fee if any.The agreement must be signed by the lessee or licensee and sublessee, and be notarized and approved by the department. The department may charge a filing fee for such agreement. Failure to obtain an approved pasturing agreement may result in cancellation of the lease under ARM 36.25.121.

(4) A pasturing agreement will not be approved if the lessee or licensee employs hired help that have retained a personal interest in more than 1/3 of the livestock being grazed on the state land. Such an arrangement shall be considered a sublease.

(5) All pasturing agreements must have a term within March 1 and February 28 (or 29 on leap year) of the following year. Pasturing agreements may last any duration less than one year, but may not last more than one year. Each lease or license must have a separate pasturing agreement.

(2) As provided in 77-6-211, MCA, the department shall immediately notify the lessee or licensee by certified mail of the cancellation and the reason for it, and the lease or license shall be deemed canceled 15 days after such notice is received by the lessee or licensee, unless the lessee or licensee files a notice of appeal with the department prior to the expiration of the 15-day period, in which case the lease or license remains in effect until the board decides the matter. Within 10 days after receipt of notice of appeal the department shall notify the lessee or licensee of the time and place of the hearing before the board. The time and place of the hearing may be changed by the board after 10 days notice to the lessee or licensee. The board shall conduct an open hearing under the rules set out in the Montana Administrative Procedure Act, 2-4-101 et seq., MCA. A hearings examiner may be appointed to conduct the hearing. The burden of proof to show why the lease or license should not be canceled shall be borne by the lessee or licensee. The board may reinstate the lease or license where it finds that the violation is not serious enough to warrant cancellation and restore all rights and privileges upon payment of a penalty up to 3 times the annual rental against the lessee or licensee. Payment of the penalty may be considered as a notice of appeal for the purpose of keeping the lease in effect until the board decides the matter. If the board does not reinstate the lease or license, the land shall be re-advertised for lease or license in accordance with ARM 36.25.115.

(2) If a lessee or licensee mortgages his leasehold interest in state lands pursuant to 77-6-401, MCA, then there must be an assignment, signed by the lessee or licensee/mortgagor and the mortgagee, and placed in escrow. A copy of such escrow assignment must be filed with the department. An assignment is effective for the lease term during which it is made and any subsequent renewal term as long as the assignor continuously holds the lease. Failure to execute the terms of this rule shall be cause for the department not to recognize the mortgage.

(2) All provisions of these rules, including but not limited to: leasing, licensing, subleasing, reporting, assignments, and payments; also apply to leases or licenses held by a decedent's estate.

(1) A lessee or licensee may place improvements on state land which are necessary for the conservation or utilization of such state land with the approval of the department.

(a) The lessee or licensee shall apply for permission prior to placing any improvements on state land on the form prescribed by the department and then in current use.

(b) A lessee or licensee will not be entitled to compensation by a subsequent lessee or licensee for improvements which are placed on the land after May 10, 1979, and which are not approved by the department. Proof of the date of placement of improvements may be required by the department.

(c) Any improvements or fixtures paid for by state or federal monies shall not be compensable to the former lessee or licensee.

(2) The lessee or licensee is responsible for notifying the new lessee or licensee of the improvements and their value on the lease or licensed tract.

(a) Within 120 days of the issuance of the lease or license, the new lessee or licensee shall:

(i) provide proof of the new lessee's offer of payment or actual payment to the former lessee or licensee of the value of the improvements and fixtures either as agreed upon with the former lessee or licensee;

(ii) the value of the improvements as fixed by arbitration; or

(iii) provide proof that the former lessee has decided to remove the improvements and fixtures from the lease or license.

(3) If the improvements and fixtures become the property of the state because the former lessee or licensee has failed to act within 60 days after expiration of the lease, as per (4), then the new lessee or licensee shall not be required to provide proof of the offer to pay the former lessee or licensee for such improvements and fixtures.

(4) The department may require a written notice from the former lessee or licensee stating that he has been paid for, or is removing the improvements and fixtures. If the former lessee or licensee does not agree on the value of the improvements and fixtures or begin arbitration procedures within 60 days after the expiration of the lease or license, then all improvements and fixtures remaining, both movable and fixed, shall become the property of the state. The 60-day period for removal of improvements may be extended by the department upon proper written application.

(5) The value of the improvements will be determined by arbitration when the former lessee or licensee wishes to sell improvements and fixtures and the new lessee or licensee wishes to purchase such improvements and fixtures, but the parties cannot agree upon a reasonable value.

(6) When the new lessee or licensee does not wish to purchase the movable improvements and fixtures, then the former lessee or licensee shall remove such improvements immediately. Extensions for removing these improvements for good cause may be granted by the department.

(7) In case of arbitration:

(a) the lessee or licensee, or purchaser and the former lessee or licensee, shall each appoint an arbitrator, with a third arbitrator appointed by the two arbitrators first appointed:

(i) no party may exert undue influence upon the arbitrators in an effort to affect the outcome of the arbitration decision; and

(ii) if any party refuses to appoint an arbitrator within 15 days of being requested to do so by the director, the director may appoint an arbitrator for that party;

(b) the value of the improvements and fixtures shall be fixed by the arbitrators in writing and submitted to the department. That determination shall be binding on both parties; however, either party may appeal the decision to the department within ten days of the receipt of the arbitration decision by the department;

(c) if any relevant portion of the arbitration decision is vague or unclear, then the department may ask for written clarification of the intent of the arbitration panel; 

(d) upon appeal by either party, the department may examine such improvements to determine the value of the improvements and fixtures and the department's determination shall be final, however:

(i) the determination of the value of improvements by the department shall be limited to those improvements involved in the arbitration; and

(ii) the department shall charge the cost of its examination to the party or parties in such proportion as justice may require; and

(e) the compensation for the arbitrators shall be paid in equal shares by both parties:

(i) if the former lessee or licensee refuses to pay his share of the cost of arbitration, then those costs may be deducted from the value of the improvements and fixtures;

(ii) if the new lessee or licensee refuses to pay the cost of arbitration within 30 days of the completion of the arbitration, the lease or license shall be cancelled, and the lease or license shall be put up for bid to qualified bidders.

(8) The lessee or licensee shall pay the former lessee or licensee for the improvements and fixtures within 30 days after the value has been determined. Failure to pay the former lessee or licensee within 30 days shall result in rebidding of the lease or license in accordance with ARM 36.25.115 and the bid deposit shall be forfeited. The department may grant an extension in writing under special circumstances.

(9) Summer fallowing, necessary cultivation done after the last crop grown, seeding and growing crops shall all be considered improvements. The value of seeded acreage and growing crops shall be limited to costs for seeding, seedbed preparation, fertilization and agricultural labor at the prevailing rate in the area. The former lessee's or licensee's anticipated profit shall not be included in such value. If the parties cannot agree on the value of seeded acreage or growing crops, the arbitration procedure set out in (7) shall be followed. The original breaking of the ground shall also be considered an improvement; however, if one year's crops have been raised on the land the value shall not exceed $2.50 per acre, and if two year's crops have been raised, there shall be no compensation.

(2) A lessee or licensee shall not be entitled to compensation for those conservation or improvement measures placed on state lands using state or federal monies, except for the amount the lessee or licensee personally expended on such measures. Proof of payment may be required.

(1) If a lessee/licensee has not grazed domestic sheep on the state tract at any time during the previous 10 years, and if the lessee/licensee requests a change to domestic sheep, then the department shall prepare a Montana Environmental Protection Act (MEPA) document at the appropriate level of review to examine the environmental impacts. In preparing the document, the department shall consult with the department of fish, wildlife and parks and the lessee/licensee and shall seek comments and interface as necessary with surrounding landowners and any interested public groups to design appropriate measures under the law.

(2) The department may allow grazing of domestic sheep on state lands within or adjacent to officially identified bighorn sheep ranges if bighorns are separated by a protective geographic buffer or if other applicable mitigation measures to minimize contact are negotiated and implemented.

(1) Except as provided in ARM 36.25.701 through 36.25.708, the board may sell any land under lease or license under the same terms and conditions as land not under lease or license. The board shall notify the lessee prior to such sale and at least six months prior to possession being given to the purchaser or as consistent with the applicable lease agreement. The lessee or licensee shall be entitled to compensation for improvements as provided in ARM 36.25.125. The purchaser will be given possession of land sold on March 1 next succeeding the date of the sale unless the lease or license expires prior to that date or the lessee or licensee and purchaser agree in writing on another date.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

(2) Representatives of the Montana historical society have the right to enter any state lands at any reasonable time, upon notification to the department, to perform their duties in connection with the State Antiquities Act, Title 22, chapter 3, part 4, MCA. Any person discovering an object or site of historic, prehistoric, archeological, paleontological, scientific, architectural, or cultural interest on state land shall report such discovery to the Montana historical society and the department and take all steps necessary to preserve such site or object. Willful abuse of such sites or objects may constitute sufficient grounds for cancellation of the lease or license.

(3) The state reserves the right to sell or otherwise dispose of any interest other than that for which the lessee or licensee has leased or licensed the premises, including hunting or fishing access privileges on state land; however, the lessee or grazing licensee may post state land using blue paint to prevent trespass by unauthorized persons but may not use any other method, including orange paint, to post the land. Posting with blue paint must meet the same requirements as are imposed by 45-6-201, MCA, for posting of private land with fluorescent orange paint.

(2) A lessee or licensee of state-owned land may not sell or otherwise dispose of a state-owned water right for any purpose. Such practices may constitute sufficient grounds for cancellation of the lease or license.

(2) Any person desiring an easement for public purposes shall apply to the department on a form prescribed by the department. The applicant shall pay full market value for the interest disposed of. The easement shall terminate when the land ceases to be used for its specified public purpose unless the easement is authorized by the board for a specific term. The department shall terminate the easement by notifying the grantee at his last known address that the public purpose has ceased or the specified term has expired. If the easement ceases to be used for the specified use, the grantee shall notify the department of the termination of the easement. The applicant shall be required to comply with the Montana Antiquities Act and all rules promulgated thereto.

(3) An easement issued after January 16, 1987, may not be transferred or assigned without being approved and recorded on the prescribed forms issued by the department.

(4) Within 5 years of the granting of an easement by the board, the grantee must put the easement to the use which is allowed in the right-of-way deed. Failure to put the easement to such use shall be sufficient cause for forfeiture of the easement upon written notice by the department.

(2) When issuing a license, the department may attach special stipulations for protection of state land RESOURCES, and require a bond to ensure compliance with all terms of the license.

(3) The cost of a license shall vary according to the use intended. A filing fee is required with application.

This rule has been repealed.

(2) Recreational use is divided into two categories as follows:

(a) General recreational use - This use is generally defined as any type of non-concentrated, non-commercial outdoor recreational activity except disturbance of archeological, historical, or paleontological sites (which is prohibited by the Montana Antiquities Act and subjects the violator to criminal penalties) , wood gathering, tree cutting, commercial rock or mineral collecting, and trapping. This is more specifically defined in ARM 36.25.145(11) . It requires purchase of a recreational use license. Detailed procedures and restrictions are contained in ARM 36.25.146 through ARM 36.25.161.

(b) Special recreational use - This use is defined in ARM 36.25.145 and requires a special recreational use license. These kinds of uses include commercial or concentrated use as defined in 77-1-101(5) , MCA. Detailed provisions are contained in ARM 36.25.162.

(3) The purpose of ARM 36.25.144 through ARM 36.25.162 is to provide reasonable recreational use of legally accessible state lands within the bona fide management constraints of state land lessees. These rules should be interpreted to accomplish this purpose.

(1) Under Article X, section 4 of the Montana Constitution, the board of land commissioners has the duty and authority to manage state trust lands under regulations provided in law. Under 77-1-301, MCA, the department of natural resources and conservation manages state lands under the direction of the board. Section 77-1-203(3) , MCA, opens state lands administered by the board to general recreational use subject to legal access and to closures and restrictions.

(2) Lands owned by the state that are not subject to ARM 36.25.143 through ARM 36.25.162 are:

(a) lands owned by the department of fish, wildlife and parks, including:

(i) those portions of game ranges and wildlife management areas that are owned by the department of fish, wildlife and parks;

(ii) state parks;

(iii) fishing access sites; and

(iv) lands leased by the department of fish, wildlife and parks to private individuals as cabinsites;

(b) lands subject to lease, license, or easement from the department to the department of fish, wildlife and parks or a city, county, or consolidated city-county government for the following purposes:

(i) public parks, and

(ii) fishing access sites;

(c) the surface, beds and banks of rivers, streams, and lakes that are open to the general public for recreational purposes under the stream access law;

(d) highways and highway rights-of-way, except that the prohibition against open fires in ARM 36.25.149(1) (d) applies where a highway crosses state lands administered by the department;

(e) lands administered by the department of corrections;

(f) campus grounds, experiment station grounds, and other lands owned by the university system;

(g) department of natural resources and conservation administrative sites;

(h) lands in which the department of natural resources and conservation does not own the surface, including lands where the department owns the mineral estate only and private lands over which the department has acquired an easement; and

(i) other lands owned by any other state agency.

(3) The main office of the department of natural resources and conservation is located in Helena. To administer its field functions, the department has divided the state into 6 geographic "areas," each administered by an "area land office," the head of which is the "area manager." Areas are further divided into units, each administered by a "unit office." A listing of those offices is:

�

Area��	Office Location
Central Area
Central Land Office	Helena
Helena Unit Office	Helena
Bozeman Unit Office	Bozeman
Conrad Unit Office	Conrad
Dillon Unit Office	Dillon
Eastern Area
Eastern Land Office	Miles City
Northeastern Area
Northeastern Land Office	Lewistown
Glasgow Unit Office	Glasgow
Lewistown Unit Office	Lewistown
Northwestern Area
Northwestern Land Office	Kalispell
Kalispell Unit Office	Kalispell
Libby Unit Office	Libby
Plains Unit Office	Plains
Stillwater Unit Office	Olney
Swan River Unit Office	Swan Lake
Southern Area
Southern Land Office	Billings
Southwestern Area
Southwestern Land Office	Missoula
Missoula Unit Office	Missoula
Hamilton Unit Office	Hamilton
Clearwater Unit Office	Greenough
Anaconda Unit Office	Anaconda

�����

(4) Whenever in ARM 36.25.143 through ARM 36.25.162, the submission of a document, such as a petition, is required to be filed at an area or unit office, the document must be submitted to the area or unit office listed above that administers the state land to which the document pertains. Persons may contact any department office to determine the appropriate office for any tract of land.

(5) Whenever in ARM 36.25.143 through ARM 36.25.162, a formal or informal hearing is required to be held in an "area," the term "area" refers to the department area in which the land to which the hearing pertains is located. The hearing may be held, at the department's discretion, at any location within that area.

Wherever used in ARM 36.25.143 through ARM 36.25.162, unless a different meaning clearly appears from the context:

(1) "Affidavit" means a signed statement, the truth of which has been sworn to or affirmed before a notary public, as evidenced by the signature and seal of the notary public.

(2) "Board" means the board of land commissioners provided for in Article X, section 4 of the Montana Constitution.

(3) "Closure" means prohibition of all general recreational use.

(4) "Customary access point" means, with regard to state land, each outer gate and each normal point of access to the land, including both sides of a water body crossing the property wherever the water body intersects an outer boundary line.

(5) "Dedicated county road" means a county road that has been created by means of donation of a landowner and acceptance by a county under statutory or common law dedication procedures.

(6) "Dedicated public road" means a road useable by the public under state or federal law. The term includes dedicated county roads.

(7) "Department" means the department of natural resources and conservation provided for in Title 2, chapter 15, part 32, MCA.

(8) "Director" means the director of natural resources and conservation, provided for in 2-15-3202, MCA. The director is the chief administrative officer of the department of natural resources and conservation.

(9) "Drop box" means a receptacle in which a person making general recreational use of state lands may leave notice required pursuant to ARM 36.25.155 or ARM 36.25.156.

(10) "Emergency" means, for the purposes of ARM 36.25.152, a situation that:

(a) creates an imminent threat to personal safety or of significant property damage or significant environmental harm;

(b) would be substantially lessened or alleviated by closure to general recreational access of a state tract; and

(c) requires closure more expeditiously than could be implemented through the normal closure procedure.

(11) "General recreational use" means non-concentrated, non-commercial recreational activity, except:

(a) collection, disturbance, alteration, or removal of archeological, historical, or paleontological sites or specimens (e.g., fossils, dinosaur bones, arrowheads, old buildings, including siding) (which requires an antiquities permit pursuant to 22-3-432, MCA) ;

(b) mineral exploration, development, or mining (which requires a lease or license pursuant to Title 77, chapter 3, MCA) ;

(c) collection of valuable rocks or minerals (which requires a lease or license pursuant to Title 77, chapter 3, MCA) ;

(d) cutting or gathering of standing or downed trees (for which the department conducts sales pursuant to Title 77, chapter 5, MCA, and issues licenses pursuant to ARM 36.25.136) ; and

(e) trapping.

(12) "Growing crop" means a crop, as defined below, between the time of planting and harvest. "Crop" means such products of the soil as are planted and intended for harvest, including but not limited to cereals and vegetables and including grass and alfalfa that are intended for harvest for hay or seed production. The term does not include grass used for pasturage or trees.

(13) "Lease" means a lease or land use license, other than a recreational use or special recreational use license, issued by the department for use of the surface of the land. The term does not include a mineral lease unless it is preceded by the word "mineral."

(14) "Lessee" means a person who holds a lease as that term is defined in (13) .

(15) "Legally accessible state lands" means state lands that can be accessed by dedicated public road, public right-of-way, or public easement; by public waters such as lakes, rivers, and streams that are recreationally navigable under 23-2-302, MCA; by adjacent federal, state, county, or municipal land if the land is open to public use; or by adjacent private land if permission to cross the land has been secured from the landowner. Accessibility by aircraft does not render lands legally accessible under this definition. The granting of permission by a private landowner to cross private property in a particular instance does not subject the state land that is accessed to general recreational use by members of the public other than those granted permission.

(16) "Livestock" means cattle, sheep, swine, goats, privately owned bison and elk, horses, llamas, mules, donkeys, and other animals used for the protection of these animals.

(17) "Motorized vehicle" means a vehicle propelled by motor power, including, but not limited to, an automobile, truck, motorcycle, moped, and an all terrain vehicle but excluding a snowmobile.

(18) "Recreational use account" means the account established by 77-1-808, MCA, in which revenues generated from general recreational use of state lands are deposited and from which expenses of the general recreational use program are paid.

(19) "Recreational use license" means the license issued pursuant to ARM 36.25.146 that authorizes a person to engage in general recreational use as defined in (11) .

(20) "Recreational use advisory council" means the advisory council created pursuant to ARM 36.25.154.

(21) "Restriction" means a limitation on the manner in which recreational use may be conducted.

(22) "Special recreational use" means:

(a) commercial recreational activities, such as outfitting, in which a private person, corporation, group, or other entity charges a fee or obtains other consideration;

(b) non-commercial recreational activities conducted by an organization, such as a lodge, business, church, union, or club;

(c) overnight recreational use on leased or licensed lands by one or more persons outside a designated campground and more than 200 feet from a customary and legal access point or water body; and

(d) overnight horse use.

(2) A general recreational use license is issued for a 12-month period beginning on March 1 of each year and expiring on the last day of February of the next year. The cost of a general recreational use license is $5 before March 1, 1996. After February 29, 1996, the cost of the license is $5 for persons 17 years of age or younger or 60 years of age or older. The cost of the license for persons who are older than 17 and younger than 60 is $10. Family members living within the same household may obtain recreational use licenses by paying a family fee of $20. The license is personal and non-transferable. It may be purchased at any authorized license agent of the department of fish, wildlife and parks. Any person may purchase a recreational use license for a spouse, parent, child, brother, or sister, but the license is not valid until signed by the person in whose name it is issued.

(3) A person who uses state lands for general recreational use shall abide by the restrictions imposed pursuant to ARM 36.25.149 and may not use for general recreational purposes state lands that have been closed pursuant to ARM 36.25.150,

(4) No lessee or other person may interfere with a person who is making lawful general recreational use of state lands in accordance with this rule. Violation of this provision subjects the violator to civil penalties pursuant to ARM 36.25.157. The lessee may, without such interference, make inquiry concerning the status of those using state lands.

(5) Under 77-1-801(2) and (3) , MCA, a person must, upon request of a fish and game warden, present for inspection his or her recreational use license. Failure to present the license is a misdemeanor.

(6) A person who is engaging in general recreational use on state land shall, upon request of a department employee, present his or her recreational use license for inspection. Failure to present the license subjects the recreationist to a civil penalty pursuant to ARM 36.25.157.

(7) A person who is engaging in general recreational use on private land that has been opened pursuant to an exchange under ARM 36.25.152 shall, upon request of a department employee or a fish and game warden, present his or her recreational use license for inspection. Failure to present the license subjects the recreationist to a civil penalty pursuant to ARM 36.25.157.

(a) (i) Except as provided in (ii) and (iii) , motorized vehicle use on state lands by recreationists is restricted to federal roads, state roads, dedicated county roads, other county roads that are regularly maintained by the county and those roads on state lands that are designated by the department as open for motor vehicle use.

(ii) A person who has in his or her possession a "permit to hunt from vehicle" issued by the department of fish, wildlife and parks is authorized to drive on any road except a road that is closed by the department by sign or barrier.

(iii) A recreationist may park on state land within 50 feet of a customary access point; on federal roads and highways, state highways, and county roads in accordance with applicable traffic laws and regulations; and within 50 feet of any other road designated by the department for public access across the state land. The recreationist may not park so as to block vehicle access to the tract. Parking of vehicles must be accomplished in a manner that does not produce injury to the land or the lessee's improvements.

(b) Snowmobile use on the roads referenced in (1) (a) (i) is allowed only if permitted by applicable traffic laws and regulations. Snowmobile use on leased land is restricted to those department roads that have been designated as open to motorized vehicle use. Snowmobile use on unleased land is allowed except in areas where it is prohibited by the department.

(c) A recreationist shall use firearms in a careful and prudent manner. A recreationist may not negligently, as defined in 45-2-101(37) , MCA, discharge a firearm on state lands or discharge a firearm within 1/4 mile of an inhabited dwelling or of an outbuilding in close proximity to an inhabited dwelling without permission of an inhabitant. Temporary absences of inhabitants do not render a dwelling uninhabited.

(d) Open fires on leased or licensed land are restricted to campgrounds designated by the department for public camping. No fireworks may be discharged on state land.

(e) Overnight recreational use on leased or licensed land must take place within 200 feet of a legal and customary access point or water body that is navigable for recreational purposes under 23-2-302, MCA. The person may not drive or park a vehicle more than 50 feet from the access point. A recreationist's overnight use of state lands must not exceed the following time limits:

(i) for any site on leased or licensed land outside a designated campground - 2 consecutive days;

(ii) for a designated campground - 14 consecutive days;

(iii) for unleased, unlicensed lands outside a campground 14 days per calendar year, unless permission for a longer period is obtained from the department.

(f) A recreationist may not keep horses on state land overnight.

(g) A recreationist shall keep pets on a leash or otherwise in control. A recreationist may not allow the pet to harass livestock.

(h) A recreationist may not interfere with legitimate activities of the lessees or their agents conducted pursuant to the lease. For example, the discharge of firearms that would interfere with the authorized use of a tract for livestock operations is prohibited.

(i) For state lands included within a wildlife management or block management area administered by the department of fish, wildlife and parks, recreational use and activities must be conducted in accordance with rules, regulations, and procedures specific to that management area.

(j) Littering on state lands is prohibited. Recreationists shall pack out their litter.

(2) The department may, after notice to the lessee, impose additional site specific restrictions on general recreational use to protect public safety, property, or the environment.

(a) all lands leased for cabinsites or homesites;

(b) all lands on which growing crops, as defined in ARM 36.25.145, are located;

(c) military leases while military activities are taking place;

(d) active commercial leases; and

(e) lands on which the department has proclaimed the threat of wildfire to be extreme pursuant to ARM 36.10.119 or for which the governor has made such a proclamation pursuant to ARM 36.10.120.

(2) (a) Any person, corporation, organization or agency of local, state, or federal government may petition to exclude a specific tract from a categorical closure imposed pursuant to (1) .

(b) The petition must be submitted in writing to the area or unit office, must be signed by the petitioner, and must contain the following information:

(i) name, mailing address, and telephone number of petitioner;

(ii) description of lands to which the petition applies by legal description, lease number, or description of the location;

(iii) the reason that the categorical closure should be terminated for that tract and supporting documentation; and

(iv) duration of period for which termination is sought.

(c) The department may summarily dismiss a petition with a brief statement of the reasons for dismissal whenever:

(i) the petition is unsupported by specific substantial factual allegations, data, or documentation; or

(ii) a petition requesting substantially the same exclusion has been denied within the preceding 365 days.

(d) To be considered during a particular calendar year, the petition must be submitted by April 1 of that year. Upon receipt of a valid petition, the department shall notify the lessee that a petition has been filed and he or she may submit an objection or have an informal hearing, or both, on the petition at the area or unit office on or before May 1. The petitioner may also request an informal hearing.

(e) If an informal hearing is requested, the department shall notify the petitioner and the lessee of the informal hearing and they may attend and participate. The informal hearing must be conducted by the area manager or his designee.

(f) The area manager or designee may conduct further investigation and shall, on or before July 1, make a written decision whether to grant the petition. The written decision must contain the reason for granting or denying the petition. Copies of the decision must be mailed to the petitioner and the lessee.

(g) The lessee or petitioner may appeal the decision to the director or his designee by filing a written notice of appeal with the area office within 15 days of receipt of the decision. The area office shall immediately forward the appeal to the departments main office in Helena. The appeal shall, in the discretion of the director, proceed by written argument, oral argument, or both at the main office of the department in Helena or other location designated by the director. The opposing party is entitled to notice of the appeal and the opportunity to respond, including the right to appear at any appellate hearing. Neither party may submit evidence or information that was not submitted at the informal hearing. The director or his designee shall issue a written decision affirming, reversing, or modifying the decision on or before September 1.

(3) Except for closure for fire danger pursuant to (1) (e) , the lessee shall post categorically closed lands at all customary access points with signs provided by the department or duplicated from signs provided by the department.

(1) The department may close specific tracts of state land pursuant to this rule after September 1, 1992, for any of the following reasons:

(a) damage attributable to recreational use diminishes the income generating potential of the state lands;

(b) damage to surface improvements of lessee or mineral lessee;

(c) the presence of threatened, endangered, or sensitive species or plant communities;

(d) the presence of unique or special natural or cultural features;

(e) wildlife protection;

(f) noxious weed control;

(g) the presence of buildings, structures, or facilities;

(h) protection of public safety;

(i) prevention of significant environmental impact;

(j) disruption of calving, lambing, or shipping activities or substantial disruption of livestock use;

(k) an imminent threat, caused by potential substantial public use, of immediate, irreparable property damage or bodily injury on the state tract or adjacent land; or

(l) comparable public general recreational use has been made available pursuant to (13) .

(2) Closures made pursuant to (1) may be of a seasonal, temporary, or permanent nature.

(3) (a) Any person, corporation, organization, or agency of local, state, or federal government may petition to close a specific tract of land for any reason listed in (1) .

(b) The petition must be submitted to the area or unit office in which the state land is located and must be in writing. To be considered during a calendar year, the petition must be submitted by April 1 of that year, be signed by the petitioner, and must contain the following information:

(i) name, mailing address, and telephone number of petitioner;

(ii) description of lands to which the petition applies by legal description, lease number, or other description of the location;

(iii) the reason that the land should be closed and supporting documentation; and

(iv) period for which closure is sought.

