[Advisory Report on the Jasper Land Exchange, Bureau of Reclamation]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 00-i-280

Title: Advisory Report on the Jasper Land Exchange, Bureau of Reclamation



Date:  March 31, 2000




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U.S. Department of the Interior
Office of Inspector General



ADVISORY REPORT
JASPER LAND EXCHANGE,
BUREAU OF RECLAMATION


REPORT NO. 00-I-280 

MARCH 2000




EXECUTIVE SUMMARY

Jasper Land Exchange,
Bureau of Reclamation
Report (No. 00-i-280)


BACKGROUND

The Bureau of Reclamation (BOR) acquires land for constructing
its water development projects and for mitigating the
environmental impacts associated with those projects.  The land
involved in the Jasper land exchange is adjacent to and in the
vicinity of the Cascade Reservoir, located near Boise, Idaho.
The Reservoir was constructed in 1948 as an irrigation and
hydroelectric facility.  Section 5 of Public Law 86-92, enacted
in July 1959, authorizes BOR to exchange Federal lands in the
vicinity of the Reservoir that are no longer needed for project
purposes for lands of "approximately equal value."  When BOR
purchased the private property to create the Reservoir, many of
the sellers requested and received permanent easement rights to
continue to use the land for cattle grazing and farming. 

In 1991, BOR prepared a Resource Management Plan, which
recommended that BOR address deficiencies in water quality at the
Reservoir by acquiring the permanent agricultural easements
around the Reservoir, thereby obtaining full title to these
lands.  The Jasper exchange is the first exchange since the 1970s
in which BOR has sought to acquire such an easement.  In March
1997, the former Regional Director of the Pacific Northwest
Region negotiated a tentative agreement with the  Jasper family,
which owns an agricultural easement on about 278 acres adjacent
to the Reservoir.  On April 14, 1998, BOR and the Jaspers signed
a land exchange contract.

On July 1, 1998, an official of the Western Land Exchange Project
contacted BOR and questioned the adequacy of the environmental
documentation for the exchange. Subsequently, on July 17, 1998,
BOR's realty and environmental personnel from the Snake River
Area Office and the Regional Office determined that a
site-specific environmental assessment was needed.  As of October
1999, BOR had not initiated work on the environmental assessment,
and the land exchange had not been finalized because issues
concerning the points of access to the Reservoir had not been
resolved.

OBJECTIVE

Our review of the Jasper land echange was conducted as part of
our survey of BOR's land acquisition activities.  The objective
of our survey was to determine whether BOR conducted land
acquisition activities in accordance with applicable laws and
regulations and paid a fair price for the land acquired. The
results of our overall survey will be presented in a separate
report.

RESULTS IN BRIEF

We found that the Pacific Northwest Region did not prepare the
required environmental documentation for the Jasper land exchange
or establish fair value for the land to be exchanged.  The
National Environmental Policy Act and the Departmental and
Reclamation Manuals establish requirements for environmental
documentation, and the Uniform Standards of Professional
Appraisal Practice, the Uniform Appraisal Standards for Federal
Land Acquisitions, and the Reclamation Manual provide guidance
for preparing and reviewing appraisals and consulting reports.
The Reclamation Manual also authorizes regional directors or
their designees to acquire land for more than the appraised fair
market value within specified limitations.  BOR officials told us
that the land exchange as originally planned would not have
required a separate environmental assessment and that they
considered the exchange to be fair because of additional benefits
accruing to the Government which they believed equalized the
values of the lands being exchanged. In our opinion, however, the
Region did not adequately protect the Government's interests when
it entered into the Jasper land exchange contract.

RECOMMENDATIONS

This report did not contain any recommendations; however, we made
suggestions to the Pacific Northwest Region regarding the land
exchange process.  Specifically, we suggested that the Region
comply with  requirements of the National Environmental Policy
Act before it enters into binding agreements, request written
clarification from the Regional Solicitor on whether BOR has the
authority to administratively adjust the value of land exchanges
conducted under Public Law 86-92, and use appraisals prepared in
accordance with applicable appraisal standards and the
Reclamation Manual rather than consulting reports in establishing
property values in land exchanges.  

AUDITEE COMMENTS

BOR officials generally concurred with the report's findings and
our suggestions.  We considered the officials' comments and
incorporated them into this report as appropriate.  Subsequent to
the discussion, BOR provided us with a copy of a letter from the
Office of the Solicitor, Pacific Northwest Region, dated February
10, 2000, to the Jaspers' attorney, stating that the April 14,
1998, land exchange contract with the Jaspers had been voided
because of "mutual mistakes of fact" regarding property
boundaries and compliance with environmental assessment
requirements.



