Opinion ID: 146745
Heading Depth: 3
Heading Rank: 2

Heading: .The Herzog Appraisal

Text: Nevertheless, when they did insert this new issue into the district court case, allegedly supported by an appraiser, Stephen Roachwho was never involved in the administrative process at allBLM did what it would have done had it been given timely notice of this additional concern: they hired a new independent appraiserSteven Herzogto evaluate it. So much for futility. BLM instructed Mr. Herzog independently to review David Yerke's earlier 350 page appraisal [i]n light of the Desert Citizens decision, referring to our opinion in Desert Citizens Against Pollution v. Bisson, 231 F.3d 1172 (9th Cir.2000). In that case, we held that the use of property should be considered in evaluating the highest and best use. Desert Citizens, 231 F.3d at 1180-84. The purpose of Mr. Herzog's report was to supplement the administrative record. Steven Herzog holds the designation of MAI from the Appraisal Institute. He is also a Certified General Real Estate Appraiser in California, a Registered Professional Forester, and the President of the Herzog Group. To assist him in this endeavor, he hired the Recon Research Corporation for its discount rate as applied to future income for landfill lands expertise, and EMCON, a civil engineering company with landfill experience. Despite the Charpieds' fatally tardy assertion of this matter, Mr. Herzog did what BLM and Desert Citizens asked him to do: he thoroughly considered the value of the land in connection with its value as a landfill and filed his report accordingly. He concluded as of the relevant date that the landfill was not a financially feasible use of the selected [federal] land. It follows that the highest and best use of the federal lands being appraised could not have been for a landfill. He noted that as of 1993, difficulties faced by landfill developers in obtaining required approvals impacted the ability and desire of companies to finance such projects. He pointed out that operators such as Waste Management, Inc., Western Waste, and BFI began to abandon their investments. He opined that [t]he opportunity costs of investing tens of millions of dollars in a high-risk venture, without any return on that investment for at least ten years are enormous, and that [a] knowledgeable investor with millions of dollars to invest would not have considered investment in a rail-haul landfill to be the route to obtaining a reasonable return on the investment. So, if this is true, that there was no market for the federal lands as a landfill, why would Kaiser doggedly pursue this proposal? Because Kaiser already owns the abandoned holes in the ground and the railroad necessary to serve it and has a considerable investment in the project. The idea that someone else might purchase the selected federal lands for a landfill is palpably and demonstrably hallucinatory. This is what Mr. Herzog has to say about Kaiser's determined motivation in a declaration provided to the district court summarizing his 108-page report (plus attachments) submitted to BLM: 61. . . . Under this analysis, the net present value [NPV] of the income generated from the project would be $2.48 million. Not included in the calculation of this figure is any allowance for entrepreneurial profit, the $13 million spent on permitting after September 25, 1997, the $17 million that would be required to upgrade the railroad and relocate and upgrade the paved road, or any allowance for on-site infrastructure cost and staffing. Consequently, the NPV for the net income to the landfill operation is dwarfed by the expenditures that would be required to obtain that incomea conclusion BFI obviously reached in 1994. Report pp. 106-107. 62. I reached the conclusion that, as of the effective date, landfill use was not financially feasible. Yet, Kaiser and its remaining associated investors went on to spend $13 million more pursuing final permits. Through 1994, approximately $49 million had been spent on the project. However, BFI had spent $45 million of that, and walked away. The remaining proponents had only $4 million invested, but the only way to recover any of the investment was to press on with the permitting effort. The internal dynamics of the stakeholders in the endeavor created a situation where motivations existed that were different from what a single entity, which had been solely financing the project from the beginning, would have faced. Report p. 108. 63. In addition, the expectation constantly existed that the time when final permits would be obtained was near at hand. The obtaining of the goal always seemed to be near enough that continued expenditures were justified. To stop the process would have meant the forfeiting of all prior expenditures, because the final permits were needed to put the project in its most marketable condition. As noted earlier, the pending sale is contingent upon final permits being obtained and all litigation being resolved. Report p. 108. 64. The conclusion of Mr. Roach that a landfill was economically feasible is based completely on the observation that Kaiser was investing in a landfill at the site. First, this observation is not a proper method of assessing the economic feasibility of a landfill use. See definition of economic feasibility at ¶ 11. Moreover, this observation does not consider the circumstances and history of Kaiser's investment in the project or the fact that Kaiser, since it owned the railroad, the permits, and other aspects of the project related to the selected lands, had different motivations than others in the marketplace would have had. Mr. Roach's conclusion appears to be without market support, and is based on an incomplete understanding of the factors motivating Kaiser to continue to invest in Eagle Mountain. Kaiser is correct when it argues that BLM's chief state appraiser in California, Nancy Ortiz, reviewed Mr. Herzog's report and said in a 12-page report: From my review it appears that Mr. Herzog has been conscientious in providing an independent analysis and his report meets applicable [UAS] and Federal standards and the requirements of the instructions for the assignment provided by the BLM. He has thoroughly analyzed the subject's potential for landfill as a highest and best use, using appropriate methods and consultants, and provided a feasibility conclusion based on his analysis. As the reviewer, I believe that the appraiser has addressed concerns relative to the landfill as a potential highest and best use. . . . The BLM District Manager added this perspective to Mr. Herzog's appraisal: We feel the administrative record supports BLM's decision in this case, and disagree with Plaintiff's assertions to the contrary. However, in light of the Ninth Circuit's opinion in Desert Citizens, we felt an independent analysis of whether a landfill was the highest and best use of the federal lands was justified. We were prepared to accept the results of this new analysis, regardless of its implications to the District Manager's decision of September 25, 1997. In conclusion, he said, I have reviewed Mr. Herzog's report and found nothing which indicates that it is necessary to revise or revisit the District Manager's decision of September 25, 1997 approving the exchange. This decision was served on the Charpieds in January, 2003; and Mr. Herzog's report, plus the reports of the chief appraiser and the district manager were formally made part of the administrative record and officially certified and lodged as such with the district court on February 7, 2003. How my colleagues can claim that this is not a final, appealable decision is a mystery. Did the plaintiffs timely appeal the District Manager's final conclusion to the IBLA, as they could have pursuant to 43 C.F.R. § 4.410(a)? No. This failure alone should bar them from bringing it sideways into this case. So what the Charpieds say BLM did not do has in fact been done, and remains unchallenged by them. We faced a similar problem in Warm Springs Dam Task Force v. Gribble, 621 F.2d 1017 (9th Cir.1980). In that case, a deficiency in the Army Corps of Engineers NEPA process had been cured during litigation. Calling these supervening events, we denied remand to the Corps because the Corps had already conducted studies definitively to answer the matter at issue. Id. at 1026. As we said in Friends of the Clearwater v. Dombeck, 222 F.3d 552, 560 (9th Cir.2000), if extra-record evidence shows that an agency has rectified a NEPA violation after the onset of legal proceedings, that evidence is relevant to [what] relief should be granted. See also Forest Guardians v. U.S. Forest Serv., 329 F.3d 1089, 1095-96 (9th Cir. 2003). At the very least, we should follow this example. BLM has done what we suggested in Desert Citizens. It has thoroughly considered the issue and issued a manifestly defensible answer. To remand at this point is a clear exercise in blind form over substance.