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  • GDP, US$bn: 18,624.5
  • GDP per capita, US$: 56,244.1
  • Population, mn: 321.8
  • Inflation, CPI ave: 1.8
  • FX, LCY/US$: 1.0
  • Budget Balance, % of GDP: -3.0
  • Mining GVA, US$bn: 263.3
  • Mining Industry Value, US$bn: 107.9
Country: United States

BMI Index

Utah BMI Index

77.7

Country: United States

Purchase reports
Hutte Score
59
0
100
Moderate Risk
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Fraser Institute

Utah Fraser Institute PPI

Ranked 20 out of 104 Countries

2016

Access Ratings

Hutte Score

Since a substantial proportion of the State of Utah is state land for purposes of mineral regulation, we have provided the Hutte Score on the basis of the lower of the federal and state ratings. This has negatively impacted on the state's score and is not entirely surprising given that modern mining regulation rarely offers the kind of protection that one finds in the federal General Mining Law of 1872. Overall, a Hutte Score of 59 still leaves Utah in the top half of the world and most of the land in Utah is, in fact, federal land where the regulatory environment is rated much higher.

subject review score
1st Come / 1st Serve See USA - Federal - Hutte

In Utah, anyone may propsect over land open to prospecting and staking (in competition with others attempting to do the same); upon the making of a discovery of a vein or lode, the prospector may stake and record a mining claim.

Since (A) the right to prospect is not exclusive, unlike Alaska for example (where the state law employs the concept of an exclusive prospecting site prior to discovery) and (B) the definition of discovery in the legislation may differ from federal law in a given case, we cannot find reason to deviate from the federal law score (unlike Alaska).
1
Application Critiera See USA - Federal - Hutte

With reference to mineral leases and material permits (State lands), Utah law defines a qualified applicant as an entity that is at all times in full compliance with all of the laws of the state as to qualification to do business within the state and must not be in default under those laws or the rules of the administration (Utah Code 53C-2-404 and Utah Code 65A-6-3).
5
Competing Licences See USA - Federal - Hutte

On SITLA and FFSA lands, multiple leases may be issued for different minerals found upon the same land, although not for a mineral that has already being leased. Such leases will contain stipulations to address issues that may arise as a result of simultaneous operations (Utah Code 53C-2-405(1); Utah Code 65A-6-4(1)).

It should also be noted that SITLA is empowered to designate a Multiple Mineral and Material Development Area or MMDA. Utah Admin. Code R850-24-500 states several requirements to be undertaken by a mineral lessee or material permittee operating in such designated areas. As an example of these requirements, a lessee or permittee may be asked to provide a bond or other surety in addition to the bond requirements set for in Utah Admin. Code R850-24-600(1)(a) (see infra). This bond will be used for purposes of indemnification to SITLA or other lessees/permittees in the event of an occurrence of unreasonable and unnecessary damage to a leased or permitted resource or improvement on the land. FFSL, like SITLA, may also designate a MMDA and the lessee may be obliged, by virtue of a lease provision, to secure a bond to safeguard the interests of the state and other lessees in the event of unreasonable and all unnecessary damage to mineral deposits or improvements caused by a mineral lessee (Utah Admin. Code R652-20-2500).





1
Right to Renew See USA - Federal - Hutte

A mineral lease issued by SITLA shall be continued subsequent to the expiration of the primary term if the leased substance is being produced in paying quantities or the agency director has determined that the lessee is engaged in diligent operations, exploration, or development which is reasonably calculated to advance development or production of the leased substance or has made substantial financial investments for the purposes of such development and production, and pays the annual royalties as set forth in the lease (Utah Admin. Code R850-25-300(4)). With respect to a material permit issued by SITLA, the permittee may request a permit renewal on the same or revised terms, and reissuance may occur if the agency director deems that such reissuance would be in the best interest of trust beneficiaries (Utah Admin. Code R850-25-500(3)(b)). The law in respect of leases and permits issued by FFSL is to the same effect. (See Utah Code 65A-6-4(4), see also Utah Admin. Code R652-20-2200(2), R652-20-2600, and R652-20-2700.)
5
Duration See USA - Federal - Hutte

Mineral leases issued by SITLA allow for prospecting, exploring, developing and producing minerals (Utah Code 53C-2-405) and their duration is determined by the director of SITLA (Utah Code 53C-2-403). The primary lease term shall not exceed 10 years. (Utah Code 53C-2-405 and Utah Admin. Code R850-25-300 (3)(b), see also, Utah Admin. Code R850-24-175(13)). The SITLA material permit is generally issued for a term of 5 years.

Mineral leases are issued by FFSL for the purposes of prospecting, exploring, developing, and producing minerals covering any portion of state lands or the reserved mineral interests of the state (Utah Code 65A-6-4). Essentially, the same durations apply in respect of FFSL lands as in the case of SITLA lands. (See Utah Code 65A-6-4(3); Utah Admin. Code R652-100-600).

Since a large portion of Utah is subject to SITLA or FFSA regulation, we have lowered the score of 5 (which applies to federal lands) to adequate (or 3); our rating of the state rules is adequate.
3
Mineral Coverage See USA - Federal - Hutte

Mineral leases are mineral specific (Utah Admin. Code R850-25-100(5)). Such leases will contain stipulations to address issues that may arise as a result of simultaneous operations (Utah Code 53C-2-405(1)). In the event that a mineral lessee or material permittee discovers another mineral or material which that lessee or permittee wishes to develop, a preference right to mine that mineral or material will be granted to that lessee/permittee unless a) that mineral or material has been previously leased or permitted, b) such lease or permit has been applied for by another party or c) the mineral or material has been withdrawn from leasing. It is noted that the lessee/permittee has a limited time to assert this preference right once a discovery of the mineral is made. (Utah Admin. Code R850-24-400.) FFSL likewise will grant a preference right for unleased minerals pursuant to the same criteria (see Utah Code 65A-6-8 and Utah Admin. Code R652-20-2200(1)).

Since a large portion of Utah is subject to SITLA or FFSA regulation, we have lowered the score of 5 (which applies to federal lands) to inadequate (or 1); our rating of the state rules is inadequate.

1
Right to Mine See USA - Federal - Hutte

With respect to SITLA and FFSA lands, the right to mine is assured by virtue of the lease and permit providing the right to mine upon grant; no new form of tenure is necessary to secure mining rights.
5
Criteria for Mining Rights See USA - Federal - Hutte 5
Tenure See USA - Federal - Hutte

The director of SITLA will determine the duration of a mineral lease term (Utah Code 53C-2-403). It may be continued subsequent to its initial term if the leased substance is being produced in paying quantities or the agency director has determined that the lessee is engaged in diligent operations, exploration, or development which is reasonably calculated to advance development or production of the leased substance or has made substantial financial investments for the purposes of such development and production, and pays the annual royalties as set forth in the lease (Utah Admin. Code R850-25-300(4)). The law in respect of leases issued by FFSL is to the same effect. (See Utah Code 65A-6-4(4), see also Utah Admin. Code R652-20-2200(2), R652-20-2600, and R652-20-2700.)

Since a large portion of Utah is subject to SITLA or FFSA regulation, we have lowered the score of 5 (which applies to federal lands) to inadequate (or 1); our rating of the state rules is inadequate.

