[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
    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



                                


                      U.S. GOVERNMENT PRINTING OFFICE
 48-058 CC                   WASHINGTON : 1998
------------------------------------------------------------------------------
                   For sale by the U.S. Government Printing Office
 Superintendent of Documents, Congressional Sales Office, Washington, DC 20402



                         COMMITTEE ON RESOURCES

                      DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana       GEORGE MILLER, California
JAMES V. HANSEN, Utah                EDWARD J. MARKEY, Massachusetts
JIM SAXTON, New Jersey               NICK J. RAHALL II, West Virginia
ELTON GALLEGLY, California           BRUCE F. VENTO, Minnesota
JOHN J. DUNCAN, Jr., Tennessee       DALE E. KILDEE, Michigan
JOEL HEFLEY, Colorado                PETER A. DeFAZIO, Oregon
JOHN T. DOOLITTLE, California        ENI F.H. FALEOMAVAEGA, American 
WAYNE T. GILCHREST, Maryland             Samoa
KEN CALVERT, California              NEIL ABERCROMBIE, Hawaii
RICHARD W. POMBO, California         SOLOMON P. ORTIZ, Texas
BARBARA CUBIN, Wyoming               OWEN B. PICKETT, Virginia
HELEN CHENOWETH, Idaho               FRANK PALLONE, Jr., New Jersey
LINDA SMITH, Washington              CALVIN M. DOOLEY, California
GEORGE P. RADANOVICH, California     CARLOS A. ROMERO-BARCELO, Puerto 
WALTER B. JONES, Jr., North              Rico
    Carolina                         MAURICE D. HINCHEY, New York
WILLIAM M. (MAC) THORNBERRY, Texas   ROBERT A. UNDERWOOD, Guam
JOHN SHADEGG, Arizona                SAM FARR, California
JOHN E. ENSIGN, Nevada               PATRICK J. KENNEDY, Rhode Island
ROBERT F. SMITH, Oregon              ADAM SMITH, Washington
CHRIS CANNON, Utah                   WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   CHRIS JOHN, Louisiana
JOHN PETERSON, Pennsylvania          DONNA CHRISTIAN-GREEN, Virgin 
RICK HILL, Montana                       Islands
BOB SCHAFFER, Colorado               RON KIND, Wisconsin
JIM GIBBONS, Nevada                  LLOYD DOGGETT, Texas
MICHAEL D. CRAPO, Idaho
                     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          ENI F.H. FALEOMAVAEGA, American 
JOHN J. DUNCAN, Jr., Tennessee           Samoa
JOEL HEFLEY, Colorado                EDWARD J. MARKEY, Massachusetts
WAYNE T. GILCHREST, Maryland         NICK J. RAHALL II, West Virginia
RICHARD W. POMBO, California         BRUCE F. VENTO, Minnesota
HELEN CHENOWETH, Idaho               DALE E. KILDEE, Michigan
LINDA SMITH, Washington              FRANK PALLONE, Jr., New Jersey
GEORGE P. RADANOVICH, California     CARLOS A. ROMERO-BARCELO, Puerto 
WALTER B. JONES, Jr., North              Rico
    Carolina                         MAURICE D. HINCHEY, New York
JOHN B. SHADEGG, Arizona             ROBERT A. UNDERWOOD, Guam
JOHN E. ENSIGN, Nevada               PATRICK J. KENNEDY, Rhode Island
ROBERT F. SMITH, Oregon              WILLIAM D. DELAHUNT, Massachusetts
RICK HILL, Montana                   DONNA CHRISTIAN-GREEN, Virgin 
JIM GIBBONS, Nevada                      Islands
                                     RON KIND, Wisconsin
                                     LLOYD DOGGETT, Texas
                        Allen Freemyer, Counsel
                     Todd Hull, Professional Staff
                    Liz Birnbaum, Democratic Counsel
                   Gary Griffith, Professional Staff



                            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



    HEARING ON BUREAU OF LAND MANAGEMENT REALTY AND APPRAISAL ISSUES

                              ----------                              


                        TUESDAY, MARCH 24, 1998

        House of Representatives, Subcommittee on National 
            Parks and Public Lands, Committee on Resources, 
            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 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.

    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.
    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-

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 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.
    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 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. 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.
    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.
    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 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 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.
    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?
    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.
    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 pre-
negotiations 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.
    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.
    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 cop-out 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 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.
    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. 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.
    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 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 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 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-

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 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 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 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 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.
    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?
    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 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.
    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 
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.]
  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.
    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 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 Staircase-Escalante 
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.
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 BLM-State 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, 
        arms-length 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-

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.
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 state-Federal 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.
       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.
        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 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.

[GRAPHIC] [TIFF OMITTED] T8058.001

[GRAPHIC] [TIFF OMITTED] T8058.002

[GRAPHIC] [TIFF OMITTED] T8058.003

[GRAPHIC] [TIFF OMITTED] T8058.004

[GRAPHIC] [TIFF OMITTED] T8058.005

[GRAPHIC] [TIFF OMITTED] T8058.006

[GRAPHIC] [TIFF OMITTED] T8058.007

[GRAPHIC] [TIFF OMITTED] T8058.008

[GRAPHIC] [TIFF OMITTED] T8058.009

[GRAPHIC] [TIFF OMITTED] T8058.010

[GRAPHIC] [TIFF OMITTED] T8058.011

[GRAPHIC] [TIFF OMITTED] T8058.012

[GRAPHIC] [TIFF OMITTED] T8058.013

[GRAPHIC] [TIFF OMITTED] T8058.014

[GRAPHIC] [TIFF OMITTED] T8058.015

[GRAPHIC] [TIFF OMITTED] T8058.016

[GRAPHIC] [TIFF OMITTED] T8058.017

[GRAPHIC] [TIFF OMITTED] T8058.018

[GRAPHIC] [TIFF OMITTED] T8058.019

[GRAPHIC] [TIFF OMITTED] T8058.020

[GRAPHIC] [TIFF OMITTED] T8058.021

[GRAPHIC] [TIFF OMITTED] T8058.022

[GRAPHIC] [TIFF OMITTED] T8058.023

[GRAPHIC] [TIFF OMITTED] T8058.024

[GRAPHIC] [TIFF OMITTED] T8058.025

[GRAPHIC] [TIFF OMITTED] T8058.026

[GRAPHIC] [TIFF OMITTED] T8058.027

[GRAPHIC] [TIFF OMITTED] T8058.028

[GRAPHIC] [TIFF OMITTED] T8058.029

[GRAPHIC] [TIFF OMITTED] T8058.030

[GRAPHIC] [TIFF OMITTED] T8058.031

[GRAPHIC] [TIFF OMITTED] T8058.032

[GRAPHIC] [TIFF OMITTED] T8058.033

[GRAPHIC] [TIFF OMITTED] T8058.034

