Case Title: OFFICE OF STATE LANDS AND INVESTMENTS; EDWARD L. GRANT, in his official capacity as Director of the OFFICE OF STATE LANDS AND INVESTMENTS, v. MULE SHOE RANCH, INC.; MULE SHOE RANCH, INC., v. OFFICE OF STATE LANDS AND INVESTMENTS; EDWARD L. GRANT, in his official capacity as Director of the OFFICE OF STATE LANDS AND INVESTMENTS.

Citation: 

Docket Number: S-10-0181

State: wyoming

Court: Wyoming Supreme Court

Date: 2001-04-19T00:00:00Z

Document:
OFFICE OF STATE LANDS AND INVESTMENTS; EDWARD L. GRANT, in his official capacity as Director of the OFFICE OF STATE LANDS AND INVESTMENTS, v. MULE SHOE RANCH, INC.; MULE SHOE RANCH, INC., v.  OFFICE OF STATE LANDS AND INVESTMENTS; EDWARD L. GRANT, in his official capacity as Director of the OFFICE OF STATE LANDS AND INVESTMENTS.2011 WY 68Case Number: S-10-0181Decided: 04/19/2001NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so correction may be made before final publication in the permanent volume.

APRIL 
TERM, A.D. 2011

                                                                                                

OFFICE 
OF STATE LANDS AND INVESTMENTS; EDWARD L. GRANT, in his official capacity as 
Director of the OFFICE OF STATE LANDS AND INVESTMENTS,Appellants 
(Respondents),v.MULE SHOE RANCH, INC.,Appellee 
(Petitioner).MULE SHOE RANCH, INC.,Appellant 
(Petitioner),v.OFFICE OF STATE LANDS AND INVESTMENTS; EDWARD L. 
GRANT, in his official capacity as Director of the OFFICE OF STATE LANDS AND 
INVESTMENTS,Appellees (Respondents).

 
 
 
 

Appeal 
from the District Court of Crook County

The 
Honorable Michael N. Deegan, Judge

 
 
Representing 
Appellants in Case No. S-10-0181:

Bruce 
A. Salzburg, Wyoming Attorney General; Michael L. Hubbard, Deputy Attorney 
General; Bridget Hill, Senior Assistant Attorney General.  Argument by Ms. Hill.

 
 
Representing 
Appellee in Case No. S-10-0181:

David 
M. Clark of Worrall & Greear, P.C. Worland, Wyoming.

 
 
KITE, 
Chief Justice.

 
 
[¶1]  Mule Shoe Ranch, Inc. (Mule Shoe) sought 
to exercise its preferential right to renew a state lease.  Two Y Ranch (Two Y) submitted a 
competing bid at a higher rate.  The 
director of the Office of State Lands and Investments (State Lands Office) 
issued a decision requiring Mule Shoe to match the higher bid in order to 
exercise its preferential right.  
Mule Shoe requested an administrative hearing.  

 
 
[¶2]  The State Lands Office and Mule Shoe 
filed motions for summary judgment.  
The Board of Land Commissioners (Board) granted summary judgment to the 
State Lands Office, agreeing with the director's decision.  Mule Shoe filed a petition for review in 
the district court which reversed the Board's decision and remanded the matter 
to the Board with instructions to direct the State Lands Office to conduct an 
economic analysis and make a determination as to whether the competing bid was 
based on fair market value.  The 
State Lands Office appealed to this Court.  
Mule Shoe filed a cross-appeal.  
We reverse the district court's order.

ISSUE

 
 
[¶3]  We paraphrase the issue the State Lands 
Office presents in its appeal as follows:

 
 
Whether 
the district court erred in reversing the Board's decision requiring Mule Shoe 
to meet the highest bid offered in order to exercise its preferential right to 
renew its lease.

 
 
Mule 
Shoe states the issue as follows:

 
 
Whether 
the state grazing lease statutes place an upper constraint on the amount an 
existing grazing lessee is required to pay to match a competing bidder under 
Wyo. Stat. Ann. § 36-5-105(c). 