                                             W-IN-BOR-004-99(A)-R
ADVISORY REPORT


Memorandum

     To:  Commissioner, Bureau of Reclamation

   From:  Roger La Rouche
          Acting Assistant Inspector General for Audits

Subject:  Advisory Report on the Jasper Land Exchange,
          Bureau of Reclamation (No. 00-i-280)

INTRODUCTION

This report presents the results of our review of the pending
Jasper land exchange being conducted by the Bureau of
Reclamation's (BOR) Pacific Northwest Region in Boise, Idaho. The
review was prompted by the Western Land Exchange Project, a
nonprofit public interest organization, located in Seattle,
Washington, which expressed concerns regarding BOR's compliance
with the environmental and land valuation requirements for the
exchange.  We performed our review as part of our survey of BOR's
land acquisition activities.  The objective of our survey was to
determine whether BOR conducted land acquisition activities in
accordance with applicable laws and regulations and paid a fair
price for the land acquired. The results of our overall survey
will be presented in a separate report. 

BACKGROUND

BOR acquires land for constructing its water development projects
and for mitigating the environmental impacts associated with
those projects.  The land involved in the Jasper land exchange is
adjacent to and in the vicinity of the Cascade Reservoir, located
near Boise.  Constructed in 1948 as an irrigation and
hydroelectric facility, the Reservoir has become increasingly
important for recreational uses, such as swimming, boating,
camping, picnicking, and fishing.  BOR has attempted to acquire
agricultural easements[1] on the land around the Reservoir in an
effort to improve water quality by reducing grazing along the
shoreline. Section 5 of Public Law 86-92 (an act to add certain
lands located in Idaho to the Boise and Payette National
Forests), enacted on July 17, 1959 (16 U.S.C. * 486a-486w),
authorizes BOR to exchange Federal lands in the vicinity of the
Reservoir that are no longer needed for project purposes for
lands of "approximately equal value" within 300 feet of the
Reservoir's shoreline.[2] 

In 1991, BOR prepared a Resource Management Plan to coordinate
development and provide guidance for managing the lands and
facilities under BOR jurisdiction at the Reservoir.  The Plan
recommended that BOR address deficiencies in water quality at the
Reservoir by acquiring the permanent agricultural easements
around the Reservoir, thereby obtaining full title to these
lands.  The Jasper exchange is the first exchange since the 1970s
in which BOR has sought to acquire an agricultural easement
within the 300-foot area.  In March 1997, the former Regional
Director of the Pacific Northwest Region negotiated a tentative
agreement with the  Jasper family, which owns an agricultural
easement adjacent to the Reservoir.  Under the agreement, the
Jaspers were to relinquish easement rights for 277.83 acres[3]
and also provide a road access easement to BOR in return for
title to 55 acres of Government-owned land, various easements,
access to the Reservoir, and resolution of an existing building
trespass issue.  On April 14, 1998, BOR and the Jaspers signed a
land exchange contract.

On July 1, 1998, an official of the Western Land Exchange Project
contacted BOR and questioned the adequacy of the environmental
documentation for the exchange. Subsequently, on July 17, 1998,
BOR's realty and environmental personnel from the Snake River
Area Office and the Regional Office determined that a
site-specific environmental assessment was needed.  In a January
6, 1999, letter to our office, a Project official reiterated the
Project's concerns about environmental documentation and raised
other concerns regarding the fee appraiser's consulting report
for the exchange.  As of October 1999, BOR had not initiated work
on the environmental assessment, and the land exchange had not
been finalized because issues concerning the points of access to
the Reservoir had not been resolved.

SCOPE

We conducted our review of BOR's land acquisition activities,
including the Jasper exchange, from June through October 1999 at
the Pacific Northwest Region.  To obtain an understanding of
BOR's authority to conduct land exchanges, we reviewed relevant
laws and regulations and the Reclamation Manual.  We also
reviewed BOR's implementing regulations and procedures to
identify the specific requirements for conducting land exchanges
and reviewed the Jasper land exchange transaction file at the
Regional Office to identify key documents and determine why and
how the exchange was being conducted.  In addition, we
interviewed BOR program and realty personnel and the Regional
Review Appraiser to discuss the land exchange and verify
information and data obtained through our review of the land
exchange file.

Our audit was conducted in accordance with the "Government
Auditing Standards," issued by the Comptroller General of the
United States.  Accordingly, we included such tests of records
and other auditing procedures that were considered necessary to
accomplish the objective.  As part of the audit, we examined
BOR's annual assurance statement on management controls and the
Departmental Reports on Accountability for fiscal years 1996,
1997, and 1998, which included information required by the
Federal Managers' Financial Integrity Act, and determined that no
material weaknesses were reported that related to BOR's land
acquisition activities.

