New Mexico State Geothermal Lease (3-NM-a)
The leasing process generally applies to geothermal leases on state trust lands shown to be open upon the tract books of the NMSLO. 220.127.116.11 NMAC. The leasing process also applies to “miscellaneous lands,” which are state lands that are controlled by school districts or state agencies. Miscellaneous lands require a written request for leasing by the governing board of public officials having jurisdiction over such lands before an application for their lease will be reviewed. In addition, where the developer’s lease of miscellaneous lands will involve appropriation of water, the developer must obtain written permission from the state engineer, filed with the Commissioner, before water is appropriated. 18.104.22.168 NMAC.Note: Within the NMSLO, the Commissioner (“Commissioner”) of public lands has broad authority prior to and during the application process to withhold state trust lands in the best interests of New Mexico or reject applications and offer them to the public for a competitive leasing process. 22.214.171.124-19 NMAC. The Commissioner’s authority derives from Article XIII, Section 2 of the Constitution of the State of New Mexico.
State Geothermal Lease Process
3-NM-a.1 to 3-NM-a.3 – Is the Resource Greater than 250 Degrees Fahrenheit?
As an initial inquiry, New Mexico’s Geothermal Resources Act and Geothermal Leasing Regulations do not apply to the application of potable water to a beneficial use where the temperature of the water is 250 degrees Fahrenheit or less. If the extracted geothermal resource is above 250 degrees Fahrenheit, the aforementioned statute and regulations do apply. The Geothermal Resources Act defines geothermal resources as "the natural heat of the earth in excess of two hundred fifty degrees Fahrenheit..."
Developers may still lease state trust lands for the purposes of developing “low-temperature” geothermal resources (where the heat and/or water extracted is 250 degrees Fahrenheit or less) by initiating the State Business Lease:
In addition, developers engaging in “low-temperature” geothermal resource (where the heat and/or water extracted is 250 degrees Fahrenheit or less) development must go through the New Mexico Office of the State Engineer (NMOSE) and abide by all applicable New Mexico state water laws, rules, and procedures - as described in Water Access and Water Rights Issues Overview:
3-NM-a.4 – Is the Land Classified as a Known Geothermal Field?
Under New Mexico's Geothermal Resources Act, land classified as a “known geothermal field” may only be leased by oral bids at a public auction. Such lands are noted in the NMSLO tract books and unavailable for leasing by application. 126.96.36.199 NMAC.
3-NM-a.5 to 3-NM-a.6 – Nominate Lands for Leasing
Interested developers should notify the NMSLO of lands the developers want to lease. Unless the Commissioner withholds the specific land from leasing, the NMSLO will subsequently hold a public auction. The Commissioner must post a notice of an upcoming sale by public auction at least 10 days prior to the date of sale. 188.8.131.52 NMAC.
3-NM-a.7 – Hold Public Auction
Public auction sales, whether by sealed or oral bids, are ordinarily held on the third Thursday of each month. 184.108.40.206 NMAC. A successful bidder at an oral-bid public auction will be required to pay, on or before the close of business on the date of sale, the filing fee, first year’s rental and bonus. 220.127.116.11 NMAC.
3-NM-a.8 – Geothermal Lease
Leases are made on forms furnished by the Commissioner. A Geothermal Lease will contain the terms of the lease including a rental rate, duration and any conditions attached by the commissioner. 18.104.22.168 NMAC. Leases may be assignable upon approval by the Commissioner. 22.214.171.124 NMAC.
3-NM-a.9 – Generate required Surety/Bond Payments Before Conducting any Activities on Lease
After the NMSLO awards a geothermal lease, a developer may not commence operations, including prospecting activities, until executing and filling a sufficient surface bond or surety with the Commissioner. The minimum surety to protect surface lessees is $5,000, unless otherwise proscribed by the Commissioner. The developer is exempt from paying the surety to protect surface lessees only by obtaining a waiver from the applicable surface owner and permission from the Commissioner. In addition, before issuance of the lease, the developer must file a bond or surety with the Commissioner to guarantee performance (payment of royalties to the State of New Mexico) in an amount determined by the Commissioner. 126.96.36.199-38 NMAC. Note that generally, the Commissioner will only issue a Geothermal Lease after both bonds are in place.
3-NM-a.10 – Application for Lease; Performance Surety/bond
The application must be in the form required by the Commissioner, as outlined in N.M. Admin. Code section 188.8.131.52. All applications must contain a non-refundable fee of $30 along with the amount of first year’s rental and bonus offered (if any) and an appraisal of the value of the land for lease made by a disinterested party. 184.108.40.206 NMAC. For application purposes, rentals are calculated at a minimum of $1 per acre unless otherwise specified by the commissioner. In addition, applications must include a performance bond or other surety in an amount set by the Commissioner necessary to guarantee payment of royalties. Developers may choose to submit a surety/bond in the amount of $25,000 to cover both the performance and surface protection bonds. 220.127.116.11 NMAC. Developers should generally submit both a performance and surface bond/surety during the application phase or soon after because the Commissioner generally will not issue a lease unless both bonds are in place.
Applications received in the same delivery of open mail are deemed “simultaneous applications” and are disposed of in one of the following ways, as determined by the Commissioner:
- Submission of amended applications in which case preference is given to the applicant offering the highest bonus; or
- By offering the lands for lease at public auction. 18.104.22.168-17 NMAC.
3-NM-a.11 to 3-NM-a.12 – Review Application Materials for Completeness
The NMSLO will reject applications not accompanied by the proper fees outlined in 3-NM-a.9. Applications that are incomplete for other reasons will be returned to the applicant. 22.214.171.124 NMAC.
3-NM-a.13 – Did the Commissioner Reject and Offer for Competitive Leasing?
At any point during the application process, the Commissioner may reject a complete application and offer the tract for competitive leasing, either by sealed bidding or oral public auction. 126.96.36.199 NMAC.
3-NM-a.14 – Administer Competitive Lease Process
The oral bidding process is described in 3-NM-a.6. Sealed bids will be received up to the hour set in the notice of sale described in 3-NM.a.5, at which point all bids are opened and the Commissioner or other NMSLO representative awards the lease to the highest bidder. 188.8.131.52 NMAC. Sealed bids must contain the same consideration as required for a successful oral bid, as described in 3-NM-a.6. In the case of two or more high bids, the applicants will be given a chance to amend their bids, with the lease awarded to the highest bidder, similar to the second option for simultaneous applications as described in 3-NM-a.9.
Note that the Commissioner can reject all bids if he deems the bids too low or not in the best interests of the trust. 184.108.40.206 NMAC.
3-NM-a.15 – Geothermal Lease
As described in 3-NM-a.8.
3-NM-a.16 Generate Surety/bond to Protect Surface Lessees Before Conducting Activities on Lease
Before conducting any activities on the lease, the developer must submit an adequate surety/bond to the Commissioner in an amount not less than $5,000 to protect surface owners or lessees from potential damage. 220.127.116.11 NMAC. In the case where a developer supplied a $25,000 bond for both performance and surface protection, as described in 3-NM-a.10 above, the developer has satisfied all bonding requirements and may disregard this element. Note that the Commissioner may choose not to issue a lease if both bonds are not in place. Developers are encouraged to satisfy both bonding requirements during the application phase.
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