[Federal Register Volume 59, Number 45 (Tuesday, March 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4997]


[[Page Unknown]]

[Federal Register: March 8, 1994]


Part II





Department of Agriculture





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Forest Service



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36 CFR Part 254




Land Exchanges; Final Rule
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DEPARTMENT OF AGRICULTURE

Forest Service

36 CFR Part 254

RIN 0596-AA42

 
Land Exchanges

AGENCY: Forest Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule revises the requirements that are applicable 
to the land exchange activities of the Forest Service. The principal 
provisions of the rule pertain to exchange agreements, assembled land 
exchanges, segregation, compensation for costs assumed, appraisal 
standards, bargaining, arbitration, approximately equal value 
exchanges, value equalization, cash equalization waiver, and 
simultaneous transfer of title. The intended effect is to fully 
implement the authorities granted by the Federal Land Exchange 
Facilitation Act of August 20, 1988.

EFFECTIVE DATE: This rule is effective April 7, 1994.

FOR FURTHER INFORMATION CONTACT:
James M. Dear, Lands Specialist, Lands Staff, Forest Service, USDA, 
P.O. Box 96090, Washington, DC 20090-6090, (202) 205-1361.

SUPPLEMENTARY INFORMATION:

Background

    On October 2, 1991, the Forest Service and the Bureau of Land 
Management published separate proposed rules (56 FR 49948-49977) for 
implementing the amendments to section 206 of the Federal Land Policy 
and Management Act of 1976, made by the Federal Land Exchange 
Facilitation Act of August 20, 1988 (43 U.S.C. 1716).
    The purpose of the Act is to facilitate and expedite land exchanges 
under the authority of the Secretary of Agriculture and the Secretary 
of the Interior by streamlining and improving the procedures for such 
exchanges. The Act endorses the long-standing policy that land exchange 
is an important tool to consolidate landownership for purposes of more 
efficient management; to secure important objectives of resource 
management, enhancement, development, and protection; and to fulfill 
other public needs. The Act requires each Secretary to promulgate rules 
for exchanges of land.
    The proposed rules also incorporated other authorities and 
procedural requirements applicable to each agency. Included in the 
rules were provisions to streamline and expedite exchanges involving 
Federal and non-Federal lands such as exchange agreements, assembled 
land exchanges, segregation, compensation for costs assumed, appraisal 
standards, bargaining, arbitration, approximately equal value 
exchanges, value equalization, cash equalization waiver, and 
simultaneous transfer of title. A 60-day public comment period was 
provided.

Summary of Public Comments Received and Agency Response to Comments

    The Forest Service and BLM received comments from 58 sources 
including: 6 individuals, 18 business and industrial entities, 2 civic 
organizations, 2 environmental organizations, 2 professional societies, 
and 28 Federal, State, and local government entities.
    All comments received on the rules were shared and jointly analyzed 
by the Forest Service and BLM. The analysis of comments pertaining to 
the Forest Service rule, and the corresponding responses and changes 
are discussed as follows. Editorial and grammatical corrections also 
have been made as necessary.

General Comments

    Comment. Two respondents stated that the timeframes in the rule are 
too lengthy, particularly those related to the initiation and review 
process.
    Response. The time periods specified in various sections of the 
rule were either imposed by the Federal Land Exchange Facilitation Act 
or are administratively necessary to comply with the Forest Service's 
public participation and environmental analysis procedures. However, 
the Forest Service and BLM have made further adjustments in their 
scheduling requirements in order to develop more uniform final 
regulations and to reduce the time periods wherever possible.
    Comment. One respondent felt that streamlining the process to 
expedite exchanges may promote rapid disposal of Federal holdings in 
urban areas and forego revenue-making opportunities on those 
properties. It was further suggested that a process for mid-course 
review, at the highest departmental levels, should be built into the 
regulations.
    Response. The land management agencies generally do not administer 
lands for intense development in urban areas. Moreover, each exchange 
opportunity must be analyzed on an individual basis. Certain high value 
or complex exchanges may involve Secretarial review, but to require a 
mid-course review of all exchanges would create unnecessary delay and 
inefficiency. Therefore, this suggestion was not adopted.
    Comment. It was pointed out by one reviewer that there is no 
provision in the rule for conducting public hearings.
    Response. In conjunction with the written notification requirements 
in Secs. 254.8 and 254.13 of the final rule, the authorized officer may 
hold public hearings or public meetings whenever appropriate to solicit 
information from the public. The need to conduct hearings or meetings 
will vary depending on the level of interest and potential controversy 
associated with a land exchange. Therefore, a separate provision to 
cover public hearings or meetings is considered unnecessary.
    Comment. One respondent suggested that the rule require the 
preparation of an ``environmental values document'' to compare relative 
ecological values to be exchanged.
    Response. All resource values associated with the lands involved in 
an exchange are examined through an environmental analysis completed 
pursuant to Council on Environmental Quality regulations at 40 CFR 
parts 1500-1508 and Forest Service directives (FSM 1950; FSH 1909.15). 
Therefore, a separate ``environmental values'' document is not 
required.

