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State
Oregon Regulations
CHAP 141 DIVISION 14 RULES OF ADMINISTRATIVE PROCEDURE FOR AUDIT OF SAND AND GRAVEL LEASES



The Oregon Administrative Rules contain OARs filed through July 14, 2006

DEPARTMENT OF STATE LANDS


DIVISION 14
RULES OF ADMINISTRATIVE PROCEDURE FOR AUDIT OF SAND AND GRAVEL LEASES

Sand and Gravel Program





141-014-0070

Purpose

(1) These rules describe when royalty payments are due to the State of Oregon for sand and gravel and other material removed from state-owned submerged and submersible lands.

(2) These rules are in addition to those governing the Oregon Removal-Fill Permit Program (OAR 141-085-0005 through 141-085-0090).

Stat. Auth.: ORS 273.551, ORS 274 .525, ORS 274 .530, ORS 274 .550 & ORS 274.560
Stats. Implemented: ORS 274 .525 & ORS 274 .550
Hist.: LB 7-1991, f. & cert. ef. 9-13-91



141-014-0075

Authority

ORS 273 .225 through 273.241 (Removal of Material); ORS 274 .040 and 274.525 through 274.550 (Submersible and Submerged Lands).

Stat. Auth.: ORS 273.551, ORS 274 .525, ORS 274 .530, ORS 274 .550 & ORS 274.560
Stats. Implemented: ORS 274 .525 & ORS 274 .550
Hist.: LB 7-1991, f. & cert. ef. 9-13-91



141-014-0080

Definitions

(1) "Applicant" is any person (as defined in Section 15 of this rule) applying for a lease or license to sell or use material removed from state-owned submerged and submersible lands. "Applicant" also refers to the successful bidder at an auction prior to final lease execution.

(2) "Article of Commerce" is any state-owned material which is bought, sold, traded, or bartered for other goods or services, or is used for a beneficial purpose and which would otherwise have to be acquired from alternate sources (such as material used for the purpose of "surcharging").

(3) "Channel Improvement" is a removal activity conducted under contract or undertaken by a government agency or officially constituted public body (such as a port district) to improve federally authorized navigation channels in accordance with official minimum project specifications.

(4) "Division" means the Division of State Lands.

(5) "Dredge Spoils" are materials which have been dredged from state-owned submerged and submersible lands and placed on upland sites during the process of constructing, maintaining, or improving channels, harbors, or flood control projects.

(6) "Exclusive Leases" grant the exclusive right to remove, sell, or use state-owned material from a specific area of submerged or submersible lands.

(7) "Flood Control" is removal activity undertaken to construct, maintain, or improve flood control structures, channels, or projects.

(8) "Harbor Improvement" is removal activity undertaken to construct, maintain, or improve a harbor area which has navigational access to a navigation channel.

(9) "Lessee" refers to any person (as defined in Section 15 of this rule) having a lease to remove, sell, or use material from state-owned submerged and submersible lands.

(10) "License" refers to a non-exclusive royalty agreement allowing the removal, sale or use of state-owned material. A license may be issued for removal, sale, or use of dredge spoils, or may be issued instead of an exclusive lease.

(11) "Licensee" refers to any person (as defined in Section 15 of this rule) having a license to remove, sell, or use material removed from state-owned submerged and submersible lands.

(12) "Material" means rock, gravel, sand, silt, and/or other organic or inorganic substances removed from state-owned submerged and submersible lands.

(13) "Ordinary Low Water Line" is the line on the bank or shore to which the water ordinarily recedes annually. Ordinary low water shall be established by the Division with reference to historical data, field observations, survey, or other generally accepted methods.

(14) "Ordinary High Water Line" is the line on the bank or shore to which the water ordinarily rises annually. Ordinary high water shall be established by the Division with reference to historical data, vegetation, field observations, survey, or other generally accepted methods.

(15) "Person" is an individual, political subdivision, or government agency; or any corporation, association, firm, partnership, joint stock company, or quasi-public corporation registered to do business in the State of Oregon.

