Office of Mineral Resources

Leasing Manual

How to Acquire a Mineral Lease on State and State Agency Lands and Water Bottoms in the State of Louisiana

 

Step 5: Advertisement of State and State Agency Tracts Offered for Mineral Lease

B. Advertisement Notices

The advertisement may provide notice of the following:

1. Bid on an Entire Tract or a Portion of a Tract

A party may bid on the whole or any particularly described portion of the land advertised. LSA-R.S. 30:127(A).

2. Specify a Primary Term

A bidder for a mineral lease on a state or state agency tract must specify a primary term. The maximum primary term available for an Offshore state mineral lease (seaward of the Louisiana coastline, as decreed by the United States Supreme Court in litigation styled United States v. State of Louisiana et al), as well as state mineral leases in Ascension Bay, is five (5) years. The maximum primary term available for a non-Offshore state mineral lease (landward of Louisiana coastline, as decreed by the United States Supreme Court in litigation styled United States v. State of Louisiana et al), exclusive of Ascension Bay, as well as for state agency mineral leases, is three (3) years. LAC 43:I.901(13). If a bidder specifies a primary term greater than the maximum allowed by law, then the State Mineral & Energy Board may at its own discretion reject the bid outright or reduce the primary term to the legal maximum.

3. Offer a Cash Payment

A bidder for a mineral lease on a state or state agency tract shall offer a cash payment.   The cash payment shall be provided on the official Bid Form as a total amount and as an amount per acre (which is equal to the cash payment divided by the acreage bid on). One-half (½) of this cash payment is to be bonus as full and adequate consideration for every right granted by the lease (and not allocated as mere rental for a period) and one-half (½) is to be rental for the first year of the lease. The State Mineral & Energy Board requires the bidding party to submit the entire cash payment as a deposit with each bid in the form of a certified check, cashier’s check or bank money order. LSA-R.S. 30:127(F), 30:154(E). Subject to the exceptions listed below, if the bid is for a state mineral lease on state lands or water bottoms, the payee shall be the Office of Mineral Resources, and if the bid is for a state agency mineral lease on state agency lands or water bottoms, the payee shall be the state agency. LSA-R.S. 30:153.

a.

Special Requirement for the Cash Payment on a Marsh Island Wildlife Refuge Tract

The cash payment for a Marsh Island Wildlife Refuge tract shall be divided into two (2) separate payments:  One-half (½) of the cash payment shall be made payable to the Office of Mineral Resources and one-half (½) of the cash payment shall be made payable to the Russell Sage Foundation. Both payments shall be submitted with the bid and the Office of Mineral Resources shall transmit the Russell Sage Foundation payment to the Foundation. LSA-R.S. 56:798(A)(1).

Note:  If a state mineral lease is awarded on a Marsh Island Wildlife Refuge tract, then one-half (½) of any and all revenues due the state as royalty, rentals, or otherwise shall be paid directly to the Russell Sage Foundation. LSA-R.S. 56:798(A)(1).

b.

Special Requirement for the Cash Payment on Certain Russell Sage Wildlife Management Area Acreage

The Ouachita Farm Corporation sold acreage that comprises a portion of the Russell Sage Wildlife Management Area to the Louisiana Wild Life and Fisheries Commission (now the Louisiana Department of Wildlife and Fisheries) via Act of Sale dated December 28, 1960, reserving an undivided one-half (½) of the mineral rights.  The cash payment for tracts falling in that portion of the Russell Sage Wildlife Management Area subject to the Act of Sale shall be divided into two (2) separate payments:  One-half (½) of the cash payment shall be made payable to the Ouachita Farm Corporation and one-half (½) of the cash payment shall be made payable to the Louisiana Department of Wildlife and Fisheries.

Note:  If a state agency mineral lease is awarded on a tract falling in that portion of the Russell Sage Wildlife Management Area subject to the Act of Sale, then one-half (½) of any and all revenues due the state as royalty, rentals, or otherwise shall be paid directly to the Ouachita Farm Corporation and the remaining one-half (½) shall be made payable to the Louisiana Department of Wildlife and Fisheries.

c.

Special Requirement for the Cash Payment on a Section 16 School Lands Tract that Falls in a Township Lying Within More than One (1) Parish

The cash payment for a Section 16 School Lands tract that falls in a township lying within more than one (1) parish shall be made payable to the State Treasurer. LSA-R.S. 41:640(B).

4. Offer an Annual Rental

A bidder for a mineral lease on a state or state agency tract who specifies a primary term of more than one (1) year shall offer an annual rental. The annual rental shall not be for less than one-half (½) of the cash payment. See LSA-R.S. 30:127(E). If the bidder offers an annual rental of less than one-half (½) of the cash payment offered, then the annual rental amount shall be raised automatically to one-half (½) of the cash payment if the bid is otherwise accepted.