1
Surface Rights See USA - Federal - Hutte

Surface rights granted to a mining lessee on SITLA lands are set forth in Utah Code 53C-2-409(2)(3). The lessee may enter the property at all times and is entitled to the reasonable use of the surface, subject to any conditions imposed by SITLA. The lessee is, however, responsible for any damages incurred beyond such reasonable use. The lessee may fully occupy the surface for activities incidental to the permitted use, however, only with the written consent or waiver of the surface owner or lessee and upon payment for any damages. Laws and regulations concerning surface rights on FFSL lands are the same as to those applicable to trust lands managed by SITLA (see Utah Code 65A-6-8 and Utah Admin. Code R652-20-2200(1)).
5
Government Take See USA - Federal - Hutte

The director of SITLA is authorized to establish the form of a mineral lease on trust lands and its terms including the payments to be made by the lessee for annual rental and royalties in addition to or lieu of annual rental (Utah Code 53C-2-403). Utah Admin. Code R850-25-300 sets forth provisions pertaining to the production royalty and minimum annual royalty rates (see also, Utah Code 53C-2-405(2)). A material permit issued by SITLA shall specify the lessees annual rental rate as well as the amounts to be paid as royalties, both of which are subject to adjustment (Utah Admin. Code R850-25-500(1)(2)).

With respect to lands managed by FFSL, similar provisions apply. (See (Utah Code 53C-2-403). Rental rates are accordingly set out in Utah Admin. Code R652-20-1000(1). This section also provides provisions with respect to royalty payments. The amount of royalties to be paid on extracted minerals varies depending upon the classification of the mineral involved and as stated in Utah Admin. Code R652-20-1000(2)).
5
Transfer Rights See USA - Federal - Hutte

A Notice of Intention (Notice) for a large or small mining operation may be transferred to another party upon the filing of a Transfer of Notice of Intention (for either a large or small mining operation) form with UDOGM. The transferee will be required to post a new reclamation surety and undertake full responsibility for the mining operation and ensuing reclamation (Utah Admin. Code R647-4-120 and R647-3-116).

A mineral lease or material permit issued by SITLA may be transferred, in whole or in part, by assignment or sublease upon the written approval of the director of SITLA. Approval may be withheld if the director determines that approval would interfere with the development of the mineral or material resources, or be detrimental to the interests of the trust beneficiaries. Should approval be withheld, an appeal process is available. Transfer documents must be prepared in accordance with Utah Admin. Code R850-24-800.

A mineral lease issued by FFSL may be fully or partially assigned or subleased to a qualified entity subject to the approval of this division. A lease transfer instrument must be prepared and executed in duplicate and include a) the lease serial number, b) a description of the land and the interest transferred and c) identifying information pertaining to the assignee (Utah Admin. Code R652-20-2200(5)). A materials permit may also be assigned with division approval pursuant to Utah Admin. Code R652-100-1200.

Given the importance of SITLA lands within Utah, we have rated the jurisdiction as inadequate since a transfer cannot be assured in Utah.
1
Change of Control See USA - Federal - Hutte 5
EIA Process See USA - Federal - Hutte

The UDOGM enforces the Utah Mined Land Reclamation Act of 1975 (Act), which defines the state reclamation requirements. All mining operations conducted on lands privately owned, state and federal lands and those lands held by virtue of a patented mining claim are subject to the Act. An important aspect of the Act is the approval or acceptance of a complete Notice of Intention (Notice) to commence mining activities, by the UDOGM, before mining activities begin. The UDOGM attempts to avoid duplicative, overlapping, or conflicting procedures (Utah Code 40-8-5(2)(b) and Utah Admin. Code R647.1-102(2)(3)). Mining operations are subcategorized as exploration, large mining and small mining operations. Depending upon the type of mining operation involved, a plan of operations, an impact assessment, a reclamation plan and/or a surety may be required to be submitted together with the Notice. Decisions made by the UDOGM with respect to exploration, small mining and large mining operations including, but are not limited to, decisions pertaining to notices of intention, forfeitures of surety and variances may be reviewed pursuant to the formal and informal administrative proceeding outlined in Utah Admin. Code R647-5. Once all administrative remedies are exhausted, judicial review may be sought (Utah Admin. Code R647-5-107(1)).
Additional environmental permits, e.g., an air quality operating permit, may be required on both the state and federal levels. The state adopts best practices in terms of regulating impacts differently based on scale of impact and appeal and review procedures.
.
5
Power to Revoke See USA - Federal - Hutte

The UDOGM may withdraw an approved Notice of Intention (Notice) where a) a mining operator fails to substantially perform reclamation or conduct mining operations so that the approved reclamation plan can be accomplished, b) the required surety is not provided or maintained or c) where operations are continuously shut down for more than 5 years (Utah Code 40-8-16(2)). A failure to pay permit fees may also result in a withdrawal of a Notice (see, Utah Admin. Code R647-4-102). The mining operator may contest any refusal to issue, withholding of or withdrawal of a Notice approval by means of a hearing process before Board. Where a Notice is withdrawn, all mining operations will be suspended (Utah Code 40-8-16(3)(4)).

A SITLA mineral lease may also be subject to cancellation in the event the lessee violates any lawful lease term. The director of SITLA may, without further notice or appeal, cancel the lease after 30 days notice by registered or certified return receipt mail . . . However, the lessee may be able to prevent such a cancellation if the lessee remedies the violation, rectifies the condition, or requests a hearing within the said 30 day period or within such timeframe as determined by the director (Utah Code 53C-2-409(1), also 53C-1-304). The Utah Admin. Code further provides that a failure to promptly remit the agreed rental and royalty payments, together with a royalty report, shall subject the mineral lessee to late penalties and the danger of cancellation, forfeiture or termination of a lease issued by SITLA (Utah Admin. Code R850-5-200(5) and R850-5-300(1)(b)). (See similarly Utah Admin. Code R850-25-400(4)) in relation to permits and FFSL leases and permits. In the case of an FFSL lease, the lease may be adjusted by the director and FFSL will provide the lessee with a one-year notice of the impending adjustment. A mineral lessee must accept the re-adjustment or the lease will become subject to forfeiture (Utah Admin.Code R652-20-4000). A materials permit issued by FFSL shall also contain forfeiture provisions (Utah Admin. Code R652-100-700). We find the FFSL power to compel forfeiture where a lessee refuses to accept an 'adjustment to the lease terms' to be capable of subjective application and, owing to the importance of FFSL lands within the state, we have lowered the federal score of 5 (which would have applied absent state land regulation) to 1.


1
Age of Legislation See USA - Federal - Hutte 0
Other Factors Three factors have led to our awarding the Federal regulatory environment a score of 10 essentially 2/3 of the possible points in this category. First, and on the positive side, there exist few impositions in respect of training, employment of Americans, restrictions on exports, marketing or sale of products, requirements to list on local stock exchanges and other matters that are commonly found in modern mining legislation, particularly World Bank sponsored legislation. Second, Utah has adopted the concept of facilitating assistance to mineral developers in securing permitting approvals. On the negative side, there are a number of wealthy, sophisticated and determined non-governmental organizations which can, and frequently do, interfere with mine permitting processes. Court actions can be brought by these groups seeking to compel governmental agencies or officers to deny or forestall permits typically based on the failure of the agency or officer to satisfy a given legal test before awarding a permit or authorization. 10
Hutte Score 59
Close report

Environmental Overview Commentary plus sign

UNITED STATES OF AMERICA – UTAH – ENVIRONMENTAL REGULATION

GENERAL

The United States of America (“U.S.”) is a nation comprised of 50 states, the federal district of Washington D.C., and several territories including Puerto Rico, Guam and the U.S. Virgin Islands. With 3,717,792 square miles (9,629,091 square kilometers) of land, it is considered the third largest nation on the globe. Utah is located in the western region of the U.S. and is the 13th largest state in the union, although it is also one of the least populated states. The state is bordered to the north by the state of Idaho, to the northeast by the state of Wyoming, to the east by the state of Colorado, to the south by the state of Arizona and to the west by the state of Nevada. In the southeastern corner of the state, Utah, Colorado, New Mexico and Arizona uniquely meet at a point known as “The Four Corners.”

