NEVADA BLM LAND TRANSACTIONS AUDIT 

OVERSIGHT HEARING 

BEFORE THE 

SUBCOMMITTEE ON NATIONAL PARKS, FORESTS 

AND Lfu\TDS 

OF THE 

COMMITTEE ON RESOURCES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTH CONGRESS 

SECOND SESSION 

ON 

THE INSPECTOR GENERAL'S AUDIT REPORT ON BUREAU OF LAND MANAGEMENT LAND TRANSACTIONS 

IN NEVADA 

2&--997cc 

JULY 30, 1996---WASHINGTON, DC 

Serial No. 104-88 

Printed for the use of the Committee on Resources 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1996 

For sale by the U.S. Government Printing Office 

Superintendent of Documents, Congressional Sales Office. Washington, DC 20402 

ISBN 0-16-053604-9 
COMMITTEE ON RESOURCES 

DON YOUNG, Alaska, Chairman 

W.J . (BILLY) TAUZIN, Louisiana 

JAMES V. HANSEN, Utah 

JIM SAXTON, New Jersey 

ELTONGALLEGLY, Califurrua 

JOHN L. DUNCAN, JR., Tennessee 

JOEL HEFLEY, Colorado 

JOHN T. DOOLITTLE, California 

WAYNE ALLARD, Colorado 

WAYNE T. GILCHREST, Maryland 

KEN CALVERT, California 

RICHARD W. POMBO, Califorrua 

PETER G. TORKILDSEN, Massachusetts 

J .D. HAYWORTH, Arizona 

FRANK A. CREMEANS, Ohio 

BARBARA CUBIN, Wyoming 

WES COOLEY, Oregon 

HELEN CHENOWETH, Idaho 

LINDA SMITH, Washington 

GEORGE P. RADANOVICH, Califorrua 

WALTER B. JONES, JR., North Carolina 

WILLIAM M. (MAC) THORNBERRY, Texas 

RICHARD (DOC) HASTINGS, Washington 

JACK METCALF, Washington 

JAMES B. LONGLEY, JR., Maine 

JOHN B. SHADEGG, Arizona 

JOHN E. ENSIGN, Nevada 

GEORGE MILLER, Califorrua 

EDWARD J . MARKEY, Massachusetts 

NICK J . RAHALL II, West Virginia 

BRUCE F. VENTO, Minnesota 

DALE E. KILDEE, Michigan 

PAT WILLIAMS, Montana 

SAM GEJDENSON, Connecticut 

BILL RICHARDSON, New Mexico 

PETER A. DEFAZIO, Oregon 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

TIM JOHNSON, South Dakota 

NEIL ABERCROMBIE, Hawaii 

GERRY E. STUDDS, Massachusetts 

SOLOMON P. ORTIZ, Texas 

OWEN B. PICKETT, Virgirua 

FRANK PALLONE, JR., New Jersey 

CALVIN M. DOOLEY, Californi~ 

CARLOS A. ROMERO-BARCELO, Puerto 

Rico 

MAURICE D. HINCHEY, New York 

ROBERT A. UNDERWOOD, Guam 

SAM FARR, Califorrua 

PATRICK J. KENNEDY, Rhode Island 

DANIEL VAL K:!SH, Chief of Staff 

ELIZABETH MEGGINSON, Chief Counsel 

CHRISTINE KENNEDY, Chief Clerk/Administrator 

J OHN LAWRENCE, Democratic Staff Director 

SUBCOMMI'ITEE ON NATIONAL PARKS, FORESTS AND LANDS 

JAMES V. HANSEN, Utah, Chairman 

JOHN J . DUNCAN JR., Tennessee BILL RICHARDSON, New Mexico 

JOEL HEFLEY, Colorado NICK J . RAHALL II, West Virginia 

JOHN T. DOOLITTLE, California BRUCE F. VENTO, Minnesota 

WAYNE ALLARD, Colorado DALE E. KILDEE, Michigan 

RICHARD W. POMBO, Califorrua PAT WILLIAMS, Montana 

PETER G. TORKILDSEN, Massachusetts ENI F.H. FALEOMAVAEGA, American 

J .D. HAYWORTH, Arizona Samoa 

BARBARA CUBIN, Wyoming GERRY E. STUDDS, Massachusetts 

WES COOLEY, Oregon FRANK PALLONE, JR., New Je~y 

HELEN CHENOWETH, Idaho CARLOS A. ROMERO-BARCELO, Puerto 

LINDA SMITH, Washington Rico 

GEORGE P. RADANOVICH, Califorrua MAURICE D. HINCHEY, New York 

JOHN B. SHADEGG, Arizona ROBERT A. UNDERWOOD, Guam 

JOHN E. ENSIGN, Nevada PATRICK J. KENNEDY, Rhode Island 

ALLEN FREEMYER, Counsel 

ANNE HEISSENBUTTEL, Legislative Staff 

RICK HEALY, Democratic Legislative Staff 

(II) 
CONTENTS 

Hearing held July 30, 1996 ....... .... ......................................................................... . 

Statements of Members: Ensign, Hon. John E., a U.S. Representative from Nevada ........................ . Hansen, Hon. James V., a U.S. Representative from Utah; and Chairman, 

Subcommittee on National Parks, Forests and Lands .............. ................ . 

Statements of witnesses: Graves, Kevin, Auditor, Sacramento, Department of the Interior ........ ...... . LaRouche, Roger, Audit Director, Washington, Department of the Inte- rior ............................................ ................. .................................................... . Lewis, Wilma A., Inspector General, U.S. Department of the Interior ....... . Prepared statement ................................................... ............................... . Williams, Robert, Audit Manager, Western Region, Department of the 

Interior .............................................................. .... ............... ... ..................... .. 

Additional material supplied: Audit Report-Nevada Land Exchange Activities, Bureau of Land Management, dated July 1996, by the U.S. Department of the Interior ....... .. Land Exchanges: Ideas for Improvement, BLM, Department of the Interior ................................... .... .................... ..................................................... .. 

Communications submitted: 

Lyder, Jane M. (DOD: Letter of September 5, 1996, with attachments 

to Hon. Don Young .... ............ ............. ................................... .... ................... . Millenbach, Mat (DOl): Letter of July 19, 1996, to Hon. John Ensign ...... .. 

(III) 

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NEVADA BLM LAND TRANSACTIONS AUDIT 

TUESDAY, JULY 30, 1996 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON NA- TIONAL PARKS, FORESTS AND LANDS, COMMITTEE ON 

RESOURCES, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:00 a.m. in room 

1324, Longworth House Office Building, Hon. James V. Hansen 

(Chairman of the Subcommittee) presiding. 

STATEMENT OF HON. JAMES V. HANSEN, A U.S. REPRESENTATIVE FROM UTAH; AND CHAIRMAN, SUBCOMMITTEE ON NATIONAL PARKS, FORESTS AND LANDS 

Mr. HANSEN. The Subcommittee will come to order. The Subcommittee on National Parks, Forest, and Lands convenes to conduct oversight on land exchange activities in Nevada by the Bureau 

of Land Management. Early last year, on behalf of Congressman 

John Ensign, I requested the Interior Inspector of the BLM in Las 

Vegas, Nevada, and throughout the State to determine if the agency was processing these exchanges in accordance with all applicable 

laws and regulations and whether the American public received 

fair market value in these exchanges. 

The Inspector General will appear before the Subcommittee, 

present the results of the final report proved to Members, and answer questions about the problems and discrepancies identified in 

the report. 

Although Inspector General Lewis will provide much greater detail, their audit found serious problems in the land exchange process and found that in three exchanges the American taxpayer lost 

up to $12.2 million. Environmental concerns were ignored, documentation is poor and perhaps even forged in some cases. The land 

exchange process has long been a difficult and cumbersome administrative nightmare, but the growth and financial pressures in Las 

Vegas heighten these problems. I commend Congressman Ensign for his leadership and willingness to pursue this sensitive issue in his district. This Subcommittee will pursue these problems in the future to determine the extent of these violations and discrepancies within the land exchange 

process in Las Vegas. To further our goals, Congressman Ensign's 

legislation, heard by this Subcommittee earlier this year, provides 

many of the answers on how to correct the problems contained 

within this system. Passage of H.R. 3128 will enable us to make 

this a competitive system, open to the light of public scrutiny, and 

will provide fair return to the American public. 

(1) 
2 

I look forward to the testimony of the Inspector General and appreciate her being here. 

Mr. HANSEN. I now turn to my friend from the Las Vegas area 

in Nevada. Mr. John Ensign has the floor. 

STATEMENT OF HON. JOHN ENSIGN, A U.S. REPRESENTATIVE 

FROM NEVADA 

Mr. ENSIGN. Thank you, Mr. Chairman, and I do want to thank 

you for holding the hearings this morning. Given the hectic Floor 

and committee schedules, the people in Nevada and I appreciate 

your hard work and commitment to resolving this important western issue. 

As you know the Las Vegas valley is currently the fastest growing metropolitan area in the country. Given the high quality of life 

and large percentage of federally owned land, the valley is a prime 

platform for development. Over the years, the land exchange process has been used to privatize the public land that is interspersed 

amongst the private land. Many aspects of this process have greatly benefited Nevada as well as the entire country. Nevada's economy and job market have experienced a boost, we have acquired 

environmentally sensitive lands throughout the State and relieved 

the Federal agencies of some burdensome management responsibilities. 

Despite all the good that seems to stem from the land exchange 

process, there is a public perception that the system is riddled with 

corruption and plagued with problems. In an effort to address some 

of these concerns, Senator Bryan and I introduced the Southern 

Nevada Public Land Management Act which would authorize the 

sale of federally owned lands in Clark County. This process would 

ensure fair market value in the transfer of those lands and perhaps 

remove many of the discrepancies in this complicated process. 

However, the Department of Interior was less than enthusiastic 

to endorse this legislation's popular and proven successful merits. 

During the course of this legislation's movement through Congress, 

a draft Inspector General's report was released to the press. Newspaper articles followed that did not reflect very favorably upon the 

agency or the process. Additional articles were published relating 

to current land exchanges that seem to be overrun by similar flaws. 

For example, an exchange was just recently completed by the BLM 

that reportedly included sand and gravel rights, yet the value of 

these rights was not included in the exchange value. If this proves 

to be the case, the proponent may have realized a windfall worth 

millions of dollars. 

Despite this negative reporting, it did not appear that the Department of Interior was prepared to follow any other course of action other than the status quo. Allegations of a $12.2 million loss 

to the American taxpayer were simply intolerable, and I, joined by 

Chairman Young and Chairman Hansen, requested a moratorium 

on all land exchanges in Nevada. Again, the Department of Interior 

denied this request. 

Now, before us, we have the final report that has been issued by 

the Inspector General. I have reviewed the document and remain 

hesitant to support a process that appears to continue to be riddled 

with problems. In the best interest of Nevada, both financially and 
3 

environmentally, I would like to see many of the pending exchanges move forw;;trd. However, we should not tolerate the American taxpayer receiving any less than full and fair market value for 

our land. 

Mr. Chairman, the report before us today alleges that the American taxpayer has lost over $12 million due to a faulty land exchange process. I look forward to hearing Ms. Lewis' testimony 

today, and in the questioning process, I hope we can discover 

whether this is just a faulty process, incompetence or blatant, outright corruption. This is the first step in clearing up what appears 

to be a very cloudy process. 

Thank you, Mr. Chairman. 

Mr. HANSEN. Thank you, Mr. Ensign. 

Mr. HANSEN. Mr. Doolittle from California, do you have any 

opening remarks? 

Mr. DOOLITTLE. No opening remarks. 

Mr. HANSEN. Inspector General Lewis, thank you for being here 

and we will turn over the time to you. Pull that mike a little closer, 

so we can catch every one of your words. 

STATEMENT OF WILMA A. LEWIS, INSPECTOR GENERAL, U.S. 

DEPARTMENT OF THE INTERIOR; ACCOMPANIED BY KEVIN 

GRAVES, AUDITOR, SACRAMENTO OFFICE; ROBERT WILLIAMS, AUDIT MANAGER, WESTERN REGION; AND ROGER 

LAROUCHE, AUDIT DIRECTOR, WASHINGTON 

Ms. LEWIS. Mr. Chairman and members of the Subcommittee: I 

am very pleased to be here this morning to provide testimony on 

an audit report issued by the Office of the Inspector General on 

July 15th, 1996, regarding the Bureau of Land Management's land 

exchange activities in Nevada. 

In the letter of invitation to this hearing that I received from the 

Chairman of this Subcommittee, I was also asked to make available, if at all possible, individuals who actually completed work on 

the audit to answer questions regarding the audit. In an attempt 

to be responsive to the Subcommittee's request, I have here with 

me today Mr. Kevin Graves from our Sacramento office, who served 

as the auditor-in-charge of this audit, and was therefore responsible for the day-to-day running of the audit. Also here with me is Mr. Robert Williams, who served for a portion of the relevant time as the regional audit manager for the 

Western Region, where the audit was performed. Here with me, as 

well, is Mr. Roger LaRouche, an audit director who was one of the 

headquarters participants in the audit report review process. In the 

event that there is a question, the response to which involves details with which I am unfamiliar, I will consult with or refer the 

question to the appropriate individual. 

The objective of the Nevada Land Exchange audit was to determine whether the Bureau of Land Management conducted land exchanges in accordance with applicable laws and regulations, and 

whether the Bureau received fair market value in the land exchanges. In addressing these objectives, we focused on the process 

used by the Bureau, measured against the applicable laws, rules 

and regulations to determine whether the exchanges proceeded 

properly. 
4 

Because we in the Office of Inspector General do not have expertise in the area of land appraising, a specialty upon which the exchange process relies heavily, we did not go behind individual appraisals, except for purposes of identifying obvious errors or omissions that a layperson could discern, of which we found none. Instead, in order to address the portion of our objective regarding fair 

market value, we looked to other indicators, such as subsequent resale values of the land appraised or the Bureau's means of handling differing appraisals for the same property, to draw inferences 

as to whether fair market value was received for the particular exchanges. 

As you are undoubtedly aware, the Bureau's land exchange activities in Nevada have also been the subject of allegations that go 

beyond deficiencies in the process to improprieties by individuals or 

entities. Such allegations are outside the province of our audit activities, and thus beyond the scope of this audit. 

The Office of Inspector General has an ongoing investigation designed to address allegations of improprieties deemed to be of investigative merit. Because the investigation is ongoing, I am sure 

that this Subcommittee will understand that I would have to respectfully decline to answer any questions regarding the substance 

of the investigation. 

We have prepared a written statement and we have the audit report itself, both of which provide details regarding the audit. I request that a copy of both the written statement and the audit report be placed in the record of this proceeding. For purposes of this 

oral statement, I will simply summarize the main points. 

[The material may be found at end of hearing.] 

Ms. LEWIS. Our audit covered the four largest exchanges out of 

a total of six exchanges processed by the Nevada office from October 1992 through May 1995. These four transactions involved the 

exchange of over 4,000 acres of Federal land located in the Las 

Vegas area and appraised at over $63 million. Our audit disclosed 

three principal issues relating to the land exchanges. 

First, in processing the exchanges, the Bureau did not consistently follow prescribed land exchange regulations or procedures 

and ensure that fair and equal value was received for the Federal 

land exchange; 

Secondly, the Bureau exchanged, rather than sold, land within 

the land sale area designated by the Santini-Burton Act, thus reducing the amount of revenues available to offset the cost of acquiring land in the Lake Tahoe Basin; and 

Thirdly, the Bureau exchanged valuable Las Vegas area land for 

a defunct bowling alley with the intention of using this facility as 

a Bureau administrative complex-an exchange which, in our opinion, does not represent the most effective use of Federal land. 

In the area of exchange processing, the Federal Government may 

have lost an estimated $4.4 million in completing the Oliver Ranch, 

Red Rock, and Galena Resort exchanges. In the Oliver Ranch exchange, the Bureau included in the exchange a 220-acre parcel of 

Federal land that was encumbered by a right-of-way granted to the 

City of Las Vegas. The appraised fair market value of the encumbered land was $2,500 per acre for a total of $550,000. 
5 

Unencumbered, the appraised value of the land would have been 

$25,000 per acre, or $5.5 million. 

Following the transfer of the encumbered property to the proponent, the city subsequently relinquished its rights to 189 of the 

220 acres, thus retaining only 31 acres of the original right-of-way. 

We concluded that in view of all of the circumstances, including the 

fact that 7 years had elapsed with no action by the city toward use 

of the right-of-way, as well as the Bureau's responsibility under the 

Code of Federal Regulations to · ensure that only as much land is 

included in an easement as is necessary for the project, the Bureau 

should have pursued more diligently with the city the issue of relinquishing a portion of the easement. Alternatively, we believe the 

Bureau should have substituted an unencumbered parcel of Las 

Vegas area land to complete the exchange. The exchange of the encumbered land resulted in a loss of approximately $4.2 million to 

the Federal Government. The Federal Government also lost an additional $157,000 in the 

Red Rock exchange when the proponent was afforded a discount 

that should have been available only with the acquisition of additional tracts of land by the proponent. 

Further, in the Galena Exchange, the government lost $68,825 

when land was acquired at other than the approved exchange 

value. In addition to these losses suffered by the government, we found 

that in the Red Rock exchange the Bureau acquired almost 2,500 

acres of land with an exchange value of $2.7 million that was not 

in conformance with the Bureau's approved land use plan as required by the Code of Federal Regulations. Instead, the Bureau relied on draft land use plans and other planning documents which, 

in any event, did not support all of its land acquisitions. There was, 

thus, no assurance that all of the land acquired was consistent 

with the Bureau's mission-related needs. Compounding the problem in the Red Rock exchange was the 

fact that $1.2 million of the $2.7 million value of the private land 

represented an increase in the approved fair market value of the 

land that was made without reconciling differing values assigned 

by two Bureau review appraisers. With respect to the private land 

in question, its value was initially approved by a chief appraiser in 

accordance with the Bureau's manual. When the proponent expressed unhappiness with the approved values, the Nevada chief 

appraiser assigned one of his staff appraisers to conduct another 

review of the contract appraisals, which resulted in the approval of 

significantly higher values for the private land. The Bureau subsequently exchanged Federal land using the higher values for the private land without reconciling the significant differences in the values approved by the two review appraisers. We identified three additio~al issues in the Galena exchange. 

First, we concluded that the values of the Federal land and private 

land exchanged in the initial transaction were not equalized to the 

greatest extent practicable, as required by the applicable law and 

regulations. The value of the Federal land conveyed to the proponent in the initial phase of the exchange totaled about $9.6 million more than the value of the private land received by the Bu-
6 

reau. Seven transactions and 9 months later, the proponent still 

owed the government $8.9 million. 

Second, verbal commitments to a proponent to compensate the 

proponent for certain costs incurred in connection with the exchange transaction were not formalized in the official exchange 

record as required by the applicable regulations. 

Third, a ledger account to monitor the value of the land exchanged, required under the Code of Federal Regulations for exchanges involving more than one transaction, was not used by the 

Bureau. This requirement is intended to help ensure that the maximum allowable difference between the exchange values of the private land and the Federal land is not exceeded. 

In addition to the problems identified in the area of exchange 

processing, we discussed two additional areas of concern. First, we 

noted that the Bureau included a total of 446-1/2 acres of Federal 

land located within the land sale area identified by the SantiniBurton Act in three of the four exchanges that we reviewed. Although based on our legal review we found evidence indicating that 

the Act does not prohibit the exchange of land within the land sale 

area, we concluded that Congress intended that revenues from the 

sale of those lands would be used to offset the cost of acquiring 

land in the Lake Tahoe Basin. If the Bureau had sold, rather than 

exchanged, the 446-1/2 acres in question, at least $7.8 million in 

revenues would have been generated to help reduce the $40 million 

deficit that existed as of the end of fiscal year 1995 between the 

acquisition costs for Lake Tahoe Basin land and sales revenues 

from Santini-Burton Act land. 

Second, in the Tonopah exchange, the Bureau exchanged valuable Las Vegas land for a defunct bowling alley with the intention 

of using the facility and property as a Bureau administrative complex for the Tonopah Resource Area. Although we concluded that 

the Bureau acted within its authority in completing this exchange, 

we believe that using the exchange process to acquire administrative property rather than land containing significant public resources may not represent the most effective use of valuable Federal land. Based on the findings in the report, we made several recommendations that addressed a number of things: first, the need 

to institute competitive procedures into the land disposal process; 

second, the need to verify the need for easements on Federal land 

prior to disposal of the land; third, the need to establish controls 

necessary to ensure that land exchanges are processed in full accordance with applicable laws, regulations, and Bureau procedures; 

fourth, the need for the Bureau to submit reports to the appropriate congressional committees as required by the Santini-Burton 

Act; and fifth, the need to reduce the deficit between the acquisition costs for Lake Tahoe land and the sales revenues generated 

from the sale of Santini-Burton Act land. 

We also suggested that the Bureau consider establishing a policy 

limiting the use of the land exchange process to acquire administrative facilities for Bureau use. Although the Bureau took issue with a number of the findings 

in the report, it concurred with the first three recommendations 

and the suggestion regarding a policy to limit the use of the land 
7 

exchange process to acquire administrative facilities for Bureau 

use. 

As to the Santini-Burton Act recommendations, the Bureau's response did not satisfy the reporting requirements established under 

the Act, and the Bureau has opted to seek an opinion from the Office of the Solicitor regarding the legality of exchanging SantiniBurton Act lands. Accordingly, these last two recommendations are 

unresolved. 

This concludes my oral statement. I will be happy to respond to 

any questions from the Subcommittee regarding my testimony. Mr. HANSEN. Thank you very much for your very complete statement. 

Mr. HANSEN. The gentleman from Nevada, Mr. Ensign. 

Mr. ENSIGN. Thank you, Mr. Chairman. 

I appreciate your being with us today. I want to get down to a 

couple of pretty basic questions, and some you may or may not be 

able to answer. 

In any of the exchanges you investigated, did you find evidence 

of illegal action or anything that suggested that BLM operated outside the scope of existing laws or regulations? 

Ms. LEWIS. With respect to the part of question pertaining to illegal actions, as I mentioned earlier, the audit scope does not include 

a review or investigation into alleged improprieties such as illegal 

actions. To the extent that there are any alleged improprieties that 

may have resulted from the findings in the audit, those matters are 

within the province of the investigative side of the office, and on 

those matters, I am not at liberty to speak at this time. Mr. ENSIGN. Was there any evidence that any people outside the 

BLM were involved in any way inappropriately in these exchanges? 

Ms. LEWIS. When you say "inappropriately," are you referring to 

some criminal or civil wrongdoing? 

Mr. ENSIGN. Certainly that is a possibility, but also the possibility that they just were involved in a process that was outside the 

realm of the regulations. 

Ms. LEWIS. With respect to being outside the realm of the regulations, I think that there were a number of findings within the report where we concluded that the Bureau had not followed applicable rules and regulations with respect to the land exchanges. 

For example, as I mentioned with respect to the Oliver Ranch exchange, there was an easement on the property. The applicable regulations indicated that easements are supposed to be limited to 

that amount of land necessary for the particular project at issue. We do not believe that the Bureau pursued sufficiently and diligently the issue of relinquishment of the easement by the city. 

With respect to the Red Rock exchange, we found also some deficiencies in that matter. In one instance, we had an increase in the 

value of the private land, an increase totaling $1.2 million. Now, 

the regulations indicate that the values are to be approved by a 

chief appraiser. There was some question here because initially the 

values for the land were approved by the Arizona chief appraiser. 

As I mentioned earlier, the proponent came in and expressed unhappiness with the value for the private land, which the proponent 

believed was too low. At that point, the Bureau took another look 

at the contract appraisals that had been done. This second review 
8 

was assigned to a staff appraiser, and that individual came up with 

significantly higher values than the Arizona chief appraiser, totaling ·a difference of $1.2 million. 

When we inquired about why that particular review was not approved by a chief appraiser in accordance with the regulations, we 

were told that the individual, the staff appraiser, was designated 

as the acting chief appraiser for that particular review. However, 

we were not able to get any real satisfactory responses as to why 

this had taken place for this particular review, that is, the designation of this individual as the acting chief appraiser. 

Mr. ENSIGN. When you say you haven't gotten "satisfactory responses" from the BLM on the discrepancy there, what does "satisfactory" mean and where do you go with it from there? 

Ms. LEWIS. What I mean by "satisfactory" is that we really didn't 

get any real response, and there was nothing documenting the fact 

that this individual was in fact the acting chief appraiser. 

Mr. ENSIGN. Did they detail out of the difference-the discrepancy, did they detail out where-the difference between the two appraisers, and did that appear to be a legitimate difference? 

Ms. LEWIS. That was one of the concerns that we had as well. 

There was no comparison of the two Bureau appraisals to reconcile 

the differences between the two. What you had, in actuality, were 

two appraisals that took different approaches with respect to certain issues; but what we were looking for and what we indicated 

in the report was that we didn't see, for example, a reconciliation 

between those two Bureau appraisals indicating-for example, this 

one is better than the other for these reasons. There wasn't that 

kind of documentation to give us that information. 

Mr. ENSIGN. Along those lines, in your opinion, if you have a proponent coming forward and saying that in fact this appraisal is too 

low, then you have the Bureau assign somebody else to do the appraisal and now they come up with a higher appraisal value and 

there is no difference between the two, or they haven't reconciled 

the difference between the two, if nothing else, at least the appearance of impropriety would seem to be there. 

If they haven't given you the documentation as far as why there 

is a discrepancy there, I certainly want to know why they haven't 

given you answers to that. 

Ms. LEWIS. I think the appearance is a problem. I should note that I think underlying this entire exchange program is what is fundamentally a problem in the appraisal process 

itself. There are uniform appraisal standards that are to be used 

in appraising the land. The problem is, these are general principles 

and even the uniform appraisal standards themselves indicate 

that, with the implementation of general principles, wide differences often occur. So what you have holding up this program is 

a system in which one appraiser can come in and value the land 

and say it is worth $200,000, and another appraiser can come in 

and value it a bit differently and say it is worth $700,000; and the 

issue here is, which is the right value? 

Obviously, because there is this problem in the system, you run 

into problems of the nature that I just described where one Bureau 

appraiser evaluated it one way, while the other Bureau appraiser 

evaluated it very differently. The problem here and the question 
9 

that obviously comes to one's mind is the circumstances that set 

this up-the proponent came in and said he was unhappy with the 

appraisal. Then there is another review and the result is an increase in the value of the proponent's land to exactly what the 

original contract appraiser had appraised the land for. 

Let me explain the process to you to make sure it is clear. The 

way it works generally, and the way it worked in this particular 

case, is that the land was appraised by a contract appraiser. Then 

what happens is that the contract appraisal comes to the Bureau 

for review and approval by a chief appraiser. The chief appraiser 

may sign off on the contract appraiser's values. However, the chief 

appraiser also has the authority in reviewing the appraisal to say, 

I don't agree with this, and assigns other values. 

In this particular case, the Arizona chief appraiser did precisely 

that. He did not agree with the appraised values that the contract 

appraiser came up with, and he, in turn, came up with his own values and approved those values. Then, when it went to the second 

reviewer, the second reviewer again looked at the contract appraisals-appraisers' review values and came up with the same values 

as the contract appraiser, which were higher than those approved 

by the Arizona chief appraiser. Therein lay the discrepancy. Mr. ENSIGN. It would seem to me that several places within your 

report that outside influences seem to have-the proponents in 

some cases seem to have affected the process, and when we are 

talking about the public trust here, it would seem to me it would 

at least call for an explanation of what you just talked about. When 

do you expect your investigation will be completed? 

Ms. LEWIS. That is very hard to say. I imagine it will be several 

months. The reason it is difficult to say it that we continue to get 

allegations, and we are trying to do as complete a job as we possibly can on the investigation. So we take some steps, we do some 

investigative work, we get another allegation, and we start looking 

at that. So it is very difficult for me to say it is going to be done 

on a date certain. I can't imagine that it would be any shorter period of time than several months from now, however. Mr. ENSIGN. In your audit-the audit portion of this report, can 

you identify with us or for us who the people in the exchange processes are that authorize? And I want names of people who authorized the exchanges to go through. In other words, who has bottom 

line to say, yes, this can go through; this can't? Is that the State, 

is that in Washington, or is that the local office; and who are those 

people that have authorized these various exchanges that you have 

identified in this audit report? 

Ms. LEWIS. That is something I need to consult on, if I can have 

a minute. 

Mr. HANSEN. Inspector Lewis, if you would like to have those 

people you are conferring with step up to the mike and identify 

themselves, that is fine with us. Just tell us who you are. Pull the 

mike up so we can hear from you. 

Ms. LEWIS. This is Mr. Kevin Graves that I introduced earlier 

who was the auditor in charge. 

Mr. GRAVES. Everybody hear me OK? 

With respect to the appraisals, final determination and approval 

of values to be used in an exchange are by the State chief ap-
10 

praiser, so that is at the State office. With respect to the exchange 

itself, the State office has--

Mr. ENSIGN. Could you go through each one of these exchanges 

and tell us who authorized the exchange to go through, and was 

that person at the State office, at the local office, or in the Washington office; and could you give us a name? - Mr. GRAVES. There is no way I could go through and enumerate 

those. That individual could conceivably be different for each exchange. I don't know without looking back at documentation who 

signed off on it. Mr. ENSIGN. Could you get that information for us in writing? 

Mr. GRAVES. It would be in the work papers, yes. 

Mr. ENSIGN. I would appreciate each person-let's just be clear 

here. I would appreciate each person that authorized each level of 

the exchange process and whether that person was in the local office, at the State office, or in the D.C. Office for each one of these 

exchanges that you have audited, OK? 

[The material submitted may be found at end of hearing.) 

Mr. HANSEN. We will do another round. Let me goMr. GRAVES. I will only be able to do that to the extent we found 

the documentation in the exchange file, which is the way we did 

the review. To the extent that documentation was lacking in the 

file, we won't have it in our work papers either. Mr. HANSEN. The gentleman from Michigan, Mr. Kildee. 

Mr. KILDEE. Thank you, Mr. Chairman. Ms. Lewis, is there a need to change existing law to better protect the interest of--

Mr. HANSEN. Excuse me, can I intrude for just a moment? I have 

another meeting, and I will turn the Chair over to the gentleman from Nevada, and I apologize for interrupting. Mr. KILDEE. Is there a need to change existing law in order to 

better protect the interest of the United States in these land exchanges? Have you reached any conclusion that is the cause or root 

for some of the problems in existing law or the administration of 

existing law? 

Ms. LEWIS. I think that the biggest concern that we had, the biggest problem we think existed-as I mentioned a moment ago to 

Congressman Ensign-is the exclusive reliance of this program on 

the very uncertain appraisal process. That is why we made the rec- ommendation-and we strongly believe that this is the way to go 

with this program-we made the recommendation to introduce 

competition into the process. While you would still need to get appraisals of the Federal and private land, we believe that by introducing competition into the process, it would open up the process. 

It would result in less of a situation where you have one proponent 

coming in and dealing with the Federal Government, just looking 

at that particular appraisal, and, therefore, relying solely on that 

offer, as opposed to having a bidding-type process, which would introduce the . benefits that competition necessarily brings to a process. 

So I am not sure it is really the case that there is a need for 

wholesale changes in the law. I think there were some situations 

here where the Bureau needed to follow some of its regulations, 

and that is an implementation issue. But the most fundamental 
11 

problem we saw is reliance on an appraisal system that admittedly 

is not an exact science, and we are seeing wide fluctuations in ap- praisals of the same parcels of land. 

Mr. KlLDEE. Did you find any instances where it appears on the 

initial appraisal, the private appraisal, that there were any unqualified appraisers involved? 

Ms. LEWIS. We found no indication of that, no. 

Mr. KlLDEE. They met the requirements of State law, met all the 

requirements of law for appraising? 

