| (ii) Any outside party, including the adjacent mineral owner, may apply to lease a tract by sending the following materials to the GLO: (I) a written description of the tract sufficient for it to be located on the ground and a map showing the tract's boundaries and dimensions; (II) the names and addresses of all adjacent mineral owners, as reflected in the tax assessor-collector's records and county clerk's records in the county or counties where the tract is located; (III) an affidavit stating either that there was no well capable of producing oil or gas in paying quantities within 2,500 feet of the tract as of January 1, 1985, or that the lease is necessary to facilitate the drilling of a horizontal well; and (IV) the processing fee required by §3.31 of this title, (relating to Fees). (iii) An applicant who is also an adjacent mineral owner must also submit the following: (I) a written waiver of the notice to which the applicant as an adjacent mineral owner is entitled; and (II) if the applicant is a lessee of the adjacent tract, (-a-) certified copy or a reproduction of a certified copy of any recorded lease or leases on the land adjacent to the tract. If the lease has not been recorded, an applicant must submit a copy of the lease along with an affidavit stating that it is a true and correct copy of the lease on the adjacent land; and (-b-) a notarized affidavit stating the consideration paid for any lease or leases on the adjacent land. (iv) The GLO shall notify each adjacent mineral owner, by registered mail, of the proposed leasing of the tract. An adjacent mineral owner may waive this notice by providing a written waiver to the GLO. If the person who initiates the leasing process cannot determine the identity or address of an adjacent mineral owner from the county records, notice shall be by publication as provided in Texas Natural Resources Code, §32.201(d). (D) Preferential leasing right of adjacent mineral owners. (i) General rule. Each adjacent mineral owner is entitled to lease to the center of the tract in the same proportion as his or her ownership in the adjoining land. The preferential right to lease under this paragraph must be exercised by the adjacent mineral owner within 120 days of the actual notice (as defined by Texas Natural Resources Code, §32.201(d)) of the intention to lease, or such right is forfeited. (ii) Examples. (I) if the adjacent mineral owners on opposite sides of a tract differ, each is entitled to preferentially lease to the center of the tract, thereby leasing one-half of the tract. (II) if the adjacent mineral owner on both sides of a tract is the same person, he or she may lease the entire tract. (III) when the mineral ownership of leased or unleased land adjoining one side of a tract is owned in cotenancy among several adjacent mineral owners, each shall have a preferential right to lease to the center of the tract in proportion to his or her interest in the adjoining land. (iii) Lease terms. Each lease issued on a tract shall grant the lessee the authority to pool the acreage in accordance with Texas Natural Resources Code, §32.202. A certified copy of the unit designation or the pooling agreement must be filed with the GLO. Each lease shall also provide for the payment of compensatory royalty in accordance with Texas Natural Resources Code, §32.203. The additional terms of a lease depend on whether lands adjacent to the tract are leased. If the adjacent land is unleased, the SLB shall set the terms of the lease. If the adjacent land is leased, the tract shall be leased upon terms at least as favorable to the state as those of the most favorable lease held on the adjoining land. (iv) Lease approval and payments. A lease will not be issued until the SLB approves the lease and receives the bonus payment and the 1.5% sales fee provided by Texas Natural Resources Code, §32.110. If the adjacent mineral owner does not tender such sums within 120 days of receipt of notice under paragraph (4)(C)(i) of this subsection, the preferential right to lease is forfeited. (v) Waiver. Any adjacent mineral owner may waive the preferential right to lease by filing with the GLO a written waiver executed and acknowledged by the mineral owner or their duly authorized agent. (E) Leasing after forfeiture or waiver of preferential leasing right. (i) Generally. Within 18 months of the forfeiture or waiver of the preferential right, the SLB may lease the tract directly to an adjacent mineral owner prior to a public offering to the highest bidder under a sealed bid sale. (ii) Lease to adjacent mineral owners and applicants. (I) If the adjoining land on one side of the tract is owned by several adjacent mineral owners in cotenancy, and one or more of these adjacent mineral owners forfeits or waives his or her preferential right, the SLB shall lease in equitable proportions to the remaining cotenants who have applied to lease the tract. (II) If the adjacent mineral owners on one side of a tract waive or forfeit their preferential rights to lease, the SLB shall lease in equitable proportions to the adjacent mineral owners on the other side of the tract who have applied to lease such tract. (III) If all or part of a tract is not leased to an adjacent mineral owner, the SLB shall lease all or part of the unleased tract to the first person who submitted an application to lease it. (IV) The terms and conditions of a lease issued under this subparagraph will be the same as those found in leases issued to adjacent mineral owners. The SLB shall not lease to an applicant at a price or terms which are less than those offered to the adjacent mineral owner. (V) A lease will not be issued until the SLB approves the lease and receives the bonus payment and the 1.5% sales fee provided by Texas Natural Resources Code, §32.110. (iii) Lease by sealed bid. If all or part of the tract is not leased to an adjacent mineral owner or to an applicant, the SLB shall offer all or part of the unleased tract for lease by sealed bid under paragraph (1) of this subsection.