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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
VETOED
AMENDED
state
land use; highest; best
(NOW: state lands; commercial leases; auction)
Purpose
Requires the Arizona State Land Commissioner (Commissioner) to prioritize the sale of state lands that are subject to an underperforming commercial lease if the lessee provides notice to the Arizona State Land Department (ASLD) that the lessee is willing and prepared to purchase the parcel in fee simple consistent with outlined requirements. Prescribes requirements relating to the sale of state lands that are subject to an underperforming commercial lease.
Background
The ASLD must administer all laws relating to lands owned by, belonging
to and under control of Arizona and have charge and control of all lands owned
by Arizona, and timber, stone, gravel and other products of such lands (A.R.S.
§ 37-102). The Commissioner must: 1) exercise and perform all powers and
duties vested in or imposed on the ASLD and prescribe such rules as are
necessary to discharge those duties; 2) make long-range plans for the future
use of state lands in cooperation with other state agencies, local planning
authorities and political subdivisions;
3) have the authority to lease for commercial purposes and sell all land owned
or held in trust by Arizona; and 4) fulfill all other statutorily prescribed
duties (A.R.S.
§ 37-132).
All state lands are subject to lease for a term of not more than 10 years
for agricultural, commercial and homesite purposes, without advertising. The
leases must be granted according to the Arizona Constitution, state law and ASLD
rules. Leases may not be granted without an application and all applications
for leases must be: 1) made upon forms prepared and furnished by the ASLD; 2)
signed and sworn to by the applicant or their authorized agent or attorney; and
3) filed with the ASLD (A.R.S.
§ 37-281).
Any natural person over 18 years of age and any other person qualified to transact business in Arizona may apply to the Commissioner for an exploration permit on the state land in one or more of the rectangular subdivisions of 20 acres, more or less, or lots, in any one section of the public land survey (A.R.S. § 27-251). Every exploration permit must be for a term of one year from the date of issuance subject to renewals for an aggregate of up to five years from such date, and must give the permittee statutorily outlined rights subject to the terms and conditions of the exploration permit (A.R.S. § 27-252).
There is no anticipated fiscal impact to the state General Fund
associated with this legislation.
Provisions
1. Requires the Commissioner to prioritize the sale of state lands that are subject to an underperforming commercial lease if the lessee provides notice to the ASLD that the lessee is willing and prepared to purchase the parcel in fee simple consistent with outlined requirements.
2. Allows a person who holds an underperforming commercial lease or who held an underperforming commercial lease that expired less than one year before the date of application to apply to purchase the underperforming commercial state lands.
3. Requires the Commissioner, within 18 months after receiving an outlined application, to appraise, advertise and cause the underperforming commercial state lands to be sold at public auction to the highest and best bidder.
4. Requires each public auction that the Commissioner holds for underperforming commercial leases to be open to all eligible bidders from all commercial land uses.
5. Allows a person who meets the outlined requirements relating to the auction of state land that that was subject to an underperforming commercial lease and wishes to purchase the underperforming commercial state lands to:
a) submit a single application for multiple eligible parcels that the applicant leases; or
b) submit a separate application for each eligible parcel that the applicant leases.
6. Prohibits the Commissioner from taking any action during the public auction, or before the public auction, that increases the probability of a bidder from one eligible land use winning the public auction instead of a bidder from another eligible land use.
7. Stipulates that, if an applicant's underperforming commercial lease expires or an applicant applies to renew the underperforming commercial lease during the outlined 18-month time frame and the applicant does not withdraw the application to purchase, the Commissioner must proceed with the auction.
8. Prohibits a person from triggering a public auction on underperforming commercial state lands if the person does not hold, or has not held, an underperforming commercial lease of the state lands subject to application in the previous 18 months before application.
9. Requires the ASLD, to the extent possible, to provide ample notice to a lessee of an underperforming commercial lease before the termination of the underperforming commercial lease.
10. Contains a statement of legislative findings.
11. Defines underperforming commercial lease as a valid lease or a valid holdover lease of underperforming commercial state lands.
12. Defines underperforming commercial state lands as a parcel of state lands that is leased for commercial purposes and that meets at least one of the following conditions:
a) the size of the parcel prevents its independent development;
b) the parcel is landlocked;
c) the parcel lacks on-site infrastructure or services necessary to independently sustain the parcel's development;
d) the annual base rent on the parcel is below an acceptable percentage of the appraised fair market value of the parcel as determined by the Commissioner;
e) the rate of appreciation in land value on the parcel is faster than the rate of increase in annual base rent on the parcel; or
f) the appraised fair market value of the approved reimbursable improvements on the parcel exceeds the appraised fair market value of the parcel such that the value of the improvements will reduce the sale value to the trust by a percentage deemed unacceptable to the Commissioner.