5. Offer a Royalty
   
a. Lease for Oil, Gas and Other Liquid or Gaseous Minerals

A bidder for a lease for oil, gas and other liquid or gaseous minerals on a state or state agency tract shall offer a royalty for oil, gas, and any other liquid or gaseous minerals in solution and produced therewith and saved or utilized. The minimum royalties to be stipulated in such a lease, other than a lease executed by or on behalf of a school board, shall be one-eighth (1/8th) of the oil, gas, and any other liquid or gaseous minerals in solution and produced therewith and saved or utilized. See LSA-R.S. 30:127(A)(1) and (6). However, note that the State Mineral & Energy Board has not accepted a one-eighth (1/8th) royalty in a long time.

With regard to any lease for oil, gas and other liquid or gaseous minerals executed by or on behalf of any school board, the minimum royalties shall be one-sixth (1/6th) of all oil, gas, and any other liquid or gaseous minerals in solution and produced therewith and saved or utilized. See LSA-R.S. 30:127(B)(1) and (6).

Note:  Rights to geothermal resources, free sulphur, potash, lignite, salt and other solid minerals are excluded from any state or state agency lease for oil, gas and other liquid or gaseous minerals. Should a bidder include these rights in his bid for such a lease, these rights shall be disregarded to the extent of these rights only.

b. Lease for Solid Minerals

A bidder for a lease for sulphur, potash, lignite, salt or other solid minerals on a state or state agency tract shall offer a royalty for the specific solid mineral. The minimum royalties to be stipulated in such a lease, other than a lease executed by or on behalf of a school board, shall be as follows:

i.

One-eighth (1/8th) of the value per long ton of sulphur produced and saved which shall yield not less than two dollars per long ton.

   
ii.

One-eighth (1/8th) of the value per ton for all potash produced and saved, which shall yield not less than ten cents per ton.

   
iii.

Five percent (5%) of all lignite produced and saved.

   
iv.

Five percent (5%) of the value per ton on a dry salt basis for all salt produced and saved, which shall yield not less than ten cents per ton.

   
v.

One-eighth (1/8th) of all other minerals produced and saved.

See LSA-R.S. 30:127(A)(2)–(6).

With regard to any lease for sulphur, potash, lignite, salt or other solid minerals executed by or on behalf of any school board, the minimum royalties shall be as follows:

i.

One-sixth (1/6th) of the value per long ton of sulphur produced and saved which shall yield not less than two dollars per long ton.

   
ii.

One-sixth (1/6th) of the value per ton for all potash produced and saved, which shall yield not less than ten cents per ton.

   
iii.

Five percent (5%) of all lignite produced and saved.

   
iv.

Five percent (5%) of the value per ton on a dry salt basis for all salt produced and saved, which shall yield not less than ten cents per ton.

   
v.

One-sixth (1/6th) of all other minerals produced and saved.

See LSA-R.S. 30:127(B)(2)–(6).

Note:  Rights to oil, gas and other liquid or gaseous minerals are excluded from any state or state agency lease for sulphur, potash, lignite, salt or other solid minerals. Should a bidder include these rights in his bid for such a lease, these rights shall be disregarded to the extent of these rights only.

6. Offer Additional Consideration

A bidder for a mineral lease on a state or state agency tract may offer additional consideration, e.g. an obligation to drill a well within a certain period of time or pay a penalty; or an obligation to plug and abandon orphan wells located on the leased premises. Any additional consideration shall be considered along with all other factors by the State Mineral & Energy Board.

a.

Special Requirement for Additional Consideration on a White Lake Eroded Shoreline from 1942 Tract

It is mandatory that a bid for a mineral lease on a White Lake Eroded Shoreline from 1942 tract offer the additional consideration that should a title dispute arise regarding the tract and litigation ensue, the bidder obligates himself(itself) to pay to the State, as same may be billed, any and all legal costs incurred by the state of Louisiana in defending its title to said tract up to a maximum aggregate amount of one hundred fifty thousand and no/100 dollars ($150,000.00) for all leases acquired by the bidder on White Lake Eroded Shoreline from 1942 acreage.

7. Specify the Joint Bid Percent Interests

When two (2) or more parties submit a joint bid, the undivided percent interest of each party shall be designated on the official Bid Form. The interests so designated shall be stipulated in any lease that may be awarded. Failure to designate the undivided percent interest of each joint bidder shall result in the State Mineral & Energy Board assigning equal interests to each bidder.