(c) The department may summarily dismiss a petition with a brief statement of the reason for the dismissal if:

(i) the petition is not based on a reason for closure listed in (1) ;

(ii) the petition is not supported by specific factual allegations, data, or documentation; or

(iii) a petition requesting essentially the same closure has been rejected in the past 365 days unless changed conditions are alleged and documented.

(d) The department may also initiate a closure proceeding by preparing on or before April 1, a written statement containing the information described in (b) (ii) , (iii) , and (iv) . The department shall follow the procedures contained in (4) through (9) .

(4) The department shall by May 1 post public notice of the petition or statement at the county courthouse and the area and unit offices and by making a list of all petitions and statements filed statewide available at the department's main office in Helena.

(5) The public notice must give the public an opportunity to object to the petition or statement and the objector and the petitioner an opportunity to request, on or before May 20, a public hearing on the closure. The objection must be submitted to the office in the area or unit in which the land is located. The objection must contain the reasons why the petition should not be granted and supporting documentation. The objection may not be considered if it does not. If a hearing is requested, the department shall hold the hearing in the area of the proposed closure.

(6) Notice of hearing must be sent to the petitioner and the lessee. In addition, public notice must be given on or before June 5 in the same manner as provided in (4) . The notice must contain the name of the petitioner, location of the land, reason for proposed closure and reasons that the hearing has been requested.

(7) The hearing must be held in the area of the proposed closure and be an open public hearing at which any interested party may give comments and submit information. The hearing must be held before June 20.

(8) The department may conduct further investigation and shall prepare a written decision to grant, grant with modifications, or deny the petition, stating its reasons for the decision. On or before July 1, it shall send a copy of the decision to the petitioner and any person who filed objections pursuant to (5) .

(9) The objector or petitioner may appeal the decision to the director or his designee by filing a written appeal with the area office within 15 days of receipt of the decision. The department shall give the opposing party notice of the appeal and the opportunity to respond, including the right to appeal at any appellate hearing. The appeal shall, in the discretion of the director, proceed by written argument, oral argument, or both, at the main office of the department in Helena or other location designated by the director. No party may submit evidence or information that was not submitted at the hearing. The director shall convene the recreational use advisory council and request it to recommend a decision on the appeal. The director or his designee shall, after receiving the recommendation of the council, issue a written decision affirming, reversing, or modifying the decision. The director's decision must be made on or before September 1. If the advisory counsel does not make a recommendation on or before August 25, the director need not consider its recommendation in making his decision.

(10) If the petition is granted, the lessee shall post the closed lands at all customary access points with signs provided by the department or duplicated from signs provided by the department. For temporary closures, the lessee shall remove closure signs at the end of the closure period.

(11) In an emergency, as defined in ARM 36.25.145, any person or entity that is qualified to file a petition pursuant to (3) (a) may request an emergency closure by filing a written request with the area office or by making a telephone call and filing a written request within 24 hours. When possible, the area manager or his designee shall notify and consult with the lessee. The area manager or his designee shall grant or deny the petition as soon as possible, but in no case in more than 5 days. If the petition is granted, the closure must be for a specific period of time and may be extended for additional periods. The area manager or his designee shall terminate the closure as soon as the emergency ceases. Upon request of any person, the director or his designee shall review any emergency closure in effect for more than 5 days and shall approve, modify, or terminate the closure in writing.

(12) The department may also, on its own initiative, after consulting or attempting to consult with the lessee, close a tract of state land in an emergency.

(13) (a) The department may, after notice pursuant to (5) and opportunity for hearing and appeal pursuant to (5) , (7) , or (9) , enter into an agreement with a landowner whereby a tract of state land is closed under the procedures in (3) through (9) in exchange for the landowner's agreement to open private land to general recreational use if the private land:

(i) is in the same general area;

(ii) is of equal or greater recreational value to the state tract;

(iii) has equal or greater public access as the state tract; and

(iv) is not generally available for general recreational use upon request by the public.

(b) Before a state tract is closed pursuant to this rule, the private landowner shall enter into an agreement with the department whereby the landowner agrees to:

(i) allow general recreational use on the tract under restrictions no more stringent than those contained in ARM 36.25.149 and 36.25.155;

(ii) post signs meeting design and content specifications of the department at customary access points on the state tract. These signs must notify the public of the closure and give directions to the private tract;

(iii) post signs on the private tract at customary access

points advising the public that the tract is open for general recreational use by the public subject to the recreational use license requirement;

(iv) mark or otherwise inform the recreationist of the boundaries of the area;

(v) allow employees of the department and department of fish, wildlife and parks access to the private property;

(vi) not claim funds pursuant to ARM 36.25.158 or 36.25.159;

(vii) hold and save the department and the state of Montana harmless from all claims for property damage or personal injury resulting from the acts or omissions of the landowner; and

(viii) other requirements deemed necessary by the department.

(c) An agreement made pursuant to (b) must be cancelable by either party upon 60-day written notice.

(14) The department shall periodically review each closure made pursuant to this rule to determine whether the closure is still necessary. This review must occur at least at expiration or renewal   of the lease for leased tracts and at least every 10 years for unleased tracts. After public notice, notice to the lessee, and an opportunity for public comment and hearing, the department may terminate a closure it determines to no longer be necessary.

(a) Livestock is present or concentrated for purposes of calving, lambing, specialized or intensive breeding practices, or supplemental winter feeding.

(b) Livestock is concentrated for the purpose of weaning or shipping. If fewer than 200 animal units per section are concentrated, the closure or restriction may be imposed for no more than five days.

(c) Livestock is being gathered or moved.

(d) Weed control treatment is occurring or has recently occurred.

(e) The land is being irrigated; provided, however, that land may not be closed to foot traffic during a hunting season under this provision.

(f) The use would occur in close proximity to dwellings, structures, or facilities in use by the lessee; provided however, that ingress and egress to state land may not be prohibited under this provision.

(2) Closures and restrictions do not become effective until the lessee:

(a) notifies the appropriate area office that one of the situations described in (1) exists, and the area upon which it exists, the terms of the closure or restriction, and the duration of the closure or restriction. The closure or restriction is not effective until 24 hours after notice is given. Notice may be given in person, by mail, or by telephone;

(b) posts the state land near all customary and legal access points with signs that are provided by the department or duplicated from signs provided by the department. The sign must provide the lessee's name, address, telephone number, the closure or restriction imposed, the reason for the closure or restriction, the area to which it applies, and dates and the duration.

(3) Any person may object to a notice of management closure made pursuant to (1) on grounds that no basis for closure or restriction exists, that the area of closure or restriction in the notice is larger than necessary, or that the closure or restriction notice specifies a period that is longer than necessary. The objector shall notify the appropriate area office of the objection and the reason for it. The area manager or designee shall investigate the objection and within 2 working days of receipt of the objection shall determine whether the closure or restriction complies with this rule. An area manager may also conduct an investigation without receiving an objection. If he determines that the closure or restriction should be modified or terminated, he shall notify the lessee or his agent in writing. The lessee or agent shall immediately modify or terminate the closure or restriction to comply with the area office decision. Failure to comply with the area office directive subjects the violator to a civil penalty pursuant to ARM 36.25.157. If the investigation resulted from an objection, the area office shall also give written notice to the objector. The objector or the lessee may appeal the area office decision to the director by filing a written appeal with the area office within 5 working days of receipt of the notice. The area office shall forward the appeal to the director. The director shall convene the recreational use advisory council and, upon receipt of a recommendation of the council issue a written determination of the issue. The director's decision is binding on the parties. If the director's decision is to terminate or modify the closure or restriction, the lessee shall immediately remove or modify the closure or restriction signs. Failure to comply with the director's decision subjects the violator to civil penalty pursuant to ARM 36.25.157.

(4) The department shall maintain, by county, a master list of management closures and restrictions. The list must include the tract description, name, address, and phone number of the lessee, and the reason and period of closure or restriction. The list shall be available to the public by inspection or telephone inquiry at the department's main office in Helena, or by mail upon payment of $1.00 plus 15� for each page over 5 pages.

(5) General recreational use conducted in conjunction with a special recreational use license applied for prior to July 1, 1994, is exempt from closures or restrictions imposed pursuant to this rule.

(2) The advisory council shall gather information and advise the director on the validity of management closure or restriction appeals made pursuant to ARM 36.25.153, on appeals of area manager decisions regarding site-specific closure petitions pursuant to ARM 36.25.152, and on whether to subject renewal of a block management agreement pursuant to ARM 36.25.167 to public review. In advising the director, the council shall attempt to provide reasonable recreational use of state lands within the bona fide management constraints of lessees.

(3) The following are general guidelines for the council's use in determining whether the term of a management closure or restriction is reasonable: for calving or lambing, 60 days; for breeding, 30 days; for gathering or moving, 1 day; for weed treatment, 5 days; and for concentration of 200 or more animal units per section for weaning and shipping, 30 days. The council may deviate from these guidelines as management circumstances dictate.

(a) name of the lessee or lessee's agent who must be notified;

(b) telephone number of the lessee or lessee's agent;

(c) clear directions to the location at which the lessee or the lessee's agent may be contacted; and

(d) clear directions to the location of the closest drop box. If the lessee does not wish to be notified in person or by telephone, the sign must so indicate and need not contain the information required in (b) and (c) . The information must be legible and legibility must be maintained.

(2) A lessee who posts land pursuant to (1) shall provide a clearly identified drop box for each single tract at a customary access point to the tract, except that a lessee of 2 or more contiguous tracts may provide 1 drop box for those tracts to which the access point provides convenient access. In cases in which a customary access point cannot be easily identified or a question of the convenience of an access point is raised by the public, the area manager shall make a determination and the lessee shall install drop boxes in accordance with that determination.

(3) If the lessee or agent wishes to be notified in person or by telephone, the lessee or his or her agent shall be available to receive notice from recreational users by telephone or in person from the hours of 7:00 a.m. until 9:00 p.m. A person wishing to make general recreational use of state lands posted pursuant to (1) shall contact the lessee or lessee's agent in person or by telephone during those hours if the recreationist's access point to the state land is 5 miles or less by the shortest road from the nearest public telephone or the location at which the lessee or lessee's agent is available unless the lessee or lessee's agent is not available. The recreationist may determine which method of contact to employ. If the recreationist contacts the lessee or agent in person or by telephone, the recreationist shall, upon request, provide his or her name, address, and recreational use license number, the name and recreational use license numbers of all recreationists in his or her party, and the dates of use. Notice is considered to have occurred if the recreationist is answered by a telephone answering machine and the recreationist leaves his or her name, address, and recreation use license number and the same information for each member of his or her party. Notice authorizes the recreationist to engage in general recreational use for 3 consecutive days, or any longer period specified by the lessee, without further notice. In addition, no further notice is required as long as the recreationist is engaged in continuous general recreational use that includes the state land and that makes further notice impossible or extremely impractical, such as a back country hunting or fishing trip. If the recreationist attempts to contact the lessee by telephone or in person but the lessee or agent is not available, or if the shortest road distance from the recreationist's access point to the nearest public telephone or the location at which the lessee or lessee's agent is available is greater than 5 miles, the recreationist shall leave a notice in the drop box provided pursuant to (2) . Notice by drop box is effective for 3 consecutive days or until the end of any continuous general recreational use that includes the state land and that makes additional notice impossible or extremely impractical.

(4) If the lessee wishes to be notified by drop box only, the recreationist shall leave notice in the drop box provided pursuant to (2) . The notice must provide the recreationist's name, address, and recreational use license number and the names, addresses, and recreational use license numbers of each person in his or her party, and the dates of use. The recreationist is responsible for providing paper and pencil or pen to prepare the notice. Notice by drop box is effective for 3 consecutive days or until the end of any continuous general recreational use that includes the state land and that makes addi- tional notice impossible or extremely impractical, such as a back country hunting or fishing trip.

(5) The department shall, after notice and opportunity for informal hearing at the main office of the department in Helena, revoke the general recreational use license of any person who violates (3) or (4) . In addition, the department may prohibit the person from obtaining a recreational use license for a period not exceeding 2 years from the effective date of the revoked license.

(a) the name of the lessee or lessees agent who must be notified;

(b) the telephone number of the person designated pursuant to (a) ; and

(c) clear directions to the residence of the person designated pursuant to (a) .

(2) If a lessee wishes to be notified prior to a recreationist entering upon the leasehold for overnight use in conjunction with floating of a river or stream, the lessee shall post, at the customary access points, signs that are provided by the department or that are duplicated from signs provided by the department. The lessee must include on the signs the following information:

(a) the name, address, and telephone number of the lessee or lessee's agent;

(b) clear directions to the residence of the person designated pursuant to (a) , if the residence is within 500 yards of the customary access point; and

(c) directions to the location of the nearest drop box.

(3) A lessee who posts land pursuant to (1) or (2) shall provide a clearly identified drop box:

(a) for posting pursuant to (i) , at the residence of the person designated for notice pursuant to (1) (a) ; or

(b) for posting pursuant to (2) :

(i) at the residence of the person designated for notice pursuant to (2) (a) , if the residence is within 500 yards of the customary access point; or

(ii) if the residence is not within 500 yards of the customary access point, at the point that is closest to the access point and reasonably accessible to floaters. A lessee of 2 or more contiguous state tracts along a stream may, if the lessee wishes, provide drop boxes for those tracts at the outer upstream and downstream boundaries only.

(4) If the person designated pursuant to (1) (a) wishes to be notified in person or by telephone, that person shall be available to receive notice by telephone or in person from the hours of 7:00 a.m. until 9:00 p.m. A person wishing to engage in overnight use not in conjunction with floating, horseback use for any purpose other than licensed hunting or discharge of a firearm for any purpose other than licensed hunting shall contact the person designated for notice pursuant to (1) (a) during those hours, unless the person is not available. A floater wishing to engage in overnight use shall contact a person designated for notice pursuant to (2) (a) between 7:00 a.m. and 9:00 p.m. unless the person is not available. The recreationist may determine which method of contact to employ. If the recreationist contacts the person in person or by telephone, the recreationist shall, upon request provide his or her name, address, recreational use license number, and the name and recreational use license number of each person in his or her party. Notice authorizes the recreationist to engage in firearm or horse use for 3 consecutive days, or any longer period specified by the lessee, without further notice. In addition, no further notice is required as long as the recreationist is engaged in continuous general recreational use that includes the state land and that makes further notice impossible or extremely impractical, such as a back country hunting or fishing trip. Notice authorizes overnight use for 2 consecutive days only.

(5) If the recreationist attempts to contact the person designated for notice by telephone or in person but that person is not available, or if the recreationist is a floater who wishes to engage in overnight use and no person has been designated for personal or telephone notice pursuant to (2) (a) , the recreationist shall leave notice in the drop box provided pursuant to (3) . The notice must provide the recreationist's name, address, and recreational use license number, and the same information for each person in the party, and the dates of use. Notice by drop box is effective for firearm or horse use for 3 consecutive days or until the end of any continuous general recreational use that includes the state land and that makes additional notice impossible or extremely impractical. Notice by drop box is effective for overnight use for 2 consecutive days.

(6) The department shall, after notice and opportunity for informal hearing at the main office of the department in Helena, revoke the general recreational use license of any person who violates (4) or (5) . In addition, the department may prohibit the person from obtaining a recreational use license for a period not exceeding 2 years from the effective date of the revoked license.

(2) In determining the amount of civil penalty, the department shall consider the following factors:

(a) number of previous violations;

(b) severity of the infraction; and

(c) whether the violation was intentional or unintentional.

(3) A person against whom the department proposes to assess a civil penalty is entitled to a contested case hearing in accordance with the Montana Administrative Procedure Act, Title 2, chapter 4, part 6, MCA, on the questions of whether a violation was committed and the amount of the penalty. The hearing must be conducted by a hearing officer appointed by the director. The department shall notify the individual of the violation, setting forth in the notice the specific facts which the department alleges to constitute the violation. The notice shall be served by certified mail or in person by a department employee, sheriff or deputy, fish and game warden, or registered process server. The notice must give the person at least 15 days to respond to the violation notice. Upon receipt of the response or expiration of the period allotted for response, the department shall either withdraw the notice of violation or provide its rationale for pursuing the violation and a proposed penalty. Service of the response and proposed penalty must be made in the same manner as the notice of violation. The person is entitled to a hearing on the existence of the violation, the amount of proposed penalty, or both, if he or she requests a hearing within 30 days of receipt of the department's response and proposed penalty. The request for hearing must set forth a statement of the reasons that the person is contesting assessment of the penalty.

(4) Upon conclusion of the hearing, the department shall, within 60 days, issue its findings of fact and conclusions of law and order dismissing the violation or assessing a penalty. If a civil penalty is assessed, the person shall pay the penalty within 30 days of receipt of the order or such additional time as is granted by the department.

(5) The assessment of the civil penalty is appealable to district court pursuant to Title 2, chapter 4, part 7, MCA.

(2) The application must be submitted to the area or unit office within 30 days of the time that the lessee discovers the damage, must be in affidavit form, and must contain:

(a) the date of discovery of the damage;

(b) the nature of the damage;

(c) reasonable proof that the loss was caused by a recreationist;

(d) documentation of repair or replacement costs; and

(e) whether the claimant has submitted a claim to his private insurance carrier and, if so, the status of the claim.

(3) No reimbursement may be paid to the extent the lessee's costs have been reimbursed by the lessee's insurance carrier.

(4) Upon review of the application and, if necessary, additional investigation, the department shall grant the claim in whole or in part or deny the claim. The department shall issue its decision within 60 days of receipt of the application.

(5) Whenever the lessee has submitted an insurance claim, the department shall delay payment of the claim until the action on the claim is completed.

(6) The department shall, on or before July 1 of each fiscal year, designate a portion of the recreational use account for damage reimbursement. Claims that are granted may be paid only to the extent that funds are available for damage reimbursement in the recreational use account and must be paid in the order they have been filed with the department.

(2) The department shall, on or before July 1 of each fiscal year, designate a portion of the general recreational use account for weed control.

(3) A lessee may apply in writing for weed control funds, equipment, assistance or supplies to treat a weed infestation caused by general recreational use. The application must:

(a) describe the location and size of the infestation and type of weed;

(b) demonstrate that the infestation was caused by general recreational use of the tract; and

(c) contain a weed management plan, including the cost of carrying out the plan. The plan may propose any combination of recognized weed management techniques which will deal effectively with the weed problem.

(4) The area land office shall process applications in the order received and shall approve an application if it finds that the application reasonably proves that the infestation was caused by general recreational use of state lands, that the plan provides an effective method of control, and that cost of the plan is reasonable. In its approval, the area office shall designate the amount of funding approved. That amount may be less than the amount applied for. Before providing funding, supplies, assistance, or materials, the department shall enter into a written agreement with the lessee specifying how the funding, supplies, assistance, or materials must be used. The assistance may be provided through the county weed board.

(5) Projects remain eligible for funding for the fiscal year in which the approval was granted and for 2 additional fiscal years. At the end of this period, the department may terminate the approval if it determines that the project no longer meets the criteria in (4) .

(2) Under 77-1-806(2) , MCA, entry onto private land from state land by a recreationist without permission of the landowner is a misdemeanor, whether or not the recreationist knows he or she is on private land.

(3) Recreationists are responsible for determining whether state lands are legally accessible. The recreationist is encouraged to contact landowners to determine boundaries and to use accurate maps.

(4) Before the department designates roads on state lands as open for public access pursuant to ARM 36.25.149, it shall mail notice of the proposed designation to the lessee.

(5) Any person may petition the board to include within the definition of general recreational use any type of recreation other than hunting and fishing. The petition must be in writing, be signed, and include a statement of the reasons why the use petitioned for should be included subject to the general recreational use license. It must be filed with the director, who shall bring the petition before the board.

(2) To obtain a special recreational use license, a person must be at least 18 years of age or the head of a family and apply to the area or unit office on a form prescribed by the department. The applicant shall provide a description of or a map showing the area intended for use.

(3) Before granting a special recreational use license, the department shall make a bona fide attempt to notify the lessee of the application.

(4) To obtain a special recreational use license, a person must pay to the department the amount that the department determines to be the full market value of that use. A license granted pursuant to this rule may be subject to competitive bidding.

(5) A license granted pursuant to this rule may be exclusive, except the department shall reserve the right to grant other licenses for different uses on the same land. Issuance of an exclusive license does not prohibit general recreational use of state lands that have not been closed pursuant to ARM 36.25.150 or ARM 36.25.152.

(6) A license issued pursuant to this rule shall include provisions regulating motor vehicle use and requiring that only certified weed seed free hay be brought onto the state land. The license may include other restrictions on the activity.

(7) The holder of a special recreational use license shall comply with all provisions of that license.

(8) Pursuant to 77-1-804(8) , MCA, the department may assess a civil penalty of up to $1,000 for each day of violation of this rule. The department may waive the civil penalty for minor or technical violations. The penalty assessment standards and procedures contained in ARM 36.25.157 are applicable to civil penalty proceedings under this rule.

(a) a complete legal description of the state land affected by the proposal, with a description of the legal access status of each tract of land;

(b) a listing of all terms, conditions, and restrictions of the proposal; and

(c) a map that clearly identifies the boundaries of the proposed block management area, locations of state lands, adjoining public land, and public roads.

(2) The provisions of (3) apply to the review of a block management agreement that:

(a) would impose restrictions on recreational use that are more stringent than those contained in ARM 36.25.149; and

(b) contain state land that is:

(i) contiguous at some point to land that is not within the proposed block management area;

(ii) accessible by dedicated public road, public right-of-way, or easement;

(iii) accessible by public waters; or

(iv) accessible from contiguous federal, state, county, or municipal land that is open for public use.

(3) Before land that meets the criteria in (2) may be included in a block management agreement, the department of fish, wildlife and parks and the department must have:

(a) given public notice of the proposal in a newspaper of general circulation in the area of the proposed block management area;

(b) provided a 21-day period for written public comment following the public notice; and

(c) if, during the public comment period, a request for public hearing was received that in the department's opinion raises a significant question as to whether the proposal is in the best interests of the public or the trust, held a public hearing in the area.

(4) After close of the public comment period, the department shall review and prepare written responses to all substantive comments. The department shall send copies of those responses to each person who submitted a substantive comment.

(5) No public review is required for proposals that do not meet the criteria contained in (2) .

(6) The department shall notify the department of fish, wildlife and parks whether it will enter into the agreement. No block management agreement is effective as to state land until it is executed by the department. The department may not enter an agreement that does not meet the criteria contained in ARM 36.25.165.

(a) inclusion is in the best interests of the public and the trust;

(b) the block management agreement does not conflict with rights of holders of leases, licenses, and easements;

(c) inclusion would not result in damage to the land;

(d) the block management area contains private land; and

(e) the state land is contiguous to federal or private land that is within the block management area.

(1) A block management agreement that includes state lands must contain the following provisions:

(a) Motorized vehicle use on state lands is restricted to federal, state, and dedicated county roads and to those roads designated by the department to be open to motorized vehicle use.

(b) If the state land meets the criteria of ARM 36.25.164, or if the agreement includes hunter limits, requires permission, or contains other restrictions that are more stringent than the restrictions contained in ARM 36.25.149, the department of fish, wildlife and parks shall post the state land at customary access points with signs that include the period that the block management restrictions are effective and describe how access may be obtained.

(c) If a complaint is not resolved to the satisfaction of the department, the department may withdraw the state land from the block management area.

(1) A block management agreement that contains state lands may be renewed.

(2) Subject to (b) , renewal of a block management agreement that meets the criteria of ARM 36.25.164 may be subject to the review procedures contained in ARM 36.25.164 only if:

(a) during the term of the agreement, the department or department of fish, wildlife and parks have received public comments or complaints tending to:

(i) raise significant concerns regarding compliance with the agreement;

(ii) indicate that continued enrollment in the block management program may not be in the best interests of the public or the trust; or

(iii) there will be changes in the agreement that impose more stringent restrictions than those contained in the existing agreement.

(b) If the department or department of fish, wildlife and parks has received complaints under the department of fish, wildlife and parks' complaint resolution system regarding a block management area that is being considered for renewal and those complaints have not been resolved, the director may not renew the agreement without public review until receiving a recommendation from the recreational use advisory council as to whether public review is appropriate.

(3) The renewal of a block management agreement that does not contain state land meeting the criteria in ARM 36.25.164 or does not meet the criteria of (2) above is not subject to public review under ARM 36.25.164.

(4) A block management agreement that was in effect on September 20, 1993, and was terminated in protest of the board's decision to expand the definition of "general recreational use" to include hiking and bird-watching may be renewed prior to October 1, 1994, under this rule.

(5) The department may renew a block management agreement that includes state land only if it meets the criteria for approval contained in ARM 36.25.165 and contains the provisions of ARM 36.25.166.

(1) "Board" means the board of land commissioners of the state of Montana;

(2) "Department" means department of natural resources and conservation;

(3) "Director" means director of natural resources and conservation, chief administrative officer of the department of natural resources and conservation;

(4) "Lessee" means the person in whose name an oil and gas lease appears of record in the offices of the department, whether such person be the original lessee or a subsequent assignee. The term "lessee" also includes, where the context of the rule may indicate, any person who is the apparent successful bidder for an oil and gas lease but with whom a formal oil and gas lease agreement has not been completed and finalized;

(5) "Oil and gas" means all hydrocarbons and other substances and elements which are present in the earth in a gaseous or liquid form and produced therefrom. It shall not include coal, lignite, oil shale or similar solid hydrocarbons. Nor shall it include minerals, waters, steam or any geothermal resource produced pursuant to a geothermal resources lease issued by the state;

(6) "Person" means any individual, person, firm, association or corporation or other legal entity;

(7) "Qualified applicant" means any person who may become a qualified lessee as set forth under ARM 36.25.204;

(8) "State" means the state of Montana;

(9) "State lands" means all lands the leasing of which for oil and gas is under the jurisdiction of the board;

(10) "Standard lease form" means the lease then currently in use and approved by the board.

(1) State lands available for leasing under these rules including any state lands in which the oil and gas rights are not reserved by the United States or other grantor or predecessor in title. Such state lands include those which have been sold but in which oil and gas rights have been reserved, in whole or in part, by the state of Montana, but in such cases where the lands are under lease for grazing, agriculture or similar purposes, care will be taken in issuing the oil and gas lease to protect the rights of the purchaser or surface lessee. Such lands include all lands owned by the state under navigable lakes or streams. Unsurveyed lands, including those under navigable lakes and streams, are available for leasing, provided that any applicant for a lease on such lands shall supply the department with as accurate an estimate of the number of acres to be included under such lease as can be derived from the latest survey, and/or aerial photograph and other information available to the applicant. Further provided, that if and when such lands are leased and oil and/or gas in commercial quantities is produced from the lands, the lessee shall supply the department with a legal description of the lands by courses and distances (metes and bounds) . The department will assume no liability or responsibility for the correctness, completeness or validity of such description.

(2) No lease may embrace more than 640 acres, except that any section surveyed by the United States which contains more than 640 acres may be included under one lease.

(3) The land shall be leased in as compact bodies as the form and areas of the tract held by the state and offered for lease will permit. No lease may embrace noncontiguous subdivisions of lands unless such subdivisions are within an area comprising not more than 1 square mile.

(4) Any person qualified to hold an oil and gas lease on state lands may acquire, receive and hold more than one lease.

