(a) Permanent school fund lands may be leased for the exploration or development of groundwater resources through either a sealed bid procedure or through direct negotiation, at the discretion of the commissioner. Municipalities and other providers of public water supplies may be given a priority preference to lease permanent school fund lands for development of a municipal or domestic water supply.
(b) A party interested in leasing permanent school fund lands for the exploration or development of groundwater resources may submit a lease application. Alternatively, the commissioner or GLO staff may nominate a tract or tracts for inclusion in a sealed bid lease sale. A tract proposed for lease or nominated shall be described in sufficient detail that it can be identified and evaluated by interested parties. The commissioner will determine the lease procedure to be followed after considering interest in a tract and the best interest of the State.
  (1) Contents of Application. A party interested in leasing permanent school fund lands for the exploration or development of groundwater resources shall submit an application to the GLO on forms approved by the commissioner. An acceptable application shall include the following information:
    (A) Name, address, and phone number of the person or entity submitting the application. For applicants other than natural persons, an organizational charter or certificate and related documentation of its current authority to conduct business in Texas and the name and official capacity of an authorized representative or agent shall also be provided.
    (B) A description of the permanent school fund lands sought to be leased.
    (C) A description of the purpose of the lease and the activities to be undertaken or conducted on the leased premises.
    (D) A map on a scale adequate to show the location of the proposed lease. State tract numbers and names of rivers, streams, and lakes shall be shown where applicable. Location of project features should be depicted to the extent such information is available.
    (E) A business plan that describes the various phases of a groundwater development project, including exploration and analysis, regulatory compliance, project budget and financing alternatives, marketing, development and production, right of way acquisition, and transportation and delivery. The plan should also detail the expertise available to evaluate scientific data and information and to assure that the permitted uses can be conducted in a manner consistent with sound engineering and management principles.
    (F) Such other financial and background information about the proposed lessee, related entities, principals, or guarantors as may be requested by the commissioner to evaluate the application, the creditworthiness and experience of the applicant, or the potential viability of the proposed project.
  (2) Nomination procedures. The commissioner or GLO staff may nominate a tract for lease. In the event the commissioner determines that a bid sale is in the best interest of the State, the commissioner will set the terms and conditions upon which such nominated tracts will be offered for lease. These terms will be advertised and bids taken. The commissioner may accept the best bid meeting the minimum requirement set by the commissioner or by law, or the commissioner may reject any or all bids.
(c) Leases under this chapter may include provisions for bonuses upon execution, delay rentals, shut-in royalties, production royalties, advance royalties, in-kind royalties, or include the State or the permanent school fund as a participating interest in the development or exploration.

Source Note: The provisions of this §13.31 adopted to be effective April 23, 2006, 31 TexReg 3264