Amicus Curiae Brief — Public Lands Council v. Babbitt
Supreme Court brief2000
Ask Donna
What actually matters in this document.
Text
c
—
Supreme Court, 0.8, |
FILED
SEP 10 1999
No. 98-1991 OFFICE OF THE OLERS
In The
Supreme Court of the United States
e
PUBLIC LANDS COUNCIL, ET AL.,
Petitioners,
BRUCE C. BABBITT, SECRETARY
OF THE INTERIOR, ET AL.,
Respondents.
S
On Petition For Writ Of Certiorari
To The United States Court Of Appeals
For The Tenth Circuit
¢
BRIEF AMICUS CURIAE OF ALAMEDA BOOK
CLIFF’S RANCH, ARIZONA & NEW MEXICO
COALITION OF COUNTIES FOR STABLE ECONOMIC
GROWTH, PRODUCTION CREDIT ASSOCIATION OF
NEW MEXICO AND NEW MEXICO PUBLIC LANDS
COUNCIL ET AL. IN SUPPORT OF PETITIONERS
e
KarREN Bupp-FALEN
Counsel of Record
Jerrrey B. TeiCHERT
Bupp-FAaLen Law Orrices, P.C.
300 East 18th Street
Post Office Box 346
Cheyenne, Wyoming 82003-0346
(307) 632-5105 Telephone
(307) 637-3891 Telecopier
COCKLE LAW BRIEF PRINTING CO., (800) 225-6964
OR CALL COLLECT (402) 342-2831
ia eaten (mena aa
TABLE OF CONTENTS
Page
| eT Ns vb N'n 0'sa vcdeses tes eudaudecesauchens |
| PE ccaxkeccnsdcoseniwecseutens oxi<eesseeniaans l
Se GP CCE 6c cc ccivoccvesccdesenceuve 2
| ITE 0 6b 50 6 bee ncedcessceceuistnecsaneusseaes 2
I. The Permitted Use Rule Violates The TGA By Fail-
ing To Adequately Safeguard Grazing Privileges... 2
a 5. _ fo rrr ce 2
B. The Grazing Preference is a Privilege That Must
Be Adequately Safeguarded Under the TGA... 3
1. Privileges “[SJafeguarded” Under the TGA
Include the Recognition of “[G]razing
[P}rivileges [R]ecognized and [A]cknowledged”
ES Gy Geer Gn ho 0 Wh-weeeuacesesuess 5
2. The Grazing Preference was Historically
Attached to the Permit Holder’s Private
Base Property and the Number of AUMs in
the Preference was Based on the Carrying
Capacity of the Permit Holder’s Private
C. The Permitted Use Rule Contravenes the TGA’s
Mandates to Stabilize the Livestock Industry
and to Protect the Public Range............. 8
) 1. The Permitted Use Rule Destabilizes the
) RE TE 5 <o:n's dé den vennectucexa 8
2. The Permitted Use Rule Places Agricultural
Lending Institutions at Risk of Failure ... 12
D. The Permitted Use Rule Presents Grave Threats
SS Te 13
—e i. ——™
il iil
TABLE OF CONTENTS - Continued TABLE OF AUTHORITIES
Page Page
E. The Permitted Use Rule is a Death Sentence to Cases
a ee Sees ar Oe Wee... ” Chournos v. United States, 193 F.2d 321 (10th Cir.
II. The Range Improvements Rule Violates the TGA by jt tei db edeededl de ddbdneeeunesteneeweuade 8, 18
Destabilizing the Livestock Industry, Failing to Ade- ;
quately Safeguard Grazing Privileges Based on Hage v. United States, 42 Cl. Ct. 249 (Cl. Ct. 1998).... 11
aco — and Causing Pervasive Damage to the 15 Natural Resources Defense Council v. Morton, 388
ny ahah al hh F.Supp. 829 (D.D.C. 1974) .........00cceeceeeeeeeees 9
TEP TRG SAPPOPOMENES TN ......-.2.006. v9 Public Lands Council v. Babbitt, 167 F.3d 1287 (10th
B. The Range Improvements Rule Will Signifi- i i on¢teneeseee0enesseusdeesessoneetss 2, 4, 5
cantly Damage Water Property Rights and , ,
Attached Grazing Preferences................ 16 Public Lands Council .. United States Dep't of the
Interior, 929 F.Supp. 1436 (D.Wyo. 1996)............ 5
C. The Range Improvements Rule Discourages the
Construction of Range Improvements and Red Canyon Sheep v. Ickes, 98 F.2d 308 (D.C. Cir.