Specific Comments

    Section 254.1--Scope and applicability. One respondent suggested 
that paragraph (b) of this section of the proposed rule should give a 
specific citation to the Small Tracts Act regulations. This suggestion 
has been adopted in the final rule.
    Two parties commented on paragraph (c) of this section of the 
proposed rule, which would permit application of the rule to land 
exchanges in Alaska to the extent the regulations did not conflict with 
the Alaska Native Claims Settlement Act or the Alaska National Interest 
Lands Conservation Act. One suggested separate regulations for such 
exchanges, similar to the Small Tracts Act situation. The other felt 
the rule should allow the authorized officer to depart from this rule 
to the degree consistent with the Alaska National Interest Lands 
Conservation Act. These suggestions have not been adopted. Paragraph 
(c) provides the authorized officer the latitude allowed by law to 
pursue land exchanges in Alaska and is unchanged from the language of 
the proposed rule.
    Three comments were received on paragraph (d) of this section of 
the proposed rule. One respondent recommended that, in the name of 
uniformity, once the final rule is adopted all exchanges should be 
subject to the new regulations. Another suggested changing the 
provision related to proceeding with exchanges under prior agreements 
from ``may'' to ``shall''. The third asked for clarification on the 
handling of exchanges begun prior to this rule. In response, the rule 
has been revised to clearly state that, unless the parties agree 
otherwise, any written agreement based on prior regulations shall 
continue in accordance with that procedure.
    Paragraph (e) of the proposed rule provided that the boundary of 
the national forest be automatically extended to encompass lands 
acquired under the Weeks Act of March 1, 1911, as amended. There were 
two suggested changes to paragraph (e). One response recommended adding 
the clause ``upon acceptance of title by the authorized officer,'' as a 
condition upon the automatic extension of the boundary. The other 
questioned both the apparent limitation and expansion of Weeks Act 
authority that the current wording suggests. Both recommended removing 
the words ``by exchange'' and made an observation that the Weeks Act 
refers only to acquired lands within the exterior boundaries of 
national forests. The recommendation to delete the words ``by 
exchange'' was adopted. However, the reference to acceptance of title 
by the authorized officer would be inconsistent with Sec. 254.16 of the 
rule and, therefore, was not adopted.
    Section 254.2--Definitions. Two respondents suggested that the term 
``eminent domain'' not be used in the definition of ``acquisition'' 
because of the negative implication associated with condemnation and 
the erosion of private property rights. This suggestion was not 
adopted, because this is the standard definition used by the Forest 
Service to explain the various methods available to the Secretary of 
Agriculture to acquire land on behalf of the United States. It should 
be noted that Sec. 254.3(a) of the rule states that land exchanges are 
discretionary, voluntary real estate transactions between the Federal 
and non-Federal parties. Moreover, the Forest Service typically 
acquires land through exchange, purchase, or donation. Condemnation is 
rare and is considered as a last resort for acquisition.
    One respondent recommended that language be added at the end of the 
definition of ``agreement to initiate'' to clarify that the signing of 
such an agreement is not required for preliminary discussions between 
the parties to assess the feasibility of an exchange. This revision was 
not considered necessary or appropriate to a definition, as 
Sec. 254.4(a) and (b) of the final rule allow the parties to assess the 
feasibility of an exchange proposal before entering into an agreement 
to initiate.
    It was recommended that the definition of ``approximately equal 
value'' be replaced with the definition of that term as used in the 
Small Tracts Act regulations at 36 CFR 254.31. This recommendation was 
adopted.
    One reviewer recommended that the definition of ``bargaining'' 
include other issues such as minerals, access, reservations, etc. This 
suggestion was not adopted, because Sec. 254.10(a) of the rule states 
that bargaining shall be based upon an objective analysis of the 
valuation in the appraisal report(s), which takes into account all 
factors which might influence the value of the estate to be conveyed.
    One respondent stated that the definition of ``highest and best 
use'' in the proposed rule might be too broad and recommended that the 
phrase ``and present uses of adjacent property'' be added after the 
words ``based on market evidence''. The definition in the proposed rule 
is that used throughout the appraisal profession. The uses of nearby 
properties are always considered by the appraiser in determining 
highest and best use, but limiting consideration to adjacent properties 
could result in inaccurate estimates of value. Therefore, this 
suggestion was not adopted.
    It was suggested that the definition of ``market value'' include 
mineral and timber interests, archaeological sites, and cultural 
resources. This revision is not necessary. Market value is applicable 
to property as though it were in private ownership and anything that 
may affect value is considered by the appraiser.
    One respondent asked if the mineral leasing laws referred to in the 
definition of ``mineral laws'' include mineral resources on Weeks Act 
lands. In response, the definition has been revised to make clear that 
the mineral laws apply only to those lands reserved from the public 
domain for National Forest purposes.
    It also was recommended that the definition of ``party'' be revised 
to recognize States as full parties to an exchange. This change is not 
necessary. The definition in the proposed rule clearly recognized the 
States as being eligible to enter into an agreement to initiate an 
exchange and is adopted without change in the final rule.
    One respondent recommended that the definition of ``segregation'' 
be amended to clarify that Federal lands may be segregated from 
operation of the public land laws ``and/or'' mineral laws and further 
suggested adding the phrase ``or by operation of law'' after the word 
Secretary. This recommendation was not adopted. The purpose of 
segregation is to avoid the appropriation of long-term encumbrance of 
Federal lands being considered for conveyance in an exchange. The 
intent is to segregate from entry under both the public land laws and 
the mineral laws, and the term has long been interpreted to cover both 
types of entry. The term ``by operation of law'' would add nothing 
because this authority already lies with the Secretary.
    Another reviewer indicated that the definition of ``statement of 
value'' did not appear to conform to the Uniform Standards of 
Professional Appraisal Practice and could place appraisers at risk in 
violating their professional standards if they produced a statement of 
value rather than a full appraisal report. The Department disagrees. 
The regulations only require the qualified appraiser to determine if 
the Federal lands exceed $150,000. Although a full appraisal report is 
not needed, the appraisal analysis must meet the minimum standards 
contained in the Uniform Standards.
    One reviewer suggested adding definitions for ``resource values'' 
and ``management objectives'' in order to clarify the determination of 
public interest that must be made under Sec. 254.3(b). The Department 
agrees that a definition of ``resource values'' would be helpful and 
has included the term in the definition section. However, a definition 
of ``management objectives'' was not included, as the generic term is 
of widespread common usage.
    It also was suggested that the term ``presence of environmental 
values'' be defined in the rule and that the definition address 
cultural resource values and the associated costs of survey, 
mitigation, tests, excavations, etc. to ensure that such values are not 
overlooked in the determination of public interest, agreement to 
initiate an exchange, and assumption of costs. This suggestion was not 
adopted. Section 254.3(b) of the rule mentions cultural resources as 
one of several factors to be considered in the determination of public 
interest, and Sec. 254.7 of the rule allows for compensation for costs 
associated with cultural resource surveys and mitigation. Additionally, 
Sec. 254.3(g) requires that an environmental analysis be prepared. This 
analysis ensures that environmental values such as cultural resources 
are not overlooked in the determination of public interest.
    Section 254.3--Requirements.
    (a) Discretionary nature of exchanges. One respondent recommended 
that this paragraph be amended to clarify that the discretionary 
authority of the Secretary in determining public and State interests is 
subject to public review. This suggestion was not adopted, as 
Sec. 254.3(b) of the rule requires consideration of the needs of State 
and local residents, and Sec. 254.13 of the rule sets forth the 
requirements for public notice of decisions and subsequent review. 
Therefore, paragraph (a) is adopted without change from the proposed 
rule.
    (b) Determination of public interest. Extensive comments were 
received on this paragraph. One respondent suggested that protection of 
watersheds be added as a factor in the determination of public 
interest. This suggestion has been adopted.
    Proposed paragraph (b) provided that the authorized officer may 
complete an exchange only after a determination that the public 
interest will be well served. It was suggested that the term ``best 
served'' be used, instead of ``well served''. However, the term ``well 
served'' is retained in the final rule, because it is the term used in 
section 206(a) of the Federal Land Policy and Management Act of 1976.
    The same respondent pointed out that there was nothing in the 
regulations on what type of lands would be acquired and suggested the 
rule include a list of lands would be acquired and suggested the rule 
include a list of lands most desirable. It would be impracticable to 
list in these regulations all the types of lands that would be acquired 
through exchange, due to the variety of resources on involved lands and 
the variety of objectives and circumstances that lead to initiation of 
exchange proceedings. Identification of types of lands suitable for 
exchange is more appropriate during the land and resource management 
planning process.
    One respondent stated that use of the phrase ``accommodation of 
land use authorizations'' as one of the factors to be considered in a 
public interest determination was ambiguous and suggested wording to 
ensure that right-of-way corridors for energy transportation and 
utility purposes are considered in the determination of public 
interest. This suggestion was adopted by expanding on the term 
``authorized uses'' in Sec. 254.4(c)(4) of the rule to include grants, 
permits, easements, or leases and by providing a cross reference to 
this provision in Sec. 254.3(b).
    One respondent recommended that paragraph (b) emphasize the 
management and development of private lands as a factor to consider in 
determining public interest and suggested working for inclusion into 
the final rule. Additionally, two respondents recommended that this 
paragraph include an analysis of a State's economic needs and that the 
rationale and decision of the authorized officer be included in the 
public record. They specifically requested that additional regulatory 
requirements be imposed to provide an analysis of coal development, the 
feasibility of future leasing, and any possibility of royalty losses 
and the attendant impacts to States. In response to these comments, 
paragraph (b) has been revised in the final rule to include 
consideration of the opportunity ``* * *  to meet the needs of State 
and local residents and their economies * * *,'' thus emphasizing the 
importance of these criteria in the determination of public interest. 
Additionally, it should be noted that the ``Notice of Exchange 
Proposal'' at Sec. 254.8 of the rule allows the public to participate 
early in the exchange process and to identify any issues or concerns 
they may have regarding an exchange proposal. This could include issues 
such as mineral resource development potential on the involved Federal 
lands, the potential loss of royalties, and the related impacts to 
State and local economies. The information received in response to the 
notice of exchange proposal would be considered in the development of 
an environmental analysis. The environmental analysis and related 
studies would serve as the basis for the ``Notice of Decision'' at 
Sec. 254.13 of the rule, and this decision and all supporting documents 
would be included in the public record.
    Another respondent suggested adding coal as a specific value to be 
considered. This is not necessary, since coal is included within the 
reference to mineral values throughout the rule.
    A local government suggested that an exchange should not be 
approved if it may adversely affect recreation, open space 
preservation, habitat, air quality, or other resources. No change was 
made in the final rule to accommodate this suggestion, since all 
potential impacts must be considered in the environmental analysis 
pursuant to paragraph (g) of this section, and a decision to proceed 
with an exchange must consider any adverse impacts identified in the 
analysis.
    A State government wrote that the Regional Coal Team should be 
provided the opportunity for full participation in reviewing any 
exchange proposal. The Department agrees. Notice and review procedures 
are set out in Sec. 254.8 of the final rule. When processing exchanges 
involving coal, the appropriate Regional Coal Team will have an 
opportunity to review the exchange; however, it is impracticable to 
list in Sec. 254.8 all the appropriate entities that should be given 
review opportunities.
    One respondent suggested that the provision of the proposed rule 
that the intended use of conveyed Federal land not be in conflict with 
management objectives of adjacent Indian Trust lands be deleted or 
limited to those uses of conveyed Federal lands that conflict with 
management objectives of `adjoining'' Indian Trust lands that were 
established formally prior to the exchange proposal. This suggestion 
has been partially adopted by making clear that the intended use of 
conveyed Federal land will not ``substantially conflict with 
established'' management objectives (Sec. 254.3(b)(2)(ii) of the final 
rule).
    The local government respondent also suggested that as a condition 
of exchange, the Federal lands that may be used for landfills which may 
affect air quality must use LAER (lowest achievable emission rates) 
technology, not the less stringent BDT (best demonstrated technology). 
The environmental analysis conducted pursuant to paragraph (g) of this 
section of the rule should consider all potential impacts and measures 
their effects by whatever standards are appropriate. Rather then 
defining specific technologies in this rule, the appropriate method of 
analysis of air quality and other considerations will be identified as 
proposals are developed. Public input will be considered in selecting 
assessment methods. Therefore, the suggestion has not been adopted in 
the final rule.
    In order to consider the objective of meeting the needs of State 
and local residents, one respondent suggested that this paragraph be 
revised to require that an exchange be consistent with the zoning and 
the land use element of the general plan for adjacent non-Federal lands 
and include a land use consistency determination by each local agency 
with land use (planning and zoning) authority over adjacent lands. The 
authority of State and local governing bodies to regulate and zone non-
Federal land, including land that has been conveyed from Federal 
ownership, is recognized in paragraph (h) of this section of the rule. 
Since those bodies would have jurisdiction over lands conveyed to non-
Federal ownership, it would be meaningless to include in the rule that 
the use of the conveyed lands must be consistent with local zoning.
    Five respondents felt that the proposed requirement that the land 
exchanged into non-Federal ownership must be used or managed to conform 
to or enhance adjacent Federal lands uses was costly, inequitable, 
unfair, or could otherwise limit exchange opportunities. However, this 
paragraph of the proposed rule simply required the authorized officer 
to consider the intended uses as part of the public interest 
determination. The language of paragraph (b)(2) of this section of the 
proposed rule did not imply control over future uses or place any 
requirement on the management of the land after conveyance to the non-
Federal party, unless specific reservations, covenants, or restrictions 
are included in the deed or patent pursuant to paragraph (h) of this 
section of the final rule. It would not be in the public interest to 
convey Federal lands if the intended uses were to create substantial 
management conflicts on adjacent Federal lands; therefore, this 
provision is retained in the final rule as one of the findings the 
authorized officer must be able to make in order to determine that the 
public interest is well served by the exchange.
    One respondent felt that the two-part finding of public interest 
must be broad enough to encompass all management objectives 
contemplated and that emphasis should not be placed on non-commodity 
resources. Paragraph (b) of this section of the rule is sufficiently 
broad to include all involved resource values and all identified 
management objectives. Further, a definition of ``resource values'' has 
been added to Sec. 254.2 of the final rule. That definition includes 
both commodity and non-commodity values, surface and subsurface.
    It was requested that the reference to cultural resources be 
strengthened in the final regulations. In response, cultural resources 
is now specified as a resource to consider in reaching a public 
interest determination.
    Another party wanted ``promotion of multiple-use values'' changed 
to ``continuation of multiple-use values''. The language of the 
proposed rule has been retained, because it is the language used in 
section 2(a)(1) of the Federal Land Exchange Facilitation Act of 1988 
in which Congress finds that land exchange is an important tool for 
``the promotion of multiple-use values''.
    One respondent felt that the regulation ``guts'' the entire public 
interest test set forth in the Federal Land Policy and Management Act 
of 1976, by mandating that regardless of the Secretary's determination 
of public interest, an exchange must not occur if the specified 
conditions are not met. That respondent recommended deletion of this 
section. The Department disagrees. Section 206(a) of the Federal Land 
Policy and Management Act of 1976 provides a listing of considerations 
to be included in any public interest determination. That listing 
includes ``better Federal land management and the needs of state and 
local people.'' In addition to the substantive changes made in response 
to comments received, paragraph (b) of the final rule has been 
subdivided into paragraphs (b)(1)-(b)(3) for ease of use and reference.
    (c) Equal Value Exchanges. One respondent recommended that this 
paragraph of the rule be amended by adding ``Equal value can include 
the use of a public interest finding as authorized by specific statutes 
such as the Alaska National Interest Lands Conservation Act.'' This 
recommendation cannot be adopted. Section 206(b) of the Federal Land 
Policy and Management Act of 1976 requires equal value exchanges on a 
monetary basis. The elements of a public interest finding may be 
considered in the valuation of a property, only to the degree that 
those elements are reflected in the real estate market.
    Finally, it was suggested that a cross reference to the provisions 
for approximately equal value exchanges in Sec. 254.11 of the rule be 
included in this paragraph. This suggestion was adopted.
    (d) Some State exchanges. Four respondents recommended that this 
paragraph of the rule be amended to allow for interstate exchanges. 
This suggestion cannot be adopted, because section 206(b) of the 
Federal Land Policy and Management Act of 1976 requires that the 
Federal and non-Federal lands involved in an exchange must be located 
in the same State.
    (e) Congressional designations. It was suggested that in the phrase 
``upon acceptance of title by the United States,'' the words ``United 
States'' be replaced with ``authorized officer.'' This change would not 
be legally correct, since title may be accepted in the name of the 
United States by means other than formal acceptance by an authorized 
officer. (See Sec. 254.16(a) of the final rule.)
    (f) Land and resource management planning. Several reviewers felt 
the proposed rule limited the consideration of exchange proposals to 
those consistent with existing agency land management plans. No change 
in the rule is necessary to be responsive to this concern. Agency land 
and resource management plans can be amended to recognize new 
information or changes in conditions.
    Another respondent felt that the regulations should not require 
that land use plans specifically authorize exchange of Federal land in 
question, stating that the land use plan could not foresee all exchange 
proposals. The proposed rule did not require that a land and resource 
management plan specifically authorize an exchange--only that an 
exchange proposal be consistent with the goals and objectives of the 
plan. This criterion is a requirement of the National Forest Management 
Act and agency policy, and, therefore, is retained in the final rule.
    Concern was also expressed that there was nothing in the 
regulations on identifying non-Federal lands for exchange; this 
respondent called for involving the private landowner from the 
beginning. This suggestion was not incorporated in the final rule, 
because land and resource management plans identify areas or specific 
tracts of non-Federal lands which the agency is interested in acquiring 
to effect consolidation. Private landowners have the opportunity to 
provide input in the planning process to help identify long-range goals 
and opportunities to pursue land exchanges. Since exchanges are 
voluntary, both the non-Federal landowner and the United States must 
agree to the exchange.
    Sometimes BLM lands are identified as needed to complete a land 
exchange involving non-Federal lands which would be suitable for 
National Forest System purposes. One respondent suggested that BLM 
lands suitable for such exchanges be identified in the BLM planning 
process. No change was made in the rule to respond to this question. 
Land and resource management plans for National Forest System lands do 