The state is composed of three distinct geographic areas, namely, the Rocky Mountains, the Basin and Ridge region and the Colorado Plateau. The centrally located Rocky Mountains which, in Utah, consists of the Uinta Range and the Wasatch Range, renders Utah as one of the highest U.S. states in altitude. Juxtaposed to the west and northwest of the Rockies is the flat terrain of the Basin and Ridge region consisting of deserts, basins, and salt beds. The Great Salt Lake, situated in the north, is the largest lake west of the great American river, the Mississippi, and is known for it high levels of salinity. Salt Lake City, the state capital and a major population center, is situated in close proximity to its banks. In the southern portion of Utah, the large expanse known as the Colorado Plateau is home to canyons, unique rock formations and to such national treasures as Arches, Zion and Bryce Canyon National Parks.

Climate varies significantly within Utah, with lower altitudes experiencing semi-arid conditions, while significant amounts of precipitation and snow fall upon mountainous regions. Utah is the home of many species of animals including mule deer, Rocky Mountain bighorn sheep, great horned owls, Gila monsters and bears, both black and grizzly. The flora of Utah varies depending on the terrain whether mountainous, forest or desert, including salt desert. Examples include pine trees, Utah oak and Joshua trees, salt grass and varieties of sagebrush, as well as wildflowers, such as the state flower, the sego lily.

PRINCIPAL LEGISLATION AND REGULATOR

Federal legislation and regulations take a leading role where mining activities occur on U.S. public lands located in Utah or affect a resource in which the federal government asserts an interest, such as air or water. The National Environmental Policy Act of 1969, as amended, (“NEPA”) (42 U.S.C. §4321 et seq.), coupled with its implementing regulations contained in Title 40 C.F.R. Parts 1500-1508 and Title 43 C.F.R. Part 46, form the foundation for U.S. federal regulation pertaining to the environment. Other relevant U.S. federal legislation enacted to protect the environment includes the Federal “Clean Air Act” (42 U.S.C. §7401 et seq.) and its later amendments, which, among other things, requires compliance by federal land management agencies with regard to the authorization of mining activity; the Federal Water Pollution Control Act of 1972, and its amendments (the “Clean Water Act”) (33 U.S.C. §1251 et seq.); the Resource Conservation and Recovery Act (“RCRA”) of 1976 (42 U.S.C. §6901 et seq.), which regulates hazardous and non-hazardous solid wastes; and the Endangered Species Act of 1973 (16 U.S.C. §1531 et seq.), which is designed to protect endangered species of flora and fauna, as well as their ecosystems.

The laws and regulations of the state of Utah are codified in the Utah Code and the Utah Administrative Code (“Utah Admin. Code”). The primary state environmental legislation are the Utah Mined Land Reclamation Act of 1975 (Utah Code, Title 40, Chapter 8) and the Environmental Quality Code (Utah Code, Title 19). Relevant regulations are set forth in the Utah Admin. Code, particularly, Title R305 - R317 “Environmental Quality,” Title R647 “Natural Resources; Oil, Gas and Mining; Non-Coal,” and Utah Admin. Code Rule 850-25 “Mineral Leases and Materials Permits.” Although, not fully discussed in this commentary, important provisions for coal mining can also be found in the Utah Code, Chapter 2 “Coal Mine Safety Act,” and Chapter 10 “Coal Mining and Reclamation,” as well as in the Utah Administrative Code Title R645 “Natural Resources; Oil, Gas and Mining; Coal.”

The Bureau of Land Management (“BLM”), which is governed by the provisions of the Federal Land Policy and Management Act of 1976 (“FLPMA”) (43 U.S.C.§ 1701 et seq.), is the federal agency primarily responsible for the management and protection of the subsurface and, in most cases, the surface areas of federal public lands. The BLM branch office in Utah is known as the “BLM Utah” and is locally responsible for carrying out federal environmental mandates. Nevertheless, in certain instances, other federal agencies may have surface jurisdiction, including the U.S. Forest Service (“USFS”), the National Park Service (“NPS”) and the U.S. Fish and Wildlife Service (“FWS”), although much of the land administered by the latter two agencies is generally not open to mineral development. Furthermore, the Department of Defense - U.S. Army Corps of Engineers (“USACE”) exercises jurisdiction over navigable waters. Each of these agencies must meet the NEPA requirements discussed below.

Several state agencies are engaged in the administration of the laws and regulations that pertain to such matters as reclamation and environmental permits. The Division of Oil, Gas and Mining of the Utah Department of Natural Resources (“UDOGM”) is responsible for enforcing the provisions of the Utah Mined Land Reclamation Act and administers reclamation through its minerals regulatory program. The School and Institutional Trust Lands Administration (“SITLA”) and the Division of Forestry, Fire & State Lands of the Utah Department of Natural Resources (“FFSL”) administer those laws and regulations that concern mining operations that occur upon state lands under the jurisdiction of each of these agencies. The Utah Department of Environmental Quality (“DEQ”) oversees the permitting process with respect to air, water and land quality.

EIA PROCESS

Utah state and U.S. federal laws and regulations both regulate permitting and reclamation procedures to be undertaken by a mining operator. Where mining operations occur on federal land or affect resources under federal control, federal environmental criteria must be complied with, in addition to those of the state, before permission to mine will be granted. Most importantly, requirements for a federal approved plan of operations and a NEPA review may be triggered (see United States of America – Federal – Environmental Regulation). The state of Utah does, however, seek to minimize the incidence of duplicative requirements ((Utah Code § 40-8-5(2)(b) and Utah Admin. Code R647.1-102(2)(3)). The following is a discussion of various important features of federal and state environmental regulatory requirements and the overlapping nature of those requirements.

Mining on Federal Public Lands:

  • Federal Regulation: NEPA requires a federal governmental agency that intends to authorise “a major federal action” that may have a significant impact on the environment to give due consideration to the anticipated environmental consequences before engaging in that action. The granting of permission to conduct mining activities on federal public lands is, in most cases, undertaken by the BLM. Therefore, when seeking consent to mine a mineral deposit, a miner is ordinarily required to submit to BLM a plan of operations, which will include both a reclamation plan and a monitoring plan. The plan of operations, pursuant to the dictates of FLPMA, must demonstrate that the miner will “prevent unnecessary or undue degradation of the land and reclaim any disturbed land.” The submission of the operating plan typically triggers the NEPA requirements calling for the preparation of an environmental assessment (“EA”) or an environmental impact statement (“EIS”) prior to the issuance of such approval.

 

  • State Regulation: Concurrently, the Utah Mined Land Reclamation Act (“Act”) applies to all mining operations conducted in Utah, including those that occur on federal and state land and privately owned land. The UDOGM enforces the Act in concert with the Board of Oil, Gas and Mining (“Board”), which is also authorized to enact pertinent rules and to conduct related hearings (Utah Code § 40-8-6 and § 40-8-7). An important aspect of the Act is the “approval or acceptance of a complete Notice of Intention” (“Notice”) to commence mining (or exploration) by the UDOGM before mining (or exploration) activities begin. The UDOGM also attempts to avoid “duplicative, overlapping, or conflicting procedures” (Utah Code § 40-8-5(2)(b) and Utah Admin. Code R647.1-102(2)(3)) in respect of other agencies (Utah Admin. Code R647.1-102(3)).

 

  • Meaning of Mining Operations: Under Utah law, environmental permitting differs for mining and quarrying operations. A mining operation is defined as “activities conducted on the surface of the land for the exploration of, development of, or extraction of a mineral deposit, including, but not limited to, surface mining and the surface effects of underground and in situ mining, on-site transportation, concentrating, milling, evaporation, and other primary processing.” A mining operation, however, does not include the extraction of sand, gravel, rock aggregate, oil, gas, or geothermal steam, nor smelting operations, refining operations, “off-site operations and transportation” or activities that “will not cause significant surface resource disturbance or involve the use of mechanized earth-moving equipment …” (Utah Code 40-8-4(14)).