 
 
[¶4]  We paraphrase the issue Mule Shoe 
presents in its cross appeal as follows:

 
 
Whether 
the district court erred in remanding the case to the Board for an economic 
analysis and should instead have entered judgment for Mule 
Shoe.

 
 
The 
State Lands Office re-states the issue as whether the district court erred in 
affirming the denial of Mule Shoe's summary judgment motion on the basis that an 
economic analysis must be performed on Two Y's bid.

 
 
FACTS

 
 
[¶5]  The State of Wyoming owns 5,459.90 acres 
of land covered by State Lease No. 2-5310.  
The State leases the land for grazing and agricultural purposes for 
ten-year terms.  Mule Shoe, a family 
ranching operation, has leased the state land covered by State Lease No. 2-5310 
since 1941.  On February 1, 2008, 
the lease was set to expire.  
Pursuant to Wyo. Stat. Ann. § 36-5-104 (LexisNexis 2009), Mule Shoe, and 
any other party interested in leasing the land, was required to submit an 
application to the State Lands Office.

 
 
[¶6]  On October 30, 2007, the State Lands 
Office received an application for State Lease No. 2-5310 from Two Y.  Two Y offered an annual rental payment 
of $45,556.00, or $28.00 per animal unit month (AUM).  The State Lands Office notified Mule 
Shoe about the application.  On 
November 30, 2007, Mule Shoe responded with a renewal application for the 
lease.  Mule Shoe offered an annual 
rental payment of $8,476.67, or $5.21 per AUM.  

 
 
[¶7]  On March 25, 2008, the director of the 
State Lands Office issued a decision letter addressing the conflicting 
applications.  The director found 
that Two Y was a qualified applicant, had an actual and necessary use for the 
land and available forage and had submitted the highest bid.  Based upon § 36-5-105(c) (LexisNexis 
2007), which gave Mule Shoe, as the holder of the expiring lease, a preferred 
right to renew the lease, the director conditionally awarded the lease to Mule 
Shoe for the next ten year term at the rate of Two Y's bid.  

 
 
[¶8]  On April 4, 2008, Mule Shoe exercised 
its preferential right by filing a written acceptance and paying the amount of 
Two Y's bid.  Three days later, Mule 
Shoe filed a notice of appeal of the director's decision, asserting Two Y's 
$28.00 per AUM bid was not valid because it was not based on fair market value 
using the formula developed by the Board for the same or similar land use.  The matter was referred to the Office of 
Administrative Hearings (OAH) for a contested case hearing.   

 
 
[¶9]  Both Mule Shoe and the State Lands 
Office filed motions for summary judgment.  
Mule Shoe argued Two Y's bid was not a valid, competing bid and was 
outside the statutory parameters governing the preferential right to renew.  The State Lands Office asserted the 
plain meaning of the leasing statutes and Board rules required Mule Shoe to meet 
the highest bid.

 
 
[¶10]  After a hearing, the OAH issued 
recommended factual findings, legal conclusions and an order granting summary 
judgment for the State Lands Office.  
The OAH concluded the state leasing statutes required Mule Shoe to meet 
the highest bid in order to renew the lease.  The Board voted unanimously to adopt the 
recommended findings, conclusions and order.  Mule Shoe filed a petition for review in 
district court, which reversed the Board. The district court concluded the State 
Lands Office failed to conduct an economic analysis and determine whether the 
highest bid was based upon fair market value as required by statute.  The State Lands Office appealed to this 
Court.

 
 
 
 
STANDARD 
OF REVIEW

 
 
[¶11]  We review an administrative decision as 
if it came directly from the agency and do not defer to the district court's 
ruling.  Greene v. State ex rel. Wyo. Board of 
Chiropractic Examiners, 2009 WY 42, ¶ 9, 204 P.3d 285, 290 (Wyo. 2009).  We review an agency's conclusions of law 
de novo, and affirm such conclusions only when they are in accordance with the 
law.  Id.  While the interpretation of statutes and 
their implementing regulations is a question of law that we review de novo, it 
is also settled that we defer to an agency's interpretation of its own rules and 
regulations unless that interpretation is clearly erroneous or inconsistent with 
the plain language of the rules.  Powder River Basin Resource Council v. Wyo. 
Dep't of Envtl. Quality, 2010 WY 25, ¶ 6, 226 P.3d 809, 813 (Wyo. 
2010).

