U.S. GOVERNMENT PRINTING OFFICE

48–058 CC WASHINGTON : 1998

HEARING ON BUREAU OF LAND MANAGEMENT

REALTY AND APPRAISAL ISSUES

HEARING

BEFORE THE

SUBCOMMITTEE ON NATIONAL PARKS AND PUBLIC

LANDS

COMMITTEE ON RESOURCES

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

SECOND SESSION

MARCH 24, 1998, WASHINGTON, DC

Serial No. 105–86

Printed for the use of the Committee on Resources

(
(II)

COMMITTEE ON RESOURCES

DON YOUNG, Alaska, Chairman

W.J. (BILLY) TAUZIN, Louisiana

JAMES V. HANSEN, Utah

JIM SAXTON, New Jersey

ELTON GALLEGLY, California

JOHN J. DUNCAN, JR., Tennessee

JOEL HEFLEY, Colorado

JOHN T. DOOLITTLE, California

WAYNE T. GILCHREST, Maryland

KEN CALVERT, California

RICHARD W. POMBO, California

BARBARA CUBIN, Wyoming

HELEN CHENOWETH, Idaho

LINDA SMITH, Washington

GEORGE P. RADANOVICH, California

WALTER B. JONES, JR., North Carolina

WILLIAM M. (MAC) THORNBERRY, Texas

JOHN SHADEGG, Arizona

JOHN E. ENSIGN, Nevada

ROBERT F. SMITH, Oregon

CHRIS CANNON, Utah

KEVIN BRADY, Texas

JOHN PETERSON, Pennsylvania

RICK HILL, Montana

BOB SCHAFFER, Colorado

JIM GIBBONS, Nevada

MICHAEL D. CRAPO, Idaho

GEORGE MILLER, California

EDWARD J. MARKEY, Massachusetts

NICK J. RAHALL II, West Virginia

BRUCE F. VENTO, Minnesota

DALE E. KILDEE, Michigan

PETER A. DEFAZIO, Oregon

ENI F.H. FALEOMAVAEGA, American

Samoa

NEIL ABERCROMBIE, Hawaii

SOLOMON P. ORTIZ, Texas

OWEN B. PICKETT, Virginia

FRANK PALLONE, JR., New Jersey

CALVIN M. DOOLEY, California

CARLOS A. ROMERO-BARCELO ́ , Puerto

Rico

MAURICE D. HINCHEY, New York

ROBERT A. UNDERWOOD, Guam

SAM FARR, California

PATRICK J. KENNEDY, Rhode Island

ADAM SMITH, Washington

WILLIAM D. DELAHUNT, Massachusetts

CHRIS JOHN, Louisiana

DONNA CHRISTIAN-GREEN, Virgin Islands

RON KIND, Wisconsin

LLOYD DOGGETT, Texas

LLOYD A. JONES, Chief of Staff

ELIZABETH MEGGINSON, Chief Counsel

CHRISTINE KENNEDY, Chief Clerk/Administrator

JOHN LAWRENCE, Democratic Staff Director

SUBCOMMITTEE ON NATIONAL PARKS AND PUBLIC LANDS

JAMES V. HANSEN, Utah, Chairman

ELTON, GALLEGLY, California

JOHN J. DUNCAN, JR., Tennessee

JOEL HEFLEY, Colorado

WAYNE T. GILCHREST, Maryland

RICHARD W. POMBO, California

HELEN CHENOWETH, Idaho

LINDA SMITH, Washington

GEORGE P. RADANOVICH, California

WALTER B. JONES, JR., North Carolina

JOHN B. SHADEGG, Arizona

JOHN E. ENSIGN, Nevada

ROBERT F. SMITH, Oregon

RICK HILL, Montana

JIM GIBBONS, Nevada

ENI F.H. FALEOMAVAEGA, American

Samoa

EDWARD J. MARKEY, Massachusetts

NICK J. RAHALL II, West Virginia

BRUCE F. VENTO, Minnesota

DALE E. KILDEE, Michigan

FRANK PALLONE, JR., New Jersey

CARLOS A. ROMERO-BARCELO ́ , Puerto

Rico

MAURICE D. HINCHEY, New York

ROBERT A. UNDERWOOD, Guam

PATRICK J. KENNEDY, Rhode Island

WILLIAM D. DELAHUNT, Massachusetts

DONNA CHRISTIAN-GREEN, Virgin Islands

RON KIND, Wisconsin

LLOYD DOGGETT, Texas

ALLEN FREEMYER, Counsel

TODD HULL, Professional Staff

LIZ BIRNBAUM, Democratic Counsel

GARY GRIFFITH, Professional Staff
(III)

C O N T E N T S

Page

Hearing held March 24, 1998 ................................................................................. 1

Statements of Members:

Faleomavaega, Hon. Eni F. H., a Delegate in Congress from the Territory

of American Samoa ....................................................................................... 3

Hansen, Hon. James V., a Representative in Congress from the State

of Utah ........................................................................................................... 1

Statements of witnesses:

Gardner, Alan, County Commissioner, Washington County, Utah .............. 9

Prepared statement of ............................................................................... 45

Glass, Thomas R. H., Western Land Group Inc. ............................................ 12

Prepared statement of ............................................................................... 42

Hanson, Woodward S., Hanson Appraisal Company, Inc. ............................ 11

Prepared statement of ............................................................................... 58

Harja, John, Governor’s Office of Planning and Budget, State of Utah ...... 6

Prepared statement of ............................................................................... 38

Shea, Pat, Director, Bureau of Land Management; accompanied by Bill

Lamb, Director, State of Utah; and David Cavanaugh, Senior Appraiser, Bureau of Land Management ........................................................ 3

Prepared statement of ............................................................................... 36

Additional material supplied:

Carrick, David, Shepard & Assoc., Inc., Public Land Exchange, Boulder,

Colorado, prepared statement of .................................................................. 75

Johnson, Curt, Commissioner, Office of the Commissioner of School and

Public Lands, Pierre, South Dakota, prepared statement of .................... 76
(1)

HEARING ON BUREAU OF LAND MANAGEMENT REALTY AND APPRAISAL ISSUES

TUESDAY, MARCH 24, 1998

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON NA- TIONAL PARKS AND PUBLIC LANDS, COMMITTEE ON RE- SOURCES, Washington, DC.

The Subcommittee met, pursuant to notice, at 10 a.m., in room

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

(chairman of the Subcommittee) presiding.

Mr. HANSEN. [presiding] The Subcommittee convenes to conduct

an oversight hearing on BLM land exchanges and realty appraisals.

STATEMENT OF HON. JAMES V. HANSEN, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF UTAH

Mr. HANSEN. The land disposition policies of the 1800’s gave us

an extremely fragmented ownership pattern for western lands. I

refer you to the map of Utah over there as an example of this problem. This checkerboard pattern of ownership in the West makes

Federal lands difficult to manage and causes numerous problems

for state and private landowners.

The Federal Lands Policy and Management Act of 1976 declared

land exchanges the preferred method for blocking up the public

lands into manageable tracts. It sounded like a great idea. We

weren’t going to have any net loss of public lands, we were just

going to trade parcels around until we ended up with manageable

tracts. Unfortunately, things haven’t worked out as well as we

hoped they would.

I have seen minor land exchanges that have taken 15 years to

complete. I don’t think people should have to spend a quarter of

their lifetime fighting bureaucratic red tape trying to trade out a

small inholding. Somehow we’ve got to figure out a way to speed

things up. We’ve passed several land exchange facilitation bills

since FLPMA, and yet the problem persists.

I can personally say that as a city councilman 38 years ago in

the little town of Farmington, we spent my whole 12 years on the

council trying to trade a piece of land. Always it was going to get

done, but the Forest Service and BLM never really got around to

it.

Then we turned around and I was on the State legislature for

four terms and speaker for a term, and we never got it done. And

finally, we had to put it into a land exchange bill here in Congress.

I’ve instructed staff to start putting together another land exchange bill for the 11 western States, because contrary to what
2

we’ve heard from all the agencies, it just doesn’t happen and I can

get horror stories from every State to back that up.

One of the biggest problems, and the one we will spend most of

our time talking about is land appraisals. One problem is that government appraisal standards do not take into account the public interest of land. Appraisers refuse to accept the value of a non-economic quote, ‘‘highest and best use,’’ such as endangered species

habitat conservation or view-shed preservation.

Typically, a property owner with endangered species habitat

never gets credit for having maintained his property in such a

manner as to constitute valuable habitat. The highest and best use

for his land is preserving the species, and as such, the parcel of

land should have enormous value. Unfortunately, since the appraisal process is skewed toward economic uses, the appraiser will

value the land at next to zero.

Under this scenario, land exchanges are difficult to consummate.

The landowner knows his land is much more valuable than the appraisal says it is, and the BLM or whoever refuses to accept public

interest value as legitimate criteria on which to base an appraisal.

Often, neither side will budge and we go through this same old

game we’ve played around here for my 18 years.

I hope that we can come up with some answers here today.

Maybe there are some simple ways of solving these problems,

maybe not. Either way, I appreciate the willingness of our witnesses to participate in this dialog.

The gentleman from Puerto Rico, do you have an opening statement?

Mr. ROMERO-BARCELO ́. No, sir, no opening statement.

Mr. HANSEN. Thank you, sir.

As you know, a lot of things are going on right now. Members

will dribble in and we will be ready to respond to questions. We

only have one panel for today and you are all seated there, so we’ll

just start with you.

The Director of BLM, Mr. Pat Shea, from the great State of

Utah. We are always impressed to have you with us, Pat, and we

appreciate you being here. We’ll turn to you. And we also have accompanying you Bill Lamb, Director of the BLM for the State of

Utah. Is Bill here? He’s there as support, is that right? And David

Cavanaugh is also here.

Mr. Shea, we’ll turn the time to you, sir.

Mr. SHEA. Thank you very much.

Mr. HANSEN. I don’t know if I want to limit the Director to 5

minutes. You take whatever time you need but keep it under 20

minutes, will you.

Mr. SHEA. No, no. I will——

Mr. HANSEN. Can I hold you for just a minute. We are honored

to see the Ranking Member of the Committee just walked in, Mr.

Faleomavaega of American Samoa. And if you wouldn’t mind holding just a moment, we’ll turn to this gentleman for any opening

statement he has and pearls of wisdom, which I’m sure we’ll receive.
3

STATEMENT OF HON. ENI F. H. FALEOMAVAEGA, A DELEGATE

IN CONGRESS FROM THE TERRITORY OF AMERICAN SAMOA

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. I do have a very

short statement, and I do welcome our friends from the Bureau of

Land Management for their testimonies this morning.

Mr. Chairman, we all recognize that land exchanges can be a

useful management tool that can promote more efficient land management by all concerned. However, land exchanges can also be

complicated transactions involving disparate, noncontiguous lands.

Adding to this, as we know, appraisals are an art and not a

science.

There have always been certain underlying principles to Federal

land exchanges. First and foremost, such exchanges should be in

the public interest. Second, such exchanges should be done on an

equal value basis. And third, may I suggest these exchanges should

be willing seller to willing buyer type transactions.

I know there are those who would like to speed up land exchanges by cutting a few corners. We cannot or should not cut corners if it means that we undercut the public interest or the principle of equal value exchanges.

I look forward to the testimony of our witnesses this morning

and I am interested in any ideas they may have for the improvement of the exchange process, as long as such ideas are consistent

with the principles of public interest and equal value.

Mr. Chairman, thank you.

Mr. HANSEN. Thank you. Mr. Shea.

Mr. SHEA. Thank you, Mr. Chairman. I am sure with the Ranking Minority Member’s concurrence, that we will wish the Running

Utes well on Saturday as they move on in the NCAA, just by way

of a side note.

Mr. HANSEN. Put that closer to you, if you would, please. We

want to pick you up on the recorder.

Mr. SHEA. All right.

STATEMENT OF PAT SHEA, DIRECTOR, BUREAU OF LAND MANAGEMENT; ACCOMPANIED BY BILL LAMB, DIRECTOR, STATE

OF UTAH; AND DAVID CAVANAUGH, SENIOR APPRAISER, BUREAU OF LAND MANAGEMENT

Mr. SHEA. Thank you for the opportunity to testify on the Bureau

of Land Management’s exchange and appraisal process. Since becoming the BLM Director, I have come to appreciate both the importance of the exchange program and its complexity. It is vital

that the interests of the taxpayers, the true landowner, be protected and that we find means of improving and facilitating the exchange process.

We know that there is room for improvement in our land exchange process. We need to consider how the appraisal process

might be revised, whether the BLM is applying consistent criteria

in identifying potential land exchanges, how much discretion

should be left to local BLM managers, and what guidelines are

needed when private developers and nonprofit conservation groups

are involved.
4

By strengthening its land exchange policies and procedures, the

BLM can continue to acquire private property for public use while

protecting the interests of the American taxpayers.

I have undertaken several measures to improve this program. I

have established a procedure for a second level review by the BLM

State director or the Washington Headquarters Office. The second

level review requires concurrence in decisions involving exchanges

greater than $500,000 in value.

These new procedures also require a feasibility analysis report

for all land exchanges and require that concurrence for any dismissal of protests to any land exchange decisions. I should add

here that in the two months that this process has been in place,

there have been no delays in the exchanges that were presently

going through the process.

In addition, I am establishing a bureauwide land exchange team

to assist in the review of high priority exchanges, provide additional technical support to BLM field offices, and address policy

and procedural issues.

And it’s my anticipation, Mr. Chairman, that that exchange team

will be located outside of Washington, DC and will have strict

timeline guidelines to make sure that it does not cause a delay in

the process.

Before discussing the specifics of the program, I’d like to offer

some background on the exchange program. The BLM, as you

know, has stewardship of more than 264 million acres of land—

more than any other Federal agency. It completes 60 to 70 land exchanges every year. On average, these exchanges total roughly

150,000 acres of land exchanged each year at a value of approximately $50 million.

Land exchanges are an important tool to carry out the BLM land

management program. Exchanges allow the BLM to acquire the

kind of land that is suited to public ownership; land the public use

or for conservation, such as habitat for wildlife, including threatened or endangered species; land that offers recreational opportunities for the public; or land containing sensitive riparian areas that

are critical to the health of streams, rivers, and entire watersheds.

Exchanges also allow the BLM to consolidate land ownership

patterns where appropriate to increase our efficiencies and reduce

cost. The Department strongly supports public ownership of public

lands, and is committed to working with other jurisdictions to improve land ownership patterns and the management of those lands.

This is consistent with the Federal Land Policy and Management

Act of 1976.

Historically, land exchanges are time consuming because of the

number of affected parties, user and interest group concerns, and

lengthy assessments and analysis procedures. However, the Federal Land Exchange Facilitation Act of 1988 and the joint BLM and

Forest Service regulations published in 1993 have provided tools

that can improve the land exchange process.

Parties involved in the exchange must reach agreement on a

wide variety of issues, including scheduling, sharing of cost, selection of appraisers, number of appraisal reports, and methods of resolving disputes concerning the appraised value. Like other com-
5

plicated real estate transactions, there can be periodic delays and

disagreements between the parties.

And I’ve given you several examples in the testimony that I submitted for the record, where it gives you a state-by-state breakout.

I won’t go through those, but will certainly be able to answer questions that the Committee might have about that.

The vast majority of land exchanges are like these examples—so

clearly logical and mutually beneficial that they are completed

without protest or controversy. Sometimes, however, proposed land

exchanges do become contentious. Appraisals can be subject to

question and criticism from those involved in the proposed exchange, or from outside parties.