(1) A sale of oil and gas leases on state lands will be scheduled once each quarter, on the first or second Tuesday of March, June, and December, and on a day in September that will not conflict with the Labor Day holiday. For in-person auctions, the date of sale is the day on which the auction will be held. For online auctions, the date of sale will be the last day of online bidding. The department has discretion to waive or postpone a sale if circumstances warrant. In such event a notice of "no sale" will be published in a publication of general circulation in Montana and on the department's website. Notice will also be sent to stakeholders on the department's oil and gas lease sale mailing list.

(2) Sale of each lease will be by competitive in-person or online bidding.

(a) Sale will be made and a lease executed to the qualified bidder who makes the highest bid.

(b) In the absence of any bid at such sale on a particular tract, a lease will be issued to the person who first made application therefore in accordance with these rules.

(c) The department reserves the right to reject any and all bids on any tract offered for lease.

(d)  The successful bidder shall pay the first year's rental, the bonus amount, and the issuance fee to the department. For online auctions, the successful bidder may also be required to pay an online service fee and any fees associated with payment processing or wire transfers.

(3) Any person who wishes to nominate any tract of state land for an oil and gas lease shall make application for oil and gas leasing on the form currently in use by the department. Blank forms for such applications may be secured from the department at no cost.

(a) A $15.00 application fee shall be submitted with the application, and is the only payment required to be submitted with the application.

(b) Each application shall be an offer and constitute an undertaking to pay the required first year's rental for the lease within ten days following the lease sale if the applicant is the successful bidder, or if no one bids at the lease sale. The application shall contain an adequate and sufficient description of the land sought to be leased.

(i) If the successful bidder at the lease sale is a person other than the first applicant, that person shall submit the required first year's rental within ten days following the sale.

(c) The department shall accept applications until 77 days prior to the date fixed for sale, as provided for in 77-3-411(2), MCA.

(d) Any application made may be withdrawn by the applicant if request for such withdrawal is received by the department prior to the withdrawal date indicated in the letter that is sent to the applicant by the department. However, the $15.00 application fee will not be refunded.

(e) If more than one application is filed on any one tract, the department shall notify each person submitting an application subsequent to receipt of the first qualified application, that there is a prior application for that tract. The department will return the application fee(s) to those subsequent applicants.

(f) If the first applicant for a tract withdraws the application as provided in (d), and subsequent applications for that tract have been received, the tract shall be offered for lease regardless of the withdrawal. In such cases, the opening bid must not be less than the minimum rental required by ARM 36.25.208. If no bids are made, the tract will not be leased.

(4) The department will comply with 77-3-411(3), (4), and (5), MCA, to provide notification of the oil and gas lease sale.

(5) The department will maintain an interested parties mailing list of prospective oil and gas lessees who request that their names be placed on the list. At least two weeks before each sale, the department will send a copy of the sale notice to each interested party.

(6) The department shall notify the surface owners as provided for in 77-3-411(6) and (7), MCA.

(2) If oil or gas is not being produced from the leased premises at the expiration of the primary term of the lease but the owner of the lease or his designee is then engaged in drilling on the premises for oil or gas, then the lease continues in force so long as such drilling operations are being diligently prosecuted. If oil or gas is recovered from any such well drilled or being drilled at or after the expiration of the primary term of the lease, the lease continues in force so long as oil or gas in paying quantities is produced from the leased premises. The board reserves the right to decide whether such drilling operations, which may continue a lease beyond the primary term, are being diligently prosecuted.

(a) Prior to February 10, 1984, for all leases regardless of date of issuance, $1.25 per acre for the 6th year through the 10th year of the lease.

(b) After February 10, 1984, for all leases regardless of the date of issuance, $1.25 per acre for the 6th year and $2.50 per acre for the 7th through the 10th year.

(2) Failure to commence drilling a well or to pay the required delay drilling penalty shall be grounds for cancellation of the lease. Cancellation shall not occur until after notice and opportunity for an informal hearing to determine whether a well was commenced or delay drilling penalties were paid as required.

(3) If a well drilled on the leased premises is a dry hole, and if another well is not commenced on the land covered by lease before the 7th year or second anniversary of the lease following the completion of the well, whichever comes later, the leases may be terminated by the board, unless the lessee, on or before such anniversary date, pays the penalties in the amounts provided in this section. Upon the payment of such delay drilling penalties and their continued payment, the lease continues in force during the primary term as though there had been no interruption in the delay drilling payments. In case of any commencement of drilling in lieu of payment of a delay drilling penalty as above provided, the drilling of such well shall be prosecuted with due diligence and dispatch to such depth as is necessary to make a reasonable test for oil or gas. Failure of the lessee to do so shall subject the lease to termination by the board as though the lessee has neither commenced the drilling of the well nor paid the required delay drilling penalty. The lessee shall within five days of spudding in, notify the department of the commencement of drilling of any well.

(1) The lessee shall pay in cash or deliver in kind to the lessor at its option, on all oil and gas produced and saved from the leased premises and not used for light, fuel and operation purposes on the leased premises, a royalty. The royalty shall be at the following rates unless, in regard to a particular lease, the department advertises in its lease sale notices that the royalty will be at a higher rate:

(a) On gas at the rate of 16.67%;

(b) On oil at the rate of 16.67%; and

(c) The royalty on gas, including casing-head gas and all gaseous substances, while the same is not sold or used off the premises shall be at the rate of $400 per well each year or the amount of the annual rental provided in the lease, in lieu of the per well rate, whichever is the greater, payable on or before the annual anniversary date of the lease. As long as the leased lands contain a well capable of such production and such payment is made, the lease shall be considered a producing lease under the lease terms.

(2) The lessee shall pay royalties reserved to the state, in cash:

(a) on the reserved fraction of oil, the posted field price, or in lieu thereof, if no field price is posted, the fair market value in the field where produced on the day it is run into the pipeline or storage tanks; and

(b) on the reserved fraction of gas, the posted field price, or in lieu thereof, if no field price is posted, the fair market value at the well. In addition, the lessee shall pay to the state on the reserved fraction any bonus actually paid or agreed to be paid to the lessee for such oil or gas.

(3) All royalties, whether in money or in kind, shall be delivered to the state free of cost and deductions.

�

(a) the oil well is incapable of producing in paying quantities at current market values for the oil produced;

(b) a significant amount of oil production can be recovered in the future from the producing formation through the use of equipment presently used at the well head of the oil well;

(c) the well is currently capable of producing in paying quantities should the market value of the oil produced be equal to $25.00 per barrel.

(2) Production in paying quantities for the purposes of this rule is defined as production in quantities sufficient to yield a return in excess of operating costs, even though drilling and equipment costs may never be repaid and the undertaking as a whole may ultimately result in a loss.

(3) All direct costs incurred in the prudent operation of a lease whether paid or accrued may be considered as proper expenditures in the calculation of operating costs. These direct costs include, but are not limited to: labor, trucking, supervision, office maintenance, bookkeeping and accounting, treating oil to make it marketable, and maintenance and repair of roads, entrances, fences, and gates. The bonus paid for the lease, drilling costs, and costs of lease equipment shall not be considered to be direct costs of operation.

(4) In determining whether to allow the extension of the lease by payment of shut-in royalties, the director may also consider whether the temporary shut-in of the oil well would adversely affect correlative rights or the operator's implied covenant to offset drainage occurring on the lease.

(5) Shut-in oil royalties shall be in the amount of $100.00 per lease per year or the amount of the annual lease rentals, whichever is greater. Shut-in royalties must be paid within 30 days of the director's decision to allow extension of the lease by payment of shut-in oil royalties. As long as such leased lands contain an oil well capable of production as described by the three elements listed above, and shut-in royalty payments are made, the lease shall be considered a producing lease under the lease terms. The lease will be held by the payment of shut-in oil royalties for 1 year effective on the 1st day of the month following the month in which shut-in oil royalties are received by the department.

(6) No equipment shall be removed from the lease while the lease has been extended by the payment of shut-in oil royalties, so as to render the well incapable of production. Nothing in this rule shall be construed to prevent repair or replacement of equipment necessary for production. Each oil well temporarily shut-in by operation of this rule shall be maintained so as to be immediately operable.

(2) The assignment of any oil and gas lease, either in whole or in part, to more than one assignee will be permitted if the proposed assignment is otherwise in compliance with the foregoing requirements; however, any such assignment will not be approved until one of the assignees is designated to act as agent for the purpose of receiving any and all notices from the department given in connection with the lease and meeting all requirements and obligations under the lease.

(3) Assignment of undivided, fractional interests in any lease, either as to the whole of the leased premises, or as to any portion thereof, is arranged by having the lessee assign title to the acreage in question to himself and the assignee. The assignment may show the respective shares of interest but the transaction is approved as a transfer of title only and without recognition of the respective interests.

(4) All other assignments of oil and gas leases or interests therein are subject to the approval by the department, and are binding upon the state in the discretion of the department.

(5) Assignments involving overriding royalties or containing certain reservations by the assignee are approved as transfers of title only and without recognition of such overriding royalties or special terms and conditions.

(6) An assignment or transfer on the form currently approved by the board will be acceptable. Evidence of transfers by operation of law should be in the form of a certified copy of the appropriate court order or decree or similar document, such as letters of administration to executor or administrator, decree of distribution, executor's deed or sheriff's deed.

(7) Any transfer, by operation of law, to an unqualified lessee will be recognized by the department for a period of time in no event longer than one year, and only for the purpose of the further transfer of the interest to a qualified lessee.

(8) The department shall notify the parties to any assignment or other transfer submitted for approval of the approval or non-approval thereof.

(9) As to development and production, the lease is regarded as indivisible so that drilling or securing production on any part of the severally assigned tract will inure to the benefit of all segregated parts of the original lease.

(2) Although no particular form of surrender is required, such surrender must be in writing, must sufficiently identify the lease sought to be surrendered, and must specifically describe the lands to be surrendered, whether all of the lease premises or a portion only.

(3) Such written instrument of surrender and relinquishment must be signed by the owner of the lease as shown by the records of the department. If more than one person owns the working interest in a lease, either all such owners must join in a joint surrender of the lease or each must submit a separate, written surrender.

(4) If operations have been conducted on lands which lessee desires to surrender, the lessee shall also submit with his written instrument of surrender evidence of the proper plugging and abandonment of any hole drilled on the lands, together with evidence that he has restored the premises in accordance with ARM 36.25.217.

(5) If timely notice is given by the lessee of an intent to surrender lands, but the instrument of surrender is inadequate under the rules herein set forth, or if any additional required information is not timely supplied by the lessee, such informal notice of intent to surrender shall be effective to relieve the lessee of any obligation to pay further rental on the acreage to be surrendered, provided that an instrument of surrender and any additional required information is supplied to the department within 60 days after the surrender date as intended and sought by the lessee.

(2) Promptly upon receipt of such notice that a lease is to be canceled or forfeited, if the lessee does not within the permitted 10 days period apply for hearing on such notice, and promptly after receipt of the final decision to cancel or forfeit the lease, following hearing on the matter, if the lessee does not appeal, the lessee shall furnish the department with written instrument of surrender of the lease as required under the provisions of ARM 36.25.213.

(2) No particular form of pooling agreement or unit agreement is prescribed or required by the board. However, if the unit agreement is in form as prescribed by the United States geological survey for unitized operations affecting federal lands, the commitment of state lands to such unit agreement will normally be effected by means of the execution by the board of an approval and certification on the form adopted by the board on June 12, 1968. In all cases it is recommended, although not required, that the proposed form of pooling agreement or unit agreement be submitted to the board for preliminary approval prior to execution by the other participants.

(1) The lessee shall conduct all operations subject to such inspections as the department shall decide to make and shall carry out at the lessee's expense all reasonable orders and requirements of the department relative to the prevention of waste and preservation of property. On the failure of the lessee to do so, the department shall have the right, together with other recourse herein provided, to enter on the property to repair damages or prevent waste at the lessee's expense.

(2) In all operations on lands leased pursuant to these rules and regulations, the lessee shall use the highest degree of care and all proper safeguards to prevent pollution of earth, air or water by hydrocarbons or other pollutants, excepting that pollution which is allowed, if any, by these rules and regulations and the rules and regulations relating to oil and gas published by the oil and gas conservation division of the department. In the event of pollution, directly or indirectly caused by lessees operations on lands leased pursuant to these rules, lessee shall use all means at its disposal to recapture escaped hydrocarbons and other pollutants and shall be responsible for all damage to public and private properties, including bodies of water of any sort, whether above or below the surface of the earth.

(3) To minimize conflicts with the owner or lessee of the surface of the land leased, lessee hereunder shall:

(a) provide the surface owner or lessee with a plan for location of all facilities;

(b) consult with the surface owner or lessee regarding a reasonable location of access roads. The access roads must be located along section lines and existing roads to the fullest extent possible and they must disturb as little acreage as possible unless the surface owner agrees otherwise. In locating the roads, priority shall be given to minimizing interference with the surface owners or lessees operations. The lessee shall make just payment to the surface owner for all damage done by reason of his entry upon, and use and occupancy of, the surface of the land.

(4) When any oil or gas well drilling operation is commenced on land leased pursuant to these rules, any topsoil on affected lands shall be removed and stockpiled on the site. The lessee shall take all reasonable, necessary steps to insure the preservation of the stockpiled topsoil including a temporary vegetation cover to prevent erosion. At the completion of oil or gas recovery operations, and upon the final abandonment and completion of the plugging of any well, the lessee shall, unless the owner of the surface requests otherwise and executes a release to that effect, restore the surface of the location to its original contours as far as reasonably possible, redistribute the topsoil, and reseed the land with native grasses and/or native plants as prescribed by the department.

(5) Each lessee, in conducting his explorations and mining or drilling operations shall use all reasonable precautions to prevent waste of oil or gas developed in the lands and to prevent the entrance of water through wells drilled by him to the oil and gas sands or oil or as bearing strata to the destruction or injury of the oil or gas deposits.

(6) On or before the last day of each month every holder of a producing oil or gas lease shall make a report to the department for the preceding calendar month on a form the department prescribes. The report shall show the amount of oil or gas produced and saved during the preceding month, the amount of oil and gas sold, the price obtained, the total amount of all sales, and additional information as required on the form. The reports shall be signed by the lessee or some responsible person having knowledge of the facts reported, and shall be accompanied by payment of the amount due the state as royalty for the month covered by the report, unless the state's royalty is being or has been paid direct by the purchaser of the production. When the lessee is required by the oil and gas conservation board to file a completion report (form 4) with that board, he shall also file one copy of the completion report with the department of natural resources and conservation.

(7) A lessee is required, upon completing a commercially productive oil or gas well upon the lease premises, to proceed with reasonable diligence to drill such additional wells to the depth of the formation found commercially productive, or to such depth as may be necessary to economically test, develop and operate the deposits discovered. As to lands found valuable for oil production, no lessee will be required to drill to completion more than one well under any one lease during any one calendar year, or a total number of wells under any one lease in excess of the total number of 40 acre subdivisions of land held under such lease. As to lands found valuable for gas production only, the drilling obligation of the lessee shall be confined to a total number of wells equal to the total number of tracts comprising 160 acres of land included in the lease, of which total number of wells the drilling on not more than one will be required in any one calendar year. However, notwithstanding the foregoing general rules, if wells drilled on land contiguous to the state lands require, in the discretion of the department, greater diligence in drilling and a greater number of wells to be drilled on the state lands to protect the lease premises and deposits from loss, depletion or uncompensated drainage due to the wells on the contiguous lands, such greater diligence and greater number of wells may be required. All such requirements, however, shall be subject to, and shall not be inconsistent with, applicable rules, regulations and orders of the oil and gas conservation division of the department.

(8) Performance of well drilling operations as required by the foregoing rule may be suspended only by and with the consent of the board during the time oil or gas previously discovered cannot be marketed at a profit, or for other good cause shown. When such suspension of drilling operations is deemed necessary and desirable by the lessee, the lessee shall submit a written statement of reasons therefor to the board. If the requested suspension of drilling operations is approved by the board, it shall issue to the lessee a statement or certificate authorizing the suspension for a time certain and require the lessee, within such time certain, to make written application to the board for any further extension of the time in which such drilling operations may be suspended.

(9) Upon the termination for any cause of any lease, the lessee has 6 months after the date of the termination to remove all machinery, fixtures, improvements, buildings and equipment belonging to him on the premises, except casing in any well capable of producing oil or gas and other equipment or apparatus necessary for the preservation of any well capable of producing oil or gas in quantities sufficient to pay for the operation of such well. With respect to any well which has not been completely plugged and abandoned by the lessee prior to the termination date, the lessee shall not remove casing or equipment from the well nor plug and abandon it without written approval from the department for such action.

(10) If upon the termination of any lease there is located on the lease a well capable of producing oil or gas and if the succeeding lessee, or in the event there is no succeeding lessee, the state, wishes to have the casing, equipment and apparatus necessary for preservation of the well left upon the premises, that party shall pay to the lessee under the terminated lease the reasonable value of such property. If the succeeding lessee or the department is unable to agree with the former lessee upon the reasonable cash value of such casing, equipment and apparatus, the succeeding lessee or the state, as the case may be, shall pay in cash, to the former lessee a sum fixed as a reasonable price by a board of 3 appraisers, one of whom shall be chosen by the succeeding lessee or the state, one by the former lessee, and the third by the two so chosen. Its appraisal shall be reported to the respective parties in writing, and is final and conclusive. Each party will pay the cost of the appraiser which it selects, and the parties will bear equally the cost of the third appraiser. The former lessee may remain in possession and manage the land and property formerly covered by his lease until the value of the casing, equipment and apparatus which the succeeding lessee or the state desires to have left upon the premises is fixed in the manner provided in this rule and has been paid to him in cash. During the time the former lessee remains in such possession, he may retain the same share of the products of the premises as inured to him during the term of his lease. Should the state or the succeeding lessee not desire any of the lessees property as provided in these rules, the lessee shall properly plug all wells and remove all of his property from the lands.

(11) Any casing, machinery, fixtures, improvements, buildings and equipment belonging to any lessee and not removed within 6 months after the date of termination of the lease shall, upon the expiration of the 6 months' period become the property of the state. However, the claiming of such property from the lands, or any of such actions, shall not relieve the lessee of his obligation to properly plug and abandon all wells, to remove all debris and equipment from the lands, and to restore the premises to their condition prior to drilling operations as far as reasonably possible.

(2) A verbatim, written record of any hearing or rehearing will be made if any party in interest so requests not less than 5 days prior to the day set for hearing, and provided the requesting party agrees to pay the cost thereof, including the cost of the original copy of the transcript which shall become a part of the case record and remain on file with the department. The party requesting such verbatim record may be required to deposit in advance the anticipated cost of the record. If such written record is made, it shall be certified as true, correct and complete.

(2) The department shall maintain a record of the publication of notices of all lease sales. Such record shall consist of published copies of such notices or affidavits of publication as provided in 26-1-1011, MCA.

(1) The lessee shall not conduct any seismic surface activity which will disturb the surface or move the earth within 300 feet of any water source including but not limited to wells, springs, streams, lakes, or reservoirs unless permission is received in writing from the director.

(2) The lessee shall not conduct any seismic drilling or blasting activity within 1320 feet of any building or similar structure, water well or spring or within 660 feet of any reservoir dam unless permission is received in writing from the director.

(3) The lessee shall not be allowed to occupy, utilize or conduct any activity on the surface of any river or lake bed or island unless permission is received in writing from the director.

(4) The written permission specified in this rule shall not be unreasonably withheld; however, the director shall not grant such permission unless he determines that the proposed activity will not cause significant adverse environmental effects. The director shall make his decision within 30 days of receipt of written request for such permission.

(2) The department may restrict surface activity on any lease at any time when adverse or unusual weather conditions require such restrictions to prevent accelerated erosion, fires or disruption of seasonal wildlife use. The department shall consult with the lessee prior to restricting surface activity and may allow limited activity or activity with mitigating measures.

(3) The department may restrict surface activity on any lease at any time that historical or archaeological resources of significance, as determined by the state historical preservation office, are discovered on the land under lease.

(4) If restrictions pursuant to (2) and (3) prevent the lessee from complying with drilling provisions or production requirements the lease shall be extended to allow a reasonable time to comply with such requirements. This provision shall be liberally construed to prevent forfeiture or cancellation of the lease because of restrictions.

(1) In order to obtain a permit the applicant shall:

(a) be qualified to do business in the state as shown by records of the secretary of state;

(b) file a surety bond, as required, with the secretary of state;

(c) furnish proof (such as copies of letters) that it has notified the surface owner or lessee of the approximate time schedule of activities on the land;

(d) provide the name and permanent address of the geophysical exploration firm which will be doing the actual work on the land, and the name and address of any designated agent of the geophysical exploration firm;

(e) provide a legal description of the surface areas where geophysical activity will take place; and

(f) provide written or oral notification from the oil and gas lessee of permission to conduct exploration on lands covered by an oil and gas lease.

(2) A permit is valid for one calendar year from the date it is granted.

(3) The permit does not grant any rights to an oil and gas lease on or any interests of any kind in the land covered by the permit.

(1) The permittee shall confine all surface activity to improved roads during periods when the land surface is wet or is in such a condition that it may be damaged from travel by heavy vehicles or trucks. During all other periods, the permittee shall confine all activity which may disturb the surface to existing trails and terrain which is easily accessible to normal four-wheel drive travel without winching or other artificial means. The permittee shall not conduct any type of road construction activity, including but not limited to, blading and dozing existing roads and trails, constructing stream crossings, or removal of brush and trees, without the written permission of the department. The department may grant such permission only after the permittee has submitted evidence of conditions which require such road construction and a plan for the road construction which protects the land surface as much as practicable. The department may impose requirements on such construction in order to protect the land surface from erosion or other damage.

(2) The permittee shall not conduct any type of geophysical testing or measuring which will disturb the surface or move the earth within 300 feet of any springs, streams, lakes, water wells, or water storage reservoir facilities. The permittee shall not conduct any drilling or blasting activities within 1320 feet of any building, structure, water well, or spring or within 660 feet of any reservoir dam without the written consent of the department. The department may impose further restrictions when the particular situation warrants other precautions.

(3) In all operations on the lands covered by the permit, the permittee shall interfere as little as practical with the use of the premises for any other purpose to which the same may have been leased or sold by the state. All necessary precautions shall be taken to avoid any damage other than normal wear and tear to gates, bridges, roads, cattle guards, fences, dams, and other improvements.

(1) Exploration operations shall be conducted in compliance with all federal, state, and local laws, and all ordinances, rules and regulations which are applicable to such operations. Particularly, permittee shall comply with the oil and gas rules on state lands, oil and gas lease stipulations, if any, on those lands, and the bonding requirements before commencing operations.

(2) The permittee shall take such measures for the prevention and suppression of fire on the permit area and other adjacent lands used or traversed by the permittee as are required by applicable laws and regulations. When in the opinion of the department weather and other conditions affecting fire incidence and control make special precautions necessary to protect the area, the permittee shall take such additional or other fire prevention and control measures as may be required by the department.

(3) The permittee shall obtain appropriate permission to use water necessary for the exploration activities. This normally will require a permit from the owner of the water right.

(4) The permittee shall make satisfactory adjustment of any damages sustained by the owner to the surface of the lands or sustained by the surface lessee to his leasehold interest in connection with operations by the permittee. The surface lessee should not receive damages over and above his annual rental unless special circumstances are demonstrated.

(1) Except as hereinafter provided, all seismic holes shall be plugged as soon after being utilized as reasonably practicable; however, in no event shall they remain unplugged for a period of more than 120 days after being drilled and shot.

(2) The permittee shall notify the department, in writing, of its intent to plug and abandon, including the date such activities are expected to commence, the location by section, township, and range of the holes to be plugged and the name and telephone number of the person in charge of the plugging operations.

(3) All seismic shot holes shall be plugged in accordance with the board of oil and gas conservation rules. All cuttings not placed in the hole shall be spread out over the surrounding area at a depth not to exceed 1 inch.

(4) If an artesian water flow is encountered in any of the drill holes located on state land, the permittee shall immediately notify the department so that a decision can be made by the department as to whether the well will be developed. The department shall make a decision within 24 hours of notification. If the well is not developed, or if damage is occurring or is imminent, it is the permittee's responsibility to plug the hole with cement of sufficient density to contain the waters to their native strata as required by the board of oil and gas con- servation rules. If a nonflowing aquifer is encountered in any of the drill holes on state land, the permittee shall notify the department in writing of the location and depth.

(5) The permittee shall leave the land covered by the permit in as nearly the same condition as it was prior to the effective date of the permit as is practically possible. All refuse, including, but not limited to, oil cans, shot wire, powder boxes, flagging, cement or mud sacks, stakes, and primacord shall be removed from the lands and shall be properly disposed of by the permittee.

(6) A seismic shot hole may be left unplugged at the request of the surface lessee or owner for conversion to a fresh water well provided the surface lessee or owner executes a release on a form provided by the department relieving the permittee from any liability for damages that may thereafter result from the hole remaining unplugged.

(1) Within 6 months after termination of a permit, the permittee shall submit to the department an affidavit setting forth the following:

(a) the nature of the tests conducted;

(b) a narrative description of or a map showing the number and location of sites where tests were conducted; and

(c) the location and depth of any geologic formations which may be capable of producing water in usable quantities that are discovered in testing. The submission of a driller's log shall satisfy this requirement.

(2) The permittee shall maintain records (including receipts and/or check or draft numbers) of amounts paid, if any, to surface owners or lessees in settlement of damages. The permittee shall make the records available for the department's review upon requests of the department.

(1) When used herein, unless a different meaning clearly appears from the context:

(a) "Board" means the Board of Land Commissioners of the state of Montana;

(b) "Commercial quantities" means that quantity of coal which can be sold at profit in the commercial market;

(c) "Coal" means and includes black or brownish-black solid fossil fuel which has been subjected to the natural process of coalification and which falls within the classification of coal by rank: I, anthracite; II, bituminous; III, sub-bituminous; IV, lignite;

(d) "Department" means Department of Natural Resources and Conservation;

(e) "Director" means director of the Department of Natural Resources and Conservation, chief administrative officer of the department;

(f) "Interests foreign to the United States" means countries, states, or governmental subdivisions other than those within the United States of America;

(g) "Lessee" means the person in whose name and coal lease appears of record in the offices of the department, whether such person be the original lessee or a subsequent assignee. The term "lessee" also includes, where the context of the rule may indicate, any person who is the apparent successful bidder for a coal lease but with whom a formal coal lease agreement has not been completed and finalized;

(h) "Person" means any individual, firm, association or corporation or other legal entity;

(i) "Qualified applicant" means any person who may become a qualified lessee as set forth herein;

(j) "State" means the state of Montana;

(k) "State lands" means all lands the leasing of which for coal purposes is under the jurisdiction of the board;

(l) "Value" means the contract sales price as defined in 15-35-102, MCA.

(2) If after a determination of the amount, location, and quality of the coal on the lands for lease, it appears that the extraction of the coal from such lands by strip mining methods would adversely affect the methods of recovery of deep minable coal from such operations on such lands in the future, the board may not issue a lease.