We reviewed the system of internal controls over BOR's land
acquisition activities and did not identify any significant
weaknesses.  However, in our review of the Jasper exchange, we
found deficiencies in BOR's compliance with environmental laws
and regulations and in its establishing fair market value[4] for
the land to be exchanged.  These issues are addressed in the
Discussion section of this report.

DISCUSSION

We found that the Pacific Northwest Region did not (1) prepare
the required environmental documentation for the Jasper land
exchange or (2) establish fair value for the land to be
exchanged.  The National Environmental Policy Act and the
Departmental and Reclamation Manuals establish requirements for
environmental documentation, and the Uniform Standards of
Professional Appraisal Practice, the Uniform Appraisal Standards
for Federal Land Acquisitions, and the Reclamation Manual provide
guidance for preparing and reviewing appraisals and consulting
reports.  The Reclamation Manual also authorizes regional
directors or their designees to acquire land for more than the
appraised fair market value within specified limitations.[5]  BOR
officials told us that the land exchange as originally planned
would not have required a separate environmental assessment and
that they considered the exchange to be fair because of
additional benefits accruing to the Government which they
believed equalized the values of the lands being exchanged. In
our opinion, however, the Region did not adequately protect the
Government's interests when it entered into the Jasper land
exchange contract.

Environmental Compliance

The Region signed the land exchange contract without performing
an environmental assessment or updating its hazardous material
inspection.  The Code of Federal Regulations (40 CFR *1501.2)
requires that agencies integrate the National Environmental
Policy Act process in planning decisions "at the earliest
possible time to insure that planning and decisions reflect
environmental values . . . and to head off potential conflicts."
In addition, the Departmental Manual (516 DM 3.2.A) requires that
an environmental assessment be prepared "for all actions, except
those covered by a categorical exclusion, covered sufficiently by
an earlier environmental document, or for those actions for which
a decision has already been made to prepare an environmental
impact statement."  The Departmental Manual (602 DM 2.6.B) also
requires that a "pre-acquisition environmental site assessment"
(hazardous material inspection) be performed and states that such
an assessment "will be considered adequate for a period not to
exceed 12 months prior to the date of the acquisition of real
property." (Emphasis added.)

According to the Region's Lands and Recreation Manager, the
Region did not perform an environmental assessment for the land
exchange because Regional officials believed that the 1991
Resource Management Plan for the Cascade Reservoir met the
requirements of the Act.  In preparing the Resource Management
Plan, the Region conducted an environmental assessment in which
the issue of acquiring perpetual agricultural easements around
the Reservoir was addressed, and it issued a "Finding of No
Significant Impact." However, as stipulated in the March 1997
tentative agreement, the land exchange involved additional
provisions, such as obtaining public access to the Reservoir,
that were not addressed in the environmental assessment for the
Resource Management Plan.  Despite this expanded scope, the
Region did not address the need for further environmental reviews
until the Western Land Exchange Project questioned the adequacy
of the existing environmental documentation for the land exchange
in July 1998, after which the Region agreed that a site-specific
environmental assessment was needed.  We suggest that the Region,
in the future, comply with  requirements of the Act before it
enters into binding agreements.

In addition, BOR did not perform a hazardous material inspection
within 12 months prior to signing the land exchange contract in
April 1998, as required by the Departmental Manual (602 DM 2.6.B)
and the Reclamation Manual (LND 06-01, 6.E).  An inspection had
been performed during the summer of 1993, and the environmental
concerns identified at that  time had been addressed.  However,
without a current hazardous material inspection, there is no
assurance that additional cleanup costs will not be required.  We
suggest that the Region, in the future, ensure that hazardous
material inspections are performed within the required 12 months
before it enters into binding agreements.

Land Valuation

BOR did not establish a fair value for the land to be exchanged.
The consulting report used by BOR as the basis for establishing
the value of the BOR land and the Jasper easement was prepared by
an independent fee appraiser who was approved by both BOR and the
Jaspers.  The consulting report, submitted on October 5, 1995,
presented a value of $65,000 for the Government land to be
exchanged.  It also presented a value based on the hypothetical
use and a value based on the actual use of the agricultural
easement owned by the Jaspers.  Under the hypothetical use, the
value of the agricultural easement was estimated at $33,000 based
on use of the easement primarily as irrigated pasture land.
Under actual use, the value was estimated at $18,000 based on the
actual use of the land as dry pasture land.  The Regional Review
Appraiser recommended $18,000 as the fair market value of the
agricultural easement because the Uniform Appraisal Standards for
Federal Land Acquisitions and the Uniform Standards of
Professional Appraisal Practice required that the value be based
on actual use.