Ms. LEWIS. Let me clarify and say Mr. Graves has indicated to 

me that we didn't review the individuals' credentials, so I guess 

anything is possible. But there was nothing that jumped out at us 

in that regard to suggest there was a problem in that particular 

area, although we did not, in fact, review the credentials of the appraisers. Mr. Kl:LDEE. In the role of the Inspector General, do you make 

suggestions to the Department as to possible changes in law to better protect the interest of the United States? Is that done in other 

instances. 

Ms. LEWIS. Yes, to the extent that we believe that such a change 

would promote efficiency, effectiveness, economy, et cetera; yes, we 

would make that kind of recommendation. Mr. KlLDEE. When you complete your review, might that, too, be 

something you would bring to the attention of the Department? 

Ms. LEWIS. Yes, it would be brought to the attention of the Department in the form of the audit report, the final audit report that 

is issued to the Department. We issue a draft audit report to the 

Department-they review that draft and provide a response to the 

draft. In the draft we would have the recommendations. So to the 

extent we were recommending pursuing a change in the law, for 

example, the Bureau would then have an opportunity to respond 

and say they either concur or we don't concur, whatever the situation might be. Then we would issue the final audit report, which 

would include the Bureau's response. 

Mr. KlLDEE. Thank you very much. 

Thank you, Mr. Chairman. Mr. ENSIGN. [presiding.] Does the gentleman from California, Mr. 

Doolittle, wish to inquire? 

Mr. DOOLI'ITLE. Ms. Lewis, in your report discussing the 

changes, it sounds like there were some real problems with that office of the BLM. In doing your report, did you conclude that it was 

appropriate that land exchanges be terminated or delayed for a 

substantial time? 

Ms. LEWIS. We did not draw that conclusion, no. Mr. DOOLITTLE. Can you tell us again what your conclusion was 

again relative to how these things should proceed in the future? 

Ms. LEWIS. We made a number of recommendations. The first 

one was that we believe that competitive procedures should be introduced into the land disposal process. The competitive procedures 

would either be by sale, or there is an innovative process that has 

been used by the Forest Service, which is a competitive exchange. 

I know generally about competitive exchanges, although I don't 

know all the specifics. Basically I believe it involves receipt of bids 

for a particular parcel of property. 
12 

The Federal Government would put, for example, in the news- paper what property it is interested in disposing of, and it would 

receive bids from entities, citizens, or whomever regarding exchanges that the particular entity might be interested in pursuing 

with the Federal Government. That would open up the exchange 

process and allow competition into the process. So that was our 

first recommendation. 

We also recommended that the Bureau should verify the need for 

easements on Federal land prior to the disposal of the land. That 

recommendation was generated as a result of the Oliver Ranch Exchange, where the Bureau had transferred 220 acres encumbered 

by an easement that was valued at $2,500 per acre; whereas if that 

easement were not on the property, the value of the property would 

be $25,000 per acre. So we recommended that they look more closely at the easements or rights of way that they have granted prior 

to exchanging land and try to tailor those rights of way to precisely 

the amount of land that is necessary for the project. 

We also recommended that the Bureau establish controls to ensure that the land exchange process operated in accordance with 

laws, rules, and regulations. We pointed out, in particular, some of 

the areas we had problems, and we said that, at a minimum, the 

controls should ensure that the land to be acquired is in accordance 

with approved land-use plans. That recommendation arose as aresult of the Red Rock Exchange where we concluded that over 2,500 

acres were acquired that did not conform to the existing land use 

plan. 

The other aspect of that recommendation is that land acquired 

and disposed of should be properly valued. Here again we go to the 

appraisal issue and the valuation issue and point to the Red Rock 

Exchange once again where there were differing values that didn't 

appear to us to be reconciled, as well as one of the other exchanges 

where they actually did not use the approved values. We also recommended that all significant decisions involving the 

exchange transactions, particularly those affecting land valuation, 

should be fully justified and documented in the exchange file . That, 

once again, goes to the question of land values, which, as I mentioned before, is really at the heart of this problem; that the record 

should be such that anyone can go in and look and see why the Bureau went in one particular direction as opposed to another. 

The other recommendations that we had dealt with, the SantiniBurton Act issues--

Mr. DOOLITTLE. Let me just stop you there. I want to go back to 

the three recommendations you just commented on. The Nevada 

State Bureau BLM concurred with those three things; did it not? 

Ms. LEWIS. Yes, it did. Mr. DOOLITTLE. It is your belief that they will be aiming to implement those recommendations expeditiously? 

Ms. LEWIS. They have provided dates in their response by which 

they hope to have implemented the recommendations. I have no 

reason to doubt that they would be able to implement them according to the plan that they have set forth. I assume they have looked 

at the issues carefully and put forward dates they believe that they 

can meet. 
13 

Mr. DOOLITTLE. By June 1st, 1997, they will evaluate diffe!·ent 

competitive approaches. I guess recommendation number two, by 

October 1st, 1996, they will prepare guidance for that; number 

three, on the land use and so forth, March 1st, 1997. Was it your testimony that these appraisals are somewhat subjective? 

Ms. LEWIS. Yes, they are subjective. There are general rules that 

have to be followed, but appraisers can differ in their application 

of the general rules to a given situation. The uniform appraisal 

standards recognize that differences occur in implementing those 

general rules. So yes, it is to a large extent a subjective process. 

Mr. DOOLITTLE. OK, thank you. 

Mr. ENSIGN. The gentleman from Guam. Mr. FALEOMAVAEGA. American Samoa. 

Mr. ENSIGN. American Samoa. Excuse me. 

Mr. FALEOMAVAEGA. Ms. Lewis, I was going through the report, 

and I am just curious about the fact that the IG's Office has now 

made recommendations. These recommendations are made to the 

Secretary of the Interior. 

Ms. LEWIS. The report is addressed to the Assistant Secretary for 

Land and Minerals Management. 

Mr. FALEOMAVAEGA. Basically through that channel, Assistant 

Secretary to the Secretary? 

Ms. LEWIS. Yes. I sign off on a letter that goes to the Secretary 

attaching a copy of the report. 

Mr. FALEOMAVAEGA. Is it your recommendation that all of this 

can be done by secretarial directive for proper change in the policy 

regulations within the BLM? In other words, the point I am making is that do we have to pass any national law to make any certain amendments by statute in order to fulfill the recommendations 

that you are making that you think is better than what it is now 

as far as BLM is concerned? 

Ms. LEWIS. I don't think that passage of law is necessary because 

I think that the existing laws are broad enough such that if the 

Bureau chooses to introduce competition into the exchange process, 

it can. The only issue that will arise is if the Bureau chooses not 

to- do that. Obviously they have the discretion not to introduce competition if they choose to as well. However, they indicated that they plan to do that. 

Mr. FALEOMAVAEGA. My point is the Bureau chooses not to do 

that at one point, and who is going to make the final decision as 

to what direction this policy should turn? 

Ms. LEWIS. Right now the Bureau has indicated in its response 

that it intends to proceed with a pilot-type program to introduce 

competition into the exchange program. I imagine that to the extent that they review this pilot program, they will determine within the Bureau-and I am really guessing now-but I would imagine the Bureau Director, the Assistant Secretary for Lands and 

Minerals Management and maybe even up to the Secretary will ultimately make a call as to whether the pilot program has worked 

efficiently and effectively and whether they believe it is the way to 

go. 

Mr. FALEOMAVAEGA. I am a little surprised, and I suspect if the 

BLM has been in existence well over 100 years, and if the BLM has 
14 

not established standardized procedures for competitive bidding in 

land exchange processes, I am somewhat amused that we come up 

with this problem. I would think that issues as fundamental as 

these, that the BLM should at least have some kind of a streamlining process to remedy these kinds of problems. Am I making my 

comment clear on this? 

How long has the BLM been in existence? 

Ms. LEWIS. I hear from the audience 50 years. 

Mr. FALEOMAVAEGA. 50 years. Then I take it back; not 100 years, but 50 years. 

Are you suggesting here that the regional office, the BLM regional office in Nevada, has a different set of policies from other 

regional office? Is there more than one regional office, BLM? 

Ms. LEWIS. Yes, there is certainly more than one State office. 

This is the Nevada State office. There are other State offices 

throughout the country. 

Mr. FALEOMAVAEGA. How many regional offices does the BLM 

have? 

Ms. LEWIS. That I do not know. I understand from the audience 

there are 12. 

Mr. FALEOMAVAEGA. My next line of questioning is do you mean 

that among the 12 regional offices, each region has a very subjective and different approach to these two processes? 

Ms. LEWIS. We, of course, have not looked at the land exchange 

process any place else other than Nevada. However, the Bureau 

has implemented regulations for the land exchange process. You 

know, there are laws-the Federal Land Policy and Management 

Act, the Federal Land Exchange Facilitation Act and implementing 

regulations. 

Mr. FALEOMAVAEGA. My point is that the State offices in Colorado and Utah have different implementing regulations from the 

State office in Nevada? 

Ms. LEWIS. Not to our knowledge, no. 

Mr. FALEOMAVAEGA. Well--

Ms. LEWIS. In other words, there are implementing regulations 

the Bureau came out with in December of 1993 to implement land 

exchange laws. 

Mr. FALEOMAVAEGA. I understand that. And that is a national 

regulation, right? 

Ms. LEWIS. Yes, that is in the CFRs. Mr. FALEOMAVAEGA. And all 12 regional offices should comply 

with that national policy? 

Ms. LEWIS. That is correct. Mr. FALEOMAVAEGA. Are you suggesting in the IG report in the 

Nevada instance there is a difference in applying that policy? 

Ms. LEWIS. What we are indicating in the report is this: In some 

instances the Nevada office did not follow the policies and procedures set forth for the land exchange process. 

Mr. FALEOMAVAEGA. I think as a followup question for the gentleman from Nevada, I think we can be specific enough because we 

are talking about the Oliver Ranch Exchange, the Red Rock .and 

Galena Exchange, and that the gentleman from Nevada has asked 

specifically to name the parties involved in the exchange prospective bidding process. So we now are in the process. I think this is 
15 

the whole reason why we are here and wanted to find out what the 

problem is. 

My concern is if we are going to drag this issue on for another 

11 or 10 years, or does this require an immediate remedy by introducing legislation to correct these inequities? Or are these inconsistencies? If it happens in the regional office in Nevada, I can 

imagine the same problems exist in Utah, Colorado, Idaho, where 

there is a tremendous presence of BLM as far as Federal lands are 

concerned. 

Mr. ENSIGN. If the gentleman would take a look at the EnsignBryan bill we just introduced, we think it addresses most of the 

recommendations that the Inspector General has written in the report. 

Mr. FALEOMAVAEGA. So in that instance it is already by statute. 

The question is is BLM applying the--

Mr. ENSIGN. That bill is pending right now, and hopefully we are 

conferencing that bill very shortly. Mr. FALEOMAVAEGA. Is it very likely we will have the administration's support? . Mr. ENSIGN. Mter this process today, we hope so. 

Mr. FALEOMAVAEGA. I thank the. gentleman from Nevada, and I 

just wanted to pursue that line of questioning. My problem, Ms. 

Lewis, is that I have been through with audit-IG audit reports before, and when I raised the question with your predecessor, all 

right, so you made the recommendations, so what happens if the 

agency says, I don't accept the IG's recommendation? Then who 

makes the final decision? 

My problem is your predecessor said, we don't know where to go 

from there, and I suspect, and I thought, and I presumed that the 

Secretary of the Interior should be the one then making the final 

policy decision on issues based on whatever recommendations that 

the IG's Office makes. 

Ms. LEWIS. With respect to how the process works, once we issue 

the draft report, the Bureau indicates whether or not it concurs or 

doesn't concur with each of the recommendations. The Bureau 

comes back with its response. We then consider that response and 

decide whether the information provided by the Bureau is such 

that we should alter any of our recommendations or whether we 

should keep the recommendations as is. 

If we decide to keep the recommendations as is, and the Bureau 

has not concurred with them, after we issue the final report, they 

have another period of time, usually about 60 days or so, when we 

hope that we can achieve concurrence with the recommendations. 

If we don't achieve concurrence with the recommendations and we 

are at odds with the Bureau, it is then referred to the Assistant 

Secretary for Policy, Management and Budget, who is the resolution officer for the Department with respect to differences between 

the IG's position on a particular recommendation and the Bureau's 

position on a particular recommendation. Hopefully, it is resolved 

there. 

Conceivably you could have a situation where it is resolved in a 

way with which the IG's Office is not satisfied. But as I said, hopefully there is some resolution on the point. If it is not resolved in 

a way that the IG's Office is comfortable with, our office has no en-
16 

forcement authority. Our office only has recommending authority. 

So what then happens is we issue audit reports. We issue semiannual reports to Congress. We indicate to Congress where there 

are outstanding recommendations with respect to audit reports, 

and it is somebody else's battle at this point because we really 

don't have the authority to force a Bureau to do anything. Mr. FALEOMAVAEGA. Ultimately the Secretary of the Interior 

takes that responsibility? 

Ms. LEWIS. For the Department, certainly. 

Mr. FALEOMAVAEGA. My concern is in the 8 years I have been on 

this committee-this is not in any way reflective of your office and 

the good job you have done-I have had problems with agency 

squabbles that have taken 10, 15 years and still have not been resolved. That is why we are here to hope that legislatively we can 

find a better remedy to solve the problems, because we never resolve the problem because of squabbles between agencies. 

I want to say to the gentleman from Nevada that I will fully support the legislation when it comes before the committee for consideration. 

Mr. ENSIGN. I thank the gentleman from American Samoa. 

The gentleman from Arizona, Mr. Shadegg. Mr. SHADEGG. Thank you, Mr. Chairman, and let me apologize 

for having been late. I flew in on a red-eye to be here on time, and 

it was 2 and a half hours late leaving Phoenix last night. I came 

from the airport here and had no time to change. I apologize for 

my appearance, and I do have questions I would like to ask and 

information I would like to bring forward. 

Let me first start with just the law that we are operating under. 

It is my understanding that these exchanges are governed by at 

least in part 43 CFR 2200 and a subpart .0-b which sets forth criteria. I won't read all of those criteria, but I want to confirm that 

your understanding is that these aren't-well, number one, the 

BLM is to ensure that, quote, better management-the better management of Federal lands, quote, that the needs of the State and 

local residents and their economies are met by the exchange; that 

more logical and efficient management and development is promoted by the exchange, and the expansion of local communities all 

are a part of the mix or all are a part of the factors that you look 

at in the exchange. 

Is that your understanding? 

Ms. LEWIS. To my understanding, the determination is made 

with respect to an exchange based on the question as to whether 

the public interest will be best served. And the factors that you 

have enumerated are factors that are taken into consideration in 

determining whether the public interest would be best served and 

therefore deciding whether the exchange should go forward. 

Mr. SHADEGG. Certainly local support expressed by community 

leaders, State and local officials, and organizations would indicate 

that kind of support, I take it? 

Ms. LEWIS. I would imagine that support for a particular exchange from community leaders, local leaders, et cetera, would be 

one of the considerations used in determining whether the public 

interest is well served. 
17 

Mr. SHADEGG. Those would be factors you would think would be 

appropriate for the BLM to look at. 

Ms. LEWIS. I would, yes, under the standards set forth. 

Mr. SHADEGG. I notice on page 11 in your report on the section 

called "Summary," you pretty clearly identified that in the-and as 

I understand it, there are three exchanges you reviewed. There 

were instances where it appears that the purchaser or the private 

party involved in the exchange was not an end user; that is, they 

immediately double-escrowed or flipped the property; is that cor- rect? 

Ms. LEWIS. That is what we found, yes. 

Mr. SHADEGG. Is that something that you find common in 

abuses-in exchanges where you have found abuses? 

Let me state it differently: Is that a problem you identified in 

each of these three investigations regarding these three exchanges. 

Ms. LEWIS. I don't know that it was in each of the three. I know 

it was in at least one of them. 

Mr. SHADEGG. Your report talks about being in at least two of 

them. It talks about 70 acres sold for an exchange value of 

$763,000 to the private party and sold by the private party for $4.6 

million on the same day. And then it refers to another transaction, 

40 acres acquired in the exchange at an exchange value of 

$504,000, also sold on the same day for a million dollars. Ms. LEWIS. I am made to understand that these were in two of 

the exchanges. And let me just clarify one point. One of the values 

of looking at resale values is to come to the conclusion, at least we 

did, that maybe this appraisal process isn't working the way it 

should work, because if the resale value is so much higher than the 

appraised value, once again you are relying on a system that 

doesn't appear to be serving the process as well as it should. 

There is nothing, obviously, that precludes somebody from receiving the land as a proponent and then turning around and selling 

it if they choose to do that. There is nothing in the law that prevents that, but I think it points up the problem with the appraisal 

process. Mr. SHADEGG. If, in fact, there were significant local support for 

the exchange, and, it is indicated, support by the community for 

how the private exchange-private party involved in the exchange 

was going to use the property, that is to do the thing set forth in 

43 CFR, meeting the needs of local residents through their use of 

the property or aiding the needs of the State and local residents 

and their economy through the use of the property, that certainly 

would solve or address this concern where somebody acquires the 

property and apparently does not fully disclose what they are going 

to do with it immediately or how they are going to end use it; 

would it not? 

Ms. LEWIS. I am not sure I understood your question. Are you 

asking me whether, if individuals were required to indicate what 

they were going to do with the property, whether this would address that problem? 

Mr. SHADEGG. Your report indicates, for example, that the landone of the criterias you recommend, you say the Bureau should ensure the land to be acquired is in conformance with an approved 

land use plan. If, for example, the party acquiring the land is, in 
18 

fact, going to use it pursuant to an approved land use plan and has 

gotten local support from elected officials for that use in conformance with the land use plan, would that not at least suggest to you 

that it is being used in conformance with the land and that it is 

meeting those criteria of the law? 

Ms. LEWIS. I think we are mixing two different things here. The 

Bureau has to ensure that the land that it is acquiring is in conformance with approved land use plans. That is to say that the 

land use plans are supposed to address the types of properties that 

would support mission-related needs; for example, habitat, environmental considerations and so forth. The Bureau needs to make 

sure whatever lands it is acquiring are,. in fact, in conformance 

with these plans, as sort of a guarantee that it is obtaining land 

that supports its mission-related needs. 

Mr. SHADEGG. You are saying in that regard that the Bureau 

needs to look at the land it is acquiring and be sure that it fits 

with a land use plan if there is an existing land use plan. 

Ms. LEWIS. Yes, and there is supposed to be an existing land-use 

plan, according to the applicable regulations. 

Mr. SHADEGG. And it adds value to the BLM for whatever mission it has for that particular land? 

Ms. LEWIS. That is correct. Mr. SHADEGG. You indicated that-I think you just made the 

statement a moment ago that you were looking at a failure to comply in these exchanges with regulations by the Nevada regional office; is that correct? 

Ms. LEWIS. Nevada State office, yes. 

Mr. SHADEGG. You did not look at any failure to comply by BLM 

officials at a different level of government; for example, at the Federal level in VVashington? 

Ms. LEWIS. To the extent that there was a failure to comply with 

the regulations, wherever that failure occurred, would have been 

reflected in our report to the extent that we detected that failure. 

Mr. SHADEGG. My question is did you detect any failure at the 

Washington level, or was it, as you said in your statement, failures 

at the Nevada State office level? 

Ms. LEWIS. VVhat we detected was at the State office level, yes. Mr. SHADEGG. Thank you very much. I have a series of policy questions I want to ask, and I am not 

sure if you are the right person to ask them, and I will ask them. 

If you think they are not appropriate for you to answer, maybe can 

you direct someone else and BLM--or direct someone else at BLM 

who can provide the committee with answers. 

Ms. LEWIS. I will do my best. 

Mr. SHADEGG. It seems to me it would be helpful in the degree 

to which that BLM, whether it is a regional office or BLM Washington, would be interested in knowing and be influenced by, for 

example, the support of State, county and local authorities for the 

exchange. That is something that it would, in fact, be interested in 

knowing, I take it, and that support would add to the reason to 

proceed with an exchange; would it not? 

Ms. LEWIS. Under the criteria that is set for determining public 

interest, I would think that would be one of the things that could 

be considered-that would be considered, yes. 
19 

Mr. SHADEGG. That would be true for support from an environmental organization, community support? 

Ms. LEWIS. I want to make clear I can't respond as to what BLM 

actually takes into account. If that is the focus of your question, 

then I am the wrong person to be asking. 

Mr. SHADEGG. Is it, however, from what you understand of the 

law, because that is your obligation, one of the things BLM should 

be looking at in that it is one of the criteria set forth in the law? 

Mr. GRAVES. The land exchange process is a public one. Local 

publications identify the proposed exchange and solicit comments 

on it, so to that extent anybody, any agency, any individual who 

is interested in providing comments can provide them, and they are 

considered to one degree or another by the Bureau. 

Mr. SHADEGG. And indeed they are also required to be considered 

under the regulations we looked at earlier which require BLM to 

look at meeting the needs of State and local residents and their 

economies. That is a direct quote out of regulation. So that would 

fit with that specific--

Mr. GRAVES. Yes, to the extent they receive comments from the 

local jurisdictions. 

Mr. SHADEGG. [continuing]-that fit within the category of meeting the needs of State and local residents. 

Mr. GRAVES. Yes. 

Mr. SHADEGG. Similarly, the economic impact of an exchange 

that benefits the community would fit within that criteria as well; 

for example, create jobs or housing. 

Ms. LEWIS. Yes, I believe that is all part and parcel of the impact 

on a particular community. 

Mr. SHADEGG. Let me just kind of conclude by asking so far as 

you understand it, what you had in these cases, I believe there are 

three points you make. One is that in some instances there was a 

faulty appraisal process. 

Ms. LEWIS. I am sorry, it was a--

Mr. SHADEGG. A faulty appraisal process with regard to the three 

exchanges that you reviewed? 

Ms. LEWIS. Yes. 

Mr. SHADEGG. Second, there is an indication that the BLM acquired land that was not consistent with a land management plan? 

Ms. LEWIS. Approved land-use plan. 

Mr. SHADEGG. The third one; that is, BLM exchanged land that 

should have been sold under the existing Santini-Burton statute. 

Let's take the first two: Clearly in some instances in these exchanges there were regulations that were not complied with, correct? 

Ms. LEWIS. That is correct. 

Mr. SHADEGG. One of your recommendations is that, of course, 

the Nevada office should be complying with all regulations for such 

an exchange. 

Ms. LEWIS. Yes. 

Mr. SHADEGG. You would agree with me, however, that if all the 

regulations have been complied with, that these exchanges are in 

many instances extremely beneficial to the community and to the 

Federal Government? 
20 

Ms. LEWIS. Are you asking whether as a general matter I believe 

exchanges are beneficial? 

Mr. SHADEGG. Right. 

Ms. LEWIS. I think they have a lot to commend them, certainly. 

Mr. SHADEGG. So when the regulations have been complied with 

and a property value has been established, then there is no reason 

so far as you know under the law that such an exchange shouldn't 

go forward? 

Ms. LEWIS. Assuming that it is in compliance with all the applicable laws, rules and regulations, as the Inspector General's Office, 

we certainly would have no objection. 

Mr. SHADEGG. And particularly with regard to valuation, so that 

wasn't what happened in these exchanges, and that is a clear indication within perhaps minutes of the sale or the exchange that the 

value was not properly established? 

Ms. LEWIS. Well, once again we get to the valuation issue, and 

that is the crux of the problem. You know, we have several examples of situations where there is one value for the property, and 

then there is another, and maybe there is a third. I cannot sit here 

and say that because a particular individual appraiser comes in 

with a particular value that it is necessarily the right value. I don't 

know that anybody can. 

Mr. SHADEGG. I am not suggesting that you do that. Indeed, 

valuation is somewhat subjective. What we have to do is do our 

best to establish a proper value, and once we have done that, or 

once BLM has done that, then it ought to proceed with the exchange, and hopefully it obtained it-assuming all the other regulations have been complied with, it has followed the rules, and the 

exchange should go forward, and hopefully the proper value was established and used. 

Ms. LEWIS. Assuming that all the laws, rules and regulations are 

complied with, then from the Inspector General's perspective there 

would be no basis for us to say that there is a problem with the 

exchange. 

With respect to the policy ramifications, we don't normally get 

into the policy issues. I would restrict my response to the question 

of whether as the Inspector General's Office we would have a problem with a particular exchange. Assuming it complies with all the 

applicable laws, rules and regulations, the answer would be no. 

Mr. SHADEGG. I appreciate that very much, and I think that is 

a perfect way for me to conclude my questioning. In my view, the 

policy is pretty well set forth in the statute, and it makes it quite 

clear that exchanges can be extremely beneficial both to the government and the private parties and local economy, and where they 

are-where they meet those criterias, and regulations have been 

followed, and, in fact, people, by following the regulations, have 

done a genuine and fair effort to establish the correct market value 

as close as can be achieved, then it is the policy, the law, that the 

exchange go forward, and I think that is for the benefit of everyone, and I would hate to see exchange stopped. 

Thank you very much Mr. Chairman. 

Mr. ENSIGN. The other gentleman from Arizona, Mr. Hayworth. 

Mr. HAYWORTH. I thank the gentleman from Nevada, and I am 

pleased to be known as the other gentleman from Arizona with my 
21 

colleague here. We share the experience of red-eye flights, but not 

the same air carrier, so that is why there may be a difference in 

wardrobe this morning. 

From the gentleman from Nevada, I know that both Arizona and 

Nevada share the distinction of being States with lots of sand and 

very little surf, and yet this morning as I heard the line of questioning from my colleague from Arizona, and I am aware of your 

concerns, it seems that there is a new form of flipper involving not 

a dolphin, but those who would flip land for a quick buck. 

I think we just need to go on the record, Inspector Lewis. I just 

want to ask you this: Aren't we just asking for trouble when we 

don't encourage end users, the folks who actually create jobs and 

pay most of the taxes, to participate in the process, and on the 

other hand roll out the red carpet for land speculators when these 

same-day profits may rightly belong to the taxpayer? 

Ms. LEWIS. I am sorry, I am not sure I understand. 

Mr. HAYWORTH. I am saying in other words, based on criteria 

that has been established here citing the statutes that exist, there 

seems to be a very fundamental guideline that these land transfers 

should be for the public good. The public good may be defined as 

economic development in terms of job creation; may be defined as 

long-term interest of those who are participating in the land exchange. 

I am just wondering from your point of view and in terms of the 

context of reasonableness, aren't we asking for trouble if we simply 

allow the flips to go on without taking the long view of who really 

has an interest in economic development, who really has an interest in accommodating environmental concerns, who really has an 

interest in the community in the area in which the exchange is 

going on as opposed to the quick-buck artist? 

Ms. LEWIS. Certainly to the extent that the policy behind the 

statute is not being well served, then certainly there is a need to 

ensure that the policy is well served. 

Mr. HAYWORTH. I think, Inspector Lewis, I realize the difficulty in terms of trying to answer encyclopedically any number of issues 

that may come before you, because as you pointed out, there may 

be a difference in your responsibility in terms of exactly what you 

oversee with some of the questions that develop today. Nonetheless 

I would like to formalize something that my colleague from Arizona 

brought up, and I will ask it of you, and if there are others here 

from BLM, I would like to have some response from the appro- priate members. I would be most interested in being advised within 5 days in 

writing how the exchange priority system in Nevada works. Specifically I would be interested in knowing how the following impact 

the priority system, if at all: Number one-and again it echoes 

what my colleague from Arizona said, but I want to formalize 

this-number one, the support of Federal, State, county and local 

authorities for an exchange; number two, the support of environmental organizations for an exchange; number 3, the potential impacts to thousands of employees, contractors and vendors for an exchange; and number four, the clear request of a State's congressional delegation that an exchange be afforded expedited treatment 

as a matter of fairness. 
22 

Because I believe those four criteria form the foundation for what 

has been expressed in terms of the statute, and I would just like 

to see, since we talk about a discrepancy between what is going on 

in the Nevada regional office as perhaps the course of action taken 

here in Washington, or, as my colleague from American Samoa suggested, throughout the system of regional offices, I think it is very 

important both philosophically and economically to engage this performance based on these four criteria. 

Ms. LEWIS. I think that that question would be more properly directed to the Bureau of Land Management because they are obviously the ones that set the priority and make the determinations 

with respect to that issue. 

Mr. HAYWORTH. Forgive me as the gentleman here-we are new 

to this place. I don't know what congressional protocol demands, 

but I would take it there are officials from BLM who could help us 

with that, and if it is within your purview to pass this request 

along for us. 

Mr. ENSIGN. Is there anybody here from the BLM that would like 

to step forward and say they will have the gentleman from Arizona's question answered within the next 5 days? 

Would you just step forward and identify yourself for the record. 

Mr. HAYWORTH. Enter and sign in, please. 

Mr. ENSIGN. Would you identify yourself for the record at the 

microphone, please. Ms. MORRISON. Nan Morrison. I work in the BLM legislative office. 

Mr. HAYWORTH. Ms. Morrison, thank you very much. We appreciate that, and also any advice my dad gave me about volunteering. 

I thank you very much, and thank you, Inspector Lewis, for your 

time. 

I think it is important, Mr. Chairman, to articulate these criteria 

to see what has happened in the past because I think it has great 

bearing on what can happen in the future, and I appreciate your 

leadership on this issue, and with that I yield back the balance of 

my time. 

Mr. ENSIGN. Just to let you know, we will be going for another 

round of questions. However long we need to stay here and get our 

questions answered, we will stay. I still have several other questions, and I do want to follow up on the lines that both of the gentlemen from Arizona have talked about. 

I have a letter from the Bureau of Land Management that I had 

officially asked, along with Chairman Hansen and Chairman 

Young, for a halt to the exchange process, a moratorium basically. 

This was right in the whole process of the exchanges in your audit 

report which was pending, and there was a draft audit report, I 

guess, that had been leaked. · [The letter may be found at end of hearing.] 

Mr. ENSIGN. Then there was a report in the Las Vegas papers 

about this exchange that had gone through that reportedly had included sand and gravel rights that was going to be worth millions 

of dollars. And so I had asked for, at this point, a moratorium on 

the land exchange process because it appeared anyway that the 

taxpayer was getting shorted on fair market value. 
23 

Let me read just a little bit of their-the BLM's response. Basi- cally they rejected the request for a moratorium. Some of the reasons they stated in there because-and I will make this letter part 

of the record today-but it says because of the high demand in the 

Las Vegas Valley, "BLM has instituted several procedural and policy changes to set priorities on exchange proposals, to streamline 

the paperwork process, to improve coordination with local governments, to improve management of the land · exchange process and 

to assure that the public receives a fair value for land exchanges." 

The county commission has approved-has put a partial moratorium other than six prioritized land exchanges going on in the Las 

Vegas valley. There has been a lot of work, and the letter statesrefers to these six exchanges as well. 

The question, I guess, to you today-and I don't know if you feel 

qualified to answer this-there are a lot of interests-locally there 

is local environmentally sensitive lands that we would like to see 

into the-obviously into the public trust. There are some business 

concerns that are going on. 

The question is do you feel that the BLM can go forward with 

this process, with the recommendations that you have brought forward, with what you have seen going on right now, with their responses? Do you feel that these six exchanges prioritize, you know, 

for greatest need and greatest concern to the local governments 

could go through and a taxpayer as quoted here receive a fair value 

for the lands exchanged? 

Ms. LEWIS. I do not believe that the results indicated in our 

audit report require a moratorium on land exchanges. We did not 

come to that conclusion. We believe that there are problems with 

the process that need to be addressed and that should be addressed 

as promptly as possible, but I would not go so far as to say we have 

concluded that there is a need for a moratorium on land exchanges. 

Mr. ENSIGN. Conversely if you don't think there is a need for the 

moratorium, are you indicating that you think that the six exchanges could go through and the pending exchanges could go through under close scrutiny that would allow the taxpayer to 

get-the public to receive the fair value for the land exchanges? 

Ms. LEWIS. Three of the four exchanges that we looked at are al- ready completed. 

Mr. ENSIGN. Correct. I am talking about the six that are pending 

at the County Commission that they have been talking about. I 

know you have investigated it. We have six pending in Las Vegas Valley. My question basically is based on the response from the BLM, 

the BLM feels that they have put into place the recommendations 

that you have indicated for these six exchanges to go through and 

for the public to get fair market value for the land. 