 

  • Scale of Operations: Mining operations are subcategorized as exploration, small mining operations and large mining operations. Exploration is defined as “surface-disturbing activities conducted for the purpose of discovering a deposit or mineral deposit, delineating the boundaries of a deposit or mineral deposit, and identifying regions or specific areas in which deposits or mineral deposits are most likely to exist” and includes such activities as sinking shafts, drilling holes and constructing roads and other related facilities (Utah Code § 40-8-4(10) and Utah Admin. Code R647-1-106). Small mining operations are those operations that “disturb or will disturb 10 or less surface acres at any given time in an unincorporated area of a county or five or less surface acres at any given time in an incorporated area of a county” (Utah Code § 40-8-4(27) and Utah Admin. Code R647-1-106). Surface disturbances affecting greater areas are denominated large mining operations. Large mining operations may not create surface disturbances beyond that area delineated in an approved Notice (Utah Admin. Code R647-1-106).

 

The following is a synopsis of the requirements pertaining to exploration, small scale and large scale mining operations:

 

  • Exploration: A “Notice of Intention to Conduct Exploration” form must be filed and determined complete by the UDOGM. The division recommends that the filing occur at least 30 days prior to the initiation of exploration activities. Specific information to be included in the exploration notice is outlined in Utah Admin. Code R647-2-104 – R647-2-107. Where it is anticipated that an excess of five acres will be disturbed by exploration, the Notice must include an exploration development and a reclamation plan that must be approved (Utah Admin. Code R647-2-101(1)(3) and R647-2-104(4)). The division will review the filing within 15 days (Utah Admin. Code R647-2-101(4-4.12). Once the Notice is deemed complete or approved, the Notice is effective “until November 30th of the year following the year of submittal,” although it may be extended (Utah Admin. Code R647-2-102). A “Mineral Exploration Progress Report” must be filed annually on or before January 31 (Utah Admin. Code R647-2-101(6.12) and R647-2-115).

 

  • Small Mining Operations: An operator of a proposed small mining operation must file a “Notice of Intention to Commence Small Mining Operations” form together with an operation plan. Specific information required in the Notice is set out in Utah Admin. Code R647-3-104 and R647-3-105. An operation plan must be included and shall be in the form of a “brief narrative description” and contain information regarding a) the type of mineral to be extracted, b) mining operation types or methods, c) the approximate amount of surface area to be disturbed, d) the width of roads, if such construction is anticipated, and e) the amount of materials to be extracted or moved. While a reclamation plan, per se, is not required to be included in a small mining Notice, the mining operator must make a statement that reclamation shall be performed pursuant to rules promulgated by the Board (Utah Code § 40-8-13(1)(c) and Utah Admin. Code R647-3-104(4)). Furthermore, reclamation must be completed and reclamation practices adhered to as set forth in Utah Admin. Code R647-3-109. Annually, on or before January 31, a small mining operator must pay a permit fee and file an operations and progress report pursuant to the requirements of Utah Admin. Code R647-3-117 (see also, Utah Admin. Code R647-3-101(5.12)). A Notice is effective for the life of the mine, however, a failure to remit the annual fee or to “maintain and update” the surety may result in the withdrawal of a Notice (Utah Admin. Code R647-3-102).

 

  • Large Mining Operations: A “Notice of Intention to Commence Large Mining Operations”, together with an operation plan, an impact assessment, and a reclamation plan must be submitted to and approved by the UDOGM.

 

  • Notice: Specifics regarding the contents of the Notice are set forth in Utah Admin. Code R647-4-104 and R647-4-105.

 

  • Operation Plan: Statutory requirements for the operation plan include, but are not limited to, a) identification of the mineral(s) to be mined and of any materials which are deleterious or acid forming on the site or which will remain on the site due to mining or processing b) identification of materials which will undergo mining or processing including waste/overburden materials, c) a description of the mining and processing methods to be employed, d) an estimation of the amount of ore and materials, including waste materials, which will be mined or processed as well as the amount of material which will be moved, e) the amount of acreage “proposed to be disturbed and/or reclaimed annually or sequentially,” and f) the “proposed location and size of ore and waste stockpiles, tailings facilities and water storage/treatment ponds” (Utah Admin. Code R647-4-106).

 

  • Impact Assessment: The impact assessment will detail potential environmental impacts, including those that impact the health and safety of the public, “surface and groundwater systems,” “threatened and endangered species or their critical habitats,” and air quality. The assessment will propose steps to be undertaken in order to mitigate these impacts (Utah Admin. Code R647-4-109).

 

  • Reclamation Plan: The reclamation plan must provide, at a minimum, the information required in Utah Admin. Code R647-4-110, which include a description of a) both “the current land use and the proposed post-mining land use” of disturbed lands, b) the methods and the extent to which reclamation will take place with regard to impoundments, drainages, pits and ponds, drill holes, and so forth, c) revegetation plans, d) the manner in which “deleterious or acid-forming materials” will be handled, as well as other requirements. The operator shall also state that it will conduct reclamation pursuant to UDOGM regulations. The mining operator is required to follow statutory reclamation practices as more fully described in Utah Admin. Code R647-4-111, unless a written variance is granted (see also, Utah Admin. Code R647-4-112).

 

Upon submission, the UDOGM will conduct a review of the Notice and perform other relevant evaluations, such as inspections, within a 30-day period of receipt or last action by the applicant or by the UDOGM. The agency will inform the operator if the Notice is complete or incomplete; in the latter case, further information must be submitted by the operator (Admin. Code R647-4-101(1)(2)). The UDOGM will make a tentative decision, to either approve or disapprove the Notice, which will be mailed to the mining operator, the owner of the land to be mined upon, and the local zoning authority. Furthermore, the tentative decision will be published in designated newspapers (Utah Code § 40-8-13(6) and Utah Admin. Code R647-4-116). Any person or agency “aggrieved” by this decision may voice an objection and ask for “agency action.” An “informal adjudicative proceeding” will be held in the event the agency receives an objection “of substance” (Utah Code § 40-8-13(6)(d)(e) and Utah Admin. Code R67-4-116(2)). An approved Notice is valid for “the life of the mine” although it may be subject to modification (Utah Admin. Code R647-4-102). An annual permit fee as well as an “Annual Report of Mining Operations” must be filed on or before January 31 (Utah Admin. Code R647-4-101(5.12) and R647-4-121(1)). Although approval of the Notice has been granted or determined complete, a mining operator must nevertheless inform the UDOGM of the commencement of mining activities within 30 days of such commencement (Utah Code § 40-8-15(1), Utah Admin. Code R647-3-101(4) and R647-4-101(4)).

 

  • Reclamation: Once a disturbed area is “no longer needed” it shall be reclaimed “except to the extent necessary to preserve evidence of mineralization for proof of discovery” (Utah Admin. Code R647-4-107(6)). If the mining operator fails or refuses to proceed with reclamation measures as provided in the Notice, the UDOGM may undertake reclamation. This action will result in the forfeiture of the surety or the commencement of an action by the state attorney general for any resultant reclamation costs and expenses (Utah Admin. Code R647-4-114; see also Utah Code § 40-8-3, § 40-8-12.5, Utah Admin. Code R647.1-102(1.13)). More generally, the Act states that mineral extraction must be accomplished “in such a way as to minimize undesirable effects on the surroundings” and that reclamation is to be undertaken so as to allow for “subsequent use” of the mined lands (Utah Code § 40-8-2). Utah Admin. Code R647.1-106 defines reclamation as “actions performed during or after mining operations to shape, stabilize, re-vegetate, or otherwise treat the land affected in order to achieve a safe and ecologically stable condition and use which will be consistent with local environmental conditions and land management practices.”