Following negotiations with the Jaspers, the Regional Lands and
Recreation Manager administratively equalized the value of the
properties to be exchanged by increasing the recommended fair
market value of the agricultural easement by $37,200 and
decreasing the value of BOR land by $9,800, to arrive at an equal
value of $55,200.  The Manager stated that she believed  the
pending exchange was equitable and that it provided benefits to
BOR, such as providing public access to the Reservoir, improving
the Reservoir's water quality by reducing grazing along the
shoreline, and resolving a building trespass issue.  Although the
Manager has the authority to administratively adjust the value of
land to be acquired, we do not believe that this authority
extends to exchanges. The authorizing law (Public Law 86-92) for
this exchange requires that the non-Federal land exchanged for
the excess Federal land be "of not less than approximately equal
value"; however, the law does not define "equal value."  We
suggest that the Region request written clarification from the
Regional Solicitor on whether BOR has the authority to
administratively adjust the value of land exchanges conducted
under Public Law 86-92.

We also noted that BOR did not use an appraisal to establish the
values of the properties.  The Reclamation Manual (LDN 05-01)
requires that the value of the private and public lands exchanged
be established based on an appraisal conducted in accordance with
Federal regulations and appraisal standards.  However, we found
that contrary to this requirement, BOR used a consulting report
to establish the values of the properties.  According to the
consultant's October 1995 letter to BOR, the consulting report
was not intended to be a "complete or full narrative appraisal
report" and was considered limited in scope because it conveyed
only the consultant's "preliminary range of values" of the
properties.

In addition, the consulting report was 17 months old at the time
of the tentative agreement and 30 months old at the time the
exchange contract was signed.  We believe that the use of a
consulting report, especially one that was 30 months old, raises
additional concerns as to the fair value of the properties in
April 1998, when the land exchange contract was signed.
Therefore, we suggest that the Region, in the future, use
appraisals prepared in accordance with applicable appraisal
standards and the Reclamation Manual rather than consulting
reports in establishing property values in land exchanges.  In
addition, we suggest that appraisals older than 1 year be
reviewed and updated if necessary by either the original
appraiser or the regional reviewing appraiser familiar with the
property.

On February 25, 2000, we discussed the preliminary draft of this
report with BOR officials, who generally concurred with the
report's findings and suggestions.  We considered their comments
and incorporated them into this report as appropriate.
Subsequent to the discussion, BOR provided us with a copy of a
letter from the Office of the Solicitor, Pacific Northwest
Region, dated February 10, 2000, to the Jaspers' attorney,
stating that  Property Exchange Contract No. 7-07-L1455, dated
April 14, 1998, had been voided because of "mutual mistakes of
fact" regarding property boundaries and compliance with
environmental assessment requirements.

Since this report does not contain any recommendations, a
response is not required.

Section 5(a) of the Inspector General Act (5 U.S.C. app. 3)
requires the Office of Inspector General to list this report in
its semiannual report to the Congress.  In addition, the Office
of Inspector General provides audit reports to the Congress. 

**FOOTNOTES**

[1]:When BOR purchased private property to create the Reservoir,
most of the land was used for cattle grazing and farming.  Many
of the sellers requested and received permanent easement rights
to continue these uses, to the exclusion of nonagricultural uses
and development.  These restrictions applied to both BOR, which
retained fee title to these lands, and the private easement
holder.  Accordingly, by acquiring these agricultural easements,
BOR would obtain full title to and control of the land. 

[2]:The shoreline has been established in Public Law 86-92 as the
normal water surface elevation of 4828 feet, which represents the
Reservoir's high-water line.

[3]:Of the 277.83 acres, 239.33 acres are below the high-water
line and are usable only when the Reservoir recedes.  The fee
appraiser did not assign a monetary value to the 239.33 acres but
only to the 38.5 acres above the high-water line. 

[4]:Fair market value is generally defined as the price that
could be obtained in an arm's-length transaction between willing
parties in other than a forced or a liquidation sale.

[5]:According to the Reclamation Manual (LND 06, 7.G(1)),
regional directors or their designees may acquire land above the
appraised value as follows: without limitation if the appraised
amount is less than $100,000, by 15 percent if the appraisal
amount is between $100,000 and $500,000, and by 10 percent if the
appraisal amount is more than $500,000. 




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