Lease Management

Before a lease may be issued, the lessee must furnish a bond in an amount determined by the BLM to ensure compliance with all the lease terms and conditions. At a minimum, a bond is required to cover  a one year installment of the bonus bid where the lessee does not have a history of timely payments and bonus payment is due, one year of rental, one year of advanced royalty if the lease is subject to advance royalty.   If the lease is producing, the bond should cover at a minimum one year installment of the bonus bid where the lessee does not have a history of timely payments and bonus payment is due, one year rental, plus 3 months of royalty.  All bonds are rounded up to the next $1,000 but in no case less than $5,000.  Bonding for reclamation is required under the lessee's mining permit authorized under the Surface Mining Control and Reclamation Act of 1977 and issued by OSM.  Your bond with the BLM could include provisions for protection of the environment.  The BLM may require a change, either higher or lower, on the bond amount at any time conditions warrant such a change.

The bond requirement may be met by corporate surety bonds, cash bonds, or personal bonds that are accompanied by negotiable Treasury securities, and cashier's check or certified check.

The BLM expects lessees or operators to produce as much coal at possible at the royalty rate specified In the lease. However, the BLM recognizes that as circumstances change, there are instances where the lease royalty rate is detrimental to attaining the greatest ultimate recovery of the coal resource. Under certain circumstances the BLM can, upon application by the lessee or operator, temporarily reduce the royalty rate for a specific area of coal.  

The general requirements for a royalty rate reduction are:

• The royalty rate reduction must encourage the greatest ultimate recovery of the coal resource.
• The royalty rate reduction must be in the interest of conservation of the coal and other resources.
• In the judgment of BLM, the reduced royalty rate is necessary to promote development of the coal resource.

Contact the local BLM office for more specific instructions.
 

The BLM Inspects all leases and mining operations at least quarterly in an effort to ascertain that royalty is being paid on all the coal mined; that coal is not routinely or deliberately being “lost;” and that mining operations are consistent with the terms and conditions of the lease.  Other agencies may also have authority to inspect your mining operations for compliance with other federal or state laws and regulations.

Applications to modify an existing lease are common among companies seeking to expand operations at their mine. Lease modifications are similar to a lease by application in that they require an environmental review – with help via a formal public comment period – to address cultural, socioeconomic, environmental and cumulative impacts associated with the modification. The scope of the environmental review is analyzed by an environmental assessment or an environmental impact statement depending on the scope of the development plan. 

The BLM takes the necessary steps to ensure that federal coal lease modification applications are analyzed in accordance with federal regulations (43 CFR 3432.2). These regulations provide for lease modifications when:

1.  the modification serves the interests of the United States;
2. there is no competitive interest in the lands or deposits; and
3. the additional lands or deposits cannot be developed as part of another potential or existing independent operation. 

Once a lease modification is approved, the company is required to pay fair market value for the additional acreage acquired to the lease. 
 

A logical mining unit (LMU) is an administrative grouping that allows the lessee or operator to consolidate the diligent development and continued operations requirements for all the federal leases and other coal tracts within the boundaries of the mine.  An LMU provides for continuity in management of the coal resource whenever the geologic characteristics of a coal seam cross property boundaries.  LMU's have been defined as an area of land in which the coal can be developed in an efficient, economical, and orderly manner as a unit with due regard for conservation of the coal and other resources.

An application is required to form an LMU.  Contact the local BLM office for more specific instructions.

Transfer

Guidelines are in place to allow for the transfer of a coal leases to another party. First, a request must be submitted to have the lease transferred within 90 days after the date the transfer was executed by the transferor.  The rights of the transferees will not be recognized by the BLM until the transfer has been approved.  The transferor remains responsible for all obligations of the lease until the transfer is approved. An assignment of any bed of the coal deposit, or a part of the land in a lease, will result in a new coal lease being created for the partial assignment, if approved.

An exchange of coal leases is allowed when specifically provided for in legislation, for compensation cases that involve coal that was withdrawn under alluvial valley floors, or when the exchange is determined to be in the public interest.

Terminations 

If the diligent development requirement of the lease has not been met at the end of the 10-year lease period, the lease could be terminated.

Relinquishments 

The lessee may surrender a lease in whole or in part by filling a written request for relinquishment with the BLM office that has jurisdiction over the leased lands. A relinquishment, if approved, takes effect on the date it was filed.  The lessee must comply with the lease terms and conditions and have all payments and fees paid.  The lease bond can be used to assure compliance with terms and conditions of the lease.  Reclamation is a legal obligation under the lessee's OSM mine permit.