I guess my question to you-and that is why I didn't know 

whether you feel qualified to answer-do you feel that the BLM 

can put forward what they are saying they can put forward that 

would ensure that the public would get fair market value based on 

the recommendations that they are putting into place? 

Ms. LEWIS. I cannot answer that question. Mr. ENSIGN. OK Several other questions that I have for you. 

First of all, in the Galena Exchange there is a question of the 
24 

money that is still owed to the Federal Government as far as your 

report was concerned. First of all, has this money been paid back 

to the government? And also, why was the proponent in this exchange allowed to exceed the 25 percent ceiling of the money owed 

to the Federal Government for the exchange, and did you find any 

justification for that? 

Ms. LEWIS. Our audit concluded in May of 1995, so we don't have 

anything in the report that would indicate what happened subsequent to that time period. As of May 1995, there was still an outstanding balance of $8.9 million, but I don't know what has happened since that point in time. 

Mr. ENSIGN. Was interest being charged on this money that was 

owed? 

Mr. GRAVES. There is no basis in any agreement for an interest 

assessment by the government. Mr. ENSIGN. We are talking about that, and it was a 9-month period of time, correct? 

Ms. LEWIS. It was over 9 months, yes. 

Mr. ENSIGN. At the very minimum, we have a company that has 

$9 million, interest free? 

Ms. LEWIS. That is the result, yes. Mr. ENSIGN. Interest on $9 million is not exactly chump change. 

That is a significant amount of money for anybody who has been 

in business. You are talking about a very, very significant amount 

of money. Even just a reasonable 7 or 8 percent interest on money 

would be-and you are not going to be able to get that low of an 

interest rate on land speculation. 

Anybody that is in pure land speculation knows they are going 

to pay a pretty hefty premium interest rate, if they are going to 

be able to get that; and so we are talking about a major shortfall 

that was not eventually indicated in your report as far as a dollar 

figure that was on it, but the taxpayer clearly in this case has been 

basically shortchanged, potentially a couple million dollars. 

Ms. LEWIS. Let me respond to one earlier point that you made; 

then I will continue to comment. 

You mentioned exceeding the 25 percent value. We found that 

they had exceeded it, I believe for a 3-week period of time when 

one of the transactions were going forward. Our findings-we did 

not find that they exceeded that 25 percent maximum in any other 

period of time up through at least May of 1995. 

The regulations are such that these "assembled exchanges," as 

they are called, where there are multiple transactions, allow for 

this kind of carrying of a balance. There is a little bit of an inconsistency. On the one hand, the law and the regulations talk about 

trying to ensure that the land values are equalized to the greatest 

extent possible. If you just look at that portion, your conclusion 

would be-to the extent that they were not contiguous pieces of 

Federal land that were being exchanged, you could exchange them 

as the private land is available. 

Mr. ENSIGN. Did they justify to you why they did not do that? 

Ms. LEWIS. Based on the information that we have, there was an 

indication that the parties expected more private land to be forthcoming. Apparently, there were willing and available buyers for the 
25 

Federal land; they expected private land to be forthcoming, and I 

don't know, for whatever reason, it was not. 

Mr. ENSIGN. Who told you that and who do they say were the 

willing buyers? Do they have any documentation to justify that? 

We are talking about millions of dollars here to the taxpayer, just 

this interest charge. 

Mr. GRAVES. There were a number of exchange proposals and the 

exchange agreement identifies a number of private properties that 

potentially would be conveyed to the Federal Government in exchange for the land in Las Vegas. Some of those had been acquired 

by the Federal Government at the time the work concluded in May, 

others had not. 

It would have been some of those additional properties that are 

identified, but had not yet been acquired that we were being told 

about; and yes, we were told that by the Bureau of Land Management realty specialist, that the reason for providing more Federal 

land was that they expected some of this additional private land 

to come to the Federal Government shortly, but it hadn't happened 

yet. 

Ms. LEWIS. If I could, I just wanted to finish the other point I 

was making about assembled exchanges, which is that the regulations are such that I believe it requires equalization within a 3-

year period. So on the one hand, while there is a legal requirement 

that . the Bureau should try to equalize the exchangs as much as 

possible at the outset, the regulations permit carrying a balance 

over a period Of time up to 3 years. So you are sort of between 

those two principles as set forth in the applicable law. 

Mr. ENSIGN. So if you are allowed a land exchange, you would 

basically have interest-free carrying charges for up to--depending 

on how-what happens at the BLM office, you could have interestfree carrying charges for quite some time, especially on significant 

amounts of money? 

Ms. LEWIS. Conceivably that could happen, although the regulations are such that the first thing that is supposed to be attempted 

is equalization. 

Mr. ENSIGN. "Supposed to," and that happened here; they did not 

coincide, what was supposed to happen. And they easily had the 

option because the noncontiguous land tracts we are talking about 

here, it would seem to me, in the best interests of the taxpayer, because of the amount of money in interest carrying charges, can be 

applied to this money-that easily those lands should have been 

kept out. 

Ms. LEWIS. We made that point in the a1,1dit report, saying that 

we thought there was a problem here with respect to equalization. Mr. ENSIGN. Thank you. A couple of other quick questions on 

this. 

There was a copy of an interagency report that you reference regarding the Galena Resort. Do you have--can you provide us with 

a copy of that? 

[The report may be found at end of hearing.] 

Ms. LEWIS. Just to make sure that we know what you are referring to, Congressman, are you referring to the competitive exchanges and--

Mr. ENSIGN. Yes. 
26 

Ms. LEWIS. Yes. OK, we will make that available. Mr. ENSIGN. I have some correspondence from a Mr. Charles 

Hancock. Are you familiar with Mr. Hancock? 

Ms. LEWIS. Yes. 

Mr. ENSIGN. Mr. Hancock was for 16 years the chief appraiser 

of the State of Nevada. He has concerns that he has expressed to 

the Inspector General, actually quite well documented, and a lot of 

his concerns, from what I read, has turned out to be what your 

audit report turned up. 

I guess my question is-to the Inspector General's Office is, first 

of all, why weren't-why didn't this investigation happen sooner? 

His recommendation-his documentation in a lot of these problems 

have been going on for several years. It would seem to me that last 

year a lot of this was done in response to Chairman Hansen's request, at my request, but he documented a lot of similar types of 

problems that you came up with and wrote those to the Inspector 

General. 

I guess my question is, why, or can you explain what the Inspector General did with his request? 

Ms. LEWIS. To the best of my knowledge-and this predated my 

arrival as the IG-we received some correspondence from Mr. Hancock regarding various concerns about the land exchange program; 

and we responded, indicating that we would be taking a look at the 

program, the land exchange program, and in particular the types 

of concerns that he had. 

So this was, I believe, sometime in the early part of 1995, if I 

am not mistaken. Then it was put into our audit planning process 

to go ahead and conduct this audit. Mr. ENSIGN. So you felt that you were responding to his-just 

part of the time-process that it sometimes takes you-you felt you 

were taking his concerns into account and were responding to his 

concerns? 

Ms. LEWIS. Yes, that is correct, because as I said, the office received the correspondence from Mr. Hancock and responded to him 

as well, indicating that we would be conducting a review of the issues. 

Mr. ENSIGN. Does the gentleman from California, Mr. Doolittle, 

wish to inquire? 

Mr. DOOLI'ITLE. In your draft report, on page 19, there is a paragraph that reads in part-it says, quote, "There was significant 

congressional interest in the Bureau acquiring the property"-this 

is the Galena property-"for the U.S. Forest Service to manage. 

The congressional interest appears to have resulted in taking additional measures to quickly accomplish the exchange," end of quote. 

Then it goes on to talk about how that interest was expressed. 

I guess my question is, why was that paragraph deleted from the 

final report? 

Ms. LEWIS. Let me approach that by describing for you what the 

audit process is that we have in the office. 

The report to which you are referring was a preliminary draft. After the field work is done for an audit, a preliminary draft document is prepared and that is done principally to facilitate the conduct of audit exit conferences. The Bureaus believe that the conferences are more productive when they have a working document 
27 

which they can review and talk to the auditors about during the 

course of the conference. So we prepare that preliminary draft principally for the purpose of the conference and to have a document 

from which the auditors can speak in discussing with the Bureau 

personnel the direction that the audit appears to be going, based 

on the field work that has been conducted. That draft is a very preliminary document. 

It is not only a very preliminary document, but it is a working 

document. It is a document that goes through substantial revisions, 

because once the conference is over, the auditors start to prepare 

what will ultimately be a formal draft report that goes out to the 

bureaus formally, for them to provide a response. 

In going from the preliminary to the formal draft, the auditors 

in the particular region go through numerous drafts, and they go 

through these drafts making changes, as appropriate, in order to 

come out with what they believe is the most accurate product, the 

clearest product, the most thorough product, et cetera, et cetera. It 

is a document that is fully supportable, based on the information 

that they have gathered during the course of field work and so 

forth. 

So the document goes through a number of drafts within the region itself. The region then submits its proposed draft to headquarters, and the draft goes through several layers of review at 

headquarters, including through the Assistant IG for Audits and, 

ultimately, through me. 

When I get a draft, I am a cold reader of the draft and I read 

it for purposes of satisfying myself-in effect, not knowing what is 

in the work papers or what is not in the work papers-satisfying 

myself that the report hangs together; conclusions follow from the 

facts that we have laid out; the recommendations make sense in 

light of what we have in the report; it is clear; it is thorough; 

whether there are any holes or gaps in the document, as I read it 

as a cold reader, that don't make sense to me; and so on and so 

forth. So I am part of the review process as well. 

I have said all of this basically to say that the preliminary draft 

that you cited was a very, very early document, and between that 

and the final there are numerous drafts. The process of getting 

from the preliminary to the formal draft and, ultimately, the final 

document, which also goes through numerous revisions as well, is 

designed to ensure the accuracy, the thoroughness, the clarity, the 

supportability of the final audit report. 

So changes are made; that is part of the review process and in 

this case, that particular change was made. 

I know you have asked me why the particular change was made, 

and I guess I would like to express my concern and suggest caution 

with respect to those types of questions. 

My concern is one that is based on the integrity of the process, 

which I think, with all due respect to the Congressman, is compromised to the extent that the IG's Office has to come before a 

committee and explain why a particular phrase was left in or taken 

out from one draft to another. The process is such that auditors in the field, for example, are 

required on a regular basis to make judgments, and they make 

those judgments, when they come out from the field work to start 
28 

working on drafts. And I think it could have a real chilling effect 

on GS-11 or -12 or -13 auditors in the field if they believe that, 

as a result of a phrase or whatever they might put into an early 

draft of an audit report, several months later they can come before 

a congressional committee and have to explain why they put it in 

initially and why they took it out after that. 

I think it could have a chilling effect on the process. I think it 

could compromise the integrity of the process. I think auditors 

might decide, I am not going to write down anything until I am absolutely sure. And I think that would interfere with the ability to 

put early thoughts on paper, and revise them as is appropriate and 

move forward. 

I have real concerns, and I thought I should express those concerns for the record with respect to this type of questioning. 

I will say to you that this audit report-or the preliminary draft, 

because it was an unauthorized disclosure-got lots of publicity, 

probably more publicity than most audit reports have prior to the 

time of disclosure of a final audit report. Notwithstanding that, this 

audit, like all the other audits we prepare, was done-and we take 

our job seriously-without any influence by anybody outside the 

IG's Office. 

With respect to the question of the congressional interest issue, 

and I assume you want me to answer the question, so I will answer 

it. However, I wanted to register my concern for the record with 

respect to the congressional interest issue, because that reference 

was in a preliminary draft. 

I never saw that preliminary draft because I normally don't get 

into the process that early; but I did see a subsequent draft in or 

around January or so of 1996, which was a few months after the 

preliminary draft, that had the same language, or similar language 

in it. I don't believe it was the same, but it was similar. It mentioned the congressional interest issue. When I did my markup on the draft that I received in January 

of 1996, I had a teleconference with the auditors in the field; and 

I was going through my comments about the report, and one of 

them was the congressional interest issue. 

I said to the auditors that I would like to see whatever support 

we have for that statement in the audit report itself, and if we 

don't have support for the statement, then we shouldn't be making 

those statements. So I basically turned it back to them and said, 

go back and look-if you have support, I want to see it in the report; if we don't have support, we shouldn't be making that statement. 

When they took it back, ultimately it came out without the statement and I relied on their professional judgment to go back and do 

what they do on a regular basis, which is to look at the documents 

and the work papers, decide whether there is sufficient support for 

a particular statement and proceed accordingly. 

So it was a judgment, made in the field, following my comment 

to them about whether there was support for that statement, that 

resulted in taking out that statement from the report. 

With respect to that statement, there was a concern that I hadand others, actually, within the review process-which was whether there was going to be a causation issue suggested from the 
29 

statement. That is, as a result of congressional interest, these problems came about. And, I think you read the sentence, and it can 

lead to that kind of a conclusion; and that is why I wanted to make 

sure that if that was a conclusion we were coming out with, that 

in fact there was support for it and we indicated that support in 

the audit report. 

I was informed by the auditors, when I was preparing for this 

hearing during the course of the past several days, that when they 

took it back and looked at it in the field, they came to the conclusion that they did not have support to draw that nexus-that is, 

a causal relationship between congressional interest and the problems. Ultimately that is why they made the call to take the sentence out. 

Mr. DooLITTLE. Would it be fair to say then that they are withdrawing this comment because it says in the report that congressional interest appears to have resulted in the Bureau taking 

added measures to quickly accomplish the exchange? The measure 

included one assigned field special assistant to the director, located 

in Boise, Idaho, to oversee the exchange and serve as liaison, the 

Assistant Secretary for Policy Management and Budget; and two, 

moving responsibility for the process in the initial transaction involved in the Galena Resort property from personnel in the Nevada 

State office to those in the California State office. They are quite 

specific and that has all fallen out of the final report. 

Ms. LEWIS. To the best of my knowledge, from what I have 

learned from the auditors, those facts are not incorrect, that is, the 

facts you have read in-I believe there might be three of themthat are not incorrect. Those are correct facts. 

The issue, however, was the first part of the sentence, the linkage of the congressional interest and how that was being linked to 

the added measures, and how the added measures, in turn, might 

be linked to the problems at hand. And the question that the auditors were grappling with in response to my comment to them about 

putting in the document whatever support we have was whether or 

not you could really draw that nexus as neatly as was suggested 

there-that is, one sort of causing the other and the other causing 

the third. 

So the facts are not incorrect; however, it was taken out because 

of the possibility of drawing the nexus, and the conclusion was 

reached out in the region that we did not have sufficient support 

to draw the nexus between those various facts. 

Mr. DOOLI'ITLE. Do you know who or what was meant by the 

term "congressional interest"? 

Ms. LEWIS. I was told by the auditors in preparation for the 

hearing that there were two letters from Congress that were in the 

work papers; and as they were going through their analysis of 

whether or not they had sufficient support for their references to 

"congressional interest," they looked at those letters. Other than 

comments from the Bureau, the actual documentation they had 

were these two letters. Both of the letters predated the exchange 

by about 3 years, and I guess that suggests that it didn't really reflect expedition. The other thing was that--

Mr. DOOLITTLE. That is fast for the Bureau. 

Ms. LEWIS. I hope not but you might be right. 
30 

The other thing about the documents is that they refer to an 

area that still has not been consummated as part of an agreement. It referred to 7500 acres of Las Vegas land that up to now has not 

been part of an exchange agreement. And the proponent for the exchange that was mentioned in one of those two letters_ did not end 

up being the proponent for the exchange. I think as they were 

going through deciding whether this documentation was sufficient 

support for the statement that they had, they also analyzed those 

three facts and determined that this really wasn't the kind of support that they are willing to rely on to make the statements in the 

report regarding congressional interest. 

Mr. DOOLITILE. Can you tell us the identities of authors of those 

letters? 

Ms. LEWIS. We have the letters here. One letter is a letter dated 

June 26th, 1991, to the then-Secretary of the Interior, Manuel 

Lujan, and it is signed by Harry Reid, Richard Bryan, Barbara 

Vucanovich, and James Bilbray. The second letter is dated November 7th, 1991, and that also is 

addressed to the then-Secretary Manuel Lujan, and it is signed by 

Harry Reid, James Bilbray, and Richard Bryan. 

Mr. DOOLI'ITLE. So in the case of the one letter, that was the entire Nevada congressional delegation as it then existed, and in the 

case of the second letter it was the entire delegation minus Mrs. 

Vucanovich, I guess. Ms. LEWIS. That appears to be the case, yes. 

Mr. DOOLITTLE. Whom were the letters directed to, which official 

at Bureau of Land Management. 

Ms. LEWIS. No, they are. addressed to the Secretary-the thenSecretary Manuel Lujan. 

Mr. DOOLITTLE. Who at the Bureau of Land Management felt 

that this was material that should be included, I guess if you 

know? 

Ms. LEWIS. I am not sure I understand your question. 

Mr. DooLITTLE. Do you have in your reports any local BLM official that was involved with that congressional delegation, for example, in advising them how to do this? 

Ms. LEWIS. In other words, you are asking whether or not we are 

aware of any Bureau of Land Management officials who were advising the delegation--

Mr. DOOLI'ITLE. I guess what I am trying to get to is how did 

this-obviously the authors of the draft, I know you have explained 

the criteria used, by which this was taken out, but the original authors of this draft thought that this was significant and then this 

was dropped out. I am just wondering why did they think it was 

significant as far as you know? 

Mr. GRAVES. I was probably the original author of that statement 

as the auditor in charge. You will note I think that it says that it 

appears. That in itself is an indication that it wasn't based on a 

tremendous amount of solid documentary evidence. It is probably 

a function of the process itself. 

I write my report to include a lot of items, anything that I might 

think is significant or that appears to me to be significant or bears 

upon the finding and the issue that I'm talking about, but that 

doesn't mean that I expected all of those will eventually run 
31 

through the process. The process itself, with reviews beyond me in 

the office in Sacramento and in the office in headquarters, almost 

always results in a certainty of changes, additions, and deletions. 

So the answer is probably that I write a lot of things in a preliminary draft report in an attempt to cover everything and provide as 

much information forward as possible. 

Mr. DOOLITTLE. Did you at some point conclude there wasn't this 

kind of congressional interest? 

Mr. GRAVES. I concluded that I didn't have the documentary support to make that statement and to have it interpreted the way 

that I wanted. It seemed that what it was saying to every cold 

reader who looked at it was that congressional interest results in 

problems. I was not trying to say that. All I was trying to say was 

that we found a problem. 

What we were told by the Bureau people was that some of the 

problems we were identifying had to do with the fact that they 

were working hard and fast to do the exchange, and part of the 

reason for that was that there was a lot of visibility on this exchange. That is all I really was trying to say. When it got writtenit got to that point in time everybody who read it kind of focused 

on the two things you are focusing on also, and that really wasn't 

my intent in writing it. 

Mr. DOOLITTLE. I am looking at it and seeing a congressional interest produced, special personnel and expedited proceeding. I find 

that rather encouraging, frankly. 

Ms. LEWIS. There is nothing wrong with it. . Mr. GRAVES. That was one of the questions that came up. Ms. LEWIS. Bob Williams the regional audit manager is saying 

that is another reason they deleted the statement. The way it was 

drafted there was almost a suggestion that there is something 

wrong here, there is something improper about it because we are 

ultimately linking it to-or there is a possibility of ultimately linking it tcr-the problems that we have identified in the report. That 

was a concern. We didn't want to mislead the reader. 

Like I said-as Mr. Graves mentioned-when the cold reader has 

read it, and when I read it I said if we are going it make this statement, I want to make sure we have the goods and we put it in the 

report. If we don't have the goods, we have to take this statement 

out because it can be read to suggest that as a result of congressional interest these problems came into being. And, quite frankly, 

if we didn't have the support for that inference I didn't want to be 

sitting before a congressional committee having somebody ask me 

precisely the opposite questions-that is, Ms. Lewis, what was your 

support for saying that as a result of congressional interest these 

problems occurred? If we didn't have the support for that conclusion, then the statement shouldn't be in the audit report. Ultimately that was the judgment made in the field-that there was 

insufficient support for that conclusion based on what we had in 

the record, and that is why it came out. Mr. DooLITTLE. I realize I have gone on. I will ask one more 

question then yield back. 

In the letter-! wish the Bureau were here. I guess next month 

or at the break we will hear from them in another hearing; is that 

right? 
32 

OK. That is being worked on. 

Let me ask you, the letter that Mr. Ensign got from the BLM indicated there were six high-quality exchanges and that those 

three-those six exchanges were characterized by a signed initial 

exchange agreement where significant work had been completed, 

the process of the exchange and exchanges, where significant resource values would be acquired. Now, in the BLM's responses they are not going to have your recommendations, those three major recommendations implemented 

until June of next year, but I gather from the response Mr. Ensign 

got that they are proceeding ahead of time or prior to doing those 

three things or at least maybe they are doing those three things 

on these six parcels while they are working them out for the rest. 

I don't know, but it is your impression, Ms. Lewis-! think I heard 

you testify that a moratorium, in your opinion, was not called forwas it your intent that land exchange be suspended pending the 

full implementation of those three full recommendations? . Ms. LEWIS. We had not drawn that conclusion. Obviously, our 

hope was that the exchange process itself has some value too. My 

hope was these recommendations could be implemented as quickly 

as possible. 

Mr. DooLITTLE. Does that seem like this, in fact, is the track 

that they are on even though that may indeed take a year? 

Ms. LEWIS. The only information that we have-! did not have 

access to the letter that you are reading from-is the Bureau's response to our audit report with respect to the timeframes that they 

have set forth, and presumably they are trying to implement the 

recommendations as quickly as they believe they can. 

Mr. DoOLITTLE. Did the times they gave in their responses seem 

reasonable to you? I think one was competitive exchanges, was 

June the 1st of 1997, the sharing adequate controls with all the 

laws and regulations that was going to be March the 1st of 1997, 

and then guidelines required all rights-of-way be reviewed, et 

cetera, would be by October 1st of 1996. 

Was it the Inspector General's opinion that those three time tables were reasonable? 

Ms. LEWIS. We do not generally evaluate the timeframes that the 

Bureaus provide us with. To the extent that there is a period of 

time of more than a year, we generally have them give us interim 

responses with respect to where they are. But we don't usually, as 

a matter of course, assess whether or not compliance with a particular recommendation within the timeframe is appropriate or reasonable. 

Mr. DooLITTLE. Let me withdraw the word "reasonable" and you 

would use the expression "as quickly as possible." Do these three 

time tables fit within your sense of "as quickly as possible"? 

Ms. LEWIS. Obviously, we would like to see them done yesterday 

but I am not in a position to know exactly what the Bureau has 

to do in order to implement these recommendations. The most that 

we can say is we think that they are significant recommendations. 

We think they have a significant bearing on the process, so obviously from our perspective the sooner they can do it, the better. 

The competitive exchange issue, for example, is one that we continue to harp on because we continue to believe that-the way the 
33 

system works now, there is just a fundamental flaw in the system 

and that there will continue to be these types of issues and problems cropping up unless we really open the system up to more competition. That is an issue that apparently has been discussed based 

on the Bureau's response for a couple of years now, so I am hoping 

that based on those discussions, and whatever else the Bureau 

needs to do, they will get it in place as soon as possible. They have 

indicated 1997. I guess that is based on their assessment of what 

else they need to do with respect to this competitive exchange recommendation to put it into place. 

Mr. DOOLITTLE. Was it your expectation that no future land exchanges would occur without the implementation of those three 

recommendations; or rather was your expectation that some land 

exchanges would occur without those while the recommendations 

were in the process of being implemented? 

Ms. LEWIS. Obviously it would be our hope that any future exchanges incorporate the recommendations that we have made. It is 

not the case, for example, with the easement. Every parcel of land 

that is being exchanged is not going to necessarily have an easement on it, so that might be a recommendation that doesn't even 

apply to exchanges that might be in the pipeline right now. 

There are certain things like ensuring that appraisal values are 

approved by a chief appraiser. That is something that doesn't require any period of time to implement. It is something that can be 

implemented instantaneously. 

I think based on the Bureau's response, they are talking about 

reviewing all of their processes to ensure that, in fact, they are in 

compliance with the applicable rules and regulations. But it is certainly my hope that the particular items that we have pointed out 

in the audit report, to the extent they arise again in another exchange, that they would be able to do it the right way, notwithstanding the fact they might not have been completely finished 

with their entire review of their full process. 

Mr. DooLITTLE. Getting back to congressional interest where you 

have got a situation, say, where the Governor and Senators and the 

Congressmen are unsupportive of the project and carefully reviewed the-in other words, using these three criterias, which I realize you haven't seen, but you heard me articulate, would not then 

that assure protection for the parties concerned while at the same 

time not losing some of these valuable resources that otherwise 

might be lost if a moratorium were in place, which you said you 

did not feel was justified in requiring all exchanges to wait until 

the Bureau can implement everything by June the 1st of next year? 

Ms. LEWIS. Assuming that what the Bureau is suggesting with 

respect to the six pending exchanges is that they will be implementing the recommendations that we have made, in the context 

of those exchanges. That is precisely what I was referring to before 

when I said the Bureau is referring to going through and, for example, reviewing all easements. I have that page before me. To the 

extent there is an easement in a particular land exchange now, 

that is the one they need to focus on before the land exchange is 

completed. To the extent they can incorporate the recommendations 

that we have made into the pending exchanges, notwithstanding 

the fact that they might not have done a complete review such that 
34 

they can say, we have reviewed all our processes, and we can ensure all the Is are dotted and the Ts are crossed, our concerns 

would be addressed. The longer period of time for the full review 

would be understandable, but nonetheless the Bureau would be incorporating in their current exchanges the recommendations that 

we have made in the audit report. 

Mr. DOOLITTLE. I suppose the stumbling block here would be the 

issue of competitive exchange. That probably can't be complied 

with for these six. Do you see that as an insurmountable obstacle? 

Ms. LEWIS. I don't see it as an insurmountable obstacle. I just 

think there has to be a recognition by all that we are dealing with 

a system that is not a perfect system. So having said that it is not 

insurmountable, they might come out with an appraisal for a particular parcel of land, and somebody will say that is not the right 

value. Not introducing competitive exchanges is going to exacerbate 

the problem or the potential for that to come about. As long as everybody recognizes that we are dealing with an appraisal system that is not an exact science, and there can well be 

differences between appraisals. To the extent that there are, then 

the Bureau can attempt to reconcile then, particularly if there are 

differences within the Bureau itself, as was the case with the Red 

Rock Exchange. As long as we understand what we are dealing 

with under the current system, then, you are right, it is not an insurmountable problem. 

Mr. DooLITTLE. We are in transition from the old way of doing 

things to the new way. While you are in transition, it is going to 

be sort of a balancing of equity. 

Ms. LEWIS. Yes. Certainly you balance the equities in the transition, and you determine whether or not from the perspective of the 

benefits it makes sense to go forward with it, recognizing that you 

don't have a perfect system and probably never will. You have to 

decide whether the benefits outweigh the disadvantages. 

Mr. DOOLITTLE. Thank you. 

Thank you, Mr. Chairman. 

Mr. ENSIGN. Does the gentleman from Arizona wish to inquire? 

Mr. SHADEGG. Briefly, I hope, Mr. Chairman. 

First of all, I was fascinated with the discourse on the issue of 

congressional interest. And maybe my question, Ms. Lewis, is for 

your colleague. I do want to get a clear statement on the record 

there is nothing wrong with congressional interest as you perceive 

it; is that correct? · Ms. LEWIS. As we perceive it, there is nothing wrong with congressional interest, no. 

Mr. SHADEGG. Certainly BLM officials, when they get a letter, 

aren't excused from doing their job or following their regulations. 

Ms. LEWIS. Oh, no, not at all. 

Mr. SHADEGG. I guess it was your-you indicated it was your 

thought to insert that in the first place. 

You also see nothing wrong with Members of a congressional delegation, as in this case the entire delegation, expressing an interest 

in a land exchange? 

Ms. LEWIS. No. 

Mr. SHADEGG. And you would expect that the BLM officials involved would continue to do their jobs and fulfill their regulations? 
35 

Mr. GRAVES. Yes, I would. 

Mr. SHADEGG. I want to understand that-! want to make sure 

if I express interest in a transaction, I am not doing something you 

view is improper, or the mere expression of interest by me as a 

Member of Congress will cause you or BLM officials not to do your 

job or their jobs. 

I also want to follow up on the line of questioning by my colleague, Mr. Doolittle, to the extent that we can go in that direction. 

AB I understand it, you have made a reference to future exchanges, 

and. there is also the review of past exchanges. The Inspector General's Office looks only at past completed conduct; is that correct? 

Ms. LEWIS. That is not always the case. Traditionally our audits 

focus on completed conduct, yes, because traditionally auditors 

would go in after a particular program or whatever is in place and 

review that program. However, there is also opportunity to go in 

before a program is completely finished and look at it from the perspective of whether there are controls that needs to be put in place 

to make the program better, as it is being developed, and we do 

that on occasion as well. 

Mr. SHADEGG. If you were requested to, you could go and look at 

a pending exchange and do an audit of a pending exchange? 

Ms. LEWIS. We could do an audit of actions taken up to a particular point in time, certainly. 

Mr. SHADEGG. Is that normal, or is that extraordinary? 

Ms. LEWIS. I don't think we have done it in this particular context before, but we are doing more proactive work in the Department with respect to programs and activities than we have done 

in the past, under the notion that our mission is not only to detect 

fraud, waste and abuse, but it is also to prevent it. And to the extent we can get in a little bit earlier on occasion, when invited by 

the Bureau, to look at a particular program or activity and give, 

based on the expertise of the auditor, some indication as to where 

there might be problems or where they might need to put in controls to avoid potential problems, we are doing more of that kind 

of work. 

I just hesitated because I was thinking of how it would play out 

in the context of a land exchange, because obviously we haven't 

done it in this context to this point in time. 

Mr. SHADEGG. In this instance part of what you discovered is 

that existing rules and regulations governing these types of exchanges were not, in fact, followed. Rules were there. They were 

supposed to be followed. They were not. 

Ms. LEWIS. Right. 

Mr. SHADEGG. Clearly that is inappropriate. Everyone should live 

by the rules and regulations as they exist. But what you are saying 

with regard to some of your other recommendations is that you 

view it as also a part of your function to look at-I guess they 

would not be rules and regulations and laws, but rather practices 

that could be used to improve the process that are not in current 

regulation; is that right? 

Ms. LEWIS. That is correct. For example, the Tonopah Exchange 

is an example of that. We looked at that and determined that 

based on the law as written, there is nothing that prevents the Bu-
36 

reau from making a determination that it wants to exchange valuable land to get an administrative facility. That is not precluded. 

The determination is whether the public interest is well served, 

and one can make arguments however one chooses with respect to 

what is in the public interest. But in that particular case, we can't 

say there was a violation, but there was a question in our minds 

as to whether this land exchange process was really designed to acquire land for that purpose as opposed to environmentally sensitive 

land, resource value, that type of thing. That is why we have it in 

an "other matters" section as opposed to in the "Findings" section, 

because there was no finding of a violation of an applicable law or 

regulation. 

Mr. SHADEGG. I kind of want to go at the issue of-we had a series of rules and regulations and practices in the past. You made 

a series of recommendations for the future. We are not looking at 

what is going to apply to those that are currently pending. 

Congressman Doolittle referred to the interim or this hiatus between the emergence of your current recommendations and the 

new exchanges which may be begun at some point in time after 

your recommendations come forward and those that are currently 

pending, and I want to say they have some concern about changing 

the rules of the game while somebody is midway through the process. 

And in that regard let me ask, with regard to any exchange that 

was ongoing, since you are making a recommendation as to practices that would improve the process, for example, more consistently lead to a proper valuation, just as an example, it would be 

my understanding that your recommendation of that practice at 

least applied to an exchange which has already been begun would 

be satisfied not that they necessarily went back and did that practice, but rather looked at the exchange and determined that, in 

fact, the question of valuation had been properly met. 