Encourages Environmental Degradation....... 18 IPC. 2s eee eae eenseenbenesneeeesenes s
EE 20 Shufflebarger v. Commissioner, 24 T.C. 980 (1955)...... 3
STATUTES
i i 6.0 eee easdeeeneess conceesunes 4, 5, 8
EE ET ET TTT TTT TTT TTT TTT TT 16
chee 6 cduedncdcacdeeeeseuceseesqsuset 8, 18
RuLes AND REGULATIONS
43 C.F.R. §§ 160.17, 161.14 (1955)............6.06655. 15
43 C.F.R. §§ 160.25, 501.27 (1938)...... 2.6.06. eee 15
43 C.F.R. § 4100.0-S (19946). ... 2... ccc eee ccccccces 3, 16
43 C.F.R. § 4100.0-5 (1998)... 2... cc ce eees 3
ep Sere GU RN me GENS ORe ccccccccccccccccccecescess 8
iv
TABLE OF AUTHORITIES — Continued
Page
SD Sere © Ge Ge wc cc ecnccssccesecccceces 3
Gre Oo Ge Ga hee ccccecccdcedesccoccese 15
> Gee © Ge Ge cc nccnccccccccccccccosceese 16
GD Gor OO Gee Ga ca ccccccvceccccoccccccens 17
GD Gee © Ge Ge ccccnnccccceoncesevess: 17
> a te ee Cc decccedéctecccvacecesens 16
> CH | GERAD CHGGED ccc cccccccccccccesen 16, 17
> See © Ge Ga cc wcncccccccsssecencecscenes: 15
Gate OF ey CI oc ecs cscnccccéccesésccsocens 8
> Ge © Gr Gh cecccccaccvcccconcatescéns 8
Federal Range Code § SO1.2(e)......... 2.2.2.0 0000. 7, 8
Federal Range Code § 501.4(a) ............ 2. ccc eceneee 8
EE GS Ge Go ceeccccccenancsccndcccounnsucnc 2
Orner AUTHORITIES
Sep CR Gs. Ge Gee ose cncnvcccccccecsesenedd 6, 18
ep Sy Sek, Ge Gee bs bed wedccevcssccceseacesuts 6
60 Fed. Reg. 9934 (Feb. 22, 1995)..............22555:. 17
Pe Gee, TB. Fee Gee oe wcccccncscccessicdaces 8, 10
Fe Ge, TEs Bre Go oe ce cveccccvcccceccccsctune 6
FS GU, Gs Fee Ga oc ccovccvcccccecctcesesess 13
Pe Gee, TRGD. Fre Go ccc ccdcccvcsvcscsucscess 9, 18
78 Cong. Rec. 5376 (1934)...... eenbeuceseccuceads 9, 18
TABLE OF AUTHORITIES — Continued
Bee as Cs Gre bb Seb seveicndécdesecesenase 9
ee es Ge GD I ov odeswecndcucceccueicotes 13
Bureau of Land Management, United States Depart-
ment of the Interior, New Mexico Standards for
Public Rangeland Health and Guidelines for Live-
stock Grazing Management: Draft Statewide
Resource Management Plan Amendment/Environ-
mental Impact Statement (1999) “(New Mexico
Ee Didcctvivabendesnesetcescnent 9, 11, 13, 14, 15, 18
F. Obermiller, Public Domain Grazing Adjudications
Under the Taylor Grazing Act....................... 5
F.R. Carpenter, Establishing Management Under the
Re eres 5
J. Fowler, Statement to the Committee for Energy and
Natural Resources [of the] United States Senate on
Rangeland Reform ‘94 (unpublished manuscript
presented om May 14, 1994).............2-eeeeee 10, 19
P. Foss, Politics and Grass (Univ. of Washington
I et ne Oe oe ee eee ed alee 3, 5, 6,7, 9
Penny & Clawson, Administration of Grazing Dis-
tricts in The Public Lands (V. Carstensen, ed..,
University of Wisconsin Press (1962) (reprinted
from 29 Land Economics 23-34) (1953).... 7, 9, 10, 18
l
INTRODUCTION
The Tenth Circuit erred in sustaining two recently
adopted federal livestock grazing regulations that had been
struck down by the U.S. District Court for the District of
Wyoming. The first of these regulations abandoned the adju-
dicated grazing preference in favor of “permitted use” (“Per-
mitted Use Rule”). The second prospectively vests title in the
United States to all range improvements on the public lands.
This brief will demonstrate how these regulations will cause
pervasive damage to the livestock industry, the financial ser-
vices industry, the environment and the unique rural cultures
of the American West. The parties represented in this brief
respectfully request that the U.S. Supreme Court grant cer-
tiorari to hear this case.'
ISSUES
1. Whether the holder of a Bureau of Land Management
(“BLM”) grazing preference is entitled to retain his “sus-
pended use” animal unit months (“AUMs”) on BLM land,
which can be activated if increased forage becomes available
(i.e., challenge to Permitted Use Rule); and
2. Whether the regulation prospectively vesting title to
all future range improvements in the United States contra-
venes the Taylor Grazing Act's (“TGA’s”) purposes and
requirements to adequately safeguard recognized privileges in
the range and to stabilize the livestock industry (i.e., chal-
lenge to Range Improvements Rule).
' The parties have consented to the filing of this brief. Counsel for a
party did not author this brief in whole or in part. No person or entity, other
than the Amicus Curiae, its members, or its counsel made a monetary
contribution to the preparation and submission of this brief. This bref was
authored by Karen Budd-Falen and Jeffrey B. Teichert, attorneys of Budd-
Falen Law Offices, PC.
2
STANDARD OF REVIEW
Supreme Court Rule 10 states that “[rjeview on a writ of
certiorari is not a matter of right, but of judicial discretion”
and “will be granted only for compelling reasons.” Among
these compelling reasons are (1) a decision conflicting with
precedent in another circuit; or (2) “an important question
of law that has not been, but should be, settled by this
court... .” Id.
While there is technically no split of authority regarding
the issues raised in this brief, the Tenth Circuit reversed the
U.S. District Court for the District of Wyoming by a bare
majority of two votes to one (2-1). The Tenth Circuit's decision
was then upheld on a petition for rehearing Sy an en banc court
deadlocked at five votes to five (5-5), with two judges abstain-
ing. The resulting precedent will, if permitted to stand, leave
public lands grazing jurisprudence in disarray to the severe
detriment of the 16 Western states. For example, a coalition of
17 rural counties and one municipality in Arizona and New
Mexico unanimously approved a resolution warning that:
The 10th Circuit panel's decision will have serious
adverse social, cultural, economic, physical and
biological environmental impacts on the states of
Arizona and New Mexico and the Coalition of Ari-
zona/New Mexico member counties.
Resolution Concerning 10th Circuit Decision in PLC v. Bab-
bitt, Coalition of Arizona/New Mexico Counties for Stable
Economic Growth (October 2°, 1998). App. 1-2. The reasons
why this case is sufficiently compelling to warrant Supreme
Court review will occupy the remainder of this brief.
ARGUMENT
I. The Permitted Use Rule Violates The TGA By Failing
To Adequately Safeguard Grazing Privileges
A. The Permitted Use Rule
Under the prior rule, “[g)razing preference means the
total number of animal unit months of livestock grazing on
public lands apportioned and attached to base property owned
3
or controlled by a permittee or lessee,” 43 C.F.R. § 4100.0-5
(1994), including “both active and suspended use.” 43 C.F.R.
§ 4110.2-2(a) (1994). Under these regulations, the preference
was not an absolute guarantee of livestock numbers, but
allowed the rancher the right to utilize the maximum number
of AUMs the range would support, up to the preference limit.
P. Foss, Politics and Grass (Univ. of Washington Press)
(1960), App. 12-14. If grazing use (“AUMs”) was reduced,
the permittee retained the suspended use to be reactivated
when forage conditions improved. /d. Once established, the
grazing preference “is to be regarded as an indefinitely con-
tinuing right.” Shufflebarger v. Commissioner, 24 T.C. 980,
992 (1955).