(16) "Preference Right" is similar to a right of first refusal. It is the right of the owner of a parcel of land to lease state-owned submersible land that fronts that owner's upland property. A preference right to lease will be offered prior to competitive bidding for lease of those submersible lands.

(17) "Submerged Lands" are lands lying below the line of ordinary low water of all navigable waters within the boundaries of the State of Oregon.

(18) "Submersible Lands" are lands lying between the line of ordinary high water and the line of ordinary low water of all navigable waters within the boundaries of the State of Oregon.

Stat. Auth.: ORS 273.551, ORS 274 .525, ORS 274 .530, ORS 274 .550 & ORS 274.560
Stats. Implemented: ORS 274 .525 & ORS 274 .550
Hist.: LB 7-1991, f. & cert. ef. 9-13-91



141-014-0085

Royalty Exempt Activities

(1) Material may be removed from state-owned submerged and submersible lands without payment of royalty under the following circumstances:

(a) Any person may take up to 50 cubic yards of state-owned material (or the equivalent weight in short tons) per calendar year for that person's own exclusive non-commercial use, provided that the Division is notified prior to removal of such material;

(b) Any person may remove material from state-owned submerged and submersible lands for channel improvement, harbor improvement, or flood control, (as defined in these rules) provided that the Division is notified prior to removal of such material.

(2) These exemptions no longer apply if the material is removed from the place deposited and sold or used as an article of commerce (as defined in OAR 141-014-0080(2)).

(3) None of these exemptions apply if the material is transported and/or used outside the boundaries of the State of Oregon.

Stat. Auth.: ORS 273.551, ORS 274 .525, ORS 274 .530, ORS 274 .550 & ORS 274.560
Stats. Implemented: ORS 274 .525 & ORS 274 .550
Hist.: LB 7-1991, f. & cert. ef. 9-13-91



141-014-0090

Activities Subject to Payment of Royalty

Unless otherwise specifically exempted above, all material removed from state-owned submerged and submersible lands is subject to payment of royalty. Material originally exempt is subject to royalty if it is removed from the place deposited and sold or used as an article of commerce.

Stat. Auth.: ORS 273.551, ORS 274 .525, ORS 274 .530, ORS 274 .550 & ORS 274.560
Stats. Implemented: ORS 274 .525 & ORS 274 .550
Hist.: LB 7-1991, f. & cert. ef. 9-13-91



141-014-0095

Application and Notification Requirements

(1) Any person removing, using, or selling state-owned material not exempt from the payment of royalty from state-owned submerged and submersible lands must, prior to such removal, use, or sale, submit an application for a lease or license to the Division using forms provided by the Division.

(2) Any person taking up to 50 cubic yards of state-owned material (or the equivalent weight in short tons) per calendar year for that person's own non-commercial exclusive use must notify the Division prior to removing the material.

Stat. Auth.: ORS 273.551, ORS 274 .525, ORS 274 .530, ORS 274 .550 & ORS 274.560
Stats. Implemented: ORS 274 .525 & ORS 274 .550
Hist.: LB 7-1991, f. & cert. ef. 9-13-91



141-014-0100

Lease and License Provisions

(1) Exclusive leases will only be offered through a competitive bid auction procedure.

(2) The Division may deny an application for a lease or license if it is determined that issuing said lease or license would not be in the best interest of the State of Oregon, or is contrary to local, state, or federal law, or these rules.

(3) The Division will determine the leasable limits of any area and may establish conditions and terms, including the mining method(s) to be used to ensure maximum recovery and utilization of the resource, and appropriate protection of the environment.

(4) At the Division's discretion, a license may be issued for a period of less than one year without competitive bidding.

(5) If no Removal-Fill Permit is required for the proposed removal activity, the lease or license application will be sent to government agencies having jurisdiction over the removal site to determine whether the proposed removal activity is consistent with existing local, state, and federal laws.

