(1) A lessee or licensee may place improvements on state land which are necessary for the conservation or utilization of such state land with the approval of the department.
(a) The lessee or licensee shall apply for permission prior to placing any improvements on state land on the form prescribed by the department and then in current use.
(b) A lessee or licensee will not be entitled to compensation by a subsequent lessee or licensee for improvements which are placed on the land after May 10, 1979, and which are not approved by the department. Proof of the date of placement of improvements may be required by the department.
(c) Any improvements or fixtures paid for by state or federal monies shall not be compensable to the former lessee or licensee.
(2) The lessee or licensee is responsible for notifying the new lessee or licensee of the improvements and their value on the lease or licensed tract.
(a) Within 120 days of the issuance of the lease or license, the new lessee or licensee shall:
(i) provide proof of the new lessee's offer of payment or actual payment to the former lessee or licensee of the value of the improvements and fixtures either as agreed upon with the former lessee or licensee;
(ii) the value of the improvements as fixed by arbitration; or
(iii) provide proof that the former lessee has decided to remove the improvements and fixtures from the lease or license.
(3) If the improvements and fixtures become the property of the state because the former lessee or licensee has failed to act within 60 days after expiration of the lease, as per (4), then the new lessee or licensee shall not be required to provide proof of the offer to pay the former lessee or licensee for such improvements and fixtures.
(4) The department may require a written notice from the former lessee or licensee stating that he has been paid for, or is removing the improvements and fixtures. If the former lessee or licensee does not agree on the value of the improvements and fixtures or begin arbitration procedures within 60 days after the expiration of the lease or license, then all improvements and fixtures remaining, both movable and fixed, shall become the property of the state. The 60-day period for removal of improvements may be extended by the department upon proper written application.
(5) The value of the improvements will be determined by arbitration when the former lessee or licensee wishes to sell improvements and fixtures and the new lessee or licensee wishes to purchase such improvements and fixtures, but the parties cannot agree upon a reasonable value.
(6) When the new lessee or licensee does not wish to purchase the movable improvements and fixtures, then the former lessee or licensee shall remove such improvements immediately. Extensions for removing these improvements for good cause may be granted by the department.
(7) In case of arbitration:
(a) the lessee or licensee, or purchaser and the former lessee or licensee, shall each appoint an arbitrator, with a third arbitrator appointed by the two arbitrators first appointed:
(i) no party may exert undue influence upon the arbitrators in an effort to affect the outcome of the arbitration decision; and
(ii) if any party refuses to appoint an arbitrator within 15 days of being requested to do so by the director, the director may appoint an arbitrator for that party;
(b) the value of the improvements and fixtures shall be fixed by the arbitrators in writing and submitted to the department. That determination shall be binding on both parties; however, either party may appeal the decision to the department within ten days of the receipt of the arbitration decision by the department;
(c) if any relevant portion of the arbitration decision is vague or unclear, then the department may ask for written clarification of the intent of the arbitration panel;
(d) upon appeal by either party, the department may examine such improvements to determine the value of the improvements and fixtures and the department's determination shall be final, however:
(i) the determination of the value of improvements by the department shall be limited to those improvements involved in the arbitration; and
(ii) the department shall charge the cost of its examination to the party or parties in such proportion as justice may require; and
(e) the compensation for the arbitrators shall be paid in equal shares by both parties:
(i) if the former lessee or licensee refuses to pay his share of the cost of arbitration, then those costs may be deducted from the value of the improvements and fixtures;
(ii) if the new lessee or licensee refuses to pay the cost of arbitration within 30 days of the completion of the arbitration, the lease or license shall be cancelled, and the lease or license shall be put up for bid to qualified bidders.
(8) The lessee or licensee shall pay the former lessee or licensee for the improvements and fixtures within 30 days after the value has been determined. Failure to pay the former lessee or licensee within 30 days shall result in rebidding of the lease or license in accordance with ARM 36.25.115 and the bid deposit shall be forfeited. The department may grant an extension in writing under special circumstances.
(9) Summer fallowing, necessary cultivation done after the last crop grown, seeding and growing crops shall all be considered improvements. The value of seeded acreage and growing crops shall be limited to costs for seeding, seedbed preparation, fertilization and agricultural labor at the prevailing rate in the area. The former lessee's or licensee's anticipated profit shall not be included in such value. If the parties cannot agree on the value of seeded acreage or growing crops, the arbitration procedure set out in (7) shall be followed. The original breaking of the ground shall also be considered an improvement; however, if one year's crops have been raised on the land the value shall not exceed $2.50 per acre, and if two year's crops have been raised, there shall be no compensation.