In contrast, under the Permitted Use Rule, “[pJermitted
use means the forage allocated by, or under the guidance of,
an applicable land use plan for livestock grazing in an allot-
ment under a permit or lease and is expressed in AUMs.” 43
C.F.R. § 4100.0-5 (1998). The Permitted Use Rule bases
grazing decisions solely on land use plans and other deci-
sions, without the guidance of the AUMs historically attached
to the permit holder's base property. 43 C.F.R. § 4100.0-5
(1994). Additionally, under the Permitted Use Rule, the per-
mittee is not entitled to reclaim suspended use AUMs if
forage improves, even if that improvement is caused by the
permittee.
B. The Grazing Preference is a Privilege That Must
Be Adequately Safeguarded Under the TGA
The operative language of the TGA is as follows:
The Secretary of the Interior is hereby authorized to
issue or cause to be issued permits to graze live-
stock on such grazing districts to such bona fide
settlers, residents, and other stock owners. .
Preference shall be given in the issuance of grazing
permits to those within or near a district who are
landowners engaged in the livestock business, bona
fide occupants or settlers, or owners of water or
water rights, as may be necessary to permit the
proper use of lands, water or water rights owned,
4
occupied, or leased by them. . . . Such permits shall
be for a period of not more than ten years, subject
to the preference right of the permittees to renewal
in the discretion of the Secretary of the Interior,
who shall specify from time to time numbers of
stock and seasons of use. . . . So far as consistent
with the purposes and provisions of this subchapter,
grazing privileges recognized and acknowledged
shall be adequately safeguarded, but the creation of
a grazing district or the issuance of a permit pur-
suant to the provisions of this subchapter shall not
create any right, title, interest, or estate in or to the
lands.
43 U.S.C. § 315b (emphasis supplied). The Tenth Circuit
mistakenly held that historic preference, allowing the permit
holder “to graze predictable numbers of stock from permit to
permit,” was not a grazing privilege which must be “ade-
quately safeguarded” under the TGA. Public Lands Council v.
Babbitt, 167 F. 3d 1287, 1294 (10th Cir. 1998). The prefer-
ence system made authorized grazing numbers predictable by
ensuring that the preference holder’s share of the available
forage, vis-a-vis the share granted to other permittees, would
not change. A right of “preference” over other potential users
or uses is illusory if the preference does not indicate how
large a share of the available forage the holder may claim in
“preference” over others. Because the Permitted Use Rule
eliminates adjudicated grazing limits, a preference holder is
no longer guaranteed a fixed share or percentage of the forage
available on his grazing allotment.
Essentially, the Tenth Circuit held that it must follow
“the plain meaning of the regulations” rather than “unat-
tributed assertions” that “privileges recognized and acknowl-
edged,” 43 U.S.C. § 315b, included historic preference. 167
F.3d at 1297. Thus, the Tenth Circuit left these “privileges”
unprotected by its refusal to consider outside sources to
supply the scope and substance of the protected “privileges.”
Id.
Miettinen 2 ee
5
1. Privileges “[S]Jafeguarded” Under
the TGA Include the Recognition of “[{G]raz-
ing [P]rivileges [R]lecognized and
[A]cknowledged” Because of Prior Use
Although the TGA does not “create any right, title,
interest, or estate in or to the lands,” 43 U.S.C. § 315b
(emphasis supplied), it does safeguard privileges in the range
that already existed by virtue of “previous use of the range.”
F.R. Carpenter, Establishing Management Under the Taylor
Grazing Act, address at Montana State College (January 8,
1962), in Rangelands, 1981, App. 14; Public Lands Council,
167 F.3d at 1310 (Tacha, J., dissenting, citing McLean v.
BLM, 133 IBLA 225, 231-32 nn.9-10 (1995)). These privi-
leges were originally adjudicated in a process that took almost
20 years. Public Lands Council v. United States Dep't of the
Interior, 929 F. Supp. 1436, 1440 (D.Wyo. 1996).?
The TGA’s policy of recognizing prior use was, essen-
tially, a codification of history. Grazing on western public
lands began because the various Homestead Acts failed to
provide adequate acreage to support a viable livestock opera-
tion in the arid west where forage was sparse. P. Foss, Politics
and Grass (1960). App. 3-4, 9. Livestock operators therefore
resorted to utilizing adjoining public lands for grazing, id.,
App. 6, 9, and many livestock operators resorted to fencing
the unregulated range. /d., App. 6-8. “When the Taylor Graz-
ing Act was passed, these privately owned fences on the
public range were considered evidence of prior use of the
lands and thus gave the owner preference in obtaining ‘range
rights’ for his livestock.” /d., App. 8.
During debate on the TGA, its sponsoring Congressman
recognized the validity of grazing rights springing from prior
use:
There are many vested rights, which should and
must be respected and protected, which have grown
2 For a helpful review of the adjudication process, see F. Obermiller,
Public Domain Grazing Adjudications Under the Taylor Grazing Act
(paper prepared for this litigation) App. 16-25.
6
up on the range. There are involved the rights of
some who graze across State lines; and, naturally,
they do not want those rights destroyed. They do
not want to take any chances [by leaving grazing
regulation to the states].
78 Cong. Rec. 5372 (1934) (statement of Congressman Tay-
lor) (emphasis supplied).
Farrington Carpenter, the Director of the U.S. Grazing
Service, (predecessor agency to the BLM) described the pro-
cess in this way:
[T]he Act [TGA] contained a clause that said we
should protect prior rights. What were prior rights?
Prior rights were previous use of the range... .
.... After many, many battles this is what they
finally decided. The rule was finally worked out
that anyone who in the 5 years immediately preced-
ing the Taylor Act had used the range in connection
with his land, either continuously for 2 years or any
3 years in that period had prior use rights.
Carpenter (emphasis supplied), App. 2; see also P. Foss,
Politics and Grass (1960). App. 14-15.
Approximately three years after the TGA was enacted,
the Interior Department issued a formal opinion stating that
“prior use of the public lands for grazing purposes in connec-
tion with privately held property may be regarded as a most
reasonable standard for the granting of grazing privileges.” 56
Interior Dec. 62, 64 (1937).
2. The Grazing Preference was Historically
Attached to the Permit Holder’s Private Base
Property and the Number of AUMs in the
Preference was Based on the Carrying
Capacity of the Permit Holder’s Private Land
The grazing preference traditionally included sufficient
AUMs so that the rancher could graze the same number of
livestock on the public lands as he could on his private land.