8. Ten Percent (10%) Leasing Fee Pursuant to LSA-R.S. 30:124

The State Mineral & Energy Board is authorized to collect a fee for leasing state and state agency lands or water bottoms in the amount of ten percent (10%) of the total cash payment paid at the lease sale. This fee shall be in addition to the total cash payment paid. LSA-R.S. 30:124. This fee shall be submitted with the bid.  Payment shall be made to the Office of Mineral Resources via check (personal or business). If payment is not made or the check not honored for payment, the State Mineral & Energy Board may not execute the lease and may rescind it.

9.

Thirty Dollars ($30.00) Per Acre Payment by State Mineral Lessees Pursuant to LSA-R.S. 30:136.1(D) and Act 362 of the 2015 Regular Legislative Session

The following applies only to state mineral lessees and not to state agency mineral lessees:  Fifteen dollars ($15.00) per acre shall be collected from state mineral lessees and deposited into the Louisiana Wildlife and Fisheries Conservation Fund and an additional fifteen dollars ($15.00) per acre shall be collected from state mineral lessees and deposited into the Oil and Gas Regulatory Fund created by R.S. 30:21. LSA-R.S. 30:136.1(D) and Act 362 of the 2015 Regular Legislative Session.  Payment of these two items in connection with state mineral leases is combined into one payment known as the Thirty Dollars ($30.00) Per Acre Payment. This payment shall be submitted with the bid.  Payment shall be made to the Office of Mineral Resources via check (personal or business). If payment is not made or the check not honored for payment, the State Mineral & Energy Board may not execute the lease and may rescind it.

10. Bid Submission Conditions

Once a bid is submitted, it may not thereafter be withdrawn or cancelled.   The State Mineral & Energy Board does not obligate itself to accept any bid. Bid acceptance or rejection is at the sole discretion of the State Mineral & Energy Board which reserves the right to reject any and all bids or to grant a lease on any portion of the tract advertised and to withdraw the remainder of the tract. The bidding party shall include the cash payment as a deposit with each bid in the form of a certified check, cashier’s check or bank money order. LSA-R.S. 30:127(F). The cash payment amount specified on the certified check, cashier’s check or bank money order shall exactly match the cash payment amount specified on the official bid form. The bidding party shall include the Ten Percent (10%) Leasing Fee and Thirty Dollars ($30.00) Per Acre Payment with the bid. If the bid is accepted, the cash payment, Ten Percent (10%) Leasing Fee and Thirty Dollars ($30.00) Per Acre Payment shall be immediately endorsed and negotiated by the Office of Mineral Resources and the proceeds transmitted for processing in accordance with law. If the bid is rejected, the cash payment, Ten Percent (10%) Leasing Fee and Thirty Dollars ($30.00) Per Acre Payment shall be returned.   If examination of the successful bid acreage amount reveals that there is more or less state or state agency acreage than the amount bid on, then the cash payment, Ten Percent (10%) Leasing Fee, Thirty Dollars ($30.00) Per Acre Payment, annual rental, and deferred development shall be adjusted accordingly.

11. Mineral Lease Award Conditions

The successful bidder(s) to whom the lease is awarded has twenty (20) days from receipt of the lease contract, properly executed by the State Mineral & Energy Board, to execute and return the lease contract to the Office of Mineral Resources. Failure to return the lease contract, properly executed, within twenty (20) days may result in forfeiture of the lease including the cash payment and Ten Percent (10%) Leasing Fee.  All state and state agency mineral leases shall be executed upon the terms and conditions provided in the current official lease forms with attached riders. Notwithstanding any provisions to the contrary in any lease awarded or in any rider attached thereto, the lease awarded shall be granted and accepted without any warranty of title and without any recourse against the Lessor whatsoever, either expressed or implied. Further, Lessor shall not be required to return any payments received under the lease awarded or be otherwise responsible to Lessee therefor.

12. Other Applicable Regulations

Some tracts available for mineral leasing may be situated in the Louisiana Coastal Zone as defined in LSA-R.S. 49:214.21, et seq, and may be subject to guidelines and regulations promulgated by the Louisiana Department of Natural Resources, Office of Coastal Restoration and Management, Coastal Management Division, for operations in the Louisiana Coastal Zone.

13. Access by the Public

Any contract entered into for the lease of state lands for any purpose shall require that access by the public to public waterways through the state lands covered by the lease shall be maintained and preserved for the public by the lessee. This provision shall not prohibit the secretary of the agency having control over the property from restricting access to public waterways if he determines that a danger to the public welfare exists. This provision shall not apply in cases involving title disputes.