not identify BLM lands to be used in exchanges. Such exchanges occur 
only after negotiation between the non-Federal party and the agencies 
and must be consistent with BLM land use plans. The public interest 
determination will be made by BLM using the criteria specified in 43 
CFR 2200.0-6(b).
    (g) Environmental analysis. One respondent pointed out that this 
paragraph of the proposed rule suggested that the public is not invited 
to submit comments on the environmental consequences of the proposed 
land exchange. The Council on Environmental Quality regulations and 
Forest Service environmental analysis policy and procedure already 
address public notice and comment on environmental documents; 
therefore, it is not necessary to repeat these opportunities in this 
rule. In addition, Sec. 254.8 of the rule provides for public notice of 
the proposed exchange, with an opportunity for the public to submit 
timely comments which shall be considered in the environmental analysis 
of the proposed exchange.
    Finally, a concern was expressed that compliance with section 106 
of the National Historic Preservation Act is not mentioned. It would be 
impracticable to list in this paragraph all the statutory and 
regulatory requirements that must be considered in an environmental 
analysis. Cultural resources is only one of the many significant 
resources which must be considered. This rule does not limit or exclude 
any resources from consideration.
    (h) Reservations or restrictions in the public interest. Several 
respondents questioned the authority and need to use reservations or 
restrictions in the conveyance of Federal land. Two comments regarding 
authority focused on perceived conflicts between the Federal Land 
Exchange Facilitation Act and the Federal Land Policy and Management 
Act of 1976. One comment suggested that reservations or restrictions 
are not needed if the exchange is in the public interest. Another 
comment suggested conveying partial interests to third parties, in lieu 
of reservations or restrictions. Two respondents were concerned with 
the burden placed on the Federal and non-Federal parties by 
reservations or restrictions. One respondent suggested that the first 
sentence be deleted, since covenants create continuing administrative 
burdens for agencies and invite reciprocal restrictions.
    Section 206 of the Federal Land Policy and Management Act of 1976 
(FLPMA) and other statutory authorities provide for the use of 
reservations or restrictions, and the Department is unaware of any 
conflicts between FLPMA and the Land Exchange Facilitation Act. 
Identification of a need for reservations or restrictions begins with 
an agreement to initiate an exchange. Subsequent analysis will 
determine if the exchange is in the public interest, and if so, confirm 
whether reservations or restrictions are needed. The final rule allows 
alternative methods to protect resources other than reservations or 
restrictions, such as third party participation. Although reservations 
or restrictions may place burdens on both the Federal and non-Federal 
parties, the effects of reservations or restrictions would be 
considered by each party prior to a decision to proceed.
    A major utility company representative expressed the thought that 
the United States could retain title to, or administration of, lands 
involved in an exchange that are subject to rights-of-way. This is 
correct, the authority to reserve and retain any rights and interests, 
including rights-of-way permits, easements, or grants, when it is in 
the public interest, is provided in paragraph (h) of this section of 
the final rule.
    It was suggested that any covenants be developed in consultation 
with appropriate Federal and State agencies including the State 
Historic Preservation Officer. Covenants and restrictions may be 
developed to protect any Federal interests, including cultural 
resources, and consultation with appropriate Federal and State agencies 
occurs as a matter of course. Therefore, the final rule does not 
incorporate explicit language on consultation with State Historic 
Preservation Officers.
    One respondent stated that the Federal Land Policy and Management 
Act of 1976 exempts land exchange patents from including terms, 
covenants, or conditions. This is not correct. Section 206 of the 
Federal Land Policy and Management Act of 1976 supplements other 
existing Forest Service land exchange authorities and specifically 
provides authority to exchange an interest in land of less than fee 
estate. The authority to convey less than fee estate confers authority 
to accept terms and impose covenants, conditions, and reservations as 
determined by the Secretary as needed to protect the public interest.
    Three respondents suggested the United States retain a mineral 
royalty when exchanging Federal land. There is no statutory authority 
requiring the reservation of a royalty interest.
    One comment suggested that if Federal property has public interests 
so critical that they should be retained then the lands should not be 
exchanged. That is certainly a true statement and is the basis for 
turning down many proposals for land exchanges. However, in some cases 
both parties may be willing to accept reservations or covenants to 
protect critical interests, in order to make tenable an exchange that 
would otherwise be untenable.
    (i) Hazardous substances. One respondent suggested that the 
agencies require ``hold harmless agreements'' when conveying Federal 
lands affected by hazardous substances to a ``potentially responsible 
party.'' While ``hold harmless agreements'' are desirable, it is 
necessary to maintain the option for providing ``hold harmless 
agreements'' in negotiating land exchanges of critical public 
importance, in order to avoid discouraging non-Federal parties who are 
unable to assume such liability.
    One respondent pointed out a perceived inconsistency in the 
requirements for notification for private parties and the Federal 
government. The notice to the private party requires that ``known'' 
storage, release, or disposal of hazardous substances be addressed, 
whereas, the private party must notify the government of ``known or 
suspected * * *'' The respondent favored the broader application but 
suggested that, in any case, they should be consistent. The Department 
agrees. The rule has been revised to require both parties to give 
notice of only ``known'' storage, release, or disposal, in accordance 
with the minimum standard of the Environmental Protection Agency 
regulations at 40 CFR Part 373.
    The same respondent pointed out that the proposed regulations would 
require the Federal officer to determine whether hazardous substances 
are present on non-Federal lands but would not require such on Federal 
lands and recommended that the provisions be made consistent. This 
suggestion has been adopted. Paragraph (h)(1) of the final rule also 
requires the authorized officer to determine whether hazardous 
substances are present on the Federal lands.
    Several respondents proposed that the private parties only be 
required to provide a broad ``hold harmless'' indemnification if the 
government will reciprocate. This suggestion cannot be adopted. Under 
42 U.S.C. 9620, the United States is required not only to clean up any 
hazardous substances found on the Federal lands prior to conveyance, 
but also to warrant in the conveyance document to other than a 
``potentially responsible party'' that the United States will be 
responsible for any further cleanup necessary.
    Another respondent stated that a ``hold harmless agreement'' may 
not protect Federal interests from cleanup liability imposed by a third 
party. This comment is correct. A ``hold harmless agreement'' would not 
relieve the United States of any appropriate liability; however, it 
would provide a mechanism for compensating the United States for 
cleanup costs and claims after conveyance.
    It was suggested that the regulations state that the government is 
acquiring lands as an ``innocent purchaser.'' This suggestion was not 
adopted as it is doubtful that such a disclaimer in the rule would, in 
fact, establish the United States as an ``innocent purchaser'' in every 
case. In many cases, courts recognize that the owner of the property 
shares in whatever liability may exist.
    Two comments indicated the regulations failed to take into account 
a recent court ruling (Hercules, Inc. v. U.S. EPA, 938 F.2d 276, DC 
Cir. 1991) that the United States is responsible for hazardous 
substances on Federal land regardless of ownership at the time the 
substances were present, and suggested the phrase ``* * * during time 
of Federal ownership * * *'' be deleted. This suggestion was adopted 
and the phrase was deleted in the final rule.
    Another reviewer mentioned that 42 U.S.C. 9620 requires the 
conveyance document to contain a notice of hazardous substances on the 
Federal lands to be conveyed. The first sentence of paragraph (i)(1) of 
Sec. 254.3 was modified to include reference to this requirement.
    It should be noted that the Community Environmental Response 
Facilitation Act (106 Stat. 2174) was signed into law on October 19, 
1992, about one year after the proposed land exchange rules were 
published in the Federal Register. The procedural requirements of this 
statute, which amended the Comprehensive Environmental Response, 
Compensation, and Liability Act of 1980 (42 U.S.C. 9620(h)(4)), will be 
followed to the extent applicable to land exchanges, and the agencies 
will consider whether there is a need for future rulemaking in 
connection with this new law.
    (j) Legal description of properties. One respondent said that 
property description by legal survey is sometimes difficult and 
suggested that the rule be amended to provide for use of a map as an 
alternative. This suggestion cannot be adopted. Department of Justice 
standards and Public Land Survey System laws do not permit use of a map 
reference as a legal description of lands.
    Coordination with State and local governments. It was suggested 
that the Forest Service add a paragraph on Coordination with State and 
Local Governments similar to that included in the BLM proposed rule. In 
response, the final rule was amended at Sec. 254.8(a) to specifically 
provide for notifying State and local governments of proposed 
exchanges. In addition, Sec. 254.13(a)(2) of the final rule also 
provides for Forest Service notice to State and local governments when 
a decision is made to proceed with an exchange.
    Two respondents expressed concern that local government plans and 
land use ordinances be noted and respected in the exchange process. One 
suggested including a provision to require a consistency review by the 
State government. Paragraph (h) of this section of the rule states that 
the lands conveyed out of Federal ownership shall be subject to local 
government laws, regulations, and zoning, and Sec. 254.8 provides for 
notification of State and local governments. These provisions afford 
State and local governments full opportunity to conduct whatever 
reviews they feel are needed, including consideration of land uses and 
zoning, in commenting on a proposed exchange. Therefore, no additional 
reference to local plans and ordinances was felt to be needed in this 
final rule.
    Section 254.4--Agreement to initiate an exchange. A representative 
of an environmental group suggested a provision requiring full public 
input and, also, specifying that the National Environmental Policy Act 
(NEPA) process must begin as soon as the agreement is executed. The 
opportunity for public input will occur in accordance with the public 
notice and comments provisions of Sec. 254.8 of the rule. Additional 
public input opportunities will be dependent upon the level of NEPA 
analysis and documentation, which, in turn, is dependent upon the 
complexity of each exchange proposal. Generally, the NEPA process is 
begun soon after an agreement to initiate is executed.
    Another respondent suggested that the agreement to initiate should 
additionally detail who would be responsible for costs incurred to date 
in the event the exchange process is terminated prior to execution of 
an exchange agreement (or an exchange of titles). Such a requirement 
would be in direct conflict with paragraph (f) of this section and 
Sec. 254.14(d) of the rule, which provide that there are no obligations 
or reimbursement requirements in exchanges which are terminated short 
of a binding exchange agreement.
    One respondent questioned if a non-Federal party were to propose 
exchanging non-Federal lands within the boundaries of the National 
Forest System for public lands under the jurisdiction of BLM, would 
that party be required to indicate as a part of the proposal document 
that the offered land is covered by a Forest Plan showing the land is 
essential to the programs of the National Forest Sytem? No; the non-
Federal party would have no responsibility to determine whether the 
acquisition of the non-Federal land is consistent with the land and 
resource management plan. This would be a Federal responsibility.
    Another respondent suggested adding language requiring the 
authorized officer to meet with the non-Federal party and discuss 
proposed exchanges to the extent necessary prior to determining whether 
an agreement to initiate an exchange should be executed. The Department 
does not believe the rule needs to be burdened with such a requirement. 
Such advance meetings and discussions are commonplace and necessary to 
reach the point of entering an agreement to initiate. However, a 
meeting is not always needed, especially where a proposal is clearly 
infeasible or without merit.
    One respondent suggested language requiring the prospective parties 
to agree to a preliminary estimate of value prepared by a qualified 
appraiser if the property to be conveyed out of Federal ownership 
exceeds $150,000 in value. The preliminary estimate of value is a tool 
available to the parties to evaluate the feasibility of an exchange 
proposal. However, its use should remain discretionary, due to the 
added cost and to the fact that such an estimate by an appraiser is not 
always needed to estimate relative values of properties to be 
exchanged.
    One comment suggested that the preliminary estimate of value should 
reflect the intended use of the lands, thus eliminating the potential 
for unwarranted, substantial (``windfall'') profits by the non-Federal 
landowner. This suggestion was not adopted. The appraisal process 
cannot be used to identify windfall profits. However, in preparing any 
estimate of value, an appraiser must take into consideration all 
probable uses of the property, including the proposed or intended use. 
Appraisal standards require that these uses be legal, economically 
feasible, and physically possible and that appraisals reflect the 
highest and best use (i.e., the most profitable use) of the property. 
The intended use may not always be the highest and best use of the 
property, the value of which, nevertheless, must be considered in 
arriving at the estimated land values. To disregard an important 
element of information that may influence market value would be 
improper.
    A number of comments were received on the listed requirements for 
an agreement to initiate an exchange. One respondent suggested that a 
form be developed listing the information needs for a Federal land 
exchange to help determine whether an exchange is feasible. This 
suggestion was not adopted. A standard form listing all the information 
necessary to determine the feasibility of a Federal land exchange is 
impracticable because the information required depends upon the 
particular situation.
    Another respondent was of the opinion that identification of the 
non-Federal lands should not be mandatory in the agreement to initiate, 
since the environmental review process could result in changes of 
included lands. While amendment of the involved lands may occur at any 
time during the process, identification of all lands which might be 
included in the final transaction of the exchange is necessary in the 
agreement to initiate, as that document is the source of the 
descriptions in the public notice of the proposal. Therefore, this 
recommendation was not adopted in the final rule.
    Several additions to the current list of requirements were 
suggested. These included: a citation of the exchange authority; a 
statement regarding the need for segregation of the Federal lands once 
the exchange is started; and identification of the status which the 
acquired lands would assume following title acceptance by the United 
States and termination of the 90-day segregation period. It was also 
suggested that the appropriate U.S. officer having jurisdiction over 
title records for lands and minerals review these items. Such 
considerations, while essential to completion of an exchange, are 
generally not elements of the exchange upon which agreement must be 
reached, rather, they are administrative processes and considerations 
that occur in analyzing a proposed exchange. Therefore, this suggestion 
is not included in the final rule.
    Two respondents suggested revisions to the requirements for 
identification of the parties involved in the exchange. One respondent 
suggested a full disclosure of any holding companies, officers, 
directors, holders of significant blocks of stock, campaign 
contributions made to holders of Federal office, and any agreements 
made for subsequent sale or exchange of lands to be acquired from the 
Federal government. This suggestion cannot be adopted.
    One industry representative had dual concerns that all known uses 
be identified in the ``agreement to initiate'' and that right-of-way 
grants be specifically identified as an authorized use. Paragraph (c) 
of Sec. 254.4 was amended to adopt this recommendation, in order to 
assure that all affected parties can be considered and notified.
    Another industry respondent pointed out that proposed 
Sec. 254.4(c)(7) would require documentation of any agreed upon 
compensation of assumed costs which are normally the responsibility of 
the other party, but that nowhere in the regulation are these 
responsibilities laid out. It was suggested that the final rule spell 
out what costs are normally to be borne by either party. Section 254.7 
of the rule gives a partial listing of costs for which compensation may 
be made, but it would be inappropriate to assign responsibility in this 
rule, as responsibilities may vary between localities. The assignment 
of responsibility is best made by the authorized officer, in accordance 
with local common practices.
    Another respondent suggested that the requirement of paragraph 
(c)(11) of this section of the proposed rule, regarding relocation of 
tenants on involved non-Federal lands, should apply on an equal basis 
to the Federal lands and any occupants. This suggestion was not 
adopted. The application of relocation benefits pursuant to the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 
1970 (42 U.S.C. 4601, 4651) applies only to qualified displaced parties 
on acquired non-Federal lands. Under paragraph (c)(3) of this section 
of the rule, there is a requirement to identify any legitimate users of 
the involved Federal lands authorized to occupy those lands. Section 
254.15(c)(2) of the rule specifies the measures required to protect 
such authorized users.
    Two parties asked that paragraph (c)(11) also be used to establish 
the sequence and timelines for other required reports or clearances. 
The requirement that the agreement provide a timeline is already 
specified in paragraph (c)(5) of this section; the sequence of 
preparing or approving required reports is subject to negotiation and 
agency administrative procedures.
    Another respondent recommended deleting the entire second sentence 
of paragraph (d) of this section of the proposed rule, which provided 
that, in the absence of current market information reliably supporting 
values, the parties may agree to use other acceptable and commonly 
recognized methods to estimate values. This respondent said that this 
provision is ``inconsistent with'' and would ``eviscerate'' Sec. 254.9 
of the rule. To the contrary, this provision is identical to the 
provision of Sec. 254.9(b)(3) of the rule. This provision allows the 
use of other methods to determine the value of unique properties, for 
which there are no comparable sales.
    Several respondents questioned whether any authority exists to deny 
appeal rights to exchange proponents, or anyone else, when the Federal 
or non-Federal parties withdraw from an exchange proposal as provided 
in paragraph (g) of this section of the proposed rule. One of the 
parties recommended deleting this paragraph. Another felt there should 
be no appeal if the non-Federal party withdraws. The final rule retains 
paragraph (g) as proposed. As provided by Sec. 254.4(c) of the rule, an 
agreement to initiate an exchange is nonbinding on all parties. An 
administrative appeal opportunity is, therefore, illogical and 
meaningless. However, pursuant to Sec. 254.13, final notices of 
decision of the Federal authorized officer are appealable.
    Section 254.5--Assembled land exchanges. This section of the 
proposed rule addressed procedures to be followed when an entity has 
assembled non-Federal parcels from multiple ownerships and offers the 
assembled parcels for exchange as one transaction. Several States 
expressed concern that under the proposed regulations States might be 
considered single owners of multiple parcels involved in an exchange, 
resulting in lower appraised values, when compared with an assembled 
multiple ownership exchange. States or any other landowners may qualify 
for assembled land exchanges and the valuation procedures discussed in 
Sec. 254.9(b), if they assembled the offered non-Federal parcels from 
multiple ownerships, in accordance with the terms of an agreement to 
initiate. This provision of the final rule did not change from the 
proposed.
    Section 254.6--Segregative effect. This section of the proposed 
rule provided for withdrawal of Federal lands and interests in lands 
from entry under public land and mineral laws for up to 5 years when a 
proposal is made to exchange Federal lands. One respondent felt that no 
further segregation authority should be provided because too much land 
has been withdrawn in the past. Another felt the statutory authority 
for the five-year segregation is limited to the ``mining laws'' not the 
``public land laws.'' This rule provides no additional segregation 
authority, but merely allows segregation by record notation in lieu of 
publication in the Federal Register. It is true that the Federal Land 
Exchange Facilitation Act only allows for segregation from 
appropriation under the mining laws. However, public land law 
segregation to protect the Federal and non-Federal parties from 
competing lands actions during consideration of an exchange is 
authorized by section 204(b) of the Federal Land Policy and Management 