The act [TGA] furnished a clue to the method of
allocating grazing privileges. “Preference,” said the
7
statute, “shall be given in the issuance of grazing
permits to those within or near a district who are
landowners engaged in the livestock business .. . or
owners of water rights. . . . ” This clause restricted
grazing rights to landowners or owners of water or
water rights; the propertyless nomad was thereby
eliminated from consideration. The clause “as may
be necessary to permit the proper use of lands” was
interpreted to mean that the applicant must have
private holdings sufficient to sustain his livestock
when they were off the district, and conversely, that
the district lands should complement his private
holdings. . . . The director, after meetings with the
stockmen, decided upon an additional system of
preferences based on customary past use of federal
lands. This modified “squatter’s right” idea was
based on the old western common law of “first in
time is first in right.” The director found legal
justification for this concept in the language of the
statute which stated “grazing privileges recognized
and acknowledged shall be adequately safe-
guarded.”
P. Foss, Politics and Grass (1960), App. 10-11; see also
Penny & Clawson, Administration of Grazing Districts in The
Public Lands (V. Carstensen, ed., University of Wisconsin
Press) (1962) (reprinted from 29 Land Economics 23-34
(1953)). App. 28-29.
The Federal Range Code’s definition of “base property”
further demonstrates that the preference was to be based on
the carrying capacity of the permit holder's private base
property. According to the Code, “base property” is:
Property used for the support of livestock for which
a grazing privilege is sought and on the basis of
which the extent of a license or permit is computed
without reference to forest permits or [other] com-
plementary feed.
Federal Range Code § 501.2(e). App. 26. Attaching the pref-
erence to the base property furthered the purpose of the TGA
to “permit the proper use of lands, water, or water rights
8
owned, occupied, or leased by [the permittee].” 43 U.S.C.
§ 315b. This finding recognized the historic dependance of
private ranches on the complementary use of public lands. Id.;
see also Federal Range Code § 501.2(e); 501.4(a), App.
26-27.
In summary, the TGA requires that historic preference,
the right to utilize available forage subject to the preference
limit, is a privilege which must be “adequately safeguarded
within the strictures of the TGA. The preference is based on:
(1) historic use of the range; and (2) the carrying capacity of
the permit holder’s base property.* The new regulation issued
by the BLM fails to follow these requirements.
C. The Permitted Use Rule Contravenes the TGA’s
Mandates to Stabilize the Livestock Industry and
to Protect the Public Range
1. The Permitted Use Rule Destabilizes the
Livestock Industry
The Tenth Circuit mistakenly stated that “[w]hile stabi-
lizing the livestock industry is one of several purposes of the
{TGA}, PLC and the dissent place far too much weight on this
point.” Public Lands Council, 167 F.3d 1287 at 1298. This
statement is incorrect. Congressman Taylor, author of the
Taylor Grazing Act, stated that along with range protection
and improvement, the purpose of the TGA to “stabilize the
livestock industry dependent upon the public range” was “of
the greatest and highest possible importance. . . . ” 78 Cong.
Rec. 5371 (1934); see also TGA preamble, 48 Stat. 1269
(uncodified); Chournos v. United States, 193 F.2d 321, 323
(10th Cir. 1952); Red Canyon Sheep v. Ickes, 98 F.2d 308, 314
3 There are minor exceptions to base property ownership
requirements. 43 C.F.R. § 4110.1-1 (1997); see 43 CFR. § 4130.5 (1997)
(a grazing permit can be issued to persons who do not own or control base
property if they graze livestock for subsistence purposes); 43 CFR.
§ 4130.6-3 (1997) (persons who do not own base property can acquire
temporary “trail permits” to allow livestock to graze while crossing public
lands).
a eae
RRS oe cee
;
:
A
9
(D.C. Cir. 1938); Natural Resources Defense Council v. Mor-
ton, 388 F. Supp. 829, 833 (D.D.C. 1974); Foss, App. 9-12;
Penny & Clawson, App. 29. Because the lack of predictable
forage was the major destabilizing factor for livestock pro-
ducers at the time of the TGA’s passage, establishing “cer-
tainty of tenure” to graze reasonably predictable livestock
numbers was considered essential. 78 Cong. Rec. 5374 (1934)
(Statement of Rep. De Rouen, quoting Interior Secretary
Harold L. Ickes); /d. at 5376 (Statement of Rep. DeRouen,
quoting Agriculture Secretary H.A. Wallace). According to
the Congressional record:
(To stabilize the stock industry] is to make it possi-
ble for a farmer or ranchman engaged in either the
cattle or sheep business to know just what range
privileges he may expect and how many cattle or
sheep he will be allowed to graze on this public
domain.
78 Cong. Rec. 6356 (1934).
Even today, the BLM admits that the grazing preference
was the TGA’s primary mechanism for safeguarding grazing
privileges and stabilizing the livestock industry. According to
the BLM:
John Fowler states that historically “federal land
policies have encouraged development and invest-
ment by the grazing permittee. The TGA provided
enhanced stewardship, financially stable commu-
nities and livestock industry” (Fowler, 1994). The
key TGA policy is the Grazing Preference, which
was adjudicated to provide security of tenure to
encourage investment and commitment on the part
of the rancher. In return, TGA states that “Grazing
privileges recognized and acknowledged shall be
adequately safeguarded... . ”
Bureau of Land Management, United States Department of
the Interior, New Mexico Standards for Public Rangeland
Health and Guidelines for Livestock Grazing Management:
Draft Statewide Resource Management Plan Amendment/
Environmental Impact Statement (1999) (“New Mexico EIS”)
(emphasis supplied), App. 51.
10
Congressman Taylor also explained that providing pre-
dictable grazing expectations in federal lands would inspire
the confidence of lenders and provide livestock operations
with access to badly needed capital:
I had the honor of being the acting chairman of this
committee much of the time we frequently talked
over this matter of . . . the stabilization of the stock
industry on the public domain. You Members who
do not live in that country may not realize that a
herd of cattle or a flock of sheep are worth little or
nothing unless the owner has a place to graze them;
and in order to build up or maintain and stabilize
the stock-raising industry there must be some assur-
ance as to where and what kind of range they may
have and depend upon for their stock, what they can
definitely rely upon in the way of pasturage. Other-
wise, there would be no permanence to the business.
People who have herds would not be safe; they
would have no credit with banks for securing
money. They cannot secure money from the banks if
they cannot show that they have some definite and
sufficient place on the range where their stock may
be adequately grazed.
78 Cong. Rec. 5371 (1934) (emphasis supplied).
According to Agricultural Economics Professor John M.