(6) If an applicant for a lease to remove material from state-owned submersible lands is the owner of the upland fronting or abutting the removal site, the Division will determine the boundaries of the preference right area to be included within the lease and offer that preference area to said applicant. The applicant is responsible for providing to the Division whatever ownership information is required by the Division to establish the boundaries of the preference right area.

(7) Any person accepting an offer to exercise their riparian preference right must submit applications for all necessary local, state, and federal permits and other authorizations required to undertake the proposed removal within six months following the date of their written acceptance of the riparian preference right. Failure to do so may cause the Division to withdraw its offer of riparian preference right and/or re-offer the land within the preference right area for lease by competitive bidding.

(8) If an applicant is not the owner of the upland fronting or abutting the removal site, the Division shall, prior to offering a lease to the state-owned submersible lands, offer the upland owner(s) fronting or abutting the proposed lease area a riparian preference right to lease said lands in accordance with ORS 274 .040. Any person offered the riparian preference right to lease an area must notify the Division in writing whether they will accept said offer no later than 14 calendar days after receipt of a certified notification letter (evidence of receipt is the date of delivery indicated by the U.S. Postal Service). Failure to do so constitutes waiver of the preference right, and the Division may make the preference right area available through competitive bid auction.

(9) The successful bidder at an auction must submit applications for all necessary local, state, and federal permits and other authorizations required to undertake the proposed removal within six months following the auction date. Failure to do so may cause the Division to withdraw its offer to lease and/or re-offer the lands for lease by competitive bidding.

(10) The Division will not issue any lease to remove state-owned material until evidence is presented to the Division that the applicant or successful bidder has obtained the following:

(a) A surety bond in the amount required by the Division (or a cash deposit or certificate of deposit which has an equivalent face or cash-in value as the surety bond and which names the State of Oregon as co-owner) to ensure that the lessee will perform in accordance with all terms and conditions of the lease. The surety bond amount will be based on the royalty due for three months of estimated average annual removal as submitted in the lease application, or will be approximately equal to the royalties due on the total amount to be removed if only a small quantity of material is available, or on the quantity of material available for removal from the subject least site over a three month period by the applicant or other operators. A blanket bond in an amount determined by the Division will satisfy bond requirements for any lessee with multiple royalty leases. All interest accruing to any certificate of deposit accepted as security under this provision will be payable to the lessee;

(b) Comprehensive or commercial general liability insurance covering personal injury and property damage in the amount required by the State of Oregon. The State of Oregon, the State Land Board, and the Division of State Lands shall be named as additional insured on the above policy. Any person holding multiple royalty leases may satisfy insurance requirements by providing coverage of not less than twice the amount required for a single royalty lease;

(c) A Removal-Fill Permit issued by the Division (ORS 196.800 through 196.900), and any other applicable permits.

(11) The Division may require the applicant for a license to remove, sell, or use state-owned material to present evidence to the Division that said applicant has obtained any applicable permits, surety bond, and/or comprehensive or commercial general liability insurance required by the Division.

Stat. Auth.: ORS 273.551, ORS 274 .525, ORS 274 .530, ORS 274 .550 & ORS 274.560
Stats. Implemented: ORS 274 .525 & ORS 274 .550
Hist.: LB 7-1991, f. & cert. ef. 9-13-91



141-014-0105

Auction Notice and Procedure

(1) Notice:

(a) The Division will give public notice of each auction by publication in a newspaper of general circulation in the county in which the lands are located prior to the auction date. The notice will include the date, time, place, minimum bid amount, description of the offered lands, and type of auction, and will be published not less than once each week for two successive weeks;

(b) A mailing list of sand and gravel lessees and licensees, persons who have requested inclusion on the list, affected state agencies, and other interested persons will be maintained by the Division. A notice of auction will be mailed to those on the above described list prior to publication of the public notice.

(2) General Procedure:

(a) All requests to lease state-owned land for sand and gravel removal through the competitive bid process shall be submitted on application forms provided by the Division. The Division may conduct auctions without receipt of said applications;

(b) The minimum starting bid amount shall be the minimum royalty rate per cubic yard established by the State Land Board.