 

  • Surety: A reclamation surety in the amount and form required by the UDOGM must be posted with respect to all mining operations once the mining operator receives notice that the Notice is either complete or approved, but before the commencement of mining operations (Utah Code § 40-8-14, Utah Admin. Code R647-2-111, R647-3-111 and R647-4-113). A failure to “provide and maintain” a reclamation surety may result in the withdrawal of the Notice by the UDOGM (see Utah Code § 40-8-16(2)(b)). Acceptable forms of reclamation surety include corporate surety bonds, federally-insured certificates of deposit, cash, irrevocable bank letters of credit, escrow accounts and, in some cases, self bonding agreements (Utah Admin. Code R647-2-111(4.11-4.16), R647-3-111(4.11-4.16) and R647-4-113(4.11-4.16)). In addition to the surety, a completed Reclamation Contract must be submitted with respect to each type of mining operation (Utah Admin. Code R647-2-111(4), R647-3-111(4) and R647-4-113(4)).

 

  • Appeals: Decisions made by the UDOGM with respect to exploration, small mining and large mining operations including, but not limited to, decisions pertaining to notices of intention, forfeitures of surety and variances may be reviewed pursuant to the formal and informal administrative proceeding outlined in Utah Admin. Code R647-5. Once all administrative remedies are exhausted, judicial review may be sought (Utah Admin. Code R647-5-107(1)).

 

A Notice for a large or small mining operation may be transferred to another party upon the filing of a “Transfer of Notice of Intention” (for either a large or small mining operation) form with UDOGM. The transferee will be required to post a new reclamation surety and undertake “full responsibility” for the mining operation and ensuing reclamation (Utah Admin. Code R647-4-120 and R647-3-116).

 

Mining on SITLA Lands:

Mineral lessees and material permittees who wish to engage in activities that cause surface disturbance on lands under the jurisdiction of SITLA must file a plan of operations with that state independent agency for approval. A plan of operations must “include at a minimum proposed access and infrastructure locations and proposed site reclamation” (Utah Admin. Code R850-24-700(1)). A plan must be submitted to SITLA a minimum of 60 days prior to any surface disturbance or the initiation of “actual” operations and “simultaneously with the filing of any required plan of operations or permit application with UDOGM” (Utah Admin. Code R850-24-700(1) and R850-25-800). Prior to granting approval, SITLA may necessitate the lessee/permittee to “adopt a special rehabilitation program.” The agency may also impose additional requirements upon the lessee/permittee, such as the submission of cultural, paleontological and biological surveys. Approval will be granted provided the location and operations in question do not violate any SITLA rules or orders. Operations cannot begin, however, until SITLA and UDOGM, if necessary, have both granted their approval (Utah Admin. Code R850-24-700(1)(2)). A separate bond posted with SITLA may be required in some instances (Utah Admin. Code R850-24-600(1)(b)).

Mining on FFSL Lands:

 Mineral lessees must file a plan of operations a minimum of 60 days prior to initiating operations on lands under the jurisdiction of FFSL. The plan will undergo review during which time the division will “make an environmental assessment and endorse or stipulate changes” to the plan. In some cases, a review by another state agency will be accepted in lieu of one conducted by FFSL. As in the case of mineral leases on SITLA lands, a special rehabilitation plan may be required to be adopted by the lessee (Utah Admin. Code R652-20-2400(1)). FFSL bonding requirements, to assure the performance of a lease pursuant to its terms, are set forth in Utah Admin. Code R652-20-2800. Holders of materials permits must also submit a plan of operation. The plan must include a map or plan containing details set forth in Utah Admin. Code R652-100-1000(1)(a), pre-excavation and post-excavation elevation drawings and acceptable “reclamation plans prepared by any governmental agency” or, if not acceptable, “as required by the director” of FFSL (Utah Admin. Code R652-100-1000(1)(c)). Specific bonding requirements are stated in Utah Admin. Code R652-100-800.

Utah Department of Environmental Quality:

 The DEQ is comprised of several divisions responsible for the administration of various legislative “Acts” that concern the environment. The following is a brief description of certain DEQ divisions and the respective Act(s), which that division administers and which may be relevant to a mining operation:

  • Division of Air Quality – “Air Conservation Act” (Utah Code Title 19, Chapter 2 and see, Utah Admin. Code Title R307) – An objective of the Act is “to achieve and maintain levels of air quality which will protect human health and safety” (Utah Code § 19-2-101). The accompanying regulations incorporate the National Ambient Air Quality Standards (“NAAQS”), as well as other federal ambient air quality standards. Furthermore, these regulations are designed to meet the requirements of Title V of the federal Clean Air Act, which mandates that individual states “develop and implement a comprehensive air quality permitting program” (Utah Admin. Code R307-101-1 and R307-415-1, see also, Title 40, Code of Federal Regulations (“C.F.R.”), Part 50)). A mining operator engaged in activities which results in the emission of any contaminant into the air may require an Air Quality Operating Permit (as per Title V of the 1990 Clean Air Act Amendments) and/or an Approval Order issued by this agency.

 

  • Division of Water Quality – “Water Quality Act” (Utah Code Title 19 Chapter 5 and Utah Admin. Code Title R317) – The state of Utah is authorized by the U.S. Environmental Protection Agency (“EPA”) to administer state-run water quality regulatory programs. A facility that disposes or discharges wastewater may be required to obtain permits pursuant to the Utah Pollutant Discharge Elimination System (“UPDES”) (see, Utah Admin. Code R317-8-1). This division also provides Clean Water Act, Section 401 Certifications which are required in connection with obtaining federal permits from the USACE where any discharge into navigable waters may occur.

 

  • Division of Solid and Hazardous Waste – “Solid and Hazardous Waste Act” (Utah Code Title 19, Chapter 6, Part 1, and Utah Admin. Code Title R315) - This division manages solid and hazardous wastes in an effort to protect the environment.  Utah Admin. Code R315-R318 is pertinent to the disposal of solid waste by a facility that may be “permitted by rule.” 

Mining Overview Commentary plus sign

UNITED STATES OF AMERICA – UTAH – MINING REGULATION

GENERAL

Mormon settlers established mining in Utah in 1847 and the industry grew with the expansion of the railroad into the American West. Throughout the region’s history, the mineral industry has been an important attribute to the state’s economy and is responsible for much of the population growth of the state. According to the Utah Geological Survey (“UGS”) publication Utah Extractive Resource Industries 2013, Utah places 7th in the U.S. in nonfuel mineral production on the basis of the value of that production, with copper as the leading nonfuel mineral produced. Additionally, the UGS cites Utah as the nation’s only producer of beryllium concentrate, gilsonite and magnesium chloride, which is extracted from Utah’s Great Salt Lake. Other important minerals and resources found in this state include gold, silver, molybdenum, potash, uranium, phosphate, iron ore and coal, as well as crude oil, natural gas, and oil shale and sands.

The Fraser Institute, in its 2014 Policy Perceptions Index, ranked the state of Utah an impressive 14th out of 122 jurisdictions, rendering it the 4th highest of the thirteen U.S. jurisdictions ranked. The Fraser Institute quotes survey feedback that Utah has a “simple application process” and that pertinent state agencies are “to the extent they are able [given overlapping Federal jurisdiction], proactive and supportive.” The Behre Dolbear 2014 rankings for mining investments similarly indicates that Utah is a “mining friendly,” state but notes a negative impact resulting from federal regulatory delays.

PRINCIPAL LEGISLATION AND REGULATOR

According to the UGS, approximately 67% of the lands situated within the state of Utah are federal public lands. Mining claims may be established on these lands, which are open to mineral entry, and are governed by federal law – principally, the General Mining Law of 1872 (“General Mining Law”). The General Mining Law is set forth in the United States Code (“U.S.C.”) and its implementing statutes in the Code of Federal Regulations (“C.F.R.”), specifically, 30 U.S.C. §§ 22-54 and §§ 611-615 and 43 C.F.R. Groups 3700 and 3800.   Other significant federal laws include the Mineral Leasing Act of 1920, as amended (“Leasing Act”) (30 U.S.C. §181 et. seq.) for the mining of “leasable” minerals on public domain lands, as well as the Mineral Materials Act of 1947, as amended (30 U.S. Code §601 et seq., see also 43 C.F.R. §3600 et seq.) and the Surface Resources Act of 1955 (30 U.S.C. §§601-615, see also 43 C.F.R. §3830.11) in respect of “salable” minerals.

