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**Testimony of Kevin S. Carter**

**Director**

**Utah School and Institutional Trust Lands Administration**

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**Senate Energy and Natural Resources Committee**

**Subcommittee on Public Lands and Forests**

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**Hearing on S. 390**

**Utah Recreational Land Exchange Act of 2007**

**May 3, 2007**

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Mr. Chairman, and members of the Subcommittee, thank you for the
opportunity to testify today. I would also like to thank Senators
Bennett and Hatch of the Utah Congressional delegation, and their
colleagues in the House of Representatives, for their work and
assistance in connection with the legislation now before the
Subcommittee.

My name is Kevin S. Carter, and I am the Director of the Utah School and
Institutional Trust Lands Administration ("SITLA"), an independent state
agency that manages more than 3.5 million acres of state school trust
lands within Utah that were granted by Congress at statehood for the
financial support of public education.

[The Proposed Land Exchange]{.underline}

I encourage the Subcommittee, and Congress, to act favorably on S. 390,
the Utah Recreational Land Exchange Act of 2007. This legislation is the
product of several years of discussions between the State, local
governments, the environmental community, and federal land managers. At
a time when most issues relating to Utah's public lands are accompanied
by controversy and dispute, the proposed exchange is supported by rural
county governments, various environmental groups, representatives of the
outdoor recreation industry in Utah, Governor Huntsman and the Utah
legislature. We have worked hard to put together an exchange that will
be fair and transparent financially, workable in implementation, and
conducive to more effective land management by both state and federal
governments. We believe that the Utah Recreational Land Exchange Act
meets all of these goals.

In summary, S. 390 authorizes the conveyance to the United States of
approximately 46,000 acres of Utah state school trust lands and minerals
within and near Utah's Colorado River corridor, the Book Cliffs, and
areas near Dinosaur National Monument. In return, the State of Utah will
receive approximately 44,000 acres of federal lands in eastern Utah with
lesser environmental sensitivity but greater potential for generating
revenue for Utah's public education system -- again, the purpose for
which Congress originally granted trust lands to Utah and the other
western states.

[Revisions to Previously-Introduced Legislation]{.underline}

The proposed Act was originally introduced in 2005 in the House of
Representatives as H.R. 2069. The House Subcommittee on Forests and
Forest Health held a hearing on H.R. 2069 on September 27, 2005. In
response to testimony from the Department of the Interior ("DOI") and
several environmental organizations at that hearing that raised concerns
about specific provisions of H.R. 2069, the House Subcommittee invited
interested parties to work with subcommittee staff and the State to
attempt to resolve these concerns. The committee discussions included
both majority and minority subcommittee staff, representatives of DOI
and the Bureau of Land Management ("BLM"), Utah state government, and
several environmental organizations.

After multiple meetings and telephonic conferences, and many hours of
discussions and negotiations, the various parties reached compromise
legislative language that we believe resolved all of the primary
concerns raised by DOI and the environmental community. These
compromises were incorporated in Senate legislation in the 109^th^
Congress designated as S. 2788. This Subcommittee conducted a hearing on
S. 2788 on May 24, 2006. S. Hrg. 109-582. With the negotiated changes,
H.R. 2069 passed the House of Representatives in September, 2006.
Unfortunately, the Senate was unable to take action on the House Bill or
its Senate counterpart, S. 2788, prior to the end of the 109^th^
Congress.

In the current Congress, we have continued to work with committee staff
to ensure that S. 390 and its companion legislation, H.R. 1210, are
consistent with the priorities of the relevant Committees, and that the
proposed legislation continues to have broad, bipartisan support. We
anticipate that the Committee will incorporate additional changes
suggested by staff to make certain deadlines more flexible, incorporate
the Uniform Appraisal Standards for Professional Appraisal Practice in
the appraisal standards, and provide additional options to the parties
in the event that land values are determined by the appraisal process to
be unequal.

[Reasons for the Land Exchange]{.underline}

It is worthwhile and necessary to describe the lands that are involved
in the exchange, although the accompanying photographs make it clear
that these lands are in many ways beyond description. The Colorado River
corridor is a uniquely scenic area, in a state known for its scenic
beauty. Huge redrock arches such as Corona and Morning Glory arches are
found in proximity to the deep canyons carved by the Colorado River as
it winds downstream from the Colorado border to Canyonlands National
Park. The area supports thriving recreational activities, including
whitewater rafting in the Westwater wilderness study area and
downstream, mountain biking on the famous Kokopelli and Slickrock bike
trails, and myriad other activities. The importance of outdoor
recreation in the area to local economies and the state as a whole has
led the Utah Governor's task force on outdoor recreation to designate
the area as one of Utah's critical focus areas for promotion and
protection of recreation opportunities.

As you can see from the map included in my submittal, the majority of
land in the Colorado River corridor is federal land managed by BLM.
Notable exceptions are the Utah school trust lands scattered in
checkerboard fashion throughout the area. As the Subcommittee is aware,
state school trust lands are required by both federal and state law to
be managed to produce revenue for public schools. Revenue from Utah
school trust lands -- whether from grazing, surface leasing, mineral
development or sale -- is placed in the State School Fund, a permanent
income-producing endowment created by Congress in the Utah Enabling Act
for the support of the state's public education system.