 
 
DISCUSSION

 
 
[¶12]  The version of § 36-5-105(c) in effect 
at the time State Lease No. 2-5310 was expiring and the applicants submitted 
their bids provided:

 
 

An 
applicant who is the holder of an expiring lease, 
and has paid the rental when due, and has not violated the provisions of the 
lease, and is qualified under the provisions of W.S. 36-5-101, shall have a preferred right to renew such 
lease by meeting the highest bid offered by another qualified applicant who 
has actual and necessary use for the land and available forage and whose bid is based on the fair market 
value, using the formula developed by 
the board pursuant to W.S. 36-5-101(b), for the same or a similar use of 
land.

 
 
(Emphasis 
added.)1  

 
 
[¶13]  When interpreting statutory 
language:

 
 
            
[T]he paramount consideration is to determine the legislature's intent, 
which must be ascertained initially and primarily from the words used in the 
statute.  We look first to the plain 
and ordinary meaning of the words to determine if the statute is ambiguous.  A statute is clear and unambiguous if 
its wording is such that reasonable persons are able to agree on its meaning 
with consistency and predictability.  
Conversely, a statute is ambiguous if it is found to be vague or 
uncertain and subject to varying interpretations.  If we determine that a statute is clear 
and unambiguous, we give effect to the plain language of the statute.  

 
 

Dorr 
v. Smith, Keller & Associates, 
2010 WY 120, ¶ 11, 238 P.3d 549, 552 (Wyo. 2010) (citation omitted).  We consider all statutory provisions 
pertaining to the same subject in pari materia.  Sorensen v. State Farm Auto. Ins. Co., 
2010 WY 101, ¶ 13, 234 P.3d 1233, 1237 (Wyo. 2010).  Divergent opinions among parties as to 
the meaning of a statute may be evidence of ambiguity but is not 
conclusive.  Wyo. Med. Center, Inc. v. Wyo. Ins. Guar. 
Ass'n, 2010 WY 21, ¶ 19, 225 P.3d 1061, 1066 (Wyo. 2010).  Ultimately, whether a statute is 
ambiguous is a matter of law to be determined by the court.  Id.        

 
 
[¶14]  As reflected above in paragraph 12, our 
inquiry concerns the meaning of the words "by meeting the highest bid offered by 
another qualified applicant . . . whose bid is based on the fair market value, 
using the formula developed by the board pursuant to W.S. 36-5-101(b)."  The State Lands Office argues the 
director correctly concluded this provision required Mule Shoe to meet Two Y's 
bid in order to continue leasing the land.  
The State Lands Office contends the statute clearly required the holder 
of an expiring lease to meet the highest bid, Two Y's bid was the highest bid; 
therefore, Mule Shoe had to meet that bid.  
The State Lands Office further asserts that the Board complied with the 
statutory requirements for performing an economic analysis and adopting a fair 
market value formula when it enacted ch. 4, § 6 of its rules.  The State Lands Office maintains that 
while § 36-5-101(b) and the rules enacted pursuant to that provision make it 
clear the Board must establish a minimum price for leasing state lands, 
those provisions express no intent that the Board establish a maximum price.  The State Lands Office contends this is 
particularly significant given that prior versions of the statute expressly 
required rental values to fall within a specified minimum and maximum 
amount.     

 
 
[¶15]  Mule Shoe contends the interpretation 
the State Lands Office urges, which interpretation the OAH and the Board 
adopted, is contrary to the plain language of the statute and legislative 
intent.  Mule Shoe asserts § 
36-5-105(c) clearly and unambiguously provided that it had a preferred right to 
renew the lease by meeting the highest bid based on the fair market value using 
the formula developed by the Board.  
Mule Shoe contends Two Y's bid was not based on the fair market value 
using the Board's formula; therefore, it was not required to meet that bid.  

