Independent Auditors Denounce BLM Land Swaps

By Cat Lazaroff

WASHINGTON, DC, October 14, 2002 (ENS) - The Bureau of Land Management is reviewing all land exchange deals in progress or under discussion after an independent consultant determined that the agency has a history of approving deals that favor developers. The report by the Appraisal Foundation recommended that some deals be referred to the Justice Department for possible civil or criminal prosecution.

The BLM's 90 day review, announced last week, came after environmental groups obtained and released the scathing report by the Appraisal Foundation, an independent auditing group created by Congress to set real estate appraisal standards and qualifications.

"Our decision to begin this review is based in part, on findings in the Appraisal Foundation Report, which was paid for and requested by the BLM in June 2001," said Jim Hughes, the BLM's deputy director for policy and external affairs.

red rock

The BLM manages some of the nation's most spectacular landscapes, such as the Red Rock Canyon National Conservation Area in Nevada (Photo courtesy BLM)
The report, released by the Western Land Exchange Project (WLXP) and Public Employees for Environmental Responsibility (PEER), found widespread deviations from rules and laws, and deficiencies in procedures in how the BLM handles exchanges of federal lands.

"The BLM appears rife with internal dissatisfaction, confusion, controversy and outside political pressures on its performance that affect the appraisal function and the BLM at large," the report states. "It appears that violations of law may have occurred."

The foundation found a pattern of "abuses of the public trust where there is a failure to comply with laws or to conduct orderly operations in accordance with written guidance."

The BLM, an agency of the U.S. Department of the Interior, manages more land - 262 million surface acres - than any other federal agency. Most of the country's BLM managed public land is located in 12 western states, including Alaska.

The agency conducts hundreds of land exchanges each year, mostly to consolidate federal holdings. Many Western states contain a checkerboard pattern of federal, state and privately owned lands created by past policies intended to encourage the building of railroads and other developments.

Before an exchange can take place, the existing federal parcel and the non-federal lands must be appraised to ensure that they are of equal value, so that the federal government does not trade away valuable lands at taxpayer expense. In the case of exchanges authorized by legislation, Congress may direct a land exchange for other than equal value.

The Appraisal Foundation report found that BLM appraisers operate under a "politicized" climate in which appraisers are under "undue pressure" to bend rules and face "personal jeopardy" from BLM and Department of Interior managers eager to close deals. Many trades provide government land to developers at below market values, or set inflated values on private parcels to force the government to offer more land in exchange.

Despite persistent internal reports of misconduct, the BLM has failed to address these issues, leading to "total breakdowns" of management and adherence to legal standards, the report notes.

"This report completely vindicates the BLM appraisers who risked their careers to bring these issues forward," said Dan Meyer, general counsel for PEER, an organization of government employees that investigates allegations of misconduct at public agencies. BLM appraiser Kent Wilkinson recently testified to the federal Office of Special Counsel with the support of PEER.

Utah

Part of the San Rafael Swell (Photo courtesy Utah Photo Wild)
Among the projects singled out for criticism by the Appraisal Foundation report was the controversial San Rafael Swell land swap in Utah, which was approved by the U.S. House of Representatives last week. The deal, negotiated by senior BLM officials, Utah officials and federal lawmakers, would transfer some 108,000 acres of state school trust lands to the federal government in exchange for some 135,000 acres of federal lands rich in oil and coal.

But some BLM appraisers claim the deal hinges on a false appraisal which sets the value of the federal lands at about $36 million. Because that value does not include the price of the oil that may lie beneath the land, the actual value should be set up to $117 million higher, critics charge.

Interior Secretary Gale Norton is still considering the agency's response to a finding by the U.S. Office of Special Counsel concerning improprieties in the proposed San Rafael exchange. That land swap is now on hold pending the BLM review.

But the review will not help in the case of another controversial exchange in Utah's desert, where land from the Red Cliffs Desert Reserve was traded for a parcel that is home to the threatened Mojave desert tortoise. The presence of the protected species limited the development value of the private parcel, which should have limited the price the BLM could set on that land.

Instead, a BLM appraiser offered an inflated price to the landowners, which violated federal rules regarding the fair market valuation of land swaps.

The Appraisal Foundation tried to learn more about that exchange, but "the BLM was unable to provide a number of important appraisals and related file data," the report states. "Despite extensive efforts, some crucial files relating to the Washington County, Utah matter were never found."

"This is a thoroughly devastating indictment of Interior's land appraisal process," said Janine Blaeloch of the Western Land Exchange Project. "As it did with the Forest Service, the Appraisal Foundation has laid out the blueprint for reform."

The Appraisal Foundation reviewed the U.S. Forest Service's (USFS) land swap practices in 2000, and the USFS used that report to reform its exchange program.

logged

The proposed Umpqua Basin land exchange could trade intact forest lands owned by the BLM in Oregon for already logged parcels like this one. (Photo courtesy Umpqua Watersheds Inc.)
The BLM report recommends a moratorium on all pending exchanges until new independent appraisals can be performed, and the formation of a separate entity to oversee all Interior Department land valuations and exchanges.

"Past and currently proposed land exchanges, and their implications for the public trust, clearly warrant comprehensive investigation from outside the Department of the Interior," the Appraisal Foundation concluded. "We recommend an investigation by the Department of Justice of Bureau of Land Management land activities."

The BLM, however, says the Appraisal Foundation report goes too far.

"The draft report makes numerous allegations, statements and judgments that are of an inflammatory nature, but do not appear to be well supported by specific case examples," stated the BLM in a written response to an earlier draft of the report.

But the BLM is already responding to the criticism of this report and ongoing investigations by the Interior Department and its inspector general, and by the U.S. Office of Special Counsel.

Over the past two weeks, the BLM has transferred two senior officials from its Washington DC headquarters, including realty lands and realty manager Ray Brady and chief appraiser David Cavanaugh. Last year, WLXP and PEER asked for Cavanaugh's removal for many of the same reasons cited in the Appraisal Foundation report.

The BLM's Hughes said the BLM is also forming a working group to undertake a "top to bottom evaluation" of the agency's land exchange and land appraisal processes. The working group will analyze the recommendations contained in the Appraisal Foundation's report and other surveys of the land exchange program issued over the past several years by the Office of the Inspector General and the General Accounting Office.

The working group will include BLM, Department of Interior (DOI), other federal agencies, and state government familiar with the land exchange process and appraisal activities, and will report to the DOI with specific recommendations.

"The BLM is committed to ensuring that the land exchange program is impartial, credible, and consistent nationwide, and, most importantly, one that protects the public interest," Hughes said.

Until further notice, Hughes added, the DOI will review all future BLM land exchanges prior to their finalization.

A copy of the Appraisal Foundation report, "Evaluation of the Appraisal Organization of the Department of Interior Bureau of Land Management" (2002) is available at: http://www.peer.org/appraisal_report.pdf