Ms. LEWIS. I think that's right to the extent that they look at the 

pending exchange and make a determination that there was no violation of an existing law, rule or regulation; that if, in fact, they 

did it according to the applicable laws, rules and regulations, then 

that would suffice. 

Mr. SHADEGG. That is the point I want to make, and I appreciate 

that. 

My concern is this: If that is not the case, then every time the 

Inspector General reaches a conclusion that we ought to engage in 

some different practice in the future, if that means that every 

pending practice of the Interior Department has to go back at that 

point in time to when you weren't doing that and start over again, 

we are going to have the government going forward, and stepping 

back, and going forward, and stepping back. 

It seems to me that if, in fact, the recommendation in the future 

is that we should change the rules and regulations, or, as the gentleman from American Samoa suggested, change the law, that is 

well and good, and we perhaps in some instances need to do that. 

But where the suggestion is, well, this is a practice we think would 

be better, it seems to me at least for those that are pending, if you 

have established that all the rules and regulations were followed 

and that the ultimate end to be achieved, that is a proper valu-
37 

ation, has been achieved, then at least at that point you have satisfied everything the law should require for anything that is in the 

pipeline. 

Ms. LEWIS. I think that is reasonable. It seems to me that to the 

extent that there is a violation of law, that has to be corrected regardless of whether you have things in the pipeline or not. You 

need to correct that. To the extent that the recommendation goes 

more to something that is not a violation of law, but is something 

that you are looking toward improving the process in a particular 

way, then I think it is reasonable to say that to the extent you 

have ones in the pipeline, you will do it for the future. 

Mr. SHADEGG. No more questions, but that if you have a regulation that requires certain things should be done, that is not adequate, period. 

Let me go to one last point. Mr. Hansen asked you about the six 

pending exchanges, and you said that you could not know, because 

you had not reviewed them, whether or not they should go forward. 

You had also indicated that you hadn't concluded that a moratorium was necessary. 

If BLM is satisfied that it has followed all the rules and regulations, and looks at those existing exchanges and determines that 

the policy of the law has been met, and perhaps maybe even looking backward at some of your recommendations and that the goal 

that your recommendations are designed to achieve, for example, 

fair valuation has, in fact, occurred, then certainly you would know 

of no reason once that has been done why those exchanges 

shouldn't go forward. 

Ms. LEWIS. That is correct. The way our audit process works is 

that implementation issues are left to the particular Bureau. The 

Bureau reports to us, for example, that they have implemented recommendations A, B, and C. We don't know for a fact whether they 

have implemented them until we do a followup audit, and sometimes we will go in and find out they haven't implemented them, 

or they have. But implementation, following the issue of our audit 

report, is the responsibility of the Bureau. 

Mr. SHADEGG. You have got your job, they have got theirs. If 

they are satisfied they have fulfilled the law and the regulations, 

then that is their call, and they make that decision. You may or 

may not be asked to second-guess them later. 

Ms. LEWIS. That is their call until we go back in. 

Mr. SHADEGG. Thank you, Mr. Chairman. That is all I have. 

Mr. ENSIGN. Couple of other questions. First of all, in your report 

I notice that you talked about between 1992 and 1995, the six exchanges had taken place. Were those the only exchanges that had 

taken place? That is what it leads me to believe, your audit, that 

only six had taken place. 

Ms. LEWIS. During that period of time. 

Mr. ENSIGN. There were only six total? 

Ms. LEWIS. Yes. 

Mr. ENSIGN. I just wanted to clarify that. 

Second thing is on the Oliver Ranch Exchange, the 220 acres for 

the flood control basin that was where the big controversy was 

that, I think what it came down to, a little over 30 acres were actually needed for that. I just want to bring up a couple of other fac-
38 

tors under that that I don't-! didn't see mentioned in your report. 

From what I understand talking to people, that the city got the 

$400,000 cash plus other factors. One of the other factors was that 

the private company built the flood control basin. 

Ms. LEWIS. Yes. 

Mr. ENSIGN. How much is the value of that, and would that offset the law-in other words, if the city is looking at this thingwell, we will take away our right, and we know that is going to 

increase the value of the land. And so to offset that they are going 

to give us $400,000, plus they are going to build this flood control 

retention basin, and that would cost us more if we kept it. And so 

we will allow the developer to make some money over here on selling the land, because in exchange for that, they are going to build 

us this flood control retention basin. 

In other words, did the value of building that-I know it was several million dollars over here versus $400,000, but if you add on 

the value of the building, I don't know how much those things cost, 

that is why I am asking-do we know-was that asked how much 

that cost? 

Mr. GRAVES. It wasn't constructed. At the time we did our review 

there was no construction, at least to our knowledge-no, there was 

no construction at that point in time. 

Mr. ENSIGN. Was that part of the agreement? That was part of 

the agreement, they would build that? 

Ms. LEWIS. Yes. 

Mr. ENSIGN. Were there other factors or other goodies that they 

put into the pot besides just that? 

Mr. GRAVES. The Bureau provided a document in its response 

that was the agreement, and by way of looking at that document, 

it identifies the $400,000. It also identifies the cost of design and 

construction, and it may contain other items. I don't know what 

those are, and I don't have a value to attach to them. 

Mr. ENSIGN. Hopefully the BLM or somebody can get us the 

value of the construction, because something that looks rather like 

the taxpayer got shorted there may, in fact-may not have been, 

because if the value-if the cost of construction design and all of 

that at the flood control basin mitigateed the difference in the cost, 

it certainly would appear then that the taxpayer got the fair value; 

would you agree or disagree? 

Ms. LEWIS. I guess ultimately the question is whose benefit is it 

supposed to be? The Federal Government has granted a right-ofway to a city. Under the applicable regulations, the Federal Government is only supposed to grant that much land that is necessary 

to support the particular project or facility. However, under your 

scenerio, the Federal Government grants more than that, the city 

is aware that it is not going to use that excess land, but then the 

city can hold onto that, then later on enter into an agreement that 

allows them to benefit from the fact that they have gotten extra 

land in violation of a regulation. 

I am not sure it works out quite so nicely to say that the city 

got a benefit, so you reduce the amount that the Federal Government should have gotten by the benefit that the city receives. That 

is because the question is whether the city should have received 
39 

that benefit to begin with, whether it was rightfully their property 

to barter and negotiate to turn into a benefit to the city. 

I am not sure I agree with you that that would be the appropriate way to look at this unless there was a determination made 

that, yes, it was OK to have the city barter away what really 

should have been Federal property. 

Mr. ENSIGN. I guess from a person who represents Las Vegas, I 

don't have that big of a problem with that part of it if this is a 

mitigating fact. I can understand where other Members might have 

a problem with it, but I would have a serious problem if it was just 

the private developer that got the windfall. But if it happened to 

benefit the good of the Las Vegas Valley, that doesn't seem to be 

anything nefarious going on in there in the least. 

Ms. LEWIS. I appreciate your interest. Mr. ENSIGN. Overall on these exchanges did you find that the 

problems lay mostly in following proper procedures, and guidelines 

lay with the State office or the local office, and was there any connection with the Washington, D.C., office? 

Mr. GRAVES. We didn't identify a connection with anything that 

had a problem being in Washington, D.C. 

Mr. ENSIGN. So there was this D.C. involvement that you identified? 

Mr. GRAVES. No, not that I can recollect. Nothing comes to my 

mind right offhand. The decisions and the activity all took place in 

the district's resource area, the district and the State office, and 

there is a certain amount of paperwork that passes back and forth 

for approvals between those offices. So it is all within the State office because the district is a part of the State, but exactly at which 

location, I don't think I could tell you. That kind of goes back to 

your first question, who approved what. 

Mr. ENSIGN. Hopefully when we get the written responses to 

this, we can more closely determine on where some of the responsibility has laid out. 

Congressman Faleomavaega gave a talk about that one, the purpose for this. You can't say, well, the taxpayer got shorted, we really. don't know who is responsible for it. Someone ultimately has to 

take responsibility for what is going on here if the taxpayer has 

been shorted by not following proper procedures that you have outlined there. 

We need to be able to put a name and position onto who is responsible because we are talking about the taxpayer trust. And in 

the form of government that we have, the individual out there, the 

small taxpayer out there has to have their interest protected, and 

that is what your office and our office is responsible for is holding 

sacred that public trust. And we have to look out for that taxpayer, 

the little person out there that can't-that doesn't have the resources to look out for their own particular interest. 

That is what our charge is, and that is why I think it is important to find out exactly who is responsible for making some of these 

decisions. First of all, I think it can help prevent them in the future, but it can lay responsibility, because there are many, many 

qualified, competent people working within the Bureau of Land 

Management, and we don't want to broad brush, to hurt everyone's 

reputation. If it was even a few of them that made the mistakes 
40 

or didn't follow proper procedures, those people should be identified 

so the other people's good names can be protected. 

One thing I wanted to say before we close out, I don't know if 

you have more questions, Mr. Doolittle. I certainly do not, but we 

will be submitting other written questions for the Inspector General's Office. We would appreciate timely answers to those, and 

other than that, if we have nothing else, do you have any other 

concluding remarks to make, and if not--

Ms. LEWIS. Nothing further, thank you. 

Mr. ENSIGN. If not, then this hearing is adjourned. 

[Whereupon, at 12:22 p.m., the Subcommittee was adjourned; 

and the following was submitted for the record:] 
41 

U.S. Department of the Interior 

Office of Inspector General 

Testimony of 

Wilma A. Lewis 

Inspector General 

U.S. Department of the Interior 

on Audit Report No. 96-1-1025, 

"Nevada Land Exchange Activities, 

Bureau of Land Management" 

Before the Subcommittee on National Parks, 

Forests, and Lands 

Committee on Resources 

U.S. House of Representatives 

July 30, 1996 
42 

Mr. Chairman and members of the House of Representatives Subcommittee 

on National Parks, Forests, and Lands, Committee on Resources: 

I am pleased to be here today to provide testimony on an audit report 

recently issued by the Office of Inspector General involving land exchange 

activities conducted by the Bureau of Land Management, U.S. Department 

of the Interior. 

On July 15, 1996, we issued Audit Report No. 96-I-1025, entitled "Nevada 

Land Exchange Activities, Bureau of Land Management." The objective of 

our audit was to determine whether the Bureau conducted land exchanges in 

accordance with applicable laws and regulations and whether the Bureau 

received fair market value in these land exchanges. The Bureau exchanged 

approximately 710 acres in fiscal year 1993; 2,910 acres in fiscal year 1994; 

and 725 acres through May 31 of fiscal year 1995. Of the six exchanges 

processed by the Bureau from October 1, 1992, through May 31, 1995, we 

focused our review on the four largest exchanges, of which three were 

completed during the period audited and one, a multiple-transaction 

exchange, was partially completed. The Federal land exchanged in these 

four transactions was located in the Las Vegas area and was appraised at 

about $63.2 million. We did not review the two remaining exchanges, for 

which the Federal land involved had a total appraised value of only $22,900. 

By way of background, the Bureau conducts land exchanges under the 

authority of Section 206 of the Federal Land Policy and Management Act 

of 1976 (Public Law 94-579), which authorizes the Secretary of the Interior 

to dispose of Federal land by exchange when the public interest will be well 

served. Land exchanges may be initiated by either the Bureau or other 

interested parties. In recent years, the Bureau has identified about 70,000 

acres of Federal land for disposal in the Las Vegas Valley of Nevada, which 

the U.S. Bureau of Census has reported was the fastest growing 

metropolitan area in the United States between 1990 and 1994. Real estate 

development in the private market associated with this growth has created 

significant interest in acquiring this Federal land. 

The values of public and private land exchanged are established by 

appraisals that are to be conducted in accordance with principles defined in 

the "Uniform Appraisal Standards for Federal Land Acquisitions." The 

"Standards" provides for a uniform approach to addressing appraisal 

problems and prescribes requirements for adequate supporting data to 

develop justifiable market values. Specifically, the "Standards" requires that 
43 

each appraisal be carefully reviewed by a qualified review appraiser and that 

the review be documented by a written report indicating the scope of the 

review and the action recommended by the reviewer. Nonetheless, the 

"Standards" recognizes that in the application of its general rules, "wide 

differences of opinion occur." 

As discussed further below, our audit disclosed three principal issues 

relating to land exchanges. First, we found that while the Bureau had 

acquired some high quality properties by exchanging land with private 

entities, or proponents, it did not consistently follow prescribed land 

exchange regulations or procedures and ensure that fair and equal value was 

received in completing three of the four exchanges we reviewed. Second, 

we found that the Bureau exchanged, rather than sold, 446 acres of land 

within the land sale area designated by the Santini-Burton Act. Based on 

our legal review of the legislation, we believe that, while the Act does not 

prohibit land exchanges, the Congress intended that the land within the 

designated area should be sold to offset the costs incurred for land 

acquisitions in the Lake Tahoe Basin. Finally, we noted that the Bureau 

exchanged a portion of its Las Vegas area land to obtain a defunct bowling 

alley with the intention of using this facility as a Bureau administrative 

complex for the Tonopah Resource Area. We believe that such an exchange 

may not represent the most effective use of valuable Federal land . 

Exchange Processing 

We concluded that the Federal Government may have lost an estimated $4.4 

million in completing the Oliver Ranch, Red Rock, and Galena Resort 

exchanges as follows: Oliver Ranch- $4.2 million; Red Rock- $157,000; 

and Galena Resort - $68,825. We also found that, in the Red Rock 

exchange, the Bureau acquired 2,461 acres of land, with an exchange value 

of $2.7 million, that was not in conformance with an approved land-use 

plan. Of the $2.7 million, we found that $1.2 million represented an 

increase in the approved fair market value of the private land that was made 

without reconciling differing values assigned by Bureau review appraisers. 
44 

Oliver Ranch Exchange. In the Oliver Ranch exchange, the 

Bureau acquired a 300-acre privately owned property, valued at about $7 .7 

million, that had two houses and storage buildings. This property, located 

about 15 miles southwest of Las Vegas, was within the boundaries of the 

Red Rock Canyon National Conservation Area, a popular recreation area 

managed by the Bureau. The Bureau said that it acquired this property to 

prevent future development on the land and to preserve the scenic nature of 

the Conservation Area. 

In acquiring the Oliver Ranch, the Bureau exchanged 591 acres of Federal 

land, valued at about $8 .7 million. The transaction was completed in two 

phases: the exchange of approximately 146 acres of the Oliver Ranch for 

389 acres of Federal land on March 30, 1993, and the exchange of the 

remaining approximately 154 acres of the Oliver Ranch for 202 acres of 

Federal land on August 5, 1993 . The proponent paid the Bureau $925,000 

to equalize the established exchange values. However, we found that, 

before the first phase of the exchange took place, Bureau management did 

not adequately verify the need for an easem.ent granted to the City of Las 

Vegas on a 220-acre parcel of Federal land, which ultimately resulted in a 

loss to the Federal Government of approximately $4.2 million on this 

exchange. (This amount was incorrectly shown in Appendix 1 of the audit 

report under the column for funds to be put to better use instead of under 

the column for lost revenues.) 

In 1986, the Bureau granted a 30-year right-of-way to the City of Las Vegas 

for construction of a flood control detention basin. On December 7, 1992, 

at the City's request, the Bureau extended the duration of the right-of-way 

into perpetuity without obtaining any additional documentation from the City 

regarding its plans for use of the easement. With the easement, the 

appraised fair market value of the 220-acre parcel was $2,500 an acre, or 

a total of $550,000. Without the easement, the appraised value per acre was 

$25,000, or a total of $5 .5 million. 

Because the Bureau did not adequately verify that the entire 220-acre parcel 

would be used in accordance with the existing land-use easement, the 

Government incurred a ·significant loss. Specifically, on March 30, 1993, 

just 4 months after the easement was extended, the Bureau conveyed the 

220-acre parcel to the proponent as part of the exchange. Later that same 

year, the proponent and the City were engaged in negotiations that resulted, 

3 
45 

in December 1994, in the City's relinquishing its rights to the easement on 

189 acres, retaining only 31 acres for construction of the detention basin. 

Based on the original appraisal values, the 189 acres exchanged for $2,500 

an acre were thus worth at least $25,000 per acre. Accordingly, the 

Government effectively lost about $4 .2 million on this exchange . The 

Government's loss represented a gain for the proponent, as well as for the 

City, which obtained $400,000 in cash and an agreement from the proponent 

to design and construct the flood control detention basin as part of the City's 

arrangement to relinquish a portion of the easement to the proponent. 

In attempting to justify this transaction, the Bureau stated that, while it was 

aware of the potential for this loss, it decided that the "benefits" related to 

acquiring the 0Ii¥er Ranch warranted the expeditious transfer of the Federal 

land to private ownership. The Bureau stated further that the value it had 

established for the 220-acre parcel of Federal land encumbered with a flood 

control easement to the City of Las Vegas was "accurate" based on 

information available to the review appraiser at the time of the exchange. 

In that regard, the Bureau cited a March 16, 1993, letter from the City to 

the Las Vegas District Office, which stated that the City had "active plans 

to use (the] right-of-way grant ... for a water detention basin for flood 

control purposes " and that it "wish[ed] to retain its right-of-way 

grant .. .. " 

We do not question the Bureau's decision to acquire the Oliver Ranch, nor 

do we question the appraised value of the encumbered 220-acre parcel of 

land. We believe, however, that under the circumstances as presented, the 

Bureau should have taken additional measures to protect the Federal 

Government's interests, such as by pursuing more diligently with the City 

the issue of relinquishing the unneeded portion of the easement or by 

seeking to substitute an unencumbered parcel of Las Vegas area land to 

complete the exchange. 

Under Title 43 of the Code of Federal Regulations, the Bureau has a 

responsibility to ensure that the amount of land included in an easement is 

limited to only those lands which the authorized officer determines "[w]ill 

be occupied by the facilities authorized . . . [and] be necessary for the 

construction, operation, maintenance, and termination of the authorized 

facilities .. .. " Accordingly, in our view, the City's brief reference, in its 

letter of March 16, 1993, to its "active plans to use [the] right-of-way 

4 
46 

grant, " without more details, provided insufficient justification for the 

Bureau not to pursue relinquishment of a portion of the easement by the 

City. This is especially so here, where an internal memorandum to the file, 

written by the Bureau's review appraiser 4 days before the exchange, 

acknowledged that at that time--some 7 years after the easement had been 

granted--"no facilities ha[d] been built under the R/W [right-of-way] grant" 

and the City could give "no timeframe for construction or even an idea of 

what may be built ... . " The internal memorandum further recognized that 

it was unlikely that all of the land would be used by the City for the 

proposed flood detention basin and that a "windfall profit" would accrue to 

the landowner if any portion of the easement was released by the City. 

In view of the. escalating property values in the Las Vegas area, the fact that 

7 years had elapsed with no action by the City, the uncertainty that had been 

demonstrated by the City as to its needs and plans, and the Bureau's 

responsibility under the Code of Federal Regulations, we do not believe that 

the Bureau was sufficiently diligent in pursuing with the City the matter of 

relinquishing a portion of the easement. As the facts reveal, the City 

ultimately retained only 31 acres of the 220 acres for construction of the 

detention basin, which resulted in a loss to the Federal Government of 

approximately $4.2 million as a result of this exchange. 

Red Rock Exchange. In the Red Rock exchange, the Bureau 

exchanged 769 acres of land in Las Vegas, valued at $9.9 million, for 3,562 

acres of private land in Nevada, valued at about $8.3 million. To equalize 

the value of the exchange, the proponent made payments totaling about $1.6 

million. The transaction was completed in two phases: on July 19, 1994, 

and on February 6, 1995. 

In the exchange, the Bureau acquired 27 separate parcels in Clark and 

Esmeralda Counties, Nevada. The Bureau's stated reasons for acquiring 

these various parcels were to prevent future development and to manage the 

land for threatened and endangered species. One parcel, a 30-acre vacant 

lot, .valued at $1.2 million, was located west of Las Vegas in Calico Basin, 

which is a small community of private homes within the Red Rock Canyon 

National Conservation Area. Twenty-two parcels, consisting of2,061 acres, 

cumulatively valued at about $2.5 million, were located about 55 miles 

northeast of Las Vegas in the Virgin River Valley, which is managed by the 

Bureau. One parcel, a 400-acre piece of land, valued at $210,000, was 

5 
47 

located about 55 miles west of Las Vegas in the Pahrump Valley , which is 

also managed by the Bureau. The remaining three parcels, consisting of 

1,071 acres, cumulatively valued at about $4.4 million, were located within 

the In yo and Toiyabe National Forests and were acquired for the U.S. 

Forest Service to manage in accordance with its forest management plans. 

We identified three problems with this exchange. First, we concluded that 

the Bureau's acquisition of 2,461 acres of land, valued at about $2.7 

million, in the Virgin River and Pahrump Valleys did not conform to the 

Bureau's approved land-use plan, as required by Title 43, Part 2200, of the 

Code of Federal Regulations. Second, we found that the Bureau increased 

the established fair market value for some of the private land exchanged 

from $1.5 million to $2.7 million without reconciling the different approved 

values. Finally, we concluded that the Government lost an additional 

$157,000 on Federal land exchanged by granting the proponent an 

unjustified purchase discount. 

On the first issue, the Bureau maintained, in its response to our draft report, 

that the Virgin River Valley acquisition was consistent with the need to 

"manage for woundfin (an endangered species) habitat along the Virgin 

River," as identified in the Clark County Management Framework Plan and 

in the U.S. Fish and Wildlife Service Woundfin Recovery Plan. The 

Bureau also noted that the Virgin River parcels were evaluated by a 

qualified wildlife biologist who determined that the entire Virgin River is 

"historic habitat for endangered fishes, i.e., the woundfin and the Virgin 

River roundtail chub." 

The inherent problem is that the Bureau is relying on a draft plan as 

opposed to a current approved land-use plan to support its acquisitions. We 

do not intend, nor do we have the expertise, to question the scientific 

evaluation of the properties made by the wildlife biologist. However, the 

Code of Federal Regulations requires the Bureau to consider only those 

exchange proposals which conform to an approved land-use plan in order to 

ensure that the land acquired is necessary to fulfill the Bureau's mission. 

Further, even the Bureau's draft plan did not support all of its land 

acquisitions. The Bureau's May 1994 "Supplement to the Draft Stateline 

Resource Management Plan," which has not been finalized, . identified the 

area north of Halfway Wash, in Nevada, as a proposed area of "critical 

6 
48 

environmental concern." Based on our review of the area of critical 

environmental concern and the acquired lands, which were identified on 

maps by a Bureau wildlife biologist, we noted that only 120 acres of the 

2,061 acquired acres were within the boundaries of the proposed area of 

critical environmental concern. We also noted that another 420 acres of 

land outside the area of critical environmental concern, as reflected in the 

1994 "Supplement," might be construed as land to be acquired because ·the 

land parcel involved was completely or partly in the river bed. Thus, at 

best, acquisition of only 540 acres of the 2,061 acres acquired might be 

justified in accordance with the most recent draft of the land-use plan: 

The Bureau also sought to justify its acquisitions by citing the U.S. Fish and 

Wildlife Service Recovery Plan for the woundfin and the Virgin River 

roundtail chub. This plan did not contain specific boundaries for acquisition 

of land along the Virgin River. Accordingly, we contacted the Chief of 

Listing and Recovery of Endangered Species for the U.S. Fish and Wildlife 

Service, in Denver, Colorado, to obtain this information. This official 

stated that the high priority area for the Virgin River was in Utah and that 

the area north of Halfway Wash was also a priority. As noted earlier, the 

Bureau's land acquisition included land outside this area of critical 

environmental concern. 

The Bureau also stated that the Pahrump Valley acquisition was consistent 

with proposals in a Draft Resource Management Plan to acquire land to 

protect the desert tortoise and with a "proposed potential tortoise 

management area" under the Clark County Short-Term Habitat Conservation 

Plan. However, this statement does not reflect the existence of other 

significant draft and final planning documents which indicate that the 

Pahrump Valley land was not needed for protection of the desert tortoise. 

In that regard, we noted that, on August 30, 1993, 3 months before the 

Bureau and the proponent signed an exchange agreement, the U.S. Fish and 

Wildlife Service had issued a Draft Recovery Plan for the desert tortoise, 

which did not include a proposal for managing any land in the Pahrump 

Valley. This draft plan was finalized on June 28, 1994. The Bureau's 

"Supplement to the Draft Stateline Resource Management Plan," issued on 

May 2, 1994, also did not propose any special wildlife management area in 

the Pahrump Valley. Accordingly, the basis for the acquisition of the 

Pahrump Valley acreage was questionable. 

7 
49 

We believe that the Bureau should update and amend its current land use 

plan, as appropriate, to conform to any scientific or other assessments on 

which it is relying so as to remove any doubt as to whether its land 

acquisitions are consistent with its mission-related needs. Such amendments 

should occur prior to exchange transactions being consummated. 

The second concern raised in our audit report regarding the Red Rock 

exchange involved the values established for the private land. Section 

9310.04.D.2 of the Bureau's Manual states that a "chief appraiser shall 

approve an amount which represents the Bureau's estimate of fair market 

value." We found that the values of the first seven parcels of private land 

exchanged in the Virgin River Valley were originally approved by the 

Arizona Chief Appraiser and subsequently approved by the Nevada Chief 

Appraiser. The initial phase of the exchange was processed using those 

approved values. However, the values of the remaining 17 parcels, 

approved by the Arizona Chief Appraiser, were not used for the second 

phase of the exchange transaction. 

A Bureau employee told us that the Bureau's former Nevada State Director 

wanted his appraisal staff to perform another review of the contract 

appraisals for the remaining parcels because the proponent was "unhappy" 

with the values previously established. The Nevada Chief Appraiser 

assigned the review to one of his staff appraisers, who approved 

significantly higher values. The difference between the values approved by 

the two Bureau appraisers ranged from $5,500 to $413,679. For example, 

the Arizona Chief Appraiser's approved value of $288,750 for a 540-acre 

parcel of land was subsequently overridden by the staff appraiser's approved 

value of $702,429. The Bureau subsequently exchanged Federal land using 

the higher values without reconciling the significant differences in the values 

approved by the two review appraisers. 

In addition, we were not provided documentation to indicate that the values 

derived by the subordinate staff appraiser were approved by a State Chief 

Appraiser, as required by the Bureau Manual. Bureau personnel told us that 

the staff appraiser had been designated as the Acting Chief Appraiser for the 

remaining parcels of Virgin River Valley land after the proponent's 

expressed "unhappiness" with the values previously established by the 

Arizona Chief Appraiser. However, the Bureau was not able to explain why 

the staff appraiser was designated as the Acting Chief Appraiser for this 

8 
50 

review. Thus, we question the Bureau's decision to override the values 

approved by the Arizona Chief Appraiser and to accept values for the 

private land that were $1.2 million higher without a reconciliation of the 

differences and under the circumstances as presented here . 

In this exchange, we also found that the Bureau incorrectly included a 

discount of $157,000 when it established the fair market value for 66 acres 

of Federal land in the Las Vegas area. Specifically, a contract appraiser had 

prepared separate appraisals of four noncontiguous tracts of Federal land 

totaling I ,311 acres and had established a total value of $16,440,000 for the 

four tracts. Further, the appraiser concluded that a single buyer would be 

entitled to a 10 percent discount on three of the four tracts, but only if all 

four tracts were .acquired. However, the Bureau allowed the proponent to 

take the discount, even though only the two smallest tracts, with appraised 

values totaling $1,570,000, were acquired. The Bureau did not have 

documentation to support why the discount was given. 

Galena Resort Exchange. The Galena Resort exchange 

involved, through May 31, 1995, eight transactions that transferred 2,677 

acres of Federal land, valued at $44.3 million, for 31,391 acres of private 

land, valued at $35.4 million. To eliminate the $8.9 million ($44.3 million 

minus $35.4 million) exchange balance owed . the Government, additional 

land transfers or cash payments from the proponent will be required. 

The Galena Resort exchange was a large exchange in which the Bureau 

acquired 10 privately owned parcels located throughout Nevada. According 

to the Bureau, these parcels were acquired primarily for three reasons: to 

prevent development within the Toiyabe National Forest; to benefit the 

Pyramid Lake Indian Reservation; and to improve the Bureau's management 

of adjoining public land. The centerpiece of this exchange was the Galena 

Resort property. This mostly unimproved 3,864-acre parcel, valued at 

$19.9 million, was located southwest of Reno within the U.S. Forest 

Service's Toiyabe National Forest. Two additional parcels, consisting of 

8,524 acres, valued at $5.6 million, were located on the northern part of 

Reno within the Toiyabe National Forest. Four parcels and a portion of a 

fifth parcel, consisting of 3,276 acres, cumulatively valued at about $7.7 

million, were located east of Reno on· or adjacent to the Pyramid Lake 

Indian Reservation. The remaining two parcels and a portion of a third, 

consisting of 15,727 acres, cumulatively valued at about $2.2 million, were 

9 
51 

located east and north of Reno adjacent to other public land managed by the 

Bureau. 

In conducting this exchange, we found that the Bureau did not use the 

Nevada Chief Appraiser's approved fair market value estimate as the basis 

for acquiring portions of a property known as the DePaoli Ranch in two 

separate transactions. In particular, the Bureau paid $107,525 more than the 

approved value on one transaction without documentation to justify using 

other than the approved value. In a related transaction, the Bureau acquired 

other DePaoli lots at no additional cost, although the approved exchange 

value was $38,700. Overall, the Government's cost exceeded the approved 

exchange value of the property by $68,825. 

In addition, we found that the values of Federal land and private land 

exchanged in the initial transaction were not equalized. Specifically, the 

value of the Federal land conveyed to the proponent in this exchange totaled 

about $9.6 million more than the private land received by the Bureau. The 

Federal Land Policy and Management Act, as amended, and the Bureau's 

implementing regulations require Bureau officials to attempt to reduce the 

difference between the values of the Federal and the private land exchanged 

to as small an amount as practicable. Bureau personnel told us that as much 

Federal land as possible was included in this transaction because the 

proponent had buyers ready to purchase the land and because the proponent 

was expected to equalize the exchange shortly. However, 9 months after the 

exchange and after seven more transactions, we found that the proponent 

still owed the Government $8.9 million of the $9.6 million. In our opinion, 

the Bureau should have limited the amount of Federal land exchanged to 

minimize the difference in the values between the Federal land and private 

land. The fact that the Federal land exchanged consisted of a large number 

of small, noncontiguous tracts of land would have enabled the Bureau to 

easily remove parcels of Federal land from the exchange so as to equalize 

the values between the Federal land conveyed and the private land received. 

We also found two additional issues pertaining to the Galena exchange in 

which the Bureau did not ensure full compliance with laws, regulations. and 

procedures. First, the Bureau made a verbal commitment to a proponent to 

compensate the proponent for its costs related to appraisals, environmental 

assessments, title work, and mining claims. However, the Bureau did not 

include this commitment in the official exchange record, as required by the 

10 
52 

Federal Land Exchange Facilities Act of 1988. As of May 31, 1995, the 

proponent's claimed compensation costs totaled about $283,000. Second, 

Bureau personnel were not using a ledger account to monitor the relative 

values of the land exchanged. As a result, the Bureau was unaware of its 

brief noncompliance with the provision of the Federal Land Policy and 

Management Act that requires the value difference between Federal and 

private land exchanged not to exceed 25 percent of the total value of the 

Federal land conveyed. 

Summary. We believe that the Bureau can take better advamage of 

the unique opportunity that exists to use the highly marketable land 

identified for disposal in the Las Vegas area to acquire land for missionrelated purposes. As we recommended, the Bureau could accomplish this, 

in part, by ensuring that land exchanges are processed in full accordance 

with applicable laws, regulations, and Bureau procedures. In that regard, 

the Bureau should ensure that the land to be acquired is in conformance with 

an approved land-use plan or properly executed amendments to the plan; all 

land is valued properly; and all significant decisions involving the exchange 

transactions, particularly those affecting land valuation, are fully justified 

and documented in the exchange file. 