(1) Any person qualified under the constitution and laws of the state of Montana may lease state lands for coal purposes provided that:

(a) all corporations not incorporated in Montana must obtain a certificate of authority to transact business in this state from the Secretary of State;

(b) no officer or employee of any agency of the executive department of state government who is required to inspect or examine field information in regard to prospecting for coal or the mining thereof, may take or hold such lease;

(c) the applicant, if a natural person, has reached the age of 18 years; and

(d) no citizen of a foreign country is eligible to obtain and hold a state coal lease unless the citizen's country provides for similar or like privileges to citizens of the United States. Likewise, no partnership, corporation, association, or other legal entity controlled by interests foreign to the United States is eligible to obtain and hold a state coal lease unless the entity's country provides for similar or like privileges to citizens of the United States.

(2) Any person qualified to hold a coal lease on state lands may acquire, receive and hold more than one lease.

(1) The land shall be leased in as compact bodies as the form and areas of the tract held by the state and offered for lease will permit. No lease may embrace noncontiguous subdivisions of lands unless such subdivisions are within an area comprising not more than one square mile.

(2) No state coal lease may be issued until the coal resources and the surface of the tract to be leased have been evaluated as provided for in 77-3-312, MCA. No coal lease may be issued for less than the fair market value of the coal included under the lease.

(3) Tracts may be offered for lease pursuant to an application submitted by a qualified lessee, or by the department of its own volition.

(4) An application to have a tract offered for lease may be made at any time during the year on a form provided by the department:

(a) such application shall contain the information called for therein, including an adequate and sufficient description of the lands sought to be leased; and

(b) such application shall be accompanied by a $50.00 application fee. Applications not accompanied by the application fee will not be considered.

(5) Where more than one application is filed on any one tract, the department shall notify each person submitting an application subsequent to the first qualified application that there is a prior application for that tract. All subsequent application fees shall be returned. This is the only instance in which the application fee may be refunded.

(6) When sufficient applications have been received to warrant a sale, or at the director's discretion, a lease sale will be announced.

(a) Notice of a lease sale shall be posted on the department's web site and published in a trade journal of general circulation in the coal mining industry or in the major newspapers of general circulation within Montana each week for four weeks preceding the date of sale. The notice shall identify the county or counties within which tracts are being offered for lease, state the date of the lease sale, provide instructions on how to obtain detailed information from the department on the specific tracts to be offered, and the bidding requirements and procedures.

(b) The department shall maintain a master mailing list of prospective coal lessees who request, in writing, that their names be placed on such list; and concurrently with the publication of the notice of sale in the newspapers or trade journal, the board shall mail or e-mail to each addressee on the master mailing list a copy of the notice of sale. However, such mailing shall not be deemed a legal prerequisite to a valid sale. Furthermore, the board shall have no liability to any person who may be inadvertently omitted in the mailing of such additional notices.

(c) Sales of state coal leases will be by competitive bidding. The board may call for bids on the percentage of royalty to be paid by the lessee, on a first year cash bonus to be paid by the lessee, or both; but unless the sales notices state that bids on the percentage of royalty will be called for on particular leases, all leases will be sold by bidding on the first year bonus alone.

(7) The board may require bidding to be by submission of written sealed bids, by oral bidding, or by a combination of both. When sealed bids are required, the notices of sale will so state as to particular leases and will designate a date by which bids must be submitted. Where the sales notices do not state otherwise, all bidding will be oral.

(8) Subject to the board's right to reject any and all bids:

(a) when bidding is on a cash bonus basis, the lease will be awarded to the qualified applicant who submits a bid of the highest cash amount per acre;

(b) when bidding is on a percentage of royalty basis, the lease will be awarded to the qualified bidder who submits a bid of the largest percentage of royalty to be paid. No bid of less than ten percent of the f.o.b. price of the coal prepared for shipment excluding that amount charged by the seller to pay taxes on production will be accepted; and

(c) when bidding is on a cash bonus and percentage of royalty basis the board will determine which bid is to the best advantage of the state and award the lease accordingly.

(9) When sealed bids have been required and there is a tie for high bid, the highest bidder will be determined by oral auction among the tied bidders. If no oral bid is offered which is higher than the sealed bids, the highest bidder will be determined by lot. If no bid is made on a tract offered for lease, no lease will be awarded for that tract.

(10) The department may require a bid deposit in any amount it may determine, up to ten percent of the appraised value of the coal offered for lease under any tract. When such a deposit is to be required, notice of the requirement shall be given in the notice of the lease sale.

(11) When bidding is by submission of sealed bids and a bid deposit is required the deposit shall accompany the bid. When bidding is oral and a bid deposit is required, the deposit must be submitted prior to the opening of bidding. 

(12) An applicant or successful bidder shall pay a $25.00 administrative fee for issuance of any coal lease.

(2) The annual money rental shall be in addition to any royalty payment.

(3) No partial rental payment will be accepted, and the entire rental shall be considered unpaid until the full rental payment has been received.

(1) The lessee shall pay in cash a royalty on all coal produced from the leased premises at a rate of not less than ten percent of the value of the coal.

(2) The fair market value of the coal shall be determined by the board in accordance with 77-3-312 and 77-3-316(4), MCA.

(3) On or before the last day of each month, every holder of a producing coal lease shall make a report to the department on a form the department prescribes, showing the number of tons mined during the preceding calendar month, the price obtained therefore at the mine, the total amount of all sales, and any additional information required by the department. The report shall be signed by the lessee or some responsible person having knowledge of the facts reported and be accompanied by payment of the royalty due the state for the preceding month as shown by the report.

(4) The lessee shall report any adjustments to the sales price of the coal which affect the sales price as previously reported in the monthly reports within 30 days of the adjustment. The royalty shall be adjusted accordingly.

(2) In the case of a partial assignment, i.e., assignment of a full interest in only a portion of the leased premises, the department shall issue a new lease or new leases, with the same expiration date as the original lease for the assigned acreage. A new ledger sheet or sheets shall be prepared and the original lease adjusted accordingly. The original lessee and the assignee(s) assume full liability for their respective leases.

(3) The lessee may assign an undivided, fractional interest in any lease, either as to the whole of the leased premises or as to any portion thereof, by assigning title to the acreage in question to himself and the assignee. The assignment must show the respective shares of interest and may be approved by the director as a transfer of title only without recognition of any assignment of lease obligations and responsibilities.

(4) All other assignments of coal leases or interests therein are subject to approval by the board and are binding upon the state in the discretion of the board.

(5) Assignments involving reservations of overriding royalties or other interests by assignee are approved by the director as a transfer of title only and without recognition of such overriding royalties or interests. Such reservations do not affect the validity of the transfer of title.

(6) An assignment or transfer must be on the form currently approved by the board. Evidence of transfers by operation of law should be in the form of a certified copy of the appropriate court order or decree or similar document, such as letters of administration to personal representatives, decree of distribution, executor's deed or sheriff's deed.

(7) The board may recognize any transfer by operation of law to an unqualified lessee for a period of time no longer than one year and only for the purpose of the further transfer of the interest.

(8) The director shall notify the parties to any assignment or other transfer submitted of approval or non-approval thereof.

(2) The reasonable compensation that the arbitrators may fix for their services shall be paid in equal shares by the owner of the improvements and the new lessee. The value of the improvements so ascertained and fixed is binding on both parties. However, if either party is dissatisfied with the valuation so fixed, he may within 10 days appeal from their decision to the department. The department shall examine the improvements and its decision shall be final. The department shall charge and collect the actual cost of the reexamination to the owner and the new lessee in such proportion as in its judgment justice demands.

(3) Before the new lease is issued, the applicant shall show to the satisfaction of the board that he has paid the owner for the improvements as agreed upon between them or as fixed by the aforesaid arbitrators or the department, that he has tendered payment as so fixed, or that the owner desires to remove his improvements.

(1) If the lessee fails to comply with any provisions of state law relating to coal leases, the provisions of these rules, or the provisions of its coal lease, the department shall give lessee written notice specifying such failure. Lessee shall have a period of 60 days following such notice to cure the failure so specified. Failure to so cure may result in cancellation of the lease by the board. Any lessee whose lease has been so canceled has the right to a hearing pursuant to the Montana Administrative Procedure Act and the regulations of the department.

(2) Every coal lease is conditioned upon compliance with the Montana Strip and Underground Mine and Reclamation Act and the Strip Mining Siting Act, Title 82, chapter 4, parts 2 and 1, respectively, MCA, and any other applicable laws and regulations of the state of Montana.

(3) The lessee shall allow the department to make as many inspections of the leased premises as it deems necessary and shall carry out at the lessee's expense all reasonable orders and requirements of the department relative to the prevention of waste and preservation of property. On the failure of the lessee to comply with this paragraph, the department shall have the right, together with other recourse herein provided, to enter on the property, repair damages, and prevent waste at the lessee's expense. These remedies are not exclusive and do not limit the state's other remedies of law.

(4) Upon the termination for any cause of any lease, the lessee must within 6 months after the date of the termination remove all machinery, fixtures, improvements, buildings and equipment belonging to him from the premises. Any machinery, fixtures, improvements, buildings and equipment belonging to any lessee and not removed within 6 months after the date of termination of the lease shall, upon the expiration of the 6 month period, become the property of the state. In special circumstances the department may allow a reasonable extension of time for removal. However, the claimant of such property of the state for salvage or otherwise, and the removal of such property from the lands, or any of such actions shall not relieve the lessee of his obligations to properly reclaim the land and restore the premises to their condition prior to mining operations as far as reasonably possible, as prescribed by Title 82, chapter 4, parts 1 and 2 MCA. If the land is leased to a new lessee prior to the expiration of the above 6 month period the former lessee may sell the improvements to the new lessee. If the new lessee and former lessee cannot agree upon the proper compensation for the improvements arbitration procedures as provided by these rules must be started prior to the end of the 6 month period.

(2) A verbatim written record of any hearing or rehearing will be made if any party in interest so requires not less than 5 days prior to the day set for hearing and if the requesting party agrees to pay the cost thereof, including the cost of the original copy of the transcript. The transcript shall become a part of the case record and remain on file with the department. The party requesting such verbatim record may be required to deposit, in advance, the anticipated cost of the record. Any transcript must be certified as true, correct, and complete by the parties before it becomes part of the record.

(2) A separate file and record shall be kept on each hearing held on application of a lessee or prospective lessee. Such separate file shall contain the written application for the hearing, a copy of the notice of the hearing, evidence of the mailing thereof, and the transcript of the hearing, if prepared.

(3) The department shall maintain a record of publication of notices of all lease sales. Such record shall consist of published copies of such notices or affidavits by each printer or publisher of the newspaper or his foreman or principal clerk, annexed to a copy of the document or notice. The record shall specify the times when and the paper in which the publication was made.

(1) The department shall assess the following fees:

(a) application for coal lease - $50.00;

(b) issuance of each coal lease - $25.00; and

(c) filing each assignment affecting a coal lease, or interest therein, of whatever nature - $10.00.

When used herein, unless the context requires otherwise:

(1) "Board" means the Board of Land Commissioners of the state of Montana;

(2) "Department" means the Department of Natural Resources and Conservation of the state of Montana;

(3) "Director" means director of Natural Resources and Conservation, chief administrative officer of the Department of Natural Resources and Conservation;

(4) "Geothermal Resources" means the natural heat energy of the earth, including the energy, in whatever form, which may be found in either position and at any depth below the surface of the earth, either present in, resulting from, created by, or which may be extracted from such natural heat and all minerals in solution or other products obtained from the medium of any geothermal resource;

(5) "Lessee" means the person in whose name the geothermal resources lease appears on record in the office of the director, whether such person be the original lessee or a subsequent assignee. The term "lessee" also includes, where the context of the rule may indicate, any person who is the apparent successful bidder for a geothermal resources lease but with whom a formal lease agreement has not been completed and finalized;

(6) "Material disturbance" means all disturbance by mechanical equipment including, but not limited to, bulldozers, graders, backhoes, trenching machines, drilling rigs, augers, and explosives;

(7) "Operator" means the person having control or management of geothermal resource operations on the leased lands

or a portion thereof;

(8) "Person" means any individual, person, firm, association, corporation or other legal entity;

(9) "Prospect well" means a geophysical test well, temperature gradient test well or any other test well drilled for informational purposes in the exploration of and search for geothermal resources;

(10) "State" means the state of Montana;

(11) "State lands" includes all lands and interests within the jurisdiction of the board;

(12) "Waste" means any physical waste, deleterious effects on surface and ground water, including but not limited to underground waste resulting from the inefficient, excessive or improper use or dissipation of reservoir energy or resulting from the location, spacing, drilling, equipment, operation or production of a geothermal resource well or prospect well in such manner that reduces or tends to reduce the ultimate economic recovery of the geothermal resources within a reservoir; and the surface waste resulting from the location, spacing, drilling, equipping, operation or production of a geothermal resource well or prospective well in such a manner that causes or tends to cause the unnecessary or excessive surface loss or destruction of geothermal resources released from the reservoir;

(13) "Well" means any excavation made for the discovery or production of geothermal resources, or any excavation or facility used for the reinjection of geothermal resources or the residue thereof underground.

�

(2) No lease may embrace more than 640 acres, except that any section surveyed by the United States which contains more than 640 acres may be included under any one lease. The land shall be leased in as compact bodies as the form and areas of the tract held by the state and offered for lease will permit. No lease may embrace noncontiguous subdivisions of land unless such subdivisions are within an area comprising not more than 1 square mile.

(3) Any person qualified to hold a geothermal resources lease on state lands may acquire, receive and hold more than 1 lease.

(a) Such application shall contain the information called for therein, including an adequate and sufficient description of the lands sought to be leased.

(b) Such application shall be accompanied by a non-refundable $10.00 application fee. Applications not accompanied by the application fee will not be considered.

(2) When sufficient applications have been received to warrant a sale, or at the director's discretion, a sale will be announced.

(a) Notice of sale will be given by publication in a trade journal of general circulation in the geothermal industry or in 2 newspapers of general circulation in Lewis and Clark County, Montana. Notice will be published each week for 4 weeks preceding the date of sale.

(b) The board will maintain a master mailing list of prospective geothermal resource lessees who request, in writing that their names be placed on such list; and concurrently with the publication of the notice of sale in the newspaper, the board shall mail to each addressee on the master mailing list a copy of the notice of sale. However, such mailing shall not be deemed a legal prerequisite to a valid sale. Furthermore, the board shall have no liability to any person who may be inadvertently omitted in the mailing of such additional notices.

(c) Geothermal lease by competitive bidding will be by sealed bid submitted to the department 40 days after announcement of the sale. Bids must be made on each tract separately.

(i) Lease will be awarded to the qualified bidder who submits a bid of the highest cash amount per acre above the minimum bid of $1.00 per acre for the first year's rental for the right to lease state-owned geothermal lands.

(ii) Each bidder must submit with his sealed bid, 1/5 of the amount of the bid in cash or by cashier's check, certified check or money order payable to the order of the department of natural resources and conservation. After completion of the lease offer, the amounts submitted by unsuccessful bidders will be returned. The successful applicant must submit to the department the remaining 4/5 of the amount bid within 30 days following receipt of notice of award.

(d) The board reserves the right to reject any and all bids on any tract offered for lease.

(3) If, at the lease sale, no bid is made on the tract for which an application was made, the applicant may negotiate with the board for lease. The board reserves the right to reject negotiations on any tract of land offered for lease.

(4) Each application shall constitute an undertaking to pay the required first year's rental plus a $25.00 fee for the issuance of the lease if at the lease sale the applicant is the successful bidder therefore, or at the lease sale no bid is made on the tract for which application was made and a lease is successfully negotiated with the applicant.

(a) If geothermal resources are not being produced in paying quantities from the leased premises at the expiration of the primary term of the lease but the owner of the lease is then engaged in drilling on the premises for geothermal resources, then the lease continues in force so long as such drilling operations are being diligently prosecuted. The board reserves the right to decide whether such drilling operations, which may extend a lease beyond the primary term, are being diligently prosecuted.

(b) If geothermal resources are recovered from any well drilled after the expiration of the primary term, the lease shall continue in force so long as geothermal resources in paying quantities are produced from the leased premises.

(c) If construction of a geothermal generating facility is under way at the expiration of the primary term of the lease or if a contract for construction has been let, the lease shall continue in force as long as construction diligently continues. Following completion of construction the lease shall continue in force as long as geothermal resources are produced in paying quantities.

(2) The lessee may shut-in a well upon approval by the department pending confirmation of the existence of geothermal resources in commercial quantities and/or the construction of a facility to utilize said resources.

(a) The lessee must notify the department, in writing, prior to shutting-in any well of intent to shut-in said well. The notification must include the exact location of the well proposed to be shut-in, the exact reasons why the well must be shut-in, and the proposed length of time the well will remain shut-in.

(b) A shut-in well will not be grounds for continuance of the primary term of the lease unless the conditions of (1) (a) , (b) , and (c) are complied with.

(a) (i) A royalty of not less than 10% of the gross revenue, exclusive of charges approved by the director made or incurred with respect to transmission or other services or processes, received from the sale of heat energy, steam, brines from which no minerals have been extracted, and associated gases at the point of delivery to the purchaser thereof.

(ii) If the lessee also operates an energy producing plant on the land the royalty will be computed in terms of (1) (a) and as if the product were to be sold to a third person at the then prevailing market price for geothermal resources in the same market area and under the same marketing conditions.

(b) A royalty of not less than 2% nor more than 5% of the gross revenue received from the sale of mineral products or chemical compounds recovered from geothermal fluids in the first marketable form as to each such mineral product or chemical compound.

(c) A royalty of not less than 10% of the gross revenue received from the operation of the geothermal resources for recreational and health proposes.

(d) An annual rental, payable in advance, of at least $1.00 per acre or fraction thereof for each year of the lease.

(e) If, after the discovery of geothermal resources in commercial quantities, the total royalties paid during any calendar year do not equal or exceed the sum equal to $2.00 per acre for each acre or fraction thereof then included in the lease, the person holding the lease shall, within 60 days after the end of the year, pay such sum as is necessary to equal the minimum royalty of $2.00 per acre.

(f) Rental and royalty rates will be determined by the board and will be set forth in the notice of sale and in the issued lease.

(2) Royalty payments shall be made pursuant to (1) (a) and (b) for all geothermal resources used and not sold by a person holding a lease, with the gross revenue therefrom to be determined as though the geothermal resources had been sold to a third person at the then prevailing market price for geothermal resources in the same market area and under the same marketing conditions.

(3) A royalty, to be set by the board, will be paid yearly on each shut-in well.

(2) Each lease shall include provisions for the diligent exploration of the leased resources until there is production in commercial quantities from the state lands subject to lease, and failure to perform such exploration may subject the lease to termination. Diligent exploration means exploration operations on or related to the leased lands, including without limitation geochemical surveys, heat flow measurements, core drilling, or drilling of a test well. A report of all exploration operations and expenditures must be submitted to the director at the close of each lease year. Beginning with the fourth year of the primary lease term, and each year thereafter, exploration operations, to qualify as diligent operations, must entail expenses during that year equal to at least 4 times the lease rental for the same year. Exploration expenses incurred during any year of the primary lease term in excess of those required herein may be credited toward diligent exploration during subsequent years of the primary lease term.

(b) Payment of delayed exploration penalty shall be as follows:

(i) for the fourth year of the primary term of the lease $2.00 per acre per year.

(ii) for the remainder of the primary term of the lease an amount per acre per year as determined by the board. The delayed exploration penalty for the fifth and succeeding years of the primary term of the lease shall continue at the rate of $2.00 per acre per year unless the board notifies the lessee not less than 60 days before the commencement of the next lease year that payment at a different rate is required or permitted; provided that if the lessee shall apply for a hearing thereon within 10 days after receipt of notice, the determination of a different delayed exploration penalty rate shall become final only after such hearing has been held, and the rate determined by the board has been affirmed.

(d) Upon failure of the lessee to either commence or continue diligent exploration or to pay the required exploration penalty, the board shall terminate the lease as of the end of the annual period of the lease in which the failure to so commence or to continue exploration or to so pay occurs. Any such termination of the lease shall be 60 days after notice to the lessee of the board's proposed action, and after hearing thereon if the lessee so requests in writing within 30 days.

(b) In case of a partial assignment, i.e., assignment of a full interest in only a portion of the leased premises, a new lease is issued for the assigned acreage, with the same expiration date as the original lease. The original lessee and the assignee assume full liability for their respective lessee.

(2) The assignment of any geothermal resources lease, either in whole or in part, to more than one assignee will be permitted if the proposed assignment is otherwise in compliance with the foregoing requirements; provided however, that any such assignment will not be approved by the board until one of the assignees is designated to act as agent for the purpose of receiving any and all notices from the board given in connection with the lease and meeting all requirements and obligations under the lease.

(3) Assignment of undivided, fractional interests in any lease, either as to the whole of the leased premises, or as to any portion thereof, is accomplished by having the lessee assign title to the acreage in question to himself and the assignee. The assignment may show the respective shares of interest but the transaction is approved by the director as a transfer of title only and without recognition of the respective interests.

(4) All other assignments of geothermal resources leases or interests therein are subject to approval by the board, and are binding upon the state in the discretion of the board.

(5) An assignment or transfer on the form currently approved by the board will be acceptable. Evidence of transfers by operation of law should be in the form of a certified copy of the appropriate court order or decree or similar document, such as letters of administration to executor or administrator, decree of distribution, executor's deed or sheriff's deed.

(6) Any transfer, by operation of law, to an unqualified lessee will be recognized by the board for a period of time in no event longer than 1 year, and only for the purposes of the further transfer of the interest to a qualified lessee.

(7) The director shall notify the parties to any assignment or other transfer submitted for approval or nonapproval thereof.

(8) Unless the lease account is in good standing at the time the assignment is reached for action, the request for approval of the assignment will be denied, and the lease shall be subject to termination in accordance with these rules.

(9) All applications for approval of assignments must be accompanied by a fee of $25.00 for each assignment.

(2) No overriding royalty on the production of geothermal resources created by an assignment contemplated by ARM 36.25.408 or otherwise shall exceed 5% nor shall an overriding royalty, when added to overriding royalties previously created exceed 5%.

(3) The creation of an overriding royalty interest that does not conform to the requirements of this rule shall be deemed a violation of the lease terms, unless the agreement creating overriding royalties provides for a prorated reduction of all overriding royalties so that the aggregate rate of overriding royalties does not exceed 5%.

(4) In addition to the foregoing limitations, any agreement to create or any assignment creating royalties or payments out of production from the leased lands shall be subject to the authority of the board, after notice and hearing, to require the proper parties thereto to suspend or modify such royalties or payments out of production in such manner as may be reasonable when and during such periods of time as they may constitute an undue economic burden upon the reasonable operations of such lease.

(2) Although no particular form of surrender is required, each surrender must be in writing, must sufficiently identify the lease sought to be surrendered, and must specifically describe the lands to be surrendered, whether all of the lease premises or a portion only.

(3) Such written instrument of surrender and relinquishment must be signed by the owner of the lease as shown by the records of the director, or by his duly authorized agent. If more than one person owns the working interest in the lease, either all owners must join in a joint surrender of the lease or each must submit a separate, written surrender.

(4) If operations have been conducted on a lease which lessee desires to surrender, the lessee shall also submit with his written instrument of surrender evidence of the proper plugging and abandonment of any hole drilled on the lease premises, together with evidence that he has complied with the reclamation provisions of ARM 36.25.316. Before the bond is released subsequent to surrender of a lease the department shall inspect the tract to determine that reclamation has been accomplished.

(5) If timely notice is given by the lessee of an intent to surrender a lease, but the instrument of surrender is inadequate under the rules herein set forth, or if any additional required information is not timely supplied by the lessee, such informal notice of intent to surrender shall be effective to relieve the lessee of any obligation to pay further rental under the lease, provided that an instrument of surrender and any additional required information is supplied to the board within 60 days after the termination date of the lease as intended and sought by the lessee.

(2) The agreement shall describe the separate tracts comprising the unit, disclose the apportionment of production or royalties and costs to the several parties, and the name of the operator, and shall contain adequate provisions for the protection of the interests of all parties, including the state of Montana. The agreement should be signed by or in behalf of all interested necessary parties before being submitted to the director and will be effective only after approval by the board.

(3) The owners of any right, title, or interest in the geothermal resources to be developed or operated under an agreement can be regarded as proper parties to a proposed agreement. All such owners must be invited to join as parties to the agreement. If any owner fails or refuses to join the agreement, the proponent of the agreement should declare this to the director and should submit evidence of efforts made to obtain joinder of such owner and the reasons for non-joinder.

(4) In lieu of separate bonds required for each lease committed to a unit agreement, the unit operator may furnish and maintain a collective corporate surety bond or a personal bond conditioned upon faithful performance of the duties and obligations of the agreement and the terms of the leases subject thereto and these rules. Personal bonds shall be accompanied by a deposit of negotiable federal securities in a sum equal at their par value to the amount of the bond and by a proper conveyance to the department with full authority to sell such securities in case of default in the performance of the obligations assumed. The liability under the bond shall be for such amounts as the board shall determine to be adequate to protect the interests of the state of Montana. Additional bond coverage may be required whenever deemed necessary by the director. In case of changes of unit operator, a new bond must be filed or a consent of surety to the change in principal under the existing bond must be furnished.

(5) Any modification of an approved agreement will require approval of the board under procedures similar to those cited in (1) .

(6) The term of all leases included in any cooperative or unit plan of development or operation shall be extended automatically for the term of such unit or cooperative agreement. Rentals or royalties on leases so extended shall be at the rate specified in the lease.

(7) Any lease which shall be eliminated from any such cooperative or unit plan of development or operation, or any lease which shall be in effect at the termination of any such cooperative or unit plan of development or operation, unless relinquished, shall continue in effect for the term of the lease or for 1 year after its elimination from the plan or agreement or the termination thereof, whichever is longer, and so long thereafter as the lessee engages in diligent and continuous drilling or so long thereafter as geothermal resources are produced in paying quantities, but in no event beyond the time provided in ARM 36.25.304.

(8) Before issuance of a lease for lands within an approved unit agreement, the lease applicant or successful bidder will be required to file evidence that he has entered into an agreement with the unit operator for the development and operation of the lands in the lease if issued to him under and pursuant to the terms and provisions of the approved unit agreement, or a statement giving satisfactory reasons for the failure to enter into such agreement. If such statement is acceptable, he will be permitted to operate independently, but will be required to perform his operations in a manner which the director deems to be consistent with the unit operations.

(9) Nothing in this rule shall excuse the parties to a unit agreement from procuring the approval of the department of natural resources and conservation if approval is required.

(10) Geothermal resources produced from any part of a unit in which state lands are included by virtue of a pooling agreement shall be considered to be produced from the state lands therein.

(2) Prior to initiation of operations to drill a well for any purpose to 1,000 feet or deeper, the lessee shall increase the bond to the amount of $10,000.

(3) At any time during the existence of a geothermal resources lease, the board may require new or additional bonds to protect the interest and rights of the state and may require the lessee to post a bond, in an amount to be set by the board, to insure the payment of damages to any surface lessee.

(1) The lessee may not enter upon the leased lands for casual exploration or inspection until there is in existence a fully executed lease.

(2) The lessee may not enter upon the leased lands for exploration operations using motorized earth moving equipment or otherwise engaging in operation which may lead to a material disturbance to lands, timber, or other resources or improvements on the leased land until there is in existence a fully executed lease and the conditions of ARM 36.25.404, 36.25.435, and 36.25.415, if pertinent, have been satisfied.

(a) Before entering upon lands as specified in ARM 36.25.414(2) , the lessee shall provide the department with the following:

(i) name and address of operator;

(ii) exact legal description of the location of the operation;

(iii) starting date and estimated completion date of the operation;

(iv) the anticipated size or scope of the operation including manpower, equipment and proposed disturbance;

(v) the general method of operation as provided in ARM 36.25.415;

(vi) any other information the department may require.