Act of 1976; that authority was not rescinded by the Federal Land 
Exchange Facilitation Act. Segregation of lands provides stability 
which allows appraisal of values and processing toward conveyance 
without disruption from subsequent entry onto the Federal lands. 
Accordingly, this provision was retained in the final rule.
    One respondent raised a question regarding the effect on right-of-
way authorizations that expire during the segregative period. That 
respondent felt that the holder of a right-of-way should have the 
ability to renew during the period of segregation. The rule would not 
prohibit such renewal. The segregation is from the mining laws and the 
public land laws only. The public land laws as defined in Sec. 254.2 of 
the rule deal with the disposal of National Forest lands reserved from 
the public domain. Rights-of-way are not disposal actions and, 
therefore, are not affected by the segregation.
    Section 254.7--Assumption of costs. This section of the proposed 
rule sets out those costs the authorized officer may assume without 
compensation and how parties may be compensated for assumption of costs 
normally borne by the other party. Thirty-one comments were received on 
this section of the proposed rule. A major concern of the respondents 
related to the criteria in paragraph (b) that determine if the 
authorized officer can compensate the other parties for assumption of 
costs or assume the costs without compensation from the other parties. 
They felt these criteria placed unwarranted limitations on the exercise 
of the cost compensation authority granted by the Federal Land Exchange 
Facilitation Act. The Act requires the Secretary to determine if it is 
in the public interest to make adjustments to values by compensating 
the non-Federal party for assuming certain costs. Therefore, it is 
necessary in the rule to establish when Federal compensation or 
assumption of costs is in the public interest. Failure to do so would 
provide an environment that could foster arbitrary, capricious, and 
inconsistent decisions. These criteria are retained without change in 
the final rule to ensure that compensation for costs assumed is in the 
public interest.
    A concern was expressed that cash equalization funds for 
compensation not be restricted to specific exchanges but be available 
in a general exchange fund so processing is not affected by budget 
delays. Cash equalization funds are appropriated and made available to 
the Forest Service in a general fund for use in any qualifying land 
exchange. Therefore, Federal cash equalization needs seldom delay case 
processing.
    One respondent suggested that compensation be allowed whenever it 
is in the best interest of both parties, rather than on an 
``exceptional basis.'' Mutual interest is an essential ingredient of 
every land exchange; however, the government must be concerned with the 
aggregate effect of cost compensation. Without a limitation on Federal 
cost assumption compensation, the United States taxpayer could end up 
paying disproportionate costs in the aggregate for land exchange. 
Therefore, the Department believes the ``exceptional circumstance'' 
limitation is appropriate and necessary to protect the public interest 
and it has been retained in the final rule.
    It appeared to one respondent that there was no restriction on the 
adjustment of relative values, other than the 25 percent cap, to 
adequately protect the government from bearing undue costs. In fact, 
however, the Federal Land Exchange Facilitation Act states that the 
amounts to be compensated must be reasonable and must accurately 
reflect the value of the cost and service. This wording is incorporated 
in paragraph (b)(1) of this section of the rule as one of the five 
criteria that must be met before compensation can be paid. Each 
exchange has specific circumstances, so anything other than general 
restrictions could impede an exchange, which would be counter to the 
intent of the Act. The five criteria contained in paragraph (b), along 
with the 25 percent limitation of Sec. 254.12, offer the authorized 
officer reasonable parameters for ensuring that Federal assumption of 
costs or compensation for costs assumed by other parties is in the 
public interest.
    It was suggested that the term ``in the public interest'' be 
defined. A public interest determination involves many factors, as 
described in Sec. 254.3(b) of the rule. However, for purposes of 
assumption of non-Federal costs without compensation and for 
compensation of non-Federal parties who assume Federal processing 
costs, Sec. 254.7(b) of the rule sets forth the circumstances under 
which such purposes are deemed to be in the public interest. Therefore, 
this suggestion was not adopted.
    A suggestion was made to spell out which costs will be borne by 
whom within the agreement to initiate an exchange. As previously noted, 
Sec. 254.4(c) of the rule provides that an agreement to initiate must 
assign responsibility for costs and specify whether certain costs will 
be compensated.
    Two respondents stressed the need to list the costs associated with 
the completion of NEPA documentation as not necessarily being costs 
associated with the Federal government's portion of the exchange. This 
suggestion was not adopted. There are many requirements involved in a 
land exchange. Section 254.4(c)(6) of the rule requires an assignment 
of responsibility for performance of required functions and for costs 
associated with processing an exchange in the agreement to initiate. 
NEPA documentation is one of those required functions and is typically 
a responsibility of the Federal agency.
    One respondent wanted to make sure that the costs associated with 
the cultural resources survey, mitigation including excavation, 
reports, and coordination with the State Historic Preservation Officer 
(SHPO), are considered. This was adequately covered in the proposed 
rule and is retained in the final rule at Sec. 254.7(a)(2) which states 
that parties may agree to make adjustments in relative values to cover 
costs which include cultural resource surveys and mitigation.
    One reviewer suggested clarifying paragraph (b) is as it applies to 
agreement to initiate provisions under paragraph (a) of this section of 
the rule. The criteria for compensation or assumption of costs listed 
in paragraph (b) should be determined by the authorized officer, 
documented in either the agreement to initiate or in a separate 
document, and made part of the case record file for that land exchange.
    It was suggested that costs incurred by the non-Federal party as a 
result of the Federal government being a party to the exchange should 
be compensated by the government. This respondent further stated that 
paragraph (b) of this section of the proposed rule attempted to combine 
compensation to the non-Federal party with compensation for Federal 
costs and, thus, was vague. Each exchange is based on its own unique 
situation. The special requirements of each party, including the United 
States, must be addressed on a case-by-case basis. It would be 
unnecessary to require compensation of the non-Federal party as a 
standard matter of practice. In every exchange case, the authorized 
officer is required to establish which party has the responsibility for 
accomplishing and paying for each step of the exchange process. Those 
processes and their costs which are the responsibility of the United 
States will be borne by the Forest Service, unless the non-Federal 
party voluntarily agrees to assume them.
    Section 254.8--Notice of exchange proposal. Several respondents 
requested that the regulation specifically state that the State 
government be notified at the time of the notice of exchange rather 
than waiting until the notice of decision. One of these also requested 
that the congressional delegation be included in this notice of 
exchange proposal. These recommendations were adopted and are included 
in paragraph (a) of this section of the final rule.
    A right-of-way holder requested that notice be provided to the 
authorized users concurrent with the publication of the first newspaper 
notice. Concurrent notice to all authorized users, including right-of-
way holders, was specified in paragraph (a) of this section of the 
proposed rule and is retained in the final rule.
    One respondent questioned if the notice would be published in all 
newspapers in the counties in which the lands to be exchanged are 
located. Paragraph (a) of this section of the rule requires a notice to 
be published in a newspaper of general circulation in the counties 
where the Federal and non-Federal lands involved in the exchange 
proposal are located. That could require publication in one or more 
newspapers, or in a single newspaper that covers several counties, as 
needed to notify the public.
    One respondent suggested that paragraph (a)(4) of proposed 
Sec. 254.8 be revised to make it clear that public comments regarding 
the environmental impacts of the proposed exchange are being sought. 
This respondent also felt paragraph (a) should include a statement 
describing the present use and proposed use of the lands to be 
exchanged and asked for clarification of the meaning of ``description'' 
of the lands being considered for exchange. Paragraph (a)(4) of the 
proposed rule stated that comments would be sought from the public and 
that timely comments would be considered in the environmental analysis 
of the proposal; however, the language was not as clear as it might be. 
Therefore, in the final rule, paragraph (a)(4) has been revised to make 
clear that the public is invited to submit any comments on or concerns 
about the exchange proposal, including advising the agency on any liens 
or other encumbrances or claims related to the lands. Paragraph (b) 
then links receipt of these comments to the environmental analysis. As 
previously noted, additional opportunity for public input during 
environmental analysis will be offered as appropriate. A primary 
purpose of the notices of exchange proposal is to identify those 
persons with interests in the lands or claims against the involved 
properties. To facilitate such notification, the properties must be 
described legally. However, the authorized officer may include 
additional information, as appropriate, for ease of identifying the 
lands. Information regarding intended uses of the involved lands is 
always available at the local agency office.
    Two respondents expressed confusion as to when the public is 
notified. The public is notified first of a proposed exchange when the 
parties enter into an agreement to initiate and again when a decision 
is reached.
    Two respondents suggested that the notice to authorized users 
should be by certified mail. However, this suggestion was not adopted; 
the authorized officer needs the freedom to choose the best and most 
appropriate means to notify authorized users, including certified mail.
    A State government official requested that notice be given by 
Federal Register publication. Although Federal Register notice would 
reach groups on a national scale, newspaper publication is a more 
effective way to reach most interested and potentially affected persons 
and groups. This, in combination with the direct notice requirements of 
paragraph (a), will ensure effective notice. Additional requirements to 
give notice in the Federal Register would be administratively 
burdensome, costly, and redundant.
    One respondent expressed confusion as to how the notice of exchange 
proposal relates to forest plan notices. Unless the proposed exchange 
requires a land and resource management plan amendment or revision, the 
notice of exchange proposal has no relationship to land and resource 
management planning.
    In addition to the changes made in response to comments, paragraph 
(a) was revised in the final rule to explicitly require that the notice 
of exchange proposal include the deadline for comments to be received 
and the name, title, and address of the official to whom comments 
should be sent and from whom additional information may be obtained.
    Some respondents suggested that minor modifications to the notice 
of exchange, for example, in the case of acreage adjustments to 
equalize values, should not have to be republished because 
republication would be counter to the intent to expedite exchanges. 
Minor corrections of descriptions or acreages or reduction of published 
acreages to achieve equal values do not require republication. However, 
any addition of new lands to achieve equal values, not previously 
published, will require republication. This was a provision of the 
proposed rule and is retained in the final rule.
    Section 254.9--Appraisals. A respondent expressed concern with the 
reference to the Uniform Appraisal Standards for Federal Land 
Acquisitions, since those standards are focused on acquisition under 
threat of condemnation; the respondent recommended instead that the 
Standards of Professional Practice promulgated by the American 
Institute of Real Estate Appraisers (now the Appraisal Institute) be 
adopted as the accepted standard. This recommendation cannot be fully 
adopted. The Federal Land Exchange Facilitation Act directs the 
agencies to comply with appraisal standards set forth in ``Uniform 
Appraisal Standards for Federal Land Acquisitions'' to the extent 
practical. The appraisal standards adopted in this rule are consistent 
with that direction. However, some aspects of the Uniform Standards of 
Professional Appraisal Practice regarding appraisal standards, which 
the Appraisal Institute has adopted, have been incorporated in 
Sec. 254.9 of this rule.
    Two professional appraisal organizations suggested that BLM and the 
Forest Service adopt the Uniform Standards of Professional Appraisal 
Practice to assure consistency and quality in appraisals. The Uniform 
Standards of Professional Appraisal Practice include standards for all 
categories of appraisal, including real and personal property, and are 
more general than the Uniform Federal Standards. The Uniform Appraisal 
Standards for Federal Land Acquisitions set detailed requirements for 
the act or process of estimating value. Since the Uniform Standards of 
Professional Appraisal Practice define an appraisal report differently 
from that generally recognized by Federal agencies, this suggestion was 
not adopted. The appraisal standards in this rule apply specifically to 
land exchanges entered into by BLM and the Forest Service. They reflect 
standards applicable to exchange transactions and appraisals or 
appraisal reports as defined in Sec. 254.2 of the rule. The standards 
are consistent with the Uniform Standards of Professional Appraisal 
Practice and incorporate the Government-wide Uniform Appraisal 
Standards for Federal Land Acquisitions: Interagency Land Acquisition 
Conference 1992 (Washington, DC, 1992), ISBN 0-16-038050-2 and the 
Department of Transportation standards of appraisal (49 CFR part 24, 
subpart B).
    (a) Appraiser qualifications. Several comments were received 
regarding the proposal to require appraisers to be certified or 
licensed under State law. Two believed requiring all appraisers to be 
State certified or licensed was impractical and possibly premature, 
since many States have not fully enacted their appraisal certification 
laws. One of the two suggested that State certification or licensing 
should be a goal and not a requirement. Two professional appraisal 
organizations expressed support for the provision.
    Eighteen States currently require all appraisers to be either 
certified or licensed regardless of the type of real estate 
transaction. The remaining States require only those appraisers 
involved in appraising property for Federally regulated financial 
agencies to be certified or licensed. In some States, appraisers not 
involved in Federally related financial transactions may voluntarily 
become certified or licensed.
    Federal real estate appraisers performing appraisal assignments 
related to their jobs are generally exempt from State licensing 
requirements. However, for purposes of supporting uniform national 
standards for appraisers, it is important that agency appraisers be 
qualified and meet training and experience standards adopted by State 
regulatory agencies. To eliminate potential problems resulting from 
uneven progress by the States in implementing certification or 
licensing requirements, the final rule has been revised to require 
qualified appraisers to possess qualifications consistent with State 
regulatory requirements meeting the intent of Title XI of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989.
    Consequently, the agency will assist and encourage staff appraisers 
to become certified or licensed. Where it is unnecessary or impractical 
to meet State requirements, staff appraisers will possess 
qualifications consistent with generally accepted State regulatory 
requirements in other States as established by each agency.
    One State government agency explained that its staff appraisers 
were exempt from certification requirements under the State law. This 
official suggested that the rule be revised to clearly indicate that 
State agency staff appraisers who are exempt from the State 
requirements be recognized as being qualified to do exchange proposals. 
This suggestion was partially adopted. Appraisers exempt from State law 
do not have to be certified or licensed. However, the appraisers in 
Federal land exchanges must meet standards generally comparable to 
State training and experience qualifications as established by the 
Forest Service and BLM.
    Another comment expressed concern that criteria for a qualified 
appraiser did not address reciprocity; i.e., a State agreement to 
accept State certification and licenses issued by other States. This 
person felt that unless the States generally agreed on qualification 
standards that permitted reciprocity, it would be difficult for agency 
and contract appraisers to appraise in States other than those in which 
they are certified or licensed. Inconsistent State standards will 
hamper the free flow of appraisal services across State boundaries; 
however, reciprocity is a State issue, not a matter under Forest 
Service or BLM jurisdiction. Therefore, the rule was not revised to 
address reciprocity.
    The definition of a qualified appraiser contained in the proposed 
rule included a provision that the appraiser be approved by the 
authorized officer. Three persons suggested this was unfair and that 
instead, the parties should agree on selection of the appraiser. The 
authorized officer must approve the appraiser agreed upon and selected 
by the parties. As provided in Sec. 254.4 of the proposed rule and 
retained in the final rule, the parties, in arranging for appraisals, 
must agree on the selection of a qualified appraiser.
    One person interpreted the first sentence in paragraph (a)(1) of 
this section of the proposed rule to require the agency to use one 
appraiser for both the Federal and non-Federal lands in all cases. This 
respondent suggested the paragraph be changed to allow use of a second 
appraiser when only one side of an exchange is in dispute. There was no 
intention to require only one appraiser to appraise both the Federal 
and non-Federal lands. In response, the final rule refers to 
``appraisers'' to alleviate this potential misunderstanding.
    (b) Market value. Paragraph (b) of Sec. 254.9 of the proposed rule 
set out standards to guide appraisers. A respondent suggested that 
paragraph (b)(1)(iii) be modified to require that consideration of 
prices paid for similar properties be limited to properties ``in the 
same general location as the subject property.'' This limitation would 
severely restrict an appraiser's analysis of properties possessing 
unique historic, wildlife, recreation, wilderness, scenic, or other 
resource values, for which comparable property transactions may be 
beyond the general location of the subject property; therefore, the 
suggestion was not adopted.
    Several comments were received asking that the list of resource 
values in paragraph (b)(1)(iii) of this section of the proposed rule be 
expanded to include watershed and archaeological values. This 
suggestion was not adopted. It is impracticable to list all resource 
values to be considered by the appraiser, and the list is merely 
suggestive, not all inclusive. The phrase ``and other resource values 
or amenities'' covers all other resources that may have value in the 
private competitive market, including watershed and archaeological 
values.
    A reviewer suggested that paragraph (b)(1)(iv) of this section of 
the proposed rule be revised to require the appraiser to consider water 
rights along with timber and mineral interests. The reviewer noted that 
water rights may be transferred in an exchange, but, depending on the 
State, may not be considered to be an ``interest in the land.'' This 
suggestion was adopted.
    Several comments were received indicating an apparent conflict 
between instructions in paragraphs (b)(1)(v) and those in (b)(1)(vi) of 
this section of the proposed rule, regarding how to appraise multiple 
properties in an assembled exchange. Paragraphs (b)(1) (v) and (vi) of 
the proposed rule were combined into paragraph (b)(1)(v) of the final 
rule to clarify that if stipulated in an agreement to initiate, lands 
assembled from multiple ownerships can be appraised separately.
    Several people commented on proposed paragraph (b)(1)(vii), which 
would have required the appraiser to disregard any change in market 
value caused by the intent of the agency to acquire the non-Federal 
property. One recommended ``similar protection'' for the non-Federal 
party. Another suggested adding an exclusion for property where the 
intended use is the highest and best use. Another stated that this 
paragraph ``clearly violates'' the provision of the Act that requires 
that the same nationally approved appraisal standards be used in 
appraising both the Federal and non-Federal lands. This respondent 
further stated that the paragraph should be deleted or the non-Federal 
parties should be afforded the same protection. In response, the 
Department believes these are valid points and has removed this 
provision from the final rule.
    A mining industry association suggested that this paragraph of the 
rule include a statement that appraisers should disregard any increase 
in value to Federal lands resulting from a non-Federal party's 
particular need to acquire the land. It was the association's belief 
that appraisers overvalue Federal lands adjacent to operating mines. 
This suggestion was not adopted, since the appraiser must take into 
consideration all potential buyers and uses of the property, including 
possible purchase by adjacent property owners. The value estimation 
should reflect motivational factors evident in similar transactions, 
i.e., sales of abutting lands.
    One respondent thought that standardized appraisal methods may not 
be applicable to exchanges in Alaska, as there are very few sales, 