In contrast to state lands, BLM lands are managed for multiple use, with
an emphasis in this area on recreation and conservation use. Limitations
on the use of surrounding federal lands, through establishment of
wilderness study areas, areas of critical environmental concern, or
mineral withdrawals can limit the usefulness of the inheld state trust
lands for economic uses such as mineral development. Likewise, state
efforts to generate revenues from its lands through sale of the lands
for recreational development and homesites have been viewed by federal
land managers as conflicting with management of the surrounding federal
lands. Over the years, disputes over access to and use of state school
trust lands within federally-owned areas have generated significant
public controversy, and often led to expensive and time-consuming
litigation between the State of Utah and the United States.

Land exchanges are an obvious solution to the problem of checkerboarded
state land ownership patterns. Exchanges can allow each sovereign -- the
State of Utah and the United States -- to manage consolidated lands as
each party's land managers deem most advisable, without interference
from the other. In the last eight years, the State of Utah and the
United States worked successfully to complete a series of large
legislated land exchanges. In 1998, Congress passed the Utah Schools and
Land Exchange Act, Public Law 105-335, providing for an exchange of
hundreds of thousands of acres of school trust lands out of various
national parks, monuments, forests and Indian reservations into areas
that could produce revenue for Utah's schools. Then, in 2000, Congress
enacted the Utah West Desert Land Exchange Act, Public Law 106-301,
which exchanged over 100,000 acres of state trust land out of proposed
federal wilderness in Utah's scenic West Desert for federal lands
elsewhere in the region.

The hallmark of each of these exchanges was their "win-win" nature:
school trust lands with significant environmental values were placed
into federal ownership, while federal lands with lesser environmental
values but greater potential for revenue generation were exchanged to
the State, thus fulfilling the purpose of the school land grants --
providing financial support for public education.

[Response to Land Exchange Controversies]{.underline}

More recently, a proposed state-federal land exchange involving state
trust lands in Utah's San Rafael Swell area failed due to questions
raised about its financial fairness and environmental effects. We
recognize that the controversy over the San Rafael proposal raised many
questions about land exchanges generally. In working to develop the
current exchange proposal, the State of Utah has worked hard to address
the issues raised in the aftermath of the San Rafael proposal. In
particular, we have sought to work closely with local governments and
citizens, the environmental community, and local BLM offices to obtain
consensus about the lands to be included in the proposed exchange. On
the issue of valuation, we are committed to an independent and
transparent appraisal process that will fully involve the Department of
the Interior's new Appraisal Services Directorate ("ASD") in developing
and reviewing appraisals for the properties involved in the exchange. As
noted above, since the time that this legislation was originally
introduced, we have continued to work with Congressional staff from both
parties, DOI and the BLM, local communities, and the environmental
community to ensure that any questions or concerns are addressed. With
the various changes from the original legislation, we believe that S.
390 will direct a fair and equitable land exchange that is clearly in
the interest of both the citizens of the United States and of Utah's
school children.

[Valuation]{.underline}

The legislation contemplates that all lands included in the exchange
will be subject to independent appraisals using the existing appraisal
standards contained in FLPMA and its implementing regulations prior to
conveyance, and that the lands to be exchanged will be conveyed on an
equal value basis. The independent appraisal will be subject to review
by each party (including the DOI-ASD), and any disputes over valuation
will then be subject to resolution through established dispute
resolution mechanisms.

The legislation contains two valuation provisions that may require some
further explanation. The first relates to mineral lease revenue sharing
under the federal Mineral Leasing Act. Certain of the federal lands are
prospective for oil & gas development, and are currently under federal
mineral lease. Under section 35 of the federal Mineral Leasing Act (30
U.S.C. § 191), the federal government is required to pay 50 per cent of
all bonus, rental and royalty revenue from federal lands to the state in
which the lands are located. Under Utah statute, these revenues are
largely distributed from the state Mineral Lease Account to local
counties to mitigate community impacts of energy development. These
distributions are a crucial funding source for rural public land
counties.

The proposed legislation would keep this revenue stream to rural
counties intact by adjusting values proportionately to reflect the
United States' obligation to share 50% of all revenue from the lands.
Put another way, those federal lands found to have mineral values would
be valued taking into account the United States' existing statutory
obligation to pay 50% of the revenue from the lands to the State for
distribution to the counties. Utah's school trust would collect these
revenues and distribute them in the same manner as federal mineral lease
funds, so the school trust would not receive any additional benefit from
this provision. Similarly, the proposed legislative language would be
revenue-neutral to the United States, because the United States
currently retains only 50% of mineral revenue from the subject lands.
There is specific precedent for adjustment of mineral land valuation to
take into account the preexisting obligation of the United States to
share revenue with the states under the Mineral Leasing Act. For
example, section 8(c) of the Utah Schools and Lands Improvement Act of
1993, Pub. L. 103-93, provides that if the State shared revenue from
selected federal properties, the value of the federal properties would
be adjusted downward by the percentage of state revenue sharing. The
Utah Schools and Lands Exchange Act of 1998, Pub. L. 105-335, ratified
an agreement between the State of Utah and the Department of the
Interior containing similar provisions. State revenue sharing payments
have also been recognized and protected in land exchange legislation
involving states other than Utah. *See e.g.* 16 U.S.C.
460ll-3(b)(3)(Montana's right to receive cash payment for coal tracts
used as exchange consideration protected).

