Sec 37-290. Cancellation of lease on reclassification of lands; preferred right to lease reclassified land; refund of advance rental payments

A. Upon reclassification of state lands, whether upon application for reclassification or upon initiation by the commissioner, notice of the decision shall be served upon all interested parties of record in the department. If no appeal from the reclassification is taken as provided for by law, or if the decision of the commissioner is upheld on appeal, any lease upon the land reclassified shall be automatically cancelled on the issuance of a new lease or at the time of auction, whichever occurs first.

B. An applicant for renewal of a lease shall have a preferred right to lease the reclassified land at the reappraised rental thereof for a term not longer than ten years as determined by the department. The preferred right to lease does not extend to a lessee who has not substantially complied with the terms of the lease or who has not placed the land to the use prescribed in the lease during the term of the lease or within the time prescribed in the lease, except when that action was excused for good cause by written authorization by the department.

C. Upon cancellation of the lease of reclassified lands, if the land as reclassified is leased to a person other than the existing lessee or applicant for a renewal lease, the unused pro rata of an advance rental payment made by the existing lessee shall be refunded to such lessee, and the lessee shall be protected in improvements on the land owned by the lessee in the same manner as provided in section 37-322.01.