lands are often unsurveyed, and very little information is available 
regarding resource values, particularly mineral values. This person 
suggested that the authorized officer be permitted to instruct the 
appraiser to use the best procedure available to provide a reasonable 
estimate of value. This contingency was already provided for in 
proposed paragraph (b)(2) of this section, which would allow the 
authorized officer to use other acceptable methods to estimate values 
when market information is not readily available. This provision is 
retained as paragraph (b)(3) in the final rule.
    One reviewer suggested reliance on the ``departure'' provisions of 
the Uniform Standards of Professional Appraisal Practice, which would 
permit an appraiser to indicate the basis for using only the market 
approach to value (as opposed to all three approaches--market, cost, 
and income). This suggestion was not adopted, as the principal 
direction for Federal appraisals comes from the Uniform Appraisal 
Standards for Federal Land Acquisitions, which specifies the direct 
comparison or market approach as the preferred approach. The Uniform 
Standards of Professional Appraisal Practice supplements the Federal 
standards.
    In addition to the changes made in response to comments, paragraphs 
(b)(1)(vi)(A), (B) have been redesignated in the final rule as 
paragraphs (b)(2)(i), (ii) for clarity. Paragraph (b)(2) is thus 
redesignated as (b)(3) in the final rule.
    (c) Appraisal report standards. Three respondents expressed concern 
that language contained in paragraph (c)(5) of this section of the 
proposed rule was vague and could subject appraisers to open-ended 
liability regarding disclosure of potentially hazardous environmental 
conditions. Upon review, the Department agrees with these comments. As 
a result, this provision has been modified to require the appraiser to 
disclose in the appraisal report any condition that is observed during 
the inspection of the property or becomes known to the appraiser 
through normal research that would lead the appraiser to believe that 
hazardous substances may be present on the property being appraised.
    One person expressed concern over the lack of sufficient safeguards 
against potential ``windfalls.'' This respondent suggested that two 
independent appraisals be required on exchanges when land values exceed 
$300,000. Such a requirement is unnecessary, as dollar thresholds are 
not reliable indicators that an appraisal assignment is complex and, 
therefore, requires another independent valuation. Further, such a 
regulatory requirement would increase processing costs and could delay 
a land exchange. The need for two appraisals should be determined by 
the parties involved in an exchange and should be based on the 
complexity of the appraisal.
    One respondent observed that parties to an exchange would be 
required to invest considerable time and expense in conducting studies, 
appraisals, and title clearance before an informed decision could be 
made whether to pursue the exchange. Since values can change over a 
period of time, it was suggested that once the parties agree on value, 
those values be binding for a period of not to exceed two years. This 
suggestion was not adopted. The parties must agree to pursue an 
exchange early in the process, in an agreement to initiate, before 
incurring any significant investment of time and expense. However, 
until a binding exchange agreement is entered all parties are subject 
to loss of their investments if any party decides that the proposed 
exchange is no longer feasible. The signing of a binding exchange 
agreement pursuant to Sec. 254.14 fixes the agreed upon values and 
commits the parties to continue until the transaction is completed. 
This avoids last-minute changes in values and other elements of the 
exchange which could jeopardize the stability that is necessary for 
closing any real estate transaction.
    Another person suggested that paragraph (c)(10)(ii) of this section 
of the proposed rule, requiring all appraisers to certify that they 
personally examined all comparable sales, could be unrealistic. This 
reviewer felt that since comparable properties may be located in many 
different areas of a State or other regions of the country, this 
provision may be unnecessarily costly and lead to inordinate delays. 
This suggestion was not adopted. It is a long-standing requirement of 
Federal appraisal standards and a requirement of the Uniform Standards 
of Professional Appraisal Practice that an appraiser must make a 
personal on-site examination of the comparable sales to perform an 
accurate comparative analysis.
    (d) Appraisal review. There were few comments regarding appraisal 
review. However, one appraisal organization concurred with the outlined 
review process and suggested requiring additional education and 
experience for an appraiser to be considered a qualified review 
appraiser. Although additional education and experience are always 
desirable, the standards set forth in paragraph (a) of this section of 
the rule are adequate in that they require the appraiser to possess the 
minimum qualifications consistent with State regulatory requirements 
meeting the intent of Title XI of the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989.
    Other comments suggested that the review appraiser should be an 
agency employee and that the reviewer should be appointed by the 
authorized officer. These suggestions were not adopted. Paragraph (a) 
of this section of the final rule would allow reviewers to be employees 
or contractors of the Federal or non-Federal exchange parties, to 
provide for those situations when it is in the public interest to use a 
qualified non-Federal review appraiser. Additionally, it should be 
noted that the authority to review appraisals is delegated by the 
Secretary to the Chief Appraiser, instead of to the authorized officer, 
to maintain the independence of the valuation process from the exchange 
negotiation process.
    Section 254.10--Bargaining; arbitration. Sixteen comments were 
received on this section of the proposed rule objecting to: (1) 
Appointment of an arbitrator by the Secretary; (2) allowing an 
arbitration decision to be binding for a period not to exceed 2 years; 
(3) allowing the agency 180 days for review of the appraisal; and (4) 
limiting arbitration to issues regarding value of the property. No 
change was made to the rule in response to these comments, as these 
provisions are specific requirements of section 3 of the Federal Land 
Exchange Facilitation Act.
    One person felt this section should clarify who would pay the costs 
of arbitration. This suggestion was not adopted. First, the costs of 
arbitration may be addressed in an agreement to initiate. Second, if 
the parties have not reached prior agreement on paying arbitration 
costs, the rules of the American Arbitration Association, which the 
Exchange Facilitation Act specifies must be used, provide for the 
assignment of costs.
    Section 254.11--Exchanges at approximately equal value. One 
respondent felt the $150,000 limit was too high and recommended 
establishing a level consistent with the Uniform Relocation Assistance 
and Real Property Acquisition Policies Act of 1970. This suggestion was 
not adopted. The $150,000 limit was established by the Federal Land 
Exchange Facilitation Act of 1988.
    Section 254.12--Value equalization; cash equalization waiver. One 
respondent stated that the rule should provide safeguards against 
windfalls, asserting that non-Federal parties acquiring property under 
the guise of an equalization payment are actually purchasing that land 
with no competition. This suggestion was not adopted, as section 206(b) 
of the Federal Land Policy and Management Act of 1976 established 
sufficient restrictions to limit the use of cash equalization payments 
in land exchanges to the minimum necessary.
    One respondent stated that BLM should have the same prohibition on 
waiving payments as the Forest Service. Another felt that the Forest 
Service should revise its rule on cash waivers to be in line with BLM. 
This recommendation cannot be adopted. The Exchange Facilitation Act's 
prohibition on waiver of payment of cash equalization applies only to 
the Secretary of Agriculture.
    It was suggested that the 25 percent limitation not be applied in 
Alaska and that the guidance of the Alaska National Interest Lands 
Conservation Act should be used instead. This is already accommodated 
in Sec. 254.1(c) of the rule, which specifies that the rules apply to 
exchanges made under the authority of the Alaska Native Claims 
Settlement Act or the Alaska National Interest Lands Conservation Act, 
except to the extent to which the rules conflict with provisions of 
those Acts.
    Two respondents were concerned about the 25 percent limitation 
imposed by the regulations. One felt this limitation is not in 
compliance with the Federal Land Policy and Management Act of 1976 and 
the Federal Land Exchange Facilitation Act, and that while section 
206(b) of the Federal Land Policy and Management Act of 1976 limits 
equalization to 25 percent of the value of the Federal lands, the 
Exchange Facilitation Act provides that any adjustment can be made to 
the relative value of the lands for assumption of costs. The respondent 
asserted that, therefore, these limitations are independent. The other 
felt the agency is limiting the ability to complete exchanges with this 
provision. The Exchange Facilitation Act provides discretionary 
authority to the Secretary to adjust relative values to compensate for 
costs assumed in accordance with terms of the Agreement to Initiate. In 
accordance with Sec. 254.7 of the rule, such compensation will be made 
by cash equalization payment under authority of section 206(b) of the 
Federal Land Policy and Management Act of 1976, and therefore, will be 
subject to the 25 percent limitation of that authority.
    Section 254.13--Approval of exchange; notice of decision. A State 
agency felt that notification to States will occur too late as all 
appraisals and reviews will have been completed. The notice under this 
section of the rule advises interested and concerned individuals and 
organizations that the proposed exchange has been approved. The earlier 
notice of exchange proposal sent to State and local governments, and 
others, under Sec. 254.8 of the rule, is intended to provide all who 
are interested an opportunity to comment on the proposed exchange 
before the appraisal(s) and environmental analysis.
    One respondent recommended that the Forest Service appeal 
regulations be amended to incorporate land exchange decisions as 
appealable actions. This recommendation was not adopted. Land exchange 
decisions are subject to Forest Service appeal regulations at 36 CFR 
part 217 and part 251, subpart C. This section of the land exchange 
rules merely informs readers of the applicability of the appeal 
regulations.
    In response to a reviewer who asked when the appeal period would 
begin, paragraph (b) of this section of the rule was revised to be 
consistent with the administrative appeal regulations which specify 
that the appeal period begins after publication of a notice of the 
decision.
    Some respondents addressed the duplicative publication of 
information required by the two exchange notices and the associated 
increased workload. While there are two publication requirements, each 
serves a different purpose. The first is essential to apprise the 
public of the agency's intent to initiate a land exchange and to obtain 
public comment. The second notice is equally important; it provides 
notice of the final decision on the proposal and affords the 
opportunity for appeal.
    Two respondents expressed concern that, because of the notice and 
appeal procedures, appraisals may become outdated before completion of 
an exchange. Paragraph (a) of Sec. 254.14 of the rule addresses that 
contingency. When there is concern that consummation of a land exchange 
may be delayed beyond the life of the appraisal(s), the parties to the 
exchange have the option of entering a binding land exchange agreement, 
upon approval of the exchange, which serves to lock in the appraised 
values.
    Section 254.14--Exchange agreement. One respondent suggested that 
an appraisal could be reviewed and approved in advance of an exchange 
agreement. No change in the rule is needed. The appraisal is always 
reviewed and approved in advance of entering an exchange agreement 
provided under this section of the rule.
    Section 254.15--Title standards. One respondent suggested expanding 
the discussion of the various types of conveyance documents and their 
associated degree of warranty. Since this rule does not change 
established methods of conveyance, this suggestion was not adopted. 
Detailed descriptions of the various forms of conveyance are addressed 
in other sources, such as Department of Justice title standards.
    One respondent suggested that this section be revised to state that 
title would be accepted by both parties as set forth in the agreement 
to initiate. This suggestion was not adopted. While the parties to an 
exchange may include general terms concerning case closing matters in 
an agreement to initiate, title acceptance is dependent upon 
instructions, requirements, and conditions which can be set forth only 
at the end of the exchange process, rather than at the beginning. The 
requirements for title acceptance are presented in Sec. 254.16 of the 
rule.
    Another remarked that the authorized officer should be given 
discretionary authority to acquire lands with reservations or 
outstanding rights that could be construed to interfere with Federal 
use or management of the land. This suggestion could not be adopted. 
Agency policy (Forest Service Manual 5430.3) requires that property 
acquired by the United States cannot contain reservations or 
outstanding rights that are inconsistent with the purpose for which the 
lands are being acquired.
    A spokesperson for an environmental group said that paragraph 
(c)(1)(iii) of this section of the rule should require the government 
to seek the costs of removing personal property from the lands to be 
acquired if the non-Federal party fails to do so. This does not need to 
be explicitly stated. This paragraph of the rule provides sufficient 
authority to the authorized officer to condition acceptance of title 
upon the removal of any personal property.
    Several respondents felt the proposed rule did not provide 
sufficient protection for existing third party special uses of Federal 
land following an exchange of title. As previously noted, Sec. 254.4 of 
the rule was revised to address authorized uses in the agreement to 
initiate. Further, agency policy (Forest Service Manual 5403.1 and 
5430.3) requires recognition and protection of authorized third party 
uses to the extent appropriate, although, if in the public interest, 
the regulations at 36 CFR 251.60(b) provide for termination or 
revocation of special-use authorizations if the involved lands are 
transferred out of Federal ownership.
    A respondent recommended that the non-Federal exchange party be 
required to offer a perpetual easement to replace the Federal 
authorization. This suggestion was not adopted. The United States has 
no general authority to require a non-Federal exchange party to offer 
any alternative use arrangement to the holder of a Federal special-use 
authorization. However, if the exchange party offers to continue the 
terms of an existing permit, then the termination or revocation of the 
Federal permit to facilitate an exchange is more justifiable. Although 
a land exchange party and an authorized user may agree to a permanent 
right of use, the users are generally granted authorizations with terms 
similar to the Federal authorizations by the non-Federal exchange 
party.
    Three comments offered by the ski industry stated that lands 
occupied by a ski area should not be exchanged without the specific 
consent of the permittee. This suggestion was not adopted, as holders 
of ski area permits are afforded the same consideration as is afforded 
other types of special-use holders. Federal special-use authorizations 
of all types are revoked or terminated to facilitate a land exchange of 
the involved Federal lands only when it is found to be in the public 
interest. In such case, the agency will encourage the non-Federal 
exchange party to reach agreement with the holder of a Federal special-
use authorization to furnish privileges equal to those enjoyed by the 
user under the Federal permit.
    A suggestion was received from one respondent that when a non-
Federal exchange party offers to provide for the continued use of the 
Federal lands, under substantially the same conditions after the 
exchange, objections raised by the third party user should not be 
permitted to prevent the completion of, or cause modifications to, a 
proposed exchange. To adopt this suggestion would require amendment of 
the agency's appeal rule. Moreover, it is unlikely to be in the best 
interest of a third party user to appeal if the same use and 
substantially same conditions have been offered. The failure of an 
authorized user to agree to terms offered by the non-Federal party, 
when their rights are protected generally, would not jeopardize the 
consummation of an exchange. However, the agency believes that the 
third party user should retain the right to an administrative appeal to 
protect the third party's interests.
    An industry respondent requested that the regulation clarify that 
(1) a mineral lease holder would not be required to negotiate with a 
non-Federal exchange party, (2) the holder of a Federal mineral lease 
could reject any proposed agreement from the non-Federal exchange party 
related to uses authorized by the lease, (3) the proposed regulations 
would have no effect on existing lease terms and conditions, and (4) 
BLM could not terminate or interfere with the exercise of valid lease 
rights, unless otherwise specifically provided for in the Federal 
lease. In recognition of the unique rights of holders of Federal 
mineral leases, paragraph (a)(2) of Sec. 254.15 of the rule has been 
revised to apply only to non-mineral leases.
    Another comment from the business sector was that the regulation 
should permit only those reservations to be placed on the Federal land 
that were first specified in the agreement to initiate. However, after 
an agreement to initiate is entered, additional rights and reservations 
may be identified that must be recognized. Therefore, the rule does not 
adopt this comment.
    A respondent suggested that proof of an agreement between the third 
party user and non-Federal exchange party should not be required at the 
time the exchange is approved but should be required upon entering into 
an exchange agreement. The Department disagrees. The decision to 
proceed with an exchange cannot be made without considering the effects 
of the proposal on authorized uses on the involved Federal lands.
    Section 254.16--Case closing. It was suggested that paragraph (a) 
of this section of the rule refer to patents or ``other documents of 
conveyance.'' However, patents and deeds are the only forms of 
conveyance by the Federal government.
    It was pointed out that acceptance of title needs to be precisely 
defined in order to determine when the 90-day segregation period 
begins. The Department agrees. This section has been revised to clarify 
that acceptance of title occurs upon recordation and that the 
segregation period for the acquired non-Federal lands terminates 
midnight of the 90th day after recordation.
    A reviewer suggested specifying that the authorized officer accept 
title and that the date of acceptance be noted on the land records. 
This suggestion has been partially adopted. Paragraph (b) of 
Sec. 254.16 of the final rule has been rewritten to state that title 
acceptance occurs upon recordation, rather than by action of the 
authorized officer, and provides for notation of the date of 
acceptance.
    One respondent felt that ``Case Closing'' was an inappropriate 
title and suggested ``Acceptance of Title'' instead. This section of 
the rule deals with automatic segregation in addition to title 
acceptance. Therefore, the more general title of ``Case Closing'' was 
retained.
    It was suggested that paragraph (b) of this section of the rule add 
the regulatory citation for withdrawal. A citation to 43 CFR part 2300 
has been added.
    Two respondents expressed concern that if the lands acquired are to 
be withdrawn, a 90-day segregation would be insufficient to complete a 
withdrawal. Although 90 days may not provide enough time to complete a 
withdrawal, further segregation may be possible upon withdrawal 
application under 43 CFR part 2300. Paragraph (b) has been revised to 
clarify that unless a withdrawal is initiated within the 90-day period, 
segregation will expire.
    An environmental group pointed out that exchanges are final only 
after the administrative appeal process had been completed. This is 
correct but no change was needed in the rule. Title does not transfer 
until any administrative appeal has been resolved, and the deed has 
been recorded.
    A State government respondent suggested that a time constraint be 
placed on the Office of the General Counsel review. This is undesirable 
and impracticable. Legal review of complicated title issues can be time 
consuming, but it is a critical step in any land exchange.
    Concern was expressed that in paragraph (a) of this section of the 
rule the word ``only'' reverses the meaning and intent of Section 3(a) 
of the Act and should be deleted. As previously noted, this paragraph 
has been revised in the final rule and this problem has been eliminated 
through the rewording.
    Section 254.17--Information requirements. The agreement to initiate 
an exchange and the exchange agreement required by Secs. 254.4 and 
254.14 of the rule represent new information requirements as defined in 
5 CFR part 1320, Controlling Paperwork Burdens on the Public. The 
agency estimates that each non-Federal party to a land exchange 
proposal will spend an average of 4 hours preparing and submitting the 
information required in an agreement to initiate an exchange and an 
exchange agreement.
    In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
3507) and implementing regulations at 5 CFR part 1320, the Forest 
Service requested, in conjunction with the publication of the first 
proposed rule, and, on August 3, 1989, received, approval from the 
Office of Management and Budget (OMB) for the information to be 
addressed in an agreement to initiate or an exchange agreement. The 
information collection was assigned OMB Control No. 0596-0105 and was 
approved for use through June 30, 1992. On May 1, 1992, the Forest 
Service requested approval of an extension of the information 
collection. That approval was granted by OMB on June 11, 1992. The 
information collection has now been approved for use through June 30, 
1995.

