P.R. Laws tit. 28, § 117
(a) General principles.— The right to extract commercial minerals is granted only through lease of the pertinent deposit granted by the Secretary of Natural and Environmental Resources with the approval of the Governor. The Secretary of Natural and Environmental Resources shall, through such leases, obtain for the Commonwealth of Puerto Rico the highest financial return possible, consistent, however, with the widest possible exploitation or extraction of the commercial mineral.
(b) Lease terms and conditions.—
(1) Nature of the lease.— The lease vests the right to extract and subsequently to own and dispose of the mineral subject to the provisions of this chapter, upon payment of a royalty and of the share fees provided herein. Such lease is [non-]transferable except with the consent of the Secretary of Natural and Environmental Resources. The mineral shall only be extracted from the ground which is included vertically within the boundaries marked off in the lease. No lease contracts shall be granted when the “open pit” and “strip mining” methods for mining minerals are to be used.
(2) Priority rule.— The application of a holder of an exclusive prospecting permit for the corresponding area shall have priority in the consideration of mining leases.
(3) Duration.— A mining lease shall be granted for a period not greater than thirty (30) years. The lease may be renewed but such renewal shall not be automatic, for every renewal, whether upon expiration of the first or of a renewed period, shall be arranged under the terms and conditions prescribed by the Secretary of Natural and Environmental Resources; Provided, That said Secretary shall offer the lessee the first opportunity to accept or reject the terms and conditions prescribed by the former for any renewal period.
(4) Grant.— Grant is any tract of land subject to lease, which shall not exceed ten (10) hectares. Its length shall not exceed three times its width. The Secretary of Natural and Environmental Resources shall determine the number of grants to be included in a lease, according to the nature of the deposit and the operation requirements.
(5) Registration and site.— The applicant for grants shall state the boundaries of the area he desires to lease, supplying adequate information with regard to the exact location of the area, making reference either to marks located on the ground or to properties abutting thereon which have already been surveyed. If such use is not made of the boundaries of such properties, the lessee shall complete the survey of the leased area within the first two (2) years of the lease, and he may credit the cost of such survey as part of the required development works. The area subject to lease may be of any shape, provided it is covered by the number of grants indicated by the Secretary of Natural and Environmental Resources.
(6) Lease rental.— The sum of one hundred dollars ($100) a year is hereby fixed as lease rental for each mining grant up to forty (40) grants, and twenty dollars ($20) a year for each additional grant.
(7) Development works.— As a condition to keeping a lease the lessee shall carry out development works on the leased area at an ascending annual cost of two hundred dollars ($200) per grant multiplied by the number of years elapsed since the date of the lease, up to a maximum of two thousand dollars ($2,000) per grant. Such works shall include, among others, the expenses of surveys, excavations, paths, samples, analyses, and any other expense or operating cost incurred in the investigation and development of the mining potential of the area. Indirect expenses of the enterprise, as well as expenses of operation and of the extracting of the commercial mineral are excluded. In exceptional cases of low-grade minerals spread out over vast areas, the Secretary of Natural and Environmental Resources may reduce the development-works requirements. In the event that the lessee does not incur the minimum development expenses during any one year, he may pay the difference in cash to the Secretary of Natural and Environmental Resources. Failure to fulfill this obligation shall be cause for the immediate revocation of the lease.
In the case of a leased area under production, the lessee shall continue the development works through the exploration and development of new reserves, unless the Secretary of Natural and Environmental Resources, for some reason he deems of weight, authorizes the reduction of such works or entirely exempts the operation from continuing such activities.
(8) Grouping of grants.— Negotiations may be made with the Commission with respect to the organization of grants in groups for the purpose of carrying out the development works. The credit for these works, even if they have been confined to but a single grant, shall be spread out over all grants included in each group. Such grant arrangement shall be based on the physical segregation and the independence of each group as a separate operating unit.
(9) Royalties.— The Secretary of Natural and Environmental Resources shall fix for all commercial-mining exploitation a royalty which shall not be less than two percent (2%) of the estimated value of the commercial mineral removed and heaped or otherwise stored at the operation site and before being processed. In determining the amount of the royalty in each case, the Secretary of Natural and Environmental Resources shall consider, among other factors, if available, the market value of the commercial mineral, the grade and/or estimated volume of the deposit, the nature and location thereof, the estimated cost of removal, and any other relevant information.
The amount of the royalties shall be computed quarterly and shall be paid within the thirty (30) days next following.
Royalty payments shall not be credited as part of the cost of development works.
The owner of the land in any private property in which an exploitation or extraction of commercial minerals is carried out shall be entitled to a twenty percent (20%) share of the minimum royalty of two percent (2%) provided for in this chapter during the first ten (10) years of exploitation, and to this effect the Secretary of the Treasury of Puerto Rico shall authorize payment of the amount of such share to the said owner, duly accredited as such by the Secretary of Natural and Environmental Resources, forthwith upon receipt of each royalty payment. For the purpose of this chapter, the land owner shall be understood to be the person who has acquired the property with an interest other than the prospecting, exploitation or extraction of the minerals or in the share of the royalty.