Appraisals are especially difficult and controversial in areas of

rapid growth and volatile market prices. This makes the job of appraisers even more challenging. Land exchanges are voluntary

transactions. They require mutual agreement by the parties to the

transaction on a wide variety of issues, including value. To be successful, the parties to the transaction must have confidence in the

appraisal process.

I’d like to describe briefly how real estate appraisals are incorporated into the land exchange process. The appraisal process is essential in reaching agreement on the value of the lands involved

in the exchange. Again, it is important that the parties have confidence in the integrity and impartiality of those involved in the

process.

Real estate appraisals are obtained to ‘‘estimate,’’ the market

value of lands involved in proposed land exchanges. Ideally, the appraisal report is an objective, impartial estimate of what property

would sell for on the open market as of the date of the appraisal

report. The credibility of the appraiser’s report is affected by his or

her ability to obtain reliable market information, properly analyze

the information, develop and test various assumptions, and reach

a logical and supported estimate of the value.

The appraisal report is an opinion of value; an appraiser’s estimate of what the property would likely sell for. The appraiser does

not determine value, but instead estimates market value.

Appraisal reports are prepared in accordance with BLM appraisal standards in 43 CFR 2200, and to the extent appropriate,

with the Department of Justice Uniform Appraisal Standards for

Federal Land Acquisition. These standards are consistent with the

Uniform Standard of Professional Appraisal Practice published by

the Appraisal Foundation, Appraisal Standards Board.

We review appraisal reports to assure that they meet professional and BLM appraisal document standards. The reviewer prepares a report approving the appraisal and recommending its use

for purposes of reaching an agreement.

If parties to a proposed exchange cannot reach agreement on the

approved appraised values, bargaining or other methods may be

used to reach an agreement.

If chances for agreement are remote, BLM or the property owner

may decide to end further efforts.

We define bargaining as a process other than arbitration by

which parties attempt to resolve a dispute concerning the appraised value. Different forms of mediation or dispute resolution
6

techniques may be used to resolve the disagreement. The process

is premised on the theory that reasonable people can reasonably

disagree with the appraiser’s analysis. Therefore, bargaining is limited to the information, assumptions and conclusions in the appraisal reports.

Any agreement reached by the parties must be in writing and

made part of the land exchange administrative record. Any appraisals presented during the bargaining process must be open to

review by a qualified appraiser representing the agency with responsibility for appraisal review. The BLM State Director must

concur in any agreement reached through bargaining.

Once the parties have agreed, BLM published a notice of decision

regarding the proposed land exchange transaction. The NOD informs the public of the BLM’s decision to proceed with the land exchange. The public has 45 days to comment or protest BLM’s decision. During the 45-day period, the appraisal reports, along with

other supporting documentation, is available for review by the public.

I want to add here that the public’s review of any exchange is

an essential part of my, and I believe, the Bureau’s filling its fiduciary duty to the taxpayers. I think a great deal of problems could

have been avoided in the past had there been a more complete public review of the proposed transactions.

In conclusion, I hope the information I have shared today has

clarified the process and demonstrated my commitment to achieving a better program. Protecting the natural resources, protecting

the public’s assets, and achieving a fair market return on all land

transactions are my primary goals.

I believe that a hearing like this can be an interesting forum to

explore means by which we could make adaptations that might

meet some additional needs that constituents of yours or other

members of the Committee may have brought to your attention.

This concludes by statement, and I will be glad to answer questions you may have.

[The prepared statement of Mr. Shea may be found at end of

hearing.]

Mr. HANSEN. Thank you, Mr. Director. We appreciate your statement. Mr. John Harja of the Governor’s State of Utah, Office of

Planning and Budget, we’ll turn the time to you, sir.

STATEMENT OF JOHN HARJA, GOVERNOR’S OFFICE OF

PLANNING AND BUDGET, STATE OF UTAH

Mr. HARJA. Thank you, Mr. Chairman. I’d like to say I am here

today as vice chair of the board of trustees for the School and Institutional Trust Lands. I’m not sure it is, but it’s the second largest

landowner in the State of Utah.

The school trust lands, of course, were given for a specific purpose, and that is to generate income for the schools. And as such,

and as you mentioned, they are scattered all over the state. When

the BLM or the Federal Government decides to engage in protective activities such as national parks, monuments, ESA protection

areas and the sort, our lands are inevitably involved. So we have

a vested interest in seeing exchanges.
7

With that in mind, they have to be efficient and they have to

have low transaction costs to be attractive to us, and that is basically what we see not happening. With trust lands, there are no

two-parties with BLM. There are mineral lease payments in targets. If the target is a mineral acquisition, half of the money comes

to the State of Utah, and that has to be recognized in any exchange

proposal.

There is also a restriction on what Trust Lands can do in terms

of selling its minerals, which is why we’re so interested in exchanges. The State and local government is also involved, as I mentioned. The mineral lease payments and local people are always

very interested in those and the actual use of the land. So there

are no two-party exchanges.

The main issues for us are what we would want to acquire and

the valuation issue, which is I think the key target today. Trust

Lands is very interested in administrative exchanges and entered

into an MOU with the BLM a couple of years ago to try to expedite

this process, and instead, has found it seriously slowed down.

I’m going to discuss some of those, but as I do, I would like to

mention right now though that we are very appreciative of the help

of Mr. Bill Lamb, the State Director, has given us and his process

in bringing in outside facilitators as help to unstick some of the

deals. We actually, in fact, did complete an exchange recently involving some habitat conservation areas near St. George for some

property up near Park City.

As we see it, there are basically a couple of difficulties. Some

have to do with the substantive issues and most of them have to

do with the process. The substantive issue as we see it has to do

with prejudging the issue. As we talk with BLM appraisers, they

are full of statements like, your land is worthless and we don’t

need to do a serious appraisal here because we can complete this

is a couple of months.

For example, in 1993, this Congress passed what we call the

inholdings bill, Public Law 103–93, a bill designed to help us get

our trust lands out of the national parks. As the bill was being

signed by the President, we got together and the BLM appraisers

said this should take us two months. That didn’t give us any great

feeling of hope. In fact, it’s five and a half years later. The appraisal process itself took two of those years, just to have four people appraise 539 separate tracts of land.

The point of all that is we have to have trust in what the BLM

will do. We need to know are they going to be fair, are they going

to give us a fair shake. And when we get statements like that put

in up front, it’s very difficult to believe that either the appraisal or

the review will be fair to us. So we get stuck in an impasse.

The procedural issue I think that we see is we don’t know exactly

how it’s going to proceed. Appraisals are done and then what? It

was never made very clear to us in either inholdings or some of our

other exchanges that are underway what would happen.

The Director mentioned bargaining. That was never made clear

to us that this is how we’ll bargain. The universe of bargaining or

the universe of mediation is never made clear.

In addition, there are a number of outside effects that seem to

pop up that give us difficulty and make us think the process in not
8

fair. They have to a lot with what I call the tail wagging the dog.

We look at the person that’s been designated to work with and we

say, OK, you’re the contact person and you’re the person that we’ll

start with.

And as we proceed to try to negotiate a process that will work,

to clarify what I just mentioned, other people lower down in the

chain will start tossing in extraneous things like ethical complaints

against appraisers or complaints that the process itself that we just

designed in order to complete this is not fair to the Federal taxpayer.

Now we’re not trying to be unfair to the Federal taxpayer, but

we are trying, as two sovereigns, to negotiate a process that will

lead to a result. And if an appraiser is saying it’s unfair to the Federal taxpayer, it gives the Director pause. And one year of a delay

in our inholdings process was due to this sort of thing.

The point is we’re willing to work with the BLM in whatever

process we can negotiate. And the Director mentioned all of their

requirements, and most of those are OK as long as we can see that

this is the path. But it needs to stick there. And if the appraisers

are undermining the process, then nobody knows where we’re going

and it just leads to a big stuckness, impasse.

The basic problem in terms of valuation is appraisers can, in

fact, as the Director mentioned, come out with wildly differing values. We’ve seen millions of dollars in difference, or hundreds of millions of dollars, in some cases. How do we resolve that?

Mr. Secretary Babbitt has mentioned horse trading, he’s mentioned being creative and solving that. That’s fine with us; we’re

willing to be very creative. But we need to understand how the appraisal process gets into that.

The chairman mentioned the natural valuation issue. I don’t

want to go into that a whole lot, but I would like to mention that

it is certainly—maybe Mr. Hansen will talk about it more—the appraisal industry is engaged in a big debate on how that should

work out.

I think that from our perspective, the Federal Government is

kind of missing the point. The chairman mentioned economics. We

don’t call it economics, we call it non-monetary uses.

For example, school trust lands recently in the recent year has

auctioned off a number of lands and the values have ranged from

$400 to $600 an acre up to $4,000 an acre. These are people that

just want to own the land. They have no water, no power. All they

want to do is own the land and basically leave it be. This is a market, in our view. People are spending money for this kind of thing.

This has gotten to be taken into account in the Federal process,

and right now, that’s very difficult. I think it’s sort of like the Federal Government is ignoring the issue.

Congressional action, I think, is necessary for some things. For

example, Congress passed something in the St. George area that

the appraisers would not consider the effects of Endangered Species Act. I think that was right, and that’s the sort of thing that

might help unstick some problems. And I would certainly, as those

come up, ask the Congress to consider that.

My own belief is becoming that appraisals, the detailed appraisal

process is very difficult in large exchanges like we’re engaged in.
9

We have our inholdings of 539 tracts. We have a new national

monument; we’ll have 337 tracts in there. It simply becomes too

large and too unwieldy.

Some way to collect issues or collect tracts into groups is necessary here and it may take the Congress to help us do that. In

fact, what we think is better is in 1996, there was an Arkansas

Oklahoma Exchange Act passed. Evidence of value was basically

presented up here in the Congress and Congress directed that this

thing happen. For large exchanges, I am becoming more and more

convinced that may be the way to have it proceed.

With that, Mr. Chairman, I will quit.

[The prepared statement of Mr. Harja may be found at end of

hearing.]

Mr. HANSEN. Thank you, Mr. Harja. Commissioner Alan Gardner, County Commissioner of Washington County, Utah. If you will

you pull that mike up to you, Commissioner, I would appreciate it,

and we will turn the time to you, sir.

STATEMENT OF ALAN GARDNER, COUNTY COMMISSIONER,

WASHINGTON COUNTY, UTAH

Mr. GARDNER. Thank you. And I would like to echo a lot of

John’s comments. My name is Alan Gardner and I live in Washington County, Utah, where I presently serve as a County Commissioner. My family owns property in an area designated as habitat

for the Desert Tortoise. And for the last 8 years, we’ve been involved in the process of establishing a habitat conservation plan

within Washington County under the Endangered Species Act.

And I do appreciate the opportunity to say a few words about the

inappropriate way we have been dealt with property holders in the

HCP. We indicated initially to the BLM and the Fish and Wildlife

Service that we liked the property that we had, but we would be

willing to accommodate the creation of the HCP by trading our

property, along with others in the area, for BLM property of like

value.

We are one of 35 other different owners of 6,803 acres of private

property, and that doesn’t include any school trust lands, that was

to be included in this Desert Tortoise HCP that encompasses about

65 square miles.

Because of the suggested devaluation of private property by Mr.

Jack McDonald of the State BLM office, it took intense negotiations

that lasted almost a year between BLM, Fish and Wildlife, the Justice Department, Washington County, and the private landowners

to finally come to an agreement as to how value was to be determined.

And there was a preliminary estimate of value established by an

accepted appraiser, and this appraiser was to be selected by the

private property holders from an approved list of appraisers furnished by the BLM. This estimate was then to be reviewed by Mr.

Don Duskin, BLM’s chief appraiser for Oregon and Washington,

and the preliminary estimate was then to be upgraded to a final

appraisal prior to completing an exchange. Neither the State BLM

office or any of its contract appraisers were to be involved in any

of this process.
10

Everything was moving along nicely until Mr. McDonald of the

State Office of Appraisers did not like the value of the property

and, contrary to the agreement, sent down his own appraiser, Mr.

Paul Meiling, who determined that since our property was tortoise

habitat, it was only of token value and appraised it at less than

15 percent of the preliminary value estimate.

This devaluation of our property is a classic example of green-collar crime. Net gains stolen by the government would have been

over $1.5 million for my family. By this breach of agreement by

BLM and the subsequent devaluation, all the HCP property trades

came to a screeching halt.

Almost a year later, we once again agreed to proceed under a

bargaining agreement with a team appointed by the BLM. We

came to a bargain value, and in so doing conceded to give up

$1,000 an acre or $239,000 which would have been the cost of

doing a Section 10 permit on our property if we were to develop it

ourselves.

We also had to pacify Fish and Wildlife Service by agreeing to

a fencing cost that came to another $63,360 for a total of $302,360

in mitigation costs.

BLM agreed that since our value was frozen at the March 20,

1996 date, whatever property we acquired from the BLM would be

valued at that same date. Coming up with a value for like property

to trade has been just as frustrating as the first part of the trade.

After disposal property by BLM had been identified, we selected

an appraiser from the BLM list. His appraisal was reviewed and

accepted by Mr. John Widdoss of BLM, but was eventually rejected

by Washington. We selected a different appraiser from their approved list and his work was likewise rejected.

So once again, BLM contracted their own appraiser and another

appraisal has been completed on the trade property. It seems that

they have the ability to keep requesting appraisals until the numbers satisfy them, with no consideration given to the rights of the

private property holders.

Another area of concern is that even though the private property

holders in the HCP were not anxious to exchange their property,

but were willing to do so to accommodate the proposed HCP, they

were still required to bear the cost of the appraisals and surveys

of the lands they were trading for.

A final concern is the complication and expense that comes about

because of the historical and archeological sites. The mitigation

costs were allowed to devalue our property, but in the case of the

trade properties, they can become almost insurmountable expense

that is added to the price. Why should the private property holder

get deducted on one side and charged on the other? It appears to

be a double whammy.

Those mitigation costs should be subtracted from the value of the

property trades.

In the case of the Washington County Water Conservancy District, those costs, including the clearance costs, have come to almost $800,000. And I might note in two months of working on the

archeological clearances, for that money they have found one arrowhead and a bunch of charcoal.
11

The appraisal of other private property within the HCP has improved since most recent legislation has helped to clarify the value

of habitant land in Washington County. Also, the Utah State Director of BLM, Mr. Bill Lamb, has assigned more local BLM personnel

to assist in land exchanges. Mr. Cavanaugh from Washington has

been to St. George several times to try to expedite this process,

which we appreciate very much. But this process is still trying.

I have a few suggestions that I would like to offer. Somehow the

decisions need to be made on a more local basis with enough staff

in the local office to accommodate it, and reasonable appraisers in

the State office to back up. The time to accomplish the trade needs

to be greatly reduced. There has to be recognition of fair market

value without the presence of an endangered species considered.

Mitigation costs for archeological sites should be deducted from

the appraised value if they are going to be paid by the new owner.

And there should be a limit to the number of appraisals and reviews that can be done on any one piece of property.

Thank you very much.

[The prepared statement of Mr. Gardner may be found at end of

hearing.]

Mr. HANSEN. Thank you, Mr. Gardner. Mr. Hanson from Hanson

Appraisal Company, we turn the time to you, sir.