Regulatory Impact

    The rule has been reviewed under USDA procedures and Executive 
Order 12866 on Federal Regulations. It has been determined that this is 
not a significant rule. The rule contains minimum procedures necessary 
to implement the Exchange Facilitation Act. The rule will not have an 
effect of $100 million or more on the economy; will not substantially 
increase prices or costs for consumers, industry, or State or local 
governments; nor will it adversely affect competition, employment, 
investment, productivity, innovation, or the ability of United States-
based enterprises to compete in foreign markets.
    The rule has been considered in light of Executive Order 12630 
concerning possible impacts on private property rights. E.O. 12630 
exempts from takings implications assessment activities which are 
consensual in nature between the United States and non-Federal parties. 
Exchanges are consensual, and, therefore, do not raise takings issues. 
Accordingly, no further consideration of takings implications were 
deemed necessary in this rule.
    Moreover, this rule has been considered regarding the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), and it has been determined that 
this action will not have a significant impact on a substantial number 
of small entities.
    Section 31b of Forest Service Handbook 1909.15 (57 FR 43180; 
September 18, 1992) excludes from documentation in an environmental 
assessment or impact statement ``rules, regulations, or policies to 
establish Service-wide administrative procedures, program processes, or 
instructions.'' Based on consideration of the comments received and the 
nature and scope of this rulemaking, the Department has determined that 
this rule falls within this category of actions and that no 
extraordinary circumstances exist which would require preparation of an 
environmental assessment or environmental impact statement.
    This proposed rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. If this proposed rule were adopted, (1) all state 
and local laws and regulations that are in conflict with this proposed 
rule or which would impede its full implementation would be preempted; 
(2) no retroactive effect would be given to this proposed rule; and (3) 
it would not require administrative proceedings before parties may file 
suit in court challenging its provisions.

List of Subjects in 36 CFR Part 254

    Land Exchanges, National forests.

    Therefore, for the reasons set forth in the preamble, part 254 of 
Title 36 of the Code of Federal Regulations is hereby amended by 
revising subpart A to read as follows:

PART 254--LANDOWNERSHIP ADJUSTMENTS

Subpart A--Land Exchanges

Sec.
254.1  Scope and applicability.
254.2  Definitions.
254.3  Requirements.
254.4  Agreement to initiate an exchange.
254.5  Assembled land exchanges.
254.6  Segregative effect.
254.7  Assumption of costs.
254.8  Notice of exchange proposal.
254.9  Appraisals.
254.10  Bargaining; arbitration.
254.11  Exchanges at approximately equal value.
254.12  Value equalization; cash equalization waiver.
254.13  Approval of exchanges; notice of decision.
254.14  Exchange agreement.
254.15  Title standards.
254.16  Case closing.
254.17  Information requirements.

Subpart A--Land Exchanges

    Authority: 7 U.S.C. 428a(a) and 1011; 16 U.S.C. 484a, 485, 486, 
516, 551, and 555a; 43 U.S.C. 1701, 1715, 1716, and 1740; and other 
applicable laws.


Sec. 254.1  Scope and applicability.

    (a) These rules set forth the procedures for conducting exchanges 
of National Forest System lands. The procedures in these rules may be 
supplemented by instructions issued to Forest Service officers in 
Chapter 5400 of the Forest Service Manual and Forest Service Handbooks 
5409.12 and 5409.13.
    (b) These rules apply to all National Forest System exchanges of 
land or interests in land, including but not limited to minerals, water 
rights, and timber, except those exchanges made under the authority of 
Small Tracts Act of January 12, 1983 (16 U.S.C. 521c-521i) (36 CFR part 
254, subpart C), and as otherwise noted. These rules also apply to 
other methods of acquisition, where indicated.
    (c) The application of these rules to exchanges made under the 
authority of the Alaska Native Claims Settlement Act, as amended (43 
U.S.C. 1621), or the Alaska National Interest Lands Conservation Act 
(16 U.S.C. 3192), shall be limited to those provisions which do not 
conflict with the provisions of these Acts.
    (d) Unless the parties to an exchange otherwise agree, land 
exchanges for which the parties have agreed in writing to initiate 
prior to April 7, 1994, will proceed in accordance with the rules and 
regulations in effect at the time of the agreement.
    (e) Except for exchanges requiring cash equalization payments made 
available through the Land and Water Conservation Act of 1965, as 
amended (16 U.S.C. 460[1]9), the boundaries of a national forest are 
automatically extended to encompass lands acquired under the Weeks Act 
of March 1, 1911, as amended (16 U.S.C. 516), provided the acquired 
lands are contiguous to existing national forest boundaries and total 
no more than 3,000 acres in each exchange.
    (f) Exchanges under the Weeks Act of March 1, 1911, or the General 
Exchange Act of March 20, 1922, may involve land-for-timber (non-
Federal land exchanged for the rights to Federal timber), or timber-
for-land (the exchange of the rights to non-Federal timber for Federal 
land), or tripartite land-for-timber (non-Federal land exchanged for 
the rights to Federal timber cut by a third party in behalf of the 
exchange parties).
    (g) Land exchanges involving National Forest System lands are 
authorized by a number of statutes, depending upon the status 
(conditions of ownership) of such lands and the purpose for which an 
exchange is to be made. The status of National Forest System land is 
determined by the method by which the land or interests therein became 
part of the National Forest System. Unless otherwise provided by law, 
lands acquired by the United States in exchanges assume the same status 
as the Federal lands conveyed.
    (h) The Federal Land Policy and Management Act of 1976, as amended 
(43 U.S.C. 1701), is supplemental to all applicable exchange laws, 
except the cash equalization provisions of the Sisk Act of December 4, 
1967, as amended (16 U.S.C. 484a).


Sec. 254.2  Definitions.

    For the purposes of this subpart, the following terms have the 
meanings set forth in this section.
    Acquisition means the attainment of lands or interests in lands by 
the Secretary, acting on behalf of the United States, by exchange, 
purchase, donation, or eminent domain.
    Adjustment to relative values means compensation for exchange-
related costs, or other responsibilities or requirements assumed by one 
party, which ordinarily would be borne by the other party. These 
adjustments do not alter the agreed upon value of the lands involved in 
an exchange.
    Agreement to initiate means a written, nonbinding statement of 
present intent to initiate and pursue an exchange, which is signed by 
the parties and which may be amended by consent of the parties or 
terminated at any time upon written notice by any party.
    Appraisal or appraisal report means a written statement 
independently and impartially prepared by a qualified appraiser setting 
forth an opinion as to the market value of the lands or interests in 
lands as of a specific date(s), supported by the presentation and 
analysis of relevant market information.
    Approximately equal value means a comparative estimate of value of 
the lands involved in an exchange which have readily apparent and 
substantially similar elements of value, such as location, size, use, 
physical characteristics, and other amenities.
    Arbitration is a process to resolve a disagreement among the 
parties as to appraised value, performed by an arbitrator appointed by 
the Secretary from a list recommended by the American Arbitration 
Association.
    Assembled land exchange means an exchange of Federal land for a 
package of multiple ownership parcels of non-Federal land consolidated 
for purposes of one land exchange transaction.
    Authorized officer means a Forest Service line or staff officer who 
has been delegated the authority and responsibility to make decisions 
and perform the duties described in this subpart.
    Bargaining is a process other than arbitration, by which parties 
attempt to resolve a dispute concerning the appraised value of the 
lands involved in an exchange.
    Federal lands means any lands or interests in lands, such as 
mineral and timber interests, that are owned by the United States and 
administered by the Secretary of Agriculture through the Chief of the 
Forest Service, without regard to how the United States acquired 
ownership.
    Hazardous substances are those substances designated under 
Environmental Protection Agency regulations at 40 CFR part 302.
    Highest and best use means an appraiser's supported opinion of the 
most probable and legal use of a property, based on market evidence, as 
of the date of valuation.
    Lands means any land and/or interests in land.
    Market value means the most probable price in cash, or terms 
equivalent to cash, which lands or interest in lands should bring in a 
competitive and open market under all conditions requisite to a fair 
sale, where the buyer and seller each acts prudently and knowledgeably, 
and the price is not affected by undue influence.
    Mineral laws means the mining and mineral leasing laws applicable 
to Federally owned lands and minerals reserved from the public domain 
for national forest purposes and the Geothermal Steam Act of 1970 (30 
U.S.C. 1001 et seq.), but not the Materials Act of 1947 (30 U.S.C. 601 
et seq.).
    Outstanding interests are rights or interests in property held by 
an entity other than a party to an exchange.
    Party means the United States or any person, State, or local 
government who enters into an agreement to initiate an exchange.
    Person means any individual, corporation, or other legal entity 
legally capable to hold title to and convey land. An individual must be 
a citizen of the United States and a corporation must be subject to the 
laws of the United States or of the State where the land is located or 
the corporation is incorporated. No Member of Congress may participate 
in a land exchange with an agency of the United States, as set forth in 
18 U.S.C. 431-433.
    Public land laws means that body of non-mineral land laws dealing 
with the disposal of National Forest System lands administered by the 
Secretary of Agriculture.
    Reserved interest means an interest in real property retained by a 
party from a conveyance of the title to that property.
    Resource values means any of the various commodity values or non-
commodity values, such as wildlife habitat and aesthetics, contained 
within land interests, surface and subsurface.
    Secretary means the Secretary of Agriculture or the individual to 
whom responsibility has been delegated.
    Segregation means the removal for a limited period, subject to 
valid existing rights, of a specified area of the Federal lands from 
appropriation under the public land laws and mineral laws, pursuant to 
the authority of the Secretary of the Interior to allow for the orderly 
administration of the Federal lands.
    Statement of value means a written report prepared by a qualified 
appraiser in conformance with the minimum standards of the Uniform 
Standards of Professional Appraisal Practice that states the 
appraiser's conclusion(s) of value.


Sec. 254.3  Requirements.

    (a) Discretionary nature of exchanges. The Secretary is not 
required to exchange any Federal lands. Land exchanges are 
discretionary, voluntary real estate transactions between the Federal 
and non-Federal parties. Unless and until the parties enter into a 
binding exchange agreement, any party may withdraw from and terminate 
an exchange proposal at any time during the exchange process.
    (b) Determination of public interest. The authorized officer may 
complete an exchange only after a determination is made that the public 
interest will be well served.
    (1) Factors to consider. When considering the public interest, the 
authorized officer shall give full consideration to the opportunity to 
achieve better management of Federal lands and resources, to meet the 
needs of State and local residents and their economies, and to secure 
important objectives, including but not limited to: protection of fish 
and wildlife habitats, cultural resources, watersheds, and wilderness 
and aesthetic values; enhancement of recreation opportunities and 
public access; consolidation of lands and/or interests in lands, such 
as mineral and timber interests, for more logical and efficient 
management and development; consolidation of split estates; expansion 
of communities; accommodation of existing or planned land use 
authorizations (Sec. 254.4(c)(4); promotion of multiple-use values; 
implementation of applicable Forest Land and Resource Management Plans; 
and fulfillment of public needs.
    (2) Findings. To determine that an exchange well serves the public 
interest, the authorized officer must find that--
    (i) The resource values and the public objectives served by the 
non-Federal lands or interests to be acquired must equal or exceed the 
resource values and the public objectives served by the Federal lands 
to be conveyed, and
    (ii) The intended use of the conveyed Federal land will not 
substantially conflict with established management objectives on 
adjacent Federal lands, including Indian Trust lands.
    (3) Documentation. The findings and the supporting rationale shall 
be documented and made part of the administrative record.
    (c) Equal value exchanges. Except as provided in Sec. 254.11 of 
this subpart, lands or interests to be exchanged must be of equal value 
or equalized in accordance with the methods set forth in Sec. 254.12 of 
this subpart. An exchange of lands or interests shall be based on 
market value as determined by the Secretary through appraisal(s), 
through bargaining based on appraisal(s), through other acceptable and 
commonly recognized methods of determining market value, or through 
arbitration.
    (d) Same-State exchanges. Unless otherwise provided by statute, the 
Federal and non-Federal lands involved in an exchange must be located 
within the same State.
    (e) Congressional designations. Upon acceptance of title by the 
United States, lands acquired by the Secretary of the Interior by 
exchange under the authority granted by the Federal Land Policy and 
Management Act of 1976, as amended, which are within the boundaries of 
any unit of the National Forest System, the National Wild and Scenic 
Rivers System, the National Trails System, the National Wilderness 
Preservation System, or any other system established by Act of 
Congress; or the boundaries of any national conservation area or 
national recreation area established by Act of Congress, immediately 
are reserved for and become a part of the unit or area in which they 
are located, without further action by the Secretary of the Interior, 
and, thereafter, shall be managed in accordance with all laws, rules, 
regulations, and land resource management plans applicable to such unit 
or area.
    (f) Land and resource management planning. The authorized officer 
shall consider only those exchange proposals that are consistent with 
land and resource management plans (36 CFR part 219). Lands acquired by 
exchange that are located within areas having an administrative 
designation established through the land management planning process 
shall automatically become part of the area within which they are 
located, without further action by the Forest Service, and shall be 
managed in accordance with the laws, rules, regulations, and land and 
resource management plan applicable to such area.
    (g) Environmental analysis. After an agreement to initiate an 
exchange is signed, the authorized officer shall undertake an 
environmental analysis in accordance with the National Environmental 
Policy Act of 1969 (42 U.S.C. 4371), the Council on Environmental 
Quality regulations (40 CFR parts 1500-1508), and Forest Service 
environmental policies and procedures (Forest Service Manual Chapter 
1950 and Forest Service Handbook 1909.15). In making this analysis, the 
authorized officer shall consider timely written comments received in 
response to the exchange notice published pursuant to Sec. 254.8 of 
this subpart.
    (h) Reservations or restrictions in the public interest. In any 
exchange, the authorized officer shall reserve such rights or retain 
such interests as are needed to protect the public interest or shall 
otherwise restrict the use of Federal lands to be exchanged, as 
appropriate. The use or development of lands conveyed out of Federal 
ownership are subject to any restrictions imposed by the conveyance 
documents and all laws, regulations, and zoning authorities of State 
and local governing bodies.
    (i) Hazardous substances.
    (1) Federal lands. The authorized officer shall determine whether 
hazardous substances are known to be present on the Federal lands 
involved in the exchange and shall provide notice of known storage, 
release, or disposal of hazardous substances on the Federal lands in 
the contract agreement and in the conveyance document, pursuant to 40 
CFR part 373 and 42 U.S.C. 9620. For purposes of this section, the 
notice of hazardous substances on involved Federal lands in an 
agreement to initiate an exchange or an exchange agreement meets the 
requirements for notices established in 40 CFR part 373. Unless the 
non-Federal party is a potentially responsible party under 42 U.S.C. 
9607(a) and participated as an owner, or in the operation, arrangement, 
generation, or transportation of the hazardous substances found on the 
Federal land, the conveyance document from the United States must 
contain a covenant warranting that all remedial action necessary to 
protect human health and the environment with respect to any such 
substances remaining on the property has been taken before the date of 
transfer and that any additional remedial action found necessary after 
the transfer shall be conducted by the United States, pursuant to 42 
U.S.C. 9620(h)(3). The conveyance document must also reserve to the 
United States the right of access to the conveyed property if remedial 
or corrective action is required after the date of transfer. Where the 
non-Federal party is a potentially responsible party with respect to 
the property, it may be appropriate to enter into an agreement as 
referenced in 42 U.S.C. 9607(e) whereby that party would indemnify the 
United States and hold the United States harmless against any loss or 
cleanup costs after conveyance.
    (2) Non-Federal lands. The non-Federal party shall notify the 
authorized officer of any hazardous substances known to have been 
released, stored, or disposed of on the non-Federal land, pursuant to 
Sec. 254.4 of this subpart. Notwithstanding such notice, the authorized 
officer shall determine whether hazardous substances are known to be 
present on the non-Federal land involved in an exchange. If hazardous 
substances are known or believed to be present on the non-Federal land, 
the authorized officer shall reach an agreement with the non-Federal 
party regarding the responsibility for appropriate response action 
concerning the hazardous substances before completing the exchange. The 
terms of this agreement and any appropriate ``hold harmless agreement'' 
shall be included in an exchange agreement, pursuant to Sec. 254.14 of 
this subpart.
    (j) Legal description of properties. All lands subject to an 
exchange must be properly described on the basis of either a survey 
executed in accordance with the Public Land Survey System laws and 
standards of the United States or, if those laws and standards cannot 
be applied, the lands shall be properly described and clearly locatable 
by other means as may be prescribed or allowed by law.
    (k) Special review. Except as provided in this paragraph, land 
acquisitions of $150,000 or more in value made under the authority of 
the Weeks Act of March 1, 1911, as amended (16 U.S.C. 516), must be 
submitted to Congress for oversight review, pursuant to the Act of 
October 22, 1976, as amended (16 U.S.C. 521b). However, minor and 
insignificant changes in land acquisition proposals need not be 
resubmitted for congressional oversight, provided the general concept 
of and basis for the acquisition remain the same.