(10) Surface rights.— The lease includes entrance and exit rights, occupation and modification of the surface of the area leased, plus any other easements, and the right to construct all kinds of improvements and roads necessary and suitable for the most effective use and utilization of the lessee’s rights. The owner of the land or of any property right therein is entitled to and shall receive in due time the compensation agreed upon with him for the loss of the land and any other damages; Provided, That in case the parties do not reach an agreement as to the amount of the compensation, the Secretary of Natural and Environmental Resources shall, after a hearing at which both parties may present evidence in support of their respective contentions, fix the amount of the said compensation. The taking, prospecting, exploitation or extraction of the land shall not be stopped or otherwise hindered by the lack of determination and payment of such compensation provided the lessee has previously deposited with the Department of Natural and Environmental Resources a cash amount acceptable to the Secretary of Natural and Environmental Resources covering the amount of said compensation, plus a bond in such form, for such amount and underwritten by such sureties as are acceptable to said Secretary, to answer to the owner of the land or of any property right therein for any difference resulting between the sum so deposited and the amount of the compensation ultimately fixed. The fixing of the said compensation shall be governed by the evaluation rules and principles applicable in condemnation cases.
(11) Government share dues in the production.—
(A) Every public or private producer who exploits commercial minerals in Puerto Rico shall pay the Secretary of Natural and Environmental Resources dues on the share of the Commonwealth Government in the production of said minerals. The precise amount of these dues shall be fixed by the Secretary who to that effect shall negotiate with each interested producer pondering, among others, the following factors:
(i) The costs and social benefits attached to a project.
(ii) The economic feasibility thereof.
(iii) The dividends that by reason of a direct interest in the producing enterprise may correspond to the Government of the Commonwealth.
(iv) The income tax that the producer shall pay to the treasury.
(v) The royalty established by this chapter.
(B) The minimum amount of these dues shall be computed according to the following formula:
Pc s Pr s N s A PP = s K, 130 - T
where PP represents “share in the production”; Pc, “price of the mineral”; Pr, the gross production during the period for which the payment is made; N, the “output or recovery factor”; A, the “time for which the lease was granted”; T, “time elapsed since the lease was granted” and K, “an economic type factor with value” of zero point one (0.1) to one (1).
(C) The precise value of factor “K” shall be determined by the Secretary of Natural and Environmental Resources by taking into consideration the market conditions, emergency situations brought about by disasters, the technological advances entailing capital investment to incorporate them, and the competitive position of Puerto Rico with respect to other producers of similar metals.
(D) For the case of petroleum extracted by enterprises or contractors who have contributed the necessary capital for the prospecting and exploitation of same, the minimum amount of the share due the Commonwealth shall be determined according to the following rules:
(i) No more than forty percent (40%) of the petroleum produced in any one year shall be set aside for investment and operation expenses. These expenses shall include those related with the works of prospecting, exploitation, transportation and sale of the petroleum, payment of royalties, and other cost items which the Secretary of Natural and Environmental Resources may deem pertinent.
(ii) The remaining sixty percent (60%) of the petroleum produced shall be divided between the Government and the enterprise or contractor so that the Government of Puerto Rico may receive no less than fifty percent (50%) of said petroleum.
(iii) A duty or tax consisting of fifty percent (50%) of the market value of said petroleum shall be levied on the petroleum corresponding to the enterprise or the contractor.
The contractor shall not be bound to pay any other tax to the Commonwealth of Puerto Rico. The Secretary of Natural and Environmental Resources may negotiate with the enterprise or the contractor other payments he might deem pertinent, mainly those corresponding to bonuses in cash to be paid at the moment of signing a contract and in other periods previously agreed upon. When production costs exceed fifty percent (50%) of the gross production value, the Secretary of Natural and Environmental Resources, with the Governor’s approval, may reduce the share dues of the Commonwealth Government so as to make feasible the exploitation of a petroleum field. The decisions adopted under this discretionary power shall be valid sixty (60) days after they have been made public in two (2) newspapers of general circulation in Puerto Rico and all the documents concerning same shall be sent by the Secretary of Natural and Environmental Resources to the Legislature not later than the date in which such decisions were published.
(E) The prospecting for petroleum does not confer rights over natural gas wells discovered, although their discoverer shall have a preferential right to negotiate with the Secretary of Natural and Environmental Resources the economic terms concerning the commercial production of such gas.
(F) The Secretary of Natural and Environmental Resources may choose between collecting in kind or in cash, or part in kind and part in cash, the dues on the share of the Commonwealth Government in the production. The Secretary shall make known his decision on whether to receive the share dues totally or partially in kind not less than two (2) months in advance and, while not so doing, it shall be understood that he chooses full payment in cash.
(G) In case the Secretary chooses to receive payment in kind, the producer shall be bound to store, without cost to the Commonwealth, the amount which he shall deliver to the latter and shall be liable therefor during its delivery and storage. When the Secretary chooses to receive payment of the metal in kind, the producer shall be bound to deliver said payment in metal in the final form in which it is produced.