(3) Lessee shall be entitled to use and occupy only so much of the surface of leased lands as may be required for all purposes reasonably incident to exploration for, drilling for, production and marketing of geothermal respirces and associated by-products produced from the leased lands, including the right to construct and maintain thereon all works, building, plants, waterways, roads, communication lines, pipelines, reservoirs, tanks, pumping stations or other structures necessary to the full enjoyment and development thereof, consistent with a plan of operations and amendments thereto, as approved by the department.

(4) Lessee shall not unreasonably interfere with the removal of timber purchased prior to or subsequent to the issuance of a lease. Lessee may remove any timber required for ingress or egress or necessary for operations. Any timber cut or removed by lessee shall be paid for by lessee on a current price basis as determined by the department.

(5) A geothermal resources lease shall not be construed to prohibit the leasing of the lands by the board to other persons for grazing and agricultural purposes, or for the mining of materials or for oil and gas development; provided, however, that the lessee under a geothermal resources lease shall have paramount right as against grazing and agricultural lessees to the use of so much of the surface of the land as shall be necessary for the purposes of the lease. All lessees shall have the right of ingress and egress at all times during the term of the lease.

(6) The board reserves the right to sell or otherwise dispose of the surface of the lands embraced with a lease, insofar as said surface is not necessary for the use of the lessee in the exploration, development, and production of the geothermal resources and associated by-products, but any sale of surface rights made subsequent to execution of a lease shall be subject to all the terms and provisions of that lease during the life thereof, including extensions and renewals under ARM 36.25.416.

(7) Lessee shall pay to the board, its surface lessees or grantees or contract purchases, for any damage done to the surface of said lands and improvements thereon, including without limitation growing crops, by reason of lessee's operations.

(8) Lessee shall reclaim all state lands disturbed by exploration, development, operation and marketing, of geothermal resources in accordance with applicable reclamation procedures contained in ARM 36.25.415 and the lease, as now existing and hereafter amended. Lessee shall conserve, segregate, stockpile, and protect topsoil to enhance reclamation. Lessee shall take all necessary steps in the exploration, development, operation, and marketing of geothermal resources to avoid a threat to life or property or an unreasonable risk to subsurface or atmospheric resources.

(a) Lessee shall use all reasonable means at his disposal to prevent:

(i) waste;

(ii) damage to any natural resource including trees and other vegetation, fish and wildlife and their habitat;

(iii) injury and damage to person, real or personal property; and

(iv) any environmental pollution or damage.

(b) The department shall have the right to enter upon the property at any time to:

(i) inspect the lessee's operation and issue such orders as are necessary to accomplish the purposes of these rules;

(ii) enter on the property to repair damages or prevent waste at the lessee's expense.

(2) A geothermal lessee shall reclaim any and all lands disturbed by operations conducted under his lease. At the completion of the operations, and upon the final abandonment and completion of plugging of any well, the lessee shall restore the surface of the location to its original contours as near as reasonably possible, redistribute the topsoil, and reseed the land with native grasses and/or plants as prescribed by the department.

(a) All available topsoil on land involved in an operation shall be removed before further disturbance occurs. Topsoil removal shall precede each step of the operation.

(b) Stockpiles of salvaged topsoil shall be located in an area where they will not be disturbed by ongoing operations and will not be lost to wind erosion or surface runoff. All unnecessary compaction and contamination of the stockpiles shall be eliminated and once stockpiled the topsoil shall not be rehandled until replaced on regraded disturbances. The department may require immediate planting of an annual and/or perennial crop on topsoil stockpiles for the purposes of stabilization.

(c) Stockpiled topsoil shall be replaced on all areas to be seeded within a 90 days period prior to revegetative seeding or planting. Extreme care shall be exercised to guard against erosion during application and thereafter.

(d) A suitable permanent diverse vegetative cover shall be established on all areas of land affected. Areas shall be planted or seeded during the first appropriate season following completion of grading, topsoil redistribution, and remedial soil treatments.

(i) An operator shall establish a permanent diverse vegetative cover or predominantly native species by drill seeding or planting, by seedling transplants, by establishing sod plugs, and/or by other methods. All methods must have prior approval by the department.

(ii) The operator shall utilize locally grown genotypical seed and seedlings when available in sufficient quality and quantity.

(iii) The operator shall plant seed of a pure and viable nature. Unless otherwise approved by the department, seed shall be at least 90% pure. Seeding rates shall reflect germination percentages.

(e) The operator may propose alternative plans for revegetation including, but not limited to, agriculture crops. Alternative plans must have prior written approval from the department.

(f) The operator shall consider soil, climate, and other relevant factors when planting and/or seeding to provide for the best seed germination and plant survival.

(3) If development of lands leased pursuant to these rules and regulations requires the utilization of water, the lessee may at any time prior to 1 year before the expiration of his lease, make written application to the board of land commissioners for permission to secure a water right to the leased land. The application shall show the permanency of the water supply and the estimated costs of utilizing it. If permission is granted, the water right shall be secured in the name of the state of Montana. Any existing water rights purchased by the lessee shall be the property of the lessee.

(4) On or before the last day of each month each holder of a producing geothermal resources lease shall make a report to the department for the preceding calendar month on a form prescribed by the department. The report shall show the amount of geothermal resources or by-products produced, saved, sold or utilized during the preceding month, the prices obtained, the total amount of all sales and additional information as may be required on the reporting form. The reports shall be signed by the lessee or some responsible person having knowledge of the facts reported, and shall be accompanied by payment of the amount due the state as royalty for the month covered by the report.

(5) Prior to initiation of operations to drill a well to 1,000 feet or deeper, lessee shall submit to the director for his approval, a plan of operations. Such plan shall include both in narrative form and on a map of suitable scale:

(a) the proposed location of each well including a layout showing the position of the mud tanks, reserve pits, cooling towers, pipe racks, etc.;

(b) existing and planned access, access controls, and lateral roads;

(c) location and source of water supply and road building materials;

(d) location of camp sites, air-strips, and other supporting facilities;

(e) other areas of potential surface disturbance;

(f) the topographic features of the land and the drainage patterns;

(g) methods of disposing of waste material;

(h) a narrative statement describing the proposed measures to be taken for protection of the environment, including but not limited to the prevention or control of fires, soil erosion, pollution of the surface and groundwater, damage to fish and wildlife or other natural resources, air and noise pollution, and hazards to public health and safety during the lease activities;

(i) all pertinent information or data which the director may require to support the plan of operations for the utilization of geothermal resources and the protection of the environment.

(6) (a) All wells drilled on state lands leased for geothermal purposes shall be identified by a conspicuous sign placed near the well, showing the name of the person drilling the well, the name of the lessee, the number of the lease, and the number of the well, if any.

(b) This sign shall remain until the well has been abandoned and all requirements of this rule have been satisfied.

(7) (a) The objectives of abandonment are to block interzonal migration of fluids so as to:

(i) prevent contamination of fresh waters or other natural resources;

(ii) prevent damage to geothermal reservoirs;

(iii) prevent loss of reservoir energy; and,

(iv) protect life, health, environment and property.

(b) Notice of intent to abandon any geothermal resources well, prospect well or injection well must be filed with the department at least 5 days before abandonment begins. After notice has been given, the lessee shall submit additional information concerning the well as is requested by the department.

(c) Upon prior approval by the department, a well may be left intact for development and use of water if the objectives of (7) (a) are met.

(8) (a) Good quality heavy drilling fluids shall be used to replace any water in the hole and to fill all portions of the hole not plugged with cement.

(b) All cement plugs with the possible exception of the surface plug shall be pumped into the hole through drill pipe or tubing.

(c) All open annuli shall be filled solid with cement to the surface.

(d) A minimum of 100 feet of cement shall be emplaced straddling the interface or transition zones at the base of ground water aquifers.

(e) One hundred feet of cement shall straddle the placement of the shoe plug on all casings including conductor pipe.

(f) A surface plug of either neat cement or concrete mix shall be in place from the top of the casing to at least 50 feet below the top of the casing.

(g) All casing shall be cut off at least 5 feet below land surface.

(h) Cement plugs shall extend at least 50 feet over the top of any liner installed in the well.

(i) Other abandonment procedures may be approved by the department if the lessee or operator can demonstrate that the geothermal resources, ground waters and other natural resources will be protected. Such approval must be given in writing prior to the beginning of any abandonment procedures.

(j) A history of geothermal resource wells, prospect wells and injection wells shall, at the request of the department, be filed with the department within 60 days after completion of abandonment procedures.

(i) Pertinent history data shall be for the exclusive use of the department and other state agencies involved in geothermal research and regulation, and shall remain confidential for a period of 2 years following submission of the history unless approved in writing earlier by the person who submitted such data.

(k) Within 30 days after the completion of the abandonment of any geothermal resources well, prospect well, or injection well, the lessee or operator of the abandoned well shall report in writing to the department on all work done with respect to the abandonment.

(9) Any person engaged in operating a well wherein high pressures are known to exist and any person drilling for geothermal resources in any geothermal area wherein the pressures are unknown shall equip such well with casing of sufficient strength seated in competent rock formation and cemented in place and with such other safety devices as may be necessary in accordance with approved methods, and shall use every reasonable effort to prevent blow-outs, explosions, and fires from such well operation.

(10) These rules in no way excuse the lessee of the obligation to comply with and be subject in all aspects to the conditions, limitations, penalties, and provisions of the laws of the state of Montana and the rules of the board, the department of natural RESOURCES, the department of environmental quality, and all other applicable federal, state and local laws, now existing or hereinafter enacted.

(2) The board shall maintain a record of the publication of notices of all lease sales. Such record shall consist of published copies of such notices or affidavits of publication as provided in 26-1-1011, MCA.

The fees charged for geothermal lease related:

(1) for application $10.00;

(2) for each lease $25.00;

(3) for each assignment affecting a geothermal resources lease or interest therein, of whatever nature $25.00.

(1) "Assignee" means the person or persons to whom a lessee has transferred all or part of the unexpired term of his lease and who appears as such on record in the offices of the department;

(2) "Assignment" means any approved transfer of interest between a lessee and a second party whereby the second party is accorded the use of all or part of the lessee's leasehold interest;

(3) "Board" means the board of land commissioners of the state of Montana;

(4) "Department" means department of natural resources and conservation;

(5) "Director" means director of natural resources and conservation;

(6) "Gems" means sapphires, rubies, and other stones commonly known as "precious or semi-precious stones" but does not mean stones or other earth materials commonly used in building or construction work;

(7) "Lease" means unless the context indicates otherwise, a metalliferous mineral and gem lease issued pursuant to Title 77, chapter 3, part 1, MCA, and this sub-chapter;

(8) "Lessee" means the person or persons in whose name a metalliferous mineral and gem mining lease appears on record in the offices of the department, whether such person or persons be the original lessee or a subsequent assignee. The term "lessee" also includes, where the context of the rule may indicate, any person who is the apparent successful bidder for a metalliferous mineral and gem lease but with whom a formal metalliferous and gem lease agreement has not been completed and finalized;

(9) "Metalliferous minerals" means gold, silver, lead, zinc, copper, platinum, iron, and all other metallic minerals, except uranium or other fissionable materials;

(10) "Mining" means operations for the purpose of extracting from the earth ore and other material containing metalliferous minerals or gems, and commences at such time as commercial quantities of ore or other material are removed for sale, benefication, refining or other processing or disposition.

(11) "Person" means any individual, firm, association, corporation, governmental agency or other legal entity;

(12) "Qualified applicant" means any person, who may become a qualified lessee as set forth under ARM 36.25.604 hereof;

(13) "Standard lease form" means the lease form currently in use and approved by the board;

(14) "State" means the state of Montana;

(15) "State lands" means all lands the leasing of which for metalliferous minerals and gems are under the jurisdiction of the board.

(1) Lands available for leasing under these rules include any state lands in which mineral rights are not reserved by the United States or other grantor or predecessor in title. Such state lands include those which have been sold but in which mineral rights have been reserved, in whole or in part, by the state of Montana.

(2) Unsurveyed lands, including those under navigable lakes and streams, are available for leasing, provided that any applicant for a lease on such lands shall supply the department with as accurate an estimate of the number of acres to be included under such lease as can be derived from the latest survey, or an aerial photograph, and such other information as is available to the applicant. Further provided, that if and when such lands are leased and metalliferous metals or gems in commercial quantities are produced from the lands, the lessee shall supply the department with a legal description of the lands by courses and distances (metes and bounds) . The department assumes no liability or responsibility for the correctness, completeness or validity of such description and does not warrant title to such lands.

(3) No lease may embrace more than one governmental section. The land shall be leased in as compact bodies as possible. No lease may embrace noncontiguous subdivisions of lands unless such subdivisions are within an area comprising not more than one square mile.

(4) No lease on lands covered by lease for the mining of coal, oil, or gas may be issued to any person, association or corporation other than the holder of such coal, oil, or gas lease while that lease is in force except with the written consent of the holder of the coal, oil, or gas lease.

(2) No officer or employee of any agency of the executive department of state government who is required to inspect or examine metalliferous mineral or gem mines or otherwise to gather field information in regard to prospecting for metalliferous minerals or gems or the production thereof, may take or hold such a lease, nor shall such person become interested in any manner in any lease on state lands.

(3) Any person qualified to hold a lease on state lands may acquire, receive and hold more than one lease.

(2) The royalty for all ores bearing metalliferous minerals or gems which are mined, saved and removed from the leased premises shall be not more than eight percent (8%) or less than five percent (5%) of the returns from the metalliferous minerals or gems, as determined by the board on a case by case basis, but in no case shall be less than five percent (5%) of the fair market value of the metalliferous minerals or gems recovered. The returns are defined as the net amount received by the shipper after deducting reasonable transportation costs to the closest feasible point of sale, smelting charges and deductions and other treatment costs, not including as a deduction any cost of producing or treating at the mine. The fair market value is the value of the minerals or gems in raw crude form as recovered at the mine site.

(2) The lessee shall furnish upon request, but not more than once each calendar year, an exploration and development report which describes the work completed by the lessee. The report shall include a plat showing the location of any work completed on the lease property and shall include a complete geologic log and electric log (if done) of any test holes.

(3) Upon commencement of mining, the lessee shall make on or before the last day of each quarter, a report to the department concerning the operations for the latest 3 months for which records are available but not more than 3 months preceding the report. The report shall be on the form prescribed by the department and shall provide sufficient information to determine the royalty as well as any other pertinent information requested by the department. The royalty for the quarter reported shall accompany the report.

(2) In the case of a partial assignment, i.e., assignment of a full interest in only a portion of the leased premises, a new lease shall be issued for the assigned acreage, with the same expiration date as the original lease.

(3) The assignment of a lease, either in whole or in part, to more than one assignee will be permitted if the proposed assignment is otherwise in compliance with the foregoing requirements. However, no such assignment may be approved until one of the assignees is designated to act as agent for the purpose of receiving any and all notices from the department given in connection with the lease and meeting all requirements and obligations under lease.

(4) Assignment of undivided, fractional interests in any lease, either as to the whole of the leased premises, or to any portion may be arranged by having the lessee assign title to the acreage in question to himself and the assignee. The assignment may show the respective shares of interest but the transaction is approved as a transfer of title only and without recognition of the respective interests.

(5) Assignments involving overriding royalties or containing certain reservations by the assignee are approved as transfers of title only and without recognition of such overriding royalties or special terms and conditions.

(6) Evidence of transfers by operation of law should be in the form of a certified copy of the appropriate court order or decree or similar document. A transfer by operation of law to an unqualified person may be recognized by the department for a period of time sufficient to transfer the interest to a qualified person.

(2) Although no particular form of surrender is required, such surrender must be in writing, must sufficiently identify the lease sought to be surrendered, and must specifically describe the lands to be surrendered.

(3) Such written instrument of surrender and relinquishment must be signed by the owner of the lease as shown by the records of the department. If more than one person owns the working interest in a lease, all such owners must join in a joint surrender of the lease or each must submit a separate, written surrender.

(4) The lease bond shall not be released until any land disturbed by the lessee has been restored as provided in this subchapter or a subsequent lessee assumes responsibility for the disturbance.

(2) Upon termination of the lease for any cause the lessee shall immediately surrender the premises and shall remove all personal property within 60 days after termination of the lease.

(3) The lessee shall remain responsible for restoring the disturbed land until it has been restored as provided in this subchapter or in the lease itself. The former lessee may be relieved of this responsibility if the land is released.

(2) The lessee shall enclose and maintain all shafts, tunnels and other openings in order to protect livestock and humans from dangerous conditions.

(3) The lessee shall not cut any timber on leased land for use in its operations without the written consent of the department. The lessee shall pay the customary charges for such timber if consent is obtained.

(4) The lessee shall comply with all applicable state and federal laws, rules and regulations, including but not limited to those concerning safety, environmental protection and reclamation. The lessee shall conduct and reclaim the operation in accordance with the performance and reclamation standards of applicable reclamation laws. Exemption of lessee's operations from applicable reclamation laws does not relieve the lessee from the obligation to conduct and reclaim the operations in accordance with the performance and reclamation standards.

(2) Any sale, contract for sale or lease of state land which has been leased for minerals pursuant to this subchapter shall be made subject to such mineral lease and the surface owner, purchaser or lessee shall not be entitled to surface damages.

(3) If the surface of the land leased for minerals pursuant to this subchapter has been previously sold or contracted for sale or leased, the rights of the prior purchaser, contractee or lessee shall be protected as required by law and the board.

(1) The mineral lessee shall promptly notify the department of the discovery of any valuable minerals other than those covered by the mining lease.

As used in this subchapter, the following definitions apply, except where the context clearly indicates otherwise:

(1) "Agenda item report" means an agenda item containing information specific to sales presented to the state Board of Land Commissioners.

(2) "Bid" means a written or oral monetary commitment to purchase land or interest in land offered at the specified time and place by a person eligible to participate in an auction, as specified by the department in accordance with 77-2-363, MCA.

(3) "Bid deposit" for a cabin site or home site sale only means electronic funds transfer or a certified check or cashier's check drawn on any Montana bank equal to five percent of the minimum sales price submitted in connection with a bid for the real property as an assurance of the performance of a contractual or promissory requirement.

(4) "Board" means the state Board of Land Commissioners.

(5) "Department" means the Department of Natural Resources and Conservation.

(6) "Estimated costs" means the estimated costs to prepare the cabin site or home site for sale.

(7)  "Improvement owner" means a person with legal title to the improvements built upon or located on the cabin or home site, who is a current or former lessee, or their successor.

(8) "Improvements" means a home or residence, outbuildings and structures, sleeping cabins, utilities, water systems, septic systems, docks and landscaping.

(9) "Lessee" means the current lease holder of any cabin site or home site lease of state trust land.

(10) "Parcel" means one section or less that can be identified by legal description, independent of any other parcel of land, using documents on file in the records of the county clerk and recorder's office or in the department's records.

(11) "Processing costs" means estimated costs of preparing the parcel for sale, including but not limited to nomination fees, legal advertising, appraisals attributable to improvements, cultural resource inventories, required environmental review if not exempt under 77-2-363(6)(b), MCA, public notice, and document filing fees.

(12) "Tract" means a distinct portion of land, irrespective of ownership, that can be identified by legal description, independent of any other portion of land, using documents on file in the records of the county clerk and recorder's office.

(1) With the exception of processing costs described in this rule, the purchaser, or an applicant for purchase, of lands formerly comprising a state cabin site need not compensate the department for any administrative costs or services performed by department staff necessary for the sale of that state cabin site.

(2) The department shall:

(a) maintain a record of each transaction; and

(b) summarize all costs at the completion of each sale.

(3) Except as provided in (1) and (2), processing costs as described in ARM 36.25.701(11), shall be paid by the nominator or the purchaser, respectively.

(1) If the sale of a parcel would extinguish existing, reasonable public access to other public or state trust land or to public water, as defined in 77-2-303(2)(a), MCA, the board shall reserve an easement or right of way for access to the other public or state trust land or to public water.

(2) If the sale of a parcel would extinguish access to adjacent private land, the department shall provide an opportunity for the landowner to make application to purchase an easement under 77-1-107, 77-1-130, or 77-2-101, MCA.

(1) The department shall conduct a preliminary review of each parcel prior to department's nomination of any cabin site or home site parcel for sale. The department shall also conduct a preliminary review of any lessee- or improvement owner-nominated parcel to determine the suitability and priority for selling a cabin site or home site. The department may consider the following factors in the preliminary review:

(a) whether sale is consistent with the board's constitutional fiduciary duty;

(b) whether the parcel possesses clear title and whether any mortgage holder consents to sale;

(c) whether there are any outstanding lease violations on the parcel;

(d) whether, and to what degree the sale of the parcel would affect access to other public lands; and

(e) the extent of infrastructure, such as roads, utilities, power, telephone, water, or sewer availability.

(2) Based on the preliminary review, the department will inform the nominating lessee how the department ranks the cabin site or home site for processing for nomination for sale.

(3) The department may determine, based on current market conditions, the annual amount of cabin site or home site sale applications that it will accept and process in a given area.

(1) The board shall, in its sole discretion, sell individual cabin sites and home sites in configurations providing the best financial and management advantage to the affected trust beneficiary.

(2) The board reserves the right to approve or deny any nominations for the sale of state cabin sites and home sites. The department reserves the right to prioritize activities and determine the number of transactions processed related to the sale of cabin sites and home sites.

(3) The board, the department, the current lessee of, or the improvement owner may nominate that cabin site or home site for sale:

(a) nominations must be on a form issued by the department and must be sent to the appropriate department office, as noted on the form;

(b) a lessee or improvement owner may nominate and shall pay a nonrefundable $100 processing fee for each cabin site or home site nominated;

(c) the department may not accept incomplete nominations;

(d) the department shall review the classification of the parcel, as provided in 77-1-401, MCA, and classify the parcel if it is not classified; and

(e) when a parcel is nominated, the department shall notify:

(i) all persons holding a license on the parcel;

(ii) the representative of any affected trust beneficiary; and

(iii) the lessee of the parcel if the board or department nominated the parcel for sale.

(4) Sale of cabin sites and home sites are exempt from Montana Environmental Policy Act (MEPA) review under 77-2-363(7), MCA.

(5) If the department determines pursuant to ARM 36.25.704 that a cabin site or home site meets the preliminary suitability requirements for sale, the department will prepare an agenda item report for the board to seek the board's preliminary approval for a potential sale of the cabin site or home site.

(6) If the department determines the cabin site or home site is not suitable for sale, the department may, without board approval, remove the cabin site or home site from nomination and eliminate the parcel from further review.

(7) The department shall notify the lessee or improvement owner of the department's recommendation of the suitability of a cabin site or home site parcel's suitability for sale by mail, as provided in 77-2-363(3), MCA.

(a) The notification must be mailed on or before the day the department posts the notice on its web site or other equivalent electronic medium.

(b) As a courtesy, the department shall try to contact the lessee by telephone about the department's notice of suitability for sale.

(8) The department shall notify all persons holding a license on the cabin site or home site and the trust beneficiary about the determination.

(9) Any person may appeal the department's removal of a cabin site or home site from nomination to the board within 15 days of the department posting the report on the web site or other equivalent electronic medium. The board shall place the appeal on the next available agenda of a regularly scheduled board meeting no later than 15 days before the meeting.

(10) On a board or department-nominated cabin site or home site, the lessee may, within 60 days of the determination, notify the department that the lessee intends to propose a land exchange.

(11) For each cabin site or home site under review for possible sale, the department shall review the title to the tract and improvements, but the department does not warrant the accuracy of its findings to any party.

(12) Upon the department's agenda item report to the board under (5), the board may preliminarily approve, reject, or modify the terms of the proposed sale.

(a) If the board rejects the proposed sale of the cabin site or home site, the department shall remove the parcel from nomination.

(b) If the board preliminarily approves the proposed sale of the cabin site or home site, the department shall post the sale information for the parcel on the department's web site or other equivalent electronic medium within 30 days of the board's approval.

(13) If the board has preliminarily approved a proposed sale nominated by the lessee or improvement owner, the department will estimate the costs of the appraisal and will notify the lessee or improvement owner of the approval and request submission of the estimated costs of the appraisal attributable to the improvements on the cabin site or home site and associated costs of processing the cabin site or home site for sale.

(a) Where the board gives preliminary approval for the sale of the parcel, the lessee or improvement owner must submit payment for all processing costs within ten days of notification to do so by the department.

(14) If the board has preliminarily approved a proposed sale, the department shall contract with a Montana-licensed certified general appraiser to appraise the cabin site or home site, including improvements under consideration for sale in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP). The department will review or contract the review of the appraisal conducted by the contract appraiser.

(15) The department shall pay that proportion of the cost of the appraisal necessary to determine the appraised value of the land. The lessee or improvement owner shall pay that proportion of the cost of the appraisal necessary to determine the appraised value of the improvements.

(a) The department will provide the lessee or improvement owner with a list of no less than two acceptable appraisers to conduct the appraisal, the lessee or improvement owner will select 50 percent of the appraisers on the list, from which the department will select an appraiser to conduct the appraisal.

(b) The appraisal for cabin sites and home sites must:

(i) include a separate land value for the state-owned cabin site or home site in the valuation;

(ii) include a separate value for the non-state-owned improvements in the valuation.

(A) Valuation of the improvements must account for all forms of obsolescence;

(iii) include a total value of the property.

(A) The value of state-owned land added to the non-state-owned improvements value will not be greater than the total value of the property;

(iv) use comparable sales for like properties;

(v) be valued with the hypothetical condition that the cabin site or home site has legal access;

(vi) be reviewed and updated one year from the date of valuation stated in the appraisal report; and

(c) The department shall notify the lessee of the appraised value and post that same information in a dated notice on the department's web site or other equivalent electronic medium.

(16) The department shall give the lessee or improvement owner notice and opportunity for an informal administrative hearing before the department to contest those valuations. The department shall review the arguments and evidence received at the hearing to make a recommendation of the values of the land and the cabin site or home site improvements to the board.

(a) The lessee or improvement owner must file notice of appeal of value with the department within ten days of the department's notification to the lessee or improvements owner of the department's initial valuation of the land and the improvements. Within ten days after receipt of any notice of appeal the department shall notify the lessee or improvement owner of the time and place of the hearing before the director of the department, or the director's designee. Any such hearing shall be informal without adherence to strict rules of evidence as provided in 2-4-604, MCA. A hearings examiner may be appointed to conduct the hearing. The lessee or improvement owner shall present evidence and arguments it wishes the department to consider in recommending values of land and improvements to the board.

(17) The department shall present its findings, conclusions, and recommended values of land and improvements to the board and the lessee or improvement owner.

(18) Upon receiving the appraisal values or department's recommendation of values, the board shall set a minimum acceptable bid on the real property comprising the cabin site or home site, and determine the improvement value for compensation to the lessee or improvement owner.

(a) Upon receipt of lessee consent to the terms and conditions of the proposed sale and the valuation of cabin site or home site improvements, the sale must proceed utilizing the board's final determination of the values, and the lessee or improvement owner is obligated to transfer its interest in the cabin site or home site improvements existing on the cabin site or home site lease according to the board's final determination of their value.

(b) Nothing in this rule prohibits the lessee or improvement owner from choosing to accept a price for the cabin site or home site improvements existing on the cabin site or home site that is less than the board's final determination of value.