Sec. 254.4  Agreement to initiate an exchange.

    (a) Exchanges may be proposed by the Forest Service or by any 
person, State, or local government. Initial exchange proposals should 
be directed to the authorized officer responsible for the management of 
Federal lands proposed for exchange.
    (b) To assess the feasibility of an exchange proposal, the 
prospective parties may agree to obtain a preliminary estimate of the 
values of the lands involved in the proposal. A qualified appraiser 
must prepare the preliminary estimate.
    (c) If the authorized officer agrees to proceed with an exchange 
proposal, all prospective parties shall execute a nonbinding agreement 
to initiate an exchange. At a minimum, the agreement must include:
    (1) The identity of the parties involved in the proposed exchange 
and the status of their ownership or ability to provide title to the 
land;
    (2) A description of the lands or interest in lands being 
considered for exchange;
    (3) A statement by a party, other than the United States and State 
and local governments, that such party is a citizen of the United 
States or a corporation or other legal entity subject to the laws of 
the United States or a State thereof;
    (4) A description of the appurtenant rights proposed to be 
exchanged or reserved; any authorized uses, including grants, permits, 
easements, or leases; and any known unauthorized uses, outstanding 
interests, exceptions, covenants, restrictions, title defects or 
encumbrances;
    (5) A time schedule for completing the proposed exchange;
    (6) An assignment of responsibility for performance of required 
functions and for costs associated with processing the exchange;
    (7) A statement specifying whether compensation for costs assumed 
will be allowed pursuant to the provisions of Sec. 254.7 of this 
subpart;
    (8) Notice of any known release, storage, or disposal of hazardous 
substances on involved Federal or non-Federal lands and any commitments 
regarding responsibility for removal or other remedial actions 
concerning such substances on involved non-Federal lands (Sec. 254.3(i) 
and Sec. 254.14);
    (9) A grant of permission by each party to physically examine the 
lands offered by the other party;
    (10) The terms of any assembled land exchange arrangement, pursuant 
to Sec. 254.5 of this subpart;
    (11) A statement as to the arrangements for relocation of any 
tenants occupying non-Federal lands pursuant to Sec. 254.15 of this 
subpart;
    (12) A notice to an owner-occupant of the voluntary basis for the 
acquisition of the non-Federal lands, pursuant to Sec. 254.15 of this 
subpart; and
    (13) A statement as to the manner in which documents of conveyance 
will be exchanged, should the exchange proposal be successfully 
completed.
    (d) Unless the parties agree to some other schedule, no later than 
90 days from the date of the executed agreement to initiate an 
exchange, the parties shall arrange for appraisals which are to be 
completed within timeframes and under such terms as are negotiated. In 
the absence of current market information reliably supporting value, 
the parties may agree to use other acceptable and commonly recognized 
methods to estimate value.
    (e) An agreement to initiate may be amended by consent of the 
parties or terminated at any time upon written notice by any party.
    (f) Entering into an agreement to initiate an exchange does not 
legally bind any party to proceed with processing or to consummate a 
proposed exchange, or to reimburse or pay damages to any party to a 
proposed exchange that is not consummated or to anyone doing business 
with any such party.
    (g) The withdrawal from an exchange proposal by an authorized 
officer at any time prior to the notice of decision, pursuant to 
Sec. 254.13 of this subpart, is not appealable under 36 CFR part 217 or 
36 CFR part 251, subpart C.


Sec. 254.5  Assembled land exchanges.

    (a) Whenever the authorized officer determines it is to be 
practicable, an assembled land exchange arrangement may be used to 
facilitate exchanges and reduce costs.
    (b) The parties to an exchange may agree to such an arrangement 
where multiple ownership parcels of non-Federal lands are consolidated 
into a package for the purpose of completing one exchange transaction.
    (c) An assembled land exchange arrangement must be documented in 
the agreement to initiate an exchange, pursuant to Sec. 254.4 of this 
subpart.
    (d) Value of the Federal and non-Federal lands involved in an 
assembled land exchange arrangement shall be estimated pursuant to 
Sec. 254.9 of this subpart.


Sec. 254.6  Segregative effect.

    (a) If a proposal is made to exchange Federal lands, the authorized 
officer may request the appropriate State Office of the Bureau of 
Management (BLM) to segregate the Federal lands by a notation on the 
public land records. Subject to valid existing rights, the Federal 
lands shall be segregated from appropriation under the public land laws 
and mineral laws for a period not to exceed 5 years from the date of 
record notation.
    (b) Any interests of the United States in the non-Federal lands 
that are covered by the exchange proposal may be noted and segregated 
from appropriation under the mineral laws for a period not to exceed 5 
years from the date of notation.
    (c) The segregative effect terminates as follows:
    (1) Automatically, upon issuance of a patent or other document of 
conveyance to the affected lands;
    (2) On the date and time specified in an opening order, published 
in the Federal Register by the appropriate BLM State Office, if a 
decision is made not to proceed with the exchange or upon removal of 
any lands from the exchange proposal; or
    (3) Automatically, at the end of the segregation period not to 
exceed 5 years from the date of notation on the public land records, 
whichever occurs first.


Sec. 254.7  Assumption of costs.

    (a) Generally, each party to an exchange will bear their own costs 
of the exchange. However, if the authorized officer finds it is in the 
public interest as specified in paragraph (b) of this section, an 
agreement to initiate an exchange may provide that:
    (1) One or more of the parties may assume, without compensation, 
all or part of the costs or other responsibilities or requirements that 
the authorized officer determines would ordinarily be borne by the 
other parties; or
    (2) Subject to the limitation in paragraph (c) of this section, the 
parties may agree to make adjustments to the relative values involved 
in an exchange transaction, in order to compensate parties for assuming 
costs or other responsibilities or requirements that the authorized 
officer determines would ordinarily be borne by the other parties. 
These costs or services may include but are not limited to: land 
surveys; appraisals; mineral examinations; timber cruises; title 
searches; title curative actions; cultural resource surveys and 
mitigation; hazardous substance surveys and controls; removal of 
encumbrances; arbitration, including all fees; bargaining; cure of 
deficiencies preventing highest and best use of the land; conduct of 
public hearings; assemblage of non-Federal parties from multiple 
ownerships; and the expenses of complying with laws, regulations, and 
policies applicable to exchange transactions, or which are necessary to 
bring the Federal and non-Federal lands involved in the exchange to 
their highest and best use for appraisal and exchange purposes.
    (b) As a condition of an agreement to initiate, the authorized 
officer may agree to assume without compensation costs ordinarily borne 
by the non-Federal party or to compensate the non-Federal party for 
assuming Federal costs only on an exceptional basis when it is clearly 
in the public interest and when the authorized officer determines and 
documents that each of the following circumstances exist:
    (1) The amount of such cost assumed or compensation is reasonable 
and accurately reflects the value of the cost or service provided, or 
any responsibility and requirement assumed;
    (2) The proposed exchange is a high priority of the agency;
    (3) The land exchange must be expedited to protect important 
Federal resource values, such as congressionally designated areas or 
endangered species habitat;
    (4) Cash equalization funds are available for compensation of the 
non-Federal party; and
    (5) There are no other practicable means available to the 
authorized officer for meeting Federal exchange processing costs, 
responsibilities, or requirements.
    (c) The total amount of an adjustment agreed to as compensation for 
costs pursuant to this section shall not exceed the limitations set 
forth in Sec. 254.12(b) of this subpart.


Sec. 254.8  Notice of exchange proposal.

    (a) Upon entering into an agreement to initiate an exchange, the 
authorized officer shall publish a notice once a week for four 
consecutive weeks in newspapers of general circulation in the counties 
in which the Federal and non-Federal lands or interests proposed for 
exchange are located. The authorized officer shall notify authorized 
users, the jurisdictional State and local governments, and the 
congressional delegation and shall make other distribution of the 
notice as appropriate. At a minimum, the notice shall include:
    (1) The identity of the parties involved in the proposed exchange;
    (2) A description of the Federal and non-Federal lands being 
considered for exchange;
    (3) A statement as to the effect of segregation from appropriation 
under the public land laws and mineral laws, if applicable;
    (4) An invitation to the public to submit in writing any comments 
on or concerns about the exchange proposal, including advising the 
agency as to any liens, encumbrances, or other claims relating to the 
lands being considered for exchange; and
    (5) The deadline by which comments must be received, and the name, 
title, and address of the official to whom comments must be sent and 
from whom additional information may be obtained.
    (b) To be assured of consideration in the environmental analysis of 
the proposed exchange, all comments must be made in writing to the 
authorized officer and postmarked or delivered within 45 days after the 
initial date of publication.
    (c) The authorized officer is not required to republish legal 
descriptions of any lands that may be excluded from the final exchange 
transaction, provided such lands were identified in the notice of 
exchange proposal. In addition, minor corrections of land descriptions 
and other insignificant changes do not require republication.


Sec. 254.9  Appraisals.

    The Federal and non-Federal parties to an exchange shall comply 
with the appraisal standards as set forth in paragraphs (a) through (d) 
of this section, and, to the extent appropriate, with the Uniform 
Appraisal Standards for Federal Land Acquisitions: Interagency Land 
Acquisition Conference 1992 (Washington, DC, 1992), ISBN 0-16-038050-2 
when appraising the values of the Federal and non-Federal lands 
involved in an exchange.
    (a) Appraiser qualifications.
    (1) A qualified appraiser(s) shall provide to the authorized 
officer appraisals estimating the market value of Federal and non-
Federal properties involved in an exchange. A qualified appraiser may 
be an employee or a contractor to the Federal or non-Federal exchange 
parties. At a minimum, a qualified appraiser shall be an individual 
agreeable to all parties and approved by the authorized officer, who is 
competent, reputable, impartial, and has training and experience in 
appraising property similar to the property involved in the appraisal 
assignment.
    (2) Qualified appraisers shall possess qualifications consistent 
with State regulatory requirements that meet the intent of Title XI, 
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 
(FIRREA) (12 U.S.C. 3331). In the event a State or Territory does not 
have approved policies, practices, and procedures regulating the 
activities of appraisers, the Forest Service may establish appraiser 
qualification standards commensurate with those generally adopted by 
other States or Territories meeting the requirements of FIRREA.
    (b) Market value.
    (1) In estimating market value, the appraiser shall:
    (i) Determine the highest and best use of the property to be 
appraised;
    (ii) Estimate the value of the lands and interests as if in private 
ownership and available for sale in the open market;
    (iii) Include historic, wildlife, recreation, wilderness, scenic, 
cultural, or other resource values or amenities as reflected in prices 
paid for similar properties in the competitive market;
    (iv) Consider the contributory value of any interest in land such 
as water rights, minerals, or timber, to the extent they are consistent 
with the highest and best use of the property; and
    (v) If stipulated in the agreement to initiate in accordance with 
Sec. 254.4 of this subpart, estimate separately the value of each 
property optioned or acquired from multiple ownerships by the non-
Federal party for purposes of exchange, pursuant to Sec. 254.5 of this 
subpart. In this case, the appraiser also must estimate the value of 
the Federal and non-Federal properties in a similar manner.
    (2) In estimating market value, the appraiser may not independently 
add the separate values of the fractional interests to be conveyed, 
unless market evidence indicates the following:
    (i) The various interests contribute their full value (pro rata) to 
the value of the whole; and
    (ii) The valuation is compatible with the highest and best use of 
the property.
    (3) In the absence of current market information reliably 
supporting value, the authorized officer may use other acceptable and 
commonly recognized methods to determine market value.
    (c) Appraisal report standards. Appraisals prepared for exchange 
purposes must contain the following minimum information:
    (1) A summary of facts and conclusions;
    (2) The purpose and/or the function of the appraisal, a definition 
of the estate being appraised, and a statement of the assumptions and 
limiting conditions affecting the appraisal assignment, if any;
    (3) An explanation of the extent of the appraiser's research and 
actions taken to collect and confirm information relied upon in 
estimating value;
    (4) An adequate description of the physical characteristics of the 
land being appraised; a statement of all encumbrances; title 
information; location, zoning, and present use; an analysis of highest 
and best use; and at least a 5-year sales history of the property;
    (5) A disclosure of any condition that is observed during the 
inspection of the property or becomes known to the appraiser through 
the normal research which would lead the appraiser to believe that 
hazardous substances may be present on the property being appraised;
    (6) A comparative market analysis and, if more than one method of 
valuation is used, an analysis and reconciliation of the methods used 
to support the appraiser's estimate of value;
    (7) A description of comparable sales, including a description of 
all relevant physical, legal, and economic factors such as parties to 
the transaction, source and method of financing, effect of any 
favorable financing on sale price, and verification by a party involved 
in the transaction;
    (8) An estimate of market value;
    (9) The effective date of valuation, date of appraisal, signature, 
and certification of the appraiser;
    (10) A certification by the appraiser to the following:
    (i) The appraiser has personally contacted the property owner or 
designated representative and offered the owner an opportunity to be 
present during inspection of the property;
    (ii) The appraiser has personally examined the subject property and 
all comparable sale properties relied upon in the report;
    (iii) The appraiser has no present or prospective interest in the 
appraised property; and
    (iv) The appraiser has not received compensation that was 
contingent on the analysis, opinions, or conclusions contained in the 
appraisal report; and
    (11) Copies of relevant written reports, studies, or summary 
conclusions prepared by others in association with the appraisal 
assignment which were relied upon by the appraiser to estimate value, 
which may include, but is not limited to, current title reports, 
mineral reports, or timber cruises prepared by qualified specialists.
    (d) Appraisal review.
    (1) Appraisal reports shall be reviewed by a qualified review 
appraiser meeting the qualifications set forth in paragraph (a) of this 
section. Statements of value prepared by agency appraisers are not 
subject to this review.
    (2) The review appraiser shall determine whether the appraisal 
report:
    (i) Is complete, logical, consistent, and supported by market 
analysis;
    (ii) Complies with the standards prescribed in paragraph (c) of 
this section; and
    (iii) Reasonably estimates the probable market value of the lands 
appraised.
    (3) The review appraiser shall prepare a written review report, 
containing at a minimum:
    (i) A description of the review process used;
    (ii) An explanation of the adequacy, relevance, and reasonableness 
of the data and methods used by the appraiser to estimate value;
    (iii) The review appraiser's conclusions regarding the appraiser's 
estimate of market value; and
    (iv) A certification by the review appraiser to the following:
    (A) The review appraiser has no present or prospective interest in 
the property which is the subject of the review report; and
    (B) The review appraiser has not received compensation that was 
contingent upon approval of the appraisal report.