Mr. WOODWARD HANSON. Yes, sir. I’d first like to thank Congressman Goss for providing the introduction and thank you, sir,

for giving me an invitation and an opportunity to appear before

this Subcommittee.

I also ask that you please include my full written testimony,

along with my supplemental summary of today’s oral testimony

into the record.

Mr. HANSEN. Without objection, all of the full testimony will be

included in the record.

Mr. WOODWARD HANSON. Yes, sir. Thank you.

STATEMENT OF WOODWARD S. HANSON, HANSON APPRAISAL

COMPANY, INC.

Mr. WOODWARD HANSON. First, what I’d like to do is begin by

identifying what the appraisal industry perceives is the problem.

As 1998 Vice President of the Appraisal Institute and an MAI

member with 20,000 members nationwide, we have dealt with this

problem again and again.

We believe that the valuation of public lands, balancing preservation and development, is not an economic issue. It is a social, cultural, political issue, and it requires a political solution. Others

agree. Recently, an article was published in the National Resources

Law Center Review from the University of Colorado, right on point

with this in that regard.

Currently, there is a fundamental disagreement over the elements of value for public and natural lands. The problem has led

to wide ranges of value estimates for public lands and increased

delays in land transactions.

I know that most of you are familiar with the Dell Webb land

transaction involving 4,700 acres of public lands located south of

Las Vegas, Nevada. But let me take a few moments to give you
12

some highlights of this exchange with respect to the appraisal

issues.

From our understanding of our land swap, it was well-documented that the case illustrates large deviations in the land value

estimates and an extended time period to complete the land transaction process.

Regarding the land value estimates, value estimates ranging

from $9,000 per acre to $10,600 per acre were first obtained by

BLM, whereas third-party intervenors have appraised the property

at $36,000 per acre, representing a difference of almost $12 million.

Shocking as this may be, this is not an isolated incident.

In addition, the complexity of the appraisal problem and the possibility and potential of third-party intervention and lack of an effective public policy to address the valuation involved drags transactions like this on for years without resolutions.

And part of the complexity of these types of appraisal assignments is you’re dealing with properties in transitionary locations

that have other issues such as comprehensive plan amendments,

zoning changes, infrastructural extension, offsite liabilities, et

cetera.

The solution: I’m here to offer what I believe is the pathway to

a solution. Congress needs to make a real commitment to better define its public policy relating to the valuation of public lands.

Congress also needs to establish clear priorities for the use and

development of public lands and natural resources. The appraisal

community has already begun working to solve the problem. There

is an active debate within the appraisal industry on the issue of

the valuation of public lands.

The Appraisal Institute has organized a series of forums and participated in national debates on these issues over the last several

years. We have concluded that we cannot solve this problem alone.

This must be a joint effort with Congress and the administration.

Because the valuation of public land, balancing preservation and

development is not an economic issue, but is a social, cultural, and

political issue, we need a political solution. And we appeal to you

today to help us find one.

Thank you for your time.

[The prepared statement of Mr. Hanson may be found at end of

hearing.]

Mr. HANSEN. Thank you, Mr. Hanson. We appreciate your comments.

We’ll now turn the time to Mr. Tom Glass, Western Land Group.

Mr. Glass, the time is yours, sir.

STATEMENT OF THOMAS R. H. GLASS, WESTERN LAND GROUP

INC.

Mr. GLASS. Thank you, Mr. Chairman, for the opportunity to testify today. My name is Tom Glass and I’m a principal in Western

Land Group, a national public lands consulting firm headquartered

in Denver.

Thank you again for your sponsorship of FLEFA and your ongoing interests in land exchanges as evidenced by your holding this

hearing today. It’s very encouraging to us as a small business to
13

have policymakers such as you striving to improve the land exchange process.

Also, Mr. Chairman, thank you for your sponsorship of the Snow

Basin Land Exchange legislation. We are working with Mr. Gray

Reynolds and the Snow Basin folks as we work to try to resolve

some very thorny appraisal issues flowing from your legislation,

and we’ll keep you posted in that regard.

Since our formation in 1981, Western Land Group has assisted

in the consummation of more than 100 Federal land exchanges, utilizing both legislative and administrative processes. We continue to

help clients facilitate dozens of new cases involving lands ranging

from tens of thousands of acres to less than one acre.

Working in partnership with BLM and the other public land

management agencies throughout the West, Western Land Group

achieved fundamental public and private land management objectives. These include, but are certainly not limited to, protecting

municipal watersheds; placing key threatened wetlands and wildlife habitat in the public domain; eliminating private inholdings in

designated wilderness areas; helping municipalities and counties

acquire lands for administrative purposes and open space; facilitating responsible community growth; and improving hunting, fishing, and recreational access to Federal land.

Until recently, current law, regulation, and policy has worked

well. The Federal Land Exchange Facilitation Act, which we helped

to develop along with you and other members of this Subcommittee, has made some significant improvements to the process.

We are, however, concerned about several recent developments in

BLM’s land exchange process. First, we’re concerned about the

newly instituted directive which relinquishes a BLM State Director’s authority to approve exchanges if the value of public lands in

the exchange is more than $500,000. The directive requires that

Washington, DC staff approve exchanges based upon an additional

level of feasibility, analyses, and issues papers.

Second, we are also concerned about the increased popularity of

competitive exchanges, or BLM’s intent to auction unwanted Federal lands to the highest bidder. As a steward of the land, BLM has

a responsibility to get the best deal for the public when disposing

of land.

The best deal means more than just money, Mr. Chairman. Exchanges should be driven not only by BLM priorities, but also by

community priorities, including development planning, infrastructure needs, open space needs, access needs and the like. To auction

a parcel could result in an outsider who has no interest in the community’s needs acquiring the parcel simply because he or she was

willing to pay the most.

And while we certainly have a lot to agree with with Commissioner Gardner and his very unfortunate situation, with regards to

the appraisal process, Western Land Group has generally been

pleased with the arbitration provisions.

Prior to FLEFA, there was no arbitration and many exchange

valuations were decided entirely by the BLM or the Forest Service.

They were both a principal in the transaction, and also the last

word in the transaction.
14

FLEFA’ arbitration provision has been a helpful tool to resolving

disputes involving value.

We also suggest that the amount allowable under Section

206(h)(1)(A) of FLPMA be increased from $150,000 to $500,000 to

allow utilization statements of approximate equal value, rather

than full appraisals in appropriate situations. This would help reduce the backlog of appraisals and appraisal reviews.

On balance, Western Land Group believes that BLM’s exchange

process has worked fairly well. However, we do have two recommendations. First, the Federal Land Policy and Management

Act requires that land be exchanged for exact equal value. Otherwise, cash equalization payments must be made. FLEFA permits

certain waivers of this requirement.

However, the BLM often doesn’t have access to the cash equalization dollars without coming back to the Congress to get specific

appropriations. We recommend that Section 203 of FLPMA be

amended so a portion of the moneys received by the Secretary of

Interior from the sale of public lands be placed in a special fund

for cash equalization purposes.

And finally, while we’re a great supporter of well-crafted and

well-managed exchanges, we recognize that exchanges are not a

panacea and can’t entirely substitute for purchases under the Land

and Water Conservation Fund.

Thank you for this opportunity to speak to you today, Mr. Chairman.

[The prepared statement of Mr. Glass may be found at end of

hearing.]

Mr. HANSEN. Thank you, Mr. Glass, for your excellent testimony.

The gentleman from American Samoa.

Mr. FALEOMAVAEGA. Mr. Chairman, thank you. And I want to

offer my personal welcome to Mr. Shea, the Director of the Bureau

of Land Management for his presence and also our friends from

Utah.

I would be remiss, Mr. Chairman, if I do not offer my congratulations to you, and as an alumnus of the University of Utah and the

Mighty Utes, and their capacity to be among the top four now in

the NCAA competition. I don’t know if you’re aware, Mr. Chairman, but the Ute tribe from Utah borrowed this word Utah from

us, because the word Utah in my language means mountains. And

I understand it’s exactly the same meaning among the Ute tribe,

the word Utah. So you actually borrowed this word from us, so you

might want to carry that on to the members of the Ute tribe in the

State of Utah.

Mr. Shea, I appreciate your testimony. I do have some questions

if you could help us with it. I notice that we have basically two

Federal statutes and a series of regulations that were instituted,

I think, in 1993: the 1976 law and the 1988 law. And then we’ve

got these regulations that were instituted in 1993.

Do we need to take any steps currently as far as the Congress

is concerned to make improvements on these statutes, or maybe we

just need to wipe them all out and start with first base again. Or

what do you suggest that we ought to do to make improvements

in the process?
15

Mr. SHEA. You can go back to 1785 when Thomas Jefferson and

James Madison started the cadastral survey. Because the United

States was faced with the prospect of frontier lands and how to

manage them, there have been, almost on a decad basis, different

political/economic problems associated with available public lands.

And each generation, indeed each Congress, has probably thought

of a different way of solving the problem.

At the end of the day, it strikes me, as the Director of the BLM,

what I need to do in terms of my stewardship is to facilitate an orderly process that will ensure the taxpayers receive the value for

their lands while, at the same time, making the necessary accommodations at the local level.

There’s always going to be a give and take on that. You could

take an arithmetic approach of two plus two is four and that would

solve the problem at the local level. But as you move up the chain

of government to county and State and Federal, I think you move

rapidly into algebra and into calculus where the variables can have

an enormously different impact, depending on which statute or

which regulation you’re doing.

I have before me the Federal Land Acquisition Act or regulations, Uniform Appraisal Standards, and you can see that it’s not

terribly thick, but it’s very complicated to read. And then I have

the private sector’s appraisal standards, a little bit thicker, and actually a little bit more complicated.

So I don’t think there is a single solution to this. I liked the suggestion that Mr. Glass made that BLM, as other Federal agencies,

be empowered to retain some of the proceeds of exchanges for cash

equalization purposes under a special fund. I think that has some

merit.

But I think to go in and throw everything out and invent whole

cloth again is simply going to delay the process further.

Mr. FALEOMAVAEGA. What is your opinion of Mr. Hanson’s thinking that the whole situation that we’re involved in here is really

not an economic issue, but a political one, and that maybe it requires a political solution?

Mr. SHEA. Well, I do think Congress ultimately has the authority

through legislation to do what they will with the property and be

held accountable in the election process. That is the ultimate solution. I mentioned in my opening statement that we transact 50 to

60 land exchanges a year involving anywhere from 150,000 to

300,000 acres. Many of those transactions are small, isolated pieces

that we need, in my judgment, to expedite so that you don’t delay

solving problems at the local level.

But once you get into rapidly developing areas—Las Vegas is a

good example—and the prices are literally going through the ceiling, I think we have an obligation to make sure that the taxpayers

are getting a just return on their property.

Mr. FALEOMAVAEGA. I noticed in your statement you mentioned

that you have only approved about 70 or 80 land exchanges last

year. How many do we do on an annual basis? I mean, how many

applications are submitted as a whole?

Mr. SHEA. I couldn’t tell you how many. There is no submission.

What happens, if you’ll see on the chart——

Mr. FALEOMAVAEGA. Some are ongoing, I know that. Right.
16

Mr. SHEA. There’s an exchange proposal and it’s usually made to

the district manager or the State director. And I can get for you

a guesstimate there, because sometimes that might be as informal

as somebody walking in the district manager’s office and saying

you know that 35 acres over in the north quarter, we’d like to see

if we couldn’t do some exchange.

Mr. FALEOMAVAEGA. Yes, I think it would be helpful for the

record if you could submit that for the record, if it’s all right, Mr.

Chairman.

Mr. SHEA. I will do that. —————

The BLM completes an average of 60 exchanges annually. We estimate twice that

many are proposed each year, but for one reason or another are not pursued. The

usual reason for not getting beyond the proposal is one of the parties in the prenegotiations decides not to pursue the proposal further.

Mr. FALEOMAVAEGA. I saw the chart here. And I am sure the

Chairman and I feel sometimes too, whenever we talk about regulations, there is a chilling factor that comes in. And when you say

about the complexity, and then when you add the regulations to

the laws, it just makes it even more complex. Am I wrong on this?

I look at the chart. This is what we go through by doing a land

exchange process.

Mr. SHEA. Right. But again, I would point out that where there

are two willing parties, that process can move very expeditiously.

Where the problem arises is when the public, as is their right, reviews the proposed exchange and raises substantive questions as to

value, as to endangered species, the system, as it’s presently designed and as I believe has many safeguards to it, does slow the

process down. And it does involve oftentimes a negotiation back

and forth.

I was interested with Commissioner Gardner’s comment that he

was unaware that there was a possibility of negotiation because it’s

clearly laid out in the regulations that I cited in my opening testimony that you can have negotiations to resolve disputes.

Mr. FALEOMAVAEGA. How does a national institute of appraisers

or national foundation or association really come out with a very

accurate assessment of what an appraised value of a property, because it seems in hearing from our friends here, that’s where the

problem lies. It’s such a subjective——

Mr. SHEA. I think you put it quite well in your opening statement when you said that the appraisal is an art form, not a

science. And just as in science, we could verify and duplicate something. I think I could take two appraisers out on the same parcel

of land and in some instances, come up with widely disparate values. And that’s where I think the chairman’s observation that, in

many ways, it’s a political question then as to what would be a fair

exchange for the taxpayers to accept in some instances.

Mr. FALEOMAVAEGA. And I think that’s where the problem is.

You don’t think that we ought to do any changes in the current law

to make it more effective?

Mr. SHEA. Well, like I said, I like the idea of having some funds

set aside so that we could do equalizations more expeditiously than

having to wait for a Congressional cycle for approval of additional

funds to have those equalizations.
17

The chairman and I have discussed the concept of a land bank,

but again, that is a question for Congress to address. We certainly

will be working with different national institutes and different

Members of Congress to see if there aren’t some things we could

do. I’m not saying we have a completely defensible system. But I’m

just saying that if we were to remove it in its entirety, we would

be, I think, in a very difficult position.

Mr. FALEOMAVAEGA. And it’s just as difficult even to establish a

national standard for even an appraisal process.

Mr. SHEA. Well, again, I think we have a very good establishment in the Uniform Appraisal Standards for Federal Land Acquisitions. Again, it’s not something that my 6th grade son could sit

down and read and understand, but it is, with the people who practice quite often, a very good guidance about what they need to do

to facilitate these exchanges.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

Mr. HANSEN. Mr. Hanson, did you want to comment on some of

this statement?

Mr. WOODWARD HANSON. Yes, sir, I would. With almost 20 years

of field experience as an appraiser who focuses on eminent domain

litigation valuation, I am often asked on the witness stand, Mr.

Hanson, isn’t it true that appraising is somewhat more of an art

than it is a science. And my answer has always been, well, I guess

that all depends on who you hire.

I would strongly suggest that the competency provision of

USPAP takes care of that at the Federal level, and segueing into

the comments made earlier by the Director, I looked closely at the

BLM 43 CFR 2200, and their standards exceed industry standards.

I can give you examples, but I won’t do that unless I’m asked to.

You have the Uniform Standards of Professional Appraisal Practice—we call it USPAP—which is created by the Appraisal Standards Board of the Appraisal Foundation as a result of the S&L crises of the 80’s. Then you have the Uniform Land Acquisition Policy

of the Interagency Office of 1992, and then you have CFR 2200. So

you have layers and layers of standards and supplemental standards.

But what I really think I can bring to this discussion as a result

of my background in eminent domain and the case law that deals

directly with these topics are some examples. And before I begin,

I would remind you that the BLM land transaction process is not

an eminent domain model; it’s a voluntary transaction model.