Federal public lands fall under the purview of federal land management agencies that oversee the implementation of these laws. The Bureau of Land Management (“BLM”), and more particularly its state district office – “BLM Utah,” is responsible for the management of subsurface, as well most surface, federal lands located within the state that are subject to mineral development. Another important federal land manager is the U.S. Forest Service (“USFS”), which concerns itself with the disturbance of surface areas for mining purposes on National Forest lands.

Utah state lands that were acquired from the federal government upon the inception of statehood are managed by an independent state agency known as the Utah School and Institutional Trust Lands Administration (“SITLA”). These state lands are held in a trust, established by the state’s constitution, that requires revenues derived from the land to be used for the benefit of Utah public schools and other intended beneficiary institutions, such as hospitals and state universities. SITLA issues leases and permits for the development of mineral and material resources on these state lands that are open for such development. The Utah Division of Forestry, Fire, and State Lands (“FFSL”), an agency within the Utah Department of Natural Resources (“UNDR”), manages state-owned land and mineral interests on those lands that fall outside of SITLA’s jurisdiction, as well as on state lands known as “sovereign lands,” which are held in trust for the public under the “Public Trust Doctrine.” (Utah Code § 65A-1-4). These lands are administered pursuant to policies of “multiple-use and sustained yield” (Utah Code § 65A-2-1). The Division of Oil, Gas and Mining (“UDOGM”) of the UDNR is another important state agency concerned with mining, particularly with regard to its administration of the state’s reclamation laws and regulations.

The primary sources of state laws and regulations are the Utah Code and the Utah Administrative Code. The Utah Administrative Code (“Utah Admin. Code”) is an authorized compilation of administrative rules (“R”) that are written by various state agencies and that have the binding effect of law. Legislation involving the establishment of mineral rights and reclamation procedures are codified in Utah Code Title 40 “Mines and Mining.” Laws and regulations pertaining to mineral leasing and materials permitting on lands administered by SITLA are set forth in Utah Code Title 53C “School and Institutional Trust Lands Management Act”, more particularly in Chapter 2, Part 4 “Mineral Leases,” the Utah Admin. Code R850-24 “General Provisions: Mineral and Material Resources, Mineral Leases and Material Permits” and R850-25 “Mineral Leases and Materials Permits.” While laws and regulations respecting mineral leases and materials permits on state lands under the jurisdiction of FFSL are found in the Utah Code, Title 65A “Forestry, Fire, and State Lands, specifically in Chapter 6 “Mineral Leases” and in the Utah Admin. Code R652 “Natural Resources; Forestry, Fire and State Lands.”

It should be noted that, outside of the foregoing types of mineral and surface ownership, other owners of surface land and mineral rights in Utah include private persons, the military and Native American tribes. Ownership interests can take the form of a “split estate”, where different parties own the surface rights and the mineral estate – often the state or federal government, on the one hand, and another private party, on the other hand. Where an operator wishes to conduct exploration or mining activities on private lands, a private contractual relationship must be secured with the landowner. Such activities will nevertheless be subject to certain governmental laws and regulations, for example, with respect to reclamation.

GRANTS AND FORMS OF MINERAL TITLE

A key aspect of the General Mining Law, the most important federal legislation pertaining to the establishment of mining rights on federal public lands open to mineral entry, is that a right to mine may be acquired by free access, also known as self-initiation. This legislation permits a miner to establish a mining claim, either lode or placer, and thereby assert a right of possession over a parcel of federal land along with the accompanying right to develop and extract a valuable mineral deposit situated therein (30 U.S.C. §26). Mill sites and tunnel rights may also be located. The proper location of a mining claim on federal public lands grants the claimholder the “exclusive right of possession and enjoyment of all the surface included within the lines of their locations, and of all veins, lodes, and ledges . . .” (30 U.S.C. §26). However, an unpatented mining claim “shall not be used . . . for any purposes other than prospecting, mining or processing operations and uses reasonably incident thereto” (30 U.S.C. § 612). Federal law allows for the patenting of properly located mining claims and mill sites thereby granting the claimholder title to both the land as well as the minerals located thereat. Since October 1, 1994, however, a budget moratorium, imposed by Acts of Congress has prevented the acceptance of new patent applications by the BLM.

Individual states are empowered to define certain aspects of the requirements for the establishment of mining claims and sites that lie on federal lands within their borders, under the proviso that such state laws are not in conflict with federal laws (see U.S. Const., art. VI, see also 30 U.S.C. § 26). In this respect, the state laws of Utah must be considered in conjunction with federal laws. This commentary deals primarily with Utah state law that relates to unpatented mining claims, with a particular emphasis on lode (hard rock) mining claims. In addition, provisions for the establishment of mineral leases and materials permits on state lands shall be addressed. For a review of the General Mining Law and a discussion of the leasing of certain industrial minerals pursuant to the Leasing Act on federal lands see United States of America – Federal – Mining Regulation.

Lode Mining Claims: The Utah Code, specifically Title 40, Chapter 1, pertains to the establishment of mining claims. After determining that no prior mining claim exists on an intended mining site, a mining claim may be established upon the discovery of a vein or lode and the subsequent location (“staking”) and recordation of the mining claim. Prior to discovery, any person may prospect on land open to mineral entry.

  • Location: The permitted size of a mining claim is consistent with parameters set by federal law (Utah Code § 40-1-1). A monument evidencing the place of discovery is required to be erected upon the claim and a notice of location shall be posted upon the monument. (See further Utah Code § 40-1-2). In the tradition of classic ground staking, the boundaries of the claim must be “distinctly marked on the ground” so that they “can be readily traced” (Utah Code § 40-1-2). The Utah Code does not specify how the boundary marking should take place and the UDOGM suggests that miners consult California state legislation for guidance.

 

  • Recordation: A “substantial copy” of the notice of location must be recorded, “within 30 days after the posting of the location notice,” in the office of the county recorder in the county wherein the claim is situated (Utah Code § 40-1-4). A copy of the notice of location, together with a map of the location, must also be filed with the BLM Utah “by the 90th day after the date of location” (43 C.F.R. 3833.11, see also 43 C.F.R. §3832.12). A failure to properly record the notice of location in a timely manner with the BLM Utah for the purposes of establishing a mining claim on federal land will render the mining claim void.

 

  • Annual Maintenance of a Mining Claim on Federal Public Lands: Once a mining claim has been properly established on federal public lands, the claim must thereafter be maintained in order to preserve the miner’s mineral rights. A mining claimant may pay an annual maintenance fee “on or before September 1st of each year in order to maintain a mining claim or site for the upcoming assessment year.” The payment of the annual maintenance fee satisfies the annual assessment work requirement under federal law as set forth in the General Mining Law and Federal Land Policy and Management Act (“FLPMA”) (43 C.F.R. §3835.30 et seq.) (43 C.F.R. 3834.11). A failure to pay the annual maintenance fee will result in a forfeiture of an established mining claim and/or site (43 C.F.R. §3830.91). Waivers of the fee may be obtained in certain instances, for example, by a small miner. If a waiver is granted, the mining operator must instead perform annual assessment work and file annual FLPMA documents (43 C.F.R. 3835.11). The State of Utah requires that an unpatented mining claimant record an annual affidavit, in the office of the county recorder for the county in which the mining claim lies, within 30 days of the end of the federal assessment year i.e., before noon, September 1. The affidavit must identify the name and address of the claimant as well as the name of the claim or its serial number, if any, as per BLM records. Where the performance of assessment work was required pursuant to federal laws and regulations, the claimant must aver that the required assessment work was performed. If the claimant was not required to perform assessment work in a particular year, i.e., in the year in which the mining claim is located, then the claimant must state that there is an intention to hold the claim (see, C.F.R. §3835.11). If, however, the maintenance fee was timely paid, then a statement to that effect will be required on the affidavit (Utah Code § 40-1-6). 