(H) The amount of the payment shall be computed quarterly and shall be paid within thirty (30) days after the expiration of the period.
(I) Payments made by reason of the share dues shall not be credited as part of the development works costs.
(11a) For the effect of the royalties and the production share dues, the Secretary of Natural and Environmental Resources shall establish the hydrocarbons reference price at the well’s mouth and the price of other minerals in gross production, taking into consideration the actual prices of the extracted minerals, production and transportation costs, market conditions, quality specifications and other factors intervening in the price makeup.
The reference prices for metals shall not be inferior to those prevailing for the same metals in the international market or in the United States market, whichever of the two is higher.
In the determination of what constitutes the gross production of hydrocarbons, the volumes effectively utilized in the exploitation and burning and gas winding operations shall be excluded.
(11b) There shall be created by law a “Trust for the Integral Development of Puerto Rico” to which sufficient contributions shall be made from the funds produced by the royalties and the share dues of the Commonwealth of Puerto Rico, according to this chapter, to, among other purposes:
(A) Promote, through subsidies or direct investments, the establishment of manufacturing enterprises that improve the vertical integration of industrial sectors of the economy and utilize manual labor intensively in its production processes.
(B) Finance plans and agricultural development projects.
(C) Restore, repair and preserve Puerto Rico’s natural or recreative and aesthetical [sic] resources.
(D) Finance educational and technical and scientific research plans and programs.
(E) Promote the arts.
(F) Establish programs to preserve, develop and rehabilitate the personality and health of infants.
(G) Finance Commonwealth permanent improvement programs.
(H) Remedy emergency situations caused by natural disasters.
(I) Promote any other plan or project pursuing an end similar to those mentioned.
(12) Refining or other processing in Puerto Rico.— The Secretary of Natural and Environmental Resources shall by all reasonable means endeavor to attain that all commercial minerals extracted in Puerto Rico be given the highest possible degree of processing and utilization in Puerto Rico, and this requisite shall be a condition for any lease and a factor to be considered in determining the amount to be paid to the Commonwealth Government as share dues in the production of commercial minerals which cannot be processed and utilized to the highest degree possible in Puerto Rico. Exportation of raw or partially refined or processed mineral shall be permitted only after it is established by unquestionable proof before the Secretary of Natural and Environmental Resources that it is not commercially sound to carry out additional processing operations in Puerto Rico. In addition, it shall also be a condition for all leases that raw or partially refined or processed commercial mineral shall not be exported if the Secretary of Natural and Environmental Resources determines that same is necessary for internal consumption in Puerto Rico.
(13) Conservation and protection of adjacent land.— The Commission may in certain specific cases impose such restrictions, controls, or requirements as in its judgment are necessary for the conservation of the resources of the area or the protection of the area and the residents thereof, such as, among others, the requirement to replace soil so that the agricultural utilization of the area may not be impaired, the requirement to prevent water pollution, the requirement to dispose of residues, the requirement to establish safety and spacing measures, the requirement to control the rate of extraction, and the requirement to fill in borings, drifts, and other excavations.
(14) Employment and training of residents.— It shall be a requisite for every lease that, insofar as economically possible, persons residing in Puerto Rico be employed for the works originating and carried out under such lease, and that such persons be trained in such operations as require technical skill.
(15) Extraction of commercial minerals mingled with others covered by lease.— The Commission shall not grant a lease if from the geological information at its command it shall find that the commercial mineral the object of the application might reasonably be mingled in a mine with any other commercial mineral already covered by a previous lease with a person other than the applicant. If after a lease is granted a commercial mineral is unexpectedly found during exploration mingled in the same mine with another as to which a lease has already been granted, the first lessee shall be entitled to extract, hold, and dispose of all the commercial minerals covered by said lease and any other commercial minerals mingled therewith.
(16) The Secretary of Natural and Environmental Resources shall set the metal and hydrocarbon extraction rhythm, according to his estimate of existing reserves and to his best criterion.
(17) Every person or enterprise that, during the prospecting and exploitation of mineral activities, causes damages to a natural resource of Puerto Rico or to the environment shall have the obligation to repair it or, should same be irreparable, to pay to the Treasury of Puerto Rico the amount corresponding to the damage caused. The expenses related to cleaning and restoration of affected areas in case of a petroleum spill during the exploitation of a deposit shall be paid by the person or enterprise occasioning same, regardless of the cause.
The contracts for metal exploitation subscribed by the Secretary shall contain a clause binding the grantees to the conservation and restoration of the land utilized in the mining activity.
(18) No mining prospecting permit or exploitation lease subscribed by the Secretary of Natural and Environmental Resources shall relieve the other party from the liability for the damages referred to in the foregoing paragraphs.
History —Aug. 18, 1933, No. 9, p. 32, § 6; Oct. 6, 1954, No. 6, p. 48, § 1; June 9, 1959, No. 17, p. 74, § 1; June 5, 1963, No. 41, p. 59; June 27, 1969, No. 96, p. 257, § 6; Oct. 29, 1975, No. 10, p. 766, § 5; June 30, 1995, No. 73, § 5.