In addition, in order to maximize the public benefit in disposing of the Las 

Vegas area land, we recommended that the Bureau introduce competition 

into the disposal process to the maximum extent practicable. Our review of 

land documents at the Offices of the Assessor and the Recorder for Clark 

County indicated that land exchange proponents have been very successful 

in realizing sizeable gains by selling land received from the Bureau in 

smaller parcels shortly after title to the land was transferred. For example, 

according to the County's records, one exchange proponent sold 70 acres 

acquired at an exchange value of $763,000 for $4.6 million on the same day 

the exchange was completed. The proponent sold another 40 acres acquired 

at an exchange value of $504,000 for $1 million, also on the same day the 

exchange was completed. Finally, the proponent sold another 25 acres 

acquired at an exchange value of $909,000 for $1.6 million within 2 months 

of completing the exchange. While the County's records did not provide 

sufficient information to determine the underlying reasons for the apparent 

substantial profits, these examples, in our opinion, demonstrate that the 

Government can sometimes obtain greater returns through a sale than 

through an exchange. They also demonstrate the difficulty of establishing 

11 
53 

the fair market value for public land in the Las Vegas area real estate 

market through the appraisal process. 

Another means of introducing competition into the land disposal process that 

we recommended in our audit report is through the use of "competitive land 

exchanges." This process, which has been used successfully by the U.S. 

Forest Service, involves sending a bid prospectus to interested parties· or 

advertising, in newspapers, the availability of specific Federal land for 

exchange. Once again, the goal here would be to introduce the benefits of 

competition into the exchange process. 

Santini-Burton Act Land 

The Bureau included 446.5 acres of Federal land located within the land sale 

area identified by the Santini-Burton Act (Public Law 96-586) in three of the 

four exchanges we reviewed. Twenty-five acres were transferred in the Red 

Rock exchange; 191.5 acres in the Oliver Ranch exchange; and 230 acres 

in the Galena Resort exchange. The Act authorizes the Secretary of the 

Interior to sell certain Federal land in and around Las Vegas to finance the 

acquisition of environmentally sensitive land in the Lake Tahoe Basin of 

Nevada and California. However, the Bureau had taken the position that the 

Act dtd not specifically prohibit the Bureau from exchanging Federal land 

within the legislatively identified area based on the Bureau's authorities in 

the Federal Land Policy and Management Act. As a result, the Bureau 

exchanged land that, if sold, would have returned at least $7.8 million to the 

U.S. Treasury to repay a portion of the $93 million the Federal Government 

has spent in acquiring land in the Lake Tahoe Basin as of the end of fiscal 

year 1995. 

Our office performed a legal review of the Santini-Burton Act and its 

legislative history and found some evidence indicating that the Bureau is not 

precluded from exchanging land within the Congressionally identified land 

sale area. Specifically, in House Report No. 96-1023, dated May 16, 1980, 

the Committee on Interior and Insular Affairs stated, "The Committee does 

not intend, by this Act, to prohibit continuation of reasonable ·land transfers 

under existing authority for public purposes." On the other hand, it seems 

equally clear from other language in the legislative history and the Act that 

the Congress intended the Bureau to minimize its exercise of other land 

disposal authorities for the specified land to help ensure that sufficient 

12 
54 

revenue was generated to offset the cost of acquiring the Lake Tahoe Basin 

land. For example, in the House Report, the Committee also stated, "The 

Committee has determined that the costs incurred as a result of enactment 

of this bill will be relatively nominal." Senate Report No. 96-1026, dated 

November 21, 1980, also included a statement by the Senate Committee on 

Energy and Natural Resources that it amended the House bill "to assure that 

any appropriations from the Land and Water Conservation Fund are offset 

by revenues from the land sales authorized in section 2 [of the SantiniBurton Act]." Also, Section 2(e) of the Act states that the land sale 

revenues generated by the Bureau would be considered repayment for funds 

appropriated for Lake Tahoe Basin land purchases. In addition, the Act 

requires the Secretary to prepare and submit accounting reports of SantiniBurton Act "income and expenditures to the appropriate Congressional 

oversight committees twice per year. Neither the Bureau nor the 

Department could provide us with copies of these reports. 

Based on information obtained from the U.S. Forest Service and the Bureau, 

we learned that Santini-Burton Act acquisition costs exceeded sales revenues 

by about $40 million as of the end of fiscal year 1995. This deficit could 

have been reduced if the Bureau had not chosen to exchange about 

$9.2 million of designated Santini-Burton Act land that would have 

generated $7.8 million in additional revenues for the U.S. Treasury. This 

substantial cost burden of $40 million, which represents 43 percent of the 

acquisition costs through fiscal year 1995, will ultimately be borne by the 

American taxpayers if the Bureau does not sell sufficient land to offset the 

revenue shortfall. Accordingly, we recommended that the Bureau use the 

land sale process, except in compelling circumstances, when disposing of its 

Santini-Burton Act land until the sales revenues generated closely 

approximate the Lake Tahoe Basin acquisition costs. 

Tonopah Administrative Facility 

The final principal issue is the Tonopah exchange, in which the Bureau 

exchanged Federal land to acquire a defunct bowling alley. 

The Federal Land Policy and Management Act, as amended, provides the 

Bureau with wide latitude in determining what constitutes a beneficial 

exchange. Specifically, Section 206 of the Act authorizes the Bureau to 

dispose of land through an exchange when an authorized Bureau official 

13 
55 

determines that the public interest will be well served . In our review of the 

Tonopah exchange, we noted that the Bureau used this latitude to acquire a 

defunct bowling alley on 8.2 acres of land with the intention of using this 

facility and property as a Bureau administrative complex for the Tonopah 

Resource Area. 

We found that, in 1989, the Bureau determined that its Tonopah Area 

facilities were inadequate and needed to be replaced. The Bureau therefore 

asked the Congress to appropriate $640,000 in fiscal year 1991 to construct 

a new 7,000 square-foot office complex on a 5-acre parcel of land already 

in Federal ownership. Subsequently, the Bureau allotted $621,000 to its 

Nevada State Office from its fiscal year 1991 construction appropriation to 

build a new Bureau complex in Tonopah. However, rather than proceed 

with the construction, as originally planned, the Bureau proposed an 

exchange of some of its Las Vegas area land for a 16,000 square-foot 

bowling alley in Tonopah that it believed could be converted into a new 

administrative complex. 

An exchange for this property was completed on June 29, 1994, when the 

Bureau conveyed 25 acres of Las Vegas area land, valued at $665,000, to 

the private landowner in return for the bowling alley property plus $166,000 

to equalize the difference in the appraised valt~es of the properties. From 

available documentation and discussions with Bureau personnel and with our 

legal counsel, we concluded that the Bureau acted within its authority in 

completing this exchange. However, we believe that management's use of 

the exchange process to acquire administrative property rather than land 

containing significant public resources, such as critical fish and wildlife 

habitat or recreational opportunities, may not represent the most effective 

use of valuable Federal land. Bureau personnel said that additional 

proposals to acquire administrative faciiities through land exchanges may be 

forthcoming based on the precedent set at Tonopah. Thus, we suggested 

that the Bureau consider establishing a policy limiting the use of the land 

exchange process to acquire administrative facilities for Bureau use. 

This concludes my prepared statement. I would be happy to respond to any 

questions that the Subcommittee may have concerning my testimony. 

14 
56 

U.S. Department of the Interior 

Office of In.spector General 

AUDIT REPORT 

NEVADA LAND EXCHANGE ACTIVITIES, 

BUREAU OF LAND MANAGEMENT 

REPORT NO. 96-1-1025 

JULY 1996 
57 

United States Department of the Interior 

MEMORANDUM 

TO: 

FROM: 

SUBJECT SUMMARY: 

OFFICE OF INSPECTOR GENERAL 

Washington. D.C. 20240 

I . 

The Secretary · . ~· 1 

W1 'l rna A . •• ....,w1s ~ .• Y • 

Inspector 07 

JUL I 5 1993 

Final Audit Report for Your Information- "Nevada Land 

Exchange Activities, Bureau of Land Management" 

(No. 96-I-1025) 

Attached for your information is a copy of the subject final audit report. The objective 

of the audit was to determine whether the Bureau of Land Management's Nevada State 

Office conducted land exchanges in accordance with applicable laws and regulations and 

whether the Bureau received fair market value in the land exchanges. 

We found that while some high quality properties had been acquired by exchanging lands 

with private entities, the State Office did not consistently follow prescribed land exchange 

regulations or procedures and ensure that fair and equal value was received in completing 

three of the four exchanges we reviewed. We also found that the State Office exchanged 

rather than sold land within the land sale area designated by the Santini-Burton Act. 

Based on our legal review of the legislation, we believe it is clear that, while the Act 

does not prohibit land exchanges, the Congress intended that the lands within the 

designated area should be sold to offset the costs incurred for the Lake Tahoe Basin land 

acquisitions in order to keep the costs of enacting the Santini-Burton legislation nominal. 

Finally, we noted that the State Office exchanged a portion of the Bureau's Las Vegas 

area lands to obtain a defunct bowling alley with the intention of using this facility as an 

administration complex for the Tonopah Resource .Area. We believe that such an 

exchange may not represent the most effective use of valuable Federal land. 

Based on the Bureau's response, we requested additional information for the three 

recommendations relating to land exchanges. However, we considered the two 

recommendations pertaining to Santini-Burton Act lands as unresolved, and the Bureau 

was requested to respond further to these recommendations. 

If you have any questions concerning this matter, please contact me or Ms. Judy 

Harrison, Assistant Inspector General for Audits, at (202) 208-5745. 

Attachment 
58 

W-IN-BLM-003-95 

United States Department of the Interior 

OFFICE OF L'ISPECTOR GE:"ERAL 

Washmgwn. 0 C. :!G::.:o 

Jl. I 5 1!:93 

Memorandum 

To: 

From: 

Subject: 

Assistant Secretary • Land and Minerals Management 

Judy Harrison -JL< d-"J J./1_ L .._.;,-yo_ 

Assistant Inspec or Ge.ic:ral for Audits 

Final Audit Repon on Nevada Land Exchange Activities. Bureau of Land 

Management (No . 96-I-1025) 

This repon presents the results of our audit of cenain land exchanges conducted by the 

Nevada State Office of the Bureau of Land Management from October 1. 1992. through 

May 31 . 1995. The objective of the audit was to determine whether the Nevada State 

Office conducted land exchanges in accordance with applicable laws and regulations and 

whether the Bureau received fair market value in the land exchanges. 

We found that while the Nevada State Office had acquired some high quality properties 

by exchanging lands with private entities (proponents), it did not consistently follow 

prescribed land exchange regulations or procedures and ensure that fair and equal value 

was received in completing three of the four exchanges we reviewed. In some instances. 

this occurred because State Office management wanted to expedite the exchanges. given 

that the proponent had willing buyers available or land purchase options that were close 

to expiring. In other instances. management proceeded with an exchange in a cenain 

manner without documenting the rationale used to support the action. As a resull. the 

State Office exchanged Bureau land for 2.461 acres of private land, valued at $2 .7 

million. that was not in conformance with current land-use plans and therefore had no 

discernible mission-related purpose. In addition. the Government may have lost about 

$4 .4 million in completing three of the exchanges reviewed. We also concluded that the 

State Office has a unique opportunity to use its highly marketable Las Vegas lands to 

acquire more land for mission-related purposes and could take maximum advantage of 

this opportunity by introducing competition into the disposal process for the Las Vegas 

lands. To improve operations in these areas. we recommended that the Director of the 

Nevada State Office instirute competitive procedures (sale or competitive exchange) into 

the land disposal process; take appropriate action to have unneeded easements removed 

from Federal lands before processing transactions for the exchange or sale of those lands; 

and establ~h the controls necessary to ensure that land exchanges are processed in full 

compliance with applicable ·taws and regulations. 

We also found that in three of the four exchanges reviewed. the State Office exchanged 

a total of 446 acres of Federal land within the land sale area designated by the SantiniBurton Act (Public Law 96-586). The Santini-Burton legislation does not specifically 

prohibit the Bureau from exchanging lands in the sale area under the authorities provided 
59 

by the Federal Land Policy and Management Act. However. it is clear that the Congress 

intended that proceeds from the sale of lands within the designated area would be used 

to offset the costs incurred for the Lake Tahoe Basin land acquisitions in order to keep 

the costs of enacting the Santini-Bunon legislation nominal. We concluded that because 

these lands were exchanged rather than sold. sales revenues of at least $9.2 million were 

not eenerated. of which about $7.8 million would have been remitted to the U.S. 

Trea~ury to repay incurred Lake Tahoe Basin land acquisition costs. At the time of our 

review. the Lake Tahoe Basin acquisition costs ($93 million) reponedly exceeded the 

sales revenues remitted to the U.S. Treasury by about $40 million. Accordingly. we 

reconunended that the Director of the Nevada State Office use the land sale process. 

except in compelling circumstances. when disposing of its Santini-Bunon Act lands until 

the sales revenues generated closely approximate the Lake Tahoe Basin acquisition costs. 

We also reconunended that the required accounting repons be prepared and submitted 

so that the cost/revenue relationship can be properly monitored by the appropriate 

Congressional oversight conunittees. 

Finally. we noted that the State Office initiated an exchange of 25 acres of the Bureau's 

Las Vegas area lands, valued at $665.000. in order to obtain a defunct bowling alley 

with the intention of using this facility as an administrative complex for the Tonopah 

Resource Area. We provided information on this exchange because we believe that such 

exchanges may not represent the most effective use of Federal land and because Bureau 

personnel said that additional proposals to acquire administrative facilities through land 

exchanges may be fonhcoming based on the precedent set at Tonopah. 

In the July 5. 1996. response from the Director. Bureau of Land Management (Appendix 

2). the Bureau concurred with Reconunendations A.l-A.3 and B. I. did not indicate 

concurrence or nonconcurrence with Reconunendation B.2. and disagreed with some of 

the repon's findings. Although the Bureau concurred with Reconunendation B. I. the 

corrective actions described are not consistent with the actions needed to adequately 

correct the deficiency. The Bureau also provided additional conunents. which we 

incorporated into the repon as appropriate. Based on the response. we requested that the 

Bureau provide additional information for Reconunendations A.l-A.3. reconsider the 

corrective action associated with Reconunendation B. I. and provide a response to 

Reconunendation B.2 after it pursues the interim step of obtaining an opinion from the 

Depanment · s Office of the Solicitor (see Appendix 3). 

The. legislation. as amended, creating the Office of Inspector General requires semiannual 

reponing to the Congress on all audit repons issued, actions taken to implement audit 

reconunendations, and identification of each significant reconunendation on which 

corrective:action has not been taken. 

In accordance with the Depanmental Manual (360 OM 5.3), we are requesting a written 

response to this repon by September 16, 1996. The response should provide the 

information requested in Appendix 3. 

We appreciate the counesies extended to our staff during the course of the audit. 
60 

CONTENTS 

INTRODUCTION . 

BACKGROUND 

OBJECTIVE AND SCOPE 

PRIOR AUDIT COVERAGE 

FINDINGS AND RECOMMENDATIONS 

A EXCHANGE PROCESSING 

B. SANTINI-BURTON ACT LAND 

OTHER MA TIERS 

APPENDICES 

I. CLASSIFICATION OF MONETARY AMOUNTS 

2. BUREAU OF LAND MANAGEMENT RESPONSE 

3. STATUS OF AUDIT REPORT RECOMMENDATIONS 

Page 

. I 

.2 

. 3 

. . . 4 

.4 

20 

. 25 

27 

28 

36 
61 

INTRODUCTION 

BACKGROUND 

The Bureau of Land Management is responsible for managing and protecting 270 million 

acres of Federal land. of which 48 million acres are in the State of Nevada. The 

Congress has emphasized the use of land exchanges and fee purchases to acquire lands 

containing resource values of public significance and to improve the manageability of 

Federal land by consolidating its land ownership. Land exchanges are the Bureau's 

preferred method of acquiring land1 and may be initiated by either the Bureau or other 

interested parties. called proponents. In recent years. the Bureau has identified about 

70.000 acres of Federal land for disposal in the Las Vegas Valley of Nevada. which the 

U.S. Bureau of the Census has reported was the fastest growing metropolitan area in the 

United States between 1990 and 1994. Real estate development in the private market 

associated with this growth has created significant interest in acquiring this Federal land. 

The Bureau conducts land exchanges under the authority of Section 206 of the Federal 

Land Policy and Management Act of 1976 (Public Law 94-579). which authorizes the 

Secretary of the Interior to dispose of Federal land by exchange when the public interest 

will be well served. Under Section 206 of the Act, the values of the lands exchanged 

must be equal or. if not equal, must be equalized by a cash payment by either party. 

Section 206 specifically directs the Secretary to make the amount of such payments as 

small as possible. but in no event may the value difference between the properties exceed 

25 percent of the value of the Federal land exchanged. On August 20. 1988, the 

Congress enacted the Federal Land Exchange Facilitation Act (Public Law 100-409), 

which granted the Secretary limited authority to approve adjustments in the values of 

lands exchanged as a means of compensating proponents for incurring certain costs. The 

Bureau finalized comprehensive regulations for land exchanges (Title 43, Part 2200. of 

the Code of Federal Regulations) to implement the provisions of both Acts in December 

1993. 

The values of the public and private lands exchanged are established by appraisals 

conducted in accordance with principles defined in the "Uniform Appraisal Standards for 

Federal Land Acquisitions," issued by the Interagency Land Acquisition Conference in 

1973. These principles acknowledge that the appraisal process is not an euct science 

and ·that estimates of the fair market value of th~ property may differ among appraisers. 

Consequently, the "Standards" provides for a uniform approach to addressing appraisal 

problems and prescribes requirements for adequate supporting data to develop justifiable 

market varues that can withstand legal challenges. The "Standards" stipulates that each 

appraisal be carefully reviewed by a qualified review appraiser and that the review be 

documented by a written report indicating the scope of the review and the action 

1

The Bureau prefers tO acquire land through exchanges because of the relatively low impact that exchanges 

have on local Government tax revenues. 
62 

recommended by the reviewer. Section 9310 of the Bureau Manual provides specific 

instructions on implementation of these requirements. 

OBJECTIVE AND SCOPE 

The objective of our audit was to determine whether the Bureau of Land Management's 

Nevada State Office conducted land exchanges in accordance with applicable laws and 

regulations and whether the Bureau received fair market value in the land exchanges. 

The Nevada State Office exchanged approximately 710 acres of land in fiscal year 1993: 

2. 910 acres in fiscal year 1994: and 725 acres through May 31 of fiscal year 1995. Of 

a total of six exchanges processed by the Bureau's Nevada State Office from October I. 

1992. through May 31. 1995. we focused our review on the four largest exchanges. 

Three of the four exchanges reviewed were completed. and one , a multiple-transaction 

exchange. was panially completed. The Federal land exchanged under these transactions 

was located in tbe Las Vegas area and was appraised at about $63.2 million. The two 

exchanges that we did not review involved Federal land with a total appraised value of 

$2~ 900 . 

This audit was made , as applicable. in accordance with the "Government Auditing 

Standards, " issued by . the Comptroller General of the United States. Accordingly, we 

included such tests of records and other auditing procedures that were considered 

necessary under the circumstances. The audit was conducted from May 1995 through 

April 1996 and included visits to the Bureau's Nevada State Office in Reno. Nevada: the 

California State Office in Sacramento, California: the Las Vegas District and Stateline 

Resource Area Offices in Las Vegas. Nevada: and the Battle Mountain District Office 

in Battle Mountain. Nevada. 

To accomplish our objective, we reviewed the following: relevant laws and legislative 

histories to obtain an understanding of the Bureau's authority to conduct land exchanges; 

the Bureau's implementing regulations and procedures to identify the specific 

requirements for conducting land exchanges; selected exchange case files to identify key 

documents demonstrating how and why the exchanges were conducted: and land records· 

in the Offices of the Recorder and Assessor, Clark County, Nevada, to identify the resale 

prices of some of the exchanged lands. In addition, we contacted Bureau officials to 

solicit their views about the exchanges and to verify information and data obtained 

through our review of documents in the case files. We also spoke with representatives 

of the Depanment of Agriculture's U.S . Forest Service concerning the Red Rock and 

Galena Reson exchanges; representatives of the U.S. Fish and Wildlife Service 

concerning the Red Rock exchange; a representative of the Depanrnent of Agriculture 's 

Soil Cons~rvation Service concerning the Tonopah exchange; and a representative of the 

Depanment of Public Works, City of Las Vegas, cooccming the Oliver Ranch exchange. 

Funher, we interviewed individuals who had contacted the Office of Inspector General 

to express complaints about the Bureau land exchange activities taking place in Nevada . 

2 
63 

As pan of the audit, we performed an evaluation of the Bureau 's system of internal 

controls related to the land exchanges at the Bureau offices visited to the extent we 

considered necessary to accomplish the audit objective. We noted wealalesses associated 

with the Nevada State Office's actions in acquiring land that was not in conformance with 

approved land use plans and obtaining less than fair market value for the exchanged 

lands. These weaknesses are discussed in the Findings and Recommendations section of 

this repon. Our recommendations. if implemented, should improve the internal controls 

in the areas with identified weaknesses. We also reviewed the Depanment of the 

Interior's Annual Statement and Repon. required by the Federal Managers' Financial 

Integrity Act. for fiscal years 1993 and 1994 and determined that none of the reponed 

weaknesses were directly related to the objective and scope of this audit. 

PRIOR AUDIT COVERAGE 

The Office of Inspector General has issued two audit repons during the past 5 years 

addressing various aspects of the Bureau's land exchange activities as follows: 

-"Land Exchange Activities, Bureau of Land Management " (No. 91-l-968). issued 

in June 1991. reponed that the Government's interests had not been properly protected 

and that the Government had not received fair value for the land exchanged because the 

appraisals used by the Bureau did not comply with Federal appraisal standards or because 

approved land value information had been changed by unauthorized personnel. We 

recommended that the Bureau establish the necessary controls to ensure that: (I) Bureau 

offices comply with instructions for reviewing appraisals for conformance with appraisal 

standards and for preparing written review determinations; (2) changes in land values are 

documented, justified, and approved by a state chief appraiser; and (3) value adjustments 

based on propeny size or location are applied consistently. Based on the Bureau· s 

response to the repon and subsequent actions, we considered all the recommendations 

resolved and implemented. 

- "Land Acquisitions Conducted With the Assistance of Nonprofit Organizations, 

Depanmem of the Interior" (No. 92-1-833), issued in May 1992, reponed that while 

nonprofit organizations provided beneficial assistance in acquiring land, the 

Government's interests were not always adequately protected and nonprofit organizations 

benefited unduly from some land acquisition transactions. The repon also stated that 

Depanmental agencies, includmg the Bureau of Land Management, established land 

values based on appraisals that were not timely. independent, or adequately supponed by 

market data. We made seven recommendations to iinprove controls over land acquisition 

activities and 10 ensure consistency and equality in the Depanment's transactions with 

nonprofit ~rganizations . On October 11, 1995, the Chief, Division of Management· 

Control and Audit Follow-up, reponed that the Office of the Secretary had completed the 

actions required to implen:tent the seven recommendations. 

3 
64 

FINDINGS AND RECOMMENDATIONS 

A. EXCHANGE PROCESSING 

The Bureau of Land Management's Nevada State Office successfully acquired some high 

quality lands. such as the Oliver Ranch and Galena propenies. in exchange for Federal 

land identified for disposal in the Las Vegas area. However. the State Office did n01 

consistently follow the prescribed land exchange procedures and regulations and ensure 

that fair and equal value was received in completing three of the four exchanges we 

reviewed. 

The Federal Land Policy and Management Act of 1976 authorizes the acquisition and 

disposal of land through land exchanges when the acquisition and disposal are in 

consonance with ~e Depanmental mission and Bureau land-use plans. Title 43 , Pan 

2200, of the. Code of Federal Regulations details the rules governing the processing of 

land exchanges. including the requirement that each exchange should be based on 

appraised fair market values for all the lands involved. In some instances, the applicable 

regulations and procedures were not followed or eq!llll value was not attained because 

State Office management wanted to expedite the exchanges. given that the exchange 

proponent had willing buyers or had land purchase options that were close to expiring . 

In other instances. State Office management proceeded with an exchange without 

documenting the rationale used to suppon the action. As a result. we concluded that the 

State Office acquired 2,461 acres of land. with an exchange value of $2.7 million. which 

was not in conformance with current land-use plans and therefore had no discernible 

mission-related purpose. and that the Government may have lost an estimated $4.4 

million in completing the Oliver Ranch, Red Rock. and Galena Reson exchanges. 

Oliver Ranch Exchange (No. N-56458) 

In the Oliver Ranch exchange, the Nevada State Office exchanged 591 acres of Federal 

land, valued at $8.655,000, for the Oliver Ranch. a 300-acre propeny , valued at 

$7,730,000. The proponent paid the Bureau $925.000 to equalize the established 

exchange values. The transaction was completed in two phases: on March 30, !993. and. 

on August 5, 1993 (389 acres and 202 acres. respectively). State Office officials said 

that the Bureau wanted to acquire the Ranch because the Ranch was located entirely 

within the boundaries of the Bureau's Red Rock Canyon National Conservation Area.' 

However, based on our review of available documentation and discussions with various 

officials, we concluded that the Government's interests were not fully protected in the 

first phase. of this exchange because Bureau management did not adequately verify the 

need for ah easement on a 220-acre parcel of Federal land prior to exchanging the land. 

' According to the Bureau's Environmental Assessment Repon for Ibis exchange. the Oliver Ranch is the 

only noncommercial privue propeny within the Red Rock Canyon National Conservation Area. The 

Repon funher swed thai the transfer of these lands into Federal ownership would prevent furure 

development on the land and preserve the scenic narure of the Conservation Area. 

4 
65 

The inclusion of this particular property in the exchange resulted in a loss to the 

Government of about $4.2 million. 

Fair Market Value. The. State Office exchanged the 220-acre parcel of Federal 

land for about 10 percent ($550.000) of the land's potential value. The Las Vegas 

District Office had encumbered the entire 220-acre parcel ill 1986 by issuing a 30-year 

easement to the City of Las Vegas for construction of a flood control detention basin. 

The State Office 's approved fair market value of this parcel, as encumbered by the 

easement. was $2,500 per acre, or a total of $550,000. However, State Office appraisal 

documents indicated that the fair market value of this same property without such an 

easement was $25.000 per acre. or a total of $5 .5 million. 

In reviewing the exchange files. we found various documents that indicated the City did 

not intend to use the entire 220 acres for the flood control basin. Specifically. documents 

dating back to 1991 showed that the City intended to relinquish its rights on at least 30 

acres of the parcel. Other documents indicated that the City was contemplating the 

construction of a water reuse facility on only 20 to 30 acres of this parcel. As such. the 

City 's need for the easement on the entire parcel was less than certain. Accordingly. the 

State Office should have fully reviewed the need for the easement to properly protect the 

Government· s interests prior to including this property in an exchange . 

Title 43 of the Code of Federal Regulations specifically limits the amount of land that 

may be included in easements to only those lands which the authorized officer detertnines 

"(w]ill be occupied by the facilities authorized [and) be necessary for the 

construction. operation. maintenance, and tertnination of the authorized facilities." 

However. we found that on December 7, 1992, the Las Vegas District Manager amended 

the 220-acre easement to extend its expiration date into perpetuity without reviewing the 

easement for compliance with regulations. 

Because State Office personnel did not adequately verify that the 220-acre parcel would 

be used in accordance with the existing land use easement. the Government mcurred a 

significant loss. Specifically , on March 30. 1993. just 4 months after the easement was 

extended, .the State Office conveyed the 220-acre parcel to the proponent as pan of the 

exchange. In December 1994, the City relinquished its rights to an easement on 189 

acres, retaining only 31 acres of the original 220 acres for construction of the detention 

basin. Once the agreement to relinquish the easement rights was reached , the value of 

the land increased substantially . Based on the original appraisal values. the 189 acres 

exchanged for $2,500 an acre were worth at least $25.000 per acre. Thus. the 

Government effectively lost about $4.2 million on this exchange. The Government's 

loss represented a gain not only for the proponent but also for the City . which obtained 

$400,000 in cash and other inducements as part of its deal to relinquish the easement to 

the proponent. 

Documentation in the exchange file indicated that State Office management was aware 

that such a loss to the Government was possible but decided that the "benefits "3 of 

1

The term ~benefits" was no[ explained ln the documentation. 

5 
66 

acquiring the Oliver Ranch warranted the expeditious transfer of the land to private 

ownership. During this phase of the exchange, the Bureau received land valued at 

$3.770.000. In exchange. the Bureau provided the first parcel of land (169 acres of the 

389 acres) valued at $3,590.000. The exchange difference of $180,000 could have been 

equalized by providing 7 to 8 acres of other Federal land in the Las Vegas area. which 

was genetally valued at $25.000 per acre. Instead. the Bureau included the 220-acre 

parcel in the exchange. the value of which was significantly reduced because of an 

encumbrance We do not believe that State Office officials had sufficient justification to 

support this course of actiOn. In our opinion. because of the potential for the increase 

in the value of the land. the Government· s interests would have been better served had 

the State Office officials proceeded to equalize the exchange using Federal land other 

than the 220-acre parcel. 

Red Rock Exchange (No. N-57773) 

In the Red Rock exchange. the Nevada State Office exchanged 769 acres of land in Las 

Vegas. valued at $9.9 million. for 3.562 acre~ of private land in Nevada. valued at about 

$8.3 million. as follows: 

General Location Acres of 

of Private Land Private Exchange 

Received jn Exchange Land Received Value 

Virgin River Valley. Nevada 1.061 $2.484 ,929 

lnyo National Forest, Nevada 792 475.000 

Toiyabe National Forest. Nevada 279 3.900.000 

Calico Basin. Nevada 30 1.200.000 

Paluump. Nevada _4QQ ;mooo 

Total 3.562 ~8 269 9,9 

To equalize the value of the exchange. the proponent made equalization payments totaling 

about $1.6 million. The transaction was completed in two phases: on July 19. 1994, and 

on February 6. 1995. 

In reviewing this exchange, we concluded that the State Office did not fully protect the 

Government· s interests. Specifically. the State Office· s acquisition of 2.461 acres of land 

in the· Virgin River and Pahrump Valleys. valued at about $2 .7 million. did not conform 

to the pe~inent land usc plans. as required by the Code of Federal Regulations. In 

addition. we found that the Bureau increased the established fair market value for some 

of the exchanged private land from $1 .5 million to $2.7 million without a documented 

rationale to substantiate that action. As a result, the UMeeded private lands were 

overvalued by $1.2 million. Finally, the Government lost an additional $157.000 on the 

Federal lands exchanged by granting the proponent an unjustified purchase discount. 

6 
67 

Land-l(se Plans. Title 43 , Pan 2200, of the Code of Federal Regulations requires 

the Bureau to consider only those exchange proposals that conform to approved land-use 

plans to ensure that it acquires only the land necessary to fulfill its mission. Tide 43 . 

Pan 1610.5-5, of the Code allows the Bureau's land-use plans to be amended and. as 

such. provides the Bureau with flexibility to acquire needed land that may not otherwise 

have been in conformance with the initial plans. The Clark Counry Management 

Framework Plan. dated 1984. is the Bureau's current approved land-use plan for the 

County and provides authority to acquire and dispose of public lands in the County . We 

found that the existing plan did not suppon the acquisition of lands in the Virgin River 

and Pahrump Valleys but instead indicated that some of the Bureau's landholdings in the 

Virgin River Valley were available for disposal. Nonetheless, the State Office exchanged 

Federal land in the Las Vegas area to acquire 2,061 acres of noncontiguous Virgin River 

Valley land and 400 acres of land in the Pahrump Valley. 

The State Office did provide us with a proposed planning document for the area. the May 

1994 "Supplement to the Draft Stateline Resource Management Plan. · which identified 

a proposed Virgin River area of critical enviromnental concern encompassing the 

nonhern ponion of the river in Nevada. With the assistance of Bureau personnel. we 

identified 120 acres of acquired land within this area of critical enviromnental concern. 