 

State Trust Lands: SITLA, more specifically, its Minerals Group, manages hard rock mineral and other subsurface resources that are situated on Utah state trust lands (see Utah Admin. Code R850-24-150). SITLA issues both mineral leases and material permits pursuant to a classification system set forth in Utah Admin. Code R 850-25-100. Mineral leases allow “for prospecting, exploring, developing and producing minerals” (Utah Code 53C-2-405).

  • Minerals, which may be obtained by lease, are placed into the following classifications: metalliferous minerals, potash, phosphates, clay minerals, humic shale, limestone, gemstones and fossils, gypsum, gilsonite, volcanic materials, industrial sands and mineral salts. Mineral leases may be issued to cover a multiple of classified minerals (Utah Admin. Code R850-25-100(5)). Furthermore, multiple leases may be issued for different minerals found upon the same land, however, a lease will not be issued for a mineral resource that is already being leased on that land. Such leases will contain stipulations to address issues that may arise as a result of “simultaneous operations” (Utah Code § 53C-2-405(1)).

 

  • Material Resources are also placed into a classification and include “common varieties of clay or stone having a primary value or use in building, construction or landscaping, including basalt, common clay, conglomerate, flagstone, gabbro, granite, lava aggregate, limestone, marble, onyx, quartzite, rhyolite, rip-rap, sandstone, serpentine, shale, slate, soapstone, trapstone, (and) travertine ….” A material permit is necessary in order to access these resources.  

 

A lease or permit may also be issued for “non-classified” minerals or materials and for “close association” minerals or materials, which are defined as “minerals or materials found in close association with the expressly leased mineral or permitted material, when the substance cannot reasonably be mined separately or mined and separated” (Utah Admin. Code R850-25-100(4)). In the event that a mineral lessee or material permittee discovers another mineral or material which that lessee or permittee wishes to develop, a preference right to mine that mineral or material will be granted to that lessee/permittee unless (a) the mineral or material has been previously leased or permitted, (b) such lease or permit has been applied for by another party or (c) the mineral or material has been withdrawn from leasing. It is noted that the lessee/permittee has a limited time to assert this preference right once the discovery of the mineral is made. (Utah Admin. Code R850-24-400.)

SITLA Mineral Leases:

  • Acquisition: A mineral lease is usually available to a qualified applicant through a competitive bidding process, although, under certain circumstances, a lease can be offered on a non-competitive basis. Furthermore, SITLA is authorized to “enter into joint ventures or other business arrangements for the disposition of material deposits” (Utah Admin. Code R850-25-400). A qualified applicant is defined as an entity that is at all times “in full compliance with all of the laws of the state as to qualification to do business within the state and must not be in default under those laws or the rules of the administration” (Utah Code § 53C-2-404). A mineral lease will not be issued for more than 2,560 acres unless the agency’s director approves a larger area (Utah Admin. Code R850-25-200(3)). With respect to competitive bidding, the process is initiated by the posting of a notice by SITLA which identifies the land and mineral interest available for leasing and also indicates the last date on which sealed bids may be received by the agency. The successful applicant will be the “highest responsible, qualified bidder, in terms of the bonus paid in addition to the first year's rental” (Utah Code § 53C-2-407(3)(c)). Alternatively, at the discretion of the agency’s director, a mineral lease may be offered at an oral public auction commencing at a minimum bid (Utah Code § 53C-2-407(4)).  SITLA can also decide to offer the lease on a noncompetitive basis where a “mineral lessee waives or relinquishes to the trust a prior mining claim, mineral lease, or other right” that may encumber, create a cloud on title, or cause other issues with respect to certain lands specified in the statute (Utah Code § 53C-2-407(5)).

 

  • Duration and Royalty: The director of SITLA is authorized to establish the form of the mineral lease and will determine the duration of its term, as well as the payments to be made by the lessee including annual rental and royalties “in addition to or lieu of” annual rental (Utah Code § 53C-2-403). Utah Admin. Code § R850-25-300 sets forth provisions pertaining to the primary lease term, the minimum rental rate, production royalty and minimum annual royalty rates (see also, Utah Code § 53C-2-405(2)). The primary lease term shall not exceed 10 years, unless the lease is made in connection with an “other business arrangement” (“OBA”), as in the case of a joint venture agreement between the agency and another approved party (Utah Code § 53C-2-405 and Utah Admin. Code R850-25-300 (3)(b), see also, Utah Admin. Code R850-24-175(13)). The lease may be continued subsequent to expiration of this time period based upon criteria set forth in the Utah Admin. Code R850-25-300(4). This includes a showing that “the leased substance is being produced in paying quantities.” Alternatively, the agency director may continue the lease if the lessee “is engaged in diligent operations, exploration, or development which is reasonably calculated to advance development or production of the leased substance” or has made “substantial financial investments” for the purposes of such development and production, and pays the annual royalties as set forth in the lease. A failure to promptly remit the agreed rental and royalty payments, together with a royalty report, shall subject the lessee to late penalties and the danger of “forfeiture or termination” of a lease by SITLA (Utah Admin. Code R850-5-200(5) and R850-5-300(1)(b)).

 

  • Other Terms: Utah Code § 53C-2-408 states additional covenants that are included in the mineral lease.   Pursuant to these covenants, a lessee cannot assign or sublet the lease without consent or commit waste on the land. Furthermore, the lessee must make advance payments of annual rent, surrender the land at the end of the lease term and allow for the removal of improvements made by others upon the land within 90 days. The lease must also provide that SITLA has the option to periodically adjust the terms of the lease in keeping with Utah Admin. Code R850-24-1000, which includes an appeal process should the lessee be dissatisfied with the revised terms. A failure by the lessee to timely accept or appeal the terms of a readjusted lease can lead to forfeiture of the lease. A lessee may likewise request a readjustment of the lease terms, which will be permitted where the agency director finds that such revision would benefit trust beneficiaries (see Utah Admin. Code R850-24-1000(9)). A lease may also be subject to cancellation in the event of a violation by the lessee of any lawful lease term. The director of SITLA “may, without further notice or appeal, cancel the lease after 30 days notice by registered or certified return receipt mail . . .”; however, the lessee may be able to prevent such a cancellation if the lessee “remedies the violation, rectifies the condition, or requests a hearing” within the said 30 day period or within such timeframe as determined by the director (Utah Code § 53C-2-409(1), also 53C-1-304).

 

  • Surface Rights: Surface rights granted to a mining lessee on trust lands are set forth in Utah Code § 53C-2-409(2)(3). The lessee may enter the property “at all times” and is entitled to the “reasonable use of the surface,” subject to any conditions imposed by SITLA. The lessee is, however, responsible for any damages incurred beyond such reasonable use. The lessee may occupy so much of the surface as is necessary for activities “reasonably” incidental to the permitted use of the leased land provided that the lessee obtains “the written consent or waiver of the surface owner or lessee,” pays for any damages incurred pursuant to an agreement with respect to damages, or provides a bond to insure payment in the event of damages.

 

SITLA Material Permits:

  • Acquisition: As in the case of mineral leases, SITLA issues permits for material resources on either a competitive or a noncompetitive basis or pursuant to an OBA. A material permit may also be issued “over-the counter” in those “areas that have been designated by the director as open for such sales” (Utah Admin. Code R850-25-400). Application procedures described in Utah Admin. Code R850-25-700 are applicable to material permits, as well as mineral leases. Permits that are offered competitively will be issued based upon the “amount of the bonus bid” and other criteria as stated in Utah Code R850-25-400(1).