Sec. 254.10  Bargaining; arbitration.

    (a) Unless the parties to an exchange agree in writing to suspend 
or modify the deadlines contained in paragraphs (a)(1) through (a)(4) 
of this section, the parties shall adhere to the following:
    (1)(i) Within 180 days from the date of receipt of the appraisal(s) 
for review and approval by the authorized officer, the parties to an 
exchange may agree on the appraised values or may initiate a process of 
bargaining or some other process to determine values. Bargaining or any 
other process must be based on an objective analysis of the valuation 
in the appraisal report(s) and is a means of reconciling differences in 
such report(s). Bargaining or another process to determine values may 
involve one or more of the following actions:
    (A) Submission of the disputed appraisal(s) to another qualified 
appraiser for review:
    (B) Request for additional appraisals;
    (C) Involvement of an impartial third party to facilitate 
resolution of the value disputes, or
    (D) Use of some other acceptable and commonly recognized practice 
for resolving value disputes.
    (ii) Any agreement based upon bargaining must be in writing and 
made part of the administrative record of the exchange. Such agreement 
must contain a reference to all relevant appraisal information and 
state how the parties reconciled or compromised appraisal information 
to arrive at an agreement based on market value.
    (2) If within 180 days from the date of receipt of the appraisal(s) 
for review and approval by the authorized officer, the parties to an 
exchange cannot agree on values but wish to continue with the land 
exchange, the appraisal(s), at the initiative of either party, must be 
submitted to arbitration, unless, in lieu of arbitration, the parties 
have employed a process of bargaining or some other process to 
determine values. If arbitration occurs, it must be conducted in 
accordance with the real estate valuation arbitration rules of the 
American Arbitration Association. The Secretary or an official to whom 
such authority has been delegated shall appoint an arbitrator from a 
list provided by the American Arbitration Association.
    (3) Within 30 days after completion of arbitration, the parties 
involved in the exchange must determine whether to proceed with the 
exchange, modify the exchange to reflect the findings of the 
arbitration or any other factors, or withdraw from the exchange. A 
decision to withdraw from the exchange may be made upon written notice 
by either party at this time or at any other time prior to entering 
into a binding exchange agreement.
    (4) If the parties agree to proceed with an exchange after 
arbitration, the values established by arbitration are binding upon all 
parties for a period not to exceed 2 years from the date of the 
arbitration decision.
    (b) Arbitration is limited to the disputed valuation of the lands 
involved in a proposed exchange and an arbitrator's award decision is 
limited to the value estimate(s) of the contested appraisal(s). An 
arbitrator may not include in an award decision recommendations 
regarding the terms of a proposed exchange, nor may an arbitrator's 
award decision infringe upon the authority of the Secretary to make all 
decisions regarding management of Federal lands and to make public 
interest determinations.


Sec. 254.11  Exchanges at approximately equal value.

    (a) The authorized officer may exchange lands which are of 
approximately equal value upon a determination that:
    (1) The exchange is in the public interest and the consummation of 
the proposed exchange will be expedited;
    (2) The value of the lands to be conveyed out of Federal ownership 
is not more than $150,000 as based upon a statement of value prepared 
by a qualified appraiser and accepted by an authorized officer;
    (3) The Federal and non-Federal lands are substantially similar in 
location, acreage, use, and physical attributes; and
    (4) There are no significant elements of value requiring complex 
analysis.
    (b) The authorized officer, not the non-Federal party, determines 
whether the Federal and non-Federal lands are approximately equal in 
value and must document how the determination was made.


Sec. 254.12  Value equalization; cash equalization waiver.

    (a) To equalize the agreed upon values of the Federal and non-
Federal lands involved in an exchange, either with or without 
adjustments of relative values as compensation for various costs, the 
parties to an exchange may agree to:
    (1) Modify the exchange proposal by adding or excluding lands; and/
or
    (2) Use cash equalization, after making all reasonable efforts to 
equalize values by adding or deleting lands.
    (b) The combined amount of any cash equalization payment and/or the 
amount of adjustments agreed to as compensation for costs under 
Sec. 254.7 of this subpart may not exceed 25 percent of the value of 
the Federal lands to be conveyed.
    (c) The Secretary of Agriculture may not waive cash equalization 
payment due the United States, but the parties may agree to waive cash 
equalization payment due the non-Federal party. The amount to be waived 
may not exceed 3 percent of the value of the lands being exchanged out 
of Federal ownership or $15,000, whichever is less.
    (d) A cash equalization payment may be waived only after the 
authorized officer certifies, in writing, that the waiver will expedite 
the exchange and that the public interest will be best served by the 
waiver.


Sec. 254.13  Approval of exchanges; notice of decision.

    (a) Upon completion of all environmental analyses and appropriate 
documentation, appraisals, and all other supporting studies and 
requirements to determine if a proposed exchange is in the public 
interest and in compliance with applicable law and regulations, the 
authorized officer shall decide whether to approve an exchange 
proposal.
    (1) When a decision to approve or disapprove an exchange is made, 
the authorized officer shall publish a notice of the availability of 
the decision in newspapers of general circulation. At a minimum, the 
notice must include:
    (i) The date of decision;
    (ii) A concise description of the decision;
    (iii) The name and title of the deciding official;
    (iv) Directions for obtaining a copy of the decision; and
    (v) The date of the beginning of the appeal period.
    (2) The authorized officer shall distribute notices to the State 
and local governmental subdivisions having authority in the 
geographical area within which the lands covered by the notice are 
located, the non-Federal exchange parties, authorized users of involved 
Federal lands, the congressional delegation, and individuals who 
requested notification or filed written objections, and others as 
appropriate.
    (b) For a period of 45 days after the date of publication of a 
notice of the availability of a decision to approve or disapprove an 
exchange proposal, the decision shall be subject to appeal as provided 
under 36 CFR part 217 or, for eligible parties, under 36 CFR part 251, 
subpart C.


Sec. 254.14  Exchange agreement.

    (a) The parties to a proposed exchange may enter into an exchange 
agreement subsequent to a decision by the authorized officer to approve 
the exchange, pursuant to Sec. 254.13 of this subpart. Such an 
agreement is required if hazardous substances are present on the non-
Federal lands. An exchange agreement must contain the following:
    (1) Identification of the parties, description of the lands and 
interests to be exchanged, identification of all reserved and 
outstanding interests, stipulation of any necessary cash equalization, 
and all other terms and conditions necessary to complete an exchange;
    (2) Inclusion of the terms regarding responsibility for removal, 
indemnification (``hold harmless'' agreement), or other remedial 
actions concerning any hazardous substances on the involved non-Federal 
lands; and
    (3) The agreed upon values of the involved lands, until 
consummation of the land exchange.
    (b) An exchange agreement, as described in paragraph (a) of this 
section, is legally binding on all parties, subject to the terms and 
conditions thereof, provided:
    (1) Acceptable title can be conveyed:
    (2) No substantial loss or damage occurs to either property from 
any cause;
    (3) No undisclosed hazardous substances are found on the involved 
Federal or non-Federal lands prior to conveyance;
    (4) The exchange proposal receives any required Secretarial 
approval;
    (5) No objections are raised during any required congressional 
oversight;
    (6) In the event of an appeal under 36 CFR part 217 or 36 CFR part 
251, subpart C, a decision to approve an exchange proposal pursuant to 
Sec. 254.13 of this subpart is upheld; and
    (7) The agreement is not terminated by mutual consent or upon such 
terms as may be provided in the agreement.
    (c) In the event of a failure to perform or to comply with the 
terms of an exchange agreement, the noncomplying party is liable for 
all costs borne by the other party as a result of the proposed 
exchange, including, but not limited to, land surveys, appraisals, 
mineral examinations, timber cruises, title searches, title curative 
actions, cultural resource surveys and mitigation, hazardous substance 
surveys and controls, removal of encumbrances, arbitration, curing 
deficiencies preventing highest and best use of the land, and any other 
expenses incurred in processing the proposed land exchange.
    (d) Absent an executed exchange agreement, an action taken by the 
parties prior to consummation of an exchange does not create any 
contractual or other binding obligations or rights enforceable against 
any party.


Sec. 254.15  Title standards.

    (a) Title evidence.
    (1) Unless otherwise specified by the USDA Office of the General 
Counsel, evidence of title for the non-Federal lands being conveyed to 
the United States must be in recordable form and in conformance with 
the Department of Justice regulations and ``Standards for the 
Preparation of Title Evidence in Land Acquisitions by the United 
States'' in effect at the time of conveyance.
    (2) The United States is not required to furnish title evidence for 
the Federal lands being exchanged.
    (b) Conveyance documents.
    (1) Unless otherwise specified by the USDA Office of the General 
Counsel, all conveyances to the United States must be prepared, 
executed, and acknowledged in accordance with the Department of Justice 
regulations and ``Standards for the Preparation of Title Evidence in 
Land Acquisitions by the United States'' in effect at the time of 
conveyance.
    (2) Conveyances of lands from the United States are made by patent, 
quitclaim deed, or deed and without express or implied warranties, 
except as to hazardous substances pursuant to Sec. 254.3 of this 
subpart.
    (c) Title encumbrances.
    (1) Non-Federal lands.
    (i) Title to the non-Federal lands must be acceptable to the United 
States. For example, encumbrances such as taxes, judgment liens, 
mortgages, and other objections or title defects shall be eliminated, 
released, or waived in accordance with requirements of the preliminary 
title opinion of the USDA Office of the General Counsel or the 
Department of Justice, as appropriate.
    (ii) The United States shall not accept lands in which there are 
reserved or outstanding interests that would interfere with the use and 
management of the land by the United States or would otherwise be 
inconsistent with the authority under which, or the purpose for which, 
the lands are to be acquired. Reserved interests of the non-Federal 
landowner are subject to the appropriate rules and regulations of the 
Secretary, except upon special finding by the Chief, Forest Service in 
the case of States, agencies, or political subdivisions thereof (36 CFR 
part 251, subpart A).
    (iii) Any personal property owned by the non-Federal party which is 
not a part of the exchange proposal, should be removed by the non-
Federal party prior to acceptance of title by the United States, unless 
the authorized officer and the non-Federal party to the exchange 
previously agree upon a specified period to remove the personal 
property. If the personal property is not removed prior to acceptance 
of title or within the otherwise prescribed time, it shall be deemed 
abandoned and shall become vested in the United States.
    (iv) The exchange parties must reach agreement on the arrangements 
for the relocation of any tenants. Qualified tenants occupying non-
Federal lands affected by a land exchange may be entitled to relocation 
benefits under 49 CFR 24.2. Unless otherwise provided by law or 
regulation (49 CFR 24.101(a)(1)), relocation benefits are not 
applicable to owner-occupants involved in exchanges with the United 
States provided the owner-occupants are notified in writing that the 
non-Federal lands are being acquired by the United States on a 
voluntary basis.
    (2) Federal lands. If Federal lands proposed for exchange are 
occupied under grant, permit, easement, or non-mineral lease by a third 
party who is not a party to the exchange, the third party holder of 
such authorization and the non-Federal party to the exchange may reach 
agreement as to the disposition of the existing use(s) authorized under 
the terms of the grant, permit, easement, or lease. The non-Federal 
exchange party shall submit documented proof of such agreement prior to 
issuance of a decision to approve the land exchange, as instructed by 
the authorized officer. If an agreement cannot be reached, the 
authorized officer shall consider other alternatives to accommodate the 
authorized use or shall determine whether the public interest will be 
best served by terminating such use pursuant to 36 CFR 251.60.


Sec. 254.16  Case closing.

    (a) Title transfers. Unless otherwise agreed, and notwithstanding 
the decision in United States v. Schurz, 102 U.S. 378 (1880), or any 
other law or ruling to the contrary, title to both the non-Federal and 
Federal lands pass simultaneously and are deemed accepted by the United 
States and the non-Federal landowner, respectively, when the documents 
of conveyance are recorded in the county clerk's or other local 
recorder's office. Before recordation, all instructions, requirements, 
and conditions set forth by the United States and the non-Federal 
landowner must be met. The minimum requirements and conditions 
necessary for recordation include the following, as appropriate:
    (1) The determination by the authorized officer that the United 
States will receive possession, acceptable to it, of such lands;
    (2) The issuance of title evidence as of the date of recordation 
which conforms to the instructions and requirements of the USDA Office 
of the General Counsel's preliminary title opinion; and
    (3) Continuation searches disclosing no matters of record that 
would require any change in the aforementioned title evidence as 
issued.
    (b) Automatic segregation of lands. Subject to valid existing 
rights, non-Federal lands acquired through exchange by the United 
States automatically are segregated from appropriation under the public 
land laws and mineral laws until midnight of the 90th day after 
acceptance of title by the United States, and the public land records 
must be noted accordingly. Thereafter, the lands will be open 
automatically to operation of the public land laws and mineral laws, 
except to the extent otherwise provided by law, unless action is taken 
pursuant to 43 CFR part 2300 to initiate a withdrawal within the 90-day 
period.


Sec. 254.17  Information requirements.

    The requirements governing the preparation of an agreement to 
initiate in Sec. 254.4 of this subpart and an exchange agreement in 
Sec. 254.4 of this subpart constitute information requirements as 
defined by the Paperwork Reduction Act of 1980 (44 U.S.C. 3507) and 
have been approved for use pursuant to 5 CFR part 1320 and assigned OMB 
Control Number 0596-0105.

    Dated: February 18, 1994.
Adela Backiel,
Deputy Assistant Secretary, Natural Resources and Environment.
[FR Doc. 94-4997 Filed 3-7-94; 8:45 am]
BILLING CODE 3410-11-M