    

[¶16]  From the wording of § 36-5-105(c) it is 
clear that Mule Shoe was required to meet Two Y's bid if:  1) Two Y was a qualified applicant; 2) 
Two Y had actual and necessary use for the land and available forage; and 3) Two 
Y's bid was based on the fair market value, using the formula developed by the 
Board pursuant to § 36-5-101(b).  
The first two factors are not at issue in this appeal.  In determining whether Two Y's bid was 
"based on the fair market value using the formula developed by the board 
pursuant to W.S. 36-5-101(b)," it is necessary to consider § 36-5-101(b), which 
provides:   

 
 
§ 
36-5-101. Qualifications of lessees; lease terms; 
rental.

. 
. . .

            
(b) The rental of any lease 
awarded shall be based on an economic 
analysis and shall reflect at least the fair market value for the same or 
similar use of the land based upon a 
formula adopted by the board using the following 
criteria:

            
            
(i) Readily available data averaged over an adequate number of years to 
remove any radical fluctuations;

            
            
(ii) Factors which reasonably reflect the true market value of state 
leases;

            
            
(iii) Parameters within which the board can be responsive to changing 
resource conditions, market demand and industry viability;

            
            
(iv) Factors which reasonably reflect the contributions made by the 
lessee. 

 
 
(Emphasis 
added.)  This provision clearly 
required that the rental of State Lease No. 2-5310 be:  1) based on an economic analysis, and 2) 
reflect at least the fair market 
value for the same or similar land based upon a formula adopted by the 
Board.  That is, the rental had to 
be based on an economic analysis and in no event could the lease be rented for 
less than the fair market value for such land as calculated using the Board's 
formula.  

 
 
[¶17]  Pursuant to § 36-5-101(b), the Board 
adopted the following rule:

 
 

(a)  
 The annual rental for all leases shall 
be:

(i)    
The 
amount bid by the applicant, if accepted by the Board, or

(ii)  
As 
set by the Board as part of its decision in a case of conflicting 
applications.

            
However, in no event shall the 
annual rental be less than the minimum rate established by subsection (b) of 
this section.

(b)  
 The minimum annual rental shall 
be:

(i)    
For 
grazing land, as established by formula as follows:

            
Private land lease rate on a per AUM basis, average for the five years 
preceding the current year, as estimated by the Wyoming Agricultural Statistics 
Service; times the five year weighted average "party ratio" for beef cattle per 
cwt. as established by the National Agricultural Statistics Service as an 
adjustment for changing resource conditions, market demand and industry 
viability; less 20% to reflect contributions made by the lessee. 

 
 
Board 
of Land Commissioners Rules, ch. 4, § 6 (2001) (emphasis added).  Consistent with the requirement in § 
36-5-101(b) that state lease rentals reflect at least the fair market value for the 
same or similar lands, subsection (a) of the Board's rule provided that rentals 
may not be for less than the rate established by subsection (b), which contained 
the Board's economic analysis and formula for calculating the minimum rental. 

 
 
[¶18]  The parties agree that using the Board's 
formula, the minimum rental for State Lease No. 2-5310 was $5.21 per AUM, or 
$8,476.67 annuallythe amount of Mule Shoe's bid.  Pursuant to the statutes and the rule, 
therefore, the minimum the Board could accept for the lease was the amount of 
Mule Shoe's bid.  