We identified another 420 acres of land outside this area where the land parcel involved 

was completely or panly in the river bed. Thus, it appears that, at most. 540 acres (but 

more likely only 120 acres) of the 2.061 acres acquired in the Virgin River area might 

be construed as lands to be acquired for endangered fish habitat. However. this plan 

supplement had not been finalized by the State Director. Accordingly. the State Office 

did not properly demonstrate that the Bureau had a need to acquire any of the Virgin 

River or Pahrump Valley propenies. We believe that by using highly marketable lands 

10 acquire private lands that are not in conformance with approved land-use plans or 

properly executed plan amendments. the Bureau reduced the amount of marketable lands 

available for use in the acquisition of propenies deemed necessary 10 satisfy missionrelated needs. 

Fair Market Value. Title 43, Pan 2200. of the Code of Federal Regulations 

requires land exchanges to be based on market values as determined through real 

propeny appraisals. To ensure that exchanges are completed at fair market value , 

Section 9310.04.0 .2 of the Bureau's Manual states that a ' chief appraiser shall approve 

an amount which represents the Bureau's estimate of fair market value.' For the initial 

exchange transaction, we found that, in July 1994, the Chief Appraiser for the Arizona 

State Office reviewed the appraisals performed by a contract appraiser to determine the 

fair market value of 24 propenies (2,151 acres) of Virgin River Valley land. The 

Arizona quef Appraiser established an approved fair market value for each propeny, 

and on July 19, 1994, the Nevada State Office acquired 7 (360 acres) of the 24 propenies 

based on the Arizona Chief Appraiser's approved values. An exchange transaction for 

15 {1 ,701 acres) of the remaining 17 propenies (1,791 acres) was initiated the following 

week.. 

In exchanging Federal land for the 15 propenies. the Nevada State Office did not use the 

approved land values established by the Arizona Chief Appraiser despite the recency of 

7 
68 

the appraiser's review. A State Office employee stated that the fonner Nevada State 

Director wanted his appraisal staff to perfonn another review of the contract appraisals 

for the 15 propenies because the proponent was "unhappy" with the values previously 

established. In response . the Nevada Chief Appraiser assigned the review to one of his 

staff appraisers. This appraiser approved significantly higher values for the private land. 

We found that State Office management subsequently exchanged Federal land for the 15 

propentes. whose valuation had increased by about $1 .2 million. without reconciling the 

significant difference in values approved by the two Bureau review appraisers. We were 

not provided sufficient documentation to suppon why the values established by the 

Arizona Chief Appraiser were overridden and the higher values were used for the second 

phase of the exchange. Therefore. we question the use of the higher values. 

For the Federal land included in the exchange. we also found that the Nevada Chief 

Appraiser incorrectly included a discount of $157.000 when he established the fair 

market value of 66 acres· of Federal land in the Las Vegas area. In this instance. a 

contract appraiser estimated a fair market value of $16.440.000 for four noncontiguous 

tracts of Federal land totaling 1.311 acres. Each tract was appraised separately by the 

appraiser. who summarized the four values in one repon. The appraiser concluded that 

a single buyer was entitled to a I 0 percent purchase discount on three of the four tracts 

of land only if all four tracts were acquired. However, the Nevada Chief Appraiser 

allowed the proponent the discount. even though only the two smallest tracts with 

appraised values totaling $1.570.000 were acquired. Documentation that justified 

applying the 10 percent discount to the $1.570.000 appraised value was not available. 

Accordingly . the Bureau may have lost $157.000 during this exchange of Las Vegas area 

land . 

Galena Resort Exchange (No. N-57877) 

The panially completed Galena Reson exchange is the largest of the four land exchanges 

that we reviewed. Through May 31 , 1995. there were eight transactions involving the 

exchange of 2.677 acres of Federal land. valued at $44.3 million, for 31,391 acres of 

private land. valued at $35 .4 million. The private lands received in the exchange are as 

follows: 

General Location 

of Private Land 

Recejved in Exchange 

Toiyabe National Forest 

Pyr31;Rid Lake Reservation 

Bureau of Land Management Lands 

Total 

8 

Acres of 

Private 

Land Receive<! 

12,388 

3,276 

u.m 

ll.J2l 

Exchange 

Value 

$25 ,494,000 

7,681 .000 

2.201.()()() 

$35 376 000 
69 

To eliminate the $8 .9 million exchange balance owed the Government, additional land 

transfers or cash payments from the proponent will be required. In reviewing the eight 

completed transactions. we found that the State Office did not properly ensure that the 

exchange was conducted in full compliance with laws. regulations. and procedures. As 

a result. the Government may have lost about $69.000 in one transaction and included 

more Federal land in the exchange than was appropriate. 

The centerpiece of this exchange was the Galena Resort, a 3 .864-acre parcel of mostly 

unimproved private land located on the eastern slope of the Sierra Nevada mountains. 

southwest of Reno. The initial exchange of Nevada properties occurred on August 12. 

1994. which. according to an official in the Las Vegas District Office. was the date on 

which the proponent's option to purchase some of the private property was to expire. 

The Bureau's initial transaction was processed by the California State Office and involved 

an exchange of 2,362 acres of Federal land. valued at $39.1 million. for 12.880 acres 

of private land. valued at $29.5 million. The unequal land values resulted in a balance 

of $9.6 million owed the Government. After the Galena Resort property was acquired . 

the responsibility for completing additional transactions to eliminate the outstanding 

exchange balance was transferred from the California State Office to the Nevada State 

Office , which subsequently processed seven other transactions. 

Fair Market Value. As noted earlier, Section 93!0.04.D.2 of the Bureau Manual 

requires a chief appraiser to establish the Government's estimate of fair market value for 

properties to be acquired in an exchange. We found that the Bureau complied with this 

requirement in six of the eight transactions completed to date . However, the Bureau did 

not use the Nevada Chief Appraiser's approved fair market value estimate as the basis 

for acquiring portions of the DePaoli Ranch in two separate transactions. As a result. 

the Government lost about $69,000 in the exchange of this property . 

The DePaoli Ranch property was located on and adjacent to the Pyramid Lake Paiute 

Indian Reservation. An appraiser estimated the value of several different rypes of 

property being acquired and prepared three appraisal reports. During the appraisal 

review process, the Nevada Chief Appraiser reduced the approved exchange values to 

recognize discounts appropriate for a single buyer of the entire property. The original 

appraise!! values and the State Chief Appraiser's approved exchange values for the 

private property are as follows: 

Prooerrv Descrimjon 

Ho'me Ranch 

Pah Rah Rangeland 

Residential Lots 

iota! 

Original 

Appraised 

Value 

$4 ,132,525 

955,000 

45 000 

$5 132 525 

9 

Approved 

Exchange 

Value 

$4,025 ,000 

821 ,300 

38 700 

$4.885.000 
70 

We found that the Bureau acquired the DePaoli home ranch in the initial exchange 

transaction on August 12. 1994, for $4,132.525. which was $107.525 more than its 

approved exchange value of $4,025.000. There was no documentation to justify 

completing this exchange at other than the approved exchange value. We also found that 

the Bureau acquired the DePaoli residential lots in a subsequent transaction on January 

31. !995 . at · no additional cost to the Government. or for $38 .700 less than their 

approved exchange value. As a result. the Government's cost to acquire the entire 

DePaoli Ranch property exceeded the approved exchange value of the property by 

$68.825 ($107.525 minus $38.700). 

Other Management Issues. In reviewing the Galena Resort exchange. we 

identified three additional areas where the Bureau· s management of the exchange did not 

ensure full compliance with laws. regulations. and procedures. While this has not 

resulted in any direct losses to the Government, the potential exists for furure losses if 

these issues are not corrected . 

We found that California State Office personnel processing the initial transaction did not 

fonnalize a verbal commitment to compensate the proponent for certain costs' and to 

make this commitment a pan of the official record for the exchange. The Federal Land 

Exchange Facilitation Act authorizes the Bureau to compensate the proponent for 

processing costs ordinarily borne by the Government when such compensation is clearly 

in the public interest and the rationale for the compensation is established and 

documented at the beginning of the exchange process. We believe that a fonnal 

agreement should have been prepared to substantiate the allowabiliry and reasonableness 

of claimed compensation costs. which. at the time of our review. totaled approximately 

$283.000. 

We also found that the values of Federal land and private land exchanged in the initial 

transaction were not equalized. A California State bffice official stated that as much 

Federal land as possible was included in the initial transaction because the proponent had 

buyers ready to purchase the land and because the proponent was expected to provide 

additional private land to equalize the exchange shortly thereafter. However. the Federal 

Land Policy and Management Act, as amended. and the Bureau's implementing 

regulations require Bureau officials to attempt to reduce the difference between the value 

of the Federal and the private land exchanged to as small an amount as practicable. 

Nonetheless, Federal land conveyed to the proponent in the initial exchange transaction 

totaled about $9.6 million more than the private !aDds received by the Government. Nine 

months later and after seven more transactions. the proponent still owed the Government 

$8.9 million. In our opinion. the State Office should have removed Federal lands as 

needed to ~equalize the values of land exchanged and could have done so because the 

'At our request , the California State Office obtained an itemized list of the costs claimed by the proponent 

through September !9, 199S . The list identified costs of 5282,847 to be compensated by the Goverrunent 

associated with appraisals, environmental assessmentS. and title work on the Federal land exchanged, as 

well as costs incurred before and after August 12. 1994. to eliminate mining claims encumbering some of 

the Federal land conveyed to the proponent. 

10 
71 

Federal land conveyed to the proponent in this exchange consisted of a large number of 

small. noncontiguous tracts of land. 

Finally. we found that Nevada State Office personnel were not using a ledger account to 

monitor the relative values of lands exchanged' Title 43. Pan 2201.1-l(e), of the Code 

of Federal Regulations requires the use of a ledger for exchanges involving more than 

one transaction. A ledger provides a mechanism which identifies the amount owed the 

Government or the proponent in an ongoing exchange and helps ensure compliance with 

the provision of the Federal Land Policy and Management Act which requires that the 

value difference between Federal and private lands exchanged not exceed 25 percent of 

the total value of the Federal land conveyed. Because a ledger was not used to monitor 

the value of lands exchanged, the State Office exceeded the 25 percent limit when 282.5 

acres of Federal land were conveyed to the proponent on November 23, 1994. This 

transaction increased the . balance owed the Government from $8.3 million to 

$13.0 million. which was 29.7 percent of the value of the Federal land exchanged at that 

·time . The baiance owed was lowered to acceptable limits by December 15 . 1994; 

however. we believe that the State Office should use a ledger to monitor and control 

future exchange activity because of the significant dollar amounts of land being 

exchanged. 

Conclusion 

We believe that the Nevada State Office can take better advantage of the unique 

opponunity that exists to use the highly marketable land identified for disposal in the Las 

Vegas area to acquire land for mission-related purposes. The State Office could 

accomplish this. in pan. by ensuring that land exchanges are processed in full accordance 

with applicable laws. regulations, and Bureau procedures. In this regard, the State Office 

should ensure · that the land to be acquired is in conformance with approved land-use 

plans or properly executed amendments to the plans; value all land properly; and fully 

justify and document in the exchange file all significant decisions involving the exchange 

transactions. panicularly those affecting land valuation. 

In addition. we believe that the State Office could maximize the public benefit in 

disposing of the Las Vegas area land by introducing competition into the disposal 

process. Our review of land documents at the Offices of the Assessor and the Recorder 

for Clark County indicated that land exchange proponents have been very successful in 

realizing sizeable gains by selling land received from the Bureau in smaller parcels 

shonly after title to the land was transferred. For example. according to the County's 

records. one exchange proponent sold 70 acres acquired at an exchange value of 

S763 ,00Q:for $4.6 million on the same day the exchange was completed. The proponent 

sold another 40 acres acquired at an exchange value of $504,000 for Sl million, also on 

' At our requeSI, California State Office personnel retrieved a ledger that they developed during the initial 

exchange transaction from their computer fiJes and updated this document to reflect subsequent transactions 

completed by Nevada State Office personnel. The Nevada State Office was provided with a copy of this 

ledger prior 10 lhe conclusion of our audit. 

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72 

the same day the exchange was completed. Finally. the proponent sold another 25 acre·s 

acquired at an exchange value of $909.000 for $1.6 million within 2 months of 

completing the exchange. While the County 's records did not provide sufficient 

information to determine the underlying reasons for the apparent substantial profits, these 

eumples. in our opinion, demonstrate that the Government can sometimes obtain more 

'"alue through a sale than through an exchange. They also demonstrate the difficulty of 

establishing the fair market value for public lands in the Las Vegas area real estate 

market through the appraisal process. 

Another way to introduce competition into the land disposal process and to reduce 

reliance on the appraisal function is through the use of "competitive land exchanges. " 

A competitive land exchange is an irmovative process that has been used successfully by 

the U.S. Forest Service. This type of exchange involves advertising in newspapers or 

sending interested parties a bid prospectus which identifies specific Federal land that is 

available for exchange for non-Federal land. This would assist the agency in meeting 

its mission-related goals. 

In November 1994. Bureau officials discussed this methodology with representatives of 

the Department of the Interior. other Federal agencies. state and county governments, 

environmental organizations. and land exchange facilitators at a meeting convened at the 

request of the Department to discuss the land exchange process. At the meeting, 

competitive exchanges were suggested as a methodology for use when comparable sales 

.on which to value the exchange lands are not available . An interagency team from the 

Department. in its June 1995 draft report "Land Exchanges: Ideas for Improvement. " 

also discussed this methodology as an approach to deal with the valuation of highly 

speculative lands. The report indicated that the Bureau should conduct at least two pilot 

competitive exchanges to test this approach . The introduction of competition into the 

disposal process for highly speculative properties. such as those in and around Las 

Vegas. would help alleviate some of the negative publicity the Bureau has received over 

the land appraisal values the State Office has used for both the Federal and the pnvate 

lands included in its exchanges. 

Recommendations 

We recommend that the Director. Nevada State Office: 

I. Institute competitive procedures (sale or competitive exchange) into the land 

disposal process to the maximum extent practicable . 

2. ~Direct that all easements on Federal lands proposed for disposal be rev iewed 

to verify grantee needs and that actions be taken to remove any easements that are not 

needed before the Federal lands are exchanged or sold. 

3. Establish the controls necessary to ensure that land exchanges are processed 

in full accordance with applicable laws, regulations, and Bureau procedures. At a 

minimum, these controls should ensure that land to be acquired is in conformance with 

12 
73 

approved land-use plans or properly executed plan amendments: land acquired and 

disposed of is properly valued: and all significant decisions involving the exchange 

transactions. panicularly those affecting land valuation, are fully justified and 

documented in the exchange file. 

Bureau of Land Management Response and Office of Inspector General 

Reply 

In the July 5, 1996. response from the Director. Bureau of Land Management (Appendix 

2). the Bureau concurred with Recommendations 1-3. Based on the response. we 

requested that the Bureau provide additional information for these recommendations (see 

Appendix 3). The Bureau also provided comments on specific land exchanges and 

information discussed in this finding, which are presented below. 

Additional Comments 

Oliver Ranch Exchange 

Bureau Response. The Bureau stated that the value it had established for the 

220-acre parcel of Federal land encumbered with a flood control easement to the City of 

Las Vegas was "accurate" based on information available to the review appraiser at the 

time of the exchange. The Bureau· included in its response a copy of a March 16, 1993, 

lener from the City to the Las Vegas District Office, stating that the City had "active 

plans to use [the] right-of-way gram . for a water detention basin for flood control 

purposes" and that it "wish[ed] to retain its right-of-way grant .... " The Bureau stated 

that the review appraiser accordingly "concluded that the City had no plans 10 relinquish 

the easement and therefore approved a value of $550,000 for the 220 acre tract." The 

Bureau also included a copy of the subsequent agreement between the City and the new 

landowner under which the City agreed to relinquish over 180 acres of the right-of-way 

in exchange for $400,000 in cash and payment of the costs of engineering and 

constructing a water detention basin, including off-site improvements. 

Office of Inspector General Reply. We considered the March 16, 1993. lener 

when we reviewed the processing of this exchange. However, this lener should not be 

read in isolation because there were other factors known 10 the Bureau prior to the 

exchange that should have been considered. 

By focusing on the March 16 letter as justification for proceeding with the exchange of 

the encumbered propeny at a value 10 times lower than the value of the unencumbered 

land, me·'Bureau does not address the totality of the circumstances surrounding this 

transaction. Those circumstances were explained, in part, in a March 26, 1993, 

memorandum to the file by the Bureau's review appraiser, which stated: 

The City of Las Vegas was contacted regarding their plans for this propeny 

since no facilities have been built under the RJW [right-of-way] grant. They 

can give no timeframe for construction or even an idea of what may be built 

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74 

althoug_h it was mentioned that a minimum of 80 acres would be needed for 

the project. A letter from the City, however, stated that no ponion of the 

RJW would be relinquished at this time. 

It is evident that any furure release of any ponion of this RJW grant by the 

City will create a "windfall profit" w·the underlying landowner . since 

the unencumbered value is ten times the appraised price. Because of the 

irregular shape and large size of the parcel. it appears likely that not all of 

the land will be used by the City for the proposed Flood Detention Basin. 

This siruation has been explained to DSD [Deputy State Director] 

Operations. and, in rum, on March 22, 1993. to . [the] Nevada State 

Director. The management decision was that the benefits of this exchange 

warranted transfer of the land to private ownership without fullher delay. 

Although we do not challenge the Bureau's decision to acquire the Oliver Ranch 

propeny. in view of all the circumstances. we do not believe that the Bureau was 

sufficiently diligent in pursuing with the City the matter of relinquishing the easement. 

First, the easement was granted to the City in 1986. In 1993--7 years later--the March 

26 memorandum stated that "no facilities ha[d) been built under the RIW [right-of-way] 

grant" and that the City could give "no timeframe for construction or even an idea of 

what may be built . . " Indeed. in a 1994 memorandum from the City's Director of 

Public Works to various City officials urging approval of a subsequent agreement 

between the City and the new landowner to relinquish over 180 acres of the easement. 

the Director acknowledged that no funding had been identified for the detention basin for 

the next I 0 years. This degree of uncenainty several years after the easement was 

granted appears inconsistent with the Bureau· s responsibility under the Code of Federal 

Regulations to ensure that the amount of land included in an easement is limited to only 

those lands which the authorized officer detellDines "(w)ill be occupied by the facilities 

authorized [and) be necessary for the construction, operation, maintenance, and 

tellDination of the authorized facilities . . " In fact, notwithstanding the uncenainty 

surrounding the City's use of the easement, in December 1992, the Bureau had extended 

the expiration date of the easement on the entire 220-acre tract into perperuity. 

Second, the Bureau was cognizant of the "windfall profit" to the proponent that would 

result from any future relinquishment of any potlion of the easement, given that the value 

of the unencumbered property was 10 times the appraised value of the encumbered 

property. In other words, the easement resulted in a 90 percent devaluation of the 

Government land. In view of the escalating property values, the fact that 7 years had 

elapsed with no action by the City, the uncenainty that had been demonstrated by the 

City as to 'its needs and plans, and the Bureau's responsibility under the Code of Federal 

Regulations. we believe that the City's brief reference, in its letter of March 16, 1993, 

to its "active plans to use [the] right-of-way grant," without more details, provided 

insufficient justification for the Bureau not to pursue relinquishment of the easement by 

the City. Indeed, as the facts reveal, the City ultimately retained only 31 acres of the 

220 acres for construction of the detention basin. 

14 
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Third. the Bureau 's lack of diligence in assessing the City's stated continued need to 

encumber the entire 220-acre parcel is further underscored by two additional facts 

contained in the City· s November 1994 memorandum regarding the proposed agreement 

with the new landowner. First . . within only a few months after the exchange. the City 

and the new landowner had entered into negotiations for the City to relinquish over 180 

acres of the flood control easement. Second. in providing background information. the 

City's memorandum noted that a number of events had occurred since the easement was 

granted in 1986. including the fact that Clark County had identified the need for a 

maximum of only 32 acres for the detention basin. 

Accordingly . notwithstanding the Bureau's response, we continue to believe that under 

the circumstances as presented. the Bureau's State Office management should have taken 

additional measures to protect the Federal Government's interests, such as by pursuing 

more diligently with the City the issue of relinquishing the easement or by seeking to 

substirute an un~ncumbered parcel of Las Vegas area land to complete the exchange . 

Regarding the role of the City in the removal of the easement, we have revised the report 

to clarify that the Government's loss represented a gain for the City as well as for the 

proponent. 

Red Rock Exchange 

Bureau Response. The Bureau stated that the Federal Land Policy and 

Management Act and implementing regulations and guidance "do not require " that land 

acquired by the Bureau "be specifically identified in land use plans . [but that] 

acquisitions be consistent with the mission of the Depanment and with applicable land 

use plans. ·• According to the Bureau, the Virgin River Valley acquisition was consistent 

with the need to "manage for woundfin (an endangered species) habitat along the Virgin 

River, " as identified in the Clark County Management Framework Plan and in the U.S. 

Fish and Wildlife Service Woundfin Recovery Plan. In addition, the Bureau said that 

the Pahrump Valley acquisition was consistent with proposals in a Draft Resource 

Management Plan to acquire lands to protect the desert tortoise and with a "proposed 

potential ·tortoise management area" under the Clark County Short-Term Habitat 

Conservation Plan. 

The Bureau also stated that our draft report was "misleading by stating that the second 

review appraiser [of the Virgin River properties] established significantly higher values 

for the properties " than the first review appraiser. " According to the Bureau, the second 

review appraiser had "evaluated areas of disagreement" between the original appraiser 

and the ft~st review appraiser and had "accepted the original appraisal on all but one of 

the parcels." The Bureau further stated that the second review appraiser concluded that 

the first review appraiser was generally "more conservative" in his approach than the 

original appraiser and used a "different technique to establish value ," particularly in 

assigning a value to "access limitations on several of the properties. " The Bureau 

provided the review statement of the second review appraiser with its response to show 

the rationale used in his review . 

15 
76 

Office of Inspector General Reply . We agree that the Federal Land Policy 

Managemem Act and implementing regulations do not require that land acquired by the 

Bureau be specifically identified in land use plans but rather that the acquisitions be in 

conformance with the plans. We have clarified that point in this repon. 

We still question. however, whether the Bureau's acquisition of lands in the Virgin River 

and Pahrump Valleys was in conformance with the current land-use plan for the area--the 

1984 Clark County Management Framework Plan. Because the U.S . Fish and Wildlife 

Recovery Plan for the Woundfin and Virgin River Chub, referenced in the Bureau 's 

response . did not contain specific boundanes for acquisition of land along the Virgin 

River. we contacted the Chief of Listing and Recovery of Endangered Species for the 

U.S. Fish and Wildlife Service, in Denver. Colorado. during the audit, to obtain this 

information. This official stated that the high priority area for the Virgin River was in 

Utah and that the area nonh of Halfway Wash, in Nevada, was also a priority . 

The Bureau's May 1994 "Supplement to the Draft Stateline Resource Management Plan," 

which. as noted earlier. has not been finalized . identified the area nonh of Halfway Wash 

as a proposed area of "critical envirorunental concern. " Based on our review of the area 

of critical envirorunental concern and the acquired land, which were identified on maps 

by a Bureau wildlife biologist. we noted that only 120 acres of the 2,061 acquired acres 

were within the boundaries of the proposed area of critical envirorunental concern. We 

also noted that another 420 acres of land outside this area, where the land parcel involved 

was completely or panty in the river bed, might be construed as lands to be acquired. 

Thus. at best, only 540 acres of the 2.061 acquired acres appear to be justified by the 

current land-use plan. Funher. the 1994 "Supplement" did not appear to suppon the 

acquisition of any of the 400 acres of Pahrump Valley lands for tonoise habitat. 

It should also be noted that the planning documents cited by the Bureau as suppon for 

its acquisitions in the Virgin River and Pahrump Valleys included only vague references 

to the land which might be acquiied, such as "land along the river." In our opinion. 

Bureau management should ensure that it acquires only propenies which clearly satisfy 

mission-related goals and objectives in exchange for highly valued Las Vegas lands. 

While it i~ not our intention to question the identification of land by the Bureau wildlife 

biologis1 as being of "critical environmental concern," we do believe that the 

"Supplement" should be more specific regarding the location and amount of land of such 

concern. Otherwise. the Bureau may exchange its highly marketable property for lands 

of questionable or limited program quality, which serves only to reduce the resources 

currently available to assist the Bureau in meeting its habitat preservation goals. 

Regarding,the issue of fair market value of the Virgin River propenies, we do not 

believe that the repon is misleading in its statement that the Nevada staff appraiser 

established significantly higher values for the private land than the Arizona Chief 

Appraiser. Whether the staff appraiser accepted the contract appraiser's value 

conclusions or developed his· own is not at issue. According to the Bureau's Manual, the 

critical requirement is approval of an amount representing the Bureau's estimate of fair 

market value by a chief appraiser. Accordingly, our point was that the second review 

conducted by the Bureau, which was performed in response to the proponent's expression 

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77 

of displeasure wilh the review by a chief appraiser. increased the Government's cost to 

acquire the land by $1.2 million wilhout reconciliation of the differences between the two 

reviews. 

During the audit. we reviewed the contract appraisal and both appraisal reviews. and we 

interviewed bmh Bureau persoMel who had performed appraisal reviews of the propeny. 

Although the Bureau responded that lhe second review appraiser had concluded that the 

first review appraiser had taken a conservative approach in making value determinations. 

·the acrual statement of lhe second review appraiser does nm acknowledge that a previous 

review was performed by lhe Arizona Chief Appraiser. In addition, the statement does 

not comment on the significantly lower value determinations for the private lands reached 

by the first reviewer considering the same factors. 

Also imponant. in our opinion. is lhe fact that lhe values of the private lands were 

originally approved by a State Chief Appraiser in accordance with Bureau Manual 

requirements and lhe initial phase of lhe exchange was processed using lhose approved 

values. The subsequent review was performed by a subordinate to the Nevada Chief 

Appraiser. with no documentation to indicate that lhe values derived by the subordinate 

staff appraiser were approved by a State Chief Appraiser, as required by lhe Bureau 

Manual. Bureau persoMel told us that lhe staff appraiser had been designated as lhe 

Acting Chief Appraiser for the 17 propenies of Virgin River Valley land for which lhe 

proponent had indicated unhappiness wilh the values previously established by lhe 

Arizona Chief Appraiser. However, we noted lhat lhe staff appraiser had signed the 

Appraisal Review of lhese 17 propenies as the Reviewing Appraiser and not as the 

Acting Chief Appraiser. Funher. lhe Bureau was not able to explain why the staff 

appraiser was designated as lhe Acting Chief Appraiser for lhis review. Thus we 

question lhe State Office's decision to override lhe values approved by the Arizona Chief 

Appraiser and to accept values for lhe private lands that were $1.2 million higher wilhout 

a reconciliation of lhe differences and under lhe circumstances· as presented here. 

In our view. in order to properly protect lhe Government's financial interests, lhe 

substantive differences berween lhe two Bureau reviews should have b!=en discussed by 

lhe panies involved and reconciled prior to completing lhe exchange . In lhis instance, 

not only was a reconciliation oot performed, but also · the Arizona Chief Appraiser 

advised us lhat he was unaware lhat a second review had even taken place . As such, he 

was not afforded an opponunity to explain and defend his decision. 

Galena Resort Exchange 

B~U Response. Regarding lhe issue of fair market value, lhe Bureau stated 

that "credit may have been .inappropriately allowed to lhe proponent" on this exchange . 

The Bureau funher stated lhat it would "carefully • review the ledger account • to 

determine lhe correct amount which is owed to lhe United States" and would ·make 

"proper adjustments ... to lhe ledger account before this assembled exchange file is 

closed. " Regarding "olher management issues, " lhe Bureau agreed lhat verbal 

commitments made "to compensate proponents for [cenain] costs" must be formalized. 

The Bureau funher noted lhat, allhough an exchange agreement lhat is "normally used 

17 
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to identify these compensation coSIS was not developed. the eltchange proponent was 

notified by lener"' of the costs the Bureau would cover. The Bureau has. however. 

expressed its intention to consummate agreements on these issues in the furure . 

Office of Inspector General Reply. The actions to be taken by the Bureau in 

regard to the fair market value appear 10 be a reasonable approach to recouping the 

$68 .825 . As to the "other management issues," Bureau persoMel did not provide a copy 

of the leller 10 the exchange proponent when such documentation was requested during 

our fieldwork . In any event. the Bureau's apparent acknowledgement that even such a 

lener would be insufficient and its statement that it will formalize its compensation 

commitments in furure transactions is sufficient 10 alleviate our concerns regarding this 

issue. 

Conclusion 

Bureau Response. Regarding the S!atement in our draft repon that the exchange 

proponents have realized "sizeable gains " by reselling lands obtained from the Bureau , 

the Bureau stated that the examples cited in our draft "represent subsequent sales that are 

probably not arms length market transactions and therefore are not necessarily indicative 

of the true market value of the propenies. • Regarding one of our examples, the Bureau 

stated; 

The 70-acre parcel .. . was originally acquired through a land exchange by 

[an organization that was a joint venrure). an entity controlled by a Las 

Vegas developer. That same developer subsequently acquired the properry 

through a paper transaction. The developer had both a seller and buyer 

interest in the properry and therefore Ibis sale may not represent an armslength market transaction. 

In addition, the Bureau stated: 

Las Vegas has experienced explosive growth over the last several years. 

This has created a speculative environment where values are difficult to 

estimate. It is also difficult to predict what buyers will do once they have 

acquired the lands; i. e., resell the land, sell off smaller tracts, or begin 

development. 

Office of Inspector General Reply. Regarding the 70-acre transaction, our repon 

recognizes that sufficient information was not available to determine the underlying 

reasons fo~ the apparent substantial profits. However, the Bureau provided no suppon, 

such as comparable sales: to demonstrate that the sales price was not, in fact. 

representative of the value of the land. Therefore, we do not believe that the Bureau's 

speculation is sufficient to justify its position that the resale values determined from Clark 

County land records were not indicative of the true value of the propenies. Without 

having information to the contrary, we believe that the resale values obtained from the 

Clark County land records are the best indicator of the prevailing market value of the 

Bureau's lands at the time of the exchanges. 

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We agree that "explosive growth in the Las Vegas area has created a speculative 

environment where values are difficult to estimate." which was the basis for our 

conclusion that the best way to protect the Government's interests is through the 

introduction of a competitive process. 

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B. SANTINI-BURTON ACT LAND 

The Bureau of Land Management 's Nevada State Office included 446.5 acres of Federal 

land located within the land sale area identified by the Santini-Bunon Act (Public Law 

96-586) in three of the four exchanges we reviewed . The Act authorizes the Secretary 

of the Interior 10 sell Federal land in and around Las Vegas 10 finance the acquisition of 

envtronmentally sensitive land in the Lake Tahoe Basin of Nevada and California . 

However. the Bureau had previously taken the position that the Act did not specifically 

prohibit the Bureau from e11changing Federal lands within the legislatively identified area 

based on the Bureau· s authorities in the Federal Land Policy and Management Act of 

1976. As a result, the State Office e11changed land that. if sold, would have rerumed at 

least $7 .8 million to the U.S. Treasury to repay a ponion of the $93 million the Federal 

Government has spent in acquiring land in the Lake Tahoe Basin. 