But what I hear are people complaining about scope of project influences. That’s a Federal rule, State rule. For example, if the government designates a property as a protected ecological habitat and

then goes in and buys it and alleges that it’s value has diminished

as a result of its own policy, then that by law is something that

you should disregard. The scope of project rule says as an expert,

as an appraiser, you should disregard any decrease or increase in

value caused by the project, solely by the project after its announcement.

I keep hearing issues that relate to, at least, Mr. Gardner’s concern of condemnation blight. Their property was affected by issues

of blight caused by public policy, and therefore, they couldn’t

achieve just compensation from their viewpoint.
18

I hear earlier testimony about why can’t sales of small tracts of

land be used to value large tracts of land. Well, folks, that was the

S&L crisis. We’ve been through that once. Five-acre, 10-acre comps

are not relevant data points to be used in the valuation of 600,

1200 acre tracts without doing a discounted cash-flow model, which

includes a lot of variables like absorption and retail pricing, et

cetera.

Otherwise, you are going to get a number that’s called gross retail sales potential, not market value, and we’ve already fought

that battle in the 80’s down there in Texas. So I would caution you,

don’t go in that direction because that’s not where you want to do.

And I would comment finally that the land valuation process,

particularly in relation to the transaction or swap, requires a tremendous amount of due diligence on both parties. And particularly

with regards to the issue of the noneconomic components of property.

The Federal agencies have clearly opined that they will not compensate for noneconomic elements in property valuation. And until

Congress can take a strong initiative on this particular issue, we

are going to continue to face this stumbling block.

Mr. HANSEN. Thank you very much. Probably one of the most

complicated issues that we ever face around here is this one. We’ve

talked about it; every year for 18 years, we’ve had a hearing on

this, and it becomes very frustrating. I could write volumes about

the frustrations that people have, with the BLM, especially the

Forest Service, Reclamation, you name it, Park Service.

General principles, I would like to get a lot of inholdings out of

parks. I’d like to get some inholdings out of BLM ground. It just

makes good public policy to do that. I always worry whether the

Democrats are in control down on Pennsylvania Avenue or the Republicans are in control. It comes into a fudge factory, in a way.

And people become very defensive. Basically, these laws come from

us and I have to say that sometimes the interpretation of the laws

leave me a little cold, but still that does happen from time to time.

So I would hope that people wouldn’t become defensive.

But you know, I look at things like Commissioner Gardner

brought up, and I’ve represented in my 18 years in Congress, 16

years I’ve represented Washington County, and I cannot believe

the problems that have been created down there on this thing of

the 1973 Endangered Species Act.

Mr. Doyle was in to see me the other day. I could name 20 people

from that area that are super-frustrated, and I share some of those

things. Somewhere—that’s what I said earlier, and this is the copout argument, is fine, as Mr. Glass pointed out, when we get to a

certain point we say fine, we’ll just put it in legislation.

He was talking about a land exchange on Snow Basin. What that

was about is Jack Ward Thomas, the head of the Forest Service at

the time, came in and sat in my room and said, ‘‘Mr. Chairman,

there is no way on earth I can make this land exchange and jump

through all those hoops in time for the 2002 Winter Games and

Utah is going to look like a bunch of dummies. Therefore, would

you do it by legislation.’’ And we did.

Even at that, it was a frustrating experience. So my first question to him was, was there any opposition to this. He said, oh, none
19

whatsoever. Boy, was he naive. There was even a great movie star

lobbying in front of my one office saying how bad it was even

though he had his own. But I won’t go into that.

Anyway, carrying that on, I would have to respectfully disagree

with the Director, and I’m not sure I am disagreeing with you at

all, but I think there are some places we can streamline this. Just

look over at that chart over there. It’s fraught with problems, in

a way. Every time there’s another person involved, then we get

personalities involved and they have their own feelings in it.

Mr. Gardner points out, and I think of half the people in Washington County and Iron County. I remember when our mutual

friend, Mr. Babbitt went into Iron County and said because we

have found the prairie dog in there, your ground is now worth $600

an acre. Well, that didn’t sit too well with the Governor of the

State or myself as Congressman from that area. This is ground

some of those people have owned for many years.

So I’m sure that Alan Gardner sits there, he and family, taking

him out of his role as County Commissioner, but put him in his

role as a landowner. And all of a sudden—they’ve owned that

ground for generations. Now, all of a sudden in 1973, Congress

comes along and says wow, we just found this little thing called the

Desert Tortoise.

Of course, some of us debate where it’s very healthy in Washington County, but very sick in the Mojave area, why we try to

keep both sides. But I won’t get into a Fish and Wildlife debate

here. But why is it now that Mr. Gardner’s ground is worth less

money than that? He didn’t do this. It had nothing to do with him.

And Director Shea, in my humble opinion, that constitutes a taking. They took the man’s ground that was worth x amount of dollars, whether it be Mr. Gardner, Mr. Doyle, a hundred of them

down there, who fall in that category.

Another thing that always bothers me is every time somebody

calls, they find an archeological site on it. I personally have gone

down, and I go down there about every other month, and tried to

find some of these archeological sites. I wish whoever finds those

would go with me one of these days and point it out to me. Or

somebody prayed there at one time. Oh, I don’t know who it was,

whether it was those early Mormon pioneers or whether it was an

Indian tribe or something. Then we constitute a religious issue.

Now someone’s got to cut through this stuff. Now I don’t mean

to take anybody on here, but I really think we’ve created ourselves

just a ton of problems on how to handle some of these issues that

we have.

And then, of course, the folks who work for you, Mr. Shea, we

always like to criticize them. That’s part of the fun of this job, you

know, is taking on those areas, because we get it every day from

the public who feels it’s our fault. But somehow I honestly think

we should come up with some recommendations to do that.

Did you want to go again? I’ve got a few more things to say, but

I’ll turn to you and you can take the second round, if you like.

Mr. FALEOMAVAEGA. Just one a half questions, Mr. Chairman, if

it’s all right. I wanted to get back to Mr. Shea again, if it’s all

right.
20

And I guess in a roundabout way in your statement, Mr. Shea,

you’ve given us what steps, as the chart also indicates, are taken

to do the land exchange process. Does the Bureau have some kind

of a division of categorizations and say that this is from a small

landowner that wants to do a land exchange to a corporate, to a

State, and to a county so that the process doesn’t get clogged up?

I hear from Mr. Harja even the small landowners get bogged up

with this whole process, and I’m just curious why couldn’t it be expedited for the situation of an individual landowner as compared,

I suppose, to a State-owned land.

Mr. SHEA. On December 23, 1997, we issued a memorandum

which allowed for a second review by a State director or by the national office. The purpose of issuing that was to try to do exactly

what you are asking about, and that is separate out those small

noncontroversial exchanges.

Let me give you an example. In central Utah, there was an 80-

acre parcel that had a particular plant that was found nowhere

else in the world. So if we had allowed an expedited exchange, it

would have been entirely possible for that parcel to have been exchanged without anybody making an assessment of the scientific

value under the Endangered Species Act of that plant.

So what we are encouraging our people to do at the local level

is to come up with those exchanges that can be done as expeditiously as possible. And as I said, on this chart, it flows very quickly if there is no controversy. Now, unfortunately, we live in a time

of great contentiousness, particularly when it comes to land questions. And that’s where it has bogged down.

Now, Congress may well come along, either with specific legislation authorizing exchanges or with a streamlining of the process.

That’s your authority. I would probably be here as the Director arguing against making it too efficient because I think some of the

abuses that were mentioned in the 80’s would arise again very

quickly. And one of the things that this process, I believe, has done

is avoided the taxpayers’ losing on the exchanges.

Mr. FALEOMAVAEGA. Boy, that really—you say that this one parcel of land had one plant in there that is the most rarest in the

world.

Mr. SHEA. Well, there was no other place. The reason I’m familiar with it was the Nature Conservancy eventually worked out an

exchange and preserved it through an exchange process that I

think took about two and a half years.

Mr. FALEOMAVAEGA. So in every procedure whether it be through

individual, corporate, county, State, we’ve got the Endangered Species, you have the scientific community that has to go in there and

make a thorough check of the——

Mr. SHEA. They have to make that assessment, yes.

Mr. FALEOMAVAEGA. And how long does it take?

Mr. SHEA. Again, it can take a very long time, or it can be done

quickly. That’s one of the areas where our inventorying the flora

and fauna on public lands would be of assistance. We are creating

an Automated Land Mineral Records System, ALMRS, which will

allow us to retain in digital form information such as that. So I

think in the future that process can be done more expeditiously.
21

But right now we don’t have those assessments in many areas and

therefore, they have to be done as the proposal was done.

————— The average is 18 months to complete a land exchange. The inventory and clearance work required by regulation is the most time consuming portion of the process.

The negotiations and agreement on land value can also add to the length of the

transaction.

Mr. FALEOMAVAEGA. I suppose this adds to my sense of frustration right now. I’ve been following this issue for the past 7 years

in trying to get a better process of giving Federal recognition to

some 100 Indian tribes that are still not federally recognized. And

some of these tribes now, over 100 years, they are still not considered Indians, which in my mind is an insult and I resent it very

much the current procedure, the way it’s done.

And I looked at the Indian tribes almost like Mr. Gardner here

and the others, going to such a tremendous amount of money and

then all to no avail. I mean, just without any real sense of success

in going through the process.

I am trying to get in my mind, Mr. Shea, what in your proposed

procedure with these regulations, what do you see now as the average time factor that will take really for a land exchange to take

place?

Mr. SHEA. I’d have to, if I may, give you an answer on the record

written for that, because it would have to be just a guesstimate.

But there have been some exchanges that have been accomplished

in less than a year, but most of them take around 18 months or

more.

Mr. FALEOMAVAEGA. There was discussion also about the public

interest value. I am a little confused on that. Can you shed some

light on this, the public interest value of the land exchange, I suppose.

Mr. SHEA. I haven’t used the term public interest value. What I

have been using as a term is the fiduciary duty I feel to the taxpayers, make sure that land that they’ve, in a sense, acquired over

the years is not turned around and then an exchange value of x

is given to it at the exchange date, and then four days later, it becomes four times x.

Mr. FALEOMAVAEGA. I suppose in layman’s terms, what I would

look at the public interest value meaning is that making sure that

the public’s property is protected by the government, that you don’t

get shortchanged. And I wondered, maybe Mr. Hanson can help me

out if there is, if we could properly use the term.

Mr. WOODWARD HANSON. Sure, yes, sir. The term public interest

value has not been well-defined in appraisal literature. It’s generally recognized as the increment over market value that a property may command, as a result of special and unique cultural, ecological features.

Mr. FALEOMAVAEGA. Mr. Webb, you cited the Dell Webb land exchange as an example in Las Vegas. Would you say that public interest value comes into play with that.

Mr. WOODWARD HANSON. I am not familiar with public interest

value having any context to the Dell Webb exchange, sir. It was

more an issue of a property—I think you were on to something that

I think is brilliant, is there needs to be a recategorization of these

lands.
22

One obvious set are BLM lands that are located in urban fringe

areas need much different due diligence than do lands that are in

remote rural areas. If I have a piece of property that’s on the edge

of Las Vegas that’s growing at 8 percent a year—I was just there

working on the CalNev Pipeline, and I see Henderson, Nevada

busting at the seams and I got 4,700 acres next to it, I’m going to

take a real darn close look at what the value of that is.

I know my institutional clients would make me do that, and I

would certainly expect the government to do the same thing on behalf of the American people.

Mr. FALEOMAVAEGA. Well, if I knew that a Federal highway was

going to come there 10 years from now, that you want to purchase

all the land there that belongs to BLM, knowing that something

very good is going to come through there. So public interest value

becomes less valued in the public interest. I mean, the public’s interest in terms of the property owned by the public just was not

taken very fairly, I guess.

Well, now that I’m more confused than ever, Mr. Chairman, I

just wanted to ask in terms of the examples you cited, Mr. Chairman, I can appreciate the problems that sometimes we have. And

I think, Mr. Shea, I don’t want to put the onus in saying that it’s

the bureaucratic mess that is causing this whole problem. But I

guess it comes right back to us here in the Congress. And if it’s

us, we want to fix it. But we don’t want to continue spinning our

wheels and continuing having hearings like this and not solve the

problem for the next 10 years.

Mr. SHEA. One of the things I would suggest is that there is no

single solution. However, your comments and questions have led

me to a concept that I would posit for the Committee’s consideration. When we do move forward to form this national exchange

team, it would be entirely possible for them to prepare an annual

report which we would give to you so that there would be an approximate source of data about exchanges that the Congress could

review, and then in its wisdom decide whether or not something

legislatively needed to be done.

Mr. FALEOMAVAEGA. I certainly have no objection to that, Mr.

Chairman, and I hope that maybe that can be done. But at the

same time, we want to encourage input from our friends at the

State and local levels so that if they’re frustrated, we want to hear

about it. And I think our good friends from Utah are very, very

frustrated with the current process. At least, that’s what I gather.

Mr. Harja.

Mr. HARJA. Yes, if I could, to further your confusion about public

interest value, if I could. We were discussing, the Director and Mr.

Hanson were discussing the changing face of the urban areas and

difficulties there.

What I was trying to suggest is that this is also occurring in the

rural areas, in the areas that are the parks and the scenery and

all the pretty stuff that we all want to preserve, and the Endangered Species Act animals.

Mr. Hanson mentioned a second ago that he called it the increment above market value. I think the debate from our view is, is

in fact that market value or not. And in fact, what I was trying
23

to say with my examples of value is people are buying these lands

for that purpose, and we call that economics, supply and demand.

That is the debate. And I agree with Mr. Hanson that if the Congress could assist us with that debate, help the appraisers out and

help us understand, that would be of great value.

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

Mr. HANSEN. Thank you. Mr. Harja, I hope everyone realizes, his

responsibility is to do some land exchanges for the State of Utah

for the children as far as trust lands. Some of our other States in

the West do a much better job than we do. I think we dropped the

ball maybe 20 years ago when New Mexico and others got on the

ball and did something.

We have an awful lot of children there and it costs an awful lot

of money to take care of their education. And Congress wisely put

some of that in trust lands, but we don’t have the best lands.

How is your exchange coming that we have talked about ad nauseam for the last 10 years?

Mr. HARJA. With great anticipation, we came to Congress in 1992

and 1993 asking for a process that would help us exchange those

lands out of the National Parks, Forests, and Indian Reservations

and acquire some properties that were about to be developed, and

we could generate the money to put in the permanent fund to

spend on education.

The Congress at that time was not willing to look at our estimations of value, our sense that it is approximately equivalent.

And it chose instead to choose a process of appraisal. And Mr.

Ventos sat here and said we would like every nickel to be accounted for.

Well, it made some sense to us. Maybe in my naive atmosphere

at the time, I said we can do this and appraisals shouldn’t take too

long. Instead, as I mentioned, as we started into it, it was a sense

of prejudgment, a sense of these lands are out there only to hold

the earth together, as I recall was the statement. And we started

to feel uncomfortable.

We negotiated a process where the appraisal industry, four highly qualified people that we jointly chose, would work on this problem. And I have to say, I think those four felt overwhelmed by 500-

and-some-odd tracts scattered all over the State, and these are

640’s, these are not 10-acre things. They are rural, they are remote,

they have minerals.