(19) The department shall give notice of the minimum acceptable bid for the real property comprising the cabin site or home site, and the determined value of the improvements for sale by listing the proposed sale of the cabin site or home site and the improvements upon the department's Internet web site or other equivalent electronic medium.

(20) If the board has preliminarily approved a proposed sale, the department shall make the following available to the public, all bidders, and the lessee:

(a) minimum acceptable bid for the land and the determined value of the improvements;

(b) contents and findings of any title review without any warranty of title; and

(c) any required environmental review.

(21) The department shall provide notice of the proposed sale to the following:

(a) Department of Fish, Wildlife and Parks;

(b) Department of Transportation;

(c) Department of Environmental Quality;

(d) all adjacent landowners of record;

(e) the appropriate trust beneficiaries;

(f) the board of county commissioners in the county where the cabin site or home site is located;

(g) any surface lessees of the sale of the cabin site or home site by mail. The notice to lessees must include an estimate of costs necessary to complete the sale if the lessees nominated the cabin site or home site;

(h) all persons holding a license on the cabin site or home site;

(i) all persons who have requested to be placed on a notification list for the sale of the real property.

(22) If necessary, the department may conduct a survey of the cabin site or home site proposed for sale. The department shall pay for any such survey of the cabin site or home site.

(1) If the current lessee of the cabin site or home site has initiated the sale, as authorized by 77-2-361 through 77-2-367, MCA, and submitted processing costs with the department, the lessee may, subject to (2), cancel the sale by sending written notice to the department by certified mail of the current lessee's intent to cancel the sale. 

(2)  To be valid, a notice of cancellation sent pursuant to (1) must be received by the department:

(a)  at least 10 days before the date of the auction; and

(b)  before any other person has registered for the auction by submitting a bid bond consistent with 77-2-363(2)(a), MCA, and executing a purchase agreement with the department.  In the event that a sale cancellation request is received by the department on the same day that the department receives a bid bond and executed purchase agreement from another bidder, the cancellation is not valid.

(3) If the lessee cancels the sale, the lessee shall pay all costs incurred by the department in preparing the sale, including but not limited to:

(a) any costs for required environmental review if not exempt under 75-1-201, 77-1-121, or 77-2-363(7), MCA;

(b) appraisal attributable to the improvements;

(c) cultural resource inventory;

(d) public notices; and

(e) other costs that may be incurred by the department and/or board.

(4) The processing costs and bid deposit, as required in ARM 36.25.705(13) and 36.25.707(4) that are paid by the lessee must be applied toward costs incurred by the department for the canceled sale.

(5) Any amount of processing costs and bid deposit remaining after payment of department costs must be returned to the lessee.

(1) All land cabin site and home site sales are subject to the provisions of 77-2-318 through 77-2-326, MCA.

(2) The department shall set the date of the auction. Bidders may appear personally or be represented by a legally authorized representative.

(3) As required by 77-2-322, MCA, the department shall, at a minimum:

(a) publish notice of the auction in a newspaper of general circulation in the county where the auction is to take place, once each week for four consecutive weeks preceding the due date for bid deposits; and

(b) post the notice on the department's web site or other equivalent electronic medium and provide links to associated realty web sites, when feasible.

(4) A person wishing to bid upon a nominated cabin site or home site offered for sale at auction shall submit a bid deposit and execute a purchase agreement with the department. The bid deposit and purchase agreement must be received by the department no later than 20 days before the date of the auction.

(5) Subject to (6), land must be sold to the highest bidder who consummates the terms of the sale.

(6) In accordance with 77-2-324, MCA, the current lessee has the preference right to match the high bid.

(7) The purchaser shall pay closing costs, including but not limited to:

(a) the cost of the appraisal attributable to the improvements;

(b) title insurance;

(c) filing fees;

(d) closing fees; and

(e) water rights transfer.

(8) The department shall retain the bid deposit and processing costs of the successful bidder. The department shall return the bid deposits of all unsuccessful bidders within 15 business days following the auction.

(9) If the highest bidder fails to consummate the sale for any reason the bidder forfeits the bid deposit and processing costs. The department may then offer the cabin site or home site to the next highest bidder at the final sale price.

(a) If the next highest bidder, or a subsequent bidder, in sequence of bid amount, agrees to the terms of the sale, that bidder shall complete a purchase agreement and resubmit a bid deposit and processing costs to the department.

(b) The bid deposit and processing costs will be returned to the highest bidder if a subsequent bidder completes a purchase agreement and resubmits a bid deposit and processing costs and the purchase price.

(10) If the final bidder who agrees to consummate the sale fails to comply with the terms of the sale, and submit the purchase price, for any reason, that bidder's bid deposit and processing costs are forfeited.

(a) The bid deposit must be credited to the land banking trust fund.

(b) The processing costs will be credited to the land banking administration account.

(1) If the lessee or improvement owner consents to the terms and conditions of the proposed sale and the valuation of cabin site or home site improvements, the sale must proceed utilizing the board's final determination of the values, and the lessee or improvement owner is obligated to transfer its interest in the cabin site or home site improvements existing upon the cabin site or home site lease according to the board's final determination of their value. The lessee or improvement owner shall receive the entire proceeds of sale attributable to the value of the improvements as previously determined by the board.

(2) Nothing in this rule prohibits the lessee or improvement owner from choosing to accept a price for the cabin site or home site improvements existing the cabin site or home site that is less than the board's final determination of value.

As used in this subchapter, the following definitions apply, except where the context clearly indicates otherwise:

(1) "Accounting period" means the interval of time used to calculate and compare investment decision criteria for various land classes.

(2) "Annual return" means the net annual income.

(3) "Asset value" means the value of an asset as determined by appraisal or purchase price.

(4) "Average annual rate of return" means the average annual return over the accounting period, divided by the purchase price, and multiplied by 100.

(5) "Bid" means a written or oral monetary commitment to purchase land or interest in land offered at the specified time and place by a person eligible to participate in an auction, as specified by the department in accordance with 77-2-363, MCA.

(6) "Bid bond" means bid deposit, as defined in (7).

(7) "Bid deposit" means a certified check or cashier's check drawn on any Montana bank equal to 20 percent of the minimum sales price submitted in connection with a bid as an assurance of the performance of a contractual or promissory requirement.

(8) "Board" means the state Board of Land Commissioners.

(9) "Department" means the Department of Natural Resources and Conservation.

(10) "Estimated costs" means the estimated costs to prepare the parcel for sale, including but not limited to appraisal fees and archeological surveys.

(11) "Lessee" means the current lease holder of any agricultural, grazing, commercial, cabin or home site, or other surface lease of state trust land.

(12) "Net annual income" means total revenues from all sources less total average expenses from all sources based on all available cost information, including information in the "Report on the Return on Asset Value by Trust and Land Office for State Trust Lands."

(13) "Net present value" means the sum of the discounted net annual income over the accounting period.

(14) "Parcel" means one section or less that can be identified by legal description, independent of any other parcel of land, using documents on file in the records of the county clerk and recorder's office or in the department's records.

(15) "Processing costs" means estimated costs of preparing the parcel for sale, including but not limited to appraisals, cultural surveys, environmental review (pursuant to Title 75, chapter 1, parts 1 through 3, MCA), and land surveys.

(16) "Report on the Return on Asset Value by Trust and Land Office for State Trust Lands" means the annual report produced to analyze the rates of return originating on trust land on land classified as forest, agricultural and grazing, and other.

(17) "Sale unit" means one or more parcels sold as a single sale.

(18) "Tract of record" means a distinct portion of land, irrespective of ownership, that can be identified by legal description, independent of any other portion of land, using documents on file in the records of the county clerk and recorder's office.

(1) The department may not be compensated for transaction costs of services performed by department staff.

(2) The department shall:

(a) maintain a record of each transaction; and

(b) summarize transaction costs at the completion of each sale or acquisition.

(3) Transaction costs as outlined in ARM 36.25.807(2) or 36.25.808(7) shall be paid by the nominator or the purchaser, respectively.

(2) The board may only sell a parcel that is wholly surrounded by land under conservation easement if the board provides compelling reasons for the sale.

(3) The board may only sell a parcel that the department, in compliance with the Montana Environmental Policy Act, 75-1-201 , et seq., MCA, (MEPA) , determines significant for threatened or endangered species if the board provides compelling reasons for sale.

(4) If the sale of a parcel would extinguish existing, reasonable public access to other public or state trust land or to public water, as defined in 77-2-303 (2) (a) , MCA, the board shall reserve an easement or right of way for access to the other public or state trust land or to public water.

(5) If the sale of a parcel would extinguish access to adjacent private land, the department shall provide an opportunity for the landowner to make application to purchase an easement under 77-1-107 , 77-1-130 , or 77-2-101 , MCA.

(6) If a person directly or indirectly creates an isolated parcel of school trust land in order to benefit from land banking, the department shall recommend that the parcel be considered nonisolated.

(1) The department shall conduct a preliminary review of each parcel prior to nomination to determine whether further review is warranted. The department may consider the following factors in the preliminary review:

(a) the parcel produces low income, as calculated by:

(i) high market value and low return on the asset;

(ii) high administrative costs relative to other similar parcels; or

(iii) low potential to increase productive capacity of the land;

(b) whether the parcel is isolated. On a nonisolated parcel, the department shall describe the existing level of access;

(c) the parcel's impact on the diversity of the overall asset portfolio and within its land classification;

(d) the extent of infrastructure, such as roads, utilities, power, telephone, water, or sewer availability;

(e) the estimated net annual income from the parcel;

(f) the potential for appreciation or depreciation in the value of the parcel, based on the best available information from the local real estate market;

(g) the parcel's potential for development or value-added activities that complement local and statewide economic development;

(h) whether and to what degree the sale of the parcel would affect access to other public lands; and

(i) whether the parcel is adjacent to other public land or private land under conservation easement, as documented by current information in the Montana Natural Heritage Program database or similar source.

(2) Based on the preliminary review, the department will recommend to the nominator whether the parcel qualifies for nomination.

(1) The board shall, in its sole discretion, sell sale units in configurations providing the best financial and management advantage to the affected trust beneficiary.

(2) The board reserves the right to approve or deny nominations for the sale of state trust land. The department reserves the right to prioritize activities related to the sale of state trust land.

(3) The board, the department, or the current lessee may nominate a parcel or parcels of state trust land for sale:

(a) nominations must be on a form issued by the department and must be sent to the appropriate department office, as noted on the form;

(b) a lessee may nominate one or more parcels currently held by that lessee under a state of Montana surface lease agreement. The nominating lessee shall pay a nonrefundable $100 processing fee for each parcel of land nominated;

(c) the department may not accept incomplete nominations;

(d) the department shall review the classification of the parcel, as provided in 77-1-401, MCA, and classify the parcel if it is not classified; and

(e) when a parcel is nominated, the department shall notify:

(i) all persons holding a license on the parcel;

(ii) the representative of any affected trust beneficiary; and

(iii) the lessee of the parcel if board or department nominated.

(4) If the department determines that a parcel meets the preliminary suitability requirements for sale, the department shall contract for an environmental review of the parcel under MEPA.

(a) If the MEPA analysis determines that the sale would result in a significant adverse impact on natural resources, the parcel is generally not suitable for sale unless the board determines otherwise.

(b) If the department conducts a checklist environmental assessment under MEPA, the department shall briefly explain in writing the potential impacts and mitigations for each resource and issue analyzed, including written explanations of resource or issue analysis conclusions of "no impact."

(5) After evaluation of the preliminary review and the MEPA analysis, the department shall determine whether a parcel is suitable for sale and report to the board on the parcel's suitability for sale.

(a) If the department determines the parcel is not suitable for sale, the department may remove the parcel from nomination and eliminate the parcel from further review without board approval.

(b) The department shall post the report required by (4), including the MEPA analysis, in a dated notice on the department's web site or other equivalent electronic medium at least 15 days prior to the meeting at which the board will consider the sale.

(c) The department shall notify the lessee of the department's recommendation by certified mail, as provided in 77-2-363(3), MCA.

(i) The notification must be mailed on or before the day the department posts the notice on its web site or other equivalent electronic medium.

(ii) As a courtesy, the department shall try to contact the lessee by telephone about the determination.

(d) The department shall notify all persons holding a license on the parcel and the trust beneficiary about the determination.

(e) Any person may appeal the department's removal of a parcel from nomination to the board within 15 days of the department posting the report on the web site or other equivalent electronic medium. The board shall place the appeal on the next available agenda of a regularly scheduled board meeting no later than 15 days before the meeting.

(f) On a board or department-nominated parcel, the lessee may, within 60 days of the determination, notify the department that the lessee intends to propose a land exchange.

(6) For each parcel, the department shall conduct a title review, if necessary.

(7) Upon the department's report to the board under (4), the board shall approve or reject the proposed sale.

(a) If the board rejects the proposed sale of the parcel, the department shall remove the parcel from nomination.

(b) If the board approves the proposed sale of the parcel, the department shall post the parcel on the department's web site or other equivalent electronic medium within 30 days of the board's approval.

(8) If the board has approved a proposed sale nominated by the lessee, the department will estimate the costs of the appraisal and will notify the lessee of the approval and request submission of the estimated costs of the appraisal and associated costs of preparing the parcel for sale.

(a) Payment must be made after the board has given preliminary approval of the sale under ARM 36.25.807(2)(b).

(b) Payment must be made ten days after the department has notified the lessee of the estimated costs.

(9) If the board has approved a proposed sale, land exchange, or acquisition, the department shall contract with a Montana-licensed certified general appraiser to appraise the parcel under consideration for sale in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP), as adopted by reference by the state Board of Real Estate Appraisers in ARM 24.207.402. The department will review or contract the review of the appraisal conducted by the contract appraiser.

(a) The department shall contract for the appraisal, to be reimbursed by the appropriate party under ARM 36.25.807(2)(b):

(b) The appraisal must:

(i) include state-owned improvements in the valuation;

(ii) exclude lessee-owned or licensee-owned improvements from the valuation;

(iii) use comparable sales for like properties;

(iv) for a parcel that has legal access, provide the value;

(v) for a parcel that lacks legal access, the appraiser is to:

(A) provide a value with the hypothetical condition that the parcel has legal access;

(B) if there are comparable sales available to provide a credible opinion of the value without legal access, the appraiser is to provide that value as well; and

(C) if comparable sales are not available to provide a credible opinion of value without legal access, the appraiser will note the unavailability of sufficient sales data.

(vi) be reviewed and or updated one year from the date of the appraisal.

(c) The department shall post the appraised value of the parcel in a dated notice on the department's web site or other equivalent electronic medium.

(10) Any person may commission, at that person's own expense, another appraisal from a list of department approved appraisers:

(a) a person commissioning another appraisal shall notify the department within 15 days of the posting of the appraised value;

(b) any subsequent appraisal must be completed within 60 days of notification to the department of the intent to commission the appraisal; and

(c) any subsequent appraisal must include all elements required of the first appraisal and be submitted to the department for review.

(11) The department shall present to the board the first appraisal and review and any subsequent appraisals and reviews that are provided to the department.

(12) Upon receiving the appraisal(s) and review(s) the board shall set a minimum bid on the parcel. The department shall add the minimum bid to the parcel's listing on the department's web site or other equivalent electronic medium.

(13) If the board has approved a proposed sale, the department shall make the minimum bid, contents and findings of any title review, and any environmental due-diligence review available to the public, all bidders, and the lessee.

(14) The department shall provide notice of the proposed sale to the following:

(a) Department of Fish, Wildlife and Parks;

(b) Department of Transportation;

(c) Department of Environmental Quality;

(d) all adjacent landowners of record;

(e) the appropriate trust beneficiaries;

(f) the board of county commissioners in the county where the parcel is located;

(g) any surface lessees by certified mail. The notice to lessees must include an estimate of costs necessary to complete the sale if the lessees nominated the parcel; and

(h) all persons holding a license on the parcel.

(15) If necessary, the department shall conduct a survey of the parcel or parcels proposed for sale. The department shall pay for the survey, to be reimbursed by the appropriate party under ARM 36.25.807(2)(c) or 36.25.808(7)(d).

This rule has been repealed.

(1) If the current lessee of the land to be sold has initiated the sale, as authorized by 77-2-361 through 77-2-367, MCA, and submitted processing costs with the department, the lessee may cancel the sale. The lessee shall send written notice by certified mail to the department, postmarked no later than ten days before the date of the auction.

(2) If the lessee cancels the sale the lessee shall pay all costs incurred by the department in preparing the sale, including but not limited to:

(a) any costs incurred for preparation of documents required by 75-1-201, et seq., MCA;

(b) appraisal;

(c) survey;

(d) cultural resource inventory;

(e) natural resource inventories;

(f) public hearings; and

(g) other costs that may be incurred by the department and/or board.

(3) The processing costs and bid deposit, as required in ARM 36.25.805(8) and 36.25.808(4) that are paid by the lessee must be applied toward costs incurred by the department for the canceled sale.

(4) Any amount of processing costs and bid deposit remaining after payment of department costs must be returned to the lessee.

(1) All land sales are subject to the provisions of 77-2-318 through 77-2-326, MCA.

(2) The department shall set the date of the auction. Bidders may appear personally or be represented by a legally authorized representative.

(3) As required by 77-2-322, MCA, the department shall, at a minimum:

(a) publish notice of the auction in a newspaper of general circulation in the county where the auction is to take place, once each week for four consecutive weeks preceding the due date for bid deposits; and

(b) post the notice on the department's web site or other equivalent electronic medium and provide links to associated realty web sites, when feasible.

(4) A person wishing to bid upon a nominated state trust land sale unit offered for sale at auction shall submit a bid deposit and execute a purchase agreement with the department. The bid deposit and purchase agreement must be postmarked no later than 20 days before the date of the auction.

(5) Subject to (6), land must be sold to the highest bidder who consummates the terms of the sale.

(6) In accordance with 77-2-324, MCA, the current lessee has the preference right to match the high bid.

(7) The purchaser shall pay closing costs, including but not limited to:

(a) the cost of the appraisal;

(b) title insurance;

(c) filing fees;

(d) survey, if necessary; and

(e) water rights transfer.

(8) The department shall retain the bid deposit and processing costs of the successful bidder. The department shall return the bid deposits of all unsuccessful bidders within 15 business days following the auction.

(9) If the highest bidder fails to consummate the sale for any reason the bidder forfeits the bid deposit and processing costs. The department may then offer the state trust land sale unit to the next highest bidder at the final sale price.

(a) If the next highest bidder, or a subsequent bidder, in sequence of bid amount, agrees to the terms of the sale, that bidder shall complete a purchase agreement and submit a bid deposit and processing costs to the department.

(b) The bid deposit and processing costs will be returned to the highest bidder if a subsequent bidder completes a purchase agreement and submits a bid deposit and processing costs.

(10) If the final bidder who agrees to consummate the sale fails to comply with the terms of the sale for any reason, that bidder's bid deposit and processing costs are forfeited.

(a) The bid deposit must be credited to the land banking trust fund.

(b) The processing costs will be credited to the land banking administration account.

(1) If the parcel is under an agricultural or grazing lease or license with the state at the time of sale, settlement and removal of improvements are governed by the conditions of the lease or license or by ARM 36.25.125.

(2) If the parcel is under a residential lease at the time of sale, the conditions of settlement for and removal of improvements are governed by the lease or by ARM 36.25.131.

(3) If the parcel is under a commercial lease or license with the state at the time of sale, the conditions of settlement for and removal of improvements are governed by the lease or license.

(4) In all other situations, the purchaser of the state trust land shall reimburse the former lessee for the reasonable value of those improvements the purchaser has accepted.

(5) Where there is a dispute over the value of the improvements, arbitration, as detailed in 77-6-306, MCA, must be used to set the value of improvements.

(1) Before issuing documents of conveyance, the department shall present the proposed sale to the board:

(a) the board shall approve or disapprove the sale; and

(b) if the board disapproves the sale, the successful bidder is not responsible for costs.

(2) For the sale of land acquired from the federal government pursuant to the state's Enabling Act, the board may convey title through a state patent, pursuant to 77-2-341 through 77-2-343, MCA.

(3) The board may convey title to other land by a grant or quit claim deed.

(4) The board may not warrant title to any land conveyed.

(5) The board may not give warranty or representation, express or implied, to a bidder for, or a purchaser of, state trust land concerning the accuracy or completeness of the title review for the property or the environmental due-diligence review investigating the presence or absence of toxic or hazardous substances.

(6) State trust land must be sold "as is."

(1) The proceeds from a sale of state trust land must be deposited in the land banking trust fund to which the land belonged.

(2) When the board conducts a sale of state trust land pursuant to the land banking program, the board shall distribute the proceeds according to the provisions of 77-1-109, 77-2-337, and 77-2-361 through 77-2-367, MCA.

(3) Proceeds from the sale of land from trusts may be pooled to acquire tracts of land to add to state trust land, if approved by the board after consultation with the affected beneficiaries.

(4) When land banking expires, any proceeds remaining in the state trust land bank fund must be expended by the tenth year after the effective date of each sale.

(5) Any remaining proceeds must be deposited in the appropriate permanent trust fund.

(6) The department shall account separately for individual trust receipts.

(1) Any person may nominate a tract or tracts for acquisition.

(2) Nominations must be on a form issued by the department and must be sent to Land Banking, Department of Natural Resources and Conservation, P.O. Box 201601, Helena, MT 59620-1601.

(a) The department may not accept incomplete nominations.

(3) The department may contract with a third party, such as a licensed real estate agent, to act on behalf of the state in acquiring a tract or tracts.

(4) The department shall notify each trust beneficiary whose land sale proceeds would potentially support the proposed acquisition. Notice to the trust beneficiary must go to the contact person identified for each trust affected by the proposed acquisition.

(5) The department shall post all tracts nominated for acquisition on the department's web site or other equivalent electronic medium. The department shall update the status of the tract throughout the process, including all applicable reports.

(1) The department reserves the right to prioritize activities related to the acquisition of land.

(2) The department shall obtain from the seller and evaluate a disclosure statement that describes any known material defects in the property:

(a) the seller shall provide disclosure on a form provided by the department; and

(b) if the seller fails to provide disclosure within 60 days of the department's request, the tract must be considered unsuitable for acquisition.

(3) The department shall conduct a preliminary review to determine the tract's suitability for acquisition. The review must address, but is not limited to, the following factors:

(a) the financial feasibility of acquiring and managing the tract;

(b) the existing level of access; and

(c) the potential for multiple use.

(4) Concurrent with the nomination of a tract and after the preliminary review, the department may secure the ability to purchase the tract, contingent upon approval by the board, as provided in ARM 36.25.814.

(5) If the department determines a tract is not suitable for acquisition, the department shall remove the tract from nomination and eliminate it from further review.

(6) Any person may appeal to the board the department's removal of a tract from nomination within 15 days of the department posting the report on the web site or other equivalent electronic medium. The board shall place the appeal on the next available agenda of a regularly scheduled meeting no later than 15 days before the meeting.

a) If the board disapproves acquiring a tract, the department shall remove the tract from nomination and eliminate it from further review.

b) If the board approves the preliminary review, the department shall begin a due-diligence evaluation.

(1) The department may not purchase a tract, easement, or improvement pursuant to 77-2-361 through 77-2-367, MCA, without preparing a financial analysis. The analysis must include:

(a) the average annual rate of return calculated over a 60-year accounting period for Class 2 lands;

(b) the average annual rate of return calculated over a 20-year accounting period for Class 1, 3, and 4 lands;

(c) a comparison with the current average annual rate of return of the parcel or parcels sold, the proceeds of which are used to fund this transaction;

(d) a prudent determination that the lands to be acquired have a higher net present value for the affected trust or trusts than the lands sold, and a greater or equal average annual rate of return as may be reasonably expected over a 20-year accounting period for Class 1, 3, and 4 lands and a 60-year accounting period for Class 2 lands, with an acceptable level of risk for the affected trust or trusts; and

(e) the expected classification of the tract under 77-1-401, MCA.

(2) Before acquiring a tract, easement, or improvement, the board shall determine that the financial risks and benefits of the purchase are prudent, financially productive investments that are consistent with the board's fiduciary duty as a reasonably prudent trustee of a perpetual trust. That duty requires the board to comply with the requirements of 72-34-114 and 77-2-364(3) through (5), MCA.

(3) The department shall prepare a description of each proposed acquisition. The description must include the following elements:

(a) an inventory of:

(i) soils;

(ii) vegetation;

(iii) wildlife use;

(iv) mineral characteristics;

(v) public use;

(vi) recreational use;

(vii) aesthetic values;

(viii) cultural values;

(ix) surrounding land use;

(x) zoning;

(xi) planning information;

(xii) weeds;

(xiii) floodplain information;

(xiv) water resources;

(xv) fisheries;

(xvi) wetlands; and

(xvii) riparian characteristics;

(b) whether the tract is isolated. On a nonisolated tract, the department shall describe the existing level of access;

(c) the extent of infrastructure, such as roads, utilities, power, telephone, water, or sewer availability;

(d) whether and to what degree the purchase of the tract would affect access to other public lands;

(e) whether the tract is adjacent to other public land or private land under conservation easement, as documented in current information in the Montana Natural Heritage Program database or similar source; and

(f) the status of subsurface mineral rights.

(4) Before acquiring any interest in land, the department and/or board shall conduct a due-diligence review as follows:

(a) the department shall contract with a Montana-licensed certified general appraiser to appraise the parcel under consideration for acquisition. The department will review or contract the review of the appraisal conducted by the contract appraiser. The appraisal must follow the department's current scope of work and the supplemental appraisal instructions for the property. A copy of the appraisal and review shall be provided to the board and department. The appraisal will be reviewed and/or updated one year from the date of the appraisal;

(b) review the title to the property proposed for acquisition and confirm that the seller is presenting a marketable title. Should the department identify any defects or encumbrances, the seller shall take steps to cure any title defects or remove the encumbrances to satisfy the department;

(c) if necessary, require a survey of the tract;

(d) the seller shall take the necessary steps to cure defects or remove encumbrances or uses of record or not of record, as requested by the department; and

(e) determine any limiting factors for future uses or development of the real property or the presence of toxic or hazardous materials. This may include, but is not limited to:

(i) phase I assessments, such as searches of government agency records and chain-of-title searches for evidence of property history and regulatory compliance, a review of permit applications, environmental health records, environmental compliance data, and other relevant information available from federal and state administrative agencies, discussions with former property owners and employees, and preliminary site visits;

(ii) phase II assessments, such as sampling of soils, water, and structural materials, well drilling, chemical analysis of samples, geotechnical survey, and a toxicological risk assessment.

(5) The department shall notify the appropriate board of county commissioners and adjacent landowners of the proposed acquisition.

(2) The department shall recommend whether acquiring the tract is in the best interest of the affected trust beneficiary.

(3) When prudently necessary to protect the interests of the affected trust beneficiary, the board may reject, modify, or approve the proposed purchase of any trust asset.

(4) Acquisition of a tract may not occur without final land board approval.

(1) Title to land acquired by the state must be by warranty deed.

(1) "Board" means the state Board of Land Commissioners.

(2) "Bureau" means the Real Estate Management Bureau of the Trust Lands Management Division of the Department of Natural Resources and Conservation.

(3) "Cluster development" means a subdivision of a tract with building lots concentrated on a portion of the tract and the remainder conserved for open space.

(4) "Commercial" means the operation by any for-profit entity of any public parking lot, restaurant, bar, hotel, motel, office space, retail store or sales outlet, storage space, gas station, convenience store, shopping center, warehouse, hospitality enterprise, or concentrated recreational use, multifamily residential use, or other similar uses.