On December 23. 1980. the Congress enacted the Santini-Bunon Act to address the need 

for the Government 10 sell some of its Nevada land and to acquire and protect 

environmentally sensitive land in the Lake Tahoe Basin. Under Section I of the Act. the 

Congress found that the Bureau had elttensive land ownership in urban areas of Clark 

County and that it should sell some of those lands "for the orderly development of the 

communities in .that county ." Under Section 2 of the Act. the Secretary was authorized 

and directed· to dispose of the Bureau land as shown on the May 1980 map entitled "Las 

Vegas Valley. Nevada. Land Sales Map" (No. 7306A). The map shows the boundary 

of a 182-square-mile land sale area of Clark County centered on Las Vegas and 

containing appro11imately 7,000 acres of Bureau land . Section 2 of the Act also required 

the Bureau to deposit 85 percent of the proceeds from these land sales into the general 

fund of the U.S. Treasury as repayment for funds appropriated to the Depanment of 

Agriculture's U.S. Forest Service for the purchase of Lake Tahoe Basin land' It also 

directed the Secretary. in cooperation with the Secretary of Agriculrure. to keep the 

appropriate Congressional oversight committees apprised of the starus of repayment by 

submitting biannual accounting repons of income and e11pendirures provided for by the 

Act. 

We found that the State Office e11changed land in the designated land sale area in three 

of the four e11changes reviewed as follows: 

• The remaining 1 S percent of the proceeds were to be paid to the Stue of Nevada and affected local 

governments. 

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Santini-Burton Revenues 

Acreage Appraised Foregone 

Exchange No. Exchanged Market Value <85 Percent) 

Red Rock <N-57773) 25 .0 $909.000 $772.650 

Oliver Ranch !N-56458) 191.5 4.555.000 3.871.750 

Galena Resort (N-57877) UQJl 3 690 000 3 !36 500 

Tmal ~ ~9 1~4 QQQ p 7§0 900 

According to Bureau documentation, Bureau officials exchanged the land within the 

legislatively identified land sale area because they believed that they had a wider latitude 

for disposing of this land under the authorities in the Federal Land Policy and 

Management Act. For example, in dismissing a private citizen's protest that the 

inclusion of Santini-Burton Act land in the Oliver Ranch exchange (No. N-56458) 

violated the intent and objectives of the Act, the Bureau's Director stated, "There is 

nothing in the legislation that prohibits us from disposing of the public lands within the 

Santini-Burton area under other authorities." 

Our office performed a legal review of the Santini-Burton Act and its legislative history 

and found some evidence indicating that the Bureau is not precluded from exchanging 

land within the Congressionally identified land sale area . Specifically. in House Report 

No. 96-1023 . dated May 16. 1980. the Committee on Interior and Insular Affairs stated . 

"The Committee does not intend. by this Act, to prohibit continuation of reasonable land 

transfers under existing authority for public purposes." 

On the other hand. it seems equally clear from other language in the legislative history 

and the Act that the Congress intended the Bureau to minimize its exercise of other land 

disposal authorities for the specified lands to help ensure that sufficient revenue was 

generated to substantially offset the cost of acquiring the Lake Tahoe Basin lands. For 

example, in the House Report, the Committee also stated. "The Committee has 

determined that the costs incurred as a result of enactment of this bill will be relatively 

nominal. " In our opinion, such can occur only if the sales revenues closely approximate 

the acquisition costs. Senate Report No. 96-1026, dated November 21. 1980, also 

included a statement by the Senate Committee on Energy and Natural Resources that it 

amended the House bill "to assure that any appropriations from the Land and Water 

Conservation Fund are offset by revenues from the land sales authorized in section 2." 

Also, as discussed previously. Section 2(e) of the Act stated that the land sale revenues 

generated QY the Bureau would be considered repayment for funds appropriated for Lake 

Tahoe Basin land purchases. In addition. a monitoring process was established that 

required the Secretary to prepare and submit accounting reports of Santini-Burton Act 

income and expenditures to the appropriate Congressional oversight committees twice per 

year. We also noted several other statements published in the ·congressional Record" 

as follows: 

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82 

· One of the Congressional authors of the bill stated that the bill involves "selling 

certain Federal ·checkerboarded' lands in the Las Vegas Valley and considering the 

proceeds repayment for acquisition of private environmentally sensitive land in the Lake 

Tahoe Basin." (Congressional Record-House. September 8. 1980. p. 24553) 

· Another Congressman stated that the bill "makes money available at np net loss to 

the American taxpayer to buy the most dangerous of these lots. " (Emphasis added.) 

(Congressional Record-House. September 8. 1980. p. 24558) 

· A Senator stated that the bill "creates a self-sustaining fund for the acquisition of 

lands deemed to be environmentally sensitive generated by the sale of 

checkerboarded Federal lands in Nevada." <Emphasis added.) (Congressional Record· 

Senate. December 4. 1980. pp. 32384-85) 

·Another Senator stated -that under the bill. "The revenue generated by the sale of 

Bureau of Land 'Management lands in Nevada will provide the funds necessary for the 

Forest Service to purchase environmentally sensitive lands at Tahoe." (Congressional 

Record-Senate, December 4. 1980. p. 32385) 

To evaluate the effect of the Bureau's decision to exchange rather than sell446.5 acres 

of Santini-Bunon Aci land. we attempted to determine the total amount of program 

income and expenditures to date by obtaining copies of the biaMual accounting repons 

required by Section 2(e) of the Act. However. Bureau officials were unable to provide 

these repons and referred us to a representative in the Depanment · s Office of Policy 

Analysis. The representative stated that she was not aware of such repons. We then 

contacted officials in the U.S. Forest Service's Lake .Tahoe Basin Management Unit and 

the Bureau 's Division of Finance for this information. These officials estimated that by 

the end of fiscal year 1995. the Forest Service will have spent about $93 million of 

appropriated funds to acquire Lalce Tahoe Basin propenies. while the Bureau will have 

deposited only about $53 million of land sale revenues into the general fund of the U.S. 

Treasury to repay the amounts appropriated. As a result. Santini·Bunon Act acquisition 

costs exceeded sales revenues by about $40 million. This deficit could have been 

reduced if the State Office had not chosen to exchange about S9.2 million of designated 

Santini-Bunon Act land that would have generated $7 .8 million in additional revenues 

for the U.S. Treasury. This substantial cost burden of $40 million, which represents 43 

percent of the acquisition costs, will ultimately be borne by the American taxpayers if 

the Bureau does not sell sufficient land to offset the revenue shonfall. 

By selling rather than exchanging the designated Santini-Bunon Act lands, the Bureau 

would help not only to repay more fully the cost of the Lalce Tahoe Basin land 

acquisition program but also to ensure that the Government maximizes its return in 

disposing of these valuable propenies. For example. we found that less than 2 months 

after the Bureau exchanged the 25 acres of Santini-Bunon Act land for $909.000 as pan 

of the Red Rock exchange (No. N-57773). the proponent resold the land for 

$1 .6 million. or almost 80 percent more than the approved appraised value used for the 

exchange . Also. Bureau records indicated that Santini-Bunon Act lands were appraised 

and sold in small tracts, rarely exceeding 20 acres in size, to maximize sales revenue. 

22 
83 

whereas 374 acres of this land were exchanged (Oliver. Ranch and Galena Resort) based 

on appraised values for two large tracts of 169 acres and 205 acres. Because smaller 

tracts of land are generally appraised at higher per acre values than hu·ger tracts of land, 

the 374 acres of Federal land could have yielded a higher value if they had been sold in 

smaller tracts. Based on our review of prior sales and resales, we believe that the 

Bureau could have sold the 446 .5 acres of Santini-Bunon Act land for substantially more 

than the $9.2 million value established for exchange purposes. 

Recommendations 

We recommend that the Director. Nevada State Office. take appropriate action to ensure 

that: 

1. The accounting reports of income and expenditures required by Section 2(e) of 

the Santini-Bunon Act are prepared and submitted to Bureau headquarters for submission 

to the appropriate Congressional oversight committees. 

2. The Nevada State Office uses the land sales process. except in compelling 

circumstances. when disposing of its Santini-Bunon Act lands until the sales revenues 

generated closely approximate the Lake Tahoe Basin acquisition costs. Any exchange 

proposals from that time on should be closely monitored to ensure that the exchange is 

justified and that the costs incurred as a result of the Santini-Burton Act remain relatively 

nominal. 

Bureau of Land Management Response and Office of Inspector General 

Reply 

In the July 5, 1996, response from the Director, Bureau of Land Management (Appendix 

2), the Bureau stated agreement with Recommendation I. However, the actions the 

Bureau described for Recommendation I are not consistent with what we recommended. 

Regarding Recommendation 2. the Bureau did not state concurrence or nonconcurrence 

but stated that it would request an opinion from the Office of the Solicitor. Based on the 

response . we consider Recommendations I and 2 unresolved. The Bureau is requested 

to reconsider its response to Recommendation I and respond to Recommendation 2 

following receipt of the legal opinion from the Solicitor's Office (see Appendix 3). 

Recommendation B.l. Concurrence. 

Bureau Response. The Bureau agreed with the recommendation, stating that it has 

been submilting the accounting reports on an ' annual basis, ' which is consistent with its 

"annual accounting procedures. " 

Office of Inspector General Reply. Since Section 2(e) of the Santini-Bunon Act 

requires "biannual" rather than annual reponing, the submission of reports on an annual 

basis would not be in compliance with the Act. Further, we were not able to confirm 

during our review that the Bureau had been submitting reports annually . Specifically , 

23 
84 

Bureau officials were unable to provide these reporu and instead referred us to a 

representative in the Depanment's Office of Policy Analysis. who told us that she was 

"not aware of such reporu." 

Recommendation 8.2. Concurrence/nonconcurrence not indicated. 

Bureau Response. The Bureau stated that "[t]he exchange of lands in the SantiniBunon area should not be continued if [such exchanges arc] inconsistent with Public Law 

96-586" and that it would ask the Office of the Solicitor to provide guidance on this 

matter by the end of calendar year 1996. 

Orfice of Inspector General Reply . We agree with the Bureau that the lands should 

not be exchanged if such exchanges arc inconsistent with Public Law 98-586. The 

Bureau, however. in lieu of addressing our recommendation. stated in its response that 

it will request an opinion from the Office of the Solicitor. Our finding and 

recommendation were based on a legal review performed by the General Counsel's 

Office, Office of Inspector General. However, we have no objection to the Bureau's 

obtaining an opinion from the Solicitor's Office in order to provide a response to our 

recommendation. 

Additional Comments 

The Bureau also stated that our draft repon "creates an impression that $7 .8 million was 

lost, when, in fact, lands with important natural resource values were acquired through 

exchange ." While we agree that some of the land was exchanged for high quality lands, 

as noted in our repon. the purpose of our finding was to demonstrate that the Bureau 

should sell rather than exchange Santini-Bunon Act land to ensure that the cost to acquire 

land in the Lake Tahoe Basin is not borne by the taXpayer. Regardless of whether 

valuable land was acquired, the fact remains that, by exchanging the land rather than 

selling it. the Bureau lost the opportunity to return funds to the U.S. Treasury as the Act 

intends. 

24 
85 

OTHER MATTERS 

Dunne our review. we noted tllat the Federal Land Poli~ y and Management A~t of 1976. 

as am~nded . provides the Bureau wi_th wide latirude in determining what ~onstirute s a 

beneficial ex~hange. Specifically. Section 206 of the Act authorizes the Bureau to 

dispose of land through an ex~hange when an authorized Bureau official determines that 

the publi~ interest will be well served. In the Oliver Ranch and the Galena exchanges. 

the Nevada State Office used this latirude to obtain private land that had been identified 

for acquisition in existing land-use planning documents because of its scenic and 

re~reational resource values. In our review of the Tonopah ex~hange (No . N-57468). 

we noted that the State Office used this latirude to acquire a defunct bowling alley on 8.2 

acres of land with the intention of using this facility and property as an administrative 

complex for the Tonopah Resource Area. 

We found that. in 1989, the Bureau determined that its Tonopah Area fa~ilities were 

inadequate and needed to be replaced. The Bureau therefore asked the Congress to 

appropriate $640.000 in fiscal year 1991 to construct a new 7,000 square-foot office 

complex on a 5-acre par~el of land already in Federal ownership. Subsequently , the 

Bureau allotted $621.. 000 to the Nevada State Office from its fiscal year 1991 

constru~tion appropriation to build a new complex in Tonopah. However. rather than 

proceed with the construction. as originally planned . the Bureau· s Battle Mountain 

Distri~t Manager proposed an exchange of some of the Bureau's Las Vegas area lands 

for a 16.000 square-foot bowling alley in Tonopah that he believed could be ~onverted 

into a new administrative ~omplex . 

An exchange for this property was ~ompleted on June 29. 1994, when the Bureau 

onveyed 25 acres of Las Vegas area lands, valued at $665.000, to the private landowner 

in rerum for the bowling alley property plus $166,000 to equalize the difference in the 

appraised values of the properties. The Bureau said that based on current cost estimates, 

it expects to spend about $2. I million to renovate the property acquired, which is over 

$1.5 million more than the amount currently appropriated for t.'Je Bureau to construct a 

Tonopah administrative complex. 

From available documentation and discussions with Bureau personnel and with our legal 

~ounsel, we concluded that the Bureau acted within its authority in completing this 

exchange. However, we believe that management's use of the exchange process to 

acquire administrative property rather than lands containing significant public resources, 

such as critical fish and wildlife habitat or recreational opportUnities, may not represent 

the most effective use of Federal land. Bureau personnel said that additional proposals 

to acquire administrative facilities through land exchanges may be fonhcoming based on 

the precedent set at Tonopah. Thus, we believe that the Bureau should consider 

establishing a policy limiting the use of the land exchange process to acquire 

administrative facilities for Bureau use . 

25 
86 

Bureau of Land Management Response and Office of Inspector General 

Reply 

In the July 5. 1996, response from the Director. Bureau of Land Management (Appendix 

2). the Bureau agreed to establish a policy limiting the use of the land exchange process 

to acquire administrative facilities for Bureau use . The Bureau stated that it "will provide 

guidance to field offices by December 1. 1996 as to when these types of exchanges are 

appropriate ... The Bureau's actions are sufficient to address our concerns regarding this 

issue. 

26 
A. 

B. 

87 

APPENDIX I 

CLASSIFICATION OF MONETARY AMOUNTS 

Eilli!ing 

Exchange Processing 

Exchange No. N-56458 

Fair Market Value 

Exchange No. N-57773 

Land Use Plans 

Fair Market Value 

Exchange No. N-57877 

Fair Market Value 

Subtotal 

Santini-Bunon Act Land 

Total 

Lost Revenues 

157.000 ) 

69 000' 

4.426.000 

7 800 000 l 

$12,226 000 

Funds To Be Put 

To Better Use 

$4,200,000 I 

$2 ,700,000' 

2.700.000 

$2 700 000 

'Represents tile value tile Bun:au lost because 189 acres of Federal land unnecessarily encumbered by a 

flood-control easement were Ci\Cbangcd at lO percent of their potential value. 

'Represents tile exchange value of 2.461 acres of private land acquired in the Virgin River and Pahrump 

Valleys that were not reflected in current land-use plans as needed for mission-related purposes. The $2.7 

million is composed of tile fair market value approved by the Arizona State Chief AppraiSer ($ 1.5 rrullion) 

and an increase in tile approved fair market value made witllout proper substantiation ($1.2 million). 

'Represents the value tile Bureau lost because a purcha3e discount wa3 incorrectly included when 

establishing the fair market value of Federal lands. 

'Represents the value the Bureau lost becawe the approved fair market value estimate for some of the 

pnvate lands acquJred was nor used. 

'RepreseniS lost revenues to tile U.S. Trea3ury because of tile lost opponunity to sell Federal land in tile 

identified land sale area. 

27 
:-temorandum 

88 

United States Department of the Interior 

Bl:Rt: .. H OF 1.\ .'U \I \, .. \I;Dit:'T"""' 

9oASHI'(;TO, , U.L. 202.lU /'t, 

APPESDIX Z ?ase l oi 8 

'' 'lo R~p~~ Refer To: % 1245(4-jpJ 

~ '~ "'- .· . .., ., July 5, 1996 

,D., i 

To: Assistant lnspe~to General for Audil& · 0 

~,,.. ; ,_,., -fl £:1(1,(,(._----JtA.. 5 1900 

Through : Bob Armmon ~an(Sedetary. Land and Mi erals anagement 

.$" .:. From: ~ if Director. Bureau of Land Management ""<i 

Subject: Respcnse to Draft Audit on Nevada Land Exchange Activities. Bureau of Land 

Management tAssignment No. W-IN-BLM-003-951 

The Bureau or Land Management tBLMl appreciates the opportunity to review and comment 

on the Office oi the Inspector GeneraJ's draft audit report. We generally agree with the 

report recommendations and will utilize them to improve our land exchange program in 

:"ievada. however. we disagree wtth several of the specific repcrt findings. 

In Nevada. land exchanges have proven to be a valuable tool to acquire environmentally 

sensttive lands. while malcing public lands available near urban areas zoned for restdential and 

commerctal uses. such as those m the Las Vegas area. Recent land exchanges have added 

key property to recreation and scenic areas and provided lands that have aided in the recovery 

oi desert tortoise populations. The Marys River exchange. completed in 1991. is an excellent 

example oi the public beneiits which .can be obtained through the exchange program. This 

acquistuon iacilitated management and improvement of 55 miles of ripanan habitat tmportant 

to the Lahonton cutthroat trout t a federally listed threatened species 1. placed 8.600 acres of 

wet meadows. marshes. and willows into public ownership .. and provided 50 mtles of public 

access to the Marys River area of northeastern Nevada. 

In order to tmprove the exchange process. the BLM in Nevada has instituted a number of 

procedural and policy changes to set priorities on exchange propcsals: streamline the 

paperwork process. improve coordination with local governments. and improve management 

of land exchanges. The Nevada BLM is also considering a process to incorporate competitive 

bidding into exchanges in the Las Vegas area. 

The BLM published regulations in December of 1993. implementing procedures contained in 

the Federal land Edhange Facilitation Act. These regulations offer new processes designed 

to better facilitate the timely completion of land exchanges. Since that rule has been 

published. the BLM has drafted a handbook for processing land exchanges. This handbook. 

anticipated to be finalized by March I. 1997. will describe procedures and ·provide sample 

documents to assist BLM staff in the completion of land exchange transactions. It will 

28 
89 

~.~':'~ ~:-:::<: 2 ?a~r.o .:. .;:,f 8 

mclude a!Jpropnate guidance to help prevent procedural deficiencies identified in !his audit 

repon irom occumng m other BLM Stales. 

The BLM's response to the subject audit repon is attached. We have addressed several of !he 

repon findings. attached additional supponing informauon. and responded to ali of the audit 

recommendations. 

!f you have general questions concerning this response. please contact Gwen Midgett. BLM 

Audit Ltaison Office. at ( 202) 452-7739. !f you have specific questions. please contact Ted 

Mi!esmck. Spcctal Areas and Land Tenure Team. at (202) 452-7727. 

[>OTE: ALL ATTAC&~ENTS ~OT !~ CLcDED BY OFFICE OF INSPECTOR GENERAL.) 

29 
90 

A?PE~'D!X 2 

Page J of 3 

RESPONSE TO THE INSPECTOR GENERAL'S DRAFT AUDIT REPORT 

~VADAL~~EXCHANGEA~S 

Bureau of Land Management 

\Assignment ~o. W-IN-BL\1-003-95) 

A. Discussion of Findings 

Oliver Ranch Exchange 

The draft audit repon (page 8) concludes that Nevada BLM's handling of the Oliver Ranch 

Exchange resulted in a loss of $4.2 mil.lion and that the BLM did not verify the continuing 

need for a right-of-way on the 220 acre tract. The BLM was concerned that the City of Las 

Vegas may no longer need the right-of-way and requested information from the City prior to 

the completion of the exchange. On March 16. 1993. the City of Las Vegas responded to the 

Las Vegas District Office affinrung their need for the water detenuon bastn and a 50-acre 

Recreation and Public Purposes lease on the parcel to be exchanged. The first sentence of the 

second paragraph from this letter states "The city has active plans to use right-of-way grant 

N-37232 for a water detention basin for flood control purposes. The city wishes to retain its 

right-of-way gram on the entire parcel of land (270 acres] except for 50 acres to be used as a 

recreation and public purpose lease in conJunction with a 10 acre City Park lease (N-37111 )." 

Based upon this letter. the revtew appraiser concluded that the City had no plans to relinqutsh 

the easement and therefore approved a value of $550,000 for the 220 acre tract. We have 

anached a copy of the letter from the City of Las Vegas to the District Manager. 

This parcel was subsequently patented on March 30. 1993. In December 1994. the buyer 

reached an agreement with the City to relinquish approximately 183 acres of a flood control 

right-of-way. In exchange, the owner agreed to pay $400.000 in cash to the City and also 

pay the cost of engmeenng and constrUction of a water detenuon basin and cenain off-site 

Improvements. In exchange, the City agreed to pennit the owner to construct and operate a 

recreational facility in the area relinquished by the City. We have anached a copy of this 

agreement. 

In conclusion, we feel that the value established by BLM was accurate given the information 

available to the BLM regarding the City of Las Vegas' intentions prior to its disposal. 

Red Rock Exchange 

Land Use Plans 

The draft audit repon {page 12) concludes that BLM did not protect the Government's 

interest by acquiring land which was not identified in the land use plan and was not needed 

for mission-related purposes. 

30 
91 

Ai'PD"DIX 2 

Page .. o f 8 

The Federal L:md Policy and Management Act and subsequent regulations and manual 

guidance do not require that land acquired by BLM be specifically tdentified in land us~ 

plans. However. they do requtre that acq~isit ons be consistent with the mission of the 

Depanmem and wtth applicable land use plans. At the time this exchange was being 

processed. the land in the Virgin River and Pahrump Valleys were analyzed to detennine if 

they conramed resource values tmportant to BLM's rrussion. 

2. 

The acquisition of lands in the Virgin River Valley were consistent with the management 

recommendations in the Clark Countv Mana2ement Framework Plan tMFP). This MFP 

idenufied the need to manage for wo~ndfin fan endangered species) habitat along the Virgin 

River. conststent with the u.S. Fish and Wildlife Servtce fFWSl Woundfin Recovery Plan ior 

this species (Wildlife Decision 2.1). The 198S FWS Recovery Plan for the Virgin River 

Fishes recommended land management agencies obtain management authority over woundfin 

habitats. A subsequent 199S revision ·of the recovery plan reconunends that land management 

agenctes "acqutre land anll/or protective easements along the Virgin River for preservation of 

important habitats for woundfin and Virgin River chub." 

The Virgm River parcels were evaluated by a qualified wildlife biologist before the exchange 

was completed to assess resources values. The biologist detennined that the entire Virgin 

River is historic habitat for endangered fishes. i.e .• the woundfin and the Virgin River 

roundtail chub. 

At the time the offered lands in Pahrump Valley were being processed for exchange. the Draft 

Resource Management Plan tRMPl proposed an Area of Critical Environmental Concern 

(ACEC) to incorporate the lands for desert tortoise protection .. The area was also included in 

a proposed potential tortoise management area under the Clark County Short-Term Habitat 

Conservation Plan for desert tortoise recovery. · 

Fair Market Value IRe-review of Virgjn Rjver Prooemesl 

The draft audit report (page IS) states that the Nevada BLM directed a second review of the 

appraisal regarding IS properties in the Virgin River and that the second revtewer established 

stgnificantly higher values for the propenies without providing adequate supporting 

documentation. A second review of the appraisal was completed because the exchange 

proponent expressed concern th81 the first review appraiser rarely accepted the findings of the 

original appraiser and that the values were considerably lower than the option prices on the 

parcels. The second review appraiser concluded that the first review appraiser generally took 

a more conservative approach and utilized a different technique to establish value. Among 

other differences .. the original appraiser and the first review appraiser assigned different values 

stemming from acce~s limitations on several of the properties. The second review appraiser 

evaluated areas of disagreement and accepted the original appraisal on all but one of the 

parcels and directed· the original appraiser to correct that one appraisal report. The draft audit 

report is misleading by stating that the second review appraiser established significantly 

higher values for the properties. Actually. he merely accepted the first appraiser's value 

Jl 
92 

Page 5 oi 8 

conclusions. The rauonale utilized by the second rev1ew appra1ser 1s mcluded in his review 

;tatement which is m the iiles oi the Appra1sal Branch of the Nevada BLM .. We have 

attached a copy oi this re view statement ior your consideration. 

Galena Resorr Exchange 

Fair :-.1arket Value 

The draft audit repon I page I 71 assens that the Government may have lost S68,825 in two 

transactions of the Galena Reson Exchange. After a review of the ledger for this assembled 

land exchange. it appears that credit may have been inappropriately allowed to the proponent. 

The account will be carefully reviewed to determine the correct amount which is owed to the 

United States and proper adjustments will be made to the ledger account before this 

assembled exchange file is closed. 

Other :\1anaeement Issues 

The draft audit repon !page 181 indicates that the BLM did not formalize verbal commitments 

to compensate the exchange proponent for cenain costs. We agree that commitments to 

compensate proponents for costs to be incurred must be identified and agreed to in writing in 

advance of any funds being spent by the proponent. Although an initial exchange agreement. 

which is normally used to identify these compensation costs was not developed. the exchange 

proponent was notified by letter of the costs the BLM would cover. We will take the 

necessary action to ensure that on future transactions. initial exchange agreements are 

completed to document these commitments. 

Conclusion Statement 

The draft audit repon 1 page 21 ) concludes that exchange proponents have realized sizeable 

gains by reselling lands obtained from the BLM. 

The examples cited in the draft audit repon (page 22) represent subsequent sales that are 

probably not an arms length market transaction and therefore ane not necessanly indicative of 

the true market value of the properties. The 70-acre parcel for example was originally 

acquired through a land exchange by entiry conD"Olled 

by a Las Vegas developer. That same developer subsequently acquired the properry through a 

paper transaction. The developer had both a seller and buyer interest in the properry and 

therefore this_ sale may not represei'lt an arms-length marke transaction. 

Las Vegas has experienced explosive growth over the last several years. This has created a 

speculative environment where values ane d;fficult to estimate. It is also difficult to predict 

what buyers will do once they have acquired the lands; i.e., resell the land, sell off smaller 

tracts, or begin development. 

[NOTE : THE NAME OF THE BUSINESS ENTITY HAS NOT 

BEEN INCLUDED BY THE OFFICE OF INSPECTOR GENERAL.) 

32 
93 

APPESD!X 2 

Page 6 of 8 

Santini-Bunon Act 

The drait audit report 1 page 251 concludes that some lands within the Santini-Burton area 

were exchanged. rather than sold. causmg a loss of revenues of at least $9.2 rrullion !S7.8 

m!llion oi wh1ch would have been renutted to the U.S. Treasurv to repay incurred Lake 

Tahoe Basin land acquiSition costs). The draft audit report cre~tes an impression that $7.8 

m!llion was lost. when. m fact. lands with important natural resource values were acquired 

through exchange. 

4 

Cnder the auspices of the Santini-Burton Act. the BLM has sold 2.700 acres of public land 

during the 16 years since its passage. generating $64 million. Also within the Santini-Bunon 

boundary. approximately 2.200 acres have been leased or patented under the authority of the 

Recreation and Public Purposes Act to local government and non profit entities. Additionally. 

approximately 900 acres w1thin the Sannni-Burton area have been exchanged to obtain 

valuable resources benefitting the public. There are approximately 3.500 acres managed by 

BLM remaining wuhin the Santini-Burton area. Nearly all of these remaining lands are 

located within the a1rport no1se impact area and will be managed in accordance With a 

Memorandum of Understanding with Clark County. 

Oth~r Man~rs 

The draft audit report (page 321 indicates the BLM should consider establishing a policy 

limiting the use of the land exchange process to acquire administrative facilities for BLM use. 

We agree. Since other proposals may be forthcoming, the BLM Washington Office will 

provide guidance to field offices by December I. 1996 as to when these types of exchanges 

are appropnate. 

B. Response to Recommendations 

Exchange Proc~ssing 

Recommendation I: 

Institute competitive procedures (sale or competitive exchange) into the land disposal process 

to the maximum extent practicable. 

Response: 

We agree. Nevada BLM is working to develop a strategy (competitive sale or exchange) to 

incorporate compeutiie procedures into the land disposal process. By June I, 1997, the 

Nevada BLM will evaluate different competitive approaches and recommend an option for a 

prototype competitive land exchange. Depending on the results. a pilot project will be 

developed and tested. We believe a competitive process is an artractive alternative in 

assuring payment of fair market value. 

33 
94 

APPPIDIX 2 

Pag~ i of 8 

5 

Recommendation 2: 

Direct that all easements on Federal lands proposed for disposal be reviewed tO verify grantee 

needs and that acuons be taken to remove any easements that are not needed before the 

Federal lands are exchanged or sold. 

We agree. By October I. 1996, Washington Office BLM will prepare guidance requiring all 

rights-of-way be reviewed and actions talcen to clear those that are no longer needed before 

transfer of the Federal lands. 

Recommendation 3: 

Establish controls necessary to ensure that land exchanges are processed in full accordance 

w11h applicable laws. regulations. and Bureau procedures. At a mmimum. these controls 

should ensure that land to be acquired is within approved land-use plans or properly executed 

plan amendments: land acquired and disposed of is properly valued: and all significant 

decisions involving the exchange transactions. panicularly those affecting land valuation. are 

fully justified and documented in the exchange file. 

We agree. Washington Office BLM will review the Nevada BLM exchange process to assure 

that adequate controls are in place to comply with applicable laws. regulations and BLM 

procedures. This revtew will be completed by December I. 1996. In addition. by March I. 

1997. the BLM will finalize its BLM-wide land exchange handbook. 

Santini-Bunon Act 

Recommendation I: 

The accounting repons of income and expenditures required by Section 2(e) of the Santini· 

B unon Act are prepared and submitted to B.ureau headquaners for submission to the 

appropriate Congressional oversight committees. 

We agree. Section 2(c) of the Act requires submittal of an accounting repon to the 

appropriate House and Senate committees. The BLM has been submitting these repons on an 

annual basis. This is consistent with our annual accounting procedures. 

34 
95 

~ag~ ~ oi 8 

Recommendation 2: 

The :><evada State Office uses the land sales process. except in compelling circumstances. 

when disposmg oi its Santim-Bunon Act lands until the sales revenues generated closely 

appro"m:ue the Lake Tahoe Basin acquisition costs. Any exchange proposals from that time 

on should be closely momtored to ensure that the exchange IS justified and that the costs 

incurred as a result of the Santini-Bunon Act remain relatively nominal. 

The exchange of lands in the Santini-Bunon area should not be continued if it is inconsistent 

with Public Law 96-586. We will ask the Depanment of the lntenor Solicitor"s Office to 

review the legislative history and provide guidance on the exchange of lands located within 

this area. We w11l ask that guidance on this issue be prov1ded by the end of calendai" year 

1996. 

35 

6 
96 

APPENDIX 3 

STATUS OF AUDIT REPORT RECOMMENDATIONS 

Finding/Recommendation 

Reference 

A.I-A.3 

B.l 

8.2 

Starus 

Management concurs; 

additional information 

needed. 

Unresolved 

Unresolved 

36 

Action Requjred 

Provide titles of officials 

responsible for 

implementation. 

Reconsider the response to 

indicate how compliance is to 

be achieved with the biannual 

reporting requirement of 

Section 2(e) of the SantiniBurton Act. 

Respond to the 

recommendation. and provide a 

copy of the opinion to be 

requested from the Office of 

the Solicitor. 
97 

ILLEGAL OR WASTEFUL ACTMTIES 

SHOULD BE REPORTED TO 

THE omcE OF INSPECTOR GENERAL BY: 

Sending written documents to: CalliDg: 

Within the Continental United States 

U.S. Department of the Interior 

Office of Inspector General 

1550 Wilson Boulevard 

Suite 402 

Allington, Virginia 22210 

Our 24-hour 

Telephone HOn.INE 

1-800-424-5081 or 

(703) 235-9399 

IDD for beariD11 impaired 

(703) 235-9403 or 

1-800-354-0996 

Outside the Continental United States 

Car!bbyn Rqion 

U.S. Depanment of the Interior 

Office of luspector General 

Eastern Division - lnvestil!ations 

1550 Wilson Boulevard 

Suite 410 

AllinBtOn. Virginia 22209 

Nortb Pac!Oc Rcc!on 

U.S. Depanment of the Interior 

Office of lpspector General 

North Papific Repoa 

238 Archbishop F. C. Flores Street 

Suite 807, PDN Buildinl! 