They had to examine 20 different minerals: coal, alabaster, ad

nauseam. We had to hire not only four appraisers and a research

assistant to go out and look at all the comparables. We had to hire

a mineral appraiser because we had 175 tracts where we only

owned the minerals. And he had to hire 15 different experts on

minerals. That process alone cost us about $1.5 million.

And we’re nowhere near completing it because, despite our efforts, this question of what is the market for rural areas came up

and the—I believe the USPAP allows for these sort of things to be

considered, that Mr. Shea mentioned. The Federal book here, this

yellow book, does not allow that. And to us, that’s simply ignoring

a common issue.

So we’re stuck right now. We had to finally—the State had to sue

and we’re now in negotiations with the Department of Justice to
24

try to conclude this. And right now, assuming all goes well for us

in courts, we’re looking at probably 10 years from start to finish

to get an exchange of 500-and-some-odd parcels done. I am hopeful

we can simply mediate that and be done soon.

Mr. HANSEN. Mediate that and be done soon.

Mr. HARJA. Mediate the dispute.

Mr. HANSEN. Soon? How long do you say you’ve been on it?

Mr. HARJA. I used to estimate days and months. Now I don’t do

that anymore. I just say soon.

Mr. HANSEN. If Roll Call was here, they’d put that in as the Joke

of the Day. But thank you for your good work, though. I know Mr.

Harja works very diligently on that.

Mr. HARJA. We intend to conclude this. We intend to get this

done. It’s in our best interest. It is just frustrating that the process

turned out to be so large——

Mr. HANSEN. Well, you’ve got the monument in there. Of course,

the monument is almost nothing to a lot of us, even though the delegation takes the point that it’s reduced the WSAs down to 2.8,

rather than 3.2. That doesn’t really matter much either way. But

I’d sure like to see some of that resolved, and I think most of the

citizens in the State of Utah would.

Every time they pick up their property tax notice and see how

much their mill levy goes to education when we should have taken

the vision of a very great Governor by the name of Scott Matheson

and gone ahead and done that some time ago. I wish we had

blocked that out. We’d have most of this out of our hair when he

came up with that Project BOLD which should have been done

years before.

Mr. Glass, you had a comment.

Mr. GLASS. Thank you, Mr. Chairman. Just to clarify a couple of

things. I’m not an apologist for the exchange process at all. I know

that there are certainly some subjective elements to appraisals, but

because of FLEFA, the agencies are no longer arbitrary, and that’s

because of the arbitration provision.

We’ve been through one arbitration. Out of over 100 land exchanges, we’ve taken one case to arbitration. In that case, the government lost big. They were accused of being arbitrary and capricious and the arbitrator determined such.

One of the main problems with completing exchanges, Mr. Chairman, is that the staff reviewers often lack the self-confidence to review people’s work, like Mr. Hanson here, and approve it without

a lot of squirming and teeth gnashing and fingernail biting.

However, I want to compliment Mr. Dave Cavanaugh, the Chief

Review Appraiser here in Washington, DC, for some very competent work that he did on behalf of the City of St. George in

Washington County. He was instrumental in resolving some very

difficult questions concerning tortoise habitat that was owned by

the City of St. George.

Without Mr. Cavanaugh’s intervention, I don’t think we could

have possibly resolved this issue, with all due respect to the State

staff in Utah. I want to point out that a lot of it is self-confidence

on the part of these review appraisers. Particularly, when they get

into high growth areas. They are used to going out and appraising

farms, then all of a sudden, they are on the edge of a real estate
25

boom like the one case we talked about in Las Vegas, and they are

somewhat out of their bailiwick.

And if there is ever an appropriate role for Washington, short of

arbitration, it is getting competent people like Mr. Cavanaugh out

there to try to address some of these issues before the entire transaction falls apart.

Mr. HANSEN. Mr. Hanson, in regard to Mr. Glass’s comment, as

we try to somewhat streamline this and make it more efficient, one

of the frustrations we find in Washington, DC is we can never find

somebody who can make a decision. We are always trying—somebody is going to cover himself, and I’d better check further up. I

spend most of my time working on military issues. I finally have

to get to the Secretary or his Deputy or a Secretary of the Army,

Navy, Air Force, Marines to get a decision. And it’s a frustrating

experience. And you find that all over the Federal Government.

I noticed you have MAI behind your name. Would you, for the

record, tell us what that is.

Mr. WOODWARD HANSON. MAI is a professional designation that

is owned by the Appraisal Institute and it stands for Member, the

Appraisal Institute. What it means is as a professionally designated appraiser, we have stringent educational requirements,

stringent ethics and review requirements. We have a disciplinary

process. We have a comprehensive exam. We have demonstration

and report writing criteria.

It means that the standards that we have set for membership

into our organization greatly exceed those minimum standards that

were defined by Title 11 of FIRREA during the creation of the

State-certified appraiser.

Mr. HANSEN. Are you of the opinion that the Federal Government and those who handle public lands have the qualifications to

do it?

Mr. WOODWARD HANSON. Sir, to be sure that I understand your

question correctly, do you mean those who are currently doing the

appraisals on behalf of BLM, et cetera?

Mr. HANSEN. Realizing they have a lot more going than—I mean,

they are not private business people and they have a lot of considerations, do you think that they appraise the ground in the way

that you would or someone from the private sector would?

Mr. WOODWARD HANSON. In my review and investigation in preparing for this hearing, I learned that BLM has a policy or history

of outsourcing appraisals. And I’ve learned that oftentimes they

use members of my organization, so to speak. So I think the policy

is a good policy in that they are going to the people with the greatest experience and educational backgrounds to solve these problems.

But what I hear today are not appraisal problems that are

unique. These are appraisal problems that I face every day in my

business. I have institutional clients that are involved in land on

the east coast of Florida next to agricultural preserves and fringe

areas that need plan amendments and infrastructure extensions.

And we are trained, we have the tools necessary to lead to accurate

conclusions in these settings.

Mr. HANSEN. Well, what I’m getting at, and I guess this is also

for the Director, is a lot of situations we have is somebody in Flor-
26

ida, Utah, wherever it may be, an appraiser with your qualifications does something and it’s all thrown out in Washington. Case

after case, this is thrown out, the other one is thrown out. Why?

What criteria are they using at this level that didn’t fit at that

level?

Maybe the Director would rather respond to that.

Mr. SHEA. Again, I agree with Mr. Hanson. Many of the more

complicated land transactions that we do we outsource to the professional who we find to be the most highly qualified. And quite

frankly, it’s a tension between trying to push the decisionmaking

authority to the local level to allow them to make expeditious and

yet just decisions, while at the same time having the opportunity

in appropriate settings, to bring in the truly professional.

So I know that parties can disagree. Having been a lawyer for

23 years, I was often hired to create disputes perhaps where there

were none. And we live in a society where we have that happen

all too often.

But that’s why I was saying in my opening comments, this is a

complicated process that requires an ability to give local authority

the right to make the decision, and yet, because it involves a trust

obligation to the people of the United States, we need to have the

most competent people like Mr. Hanson and other MAIs available

to do it.

Mr. HANSEN. Is it BLM policy that the public always has access

to the final approved appraisal before an exchange is completed?

Mr. SHEA. It has to have a 45-day comment or the exchange can’t

go forward.

Mr. HANSEN. I see. When some organization that comes in has

an obvious built-in agenda which is particular to their group, but

not really along with the will of the masses of people, is that taken

into consideration?

Take for example, somebody who is really uptight, who has a

save-the-slimy-slug type of thing. Therefore, they foul up a land exchange to save a slimy slug. The slimy slug is going to be saved

over the direction of maybe 10,000 people, because of two people.

Does that come into consideration?

Mr. SHEA. I guess we don’t check the Fifth Amendment as to

whether it’s applicable to the slimy slug advocate or the ordinary

citizen. That’s part of the due process provisions of our Constitution.

Mr. HANSEN. But somewhere, someone has to adjudicate this and

determine where is the value.

Mr. SHEA. Oh, I agree.

Mr. HANSEN. I mean, here we’ve got a community like Iron

County, which is growing by leaps and bounds and they find two

prairie dogs down there and it stops a huge amount of growth,

even though people figured out how to move it safely to another

spot. And yet it cost us millions of dollars to do it. Somebody’s got

to cut through some of this sometimes.

Mr. SHEA. Again, I think Congress, in terms of legislating standing in jurisdictional questions involving the Article 3 Powers of Adjudication, has that ability. There is an individual up in Idaho, Mr.

Marvel, who has on our permit questions—this is not a land exchange question, but on permits has quite regularly been suing the
27

BLM and the Forest Service and we are obligated to go to court

and defend the actions, which take a great deal of time and for the

private permit holder, the livestock rancher or agriculturist, it’s an

enormous cost.

But I didn’t write the Constitution and I wouldn’t want somebody to say, well, if you have curly hair you get one right and if

you have straight hair, you get a different right.

Mr. HANSEN. Specifically to the Spillsbury exchange, a letter was

sent to the BLM by the Western Land Exchange Project, an environmental watchdog organization which initiated the fourth appraisal of this property and resulted in another delay just days before it was to be completed.

Now we’ve read the letter here and find nothing in it overwhelming evidence that would compel the BLM to conduct yet another appraisal. And I just wonder why it was such a big deal that

the BLM responded to the Western Land Exchange Project. Does

anybody want to respond to that, or am I getting too specific on

something?

Mr. SHEA. I’d be happy to get something for the record. I am not

familiar with that.

—————

The BLM responds to every citizen or group that protests or comments regarding

one of our decisions. We do not arbitrarily single out any comment we receive for

a response. The reason we responded to the Western Land Exchange Project is they

commented on the decision. We did not hold up the land exchange because of the

Western Land Exchange inquiry. We needed to have an administrative record that

conformed with lands being exchanged. Generally we will delay an exchange until

the administrative record supports the management decision to complete the land

exchange.

Mr. HANSEN. I’d appreciate it very much if you would do that.

Mr. Glass, I had a question I wanted to ask you. You have told

us that you oppose the development of a national exchange team,

is that right?

Mr. GLASS. No, I did not. What I said, Mr. Chairman, was that

I am concerned about the new directives of the BLM which relinquishes a State BLM Director’s authority to approve exchanges

where the value of the public lands to be exchanged is more than

$500,000.

Mr. HANSEN. But you mentioned response time, if my ears heard

me correct.

Mr. GLASS. And one of my major concerns about this directive is

its removing authority or taking authority back to Washington instead of out into the states.

Mr. HANSEN. But you think there should be a time limit, Mr.

Glass.

Mr. GLASS. I would love there to be a time limit.

Mr. HANSEN. And what would you propose? Is it fair to ask that?

Mr. GLASS. The thing that causes the greatest number of delays

in most exchanges is public opposition, local public opposition, similar to some of the controversy that surrounded the Snow Basin

Land Exchange. And it’s that public process, when the public gets

actively involved, that the process does slow down.

Occasionally, there are technical issues that slow the process

down. For example, surveys. If an exchange is in an unsurveyed

township or there are difficult survey problems, that can really
28

delay an exchange, up to a year or two, given the small budgets

these agencies have to go out and perform surveys.

And appraisals, for the most part, do not slow down the process

unless they become contentious. And that is why the arbitration

provision that you sponsored in FLEFA is so important.

If we could have some timeframes for review, I would welcome

them, but I haven’t called for anything specifically today.

Mr. HANSEN. Mr. Gardner, you commented in your statement

about your land being appraised and appraised and appraised. How

many times has it been appraised?

Mr. GARDNER. I think altogether the lands we’ve been involved

with, we’ve had five different appraisals on ours and——

Mr. HANSEN. Five different appraisals?

Mr. GARDNER. Two on our private and three or four on BLM that

we are trying to acquire.

Mr. HANSEN. Over what period of time?

Mr. GARDNER. Oh, probably started 4 or 5 years ago now, I don’t

know. I lose track, it’s been so long. But from the initial prevalue

estimate, that would have been in 90—we’ve been 2 years since we

arbitrated or bargained for the agreement on our property, and so

it’s been at least 2 years before that when we started this process.

Mr. HANSEN. What was wrong with the five appraisals, that you

had to have five appraisals?

Mr. GARDNER. Well, the first was the preliminary value estimate,

and then that was supposed to be just upgraded to a regular appraisal, and BLM sent down another appraiser to do a complete

new appraisal.

And that’s where we ran into the problem, because he discounted

the tortoise and gave us a low value. And we bargained there when

we selected the BLM land to exchange for. We selected an appraiser off of their approved list who was MAI-certified—all of the

appraisers have been MAI-certified. He was extremely slow getting

his appraisal completed. Both us and BLM were very frustrated

with the time that he took. But he worked that process through.

It was accepted by Mr. Widdoss, the review appraiser for BLM out

of South Dakota, and then rejected at Washington. I think Mr.

Cavanaugh rejected it because of—I’m not sure the total reasons

there.

Mr. HANSEN. If there’s ever an illustration of a fudge factory, it’s

Washington County. I would do anything to get that done if I have

to stick it in an appropriations bill somewhere just to get the dang

thing over with. Can’t we get these things squared away somehow?

I’d like somebody to send me a list of what’s holding things up

in Washington County. Every time I turn around, there’s another

hang-up on that thing. It’s just gone on and on.

Do you want to comment on that, Mr. Hanson?

Mr. WOODWARD HANSON. Yes, sir. You know, what I keep hearing over and over again is a private property owner who feels as

though—who feels frustrations resulting from the process largely

due to the amount of time and also the conclusions. And the value

estimates are affected by the legislation or local policies that affect

highest and best use and ultimately value.

And it gets back, once again, to scope of project influence. What

I hear this gentleman saying, as a private property rights sort of
29

perspective, is you can’t downzone my property, and then value it

on that basis before you buy it from me. And his frustrations are

certainly fair.

So that’s where I want to remind you, that’s an example of where

the Federal Government and its rules and regulations and legislation affect value. You can’t have it both ways. You can’t downzone

or limit the use of somebody’s property through an Endangered

Species Act, for example, and then come in and tell them it’s worth

nothing. That doesn’t get to just compensation, which is once again,

an eminent domain paradigm, not a voluntary transaction paradigm.

But I would like to say one thing. One instance where the BLM

system goes way in the direction of the benefit of the property

owner is where it allows the property owner to select the appraiser.

That is in direct conflict with Title 11 FIRREA where earlier legislators concluded that one of the causes of the S&L crises was the

developer, the borrower, got to pick the appraiser. The fox was

guarding the henhouse.

So that is an example of where the BLM system, I think, is in

conflict with other existing Federal legislation, but goes in the direction of the landowner’s interests.

Mr. HANSEN. Mr. Gardner, do you want to comment?

Mr. GARDNER. We were agreed to select the appraiser, but it was

from a list of stipulated appraisers given us by BLM. And prior to

their selection, we knew neither one of these appraisers, so you

know, there wasn’t anything there.

And that’s the whole reason, I guess, this process came about, because the State Office of Appraisal initially right up front had problems with the value of the property because it was impacted by the

tortoise, and we went around and around with that for over a year

because we knew there was no point in even starting if we were

going to be faced with Mr. McDonald’s recommendations from the

State level.

So that’s why Mr. Duskin was used out of Oregon and Mr.

Widdoss out of South Dakota because of the attitude that was in

the State appraiser’s office. And ideally, it should be just addressed

there if we had someone that was reasonable to work with. We

would prefer that. But with the attitude that was there, why that

could not be accomplished.

Mr. HANSEN. Mr. Director?