(5) "Conservation" means a primary land use for open space, preservation of habitat, natural areas, parks, or related public purposes, secured through dedication, lease, license, easement, deed restriction, or other legal instrument consistent with 77-1-203, MCA, for multiple use management.

(6) "Conservation entity" means a public entity or private organization qualified per Title 76, chapter 6, MCA, to acquire or designate interests and rights in real property to provide or preserve open space.

(7) "Department" means the Department of Natural Resources and Conservation.

(8) "Developed" means when a building permit, septic permit, or a permit to connect to a public sewer system, whichever comes first, has been issued for 25 percent or more of the commercial, industrial, or residential lots of a subdivided tract. Developed also means a permit has been issued for the construction of a private sewer system.

(9) "Division" means the Trust Land Management Division of the department.

(10) "Easement" means land use authorization as defined in 77-2-101, MCA.

(11) "Entitlement" means an approval or permit obtained from a local government that provides a right to annex, zone, or subdivide a tract of land.

(12) "Environmental review" means a written document as defined in 75-1-220(4), MCA.

(13) "Growth policy" means a document adopted under Title 76, chapter 1, part 6, MCA.

(14) "Industrial" means a land use that includes manufacturing, wholesaling, warehousing, utilities, heavy transportation, sanitary landfills, sewage treatment facilities, wind farms, feedlots, grain storage bins, irrigation facilities, reclamation projects, electrical substations, intermodal shipping facilities, and other uses.

(15) "Isolated tract or land" means any state land not possessing a legal right of access by the public, as provided in 77-2-361(1), MCA.

(16) "Joint venture" means a partnership between the department and another entity or entities to undertake a development project, each contributing equity and sharing in the revenues, expenses, and control of the project.

(17) "Land classification" means categorizing land according to its principal value, as defined in 77-1-401, MCA.

(18) "Lease" means a contract by which the board conveys a limited property interest in state lands for a term of years, for a specified rental, and for a use for which the land is classified.

(19) "License" means a contract by which the department conveys a limited property interest in state lands for a specific term and fee, and for a use other than that for which the land is classified.

(20) "MEPA" means The Montana Environmental Policy Act, Title 75, chapter 1, parts 1 through 3, MCA.

(21) "Other (land)" means a land classification that encompasses residential, commercial, industrial, and conservation uses.

(22) "Public entity" means a federal agency, state agency, a political subdivision of the state including a county, city, town, municipal corporation, a school district or other special district, a joint agreement entity, a public authority, or any other public body of this or other state.

(23) "Public facility" means a building or area operated by a public entity.

(24) "Purchase of development rights" means acquiring one or more of the fee-simple interests associated with a parcel of land, such as the commercial or residential development rights.

(25) "Rate of return" means the ratio of income received from a project relative to the value of the asset or equity contribution, expressed as a percentage.

(26) "Real estate activities" means the following:

(a) land sales and land banking;

(b) land exchanges;

(c) issuance of easements;

(d) issuance of leases;

(e) issuance of land use licenses;

(f) marketing of state trust lands proposed for lease, license, or easement, sale, or exchange;

(g) requests for proposals;

(h) planning and design;

(i) surveying and platting;

(j) development of entitlements;

(k) extension of services and infrastructure;

(l) contracting for services;

(m) environmental review; and

(n) minor repairs, operation or maintenance of existing equipment, improvements, or facilities.

(27) "Real Estate Management Plan (plan)" means the PEIS for real estate for the department and the associated Record of Decision (ROD) approved July 18, 2005.

(28) "Real estate project" means a proposal initiated by the bureau to develop state trust land for a commercial, industrial, residential, or conservation use, or a public facility where no such use existed previously, when one or more of the following are required by a local government:

(a) subdivision approval;

(b) annexation; or

(c) development or amendment of a growth policy or neighborhood plan. Real estate project also means the development of entitlements on state trust lands proposed for sale or exchange.

(29) "Receiving area" means land that receives additional development rights from land within a sending area. This is a component of a program providing for the transfer of development rights.

(30) "Residential" means single family dwellings, duplexes, condominiums, townhouses, cabins, associated ancillary uses, or other types of residential uses.

(31) "Rural" means a tract that does not meet the criteria for an urban tract.

(32) "Sending area" means land that provides additional development rights to other land within a receiving area. This is a component of a program providing for the transfer of development rights.

(33) "Subdivision" means a division of land defined by Title 76, MCA.

(34) "Subdivision review" means a city, town, or county governing body evaluating a subdivision proposal for compliance with the jurisdiction's subdivision regulations.

(35) "Threshold" means a predefined number of state trust land acres to be developed for commercial, industrial, or residential uses that, if met before July 18, 2025, may require a review of the programmatic plan.

(36) "Tract" means a parcel of state trust land that can be identified by legal description, independent of any other parcel of land, using documents on file in the records of the county clerk and recorder's office or in the department's records.

(37) "Transfer of development rights" means separating some or all of the development rights from a parcel of land in a "sending area" and transferring those rights to a parcel in a "receiving area," where additional development density is allowed.

(38) "Urban" means a tract meeting one or more of the following criteria:

(a) within the boundaries of an incorporated city or town;

(b) within 4.5 miles of the boundaries of an incorporated city or town;

(c) within a public sewer or water district; or

(d) within one mile of the boundaries of a public sewer or water district. An entire tract of state trust land is urban if any portion of the tract falls within an area described in (38)(a) through (d).

(2) The rules apply to real estate projects, sales, and exchanges administered by the bureau on state trust lands, except for the following:

(a) real estate projects that, prior to July 18, 2005, have been subject to public scoping and environmental review processes under MEPA, section 75-1-201, et seq., MCA;

(b) real estate projects that received all local government approvals necessary for the completion of the real estate project on or before December 15, 2008;

(c) lease lots created prior to July 18, 2005;

(d) land use licenses;

(e) sales and exchanges closed on or before July 18, 2005; and

(f) real estate activities within navigable waterways of the state.

(3) These rules remain in effect until July 18, 2025, whereupon they shall expire.

(a) targeting those tracts most suitable for development;

(b) improving entitlements on tracts selected for sale or development, when appropriate; or

(c) prioritizing projects with the highest financial return per acre.

(2) The department will give priority to urban real estate projects over rural real estate projects using the following criteria:

(a) financial rate of return per acre;

(b) funding availability; and

(c) the acres remaining in the development thresholds described in ARM 36.25.911.

(3) The department will comply with local and state land use regulations. The department will apply the following development standards in selecting, prioritizing, designing, and implementing real estate projects on state trust lands:

(a) real estate projects should be contiguous to or part of existing or proposed development;

(b) real estate projects in urban locations must connect to existing or planned public infrastructure and be designed to public standards, including alignment to adjoining public and private streets, that are consistent with local land use regulations;

(c) urban real estate projects should achieve urban densities consistent with local land use regulations;

(d) the department will promote mixed use in urban locations through planned-unit development or other means provided by local land-use regulations;

(e) the department will utilize local land use planning and regulatory processes to involve the general public and beneficiaries in developing state trust lands for commercial, industrial, residential, and conservation uses;

(f) the department will coordinate environmental review with local regulatory review;

(g) the department may use or promote purchase of development rights, transfer of development rights, cluster development, joint ventures, or other measures as provided by law;

(h) the department will coordinate with local communities, other state and federal agencies, conservation agencies, and other interest groups to provide for notice and review as necessary; and

(i) the department will exclude from consideration, or employ necessary measures to avoid, minimize, or mitigate impacts potentially resulting from commercial, industrial, and residential real estate projects:

(i) on slopes greater than 25 percent;

(ii) in a designated 100-year floodplain or wetland. The department will avoid adverse impacts in the floodplain. Adverse impacts will be determined by the department through an environmental review in compliance with Title 75, chapter 1, MCA;

(iii) that potentially affect federally listed threatened and endangered species or designated critical habitat; and

(iv) in a designated wildland-urban interface or area of high wildfire hazard.

(4) Any commercial, industrial, or residential lease expected to generate annual revenue in excess of $50,000 may not be issued without the board's prior approval.

(a) The board delegates its authority to the department to issue commercial or industrial leases expected to generate $50,000 or less annually, but the board reserves the authority to subsequently review the issuance of such leases.

(5) Development in rural areas will include commercial resorts, development for public purposes such as sewer or water, natural resource based development, and conservation opportunities. Other unique development opportunities may be considered when the intended uses:

(a) provide infill opportunities;

(b) are contiguous to existing development;

(c) are or can be located within a sewer or water utility service area;

(d) add value to the existing uses;

(e) demonstrate economic viability and conform to applicable development standards; or

(f) limit development to not more than 25 percent of a tract while the remainder of the tract is designated for conservation through an easement, deed restriction, or dedication at final subdivision approval.

(2) The department will require ARM 36.25.906 through 36.25.910 for real estate projects approved by the project identification team after December 25, 2008.

(3) The department will not require ARM 36.25.906 through 36.25.910 for an individual real estate activity that is associated with a previously approved real estate project.

(a) unique or sensitive biological and physical features;

(b) topography;

(c) influence of floodplains and/or wetlands;

(d) hazardous geologic conditions;

(e) known cultural or historic features through a preliminary cultural survey;

(f) proximity to other public lands or private lands under conservation easement, as documented by information in the Montana Natural Heritage Program database or similar source;

(g) water availability and water rights;

(h) existing and required access;

(i) the location and quality of infrastructure, such as roads, utilities, power, telephone, public water, or sewer availability;

(j) any existing encumbrances;

(k) proximity to community infrastructure and utilities;

(l) other nearby residential, industrial, or commercial development, proposed or existing; and

(m) wildland fire hazards and available fire protection.

(2) The department will analyze federal, state, and local land-use regulations, plans, and policies, for their relationship to the proposed real estate project. This analysis must identify existing entitlements and any entitlements that must be acquired for the proposed real estate project to achieve the highest return.

(3) The department may conduct a market analysis for a parcel proposed for commercial, industrial, residential, or conservation use. At minimum, the market analysis must identify:

(a) the size of the current and future market;

(b) market-growth trends, historic and future; and

(c) expected rate of return.

(a) how the proposed real estate project conforms to the standards in ARM 36.25.904;

(b) description of the proposed real estate project, including proposed land use, density, existing and proposed entitlements, required infrastructure improvements, local regulatory approval required, and potential rates of return from the real estate project, if implemented;

(c) how the proposed real estate project relates to ARM 36.25.911 and 36.25.912;

(d) results of the site-specific evaluation;

(e) estimate of the costs and timeline for the proposed real estate project; and

(f) how the proposed real estate project integrates with other trust land management projects or programs.

(a) reviewing and selecting real estate projects proposed by field staff;

(b) reviewing the status of previously selected real estate projects;

(c) canceling previously selected real estate projects; and

(d) assigning resources.

(2) The project identification team will select real estate projects based upon review of the site selection reports developed by field staff under ARM 36.25.907, in consideration of the following criteria:

(a) conformance to the standards in ARM 36.25.904;

(b) relationship to ARM 36.25.911 and 36.25.912;

(c) results of the site-specific evaluation;

(d) results of the market analysis, as described in ARM 36.25.906(3);

(e) staffing and funding needs and limitations;

(f) project complexity;

(g) project timeline; and

(h) how the proposed real estate project integrates with other trust land management projects or programs.

(3) The department will form a project review committee, comprised of bureau staff and planning and land use staff from each area office. The project review committee will meet annually, at minimum. The duties of the project review committee will generally include:

(a) reviewing the status of previously selected real estate projects;

(b) assessing resource needs of real estate projects; and

(c) recommending project proposals to the real estate project identification team.

(2) The department will create and maintain a list of persons, conservation entities, and other organizations interested in receiving notice of new real estate projects.

(3) Within 30 days of the project identification team's selection of new real estate projects, the department will:

(a) provide the project management list to the board;

(b) provide a list of new real estate projects to interested persons who have made a request to the department to be informed of new real estate projects; and

(c) post the project management list on the department's web site.

(4) The department will notify affected lessees and licensees and local governments having jurisdiction over the area of a selected real estate project.

(2) A conservation entity submitting a letter of conservation intent during the 60 days has an additional 45 days in which to apply to the department for a lease, license, easement, or other approved legal instrument to secure conservation use, as approved by the department. The 45 days begin on the day following the last day of the 60-day period. An entity applying within the 45-day period has 12 months to secure conservation use. The department may extend the 12 month period.

(a) Issuance of a conservation lease, license, or easement shall be made pursuant to Article X, section 11 of the Montana Constitution. The department reserves the right to approve or deny a proposal for a conservation use.

(b) The department may require bonding, letter of credit, or nonrefundable deposit as part of the application for a conservation use.

(3) Any real estate project on the project management list may proceed forward if:

(a) the department receives no letter of intent within the 60-day period;

(b) a conservation entity submits a letter of intent within the 60 days but fails to apply to the department within the subsequent 45 days; or

(c) a conservation entity submits a letter of intent and application within the applicable periods but fails to secure conservation use on the subject property within 12 months, unless the department has granted an extension.

(a) Five percent of the statewide threshold, termed the rural threshold, is allocated for rural real estate projects, sales, and exchanges. The rural threshold is 1500 acres. The department will conduct a review of the programmatic plan as specified in ARM 36.25.914(2) if the aggregate acreage of real estate projects, sales, and exchanges in rural areas meeting the criteria described in ARM 36.25.916(2) exceeds the rural threshold or is anticipated to exceed the rural threshold during the term of the programmatic plan.

(2) The following, unless otherwise exempted in ARM 36.25.912, will count toward the applicable thresholds in (1) and (1)(a):

(a) tracts leased or under easement for commercial and industrial uses;

(b) tracts leased or under easement for residential uses at a density greater than one residential unit per 25 acres;

(c) tracts disposed of through sale or exchange and developed within five years following sale for a commercial or industrial use; and

(d) tracts disposed of through sale or exchange and subdivided within five years following sale for residential use where the planned density is greater than one residential unit per 25 acres.

(a) leases, sales, exchanges, and easements to a public entity, for a public facility, community service, public benefit, or for a private sewer or water system;

(b) acres under lease or easement for communications facilities, or for wind, geothermal, or solar power generation;

(c) acres under easement for public or private rights-of-way;

(d) a tract developed for commercial, residential, or industrial uses through lease or easement or following sale or exchange, whereby such uses are clustered on not more than 25 percent of a tract and the remainder of the tract is designated for conservation in perpetuity through an easement, deed restriction, or dedication upon final subdivision approval;

(e) a tract developed for residential lease or easement, or disposed of through sale or exchange, with restrictions limiting residential density to one residential unit per 25 acres;

(f) a tract sold or exchanged and not developed until after five years following the sale closing date;

(g) an isolated tract sold or exchanged except in Beaverhead, Broadwater, Carbon, Cascade, Flathead, Gallatin, Lewis and Clark, Lake, Madison, Missoula, Park, Powell, Ravalli, Stillwater, Sweet Grass, Teton, and Yellowstone counties;

(h) acres dedicated for conservation upon final subdivision approval review in excess of minimum state or local subdivision requirements;

(i) a tract within a receiving area established by a local jurisdiction as part of a transfer of development rights program, and developed for commercial, industrial, or residential use by means of development rights permanently transferred from land in the sending area; and

(j) a tract developed for residential use at a density greater than one unit per 25 acres when the potential density of one or more additional tracts is reduced in perpetuity by an equal or greater amount, such that the combined development density of all tracts is not greater than one unit per 25 acres. This exemption applies to lands for lease, easement, exchange, or sale, and includes lands receiving final subdivision approval within five years following sale.

(2) A rural tract that is not otherwise exempt from the rural and statewide threshold as provided in (1) will be exempt from the rural threshold but will still count toward the statewide threshold when one of the following criteria are met:

(a) the tract is developed consistent with zoning adopted by the county's governing body in compliance with Title 76, chapter 2, part 1 or part 2, MCA; or

(b) the developed use meets all of the following:

(i) provides infill opportunities;

(ii) is contiguous to existing development;

(iii) is or can be located within a sewer or water utility service area;

(iv) adds value to existing uses;

(v) demonstrates economic viability; and

(vi) conforms to the development standards in ARM 36.25.904.

(1) The department will account for real estate management activities that meet ARM 36.25.910 and 36.25.912. In addition, the department will account for the following:

(a) acres under commercial, industrial, or residential lease where no commercial, industrial, or residential lease existed previously;

(b) acres under easement for commercial, industrial, or residential use;

(c) nonisolated tracts sold and developed for a commercial, industrial, or residential use within five years of sale;

(d) tracts acquired with existing commercial, industrial, or residential development;

(e) tracts, or portions of tracts, encumbered or purchased with an existing conservation lease, license, easement, or other means of securing conservation uses;

(f) nonisolated tracts sold and encumbered with a restriction on development for conservation uses within five years of sale;

(g) acres dedicated as open space during subdivision review in excess of minimum requirement; and

(h) acres designated as "Natural Area" per Title 77, chapter 12, part 1, MCA.

(2) The department may account for other land use, development, and disposition in other department documentation, such as annual reports.

(3) The department will report the results of the accounting to the board by August 2010 and every five years thereafter.

(2) Upon review of such reports, the board or the department may consider a review of the programmatic plan for any of the following reasons:

(a) the thresholds in ARM 36.25.911(1) or (1)(a) have been exceeded;

(b) new legislation is adopted that is incompatible with the selected alternative;

(c) the board provides new direction; or

(d) the Trust Land Management Division administrator judges that the original assumptions supporting the plan no longer apply.

(3) The department may implement and initiate real estate projects during a review of the programmatic plan pursuant to ARM 36.2.537.

(4) The department may make minor changes or additions to the plan without a review of the entire programmatic plan, as long as those changes are compatible with the overall plan, as determined by the department.

(a) Cumulative minor changes may result in the department's review of the programmatic plan.

(2) The board delegates to the department, consistent with the board's fiduciary duties and subject to the board's review, its authority to agree to exactions, conditions, restrictions, or fees imposed as a result of zoning, annexation, subdivision, or building permit approval processes within Title 7, 50, 67, or 76, MCA, or local land use regulations.

(1) The value of a parcel under consideration for lease or issuance of an easement shall be determined through an appraisal or limited valuation.

(2) An appraisal must include state-owned improvements in the valuation and use comparable sales for like-properties. The department may conduct an appraisal or appraisal update; or the department may contract with a Montana-licensed certified general appraiser. The department shall review and approve an appraisal or appraisal update conducted by a contract appraiser.

(3) A limited valuation is an estimation of value through other means which may include:

(a) the department's fee schedule;

(b) a survey of real estate appraisers, local tax assessors, or local realtors; or

(c) an evaluation of local rents or local market fees.

(4) An appraisal or limited valuation must be updated, or the parcel reappraised:

(a) where issuing a lease, if the appraisal or limited valuation is older than two years; and

(b) where issuing an easement, if the appraisal or limited valuation is older than one year. An appraisal or limited valuation may be updated or the parcel reappraised earlier than as required in (4)(a) and this subsection.

(a) lease and license administration including review, inspection, amendments, assignments, renewals, and enforcement of terms and conditions;

(b) department review and approval of lease or license modifications, improvements, removal of improvements, and new utility service connections, consistent with applicable regulations;

(c) adjustments to the boundaries of existing leases or licenses, consistent with applicable regulations;

(d) project planning and design;

(e) project evaluation under ARM 36.25.906;

(f) development of a site selection report under ARM 36.25.907;

(g) project selection under ARM 36.25.908;

(h) development of the project management list under ARM 36.25.909;

(i) marketing of state trust lands proposed for lease, license, or easement;

(j) short-term land use licenses, involving no resource extraction or developed uses, and conforming to local permitting and land use regulations;

(k) other real estate management activities administered by the bureau on state trust lands that are not in connection to:

(i) a department proposal for a sale, exchange, easement, placement of improvement, lease, license, or permit; or

(ii) a department review of an application for authorization of a sale, exchange, easement, placement of improvement, lease, license, or permit;

(l) department request to amend a local growth policy or zoning regulation;

(m) department request to amend or develop a neighborhood plan or extension of services plan;

(n) annexation; and

(o) land acquisition. Categorical exclusions include activities on state trust lands conducted by others under the authority of the department as well as activities conducted by the department itself.

(2) Categorical exclusions shall not apply in extraordinary circumstances where the bureau is proposing an activity:

(a) upon sites with high erosion risk;

(b) where critical habitat for federally listed threatened and endangered species may be affected;

(c) where Native American religious and cultural sites may be affected;

(d) where archaeological sites may be affected;

(e) where historic properties and areas may be affected;

(f) where several related categorically-excluded individual activities may cumulatively result in significant impacts to the human environment because they will either occur closely in time, or in the same geographic area. Such related actions may be subject to environmental review even if they are not individually subject to review; or

(g) where the activity would result in a violation of any applicable local, state, or federal laws or regulations.

(1) "Abandon" or "abandonment" means the simultaneous intent and voluntary act of surrendering or disclaiming any ownership of, or surrendering or disclaiming a property interest in a lease or the improvements existing upon a lease, or both.�

(2) "Assignment" means the transfer of rights, obligations, and ownership of a current lease agreement to another person or other legal entity qualified to hold a lease. Assignments must be executed on a form prescribed by the department, and are subject to department approval.

(3) "Board," also referred to as "Land Board," means the Board of Land Commissioners.

(4) "Cabin site," also referred to as "home site," means land leased or to be leased for single-family residential use that is noncommercial in nature

(5) "Cancellation" means an involuntary nullification or voiding of rights under a lease before the end of its stated term due to a breach of the lessee's obligations under the lease contract.

(6) "Department" means the Department of Natural Resources and Conservation.

(7) "Improvement" means structures including, but not limited to:

(a) a home or residence;

(b) outbuildings;

(c) sleeping cabins;

(d) utilities;

(e) water systems;

(f) septic systems;

(g) docks;

(h) landscaping;

(i) any other structure necessary for the conservation or utilization of state trust land; and/or

(j) any other structure determined by the department to meet this definition.

(8) "Lease" means a contract conveying state trust land for:

(a) a specific term of years;

(b) a specified lease fee; and

(c) use as classified under 77-1-401, MCA.

(9) "Leased land" means the land leased for a cabin site, and does not include any improvements.

(10) "Neighborhood" means a cabin site management region as determined by the department.

(11) "Rental rate" means a percentage of the Department of Revenue (DOR) valuation of the leased land to derive a lease fee. The rental rate for renewing leases is 5 percent or $800, whichever is higher, unless otherwise determined by the board. The minimum rate for new leases issued through a competitive bid is 6.5 percent unless reduced in accordance with these rules, or as otherwise determined by the board.

(12) "Security bond" means an amount submitted by the lessee and held by the department throughout the term of the lease to secure costs incurred by the department as a result of activity or improvements upon the lease site.

(13) "Security interest" means an interest a third party retains in any portion of the lease improvements located on that lease in order to secure the payment by the lessee to that third party.

(14) "State trust land" means lands or property interests held in trust by the state as defined by 77-1-101, MCA.

(15) "Trust(s)" means any one, or collectively all of the trusts, that receive income derived from department management of state trust lands.

(1) A cabin site lease generally may only include a maximum of five acres; however, special circumstances may exist for which the department may grant more than five acres.

(2) The lessee shall be required to comply with all rules and regulations, including, but not limited to:

(a) county planning;

(b) subdivision requirements; and

(c) all other local, state, and federal statutes and regulations.

(3) A cabin site lease authorizes the lessee access to the leased land and, with prior approval from the department, allows for placement of necessary utility facilities within the cabin site and across specified adjacent state trust lands from the main utility to the cabin site during the term of the lease. For any such authority outside of state trust land, the lessee will be responsible for obtaining any necessary easements from the appropriate landowner(s).

(4) At the lessee's expense, cabin site lessees are solely responsible for road maintenance of all roads upon state trust land that are used to access the cabin site lease.

(a) The department reserves the right to require the formation of road users associations (RUA), at lessee's expense, to address the potential of multiple use on access roads to the lease land.

(b) Should the department require the formation of a RUA, the cabin site lessees shall become members of that RUA and comply with all requirements of the RUA bylaws as approved by the department.

(5) At the lessee's expense, the lessee must keep the leased land free of fire hazards by:

(a) fireproofing incinerators, fireplaces, stoves, or any other type of burner by use of spark-proof screens;

(b) removing any forest litter such as needles, twigs, or duff in a ten-foot perimeter around all buildings and roof tops;

(c) removing all tree limbs encroaching the roof or chimney(s); and

(d) abiding by all restrictions on fires which may be in effect at any time and take all reasonable precautions to prevent and suppress fires, including extinguishing all fires prior to leaving the lease area.

(6) The use of firearms or fireworks is not permitted.

(7) Any felling of live or green trees is prohibited unless otherwise permitted by the department.

(8) At the lessee's expense, the leased land must be kept free of weeds, debris, garbage, and any open pits or ditches.

This rule has been repealed.

(1) All cabin sites are assessed an annual lease fee. Payment is due in one annual installment unless the lessee elects to pay the annual fee on a semi-annual schedule in two equal installments. 

(a) Annual lease fees are due on March 1 of each year.

(b) Semi-annual lease fees are due on March 1 and on September 1 of each year.

(2) Lease fee payment must be postmarked by the due date. Lease fee payment that is not postmarked by the due date will be considered late and a $25 late fee will be assessed.

(a) Late payment of annual lease fees will be accepted if postmarked on or before April 1.

(b) Lease cancellation for leases on an annual fee schedule occurs if payment is not received, or is received postmarked after April 1.

(c) Late payment of the first installment of semi-annual lease fees postmarked on or before April 1 will be accepted; late payment of the second installment postmarked on or before October 1 will be accepted.

(d) Lease cancellation for leases on a semi-annual fee schedule occurs if payment is not received, or is received postmarked after either date in (c).

(3) The department will send written notice of payments due to the address of record for lessees in accordance with the following schedule:

(a) invoice in January for all annual lease fees;

(b) invoice in January and July for all semi-annual lease fees;

(c) late notice in March for any unpaid annual lease fees;

(d) late notice in March and September for any unpaid semi-annual lease fees;

(e) cancellation notice in April for any unpaid annual lease fees; and

(f) cancellation notice in April and October for any unpaid semi-annual lease fees.

(4) Late notices and cancellation notices will be mailed to the address of record by certified mail; and, will be copied to any known security interest holder for improvements upon the leased land.

(a) As determined by the department or at the direction of the board, the department may send notices regarding payments due to lessees at times other than those described in this rule.

(5) A cancelled lease may be reinstated at the discretion of the department. The minimum fee for reinstatement is $500, or as much as three times the annual lease fee. The decision to reinstate the lease, as well as the reinstatement fee amount, are at the discretion of the department.

(1) A cabin site lessee may apply to the department to request authorization to place improvements on, or to install utilities to, the leased land. Approval is at the discretion of the department. 

(a) The lessee must apply for permission prior to placing any improvements or utilities on state trust land using a form provided by the department. Failure of the lessee to obtain prior written permission from the department, may result in:

(i) limited or no compensation paid to the lessee for the improvements upon termination of the lease; or

(ii) the department requiring the lessee to remove any improvements placed on the leased land, at the lessee's expense.

(b) Only one single-family residence will be permitted on each cabin site lease.

(c) The lessee is responsible to ensure all installations and improvements meet all applicable rules, codes, and regulations. The department's approval to place or modify any improvement on the lease lot does not necessarily constitute approval from any other regulatory entity such as a county, other state administrative agencies, or federal agencies.