A second mineral issue involves the bill's provisions obligating the
State to pay to the United States future mineral revenues from currently
unleased federal lands, in a share equal to what the United States would
have received had the lands been retained in federal ownership. This
payment obligation eliminates the need to appraise leasable mineral
values under those lands, since the United States will continue to
receive all leasable mineral revenues it would have received
notwithstanding the exchange.

Significant portions of the federal lands to be transferred to Utah are
currently not leased for oil, gas or other hydrocarbon minerals (e.g.
tar sands, oil shale), but are thought to be prospective for such
minerals. Appraisals of prospective but nonproducing mineral lands are
expensive and inherently unreliable due to the many unknowable variables
involved in determining potential resources and their likelihood of
production. To avoid the expense and potential controversy that could
arise from appraisal of these non-producing resources, section 5(b)(4)
of the proposed legislation proposes an alternative means of
compensating the United States for leasable minerals underlying
currently unleased federal lands. The lands will be appraised for
surface values and for all minerals other than minerals leasable under
the federal Mineral Leasing Act. Upon acquisition of the lands, the
State also commits to pay the United States all revenue that the United
States treasury would have received from leasable minerals had the U.S.
retained ownership of the lands, i.e. 50% of bonuses and rentals, and a
share of royalties equal to the federal share of production royalties
(6.25% in the case of oil and gas, less for tar sands and oil shale).
The U.S. treasury is thus held harmless with respect to the exchange.
The State of Utah's school trust would also continue to pay the 50%
state share to the Utah mineral lease account. In addition to protecting
future revenue-generating opportunities for the United States, the
administrative costs of preparing the lands for development,
administering any subsequent mineral leases, and the distribution of
revenues generated on the lands will be borne solely by the State of
Utah through the Trust Lands Adminstration.

These provisions leave Utah's school trust with a commitment to pay the
United States and the State of Utah's mineral lease account all amounts
that could be derived from the lands under federal law. However, because
the school trust has legal flexibility to issue leases for royalty rates
greater than permitted under existing federal law, it hopes to achieve
some economic return from leasable minerals on the subject lands based
upon this flexibility. This risk is solely borne by the Utah school
trust; the legislation commits the required payments to the United
States as a covenant running with the land. The U.S. is thus compensated
for leasable minerals on the subject lands as if it retained ownership,
as well as being paid appraised surface values and non-leasable mineral
values. Again, this provision is revenue neutral to the United States.

[Post-Exchange Land Management and Wilderness]{.underline}

Substantial portions of the state trust lands to be exchanged to BLM are
located in wilderness study areas ("WSAs") created under Section 603 of
FLPMA, or areas proposed for wilderness in pending federal legislation.
Other portions are not within proposed wilderness. The legislation
provides that exchanged lands that lie within existing WSAs or other
formally-designated federal areas will automatically become part of
those areas upon conveyance. For other state lands exchanged to BLM,
some lands recognized by the parties to have special significance, as
designated on the exchange map, will be withdrawn from mineral entry by
the terms of the legislation. For all other state lands exchanged to
BLM, the lands will be withdrawn pending revisions of BLM's resource
management plans to determine appropriate management of the lands. The
proposed exchange is not intended as an endorsement of any particular
configuration of wilderness, which is a matter that is for Congress to
decide at some future time. Rather, the intent of the exchange is to
allow BLM land managers to determine, on a landscape scale, how best to
manage the lands without having to deal with inheld state trust lands.

[Conclusion]{.underline}

Again, if I may refer to the accompanying map, the islands of state
trust land intermingled throughout the public domain in Utah present
historic, current and future opportunities for contention between the
United States and the State of Utah. These scattered sections create
never-ending complications for both federal and state land managers, and
often hinder federal land managers from accomplishing Congressional
mandates. S. 390 represents a significant great step toward simplifying
land management in Utah, protecting Utah's natural heritage, supporting
local economies through increased opportunities for outdoor recreation,
and adequately funding public education. It is the product of public
outreach and compromise that has led to a better proposal than
originally crafted. In addition, it provides a template that may help to
rationalize the 'kaleidoscope' that is the Utah land ownership map. I
respectfully urge the Subcommittee to approve it expeditiously.

Thank you again for the opportunity to testify today.

Kevin S. Carter

Director

Utah School & Institutional Trust Lands Administration

675 East 500 South, Suite 500

Salt Lake City, Utah 84102

\(801\) 538-5100

\(801\) 538-5118 (fax)

kevincarter@utah.gov