Federal Land Exchanges: 1960-1999

MOLLY ESPEY (*) This research estimates the influence of various economic, legal, and political factors on the occurrence of federal land exchanges over time. Economic growth is found to significantly increase the number of land exchanges. The passage of laws related to exchanges and the political affiliation of the president also influence the number of exchanges. Finally, appropriations for land acquisition are inversely related to the number of federal land exchanges. (JEL H410, Q38, R520) I. INTRODUCTION Over the years, the federal government of the United States has acquired land through a variety of means, including force, purchase, donation, and exchange. Before 1900, the primary intents of acquisition was to transfer the land to private citizens by means of the Homestead Act of 1862, transfer land to states, and transfer land to railroads to facilitate the opening of the West. Lands were selectively retained as national parks and national forests, beginning with the creation of Yellowstone National Park in 1872. Federal efforts returned to acquisition with the Weeks Act of 1911 and the Clark-McNary Act of 1924. Acquisitions for watershed management and timberland under these two acts added 20 million acres of eastern lands to the national forest system (Loomis 1993). Increasing demand for recreation, wildlife, and habitat protection contributed to the creation in 1964 of the Land and Water Conservation Fund, a fund dedicated to federal land acquisition. The ability of federal land agencies to increase their holdings of environmentally sensitive land and lands with high recreational value has still been restricted, however, by limited budgets and federal regulations that require revenues generated by agencies to be returned to the federal Treasury. In order to meet the public's increasing demand for outdoor recreation and environmental preservation, federal land agencies have increasingly opted to undertake land exchanges. Since 1960, land exchanges have resulted in federal acquisition of over 8.6 million acres. In comparison, the Land and Water Conservation Fund, the primary source of revenue for federal land acquisition since 1964, has been used to acquire about 7 million acres of land, about one-third of which is owned by state or local governments. Clearly, land exchanges are not an insignificant means of acquiring new lands for the federal government. Since land exchanges with the federal government are by law initiated by private parties, it could be useful to federal land managers to understand factors that influence that demand. On the other hand, understanding of the extent to which congressional legislation and federal executive branch activities facilitate or hinder the process might also be of interest. Understanding these influences can improve the ability of local land managers to anticipate changes in land ownership patterns and plan accordingly, both in regions of increasing federal influence and in areas where federal land is increasingly converted to private ownership. This article begins with a brief background outlining the legal process of federal land exchanges and the history of federal exchanges since 1960. Although there has recently been controversy over various aspects of the exchange process, especially the accuracy of land appraisals and whether or not exchanges have been in the public interest, this research does not attempt to resolve these issues. Rather, this research estimates the influence of various economic, legal, and political factors on the occurrence of federal land exchanges over time and concludes with some policy implications. II. LEGAL BACKGROUND In essence, a land exchange is simply a swap of one piece of real property for another. If certain conditions hold, such a swap qualifies as a tax-deferred exchange under section 1031 of the Internal Revenue Code. This section provides that there will be no recognition of gain or loss for tax purposes on "exchange of property held for productive use in trade or business or for investment" if exchanged for property of "like kind which is held for productive use in a trade or business or for investment. …