The Department of Natural Resources (DNR) serves as a trust manager with a fiduciary responsibility: to keep lands productive and generate revenue for the trusts, in perpetuity. State law requires that we obtain Fair Market Rent (FMR) when leasing state trust lands. Our lessees’ right to the leased property does not extend beyond the term of the existing lease agreement. When a lease expires, the State, at its option may choose to take a lease to public auction, or renegotiate a new lease with the existing lessee, which allows for bids from other interested parties.
When DNR decides to negotiate the re-lease of a parcel with an existing lessee, there is still an opportunity for other qualified interested parties to let us know they are interested in the lease. They do this by submitting an offer called a “bonus bid” on the lease. The bonus bid packet must include evidence of required managerial and financial qualifications of the bidder, a deposit payment of $100, a plan of operation for the land, and a cash bid amount proposed by the bidder.
The existing lessee may match the bonus bid. If they do, negotiations continue with the bonus bid amount serving as an additional one-time payment along with the negotiated FMR rent. If the existing lessee does not match the bid, or negotiations fail for some other reason, the lease is more widely marketed for public auction, with the bonus bid amount set as a minimum bid.
In the past, DNR has received feedback that it is difficult for other interested parties to learn about leasing opportunities, and there isn’t enough time to learn about the characteristics of the land and DNR’s leasing terms to submit a bid proposal. Per state law bidders may only submit a bid proposal during the 30 day period following the date the lease is advertised (160 days prior to lease expiration), and before negotiations commence with the existing lease.
DNR is working to improve transparency, efficiency and trust revenues by posting more information on our DNR website about our agricultural and grazing lands, leases, and the bidding process. Expanding our marketing of expiring leases is one way we can validate the value of our leases with a public process. This will also provide an additional opportunity for other farmers and ranchers to bid on leases of state land.
Over the next few months we plan to post more information on upcoming lease expirations, required forms, and a description of the process for placing a bid on an expiring lease. One tool will be an interactive map that allows users to zoom in on a lease parcel and see the size and location of the state lands, and individual leases. When you click on a parcel on the map for which there is an upcoming public auction or lease expiration, additional information to help bidders will be available online.
I plan to attend industry events and I’m available to give a presentation to your commodity group to share information about leasing opportunities and the application process. By providing more information earlier, potential bidders will have the information they need well in advance of lease expiration. This process still allows the existing lessee a first right of refusal (by matching a bonus bid).
By Kathleen Beach, Lease Marketing Section Manager, DNR Southeast Region