Fowler, even today the elimination of the “grazing preferen-
ce . . . and adding in its place the term ‘permitted use’
provides unusual latitude for the BLM to redefine authorized
livestock use.” J. Fowler, Statement to the Committee for
Energy and Natural Resources [of the] United States Senate
on Rangeland Reform ‘94 (unpublished manuscript presented
on May 14, 1994), App. 32; see also Affidavit of Frederick J.
Obermiller (“Obermiller Aff.”) ¥ 8, App. 34. This problem is
particularly serious in the Southwest where most BLM graz-
ing permits are tied to water rights serving as base properties.
Penny & Clawson, App. 28; Affidavit of John Fowler
(“Fowler Aff.”) ¥ 10, App. 38-39. Unlike deeded land, a water
right on public lands is “virtually useless without a BLM
grazing permit” because the water right owner must have a
grazing permit to utilize the water right. Fowler Aff. ¥ 10,
App. 38-39. As stated by one court, owners of water rights
“have a property interest in the . . . forage rights appurtenant
to their water rights” and the denial of a grazing permit
needed to access a water right would amount to an uncompen-
sated taking of private property in violation of the Fifth
Amendment. Hage v. United States, 42 Cl. Ct. 249, 250-57
(Cl. Ct. 1998).
Because the Permitted Use Rule bases public lands stock-
ing decisions on land use planning rather than stable prefer-
ence adjudications, the assurance of predictable livestock
numbers will be eliminated, resulting in drastically reduced
loan capital, loan availability and loan size. Obermiller Aff.
Ti 7-8, App. 34; Fowler Aff. 411, App. 39; Affidavit of Jack
C. McCall (“McCall Aff.”) 49 6-8, App. 62; Affidavit of
Jaqueline A. Buchanan (“Buchanan Aff.”) 4¥ 7-8, App. 70;
Affidavit of Jimmie C. Hall (“Hall Aff.”) 4] 6-7, App. 74;
Letter From Don Kidd, President and CEO of Western Com-
merce Bank to Connie Brooks (Oct. 29, 1998) (“Kidd”)
(unpublished), App. 87-90. In fact, as a result of the Permit-
ted Use Rule, a majority of lenders in both the Pacific North-
west and the Southwest will no longer consider BLM grazing
privileges in evaluating security for loans. Fowler Aff. ¥ 12,
App. 39; McCall Aff. 4 8, App. 62.
Additionally, because of the loss of tenure security, BLM
grazing permits will also no longer be considered in
appraisals of ranch value either for purposes of sale or use of
the ranch as collateral for a loan. McCall Aff. ¥ 7, App. 62;
Obermiller Aff. ] 7, App. 34. Furthermore, young people will
no longer be able to obtain financing to enter the ranching
profession, which guarantees that the industry will continue
to dwindle. Kidd, App. 90. Most BLM ranchers operate on a
one to two percent profit margin and are highly vulnerable to
small fluctuations in cost or income that result from changes
in public policy. Fowler Aff. 4 17, App. 40; New Mexico EIS,
App. 55-57. Thus, many BLM dependant ranches will be
12
forced out of business because of probable livestock reduc-
tions* and the inability to obtain loans. Polley Aff. 1 6, App.
92. Buchanan Aff. 47 8-9, App. 70; McCall Aff. 47, App. 62;
Obermiller Aff. ¢ 10, App. 35.
2. The Permitted Use Rule Places Agricultural
Lending Institutions at Risk of Failure
As agricultural operations are driven into insolvency,
their preexisting loans will also be placed in default, causing
financial losses to agricultural lenders. Buchanan Aff. 1 8,
App. 70. This problem will likely affect between forty and
ninety-five percent of existing BLM dependent loan portfo-
lios. Buchanan Aff. 4 8, App. 70; Kidd, App. 89. In some
cases, existing debts are secured up to ninety-five percent by
BLM grazing permits. Buchanan Aff. 4 8, App. 70. If these
loans are subjected to “CLASSIFICATION” by Federal
Deposit Insurance Corporation (“FDIC”), all banks with sig-
nificant permit-secured loans will be in danger of default to
the Federal Reserve. /d. Losses of even twelve to fifteen
percent of an institution's loan portfolios would present a
serious threat of failure because of the losses themselves, and
because of the resulting loss of confidence by underwriters.
McCall Aff. 4 9 App. 63. If BLM permits are rendered
valueless by tenure insecurity, it is reasonable to predict a
direct loss of approximately $1,000,000,000 to the BLM
dependent livestock industry, which has an aggregate value of
approximately $8,000,000,000 to $10,000,000,000. Ober-
miller Aff. 4 9, App. 34-35. Losses will be felt by approx:-
mately seventy-five percent of the livestock industry in the
Western states.5 Obermiller Aff. 7 11, App. 35.
+ Because many costs of production remain constant, livestock
reductions increase the per cow cost of production and decrease profits.
Obermiller Aff. 4 10, App. 35; Affidavit of Adam C. Polley (“Polley Aff.)
q 6. App. 92.
* The impact of instability in the livestock industry should not be
measured only in dollar amounts. The author of the TGA indicated that
ee ee ed
13
D. The Permitted Use Rule Presents Grave Threats
to Ecosystem Health
“Range improvements are long term investments in the
basic land resource that require years to yield a positive
return to amortize the dollars invested.” New Mexico EIS,
App. 55 ; Fowler Aff. 4 14, App. 39; McCall Aff. 4 10, App.
63. Without “Ye security of tenure provided by the historic
grazing preference, permittees will not be willing to invest in
range improvements to enhance ecosystem health. Fowler
Aff. 41 14, 16, App. 39-40; McCall Aff. | 10, App. 63.
Furthermore, since the government no longer makes a long-
term commitment to grazing permittees, lenders can no longer
afford the risk of funding permanent improvements that
require a considerable time to pay for themselves. Kidd, App.
88; McCall Aff. 4 7, App. 64. According to the BLM:
Healthy ranges cannot be maintained without secure
livestock operations. In short, as the range improves
in productivity with the help of the rancher, the
rancher should re-establish his or her profitability
and pay the variable costs. Once the profitability is
achieved, the rancher will invest capital to improve
the healthy ranges. The improved healthy ranges
will provide a more secure environment for family
and community stability. With improved security
and stability, the rancher will have greater incen-
tive to further invest in public land improvements.
