(1) Any person desiring to lease a tract of state land or portion thereof for any use other than the present classification must submit an application proposing such alternative use. If such application is received from anyone other than from the existing lessee for a reclassification, then proper notice shall be given to the appropriate lessee. The department shall conduct a capability inventory of the tract, and if it determines such proposed use to be in the best interests of the state, the tract may be reclassified and leased for such alternative use. The person submitting an application for reclassification will be notified of the department's decision at least 90 days prior to the date applications and bids for leases or licenses are due.

(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 The lessee shall be entitled to reasonable compensation for any improvements on the withdrawn land and to an adjustment or return payment of rent.