13. Makes conforming changes.
14. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Extends the term for an exploration permit from one year to five years after the date of issuance and specifies that the exploration permit is eligible for a renewal for one additional five-year period for an aggregate of 10 years after the date of issuance.
2. Increases the rental for each subsequent permit period for which a permit may be renewed from $1 to $2 for each acre of state land for which the application for renewal is filed.
3. Clarifies that, during the period the exploration permit is in force and effect, the permittee has the surface rights necessary for exploration on state land covered by the permit but may remove from the state land only that amount of mineral or common variety mineral that is required by the permittee for sampling, assay and metallurgical testing purposes.
4. Prohibits a municipality from requiring a person to obtain a special land use permit, conditional use permit, development agreement, variance or other express authorization for the use of state lands for mining, whether for common variety minerals or mineral claims, if the state lands were subject to a valid mineral lease, common variety mineral lease or holdover lease when the municipality annexed the state lands.
5. Allows an exploration permit or common variety right of entry permit that the ASLD issued before the general effective date to, at the choice of the permittee:
a) continue in effect until the initial expiration stated in the existing exploration permit; or
b) be surrendered at any time before the initial expiration date stated in the exploration permit and remain subject to a replacement with a five-year permit period.
6. Modifies requirements relating to exploration permits, mineral leases and common variety mineral leases.
7. Prohibits the ASLD from requiring the holder of a valid mineral lease or common variety mineral lease of state lands that are located within the boundaries of a municipality to obtain a special land use permit, conditional use permit, development agreement, variance or other express authorization from the municipality as a condition of lease renewal.
8. Prohibits a municipality from requiring a person to obtain a special land use permit, conditional use permit, development agreement, variance or other express authorization for the use of state lands for mining, whether for common variety minerals or mineral claims, if the state lands were subject to a valid mineral lease, common variety mineral lease or holdover lease when the municipality annexed the state lands.
9. Defines terms.
10. Makes technical and conforming changes.
Amendments Adopted by Committee of the Whole
1. Requires the Commissioner to prioritize the sale of state lands that are subject to an underperforming commercial lease if the lessee provides notice to the ASLD that the lessee is willing and prepared to purchase the parcel in fee simple consistent with outlined requirements.
2. Allows a person who holds an underperforming commercial lease or who held an underperforming commercial lease that expired less than one year before the date of application to apply to purchase the underperforming commercial state lands.
3. Requires the Commissioner, within 18 months after receiving an outlined application, to appraise, advertise and cause the underperforming commercial state lands to be sold at public auction to the highest and best bidder.
4. Requires each public auction that the Commissioner holds for underperforming commercial leases to be open to all eligible bidders from all commercial land uses.
5. Prohibits the Commissioner from taking any action during the public auction, or before the public auction, that increases the probability of a bidder from one eligible land use winning the public auction instead of a bidder from another eligible land use.
6. Stipulates that, if an applicant's underperforming commercial lease expires or an applicant applies to renew the underperforming commercial lease during the outlined 18-month time frame and the applicant does not withdraw the application to purchase, the Commissioner must proceed with the auction.
7. Prohibits a person from triggering a public auction on underperforming commercial state lands if the person does not hold, or has not held, an underperforming commercial lease of the state lands subject to application in the previous 18 months before application.
8. Removes the authorization for the Commissioner to renew an existing mineral or mineral materials lease without public auction if prescribed determinations exist.
9. Removes the requirement that to the extent possible, the ASLD restrict the use of a holdover lease to not more than 90 days.
10. Removes the requirement that to the extent possible, the ASLD, for a lease renewal and special land use permit, approve any improvements that are reasonable and customary in the lessee's or permittee's course of business.
11. Requires the ASLD, to the extent possible, to provide ample notice to a lessee of an underperforming commercial lease before the termination of the underperforming commercial lease.
12. Defines underperforming commercial lease and underperforming state lands.
13. Modifies the statement of legislative findings.
14. Makes conforming changes.
Governor's Veto Message
The Governor indicates in her veto message that H.B. 2755 allows lessees to compel a sale of state trust land which overrides the Commissioner's independent fiduciary judgment about when a sale serves the state land trust beneficiaries.
House Action Senate Action
NREW 2/12/26 DPA 6-4-0-0 NR 3/24/26 DPA 5-3-0
3rd Read 2/26/26 30-23-7 3rd Read 6/12/26 16-13-1
3rd Read* 3/3/26 32-22-5-0-1
Final Read 6/13/26 31-22-7
*on reconsideration
Vetoed by the Governor 6/19/26
Prepared by Senate Research
June 25, 2026
SB/hk