(3) Oral Bid Procedure:

(a) The highest qualified bidder shall be awarded the lease upon compliance with these rules and applicable statutes;

(b) If no bids are received at the auction, the Division may award the lease to the applicant at the minimum royalty rate.

(4) Sealed Bid Procedure:

(a) Each bidder shall submit a completed bid form provided by the Division;

(b) All bids received by the deadline stated in the auction notice shall be opened and announced at the specified date, time, and place;

(c) The highest qualified bidder shall be awarded the lease upon compliance with these rules and applicable statutes.

Stat. Auth.: ORS 273.551, ORS 274 .525, ORS 274 .530, ORS 274 .550 & ORS 274.560
Stats. Implemented: ORS 274 .525 & ORS 274 .550
Hist.: LB 7-1991, f. & cert. ef. 9-13-91



141-014-0110

Lease and License Terms and Conditions

(1) Exclusive leases will not be issued for a period of more than ten years.

(2) Licenses will not be issued for a period of more than 364 days.

(3) Material removed from state-owned submerged and submersible lands may not be commingled with privately-owned material prior to payment of royalty without prior written approval of the Division.

(4) The removal, sale, or use of material from state-owned submerged and submersible lands without a lease, license, or specific permission is a trespass, and, if willful, is subject to double damages pursuant to ORS 273 .241.

(5) Each lessee and licensee, or sublessee or assignee must maintain and make available for audit by the Division adequate records and accounts which accurately reflect the amount of material removed and that portion which is subject to royalty payment.

(6) Leases may be assigned or subleased only upon written approval of the Division. Upon such approval of any assignment or sublease by the Division, the assignee or sublessee shall be bound by all the terms and conditions of the lease so assigned or sublet. All transfers shall be on a form approved by the Division.

(7) In no case shall these rules be so construed as to allow any practice which would not accurately reflect the quantity of material for which royalty is due.

Stat. Auth.: ORS 273.551, ORS 274 .525, ORS 274 .530, ORS 274 .550 & ORS 274.560
Stats. Implemented: ORS 274 .525 & ORS 274 .550
Hist.: LB 7-1991, f. & cert. ef. 9-13-91



141-014-0115

Weight and Measurement Determinations

(1) All royalties due the Division shall be based on the number of short tons (each containing 2,000 pounds) removed from a leased or licensed area as determined by a state-certified scale. If the lessee or licensee is unable to weigh the material removed, the Division may allow the lessee or licensee to pay royalties based on cubic yards removed. If the volume of material cannot be determined at the point of removal, the Division may allow the lessee or licensee to calculate the royalty owed based on sales receipts or other forms of evidence approved by the Division.

(2) The applicant is responsible for developing the cubic yard-to-ton conversion factor for each leased or licensed area, and for providing at its own expense sufficient and documented evidence to the Division justifying the conversion factor. Applicants with, or having access to weigh scales will provide the appropriate cubic yard-to-ton conversion factor as required in the application form. Current lessees with, or having access to weigh scales will provide the conversion factor no later than six months from the adoption date of these administrative rules.

(3) The Division may, at any time during the term of the lease or license, require the lessee or licensee to re-establish the validity and appropriateness of the conversion factor at the lessee's or licensee's expense.

(4) In the event that the applicant is unable to develop a cubic yard-to-ton conversion factor, the Division may establish a factor which must be used by the lessee or licensee until sufficient and documented evidence is provided to the Division by the lessee or licensee that another conversion factor is more appropriate.

(5) If it is determined through weighing of the material by either the applicant/lessee/licensee or the Division that the cubic yard-to-ton conversion factor in use/to be used is not appropriate, modification of the rate shall be prospective only.

(6) At such time that a lessee or licensee using a cubic yard-to-ton conversion factor obtains a scale, the lessee or licensee must begin to submit monthly reports (as provided for in these rules) indicating by direct measurement the quantity of material removed on a tonnage basis, and pay royalty owed to the Division.