 

  • Duration and Royalty: The permit shall specify the permittee’s annual rental rate, as well as the amounts to be paid as royalties, both of which are subject to adjustment (Utah Admin. Code R850-25-500(1)(2)). The material permit is generally issued for a term of five years and may further contain any additional contractual provisions that SITLA “deems necessary” (Utah Admin. Code R850-25-500(3)(4)). The permittee may subsequently request a permit renewal on the same or revised terms, and reissuance will occur if the agency director deems that such reissuance would be in the best interest of trust beneficiaries (Utah Admin. Code R850-25-500(3)(b)). A material permit may be terminated in the event that the permittee does not comply with permit terms or conditions or pertinent laws and rules (Utah Admin. Code R850-25-400(4)). A reinstatement procedure is available “within 60 days of cancellation” where the best interests of trust beneficiaries will be served (Utah Admin. Code R850-5-500).

 

  • Other Terms: SITLA is empowered to designate a Multiple Mineral and Material Development Area or “MMDA.” Utah Admin. Code R850-24-500 states several requirements to be undertaken by a mineral lessee or material permittee operating in such designated areas. As an example of these requirements, a lessee or permittee may be asked to provide a bond or other surety in addition to the bond requirements set forth in Utah Admin. Code R850-24-600(1)(a) (see infra). This bond will be used for purposes of indemnification to SITLA or other lessees/permittees in the event of an occurrence of “unreasonable and unnecessary damage” to a leased or permitted resource or improvement on the land. A mineral lease or material permit may be transferred, in whole or in part, by assignment or sublease upon the written approval of the director of SITLA. Approval may be withheld if the director “determines that approval would interfere with the development of the mineral or material resources, or be detrimental to the interests of the trust beneficiaries.” Should approval be withheld, an appeal process is available. Transfer documents must be prepared in accordance with Utah Admin. Code R850-24-800.

 

FFSL Lands: Laws and administrative provisions are separately outlined for the development of mineral and material resources situated on Utah state lands that fall under the purview of FFSL. These lands include lands not held in trust by SITLA and “sovereign lands.” The term sovereign lands is defined as “those lands lying below the ordinary high water mark of navigable bodies of water at the date of statehood and owned by the state by virtue of its sovereignty or land received in exchange for sovereign lands” (Utah Admin. Code R652-1-200(27)).

  • Minerals: Mineral leases are issued by FFSL for the purposes of “prospecting, exploring, developing, and producing minerals covering any portion of state lands or the reserved mineral interests of the state” (Utah Code 65A-6-4). Minerals are divided into classifications that are similar, although not identical, to the classifications recognized by SITLA. Likewise, FFSL allows applications for minerals that are not classified or are characterized as “close association” minerals (Utah Admin. Code R652-20-200, R652-20-300 and R652-20-400). FFSL may issue leases for more than one type of mineral on the same land and such leases will include “simultaneous operations” stipulations. FFSL will not, however, issue more than one lease for the same mineral on the same land ((Utah Code § 65A-6-4(1)). Minimum and maximum land size requirements are provided and, again, a mineral lease tract shall generally not exceed 2,560 acres (see Utah Admin. Code R652-20-800 and R652-20-900). Application procedures for mineral leases on FFSL lands are essentially the same as procedures for applying for mineral leases on SITLA lands and are set forth in Utah Code § 65A-6-5 (see also Utah Admin. Code R652-20-1200 - R652-20-2100). Lease applicants are likewise essentially subject to the same qualifications as those seeking a SITLA lease (see Utah Code § 65A-6-3).

 

  • Materials: FFSL is authorized to issue materials permits for the development of “common varieties of sand, gravel, cinders, and similar materials” located on sovereign lands that are in keeping with land use requirements (Utah Admin. Code R652-100-100 and R652-100-200). A materials permit may be attained from FFSL either through an application or a bid solicitation process as set forth in Utah Admin. Code R652-100-400. A successful applicant for a materials permit must execute and return permit documents within 60 days of receipt of a permit or risk cancellation of the permit (Utah Admin. Code R652-100-500).

 

Further particulars in respect of these licensing regimes are set out below.

 

FFSL Mineral Leases:

  • Duration and Royalty: The duration of a mineral lease as well as the payments to be made by the lessee, including annual rental and royalties “in addition to or lieu of” annual rental, shall be determined by the division director (Utah Code § 53C-2-403). The length of the lease term will depend upon the mineral to be developed, 10 years for oil and gas and other minerals and 20 years for oil shale and tar sands (Utah Code § 65A-6-4(3)). After the expiration of the primary lease term, FFSL may continue the lease provided that the lessee is a) paying a “minimum royalty” and b) “so long as . . . the mineral covered by the lease is being produced in paying quantities” or c) “the lessee is engaged in diligent operations, exploration, research or development which is reasonably calculated to advance development or production of the mineral covered by the lease” (Utah Code § 65A-6-4(4), see also Utah Admin. Code R652-20-2200(2), R652-20-2600, and R652-20-2700). FFSL seeks “to receive full value for the resources leased to persons of profit” and a “fair rental” for the leased land. Rental rates are accordingly set out in Utah Admin. Code R652-20-1000(1). This section also provides provisions with respect to royalty payments. The amount of royalties to be paid on extracted minerals varies depending upon the classification of the mineral involved and as stated in Utah Admin. Code R652-20-1000(2). Like mineral leases on trust lands, royalties may be payable “in addition to or in lieu of” the annual rental (Utah Code 65A-6-2).

 

  • Other Terms: Mineral leases must also include covenants: a) requiring the prompt payment of annual rental in advance; b) not to commit waste; c) prohibiting assignments or subletting without the approval of the agency’s director; d) mandating the surrender of the leased premises upon expiration of the lease; and e) permitting the removal of authorized improvements made by others within 90 days (Utah Code 65A-6-6). The terms of a mineral lease may be readjusted by FFSL and the division will provide the lessee with one-years notice of the impending adjustment. A mineral lessee must accept the re-adjustment or the lease will become subject to forfeiture (Utah Admin.Code R652-20-4000). A lease may be fully or partially assigned or subleased to a qualified entity subject to the approval of FFSL. A lease transfer instrument must be prepared and executed in duplicate and include a) the lease serial number, b) a description of the land and the interest transferred and c) identifying information pertaining to the assignee (Utah Admin. Code R652-20-2200(5)).

 

  • Surface Rights: Laws and regulations concerning surface rights and preferences rights for unleased minerals are the same as to those applicable to trust lands managed by SITLA (see Utah Code § 65A-6-8 and Utah Admin. Code R652-20-2200(1)).   FFSL, like SITLA, may also designate a MMDA and the lessee may be obliged, by virtue of a lease provision, to secure a bond to safeguard the interests of the state and other lessees in the event of “unreasonable and all unnecessary damage to mineral deposits or improvements” caused by a mineral lessee (Utah Admin. Code R652-20-2500).

 

Materials Permits:

  • Duration and Royalty: A permit is generally valid for no more than 5 years, however, the director has discretion with respect to shorter or longer terms where it “would be in the best interest of beneficiaries” (Utah Admin. Code R652-100-600). Provisions for the payment of annual rental and royalty rates are set forth in Utah Code R652-100-300. Royalties shall be paid on a quarterly basis and the permittee is additionally required to submit a “Production and Settlement Transmittal Form” with the payment (Utah Admin. Code R652-100-300(2)(c)).
  • Surface Rights: The materials permit shall also contain terms for “responsible surface management” that include the rights of the parties, reclamation and indemnification requirements, requirements for the transfer of the permit and forfeiture provisions (Utah Admin. Code R652-100-700). A materials permit may be assigned with division approval pursuant to Utah Admin. Code R652-100-1200.

 

ENVIRONMENTAL REGULATION

See Utah Environmental Regulation.

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