Section 10.5 - Mining Leases on Relinquishment Act Lands(a) Lands and minerals subject to lease. (1) Any survey or portion of a survey of the Relinquishment Act land, as this term is uniquely defined in § 10.1(a)(9) of this title (relating to Definitions; Exploration and Development Guide), is subject to lease under this section.(2) All minerals, as defined in § 10.1(a)(5) of this title are subject to lease by the surface owner as agent for the state. Minerals other than oil and gas may be leased together or separately. Oil and gas must be leased under the terms of Chapter 9 of this title (relating to Exploration and Leasing of State Oil and Gas).(b) Authority and duties of agent. (1) Prohibition against self-dealing. A surface owner may not lease to himself, herself, or itself, either directly or indirectly. A surface owner may not acquire by assignment a lease executed by the surface owner. A surface owner will be considered to have engaged in self-dealing if the surface owner leases to the following persons or entities or if the lease executed by the surface owner is assigned to the following persons or entities: (B) any corporation or subsidiary in which the surface owner is a principal stockholder, 5% or more, or an employee of such a corporation or subsidiary;(C) a partnership in which the surface owner is a partner, or an employee of such a partnership;(D) if the surface owner is a corporation or a partnership, a principal stockholder of the corporation or a partner of the partnership, or any employee of the corporation or partnership;(E) a fiduciary representing the surface owner, including, but not limited to, a guardian, trustee, executor, administrator, receiver, or conservator; or(F) a family member or to anyone related to the surface owner by marriage, blood, or adoption. within and including the second degree of consanguinity or affinity.(2) Fiduciary duty of agent. A surface owner is the state's agent and owes the state a fiduciary duty and a duty of utmost good faith. A surface owner must fully disclose any facts affecting the state's interest and must act in the best interest of the state. Any conflict of interest must be resolved by putting the interests of the state before the interests of the surface owner. In addition to these specific duties, the surface owner owes the state all the common-law duties of a holder of executive rights.(3) Consequences of a breach of the surface owner's fiduciary duty or a violation of the prohibition against self-dealing. When a surface owner breaches any duties or obligations owed to the state by law, any suit relating to such breach shall be filed in a district court in Travis County. Such a suit may seek removal of the owner of the soil's agency rights in addition to any other remedies authorized by statute or by common-law.(4) Penalty assessment for breach of the surface owner's fiduciary duty. A penalty of 10% shall be imposed on any sums due the state because a surface owner breaches a fiduciary duty. The imposition of this penalty will not limit the right of the state to obtain punitive damages, exemplary damages, or interest. Any punitive damages or exemplary damages assessed by a court shall be offset by the 10% penalty imposed by this subsection.(c) Lease negotiation procedure. (1) The surface owner is authorized to act as the state's leasing agent with any person, firm, or corporation desiring to develop the permanent school fund's minerals.(2) The lease shall be negotiated by the surface owner and the prospective lessee on a form prepared and furnished by the GLO, which will incorporate the terms and conditions prescribed by the SLB.(3) The proposed lease shall be submitted to the GLO for approval prior to recording the lease in the county records.(d) Approval and filing of lease.(1) The commissioner may reject or refuse for filing any lease deemed not in the best interest of the state.(2) Upon rejection of a proposed lease by the commissioner, the prospective lessee will be given written notice, which will specify the reasons for the rejection and any changes, deletions, or additions which would render the lease acceptable. The prospective lessee may request a hearing upon a rejection of a lease under the hearings procedures set out in Chapter 2 of this title (relating to Rules of Practice and Procedure).(3) Upon receipt of approval of the lease, the prospective lessee shall finalize the lease and have the lease recorded in the county or counties in which the land lies and shall file a certified copy of the lease with the GLO. Leases are not effective until approved and filed in the GLO.(4) The state's share of the approved bonus payment and the filing fee prescribed by § 3.31 of this title (relating to Fees) shall be submitted along with the certified copy of the lease within 90 days of execution the lease. Any lease is void unless it recites the actual consideration paid or promised for the lease.(5) A surface owner, as the state's agent, owes the state a fiduciary duty. See subsection (b) of this section. This fiduciary responsibility must be of paramount concern when a surface owner enters lease negotiations.(e) Lease terms and conditions. (1) Lessee shall pay bonus, rentals, royalties, and other lease considerations as follows. (A) On leases filed before September 1, 1987, lessee shall pay to the state 60% of all bonuses, rentals, and royalties and other considerations agreed upon. Lessee shall pay to the surface owner 40% of all consideration agreed upon.