Mr. SHEA. Yes, Mr. Gardner’s right. We submitted a list and they

chose from the list, so they don’t have a unilateral right to name

the appraiser in that process. Second, I do have a prepared response on the public interest value that I’ll submit for the record.

And then, Mr. Chairman, there was a letter that was sent to you

on March 10 in response to your inquiry about the land exchange

and the appraiser. So I’ll have copies of that, as well.

Let me make one suggestion on the endangered species question.

It would be entirely possible to do a computation of what the purchaser of the property paid for the property with some return on

that property if, by happenstance, it was found after the purchase

to have an endangered species on it, so that you didn’t get into this

esoterica as to what impact the endangered species presence on
30

that land had and would give some just return based on a calculation to the property owner.

But again, that would be a congressional type of activity that

would perhaps expedite the process.

Mr. HANSEN. Mr. Hanson, in your opinion, if a property owner

owns property for many, many years, and Congress passes a law

like the Endangered Species Act, or the Section 404 of the Wetlands Act, and then the person cannot use the property for what

he intended it for or proposed to sell it sometime.

In your opinion, does that constitute a taking?

Mr. WOODWARD HANSON. I wish I was a Federal judge and could

answer that question frequently. That question gets back to this

very complex issues of investment-backed expectations, which you

cited, and which I would refer you to, the first English decision out

of California and the Lucas Decision out of South Carolina. It gets

to other issues related to reasonable economic use.

But there are too many more facts that I would need to know

whether or not it constituted a taking. But it’s definitely an intrusion into constitutionally protected private property rights. It, in

my experience, definitely affects value and there becomes a point—

and I have specialized in inverse condemnation actions over the

years where the cumulative impact of the regulation is a de facto

taking, yes.

Mr. HANSEN. Mr. Gardner, you tell me if this is true. I had somebody call me from Washington County who did not have the Desert

Tortoise on their property and said the Fish and Wildlife physically

put one on their property. Is that just one of the better rumors

going around or is there any truth to that? Or do you know?

Mr. GARDNER. Are you talking to me?

Mr. HANSEN. Yes, sir.

Mr. GARDNER. I’ve heard a lot of rumors to that effect. I don’t

know that we can physically prove that.

Mr. HANSEN. You can’t give us names or an admission from

somebody or dates or anything like that.

Mr. GARDNER. No, I know that I’m very firmly convinced that all

of the tortoises to the north of town where by coincidence, the HCP

is located, are all transplanted tortoises from down on the slope.

I have a signed letter from one individual who ran sheep in the

City Crick area, which is the highest concentration of tortoises in

the area now, and they lambed their sheep there every spring. And

when they’re lambing sheep, they live with them out there and

they never did see a tortoise in all that time. And so it’s just been

in the last few years that they’ve been there. So it’s something

we’ve done to ourselves as we’ve brought pets home from over the

mountain.

Mr. HANSEN. Mr. Hanson, would you comment?

Mr. WOODWARD HANSON. I just would comment in Florida we

have what is called portable Indian mounds, you know, where the

Indian mounds are transported to your property and like the tortoise, being hypothetically placed. It’s one of the many things that

have been brought up in eminent domain cases I’ve been in. Somebody says if you’re not careful, you know, we’ll put an Indian

mound on your property. And I happen to own a property with an

Indian mound, so I’m very proud of that.
31

Mr. HANSEN. Mr. Faleomavaega.

Mr. FALEOMAVAEGA. I just have one followup question, Mr.

Chairman. I am asking Mr. Shea if he could help me out. What exactly is BLM’s procedure, let’s say that Mr. Gardner is a willing

donor, or wanted to do this land exchange with BLM. I get the impression from Mr. Gardner that these appraisals are given to him

without any say on his part. And I was under the impression that

the process is totally voluntary on both sides.

Could you help us? Is there a pool of appraisers that BLM just

dips into and says this is what you get? Or do you go through a

process with Mr. Gardner going through the list of potential appraisers that will be involved in the process? How does the BLM

go about selecting appraisers in the process? Or does the BLM have

their own appraisers?

Mr. SHEA. BLM does have its own appraisers, but given the volume of work and given the complexity, as Mr. Hanson pointed out,

we do have a list of qualified appraisers that are available on a

contract basis. And in Mr. Gardner’s instance, a list was prepared

of available ones that would be acceptable to BLM, and he was

given the opportunity, as I understand his testimony, to select one

that would then be used.

Now, there was, as he pointed out, a dispute with the State appraiser as to how calculation would be made. So once the initial exchange proposal has been put forward, you then move to, all right,

how are we going to appraise this process, and at any given juncture on that chart you can have a dispute.

And quite frankly, to go back to a comment the chairman was

making, that chart inoculates the BLM against a court deciding

that somebody’s property was improperly taken, and that’s one of

the reasons we have so many safeguards built into it.

Mr. FALEOMAVAEGA. And then the dispute would end up with

four or five appraisers and Mr. Gardner’s——

Mr. SHEA. But let me just get clear in my own mind, I understood him to say that there were two appraisals on his property

and three appraisals on the BLM property that was going to be exchanged, for a total of five, but not five on any one single piece of

property.

Mr. FALEOMAVAEGA. And the procedure sometimes, let’s say that

if it takes place in Utah, you get appraisers from Florida or from

other states to conduct the survey?

Mr. SHEA. In the instance of Washington County, there was an

appraiser from North Dakota or South Dakota. And then I also believe there was an appraiser who came in from California.

Mr. FALEOMAVAEGA. Now I would be very leery of getting an appraiser from Hawaii. You talk about inflated real estate business

going on over there. I would question whether that appraiser is

going to give me a fair bargain as far as the negotiations taking

place.

And these appraisers, are they all members of MAI or are they

different associations? Is there competition among appraisers in

the different associations, just like the AMA and others?

Mr. SHEA. There’s definitely—and I’ll let Mr. Hanson discuss the

competition within his own trade, but there are definitely.

Mr. FALEOMAVAEGA. Mr. Hanson, can you help us on that?
32

Mr. WOODWARD HANSON. Yes, sir. Thank you.

Mr. FALEOMAVAEGA. Sure, absolutely. There is definitely competition among organizations that designate professionally trained

appraisers, so the answer is yes to that.

The other comment I wanted to tell you is the notion of an approved appraiser list is not unique and peculiar to BLM. Every regional bank that I know of has an approved appraiser list, and

what it is is like a prequalifing effort to ensure that the best and

most qualified people are on this list.

Now, when I work for regional banks in the Southeast, I’m on

various lists, I’m not allowed to talk to the borrower before I’m engaged by the lender or I have violated Federal law. So my corollary

is still accurate. It is still an advantageous element of the BLM policy to the property owner to be able to pick from a list of

prequalified skilled appraisers to represent them in the appraisal

process.

And I would say one more thing. USPAP—because I know you

are sensitive to bringing in an appraiser from Hawaii to do something in Utah—the Uniform Standards of Professional Appraisal

Practice has a competency provision, and the competency provision

deals with not only having adequate education and experience

background, but geographic competency. So there are protections

within existing appraisal standards to mitigate or avoid those sorts

of problems and punish those who don’t comply.

Mr. FALEOMAVAEGA. Maybe my using the word competition is not

proper, Mr. Shea. But besides the MAI, how many other institutions or associations that make up the appraisers in the country?

Mr. WOODWARD HANSON. There’s numerous. There’s, I would

dare to guess, an excess of probably 25 to 30, and out of that number, the critical mass is really associated with what I would estimate are one to three organizations.

Mr. FALEOMAVAEGA. And you don’t have a national association

like the AMA then? I mean, you have three big associations or

groupings.

Mr. WOODWARD HANSON. Well, the Appraisal Institute is the

largest of them all. We are the 900-pound gorilla, so to speak. And

with 20,000 members, we are widely recognized as the leading authority on real estate appraisal. We are currently involved in a

process now where we are working with allied organizations like

the Farm Managers and Rural Appraisers and the American Society of Appraisers, trying to help discuss and create contribution to

this emerging public policy initiative.

Mr. FALEOMAVAEGA. Mr. Shea, I don’t sympathize with the problem you are faced with. So with all these 20,000 appraisers and the

900-pound gorillas and two 200-pound gorillas, how do you go

about in putting in such a way that you have competency and fairness among the appraisers that will be involved in the process?

Mr. SHEA. At the end of the day, a Federal judge unfortunately

will, if it’s pushed to that extent, say whether or not we were fair

in the process. But let me try to illustrate what I think Mr. Hanson

is getting to, and it’s a personal problem. I call it Pat’s basement

problem.

We have a house that we designed in Salt Lake. Because we can

get a 1.5 point difference in our mortgage, we are going through
33

the process of having it appraised for refinancing purposes. Now,

the ground floor of this house is in the side of a hill; we built on

a hill.

One appraiser comes in and says that that’s a basement, and

therefor, any of the floor on that basement level is one-half the

value per square foot as it is on the second floor. But if the appraiser comes in and says well, that’s just an entry level, that’s the

first floor, then the appraisal goes up.

Now I’ve had three different appraisals, and we’re still having

discussions back and forth. Now what’s one person’s basement is

another person’s first floor, and that’s the inherent problem we

have here.

And that’s why I come back to the theme I introduced in my

opening comment. If we try to streamline this process too quickly,

there may be some people who are satisfied because they will get

greater value for their property. But at the end of the day, the taxpayers will not have gotten full value for the property that they’ve

been holding, or we’ve been holding in their trust for, in many instances, hundreds or more years.

Mr. FALEOMAVAEGA. Mr. Glass.

Mr. GLASS. I know that fairness is the goal here, and it’s not an

easy road to tow. But let me give you a couple of examples.

Mr. Chairman, you mentioned wetlands. Wetlands have been

designated for at least a decade or two. On a regular basis Western

Land Group goes out into the market and purchases wetlands.

There has been a market for existing wetlands. We have been able

to find fair market value wetlands all over the United States to put

into the land exchanges.

In other words, the situation has stabilized after 10 or 15 years

of property values being dislocated and disrupted. Where the real

problems are—and you’re seeing it here—I have nothing but empathy for Commissioner Gardner and what he is going through with

the Desert Tortoise. We do a great deal of work up in the Pacific

Northwest, and as you know, Mr. Chairman, first it was the Spotted Owl and then it was the Marbled Muirlet. All of a sudden, it’s

various species of salmon. And each one of these new additions,

new species that’s considered under the Endangered Species Act

has had a profound impact on the value of both the public land and

the private land that’s out there.

And I will also tell you that the agency, the BLM, treats these

species differently in different parts of the country. And I will tell

you that there are few exchanges in the Pacific Northwest where

they have run into the same problem that Commissioner Gardner

has run into, because they’ve made an administrative decision to

not consider the impact of endangered species on the two sides of

the transaction.

And typically, what occurs is that the private landowner who has

an HCP or who has spotted owl on his land trades that spotted owl

land to the United States, ignoring the fact that there may be an

appraisal issue associated with it. The landowner acquires land

that doesn’t have owls or salmon or whatever, that has harvestable

timber on it. That’s an administrative decision that has been helpful, I think, to some degree in the Northwest. But it was handled,

apparently with the opposite outcome with Commissioner Gardner.
34

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman.

Mr. HANSEN. I don’t mean to pick on anybody here, but Mr.

Gardner, why did you go to South Dakota to get an appraiser. We

keep hearing there’s problems in the office up there. Now I don’t

want to spit on the flag, but why did you go to South Dakota?

What was wrong with the one in Utah?

Mr. GARDNER. Well, initially, in our agreement that we had in

determining the prevalue estimate, it was to be appraisers outside

of the State of Utah or outside of the involvement of the Utah Appraisal Office, at least. And so that——

Mr. HANSEN. The BLM Appraisal Office in Utah is what you’re

referring to.

Mr. GARDNER. BLM Appraisal Office in Utah, yes. And the BLM

is the one that selected Mr. Widdoss as a review appraiser for them

to help with the land exchanges in Washington County.

Mr. HANSEN. Was there quite a difference between what you got

out of the one from Utah and the one from South Dakota?

Mr. GARDNER. Well, Utah we knew we had the value of $1,000

gift and that was their appraisal they did on our property. And I

might add that they tried to incorporate them again here just a few

months ago, and they sent down the same appraiser even after the

legislation that you put through Congress specifying that the Endangered Species was not to have an effect on property. And he appraised some adjoining land to our land and came up with the

same value.

Mr. HANSEN. Maybe I’d have to ask Mr. Lamb this question.

Maybe Mr. Shea wouldn’t be aware of it. Do you ever use anybody

outside of the Utah State Appraiser at BLM to do Utah work?

Mr. SHEA. Do we ever use outside of Utah?

Mr. HANSEN. Yes.

Mr. SHEA. Yes, we do.

Mr. HANSEN. Have you done that on a regular basis or is that

an uncommon basis? I see the one example here, but are there any

others?

Mr. SHEA. I’d have to ask Bill.

Mr. HANSEN. In other words, how many times have you used

somebody outside of the Utah Appraisal of Mr. McDonald?

Can you step up to the mike there, Mr. Lamb, so the recorder

can pick you up? And identify yourself first, if you would please.

Mr. LAMB. I’m Bill Lamb, the Acting State Director for Utah.

I guess this is a complicated question. When Mr. Gardner, Commissioner Gardner, had the first appraisal on there, and this was

some time ago, your legislation provided that to all lands in Washington County the existence of endangered species would not be

considered when making a valuation.

The valuation of Mr. Gardner’s land happened prior to that legislation enacted. So one appraiser that went into the area appraised

it at $1,000 an acre; the other appraised it somewhere around

$7,000 an acre. We had a review appraiser who was outside of the

State for the reason that these gentlemen have stated, that they

felt that they were biased and so we went outside of Utah to find

some review appraiser.

During this process, we felt that it was necessary that we go

through some kind of a bargaining. So we established a small
35

team. They looked at the situation and came up with a valuation

of, I think it was, $7,440 for the property, and Mr. Gardner and

his family accepted that value.

It was a long, drawn-out process because of the various things

that happened during the course of the time that we were involved.

Mr. HANSEN. Thank you for your answer. Mr. Faleomavaega, do

you have any more questions? I’ve got one final question for the Director and I’m ready to——

Mr. FALEOMAVAEGA. No questions, Mr. Chairman, but only to

thank our Director, Mr. Shea, of the BLM, and our friends from

Utah and Mr. Glass for their fine testimony. I sincerely hope, Mr.

Chairman, that we will do our part and hopefully make some constructive amendments, if necessary, to the current law to be helpful

not only to Mr. Shea, but to our friends also from Utah.

Mr. HANSEN. Mr. Shea, we have a rumor up here which I hope

is not true that one of the men from South Dakota and one from

New Mexico was told not to come and testify, that were supposed

to be here to testify, that they would have trouble with their land

exchange with the BLM. Any truth in that?

Mr. SHEA. Oh, absolutely not. We met with them two weeks ago

and I was the one that suggested that they come. And Mr. Powell

wrote you a letter, I believe, and Mr. Johnson did, as well. And we

have formed a very effective working relationship. We are having

all of our State Directors here in April to meet jointly with them

to see if there aren’t ways we can expedite exchanges.

So I have encouraged that partnership and both of them are outstanding public servants in their respective states that we support.

Mr. HANSEN. We’re not trying to create any problem for you. We

just wouldn’t want to have anyone told they couldn’t come, especially if we asked them to.

Let me thank you, Mr. Shea, and the members of the panel. It’s

been very informative. I don’t know what will come out of this, but

I do think that there is some very necessary parts of streamlining.

