(a) Lands and minerals subject to lease. Generally, coal, lignite, sulphur, salt, and potash on PSF lands and all minerals on state agency lands are subject to lease by sealed bid. See §10.1 of this title (relating to Definitions; Exploration and Development Guide) for lands and minerals which are subject to lease under these sealed bid procedures and §10.2(b) of this title for other minerals that may be leased under the section.     
      (b) Exploration for certain minerals. Exploration for coal, lignite, sulphur, salt, and potash on PSF lands may be conducted under geophysical and geochemical permits issued by the GLO. Applications must be submitted on forms prescribed by the GLO. (See §9.11 of this title)     
      (c) Nomination, advertising, and award of tracts.      
        (1) Nominations, setting of terms and conditions, evaluation of sealed bids, advertising, and awards are administered by the SLB under Chapter 9 of this title (relating to Exploration and Leasing of State Oil and Gas).       
        (2) On land trade lands, the GLO will notify the surface owner that a lease has been issued if the surface owner requests such notice in writing by furnishing the GLO with a current mailing address and a legal description of each tract on which he desires such notice. Failure of the surface owner to receive notice will not affect the validity of a lease issued under this section.       
        (3) TPWD may review the leasing of lands whose minerals are subject to lease under this section but whose surface is owned or leased by TPWD or is subject to a conservation easement in favor of TPWD. If such lands are nominated for lease, the GLO shall notify the executive director of TPWD of such nomination. On the same day as a lease is issued on such lands, the TPWD will be notified of the issuance of the lease. Such lease will state that the surface of such land is owned or leased by TPWD or is subject to a conservation easement in favor of TPWD and will identify the TPWD park or area manager who is responsible for the surface of the land.       
      (d) Minimum terms and conditions.      
        (1) Terms and conditions of leases will be set by the SLB for each lease sale and will be included in the notice for bids.       
        (2) The royalty reserved to the state shall be not less than one-eighth of the gross production of sulphur or the value of the sulphur that may be produced or that may be produced and sold off the area and not less than one-sixteenth of the value of coal, lignite, salt, and potash that may be produced.       
        (3) Upland leases issued under this section on tracts in which the PSF own the surface must include a provision requiring the payment of damages for the use of the surface in prospecting for, exploring, developing, or producing the leased minerals. The amount of damages for use of the surface will be determined by negotiation with GLO staff, approved by the commissioner, and incorporated in each lease form.       
        (4) Lessee shall conduct all mining operations and reporting requirements in compliance with state and federal laws and §10.7 of this title (relating to Conduct of Exploration and Mining Operations).       
        (5) State agency leases (except TPWD and TDC leases) may not be for a primary term exceeding five years.       
      (e) Assignments, releases, reports, inspections, forfeitures, and reinstatements. Leases issued under this section are subject to all general provisions covered in §10.8 of this title (relating to Assignments, Releases, Reports, Royalty Payments, Inspections, Forfeitures, and Reinstatements).     
     Source Note:        The provisions of this §10.4 adopted to be effective March 22, 1989, 14 TexReg 1280; amended to be effective December 10, 2009, 34 TexReg 8776