(B) On leases filed on or after September 1, 1987, lessee shall pay to the state 80% of all consideration agreed upon. Lessee shall pay to the surface owner 20% of all bonuses, rentals, and royalties.(C) On leases filed after September 1, 1999 for the exploration and production by surface mining of coal, lignite, potash, sulphur, thorium or uranium, lessee shall pay to the state 60% of all bonus, rentals, royalties and other considerations agreed upon. Lessee shall pay to the surface owner 40% of all consideration agreed upon.(2) In the event of production, the state must receive not less than one-sixteenth of the value of the minerals produced. The combined royalty payable to the surface owner and the state will be expressly provided for in the lease negotiated by the surface owner.(3) All royalties and other payments accruing to the state shall be paid to the state through the commissioner at Austin, and shall be deposited to the PSF.(f) Reports, assignments, releases, inspection, forfeitures, and reinstatements. Leases issued under this section will be governed by all general provisions found in § 10.7 of this title (relating to Conduct of Exploration and Mining Operations) and § 10.8 of this title (relating to Assignments, Releases, Reports, Royalty Payments, Inspections, Forfeitures, and Reinstatements). However, a lease issued under this section cannot be assigned to the surface owner who executed the lease. See subsection (b)(1) of this section.(g) Lease by owner of the soil. (1) An owner of the soil of lands covered by this subchapter may lease those lands for the purpose of exploring for and producing minerals other than oil and gas in the manner provided by this section.(2) An owner of the soil may apply in writing to the board for a lease of a mineral or minerals other than oil and gas.(3) The application shall contain the following:(A) the name and address of the applicant;(B) a complete legal description of the land the applicant seeks to lease;(C) the name and address of every owner of the soil of the land the applicant seeks to lease, if the applicant is not the sole owner of the soil;(D) a brief letter opinion signed by an attorney licensed in this state setting out the surface ownership of the land sought to be leased;(E) a statement of the applicant's experience in the exploration for and production of minerals other than oil and gas, including, without limitation, a list of any State of Texas or federal mineral leases currently or previously held or operated by the applicant or other entity in which the applicant has or had a significant interest during the five-year period preceding the date of the application;(F) a statement that the applicant intends to explore for and, if commercially reasonable, produce minerals other than oil and gas or if the applicant plans that another person or firm shall conduct exploration and production: (i) the name and address of the person or firm;(ii) a description of such person's or firm's experience in the exploration for and production of minerals other than oil and gas, including, without limitation, a list of any State of Texas or federal minerals other than oil and gas leases currently or previously held or operated by the person or firm during the five-year period preceding the date of the application; and(iii) a description of the applicant's intended degree and type of participation in the exploration of and production from the property and all consideration or benefits the applicant expects to receive in connection with the exploration of and production from the property; and(G) the amount of bonus, rental, royalty, and other lease terms that the applicant proposes to pay or offer or pay and offer for the lease.(4) The applicant shall provide geological, geophysical, geochemical, and other data or copies of the data, including interpretative data, pertinent to exploration for minerals other than oil and gas on the lands for which the application is made, in the applicant's possession or to which the applicant has reasonable access and which the applicant has the ability to provide to the land office. All such data shall be confidential and not subject to the provisions of the open records law, Chapter 552, Government Code, until one year after the expiration, termination, or forfeiture of a lease granted pursuant to this section. After one year after the expiration, termination, or forfeiture of such a lease, the data shall remain confidential to the extent permitted by Chapter 552, Government Code. If a lease is not issued, the data shall be returned to the applicant.(5) The board may prescribe the form of the application, require additional information as it considers appropriate, and, by rule, otherwise provide for the implementation of this section.(6) The staff of the land office shall review the information presented in the application, such other geological, geophysical, and geochemical data reasonably available to it relevant to the land proposed to be leased, and leasing information reasonably available to it relevant to the land proposed to be leased. The staff shall prepare a report to the board that contains:(A) a summary of bonus, rental, royalty, and other lease terms then being offered and asked for leases of similar lands in the area of the land proposed to be leased; and(B) data considered by the staff to be relevant, including, but not limited to, data concerning the land proposed to be leased and its estimated value for minerals other than oil and gas, recommended lease terms, and the applicant, including the applicant's history of leasing State of Texas or federal lands for minerals other than oil and gas.