If not, we are probably going to go back to the old saw of just putting it in legislation. I don’t think that’s the right way to do things.

I think it really should come through the agencies.

Thanks so much, and this hearing is now adjourned.

[Whereupon, at 11:51 a.m., the Subcommittee adjourned subject

to the call of the Chair.]

[Additional material submitted for the record follows.]
36

STATEMENT OF PAT SHEA, DIRECTOR, BUREAU OF LAND MANAGEMENT, REALTY

APPRAISAL PROCESS ON BLM LAND EXCHANGES

Thank you for the opportunity to testify on the Bureau of Land Management’s

(BLM) exchange and appraisal process. Since becoming BLM Director, I have come

to appreciate both the importance of the exchange program and its complexity. It

is vital that the interest of the taxpayers—the true landowner—be protected and

that we find a means of improving and facilitating the exchange process.

We know that there is room for improvement in our land exchange process. We

need to consider how the appraisal process might be revised, whether the BLM is

applying consistent criteria in identifying potential land exchanges, how much discretion should be left to local BLM land managers, and what guidelines are needed

when private developers and nonprofit conservation groups are involved. By

strengthening its land exchange policies and procedures, the BLM can continue to

acquire private property for public use while protecting the interests of American

taxpayers.

I have undertaken several measures to improve this program. I have established

procedures for a second level review by the BLM State Director or the Washington

Headquarters Office. The second level review requires concurrence in decisions involving exchanges greater than $500,000 in value. These new procedures also require a feasibility analysis report for all land exchanges and require the concurrence

for any dismissal of protests to any land exchange decisions. In addition, I am establishing a bureauwide land exchange team to assist in the review of high priority exchanges, provide additional technical support to BLM field offices, and address policy and procedural issues.

BACKGROUND

Before discussing the specifics of our program, I would like to offer some background on the exchange program.

The BLM, with stewardship of more than 264 million acres of land—more than

any other Federal agency—completes 60 to 70 land exchanges every year. On average, these exchanges total roughly 150 000 acres of land exchanged each year at

a value of about $50 million.

Land exchanges are an important tool to carry out BLM’s land management program. Exchanges allow the BLM to acquire the kind of land that is suited to public

ownership: land, the public use of which is conservation, such as habitat for wildlife

including threatened or endangered species; land that offers recreational opportunities for the public; or land containing sensitive riparian areas that are critical to

the health of streams, rivers and entire watersheds. Exchanges also allow the BLM

to consolidate land ownership patterns where appropriate, to increase our efficiency

and reduce cost. The Department strongly supports public ownership of public lands

and is committed to working with other jurisdictions to improve land ownership patterns and the management of those lands. This is consistent with the Federal Land

Policy and Management Act of 1976 which provides that ‘‘the public lands [will] be

retained in Federal ownership, unless . . ., it is determined that disposal of a particular parcel will serve the national interest . . .’’

Historically, land exchanges are time consuming because of the number of affected

parties, user and interest group concerns, and lengthy assessment and analysis procedures. However, the Federal Land Exchange Facilitation Act of 1988 (FLEFA) and

joint BLM and Forest Service land exchange regulations published in 1993 have

provided tools that can improve the land exchange process. Parties involved in the

exchange must reach agreement on a wide variety of issues including scheduling,

sharing of costs, selection of appraisers, number of appraisal reports, and methods

for resolving disputes concerning the appraised value. Like other complicated real

estate transactions, there can be periodic delays and disagreements between the

parties.

LAND EXCHANGES

Examples of recent successful exchanges include the following:

California: BLM completed an important exchange last year with the Merced Irrigation District in California to consolidate some lands along the Merced Wild and

Scenic River. The Irrigation District acquired title to 180 acres of inaccessible public

lands which were key parcels in its water operations to serve its customers, while

BLM acquired 160 acres of land with river frontage that provides the public better

access to this nationally rated Wild and Scenic River, known for its whitewater

thrills. It was a win-win for the public on both sides. The BLM and the Irrigation

District both received fair market value for their constituents.
37

The positive benefits of such small, but locally important exchanges cannot be

overstated, but these benefits can also be accomplished on a larger scale for even

greater returns. Also, in California, the BLM and the State Land Commission have

already exchanged 70,000 acres within the California Desert with plans underway

for another 200,000 acres to be exchanged over the next few years. These exchanges

will result in BLM acquiring State inholdings in the National Park Service managed

Mojave preserve and in Wilderness Areas managed by BLM for excess Federal lands

with development potential in other parts of the State. Appraisals were done cooperatively by BLM and the State Land Commission to ensure that both public entities received fair market value for these public assets.

Colorado: Last summer, the BLM’s Canon City District acquired through an exchange the 1,272-acre VVN Ranch in Park County, Colorado. The BLM did so with

the help of the Rocky Mountain Elk Foundation, which purchased the property and

held it until the land exchange could be completed. The ranch contains a year-round

elk habitat; significant scenic, recreation, and wildlife resources; and three miles of

wetland-riparian (streamside) areas that were not previously available for public

use. In return, 840 acres of land within 13 scattered parcels were transferred into

private ownership. The majority of these lands were grazed lands with some potential for recreation home sites.

Utah: In January, the Dixie Field Office completed an innovative, three-way exchange that added critical desert tortoise habitat to the Red Cliffs Desert Reserve

located in Utah’s Washington County. In the trade, the Federal Government acquired 614 acres of desert tortoise habitat from the State’s School Trust Administration in exchange for a 250 acre gravel pit. Through the exchange, the BLM transferred the gravel pit to Western Rock Products, which in turn provided $1,950,000

for the habitat lands that the State transferred to the Federal Government. Creativity and flexibility, along with cooperation between public and private partners

were the keys to success in this win-win transaction. This is but one example of four

recently completed exchanges in southern Utah that has added nearly 1,200 acres

of habitat to the Red Cliffs Reserve in return for lands and resources that can be

privately developed in booming Washington County.

The vast majority of land exchanges are like these examples—so clearly logical

and mutually beneficial that they are completed without protest or controversy.

Sometimes, however, proposed land exchanges do become contentious. Appraisals

can be subject to question and criticism from those involved in the proposed exchange or from outside parties. Appraisals are especially difficult and controversial

in areas of rapid growth and volatile market prices. This makes the job of appraisers even more challenging. Land exchanges are voluntary transactions. They require

mutual agreement by parties to the transaction on a wide variety of issues including

value. To be successful, parties to the transaction must have confidence in the appraisal process.

APPRAISALS

I would like to describe briefly how real estate appraisals are incorporated into

the land exchange process. The appraisal process is essential in reaching agreement

on the value of the lands involved in the exchange. Again, it is important that the

parties have confidence in the integrity and impartiality of those involved in the

process.

Real estate appraisals are obtained to ‘‘estimate’’ the market value of lands involved in a proposed land exchange. Ideally the appraisal report is an objective, impartial estimate of what the property would sell for on the open market as of the

date of the appraisal report. The credibility of the appraiser’s report is affected by

his or her ability to obtain reliable market information, properly analyze the information, develop and test various assumptions, and reach a logical and supported estimate of value. The appraisal report is an opinion of value; an appraiser’s estimate

of what the property would likely sell for. The appraiser does not determine value,

but instead estimates market value.

Appraisal reports are prepared in accordance with BLM appraisal standards in

43 CFR 2200 and, to the extent appropriate, with the Department of Justice ‘‘Uniform Appraisal Standards for Federal Land Acquisitions.’’ These standards are consistent with the ‘‘Uniform Standards of Professional Appraisal Practice’’ published

by the Appraisal Foundation, Appraisal Standards Board.

We review appraisal reports to assure they meet professional and BLM appraisal

documentation standards. The reviewer prepares a report approving the appraisal

and recommending its use for purposes of reaching an agreement.

If parties to a proposed exchange cannot reach agreement on the approved appraised values, bargaining or another method may be used to reach agreement. If
38

chances for agreement are remote, BLM or the property owner may decide to end

further efforts.

We define bargaining as a process, other than arbitration, by which parties attempt to resolve a dispute concerning the appraised value. Different forms of mediation or dispute resolution techniques may be used to resolve the disagreement. The

process is premised on the theory that reasonable people can reasonably disagree

with the appraiser’s analysis. Therefore, bargaining is limited to the information,

assumptions, and conclusions in the appraisal reports.

Any agreement reached by the parties must be in writing and made part of the

land exchanges’ administrative record. Any appraisals presented during the bargaining process must be open to review by a qualified appraiser representing the

agency with responsibility for appraisal review. The BLM State Director must concur in any agreement reached through bargaining.

Once parties have agreed, BLM publishes a Notice of Decision (NOD) regarding

the proposed land exchange transaction. The NOD informs the public of the BLM

decision to proceed with the land exchange. The public has 45 days to comment or

protest BLM’s decision. During the 45 day period, the appraisal reports, along with

other supporting documentation, is available for review by the public.

CONCLUSION

I hope the information I have shared today has clarified the process and demonstrated my commitment to achieving a better program. Protecting the natural resources, protecting the public assets, and achieving a fair market return on all land

transactions are my primary goals.

This concludes my statement. I will be glad to answer any questions you may

have.

STATEMENT OF JOHN A. HARJA, VICE-CHAIR, BOARD OF TRUSTEES, UTAH SCHOOL &

INSTITUTIONAL TRUST LANDS ADMINISTRATION

My name is John A. Harja, and I represent the Utah School and Institutional

Trust Lands Administration (the ‘‘Trust Lands Administration’’), an independent

state agency that manages more than 3.7 million acres of land within Utah dedicated to the financial support of public education. I serve as Vice-Chair of the Board

of Trustees that guides and supervises the Trust Lands Administration’s activities.

Thank you, Mr. Chairman, and members of the Committee, for the opportunity

to testify today concerning Bureau of Land Management (‘‘BLM’’) land exchanges.

It is no secret that BLM land exchanges in Utah in the last several years have been

both controversial and difficult for all participants. From the standpoint of the Trust

Lands Administration, the BLM has recently made substantial progress in some

areas, and there is reason for optimism that future exchanges, whether administrative or legislative, need not be so difficult. Our testimony today is meant to:

• Encourage the BLM to continue some positive activities with respect to administrative exchanges;

• Suggest a few changes in the BLM’s statutory and regulatory procedures for

administrative exchanges; and

• Inform the Committee of some situations where Congressional involvement

may clearly be in the public interest.

Many members of the Committee are familiar with the situation of Utah’s school

trust lands. Of the 3.7 million acres managed by the Trust Lands Administration,

over a million acres are located inside national parks and forests, proposed wilderness, critical habitat for endangered species, and of course the new Grand StaircaseEscalante National Monument. Although the lands were granted to Utah with the

express purpose of generating revenue for Utah’s schools and other public institutions, Federal land management restrictions have in many cases made economlc use

of the state’s trust lands impossible.

The natural solution to the problem of state trust inholdings within Federal reservations is to exchange the state lands for more developable, less sensitive Federal

lands elsewhere in Utah. Unfortunately, this solution has been difficult to implement except in a few limited circumstances, with the result that state inholdings

continue to exist within most Federal reservations in Utah. This is not a desirable

situation for anyone. Federal managers have to contend with potential development

of state enclaves within otherwise undisturbed Federal lands, while the State faces

substantial controversy when its legal duty to maximize revenue for the schools conflicts with the purposes for which the particular park or other reserve was created.
39

1. Recent History of BLM-State Administrative Exchanges in Utah.

As the Committee is aware, the BLM has an existing process for administrative

exchanges under the Federal Lands Policy & Management Act (‘‘FLPMA’’) and the

Federal Lands Exchange Facilitation Act (‘‘FLEFA’’). The Trust Lands Administration believes that this process can work in some circumstances, although, as we will

discuss later, its utility in large scale exchanges is doubtful. Our experience with

administrative exchanges has been difficult in recent years, but we have also seen

great improvement within the last year with respect to the BLM’s commitment of

good personnel and adequate resources dedicated to making these exchanges work.

We commend the BLM for these commitments, and are optimistic that this positive

trend will continue.

The best example of the BLM administrative exchange process in Utah in recent

years has been that involving the Desert Tortoise Habitat Conservation Plan area

near St. George. When the U.S. Fish and Wildlife Service designated thousands of

acres within and just outside the city limits of St. George—one of Utah’s fastest

growing cities—as critical habitat for the threatened tortoise in 1991, it effectively

shut down development of almost ten thousand acres of prime residential and commercial land owned by the State, in addition to thousands of acres of private lands.

In 1994, the BLM and the Trust Lands Administration signed a Memorandum of

Understanding creating an assembled land exchange process to facilitate exchange

of state desert tortoise lands and other state lands desired by BLM for BLM lands

elsewhere in the State. Although the MOU was ostensibly meant to speed BLMState exchanges along, and although the tortoise exchange was ostensibly a BLM

priority, no exchanges were completed for several years after the MOU was signed.

What were the problems that delayed desert tortoise exchanges for so long?

• Appraisals conducted by the BLM’s State Office penalized landowners for the

misfortune of owning valuable habitat. BLM’s state level in-house appraisers

told landowners that the Fish and Wildlife Service, another Department of Interior (‘‘DOI’’) agency, would never let them develop their land because of the critical habitat designation. Therefore, the land was deemed virtually worthless by

BLM. Not surprisingly, landowners offered 10 cents on the dollar for their lands

were not willing participants in the exchange program, and no exchanges were

completed until after Congress resolved this issue in 1996.

• Certain state level BLM appraisal staff appear to have engaged in a campaign

of intimidation of appraisers who differed on how to appraise tortoise lands.

Acting as a private individual, at least one BLM appraiser filed complaints—

ultimately dismissed as meritless—with state appraisal licensing authorities

claiming violations of state appraisal standards, and seeking disciplinary action

against a private appraiser. The private appraiser’s work was then rejected by

BLM because of the disciplinary filing. These actions were hardly conducive to

efforts to reach mutually acceptable valuations.

•There has been no clarity as to how legitimate differences between the parties

over valuation can be resolved. Even the best appraisers often differ wildly in

their opinion of the value of particular tracts. Where this occurs, fair, armslength negotiation is the only solution that will reach a mutually acceptable result. Yet many parties have felt that the BLM has at times used its regulations

and appraisal guidelines as justification for refusing to negotiate, resulting in

a ‘‘take it or leave it’’ situation. Again, landowners, whether private or state,

who feel that there is no room for bargaining over legitimate differences in valuation are unlikely to be willing participants in the exchange process.

• BLM District offices elsewhere in Utah have been unable for staffing and

budgetary reasons to perform work necessary to amend Resource Management

Plans, perform NEPA analysis, and conduct cultural resources reviews for land

targeted by the State for acquisition. At least one 12,000 acre tract sought by

the State has been placed ‘‘off limits’’ for exchange indefinitely, not because of

public interest or environmental reasons, but rather because of lack of BLM resources. The larger the exchange, the more profound this problem becomes; past

experience would suggest that any administrative exchange of 100,000 acres or

more would take decades to complete if it could be done at all.

Happily, the BLM has made substantial progress during the last year in correcting some of these problems. Their efforts have resulted in the completion of an

exchange of several hundred acres of state tortoise habitat for BLM lands near Park

City, Utah; an innovative three way exchange of an additional 614 acres of state

tortoise habitat that involved the Trust Lands Administration, the BLM and a private party; and the anticipated completion in the next few months of a multi-tract

exchange that will protect habitat for the endangered dwarf bearclaw poppy. BLM

employees have worked hard to complete these projects, and the Trust Lands Ad-
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ministration appreciates their efforts. We are optimistic that ongoing administrative

exchanges with BLM will continue on this successful path over the next year.