ApDa, Guam 96910 · 

(703) 235-9221 

(700) 550-7279 or 

COMM 9-011-671-472-7279 
98 

., ................................... ,..._ 

• Toll Free Numbers: i 

1-800-424-5081 5 

. . . . . . . . .. 

. 

: 

: 

: 

.. 

. 

: 

~ 

TDD 1-800-354..0996 : 

FTS/Commercial Numbers: 

(703) 235-9399 

TDD (703) 235-9403 

HOTLINE 

1550 Wilson Boulevard . 

Suite 402 

Arlington, Virginia 22210 

c: 

i 

. 

~ 
99 

• 

United States Department of the Interior 

BOnoxai>la JollA IIIIIILIJD 

BO'CIIIII of 118pr.esomt:at£...,a 

'lhlllhlJiqtall, 11.0. li0Sl5 

~ 19,1996 

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P"""'ecto.ral •ud pr>lloy ab&Dgaa to •oet pdodtias OA -..ge P&"OFO•sl ... , to 

atrNDliue t:.b. Pl"""1f0n. proot~aa, to ~ CIOOALRa~ with local 

"""-*"• to '-'"' .._m, of tm 1-~ ;proo-• 8Dd to .. ..,.,.. that t11a JIU)>U.a I:OIIIli."V<Jo a fa~ nllle = J.....:t ex.:~. 

'file 8Lil 11"&4il Off1ae h .. ~118<2 a p&rtial .aratarlua .... th• ....- az l.aDCI 

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init:ial ""'!bnngll ~-ta ""- been ~. •l!JDJ.UaaDt. WIR'II: .... beaD 

o~~ete4 to ~oe.., tbe exchaAQe•• a.l4 ·~1\Lf:'LA:allt _.,. val""" -lei be 

&eq~U.red. '1'._ m.x ~ pl&CIId. a moratorL• 011 211 ~ ocba11ge pc6'PI:!Mla .1.1\ 

the Lat. Vepe Vd19Y ..,.. an4 !.e Got ~-•l.a!r .ur - ~ .1.1\""l.•!.q l"""-' • "'1 UU az:oa. 

~ha 111'.11. .I.e BVuS.t:.l.ve to tlla OUJ.ce at! 1:11s :IIUip8GIIm: ~al. • s aud.l.t ot llor9ada 

land -Cihaqs AotiYit.i ... om4 _. vith -at~ ,.,,..bt.l.one U. tho> rooport:. 

'l'luo - i.8 lm.tiat!.q -••"""• to en...,... that .-ec: . r o ..,tJ.ao>a .l.deo>tl.fi.ed 1.11 

tllo .-ep>rt .. .,. adhanoCI to in po:oee•sill9 future .. c:llllilgell .1.1\ •--· 
100 

a 

l: te.l GCUi-1!1nt tllllrl; die IILK'• CIJftOIIIt qpteecll t:o ""'"''l.el;e ~· b 

..,.. 

~ 

.... at • p~ Ul4 na-.1 ..,_, alOD!J with ~tJ.Dsr ~ 

~·cots.-• .Ul - -·· ....sa. .. ~ t=w....S to ..oJI:'Id.D9 

coapou:atiY11lY wit!& :tOll 01 a..lllla•• lUcl -~ P""!F- 1n tbe r .. -.. •.1.cz111.a:z: lett:ea &H ~!.IICI -t to raur aoll-ea. 
101 

United States Department of the Interior 

BY SPECIAL MESSENGER 

Honorable Don Young 

Chairman 

Committee on Resources 

House of Representatives 

Washington, D.C. 20515 

Dear Mr. Chairman: 

OFFICE OF lliE SECRETARY 

Washington, D.C. 20240 

SEP - 5 1006 

Enclosed is the transcript of the oversight hearing before the Subcommittee on National 

Parks, Forests and Lands, held on July 30, 1996, regarding the Inspector General Audit 

Report on BLM Land Transactions in Nevada. 

The transcript has been reviewed and corrected by the Department's witness, Ms. Wilma 

Lewis, Inspector General. The information· requested page 24, line 543; and page 63, line 

1471, is enclosed for insertion in the record. 

Thank you for the opportunity to review the transcript. 

Enclosures 

Sincerely, 

. 1,, n 1 ./ '"' -1;, . 1.. .·n/ ,;J. "~ !,> r!\, n'< /"r'J;.) \pl"'f;u\./ ... -w-c· '_11..._,~ "' __., '/y... J 

Jane M. Lyder 

Acting Legislative Counsel 

Office of Congressional and Legislative 

Affairs 

cc: Honorable John Ensign (inserts only) 
102 

I nsert on Page 6 3, line 1471 

OLIVER RANCH EXCHANGE 

Land Exchange Approvals 

Land exchange agreement, signed by Ben Collins, Las Vegas District Manager 

Decision Record and Finding of No Significant hnpact, recommended by Patricia Hall, Realty 

Specialist, Stateline Resource Area and decided by Marvin D Morgan, Area Manager, Stateline 

Resource Area. 

Final Decision to Exchange, signed by Ben Collins, Las Vegas District Manager 

Decision Record and Finding of No Significant hnpact, recommended by Patricia Hall, Realty 

Specialist, Stateline Resource Area and decided by Marvin D Morgan, Area Manager, Stateline 

Resource Area. 

Final Decision to Exchange, signed by William T Combs, Las Vegas District Manager 

Appraised Value Review I Approvals 

Federal Land disposed 

The values of the l'ederal land in both phases of the exchange were reviewed by Kenneth 

Thompson, Nevada staff appraiser; no documentation for Chief Appraiser approval. 

Private Land acquired 

The value of the Oliver Ranch was reviewed and approved by Kenneth Thompson, Nevada staff 

Appraiser; no documentation for Chief Appraiser approval. 
103 

RED ROCK EXCHANGE 

Land Exchange Anprovals 

Land exchange agreement, signed by Gary Ryan, Las Vegas Acting District Manager 

Decision Record and Finding of No Significant Impact, recommended by Patricia Hall, Realty 

Specialist, Stateline Resource Area and decided by Gary Ryan, District Manager, Las Vegas 

District Office. 

Final Decision to Exchange, signed by Gary Ryan, Las Vegas Acting District Manager 

Decision to Exchange, signed by Gary Ryan, Las Vegas Acting District Manager 

Appraised Value Review I Approvals 

Federal Land disposed 

One appraisal reviewed and approved by Gerald Stoebig, Nevada Chief Appraiser. Two 

appraisals reviewed by Kenneth Thompson, Nevada staff Appraiser and approved by Gerald 

Stoebig, Nevada Chief Appraiser. 

Private Land acquired 

7 Virgin River parcels reviewed by Michael S Redfield, Arizona Chief Appraiser and approved 

by Gerald Stoebig, Nevada Chief Appraiser. 

Pahrump property reviewed by Kenneth Thompson, Nevada staff Appraiser, and approved by 

Gerald Stoebig, Nevada Chief Appraiser. 

Aleman property reviewed by Richard Webster, USFS; approved by R. Ronald Ashley, Chief 

Regional Appraiser, USFS; subsequently approved by Gerald Stoebig, Nevada Chief Appraiser. 

Sky Mountain property reviewed and approved by R. Ronald Ashley , Chief Regional Appraiser, 

USFS; subsequently approved by Gerald Stoebig, Nevada Chief Appraiser. 

Anderson property reviewed and approved by Gerald Stoebig, Nevada Chief Appraiser. 

2 
104 

Federal Land disposed 

Don't have signature page of appraisal review report to show who performed the review. Also, 

no memo in the file demonstrating approval by Nevada Chief Appraiser. 

Private Land acquired 

15 Virgin River parcels reviewed by Michael S Redfield, Arizona Chief Appraiser; subsequently 

reviewed and higher values established by Kenneth Thompson, Nevada staff Appraiser; no 

documentation for Chief Appraiser approval. 

Calico Basin property reviewed and approved by Gerald Stoebig, Nevada Chief Appraiser 

3 
105 

GALENA RESORT EXCHANGE 

Land Exchange Aoprovals 

Land exchange agreements (original dated 9/20/93, amended dated 1111193, and second 

amended dated 3/7/94), all signed by Billy Templeton, Nevada State Director and Ed Hasty, 

California State Director. 

Decision Record and Finding of No Significant bnpact/Supplement to the Enviromnental 

Assessment, signed by Billy Templeton, Nevada State Director on 11/1193. This is the decision 

to complete the "American Land Conservancy-North Las Vegas Exchange". 

Decision Record and Finding of No Significant Impact, Environmental Assessment #NV054-94-83, Exchange N-57877, signed by Gary Ryan, Las Vegas Acting District Manager on 

6/14/94. 

Appraised Value Review I Approvals 

Federal Land disposed 

The value of all Federal land in the exchange was reviewed and approved by Gerald Stoebig, 

Nevada Chief Appraiser. 

Private Land acquired 

Galena Resort, reviewed and approved by Gerald Stoebig, Nevada Chief 

Appraiser. 

Peavine - Granite Construction, reviewed by John H. Moore, USFS; approved 

by R. Ronald Ashley, Chief Regional Appraiser, USFS; subsequently reviewed by Kenneth 

Thompson, Nevada staff Appraiser. 

Peavine - Reno Ranch, reviewed by John H. Moore, USFS; approved by R. 

Ronald Ashley, Chief Regional Appraiser, USFS; subsequently reviewed by Kenneth Thompson, 

Nevada staff Appraiser. 

Depaoli Ranch, reviewed and approved by Gerald Stoebig, Nevada Chief 

Appraiser. 

Urrutia Ranch, reviewed and approved by Gerald Stoebig, Nevada Chief 

Appraiser. 

4 
106 

Pulver property, reviewed by Kenneth Thompson, Nevada staff Appraiser; no 

documentation for Chief Appraiser approval. 

Comer property, reviewed by Kenneth Thompson, Nevada staff Appraiser; no 

documentation for Chief Appraiser approval. 

Massacre Ranch, reviewed and approved by David Reynolds, Acting California 

Chief Appraiser. 

Crean Property, reviewed and approved by Gerald Stoebig, Nevada Chief 

Appraiser. 

Bitner Ranch, reviewed and approved by the California Chief Appraiser (written 

name is illegible). 

5 
107 

TONOPAH EXCHANGE 

Land Exchanee Anprovals 

Land exchange agreement - none 

Decision Record and Finding of No Significant Impact attached to the Environmental 

Assessment, recommended by Patricia Hall, Supervisory Realty Specialist, Stateline Resource 

Area and Kevin Finn, Realty Specialist, Tonopah Resource Area; decided by Gary Ryan, 

District Manager, Las Vegas District Office and James Currivan, District Manager, Battle 

Mountain District Office. 

Appraised Value Review I Approvals 

Federal Land disposed 

The value of the Federal land in the exchange was reviewed by Kenneth Thompson, Nevada 

staff appraiser, and a slightly different value was approved by Gerald Stoebig, Nevada Chief 

Appraiser. 

Private Land acquired 

The value of the bowling alley and land were reviewed and approved by Gerald Stoebig, Nevada 

Chief Appraiser. 

6 
108 

United States Devartment of Interior .. .... 

Bureau of Land Management 

LAND EXCHANGES: IDEAS FOR IMPROVEMENT 

september, 1995 
109 

Executive Summary 

Land exchanges are. one of the most complex land transactions that Bureau employees can 

process. However, the gains to improving public land management are tremendous. Disposing 

of difficulr to manage lands is a cost savings in itself When the disposal action is part of a land 

exclumge. not only is the cost to manage the public lands · reduced but lands with valuable 

resources ate odded to the public domain. 

We have reviewed 7114 Keystone Center report of November 17- 18, 1994 as a springboard to 

looking ar uuas to improve upon the Bureau's land exchange program. We found marry elements 

of the report tiJ be based on perceptions. In 11101rJ cases, this poi11lS out a need for outreach 

efforts rarher than major procedural fixes. '11u!re were several areas, however, where 

procedural ideas for improvement surfaced. This report will deal with those issues identified by 

che Keystone group as well as additional areas probed by the team. 

ln summary, the team is recommending rhDr an outreach program be developed to deal with the 

misconceptions and perceptions. Additionolly, there are seven recommendations that deal with 

the management of the program or processing of exchange transactions. 

Those recommendmions are as follows: 

1. Utiliu a project management strategy for each land exchange. 

2 .. Develop processes to deal with valuing highly speculative and unique property, including the 

use of competitive land exchanges. 

3. Finaliu the BLM land exchange handbook, looking at ways to establish consistent approaches 

among agencies who deal with land exchanges. 

4. Uriliu incentive awards to recogniu those employees who are involved in processing 'difficult 

or highly complex land exchanges. 

5. Propose legislation to the Congressional subcommittees to elimi1Ulle certain impediments. 

6. Promote regional planning. 

7. Look at innovative methods such as land banking to reduce processing costs. and increase 

stakeholder involvement. 
110 

Land Exchanges: Ideas for Improvement 

The primary objective of this rtpon, prepared by an interagency team, Is to offer ideas to 

improllt or streamline the BLM's land exchange process. Originally lire ream was coiiSidering 

recommendaJiOIIS regarding all agencies. Since the team was chmtered fly BLM it was determined thai those ideas invnllling other agencies steamlining would be identified but passed 

on to tM agency. The Keystollt ~nler repon of November 17- 18, 1994, was utilized as a 

springboard for brainstorming ideas. Those ekrnenrs that are more perception than reality are 

separated. Problem areas haW! been captured and recommendations made. Action steps are 

provided to resolllt tM problem areas. 

Team Members 

Following are lire team monbers: 

Don Simpson 

Craig McBroome 

Bob Abbey 

Bill Ruddick 

Milce WilliatiiS 

Dick Young 

Afencv ProPrOTfiS 

BLM Washington Office 

FWS Allanra Regional Office 

BLM Jackson, MS District Office 

BLM Phoenix. AZ District Office 

USFS Washington ·office 

NPS Denver Regional Office 

The jour primary resource man.agement agencies hallt different minioiiS and tJWerent authorities 

but all share the ability to exchange lands. The BLM and USFS are more closely alig11td 

because they are both authoriud ro conduct land exchanges through the Federal Land Policy 

and Management Act (FLPMA.) and tM Federal Land E".uhange FacilitaJion Act (FLEFA). ~ 

following summary table shows thL exchange programs oftM/Our agencies on an annual basis: 

~ Acrea« Acguind dC@f( Convey(d 11 ot llw!sactions Value ofLgnds 

BLM 135,000 acrf!S 75,000 acres 62 $62 million 

USFS 80,000 acres 50,000 acres 115 $60 million 

FWS 600 acres 160 acres 11 S .5 million 

NPS 6:@acrt..s. i.@qcrg: ~ s. 6: million 

TOTAL 221,600 QCTf!S 130,160 acres 228 $123.1 million 
111 

Effects ()( FLEFA 

It has been 18 montJu since publication ofrhefi111Jl rulemalcing implementing the FLEFA. The 

rule was prepared jointly wirh rhe Forese Service. Since publication of the rule, a draft 

hlllllibook has been prepared and distributed for use in the field with a review ofche procedures 

and finalization to occur nac fiscal year. Training was developed and conducced in each of che 

StaJe Offices for all mo111Jgers and field personnel involved in l4nd exchanges. The passage of 

FLEFA did not elimilltlle the law requiring environmental documentation, the clearance process 

for critical resources and the review of rhe lands for legal and physical problems such as ririe 

problems and the existence of hozmdous maJeria/s. The passage of FU!FA did, however, add 

tools to the Bureau's toolbox to assist in 111Jvigating through che process. With the full utilization 

of the provisions contaiMd in FLEFA, land exchturge processing will improve and the success 

rQle for individual land exchanges will be consitkrahly higher. 

Team Findings 

A. Public Perception 

When reviewing the Keystone Center repon it was felt thai cenain items itknrijied go beyond the 

scope of exchange processing and are more perception chan reality. An outreach program is 

recommentkd to reduce or elimilltlle perceptions. Those areas char appeared to be strictly 

perception problems are as follows: · 

1. Appraiser incompetency 

2. Agencies do nor scope land exchanges 

3. Ecosystem management has not been tkjined 

4. Socio-economic impacts are not factored into evaluation process 

5. There is no 1neJhod for prioritizing land base 

B. Program lssues!Reco1111'11e11JJD1ions 

Recommendations have been matk in the ortkr of imponance dealing with the following seven 

issue areas: 

I. Project Managementneam Concept 

2. Valuation 

J. Policy and Procedure 

4. Employee Recognition and lncentiws 

5. Legislation 

6. Collaborative Planning Ejfons 

7. Land Bank 

Attached are discussions of the above listed issue areas containing recommendations and an 

action plan. 
112 

PROJECI' MANAGEMENT/TEAM CONCErT 

Cumnt SituQijnn 

Agencies lulve inconsistent approaches to processing IIWi exchanges. uvels of environmental 

documentarian vary berween agencies and between offices within agencies. Components such 

as contributed fonds, cost sharing, cusumption of costs aiJd compensation for assumed costs are 

applied inco'ISistent/y. Documents common to allllllld exchanges such as escrow instructions 

and exchange agreemmJs also vary. Variations in processing leave the public confused IWi the 

agencies subject to administrarive chiJJienge. 

The agencies an experiencing a shrinking tak111 pool leading to higher processing costs IWi an 

increased probability of errors. The loss of experienced personNI is compounded by inefficient 

use of scarce sldlls. 

It is felt by mmry outside of the agencies that there is no one point of agency contact for 

exchange proponents. It has been expressed by many non-Federal parries tlult due to limited 

upper management commitment, local managers are not willing to take on controversial 

exchanges, regardless of the resource values involved. 

Most offices have link accountability for the tilnely comploion of land exchanges. This is 

caused by competing lands transactions such as righrs-oj-way, leases, permits, sales, ere. that 

are all handled by the same realty specialist. ihlJ other realty worlcload often forces llllld 

exchanges onto the back burner as a low priority. 

Marry exchanges proposed by the non-Federal pony are not in the public interest, only enhancing 

the non-Fetkral holdings. 

&commendorion 

Prioritize /IWi exchanges and reject those not in the public inlerest. 

Encourage the use of core teams staffed with experienced personNI aiJd supplone111ed with a 

matrix organizalion for each project. The core team should be comprised of only the necessary 

professioNJi and technical staff needed to accomplish the transaction. This will maximize the 

use of the limited expertise and serve to expose newer employees to the process. Addirionally, 

the processing will be uniform with a higher quality srandard. 

Require all 1114jor land exchanges to be headed by o project manager who will be responsible 

for efficiently managing resources to complete the exchange. The project mtlnager and 

associated core team would typically be an ad hoc group reporting directly to the responsible 

field manager. This would involve properly traclcing actions through the Utilization of a timeline. 

In less encumbered cases the projecr manager may only be involved in the exchange processing 

a jew hours per week and can still accomplish other work. 
113 

Assign direct accountability to a line officer. 

Utilize tM core re0111 concept a.s on the job training (OJT) for less experienced field employees 

and develop form41 training for specific area.s of need. 

Action Plan 

In conjunction with the Forest Service develop instruction to the field to transition into a project 

oriented exchange process. Send a copy of the policy to other resource management agencies 

for their consideriJlion and use. 

In conjunction with the NIJlional Training Center, redesign the advanced land acquisition course 

to include appropriate land o:change and project managemenr training. Work with the other 

land managing agencies to allow for multi agency attendance. 

Review current skills mix and encourage training!OJT/Apprenticeships to assure adequate skills 

for processing land o:chonges. 
114 

VALUATION 

Current Situation 

Unique and highly speculative properries are difficult to value. 

This often results in failed land exchanges or time-consuming processes co fii'UJlly consummate 

the craruaccion. 

The agencies are receiving negative publidcy for the values used for both the priVaJe and Federal 

lands involved. AlleguJions have been made that Fetkrally approved appraisals are completed 

by incompetefll appraisers or that we havt: customiud the values. 

When processing exchanges on a first come· first served basis, there is no competition involved. 

Market forces are rwt allowed to work as chey would be in a comperirive situation where a 

propeny is marketed in the traditional private sale market. Cenain public lands with a 

competitive ifllerest may bring more private lands under a competitive approach. 

Land managing agencies often place sole reliance on the appraiser's estimate of market value 

co tktermine exchange values. Managers are reluct0111 to use other numbers for fear of public 

scrutiny and lest exchange opporrunicies. 

Recommendqljon 

Pilct s~eral competitive land exchanges where conditions warr0111. A competitive land exchange 

would involve: 

1) offering Federal lands through a prospectus as available for exchtUtge for rwn-Federallaruis 

co111aining certain resource values for a period of rime. The proposal offering the greatest 

public benefit would be seleaed. Ideal conditions would involve Fetkrallands with unique or 

highly specularive values crearing a comperilive ifllerest. Examples would be lands in a ski area 

or near a growing urban area. 

2) ide111i.fying 1Wn-Federal lands with critical resource values to see what Fetkral laruJs are 

desired as parr of an exchange. 

Explore the full Uliliz;ation of the existing tools provided in FLEFA to assist in negotiating an 

agreed upon exchange. This inclutks the use of a statement of value, instead of an appraisal, 

for those lands that are similar in character and worth less than $150,000 in value. In the BLM 

and USFS regularions a statement of value is defined as •a wrinen report prepared by a 

qualified appraiser that states the appraiser's conclusion(s) of value •. Share options wich 

manager~ of mechods where values were detemtined using bargaining and other methods using 

che estimate of value as a pains of beginning rather than che answer. 
115 

Actinn Plan 

Pilot at least rwo competitive land exchanges; one pilot urilizing a third parry and one with an 

open market approac_h. Capture the processing steps and criteria used for selection of both rhe 

public and the non-Federal lands. A.ccept and/or revise the recommendations and implemenr the 

process through instruction to rhe field.. 

Develop a process to gather i'!formtJiion, aNJlyze the process and disseminate the approaches 

and techniques used to reach an agreed upon value (bargained and other metlwd.s) liJ the }reid 

offices. 
116 

POLICY AND PROCEDURE 

Curren: Situation 

There are differenr levels of inreMiry to the resource clearance and analysis process (NEPA, 

Floodplain&: Wetlands (EO 11988 &: 11990) and NaJive American ConsultaJion. ere.) used l7y 

rhe Federal land managing agencies. 

Cultural resource clearances are very costly and ti1M consuming ro complete. This is due in 

pan to cumbersome regulations and pan is a junction of thL unique cluJracter of thL Stme 

Historic PreservaJion Officer (SHPO) in each srme. 

Haz.ardous MaJerials clearances are approved ai thL departmenr (or regio"Nll level in lh.t case 

of USFS), rmher rhon aJthL appropriaJe field office level. 

Federal Advisory Committee Act {FA CA.) limits non-Federal panicipation ai advisory meetings. 

Meetings willa o:clumge proponenrs and local officials could bt considered advisory meetings 

with porenrial FA CA. violaJioM. The lack of guidJJnct: in this area luJs c"ated a multilruk of 

opinions on proper implemenration. 

Recommendatiol!.f 

The land managing agencies need ro work UJWQ.rd.s streamlining and consistency in processing 

exchanges. Common ground must be establislwl regardless ofthL agency authorities. Agencies 

should also review Federal AcJ]uisition Regulatio11S conrracting altematives (ie Architects and 

Engineers Standards) to see if streamlined ~thods are available. 

Action Plan 

Jn coordination with rhL USFS, review lh.t lond exchange processing steps looking for ways to 

promote consistency and efficiency. If resource specific clearance or evaluation processes can 

be streamlined, idenlify those areas (ie T 4< E· species, minerals, ere) and establish reams to 

develop methodology. 

Establish a culrural resources process analysis team to specifically address streamlining culrural 

clearances. This team should i!lvolvejleld represenrative.s, establishing guidance in consultation 

with thL Advisory Council on Historic Preservation and thL National Conference of Stale Historic 

Preservation Officers . 

.Review the Juuardous material clearance approval process and revise policy as opproprime with 

the goal of streamlining and delegating awhoriry to thL lowest organiuuionallevel possible. 

In coordination with lhe USFS, ji"Nllize thL land achange processing handbook to fully 

implemenl thL 12193 rulemaking implementing FLEFA with .full inreragency coordination. 
117 

EMPLOYEE RECOGNITION AND INCENTIVES 

Current Situation 

Managers prioritiZe a large workload and in TTUUJY ca.res determine that the best use of the rax 

payers dollars is to avoid complex and controversial actions. 

There is little recognition of those employees processing land e:xchonges and the line office~ who 

place priority on land exchanges and take appropriate risks. 

Recommendation 

Recognize employees (staff and line office~) who initiate and complete high public ·value 

exduznge proposals. 

Actinn Plan 

Evaluate the merits of eilher utilizing the current incentive award program or developing a high 

profile monetary award to give annual recognition ro those units completing land exchonges with 

high public values. 
118 

LEGISLA.TIVE PROPOSALS 

Cumnl Situation 

'I'Mre is currenlly a high level of Congressior!lll inlerest in streamlining the land exchange 

process. There have bt:en oversight hearings and briefings during the past few mbr!lhs. It is 

expected that there will be conlinued Congressiollill interest during the na1 year. 

FLPMA restricts inlersuue exchanges. Case by case legislation is required to process land 

exchanges which cross state lines. 'I'M exception L~ the processing of land exchanges Hilder the 

authority of the Natiollill Wildlife Refuge System Act. · 

USFS and FWS have Congressiollill Committee oversight for land exchanges as foll.uws: · 

USFS exchanges processed under the Weeki' Law and valued over $150,000 require 30 

day review by the House and SeiiiJle Agriculture Committees along with approval by rht 

Depury Under Secretary of Agriculture for those valued in excess of $250,000. 

FWS is required to obtain approval from the House and Senate Appropriation 

Subcommittees on Interior and Related Agencies for all exchanges valued over $100, {)()(). 

Additionally, a 45 day review is required by the Senate Envi;onmenc and Public Workr 

Committee and the House Committee on Resources. Addilional overview is required by 

the Committees on Energy and Natural Resources and Interior and Insular Affairs for 

land exchanges in Alaska. 

USFS boundary adjustments require Congressionlll and Secretary level approval (except Weeki' 

Law) when acquired lands are located oursitk but adjacer!l to cu"e111 parkr and forests. 

It is dijJiculrro utilize gove171111i!nt surplus property (ie cwsing military bases) as trading stock. 

Agencies can not utilize cash equalization IMMJS for subseque111 acquisition. 

Federal land 17Ul1!1lging agencies appear to fall un.ckrrhe provisions of CERFA (PL 102-426, 106 

Star. 2175) which amends Section 120 (h) of CERCLA. Under this act, conveyances involving 

uncor!laminated FetkrallandS may require additional concurrence from appropriate state agency 

or EPA. 

NPS can not acquire landS outside of park boUNJaries through land exchange but can purchase 

chbse same lands as uneconomic remn.onrs. These runnanr propenies involve land that is parr 

of the property purchased but locilled outside of the park boundary and not economically feasible 

to retain by the land owner. 
119 

Recommcndarion 

Creaie a MlioMl Burton-Sanrinl rype alllhority similar to that co111ained in the NaciollOl Wildlife 

Administra.tion Act a/lowing agencies to utilize land sale receipts and/or cash equaliuuionjund.s 

for direct acquisition. The biii could also co111ain a provision to elimiMie the limitation on 

exchllnging lands across state boundaria. Notification ofGovemors and affected CongressioMl 

delega.tions would suffice. 

Exempt Federal/and managing agencies from CERFA provisioM. 

Modify CongressiollOl review process to be a rru.t. ovtrsight jullcrion ii!Stead of case by case 

review that curre111/y exisu for the agencies other than BLM. 

Give USFS boundary adjustmelll authority for ali exchanges similar to the Weeks Law Act. 

Allow land mQI!Qging agencies to use gove1711T1tlll surplus property as trading stock. 

Provitk NPS alllhority to acquire lands adjace111 to their boundaries through land exchllnge 

similar to their purchase alllhoriry. 

Action Plan 

Notify the Director/Chief of the land mQI!Qging agencies of the Tf!Commendation to revise 

oversight and modify boundary related legislation. 

Work with GSA, Military, FDIC, Drug llllerdicrion Agencies, FmHA., FHA, HUD, etc. to 

understand processes for using surplus lands as trading stock and assure they understand rhe 

benefits that using these lands offers rhe land maMging agencies. 

After utilizing FLEFA and associated rule for a reasonable period of time, make 

recommendatioi!S to the Secretary regarding legislative needs to enhllnce or streamline the 

process. 
120 

PLANNING 

Cumm Siruorion 

PI/VIning has historically bun segregated by the Fetkral agencies to meet individual unit needs. 

The localized or •piecemeal" approach is vi~d as conve111io111ll because of the resources 

a/lolled to individual agencies. 

We are not able to deal with large scale issues such as biological diversity with current 

geographic boundaries. 

Collabororion with Mn-Federal ponies such as cofii11WIIides and olher stakeholders has bun 

limited. 

Recommrndation 

'Encourage regiolllll planning approach srrucrured such lhat varying levels or tiers are developed 

in lieu of planning based on small administrorive unirs. 

StandtJrds (criteria regarding resource quality or quantity) and guidelines (preferred approach 

to managing activities) should be prepared to handle localized activities. 

Action Plan 

Establish a poilU of contact lowwledgeable wilh the l41ld achiVIge process to work with the 

planning team as the planning praceJs is revised and implemented. The contact will look at 

innovative ways to simplify and consolldale the planning procus, develop exchiVIge criteria and 

target locorions to pilot regional and tiered planning ejJons. 

Note: The Florida Conservation and Recreorion Lands (CARL) program is a succiss story 

in irself and is an acelle111 eiample of how lhe quasi regiolllll planning concept has been 

implemented. Their statewide planning initiorive could possibly be used as a motklto 

tkvelop a similar strategy /or use by FetkraJ agencieJ. The State of Florida. has also 

developed a criteria for priority ranking of land acquisition projects which could be 

similarly used for exchiVIge transactions by Federal entiMs. 
121 

UNDBANK 

Current SjtriQlion -

Historically, exchange proponents have expected the federal agencies to bear the burden of costs 

and. risks associated with land. exchanges while the proponents enjoyed sole panicipation in arry 

and. all profits derived from subsequeTU land sales associated with the completed exchanges. 

Where values of the non-Federal and the Federal lan.d.s are nor equal and the proponeTil pays 

to the agency a cash equaliuuion paymeTil, the agencies are not allawed to capture equaliZIJJion 

funds and. apply such funds to .folure acquisition. 

The land achange process has become more expensive due to ever increasing costs associated 

with resource inveTilories, NEPA anolysis and mitigation. 

Agencies are faced wtth budget reductions. shrinldng staffs and the loss of experienced personnel 

in the land exchange program. 

Exchange IrlliiSacrions are subject to greater public scrutirry as populations and iTUerest in 

resource issues increase. 

Recommendation 

Look at innovative methods such as land banking to achieve reduced processing costs, increase 

stakeholtkr and non profit organization involvement and recapture funds for fulure acquisitions. 

1M concept of a land bank involves an assemblage of land, a .facilitator and the commitmeni of 

funds or expenise from the BLM and inierested parties willing to fwul the transactions to steer 

the outcome of the transaction. 1M assembled lan.d.s would be exchanged in a series of 

transactions l7y the exchange facilitator. Funding from the interested NPO's, proponents and 

sr~holtkrs would pay for all or pan of the transacrion processing costs. Specialisrs from BLM 

would be responsible for acceptable resource clearances even though BLM may not plrysically 

conduct the clearance or jimd the workload. 

Action Plan 

Develop guidelines and policies for the use of the land bank trial process. 

In col'!iunction with the USFS, complete a pilot land achange project utilizing a multisrakehokkr approach in a western location. Solicit non profit organization involvemeni, identify 

a suitable area, critique process and recommend continuation, termination, modification or alte171lllive approaches. 

0 


ISBN 0-16-053604-9 

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9 780160 536045