 
 
[¶19]  In contending the Board was not 
authorized to require it to meet Two Y's bid, Mule Shoe argues that the term 
"fair market value" as used in § 36-5-105(c) meant the value as determined using 
the Board's formulain this case, the amount of Mule Shoe's bid.  We disagree for several reasons.  First, neither the statutes nor the 
rules enacted pursuant thereto contained any suggestion that the value arrived 
at by using the formula was "the fair market value" for leasing the 
property.  Section 36-5-101(b) 
expressly provided that rentals must be at least the fair market value as 
calculated using the Board's formula; it did not state rentals must be the fair market value calculated using 
the formula.  In addition, 
interpreting the provision as Mule Shoe suggests would lead to the absurd result 
that the Board could only accept a bid equal to the amount calculated by using 
the formula and could never really consider competing bids.  We will not construe statutory language 
to reach an absurd result.  Chevron U.S.A., Inc. v. Dep't of Revenue, 
2007 WY 43, ¶ 18, 154 P.3d 331, 337 (Wyo. 2007).  Finally, while § 36-5-101(b) expressly 
provided that rentals must at a minimum reflect fair market value, nowhere did 
it suggest that there was a maximum value for bids the Board could accept.       

 
 
[¶20] 
 As statutory interpretation 
principles make clear, the plain and ordinary meaning of the words governs.  Horse Creek Conservation Dist. v. State ex 
rel. Wyo. Attorney General, 2009 WY 143, ¶ 36, 221 P.3d 306, 317 (Wyo. 
2009).  Fair market value is defined 
as "[t]he price that a seller is willing to accept and a buyer is willing to pay 
on the open market and in an arm's-length transaction."  Grommet v. Newman, 2009 WY 150, ¶ 52, 
220 P.3d 795, 815 (Wyo. 2009), quoting Black's Law Dictionary 1691 (9th ed. 2009).  Applying this definition in the context 
of the state leasing statutes in effect in 2007, the fair market value was the 
price the Board was willing to accept and an applicant was willing to pay.  Here, the Board was willing to accept 
Two Y's bid and Two Y was willing to pay the amount of its bid.  We conclude Mule Shoe was required to 
pay that amount in order to keep the lease.

 
 
[¶21]  In support of its assertion that it 
should not be required to pay the amount of Two Y's bid, Mule Shoe cites earlier 
versions of the leasing statutes and decisions of this Court interpreting those 
statutes.  Mule Shoe begins with 
Wyo. Rev. Stat. Ann., § 91-113 (1931), which provided that the holder of an 
expiring lease 

 
 
may 
take the lease at the highest annual rental offered by any other applicant; 
provided, that should the highest rental offer received be unreasonably 
excessive and clearly out of proportion to rentals paid for lands of similar 
kind and character the board shall fix the rental at which the old lessee may 
take the lease, upon a fair and reasonable basis within the minimum and maximum 
limits of appraised rental values as provided in § 91-108.  

 
 
Section 
91-108 provided for a minimum rental of not less than 2% and maximum rental of 
not more than 5½% of the appraised rental value as approved by the board.  

 
 
[¶22]  Mule Shoe also cites Wyo. Compiled Stat. 
Ann. § 24-113 (1945), Wyo. Stat. Ann. § 36-19 (Michie 1957) and Wyo. Stat. Ann § 
36-2-106 (Michie 1977) which, like § 19-108 of the 1931 statutes, provided for a 
minimum rental of 2% and maximum rental of 5½% of the appraised rental value as 
approved by the board.  As we have 
discussed, the statute in effect in 2007 contained no language setting a maximum 
rental value, nor did it contain language addressing excessive or 
out-of-proportion offers.  When the 
legislature omits language from a statute, we consider the omission 
intentional.  Stutzman v. Office of Wyo. State 
Engineer, 2006 WY 30, ¶ 16, 130 P.3d 470, 475 (Wyo. 2006).  It seems clear from the language used in 
the statute in effect in 2007 that the legislature intended to establish a 
minimum rental value, but no maximum.  