(d) The lessee is solely responsible for the installation, maintenance, and expense of any improvements or utilities to the leased land.

(e) The lessee is responsible for all initial or recurring utility company charges or taxes resulting from the installation.

(f) Applications for improvement within 100 feet of a water body may be denied or limited.

(g) The department may require a security bond, the terms of which will be defined within the lease.

(2) A lessee may apply to the department to request to sublet the improvements.

(a) The lessee must apply for permission prior to subletting.

(b) The application must be on a form prescribed by the department.

(c) Subletting of improvements is permissible for long-term (monthly or longer) single-family residential use. Any subletting for short-term and/or recreational activity for total rentals that exceed the annual lease fee in a given year is prohibited.

(d) Approval of any sublease is at the discretion of the department.

(1) The former lessee has a limited right to remove the improvements or be compensated for the improvements by a new lessee. Improvements that are not removed or sold in accordance with this section will result in trust assumption and ownership of all improvements. 

(2) The ability to remove or seek compensation for improvements is only available if the former lessee has continued to pay all taxes and any other applicable assessments; and, is limited to a time period of up to three years after the date of cancellation or abandonment.

(a) If, after three years there is no new lessee and the improvements have not been removed, the department will provide written notice to the former lessee granting 60 days for removal of remaining improvements. After that time, the improvements will become the property of the trust.

(b) This condition and limitation applies to all improvements on the leased land, including movable and nonmovable improvements, as well as personal property.

(c) The beginning of the three-year time period shall be either:

(i) the effective date of an abandonment form executed by the lessee and accepted by the department;

(ii) the date rent is due, if the rent is not paid, as per ARM 36.25.1004; or

(iii) the effective date of cancellation provided in the cancellation notice from the department to the lessee, if the lease is cancelled for any reason other than failure to pay rent.

(3) A former lessee intending to remove the improvements must obtain a land use license from the department to remove the improvements. The license fee must be paid in advance.

(a) The department reserves the right to withhold authorization to remove the improvements during any time a lease is being actively offered for bid by the department.

(b) The land use license may be for a term of up to 60 days.

(c) The term may be extended by the department for good cause.

(d) The license fee will be calculated as the most recent year's lease fee, divided by 365, and multiplied by the number of days in the license.

(e) The minimum fee for a removal land use license is $50.

(4) A former lessee intending to be compensated for improvements by a new lessee must obtain a land use license from the department to access the cabin site for the limited purpose of maintaining and marketing the improvements for a potential buyer and new lessee. The former lessee may not utilize the cabin site for recreational or residential purposes.

(a) The maximum asking price of the improvements shall be the most recent DOR assessment of the improvements; or, if requested by the improvements owner, an appraisal of the improvements conducted pursuant to Uniform Standards of Professional Appraisal Practice (USPAP) standards. In case of a conflict, a USPAP appraisal will control.

(i) Improvements placed on the land after May 10, 1979, which were not previously approved by the department in writing prior to their placement, are not eligible for compensation under this rule.

(ii) Proof of the date of placement of improvements may be required by the department.

(iii) Any improvements or fixtures paid for by state or federal monies will not be compensable to the former lessee.

(b) If an appraisal is requested by the former lessee, the appraisal must:

(i) be contracted by the department and paid for by the lessee; and

(ii) utilize standard appraisal procedures, giving full consideration to the improvement's condition, its contribution to the value of the property for residential purposes, and remaining economic life. Compensation shall be the estimated cost to construct, at current prices, a building with equivalent utility as of the date of the lease or license's expiration.

(c) The lessee or improvement owner will be afforded notice and opportunity for an informal administrative hearing before the department to contest the appraisal valuation, as follows:

(i) the lessee or improvements owner must file a request for a hearing with the department within ten days of the department's notification to the lessee or improvements owner of the appraised value of the improvements. The department shall notify the lessee or improvements owner of the time and place of the hearing before the department director, or the director's designee. The hearing will be informal, without adherence to strict rules of evidence as provided in 2-4-604, MCA. A hearing examiner may be appointed to conduct the hearing. The lessee or owner of improvements may present any evidence and/or arguments for the department to consider;

(ii) upon determination of the improvement value, the lessee or improvement owner is obligated to transfer its interest in the improvements according to the department's final determination of the value.

(d) The proposed buyer of a former lessee's improvements must still participate in, and be the successful bidder of, the cabin site lease, per ARM 36.25.1009.

(e) In no case will the department pay any realtor fees, commissions, or otherwise, for the marketing of improvements when such marketing services are contracted by the lessee or former lessee.

(5) When a former lessee intends to unconditionally abandon the lease and improvements, the abandonment shall be recorded on a form as prescribed by the department, and the following will apply:

(a) the department or other party is under no obligation to compensate the former lessee for any improvements on the leased land, including movable and nonmovable improvements, as well as personal property;

(b) the improvements may be sold to a new lessee at a price determined by the department. Any revenue generated from the sale of improvements that have been unconditionally abandoned shall be distributed by the department in the same manner as rentals for the applicable leased land; and

(c) the department reserves the right to refuse an unconditional abandonment.

This rule has been repealed.

(1) Either the department or the lessee may cancel the lease. 

(a) The department may cancel a lease for any breach of the lease contract.

(b) A lessee may cancel per the terms of the lease, or unconditionally abandon a lease in accordance with ARM 36.25.1006.

(2) Before any cancellation or abandonment of a cabin site lease, the department shall notify any known holder of a security interest for improvements located upon the cabin site.

(3) Abandonment of the lease begins on the date specified on the abandonment form. At such time the former lessee will forgo all rights to the lease, and if specified on the form, will forgo all rights to all improvements on the property. Abandonment of improvements means all movable and nonmovable improvements, as well as personal property.

(4) The cancellation date of the lease begins on the date specified by the department when the cancellation process is complete.

(5) After the lease is cancelled or abandoned, the lease shall be available for lease to a third party and the department may put the lease lot up for bid.

(6) The former lessee will not be entitled to any refunds of any lease payments after cancellation or abandonment.

(1) Unleased cabin sites are available to lease through a competitive bidding process. 

(a) The minimum bid amount will be the first year's annual lease fee, determined by applying a rental rate to the land value. In no case will a bid be considered if it is less than the minimum lease fee specified in the bid solicitation. 

(i) Rental rates for new bidding shall start at 6.5 percent for all neighborhoods, or as otherwise determined by the board (in accordance with ARM 36.25.1014).

(ii) The department may reduce the rental rate to 5 percent after 60 days if no bids are received.

(iii) In neighborhoods with vacancy rates over 30 percent, the department may incrementally reduce the rental rate after 60 additional days until the vacancy rate is no longer over 30 percent. The rental rate shall not be less than 3.5 percent or $800, whichever is higher.

(b) The department will advertise unleased cabin sites for bid on the department web site, and may advertise through other marketing avenues.

(c) A response to a bid solicitation must be received prior to the bid closing date and time, at the location specified in the bid solicitation. The response must include the following:

(i) the bid form or application as provided by the department;

(ii) a bid deposit equal to 10 percent of the bid amount; and

(iii) the application fee as provided on the bid form.

(d) The department will specify whether the application fee and the bid deposit may be in the form of a cashier's check, money order, or from a credit card or similar electronic funds transfer for electronic bids.

(2) The cabin site will be leased to the highest qualified bidder unless:

(a) the department, at its discretion, may determine the bid is not in the best interest of the trust and reject the bid. The department will issue its reason for the rejection in writing and may accept the next highest qualified bid;

(b) if no bidder is selected, or if the highest qualified bidder declines the bid, the department may determine if and when to reopen a lease for bid, or accept the next highest qualified bid.

(3) The successful bidder shall sign and return the lease to the department within 30 days of receipt of the lease. If the lease is not signed and returned to the department within 30 days, the bidder forfeits the bid deposit, and the department may:

(a) advertise the lease for bid;

(b) accept the next highest qualified bid; or

(c) choose to offer the lease for bid at a later time.

(4) The lease fee for the first year of a new lease is the bid amount divided by 365, and then multiplied by the number of days between the lease start date and the last day of the upcoming February.

(5) Any former lessee who has had a cabin site lease cancelled and not reinstated by the board or department for nonpayment of lease fees may bid upon that cancelled lease, or any other cabin site lease provided that before the bid:

(a) the former lessee pays the unpaid lease fee billed for that cancelled lease; and

(b) the former lessee pays any unpaid taxes or similar assessments on the improvements, if bidding on that cancelled lease.

(6) Any lessee who has had a cabin site lease cancelled and not reinstated by the board or department for any reason other than nonpayment of lease fees may be allowed to bid; however, the board or the department may reject any or all bids for a cabin site from a lessee who has had a cabin site lease cancelled in the past.

(7) The successful bidder for a cabin site lease may be required to pay for the cost of any surveys, fulfillment of zoning and subdivision requirements, and other assessments or costs related to compliance with any other local, state, and federal statutes and regulations.

(1) A cabin site lease will be issued for a period not to exceed 15 years unless the cabin site lessee demonstrates a need for a longer period for loan security purposes, in which case the new lease may be issued in the discretion of the department for a period up to five years longer than the term of the loan up to a maximum lease period of 35 years. If a lease is issued for term longer than 15 years as provided in this section, the following will apply:

(a) a demonstration of need must be supplied to the department in the form of a request from the lender asking for the extended lease term;

(b) a cabin site lease will expire on February 28, 35 years or less from the beginning date of the lease;

(c) lease terms longer than 15 years are intended for loan security of dwelling improvements, not ancillary improvements such as septic tanks, wells, garages, and outbuildings; and

(d) the lender may submit a form provided by the department to document its security interest in the improvements on the lease land; and, to secure in advance a transfer of the lease to the lender in the event of lessee default.

(2) If all rental payments due have been paid and the terms of the lease have not been violated, the lease may be assigned on forms provided by the department. Any assignment is subject to the following:

(a) no assignment shall be effective until it is approved by the department, and the assignment fee has been paid;

(b) the department reserves the right to withhold approval of an assignment pending compliance with lease terms and conditions; and

(c) at the time of assignment or other transfer of interest in the leasehold, the department must be notified in writing of the sale price of the improvements and be provided copies of any agreements reflecting the transfer of both the lease and improvements, such as, but not limited to a realty transfer certificate.

(3) If the lessee, through enforcement of contract, foreclosure, tax sale, or other legal proceeding ceases to be the owner of the physical improvements, the department may–at its discretion–assign the lease to whom title has been transferred.

(1) A current cabin site is not subject to competitive bidding upon expiration if: 

(a) the current lease is in good standing; and

(b) the new lease will continue to meet the terms and conditions described in this subchapter.

(2) The current lessee may apply to the department, to request to renew the cabin site lease if all lease fees due have been paid and there are no outstanding lease violations. An application for renewal must be on a form prescribed by the department.

(3) Applications for renewal will only be accepted after December 1 of the year preceding the expiration of the lease and must be postmarked on or before January 28 of the year of expiration of the lease. Failure to submit a renewal application postmarked on or before January 28 will result in an unleased tract, and the tract will be subject to the requirements for leasing an unleased tract under ARM 36.25.1009.

(4) Any renewal will be offered on the lease contract adopted by the board at the time of renewal.

(5) Any renewal will:

(a) be issued at the rental rate of 5 percent of the land value or $800, whichever is greater, unless otherwise determined by the board (in accordance with ARM 36.25.1014); and

(b) will be subject to other lease fee terms in ARM 36.25.1003.

This rule has been repealed.

(1) Any cabin site lessee may request a hearing before the department to resolve any dispute which arises from the interpretation, administration, or cancellation of, or the lease fees due upon a cabin site lease. However, the department will not provide for any hearing upon the assessed valuations determined by DOR for any cabin site under 15-7-111, MCA.

(1) The annual lease fee for the first lease year of an individual cabin site lease will be the greater of:

(a) the amount bid by the lessee to secure the lease;

(b) the rental rate; or

(c) $800. 

(2) Throughout the term of the lease, the annual lease fee for an individual cabin site lease, after the first lease year, shall be the previous year's rent plus an annually compounded escalator of two percent.

(a) The annual lease fee for the duration of the lease shall be compounded and provided within the terms of the lease.

(b) If the lease fee is $800 as provided in (1)(c), the lease fee will not include an annual escalator.

(3) Any lease renewal will begin a new lease, and a new first lease year.

(a) The department will provide lessee notice of any lease fee adjustment by November 1 of the year prior to the renewal lease year.

(b) The lessee is solely responsible for contacting DOR if he/she wants to contest the valuation of the leased land. Any adjustment in valuation made by DOR shall be incorporated into the lease fee calculation effective the year following department receipt of a DOR adjustment.

(4) The lease fee for the first year of a new lease shall be prorated by dividing the full annual lease fee for the first year by 365, then multiplying the result by the number of days between the lease start date and the last day of February.

(5) Every two years, beginning in 2017, the board will:

(a) review the data from all new competitive bids and lease renewals;

(b) complete a formal review by a qualified professional economist; and

(c) consider whether to revise procedures and/or rental rates.

(1) ARM 36.25.1001 through 36.25.1015 shall apply to all cabin site leases issued after June 4, 2016.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

When used in this subchapter, unless a different meaning clearly appears from the context:

(1) "Bed" means an area on or above state-owned land between the low-water marks of a navigable river channel, excepting any portion of the land greater than 50 feet vertically below the thalweg of the channel and excepting any minerals therein.

(2) "Board" means the state Board of Land Commissioners.

(3) "Calculated market value" means the market value of a footprint derived by multiplying the current per acre value of the land above the low-water mark on the adjacent larger parcel nearest the footprint by the footprint area, then discounting the result by fifty percent.

(4) "Commercial use" means an activity conducted on, within, or over a navigable river for profit, excluding any extraction of minerals, but including, but not limited to:

(a) marinas;

(b) restaurants; or

(c) retail service outlets at that location.

(5) "Department" means the Department of Natural Resources and Conservation.

(6) "Easement" means a nonpossessory right of use issued either permanently or for a term of years for a particular purpose in a defined area of servient real property appurtenant to, and for the benefit of a dominant tenement property, which is binding upon subsequent lessees, users, and owners of the real property.

(7) "Footprint" means:

(a) an area which may be occupied by a structure;

(b) an area which may be occupied for the construction or maintenance of a structure; or

(c) an interruption or modification to the bed of a navigable river below the low-water mark as provided in 70-16-201, MCA.

(8) "Hazard" means a physical condition of an improvement, structure, or facility which creates an extraordinary risk of physical harm to persons or property which is so obvious and immediately dangerous that an ordinarily prudent person would observe and appreciate such extraordinary risk and take action to address or eliminate such risk.

(9) "Land classification" means a categorization of land according to its principal value, as defined in 77-1-401, MCA.

(10) "Land use license" means a contract issued by the department for land use, not to exceed a ten-year term, for any use of state land other than its primary classification which is compatible with the department's multiple use objectives and the primary classification of the land.

(11) "Lease" means a contractual authorization issued by the department to another party or entity for use of a footprint not to exceed 99 years.

(12) "Low-water mark" means the location of the water line of a navigable river at the lowest tenth percentile of historic annual flow as measured by the nearest upstream hydrograph station.

(a) As utilized in this definition, "historic annual flow" is a graph of water flow in the stream expressed in cubic feet per second (cfs) derived from an average of all existing hydrograph records for each day of the year at a hydrograph station immediately above the river segment in question (with water flows in cubic feet per second expressed on the 'y' axis and calendar days expressed on the 'x' axis).

(b) The "lowest tenth percentile" is determined by constructing a cumulative frequency graph of the average annual historic water flow rates measured by a particular hydrograph station, and determining the average annual flow rate which is exceeded 90 percent of the time in that cumulative frequency graph.

(13) "Marina" means a small harbor, boat basin, or moorage facility operated by a private club, enterprise, or municipality that provides boat berthing, docking and mooring, and incidental services such as mooring buoys, boat hoists/lifts, boat launch ramp, fishing, or retail services.

(14) "Navigable river" means a segment of a river adjudicated as navigable for title purposes by a court of competent jurisdiction.

(15) "Public use" means activities on navigable waters that are guaranteed by law to the general public to use navigable waters to fish, hunt, trap, navigate, camp, install docks and wharves, and recreate; provided that no physical occupation by a boat positioned, moored, or anchored in a specific location is made for any longer than fourteen days in any thirty-day period.

(16) "Specific location" means within a radius of 500 feet of any location where a structure or vessel was previously positioned, moored, or anchored upon the bed of a navigable river.

(17) "Thalweg" means the deepest portion of the active channel of a stream or river in any given cross-section of the stream or river.

(1) Pursuant to Article X, Section 11(1) of the 1972 Montana Constitution and 70-1-202(1) and 77-1-102(2), MCA, the title to all navigable rivers is held by the board in trust for the benefit of the public.

(2) The board, through the department as the board's administrative arm, shall manage and administer the navigable rivers of the state of Montana to:

(a) ensure the public's right to fully use and enjoy this resource for commerce, navigation, fishing, hunting, recreation and other public trust values; and

(b) generate income from navigable rivers for the public trust in a manner consistent with these rules and other laws.

(3) The department may, upon request by an applicant, issue an easement or lease for the board's approval of the use of a river bed which is not yet adjudicated as navigable.

(a) Any such easement or lease, which is voluntarily sought by an applicant, shall only convey a contingent right to use the riverbed based upon the validity and extent of the board's title to the river bed.

(b) The department may issue such contingent-right easements and leases, only where the department has historical documentation that the river was susceptible of use in commerce at statehood.

(c) Private use may be made of the bed of an unadjudicated river without prior department authorization, unless and until five years has passed since the department:

(i) has published public notice twice in a newspaper of general circulation in the area of the river that the river has been adjudicated as navigable; and

(ii) has given notice to adjacent landowners that the river has been adjudicated as navigable.

(4)  The department may, upon request by an applicant, issue a license for the use of a riverbed which is not yet adjudicated as navigable.

(a)  Any such license, which is voluntarily sought by an applicant, shall only convey a contingent right to use the riverbed based upon the validity and extent of the board's title to the riverbed.

(b)  The department may issue such contingent-right licenses only where the department has historical documentation that the river was susceptible of use in commerce at statehood.

(5) Navigable rivers are classified as class 4 lands under 77-1-401, MCA.

(1) If any part of ARM 36.25.1101 through 36.25.1108 is found to be invalid, all valid parts that are severable from the invalid part remain in effect in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications.

(1) Except as otherwise provided in this rule, the following shall require prior written authorization from the department:

(a) fixed structures placed within the bed of a navigable river or suspended above the bed of a navigable river; and

(b) boats positioned, moored, or anchored longer than fourteen days within any 30-day period within a specific location upon navigable waters.

(2) The following uses require no prior written department authorization:

(a) public uses as defined in ARM 36.25.1101; and

(b) uses and structures described in 85-16-101, MCA.

(3) Individuals seeking department authorization for the use of the bed of a navigable river must complete and submit an application form as prescribed by the department.

(4) Department authorization shall be in the form of a lease, license, or easement.

(5) All leases, licenses, or easements shall include a provision reserving all rights and interests other than those specifically granted by the lease, license, or easement. These reservations include, but are not limited to mineral reservations.

(a) No lease, license, or easement issued under this rule shall allow that lessee, licensee, or easement holder to mine upon the premises described therein any:

(i) coal, oil, gas and other minerals; and

(ii) deposits of stone, gravel, sand, gems, and other nonminerals valuable for building, mining, or other commercial purposes.

(6) With the exception of applications for authorization sought by the Montana Department of Transportation (MDT), all necessary federal, state, and local permits shall be acquired by those requesting authorization to use a navigable river or other river as specified in ARM 36.25.1102(3), except where the department issues contingent authorizations under (6)(b).

(a) Copies of permits must be furnished to the department prior to the department authorizing the use of the bed of a navigable river.

(b) However, the department may choose to issue a lease, license, or easement prior to the department's receipt of permit copies where the lease, license, or easement is conditioned upon the applicant's receipt of a permit and the filing of a copy of the permit with the department.

(7) As provided in 77-1-121, MCA, the department is exempt from the provisions of Title 75, chapter 1, parts 1 and 2, MCA, when issuing a lease, license, or easement for the use of the bed of a navigable river that expressly states that the lease, license, or easement is subject to further permitting under any of the provisions of Title 75 or 82, MCA.

(a) An environmental analysis may be conducted to assess the impact a permanent easement may have on the navigability of the river.

(8) The department may require holders of leases, licenses, or easements to remove hazards from the river, including structures that are no longer in use.

(9) Leases and easements for the use of the beds of navigable rivers are assignable. Easements for the use of beds of navigable rivers shall be appurtenant to dominant tenement real property.

(1) The lease, license, or easement area shall consist of the footprint only.

(2) The application fee for a land use license, lease, or easement for a use of the bed of a navigable waterway is $50.

(3) The annual fee for a land use license for the use of the bed of a navigable waterway is $150. The license fee for the first year shall be $150 without regard to the date when the license term begins.

(4) The fee for a lease for the use of the bed of a navigable waterway shall be the greater of the product of the lease rate multiplied by the calculated market value of the footprint, any competitive bid received, or a minimum fee of $150. The process for calculating the market value lease rate will be as described in 77-1-905, MCA, and ARM 36.25.915. The department reserves the right to impose higher market value lease rates where the proposed use of the bed subjects the state, the department, or the trust beneficiaries to greater risk of damage to trust lands. However, generally, the market value lease rates will be guided by consideration of various market and risk factors, including, but not limited to:

(a) the potential for waste, and the costs of demolition, reclamation, and liability;

(b) market evidence; and

(c) the current fee schedule developed by the department.

(5) Any lease for a use of the bed of a navigable waterway beginning after March 1 of a lease year will have a prorated bill for the first year. The prorated bill will include the effective lease date through February 28 of the following year.

(6) The fee for an easement shall be the greater of:

(a) fees established per ARM 36.2.1005;

(b) the calculated market value of the footprint;

(c) market evidence; or

(d) current fee schedule developed by the department.

(7) Application fees for historic land use licenses, leases, and easements will be deposited into the state special revenue fund.

(a) The revenue from the application fees may be used for processing historic easement applications.

(8) Lease and license revenues will be deposited as follows:

(a) from July 1, 2011, through June 30, 2014, to the guarantee account provided for in 20-9-622, MCA; and

(b) on or after July 1, 2014, to the school facility and technology account provided for in 20-9-516, MCA.

(9) Easement revenues will be deposited into the permanent public land trust fund according to Article X, Section 5(2) of the Montana Constitution.

(1) An applicant may apply for a land use license for a noncommercial or nonresidential use of the bed of a navigable river requiring a term of ten years or less.

(2) An applicant may apply for a lease for commercial or residential use of the bed of a navigable river requiring a term of 99 years or less.

(a) A lease will be issued by the department through a competitive bid process pursuant to 77-1-904, MCA.

(3) An applicant may apply for an easement for those uses described in 70-30-102 and 77-2-101, MCA, which serve public purposes and which require a permanent easement.

(1) The holder of a lease, license, or easement for a water diversion associated with an existing water right shall submit a notice to the department on a form as prescribed by the department when a footprint or associated facilities are proposed to be relocated or expanded.

(2) The holder of a lease, license, or easement within a navigable river may increase the size of the footprint or relocate the footprint and associated improvements, or both. The department will determine whether to:

(a) amend the existing lease, license, or easement; or

(b) issue a new lease, license, or easement.

(3) The expansion or relocation of a lease, license, or easement footprint and associated improvements may be authorized when:

(a) all necessary federal, state, and local permits have been issued;

(b) all payments due to the state for the use of the existing footprint have been paid in full; and

(c) the expanded and/or relocated footprint provides for the same beneficial use.

(i) A footprint for a water irrigation or diversion structure or use proposed for expansion and/or relocation shall be considered to have the same beneficial use when the water right and the property benefitted by the use remain the same as before the expansion and/or relocation.

(4) The department may require the holder of an existing lease, license, or easement to complete an application for a new authorization if the holder proposes to change the beneficial use of the footprint.

(5) Subject to the other provisions of this rule, if the area of the new lease footprint is larger or smaller than the originally approved footprint, the department will adjust the lease fee through a lease amendment to reflect the calculated value of the new footprint.

(6) If the new easement footprint is larger than the originally approved footprint, the department will value the additional easement area according to ARM 36.25.1105. The department will not refund the easement holder if the easement area of the new footprint is smaller than the originally approved footprint.

(7) Full market value of the new footprint will be established through an appraisal conducted in compliance with ARM 36.25.917.

(8) Relocation and expansion of a footprint under a lease, license, or easement for a water diversion structure associated with a water right which represents an historic use under ARM 36.25.1108 is exempt from the Montana Environmental Protection Act (MEPA), 75-1-201, et seq., MCA, and the Antiquities Act, 22-3-401, et seq., MCA.

(1) Persons using the bed of a navigable river adjudicated before October 1, 2011, without written authorization from the department prior to October 1, 2011, that wish to continue the use must complete an application prescribed by the department and provide the application to the department by July 15, 2017.

(2) Persons using the bed of a river adjudicated as navigable after December 7, 2012, without prior written authorization from the department, that wish to continue their use must complete an application prescribed by the department and submit the application to the department within five years of the date that the department issues a public notice that the river has been adjudicated as navigable. The requirements of this rule do not apply to:

(a) footprints related to hunting, fishing, or trapping;

(b) footprints that existed prior to November 8, 1889;

(c) footprints for which the applicant can show an easement obtained from a state agency prior to December 7, 2012, or the date of adjudication, whichever is later; or

(d) footprints associated with a power site regulated pursuant to Title 77, chapter 4, part 2, MCA.

(3) The authorization shall only include the footprint of the historical use of the navigable river by the applicant or the applicant's predecessor in interest.

(4) The department shall determine if authorization of the use and footprint for which application is made will be a lease, license, or easement according to the criteria in ARM 36.25.1106.

(5) The department shall issue authorization for a lease, license, or easement for an historic use if the applicant provides the following:

(a) an application fee of $50;

(b) a notarized affidavit on a form prescribed by the department demonstrating:

(i) the applicant or the applicant's predecessor in interest used the bed of a river that has been determined navigable in compliance with ARM 36.25.1101(13), and that the use continues; and

(ii) the historic use of the acreage covered by the footprint which occurred prior to December 7, 2012, or the date the river was adjudicated as navigable, whichever is later;

(c) evidence demonstrating the use for which authorization is sought and describing the footprint of the historic use. Such evidence may include any combination of:

(i) aerial photographs;

(ii) a 310 permit issued prior to construction of the historic use;

(iii) construction or engineering documents;

(iv) a GPS survey;

(v) a professional survey by a registered land surveyor; or

(vi) a water right pertinent to the structure to be permitted; and

(d) the authorization for easements is approved by the board. Leases and licenses may be approved by the department.

(6) The lease or license shall automatically terminate should the lessee or licensee fail to make annual payment of the lease or license fee. No easement shall be issued if the easement applicant fails to pay the full market value of the easement footprint.

(7) The department, at its discretion, may make a site inspection of the use for which authorization is sought.

(8) The department shall waive the survey requirements of 77-2-102, MCA, if the department determines that there is sufficient information available to define the boundaries of the proposed use for the purposes of recording the easement or issuing a license or lease.

(9) The applicant for authorization of an historic use may request to relocate the use within the navigable river, subject to the requirements of ARM 36.25.1107.

(10) The department is exempt from the requirements of Title 22, chapter 3, part 4, and Title 75, chapter 1, parts 1 and 2, MCA, for issuance of an authorization for historic uses.