What has made the difference between recent successes and past failures?

•The BLM has made a strong commitment to bring in experienced out-of-state

BLM personnel to expedite in-process exchanges. This has soothed some of the

disputes that arose early in the process over appraisal methodology, and has increased the State’s confidence in the process. Although we recognize that some

private parties have criticized the involvement of Washington-level BLM appraisers in local exchanges, the Trust Lands Administration has welcomed the

specific attention and problem-solving focus that the BLM has exhibited in this

regard.

•The BLM has been willing to engage in a more open dialogue concerning reasonable differences in valuation.

•The BLM State Office has committed more staff to moving BLM-State exchanges forward, and has worked to identify problem areas in advance, so that

resources can either be devoted to solving the problem in a timely manner or

diverted to more productive uses.

• In the case of the desert tortoise, Congress resolved the major valuation issue:

the impact of Endangered Species Act (‘‘ESA’’) on land values. As noted above,

DOI had previously taken the view that the ESA drastically limited landowners’

development options, making previously valuable development land virtually

worthless. Not surprisingly, landowners felt that they should not be penalized

for protecting endangered species. In Public Law 104-333, Congress directed the

Secretary of Interior to value lands in Washington County, Utah without regard

to the presence of endangered species or the designation of critical habitat. This

legislation was the crucial factor in achieving landowner willingness to exchange; no private tortoise exchanges were completed in the years before the

legislation, while a number have been completed in the 16 months since Public

Law 104-333 was enacted.

Again, the Trust Lands Administration is pleased at the progress of recent

months, and will look forward to the continuation of that progress as the exchange

process continues.

2. Suggestions for Improving the Exchange Process.

There are certain steps that could expedite state-BLM exchanges throughout the

west. The Committee should consider the following concepts:

a. Expand the concept implemented in Public Law 104-333 that Federal environmental limitations (in that case threatened and endangered species) not be

used to devalue the property to be acquired, where the purpose of the Federal

acquisition is to protect that specific environmental value.

b. Where state law or agreement provides protections for cultural and historic

resources analogous to those provided by the National Historic Preservation Act

(‘‘NHPA’’), do not require NHPA surveys prior to transfer of lands to states by

BLM.

c. Increase the current $150,000 threshold for expedited exchanges without formal appraisals.

In addition to these points, the Trust Lands Administration would encourage

meaningful Federal-state dialogue concerning valuation issues, notwithstanding the

current legal dispute in Utah concerning the valuation of natural lands. As the

Committee is aware, there has been controversy in recent months concerning whether past BLM exchange appraisals have adequately recognized the great increase in

land values in rapidly urbanizing areas such as Las Vegas. The Trust Lands Administration would point out that there has been an equally stunning rise in land prices

in rural areas of the West recognized as having natural values such as gorgeous scenery, proximity to wilderness, ancient Anasazi ruins, and recreational opportunities.

Simply put, there are tens of thousands of people today who want to own a part

of those natural values, and who have the money to pay handsomely to do so. Too

often, when state natural lands are being acquired by BLM, the focus of Federal

appraisers on prices paid in the past for traditional uses neglects this fact of the

New West.

Just as the BLM is rightly concerned about not receiving full value for its urban

lands state land management agencies (with their fiduciary duty to achieve full

value for their beneficiary institutions) cannot disregard prices paid in the market

for lands having outstanding natural characteristics. When the Federal Government

seeks to acquire these lands for public purposes, there must be a mechanism for addressing this issue.
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3. The Need for Congressional Involvement in Some Circumstances.

As BLM Director Shea has discussed in recent newspaper commentaries, the

BLM’s land exchange program serves the important Federal goal of consolidating

Federal ownership of lands with specific values: wildlife and endangered species

habitat, land that offers important recreational opportunities for the public, and ecologically sensitive lands such as riparian areas. This is a worthy goal. The checkerboard pattern of state and Federal land ownership now existing throughout much

of the west is unworkable in light of the differing management mandates of the various landowners, and often leads to unnecessary conflicts between the Federal Government and the states. The suggestions for legislative and regulatory changes described above would go far to further the BLM’s objectives and reduce state-Federal

disputes.

At the same time, there are inherent limitations to the BLM’s administrative exchange process. Where such limitations exist, Congressional involvement may serve

the public interest by facilitating desirable exchanges and eliminating unnecessary

obstacles. A small but telling example is the language in Public Law 104-333, discussed above, requiring that exchange valuations in Washington County not penalize landowners by devaluing land on account of its status as critical endangered species habitat. Before this statute was enacted, desert tortoise habitat acquisition was

at a virtual standstill; afterwards, the program has moved forward with increasing

success.

A second example of a situation where administrative exchanges fail and Congressional involvement may be useful occurs in the case of multi-tract exchanges involving large areas. There are well over a thousand tracts of state trust lands scattered

within proposed BLM wilderness in Utah, while the Grand Staircase-Escalante National Monument contains 337 school trust parcels encompassing over 175,000

acres. The existing administrative process would typically require appraisals of each

such parcel, together with appraisals, RMP amendments, NEPA review, and cultural resources surveys of all BLM tracts to be acquired. When lower value rural

lands are the subject of the exchange, transactional costs can swallow any exchange

benefits. More importantly, BLM often cannot devote the resources to complete the

necessary work while performing its other responsibilities as well.

In the early 1980s, former Utah Governor Scott Matheson recognized the untenable nature of the checkerboard pattern of state land ownership in Utah, and

launched an effort—Project BOLD—to consolidate the thousands of scattered state

sections into several dozen large consolidated state land blocks. Significantly, both

the BLM and the State then recognized that this effort was too large to be completed administratively, for the same reasons we have discussed today, and turned

to Congress for implementing legislation.

Although Project BOLD ultimately was not finalized, its lessons are still useful.

There are inherent limitations in the use of appraisals in exchanges involving hundreds of tracts, both in terms of accuracy and transaction costs. Current statutory

limitations on the BLM with respect to land use planning, NEPA compliance, and

cultural resources surveys, when combined with limited agency resources, can make

large administrative exchanges impractical. Conversely, consensus between the parties to the exchange and affected third parties on specific lands to be exchanged,

with Congressional implementation of that consensus, can achieve exchanges having

great environmental and public benefits where the administrative process cannot.

Congress has followed this path in recent years with the 1996 Arkansas-Oklahoma land exchange. Similarly, although in a slightly different format, the state

land exchange provisions contained in recent California desert protection legislation

are also of note. Although legislation of these types will not always be necessary

with large exchanges, it is clearly merited where resource limitations, special environmental or valuation concerns, or other factors jeopardize the success of the administrative exchange process.

Conclusion

In conclusion, the Trust Lands Administration believes that recent efforts by the

BLM to expedite administrative exchanges in Utah are bearing fruit. We encourage

BLM to continue these efforts, and to consider additional steps to expedite stateFederal exchanges. At the same time, the Trust Lands Administration urges the

Committee and your colleagues in Congress as a whole to consider legislation implementing or expediting high priority state-Federal exchanges.

Thank you for the opportunity to testify before the Committee.
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STATEMENT OF THOMAS R. H. GLASS, WESTERN LAND GROUP, INC.

Mr. Chairman and Members of the Subcommittee:

Thank you for the opportunity to testify today. My name is Tom Glass, and I am

a principal in Western Land Group, Inc., a national public lands consulting firm

headquartered in Denver.

Western Land Group. Inc.

Since our formation in 1981, Western Land Group has assisted in the consummation of more than 100 Federal exchanges, utilizing both legislative and administrative processes. We continue to help clients to facilitate dozens of new cases, involving lands ranging from tens of thousands of acres to less than one acre.

Benefits of Land Exchanges

Working in partnership with BLM and other public land management agencies

throughout the West, Western Land Group achieved fundamental public and private

land objectives. These include, but are certainly not limited to:

• protecting municipal watersheds;

• placing key threatened wetlands and wildlife habitat in the public domain;

• eliminating private inholdings in designated wilderness areas;

• helping municipalities and counties acquire lands for administrative purposes

and open space;

• facilitating responsible community growth; and

• improving hunting, fishing, and recreational access to Federal land.

Western Land Group helps agencies to accomplish their goals, despite limited

agency staff and resources. Together, we have created more coherent and logical

ownership patterns, resulting in win-win situations for both the public and private

sectors.

Adequacy of Current Land Exchange Law, Regulation, and Policy

Until recently, current law, regulation, and policy governing land exchanges has

worked fairly well. The Federal Land Exchange Facilitation Act (FLEFA), which

Western Land Group helped develop, has streamlined the process somewhat. The

Final BLM Land Exchange Manual integrates the essence of FLEFA, and is another

good tool which all BLM lands staff should review carefully.

Western Land Group is, however, concerned about several recent developments in

BLM’s land exchange policies.

1. Western Land Group is concerned about the newly instituted directive which relinquishes a BLM State Director’s authority to approve exchanges where the value of public lands to be exchanged is more than

$500,000. The directive requires that Washington, DC staff approve exchanges based upon an additional level of feasibility analyses and

issues papers.

In most states, BLM has talented field staff who should be supported, not

reprimanded. FLEFA encourages the consideration of local issues and local politics in all exchanges. Grassroots involvement, including the dissemination of accurate, ethical information early-on, is critical to creating successful exchanges.

In general, local personnel (including State directors) are better acquainted with

local concerns than are Washington, DC personnel whose expertise may lie elsewhere. The emphasis should be on increasing the capacity and sophistication of

BLM’s lands staff at the state and local levels, not on developing a National Exchange Team.

BLM’s new directive could slow down the process considerably. By transferring approval authority to Washington, the directive requires that an additional

level of feasibility analyses and issue papers be completed for the Washington

staff at three stages of the exchange process. Western Land Group maintains

that the previous level of analysis, when combined with community involvement, is adequate for most exchanges, and is largely redundant. The biggest

problem with the added level of analysis is that Washington, DC staff has no

mandated response time. The lack of guaranteed response times would most

certainly cause delay. The most serious consequence of delay is a reduced ability

for the United States to acquire premium private lands. Exchange proponents

must purchase private lands, usually within strict timeframes. If required feasibility analyses and issue papers are sent to Washington without specific guaranteed response times, it will be impossible for exchange proponents to set closing dates. Without closing dates, private landowners interested in conveying

lands to the United States cannot enter into secure purchase contracts with the

United States. Additional steps in the process could also lead to expiration of

appraisals, which are valid for a maximum of one year.
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1. Western Land Group is also concerned about the increased popularity of Competitive Exchanges, or BLM’s intent to auction unwanted

Federal lands to the highest bidder.

As a steward of the land, BLM has a responsibility to get the best deal for

the public when disposing of land. The best deal means more than just the most

money. Exchanges should be driven not only by BLM priorities, but also by

community priorities including development planning, infrastructure needs,

open space needs, access needs, and the like. To auction a parcel could result

in an outsider, who has no interest in a community’s needs, acquiring the parcel

simply because he or she was willing to pay the most.

The Crystal River Ranch land exchange, which Western Land Group closed

in 1995, is an example of why competitive exchanges should be approached with

caution. The Crystal River Ranch exchange involved the acquisition of 1,439

acres of Federal lands located in the Roaring Fork Valley near Aspen, Colorado

(a hot real estate market). The Federal lands were situated within the ranch,

accessible by public road, and managed by BLM. Following the exchange, Crystal River Ranch donated a conservation easement on the acquired lands to the

Colorado State Division of Wildlife. The conservation easement provides for

public hunting on the acquired lands, as well as the protection of wildlife habitat values and continued ranching activities in perpetuity. If the public lands

in this exchange had been auctioned to the highest bidder, such as a real estate

speculator, the unique negotiated benefits of the transaction would never have

occurred. Instead, the United States received full fair market value for the property and protection of open space and wildlife values in perpetuity.

As an alternative to competitive exchanges, Western Land Group recommends

the following approach, once Federal lands have been clearly identified for disposal. First, work with the community to identify acquisition priorities and generate creative options. Second, identify and obtain high priority offered lands

with significant public value. Third, work with proponents who have a vested

interest in the lands. Fourth, work with exchange facilitators who share the

agency’s goals. Fifth, complete exchanges based on appraisal rather than speculation. The appraisal process has many checks to ensure fair market value.

With regards to the appraisal process, Western Land Group has been pleased

with FLEFA’s arbitration provision. We believe it has been a helpful tool to resolving disputes involving value. In addition, Western Land Group commends

Dave Cavanaugh, BLM’s Chief Appraiser here in the District of Columbia, for

his recent efforts on the City of St. George land exchange in Washington County, Utah. Mr. Cavanaugh stepped in at the right time to resolve a difficult situation involving appraisals. Serving as the review appraiser, Mr. Cavanaugh was

able to insure that the local private appraiser adequately appraised the involved

BLM lands while giving the City of St. George proper credit for its lands within

the Mojave Desert Tortoise Preserve. His involvement is a perfect example of

how knowledgeable headquarters staff can be effective in trouble-shooting and

overseeing difficult exchanges.

We also suggest that the amount allowable under Sec. 206(h) (1) (A) of

FLPMA be increased from $150,000 to $500,000 to allow utilization of statements of approximate equal value rather than full appraisals in appropriate

situtations. This would help reduce the backlog of appraisals and appraisal reviews.

On balance, Western Land Group believes that BLM’s exchange program has

worked fairly well. We do have two more recommendations, however, for the Subcommittee to consider. The first relates to cash equalization moneys.

Cash Equalization Moneys

The Federal Land Policy and Management Act requires that land be exchanged

for exact equal value. Otherwise, cash equalization payments must be made. FLEFA

permits certain waivers of this requirement. The biggest remaining problem, however, is that BLM in particular sometimes does not have money on hand to make

equalization payments. As a result, exchanges sometimes have to be delayed to

await Congressional cash equalization appropriations. In our opinion, Congress does

not need to micro-manage cash equalization moneys in this matter.

We recommend that Section 203 of FLPMA be amended so a portion of the moneys received by the Secretary of the Interior from the sale of public lands be placed

in a special fund. This fund would be earmarked and available to the Secretary,

without need of appropriation, to provide moneys for cash equalization in land exchanges. The Forest Service already has a similar fund under the Sisk Act, and it

has served them well. In that regard, we recommend that the current requirement

for appropriation of all cash equalization dollars be eliminated and that the BLM
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be authorized to manage a fund similar to the Forest Service’s. Spending from this

fund could be limited to cash equalization purposes or other purposes, as Congress

deems appropriate.

Land and Water Conservation Fund

As a final thought, Mr. Chairman, while Western Land Group is obviously a great

supporter of well-crafted and well-managed exchanges, Western Land Group recognizes that exchanges are not a panacea. Land exchanges cannot substitute for Federal purchases using the Land and Water Conservation Fund. We recommend that

Congress fully fund the LWCF, as was done in 1998, in order to reduce the estimated $2–$3 billion backlog of land that willing sellers would like to sell Uncle Sam

for various reasons.

Mr. Chairman, that concludes my testimony. I would be happy to answer any

questions that you may have. Thank you again for your sponsorship of FLEFA and

your ongoing interest in land exchanges as evidenced by your holding this hearing

today. It is very encouraging to us, as a small business, to have policymakers such

as yourselves striving to improve the land exchange process.
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