(7) The board shall consider the application at a regular meeting. It may, in its sole discretion, grant or deny the application or grant the application subject to specified conditions. Such conditions may include a requirement that if the applicant does not materially participate in the exploration or development of the leased premises, through labor performed, cash or goods contributed, or supplying other enhancement in value, the applicant must share equally with the permanent school fund any benefit derived from the lease.(8) After the board has approved an application, the commissioner shall issue a lease to the applicant. The lease shall conform, as nearly as is practicable, to the form of lease prescribed by the commissioner under this chapter.(9) The commissioner may not deliver a lease issued under this section until the applicant has executed and delivered to the commissioner a waiver of the applicant's right and duty to act as agent for the state in leasing the leased premises and to receive any part of the bonus, rental, royalty, and other consideration accruing to the owner of the soil under this subchapter. The waiver and the lease shall be effective as of the date the commissioner executes the lease.(10) Upon the expiration, termination, or forfeiture of a lease issued under this section, the agency rights and duties of the applicant as owner of the soil are reinstated without the necessity for further action by the owner of the soil, the board, or the commissioner.(11) If an applicant is not the sole owner of the soil, the applicant may secure leases from the other owners of the soil from which the applicant is not prohibited from leasing under § 53.074, Texas Natural Resources Code. If the applicant must obtain a lease from an owner of the soil from whom the applicant would otherwise not be permitted to lease in order reasonably to explore for or produce or explore for and produce minerals other than oil or gas, the commissioner may approve the lease on the condition that the applicant shall not receive any benefit from the lease, and, if the applicant should acquire by any method, including devise or inheritance, the right to receive any rental, royalty, or other benefit accruing to the owner of the soil's interest under the lease, the applicant shall assign the benefit to the commissioner for the benefit of the permanent school fund.(12) The commissioner shall not approve any lease obtained by an applicant from another owner of the soil if the lease contains terms that are substantially inconsistent with or provide for a lesser bonus, rental, or royalty than the lease approved by the board. If the bonus, rental, or royalty in a lease obtained by an applicant from another owner of the soil for a comparable interest is greater than that approved by the board, then the lease approved by the board shall be amended to provide for the greater bonus, rental, or royalty, and the applicant shall be liable for all greater sums due. In determining whether an interest is comparable, the board shall consider the quantum of the interest, the time at which the lease was taken, and any other aspects of the lease transaction that the board considers to be relevant.(h) Leasing procedure when agent cannot be located. If a potential lessee cannot locate a surface owner, such lessee can follow the procedures set out in the Texas Natural Resources Code, § 52.186. Once these procedures have been followed, Relinquishment Act land will be leased for minerals other than oil and gas through the prospect permit and leasing procedures found in § 10.2 of this title (relating to Prospect Permits on State Lands) and § 10.3 of this title (relating to Mining Leases on Properties Subject to Prospect). The state will receive all the consideration paid under such a lease.(i) Leasing procedure when agent's rights are forfeited.(1) When a surface owner's agency rights have been forfeited under subsection (b)(3) of this section, the land shall be subject to lease for minerals other than oil and gas under the procedures set out in § 10.1 of this title (relating to Definitions; Exploration and Development Guide) and § 10.2 of this title (relating to Prospect Permits on State Lands).(2) When a new lease is executed under subsection (i)(1) of this section, the surface owner shall not be entitled to any share of the revenue generated by such lease, but the surface owner's agency rights will be ipso facto reinstated upon expiration of the new lease.(3) If no new lease is executed within one year of the date of the forfeiture of the agency rights, the commissioner may, in his discretion and for the best interests of the PSF, reinstate the surface owner's agency rights.31 Tex. Admin. Code § 10.5
The provisions of this §10.5 adopted to be effective March 22, 1989, 14 TexReg 1280; amended to be effective May 26, 1992, 17 TexReg 3473; amended to be effective July 11, 2004, 29 TexReg 6308; amended to be effective December 10, 2009, 34 TexReg 8776