New Mexico EIS, App. 50-51. (emphasis supplied). The BLM
goes on to state:
The intent of Congress [in passing the TGA] was to
provide stockholders with “ . . . some type of
assurance as to where and what kind of range they
may have and depend on in the way of pasturage.”
(78 Congressional Record) [sic]. The grazing privi-
leges were subsequently adjudicated to determine
“the small ranchman™ was the interest the TGA was “most concerned
about.” 78 Cong. Rec. 5373 (1934) (statement of Congressman Taylor): see
also 78 Cong. Rec. 6364 (1934) (statement of Congressman Taylor).
14
who was eligible for a grazing preference. The term
“grazing preference” represents a preference for a
grazing permit. The grazing preference was
attached to the base property of the ranch and was
transferred to the party who owned or controlled the
base property. The completion of the adjudication
process provided predictability and security of ten-
ure to livestock operators. This predictability and
certainty in grazing permits provides the security to
obtain financing for livestock capital, operations
and improvements on the public land.
. . . . Good range management and proper
stewardship of the rangeland is ultimately linked to
the security and tenure of the adjudicated prefer-
ence grazing permit/lease, as expressed and demon-
strated by a variety of public land research
economists (Martin, 1981, Kelso, 1983, Archer, and
Snider, 1984). When predictability and certainty are
removed, not only do the ranch finances and family
suffer, but the incentive for good stewardship and
investment into healthy rangeland improvements is
thwarted.
New Mexico EIS, App. 52-53. The BLM clearly understands
that abolishing the grazing preference is destructive to tenure
security, destabilizing to the livestock industry, and devastat-
ing to rangeland health in contravention of the TGA. The
Permitted Use Rule directly contradicts this understanding.
E. The Permitted Use Rule is a Death Sentence to
the Unique Rural Cultures of the West
“The impact from changes to the range livestock industry
will be negligible to the urban economies, but highly impos-
ing to the rural counties with large acreage of BLM land.”
New Mexico EIS, App. 49. This will deprive counties of
badly needed revenue for important programs affecting preda-
tor control, soil conservation, senior citizens and community
centers, and employee salaries. Polley Aff. {¥ 7-8, App.
92-93.
i)
“Land is the life and well-being of the rural culture in
New Mexico. Working the land is the center piece of their
livelihood[.]” New Mexico EIS, App. 53. The unique culture
and value systems of the rural West are deeply embedded in a
sense of “place” meaning “the site or sites marking the life of
a person, the story of their life and that of the lives that came
before them.” /d., App. 54. For the rural peoples of the West,
“place and identity are virtually inseparable.” Jd. A forced
separation of rural people from their lands “would destroy the
very identity of those people.” /d.
The rural cultures of the West include “a bond between
people and place that is no less a bond than flesh and blood; it
is wholly dependant upon the fabric of land, people, and
community being intact and stable.” /d. “It is within place
that the values of a region are cultivated.” /d., App. 55. If
there is serious instability in the livestock industry, cultural
values such as “self-sufficiency, hard work, and other traits,
such as community cohesion, cooperation and leadership
associated with agrarian communities, could be altered.” New
Mexico EIS, App. 58-60. A decline in unique rural cultures
would result in “the descent toward a less centered, less self-
reliant, more homogenous monoculture.” /d., App. 58-60.
Given the devastating effect of the Permitted Use Rule and its
contradiction to the TGA, the Tenth Circuit's decision should
be reversed.
Il. The Range Improvements Rule Violates the TGA by
Destabilizing the Livestock Industry, Failing to Ade-
quately Safeguard Grazing Privileges Based on Water
Rights, and Causing Pervasive Damage to the Public
Range
A. The Range Improvements Rule
For six decades, the BLM recognized that ranchers who
constructed range improvements on the BLM lands held title
to these improvements in proportion to their contribution
toward the construction or maintenance of the improvement.
43 CFR §§ 160.25, 501.27 (1938); 43 C.FR §§ 160.17,
161.14 (1955); 43 C.F.R § 4115.2-5 (1964); 43 C.F.R.
16
§ 4120.6 (1978); 43 C.F.R. § 4120.3 (1989); 43 C.F.R.
§ 4120.3-2 (1994). In 1995, the BLM abruptly reversed this
historical recognition and enacted a rule that vested the
United States with title to all permanent range improvements
authorized after August 21, 1995. The new rule reads, in
relevant part:
Subject to valid existing rights, title to permanent
range improvements such as fences, wells, and
pipelines where authorization is granted after
August 21, 1995 shall be in the name of the United
States. The authorization for all new permanent
water developments such as spring developments,
wells, reservoirs, stock tanks, and pipelines shall be
through cooperative range improvement agree-
ments.
43 C.F.R. § 4120.3-2(b) (1998).
B. The Range Improvements Rule Will Significantly
Damage Water Property Rights and Attached
Grazing Preferences
In order to attach a BLM grazing permit to a water right,
the water must be “available and accessible to the authorized
livestock when the public lands are used for grazing.” 43
C.F.R. § 4100.0-5 (1994). Without the aid of “wells, reser-
voirs, and other improvements” authorized by Section 4 of the
TGA, 43 U.S.C. § 315e (“Section 4”), many water rights
would not be “accessible” to livestock. Furthermore, when the
BLM excludes livestock from primary water sources to “man-
age” such areas, improvements such as water pipelines are
often necessary to make water “available” to livestock as
required for the water to qualify as base property under 43
C.F.R. § 4100.0-5 (1994).
Under a Section 4 permit, ranchers can construct and
maintain these range improvements with their own money.
These improvements are then owned by the permittee. A
permit holder's willingness to pay for an improvement obvi-
ates the need to wait for government funding. The Range
Improvements Rule eliminates this opportunity by requiring
lagi ts Be
17
that “authorization of all new permanent water develop-
ments . . . shall be through cooperative range improvement
agreements.” 43 C.F.R. § 4120.3-2(b) (1998). Title to
improvements authorized by cooperative agreements is held
by the United States alone. Thus, under this rule, the United
States will eventually acquire title to all range improvements
because all privately owned improvements will wear out or
become inefficient, and replacement will require a new
improvement authorization under 43 C.F.R. § 4120.3-1
(1998). See also 60 Fed. Reg. 9934 (Feb. 22, 1995).
Notwithstanding the fact that title to range and water
improvements is vested in the government, 43 C.F.R.