 
 
[¶23]  Mule Shoe also cites cases from this 
Court decided under the old statutes.  
In Kerrigan v. Miller, 53 Wyo. 
441, 454, 84 P.2d 724, 729 (Wyo. 1938), for example, the Court reiterated that a 
preferential right is a "very 
substantial right" and said the legislature intended it to be the policy of 
the state "to recognize equities in those who have built up a ranching business 
in the state which should be considered in passing upon applications for renewal 
of expiring leases."  Id.  Similarly, the Court in Frolander v. Ilsley, 72 Wyo. 342, 365, 
264 P.2d 790, 799 (Wyo. 1953) stated:  

 
 
School 
lands are, it is true, held in trust by the state, and the trust must be 
administered wisely and prudently so that its aim may be reasonably 
attained.  But prudence and wisdom 
do not, we think, require that it must be so administered as to destroy or 
diminish the value of the ranching interests of the state which form a large 
part of the source from which our schools are nourished.  

 
 
[¶24]  There is no question in our earlier 
cases that the Court gave much consideration to the benefits the State receives 
from well-established ranching operations.  
While we do not minimize those benefits, we are confronted now with 
statutory language that is substantially different from the language before the 
Court in earlier cases.  As the 
State Lands Office correctly points out, the Wyoming legislature made important 
changes to the state leasing statues in 1997.

 
 
[¶25]  Prior to 1997, § 36-5-105(a) provided 
that state lands must be leased in a manner inuring to the greatest benefits to 
the "state."  In 1997, the 
legislature amended that section to provide that state lands must be leased in a 
manner inuring to the greatest benefit of the "state land trust 
beneficiaries."  The legislature 
also deleted the minimum and maximum limits within which rental values were 
required to fall, inserting instead the language providing that acceptable bids 
must be "not less than fair market value, as determined by the economic analysis 
pursuant to W.S. 36-5-101(b)."  The 
legislature also added the language requiring the holder of an expired license 
to meet "the highest bid offered which is based on the fair market value, using 
the formula developed by the board pursuant to W.S. 36-5-101(b)."  None of the authorities cited by Mule 
Shoe involved these provisions; consequently, those authorities provide little 
guidance in interpreting the language in the statutes in effect in 2007.   

 
 
[¶26]  There is no doubt that established 
ranching operations provide great benefit to the State of Wyoming.  However, the statutory scheme in effect 
at the time Mule Shoe and Two Y submitted their bids cannot be interpreted to 
mean that the Board was precluded from accepting bids higher than the minimum 
amount calculated by using the formula set forth in ch. 4, § 6 of its rule.  The statutes and the rule clearly 
authorized the Board to accept the higher of two competing bids in order to 
carry out its statutorily prescribed duty to lease state lands in a manner 
inuring to the greatest benefit of the state land trust beneficiaries.  

 
 
[¶27]  Given our resolution of the issues 
presented in the State Lands Office's appeal, it is unnecessary to address the 
issue presented in Mule Shoe's cross-appeal.  We reverse the district court's order 
and remand the case for entry of an order affirming the Board's decision.      

FOOTNOTES

 
 

1The current version of § 36-5-105(c) 
provides:

 
 
(c)  An applicant who is the 
holder of an expiring lease, and has paid the rental when due, and has not 
violated the provisions of the lease, and is qualified under the provisions of 
W.S. 36-5-101, shall have a preferred right to renew such lease by meeting the 
highest bid offered by another qualified applicant who has actual and necessary 
use for the land and available forage and whose bid is not less than the minimum fair market value as determined by the 
board for the same or a similar use of land using the formula developed pursuant to W.S. 
36-5-101(b) and not more than one hundred twenty percent (120%) of the maximum 
fair market value as determined by the board based on the previous year's values 
for the state, district or county, whichever is most localized and available, as 
determined by the national agricultural statistics service 
utilizing:

(i)             
 The private land lease rate 
per animal unit month for Wyoming grazing leases; 
or

(ii)            
The private land irrigated or nonirrigated cropland lease rate, as 
applicable, for Wyoming cropland leases on irrigated or nonirrigated cropland; 
and

(iii)           
A downward adjustment of twenty percent (20%) to reasonably reflect 
lessee contributions typically provided as a part of a private land grazing 
lease rate or a private cropland lease rate, as 
applicable.

 
 
(Emphasis added.)