(7) Any changes made to the cubic yard-to-ton conversion factor used in a lease or license will be made by written addendum to that lease or license.

(8) Any lessee or licensee using a barge to transport the material removed shall use the draft displacement of the barge as the means of measuring and reporting the quantity of material in short tons subject to payment of royalty. If this method of measurement is used, the lessee or licensee must provide at its own expense to the Division a curve or chart for each barge indicating the correlation between the displacement of that barge in the water and the tonnage carried. This curve or chart must be provided to the Division for each of the barges used by the lessee or licensee to remove material subject to payment of royalty. The curve or chart provided to the Division must enable the lessee or licensee and the Division to determine the tonnage carried by each barge for each one-inch displacement of that barge. The lessee or licensee shall measure the draft of each of the four corners of every barge before and after loading. The average of these readings shall be used to determine the volume placed on the barge and the amount of royalty due the Division. These data shall be retained by the lessee or licensee until released by the Division for destruction.

Stat. Auth.: ORS 273.551, ORS 274 .525, ORS 274 .530, ORS 274 .550 & ORS 274.560
Stats. Implemented: ORS 274 .525 & ORS 274 .550
Hist.: LB 7-1991, f. & cert. ef. 9-13-91



141-014-0120

Royalty Rates and Payment

(1) Unless otherwise agreed to in writing by both the Division and the lessee/licensee, royalties must be paid on a monthly basis. Royalty payments and monthly removal reports are due not later than the 20th day of the month following the month that the material was removed. Monthly removal reports must be submitted to the Division every month, including those months in which no material was removed or royalty paid. Royalties not paid by the due date shall accrue interest from the first day of the month following the end of the month during which the material was removed.

(2) The minimum royalty for material taken from state-owned submerged and submersible lands will be:

(a) Sixty cents (60¢) per cubic yard for material

taken from below River Mile 72 of the Willamette River and its tributaries;

(b) Forty-one cents (41¢) per cubic yard for material taken from above River Mile 72 of the Willamette River and its tributaries;

(c) Thirty-eight cents (38¢) per cubic yard for material taken from other state-owned waterways;

(d) Forty-five cents (45¢) per cubic yard for shorecast dredge spoils.

(e) All sand and gravel leases or licenses in effect at the time these royalty rates are adopted will be subject to the new rates upon renewal or redetermination as specified in the lease agreement.

(3) The minimum royalty rates indicated in Section 2 of this rule will be adjusted every year based on an index to be created and maintained by the Division:

(a) The index will be based on the annual increase or decrease in the FOB plant retail prices for selected Oregon aggregate products as indicated in published retail price lists to be in effect on the first of January of each year;

(b) The retail price lists will be obtained by the Division from Oregon aggregate producers;

(c) The specific products used to develop this index will be determined by the Division in consultation with the Oregon aggregate industry;

(d) In the event the retail price data used by the Division are not available by the first of December of each year, or are determined by the Division to be an unreliable indicator of inflation/deflation, the Division may adjust the minimum royalty rates using another industry index or method of the Division's choice such as the United States Department of Labor Producer Price Index for construction sand, gravel, and/or crushed stone.

(4) The royalty rates for all leases and licenses shall be based on the application of the annual index to the minimum rates indicated in Section 2 of this rule, and adjusted each successive year.

(5) Any increase or decrease resulting from application of the Oregon aggregate producer retail price index shall be limited to a maximum of five percent per year. Royalty rates shall not be adjusted below those rates established in Section 2 of this rule.

(6) In instances where space on the upland is not available for the deposition of additional shorecast dredge spoils, the Division may negotiate a royalty rate other than that provided in Section 2 of this rule for material which is removed from where it was originally deposited in order to provide space for additional dredge spoils.

Stat. Auth.: ORS 273.551, ORS 274 .525, ORS 274 .530, ORS 274 .550 & ORS 274.560
Stats. Implemented: ORS 274 .525 & ORS 274 .550
Hist.: LB 7-1991, f. & cert. ef. 9-13-91


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