§ 4120.3-2(b) (1998), a permittee can be forced to sign a
“cooperative range improvement agreement” or risk losing
access to his water rights, 43 C.F.R. § 4120.3-1 (1998), and
may be forced to “maintain and/or modify range improve-
ments on the public lands... . ” 43 C.F.R. § 4120.3-I(c)
(1998). The fact that the permittee may be required to expend
his own funds and effort to construct and maintain improve-
ments which he cannot own, constitutes unjust enrichment in
favor of the government and implicates the “takings” clause
of the Fifth Amendment.
If the federal government retains title, range improve-
ments also no longer have any collateral value for securing
credit. Buchanan Aff. 4 10, App. 70-71; McCall Aff.
qi 11-12, App. 63-64; Hall Aff. {4 8-10, App. 74-75. Lenders
will, therefore, be unwilling to loan money to ranchers for
projects that would protect and benefit the public range. /d.
Inevitably, permittees will be unable to obtain loans to con-
struct and maintain the improvements necessary to make
water accessible to their livestock.
The fact that private ownership of range improvements is
being eliminated clears the way for the BLM to more easily
reduce or eliminate permitted grazing. Buchanan Aff. q 12,
App. 71; McCall Aff. 4 11, App. 63. This possibility raises
questions regarding the security of loans to BLM permittees,
and makes lending institutions reluctant to do business with
ranches. /d. The resulting financial destabilization in the
livestock industry offends the purposes of the TGA. TGA
18
preamble, 48 Stat. 1269 (uncodified); 56 Interior Dec. 62
(1937); Chournos v. United States, 193 F.2d 321, 323 (10th
Cir. 1951); 78 Cong. Rec. 5374 (1934), (statement of Con-
gressman DeRouen); 78 Cong. Rec. 5376 (1934), (statement
of Congressman DeRouen).
The extreme importance of water base properties to west-
ern livestock grazing cannot be overstated. Almost all of the
grazing permits in the Southwest are water based. Fowler Aff.
q 10, App. 38-39; Penny & Clawson, App. 28. Because
private land is scarce in the Southwest, water rights are
virtually the only base properties to which grazing privileges
can be attached. The fact that the Range Improvements Rule
jeopardizes access to water on public lands is a very serious
violation of the BLM’s duty to adequately safeguard grazing
privileges under the TGA.
C. The Range Improvements Rule Discourages the
Construction of Range Improvements and
Encourages Environmental Degradation
As stated above, “range improvements are long term
investments in the basic land resource that require years to
yield a positive return to amortize the dollars invested.” New
Mexico EIS, App. 55; Fowler Aff. ¢ 14, App. 39-40. How-
ever, ranchers will not be willing to invest in range improve-
ments if they cannot hold title to them. As discussed at the
Senate Committee for Energy and Natural Resources:
STEWARDSHIP DISINCENTIVES
Removing private incentive for investing in federal
rangeland by retaining federal ownership of
improvements and water rights, eliminating equity
and increasing annual costs will not encourage bet-
ter stewardship. The federal government will have
to fill the void in management and investment; this
will be extremely difficult in an era of reduced
funding and down-sizing of agencies.
ee ee
—"*
19
Improvements:
The regulations as proposed have two distinct
provisions that will preclude economically justifia-
ble longterm private sector investment in federal
rangelands. The first disincentive is that permanent
improvements and temporary improvements will be
retained in ownership by the United States; this
holds for all future permanent improvements and
any temporary improvement if any portion of its
cost was borne by the United States. In addition,
exclusive right to use the improvement is not con-
ferred. Even with a 10 year permit the long run
nature of the improvement will not allow the private
sector to recapture dollars expended.
Market value of federal permits will further
decline as this value is a reflection of carrying
capacity and improvements.
J. Fowler, Statement to the Committee for Energy and Natural
esources [of the] United States Senate on Rangeland Reform
‘94 (unpublished manuscript presented on May 14, 1994),
App. 30-31; Fowler Aff. { 14, App. 39-40; Obermiller Aff.
{ 13, App. 35; Polley Aff. ¥ 8, App. 92-93; McCall Aff. | 10,
App. 63. In 1986, the State of New Mexico, took title to all
future livestock water developments on state lands. Fowler
Aff. { 15, App. 40; Fowler, supra manuscript, App. 31. Since
that rule was adopted, livestock permittees on state lands have
literally made no livestock water improvements. /d.
The Range Improvements Rule is likely to have a sim-
ilarly drastic result throughout BLM lands. Fowler Aff. { 15,
App. 40; Polley Aff. { 9, App. 93; McCall Aff. { 10, App. 63.
When this occurs, the BLM simply will not have the man-
power or financial resources to construct all of the necessary
range improvements. Fowler Aff. { 16, App. 40; Fowler,
supra manuscript, App. 30. Thus, the Range Improvement
Rule’s discouragement of improvements is likely to result in
serious environmental damage. Fowler Aff. | 16, App. 40;
McCall Aff. { 10, App. 63.
20
CONCLUSION
The Supreme Court should hear this case because of its
grave implications for the culture and economy of every
Western state with significant acreage of public lands, its
destabilizing effect on the entire Western livestock industry,
and its potentially devastating impact on the natural environ-
ment.
RESPECTFULLY SUBMITTED this 10th day of Septem-
ber, 1999.
KarEN Bupp-FALEN
Jerrrey B. TeICHERT
Bupp-FaLten Law Orrices, P.C.
300 East 18th Street
Post Office Box 346
Cheyenne, Wyoming 82003-0346
(307) 632-5105 Telephone
(307) 637-3891 Telecopier
fue’
~ 5 a nel Sat
:
;
}
App. 1
APPENDIX
Coalition Of Arizona/
New Mexico Counties
For Stable Economic
Growth
RESOLUTION CONCERNING 10th CIRCUIT
DECISION IN PLC V. BABBITT
WHEREAS, the 10th Circuit Court of Appeals has issued
a ruling in the case PLC v. Babbitt; and
WHEREAS, the four regulations at issue in this case
were: (1) the use of the terms “grazing preference” and
“permitted use” to denote priorities and specify grazing
use for purposes of issuing grazing permits (permitted
use rule); (2) ownership of title to range improvements
(range improvements rule); (3) the elimination of the
requirement that applicants for permits must “be
engaged in the livestock business” (qualifications rule);
and (4) the issuance of permits for “conservation use” in
addition to permits for the grazing of livestock (conserva-
tion use rule); and
WHEREAS, the 10th Circuit reversed the Wyoming Dis-
trict Court’s invalidation of the permitted use rule, the
range improvements rule, and the qualifications rule; and
WHEREAS, the 10th Circuit panel’s decision will have
serious adverse social, cultural, economic, physical and
biological environmental impacts on the states of Arizona
App. 2
and New Mexico and the Coalition of Arizona/New Mex-
ico member Counties!.
THEREFORE, BE IT RESOLVED that the Coalition of
Arizona/New Mexico Counties disagrees with the 10th
Circuit’s panel decision to reverse the Wyoming District
Court's ruling and request an en banc reconsideration by
the 10th Circuit.
Done this 23rd day of October, 1998 by a unanimous
vote of the Board of Directors.
/s/ Leslie E. Thompson
Leslie E. Thompson, President
1 The Coalition is comprised of the Arizona Counties of
Apache, Cochise, Gila, Graham, Greenlee and Navajo, the New
Mexico Counties of Catron, Chaves, Eddy Harding, Hidalgo.,
Lincoln, Luna, Otero, Sierra, Socorro, Torrance and Union and
the Town of Sierra Vista, Az.
|
|
App. 3
P. Foss, Politics and Grass
* * *
Grazing Homesteads
The high casualty rate among homesteaders did not
deter other millions of innocents from filing new home-
stead claims. As the years passed the western range was
being steadily fenced off and pushed back. During this
same period stockmen had sponsored bills to allow leas-
ing of federal lands and prevent or minimize homestead-
ing.°> But Congressmen still clung to a sort of sentimental
belief in homesteading and to suspicion of the western
cattle “barons” who had used the range so long.
At the same time Congress finally realized that the
existing homestead acts were no longer practical — if they
ever had been. Consequently, the size of homesteads was
increased to 640 acres in the Stockraising Homestead Act
of 1916.
Once again, Congress had acted too late with too
little. The enlarged homestead (320 acres) would have
been a practical acreage at one period in the settlement of
the West but by the time of passage that period had
passed, and the acreage was inadequate. Later on a 640-
acre homestead might have been practical but when the
act was finally passed it was again too late. In 1916 the
remaining public land was generally of such low produc-
tivity that 640 acres was inadequate to support a family.
The act is particularly significant, however, because it
was the first act of Congress to deal specifically with the
land problems of people who earned their living by graz-
ing livestock. Prior to this time the stockman had been
App. 4
regarded as a “trespasser on the public domain, an obsta-
cle to settlement, and at best but a crude forerunner of
civilization of which the farmer was the advance guard
and the hoe the symbol.”%
Even so the act did not in reality apply to western
stockmen as a whole. It lured into the desert a group of
farmers to whom 640 acres sounded like a lot of land.
Their entry on the range usually meant that the old
stockman was fenced off while the homesteader over-
grazed his homestead section in an attempt to make a
living or until he abandoned his claim, sold out to a
stockman, or was able to add sufficient territory to his
homestead to enable him to stay in business. In an
attempt to control strategic points on the range, stockmen
or their employes also entered claims to grazing home-
steads.
The Grazing Homestead Act continued in force until
the passage of the Taylor Grazing Act, which had the
effect of superseding and nullifying it. The former was
the last of major public-land disposal methods. It con-
cluded a long series of congressional land acts which,
from our vantage point in time, appear to have been inept
and impractical.
We have noted in passing some of the social costs of
unsuitable land policies. We turn now to a consideration
of the effects of these policies on western landownership
patterns, on the western livestock industry, and on the
land itself.
App. 5
Results of Land Policies on Ownership Patterns
| The system of rectangular land surveys, in conjunc-
tion with the homesteads, sales, and grants, resulted ini-
tially in landownership patterns scattered out into little
squares of 160 or 640 acres. These surveyor’s squares
were, of course, superimposed upon the landscape with-
out regard to topography. We have lived with this system
of land surveying so long that it may seem to be the
natural and logical method. Possibly it was the most
logical method in the eastern part of the United States. In
the West, however, this method of surveying lands cre-
ated problems of land disposal, landownership, and land
use. Major John W. Powell, in his Report on the Lands of the
Arid Region of the United States, recognized the difficulties
for the West inherent in the rectangular survey system:
Many a brook which runs but a short dis-
tance will afford sufficient water for a number
of pasturage farms; but if the lands are surveyed
in regular tracts as square miles or townships
all the water sufficient for a number of pas-
turage farms may fall entirely within one dis-
trict. If the lands are thus surveyed, only the
divisions having water will be taken, and the
farmer obtaining title to such a division or farm
“ould practically occupy all the country adjacent
by owning the water necessary to its use. For
this reason divisional surveys should conform
to the topography, and be so made as to give the
greatest number of water fronts.5”
As could be expected, the watering places were the
first to be transferred to private ownership. according to
Clawson:
App. 6
As the range became crowded with range
livestock, but generally before the intrusion of
farmers, some ranchers began to protect them-
selves by acquisition of “key tracts.” The key
tract often contained the only available stock
water for some distance. By preventing trespass
on the land he owned, the rancher could obtain
exclusive use of a/l the grazing land that could
be used by livestock watering on his land. This
process was usually effective.”
When an individual owned a “key” tract it meant not
only that he had free use of the adjoining public lands but
also that ordinarily those lands would not be desired by
anyone else. As a consequence, much more public land
remained in the hands of the government than would
have been the case if the lands had been surveyed and
distributed according to topographical features.
As pressure for grazing land increased, stockmen
began to buy blocks of railroad lands. It will be recalled
that the railroads were granted lands by alternate sec-
tions, so that their ownership pattern resembled a check-
erboard. By purchasing a block of these checkerboarded
lands the stockman also acquired the free use of the
alternate sections of public domain. In effect, he got two
for the price of one.
East of the Mississippi, where land enclosures were
generally small, lands were ordinarily fenced with stone,
rails, or dense hedges. In the West these methods were
impractical because of the large areas involved and the
lack of wood for rail fences. In 1874, however, J. F. Glid-
den of DeKalb, Illinois, patented a successful barbed wire
fence and a machine for making it. By 1880 barbed wire
— ee
App. 7
factories were turning out 40,000 tons of this cheap fenc-
ing material; by 1890 this output had been tripled.
Western stockmen were quick to take advantage of this
new method of controlling the public range. Two Colo-
rado cattle companies were reported to have fenced off a
million acres each of government land. Three million
acres were fenced off in two New Mexico counties.
Smaller, but still considerable, amounts of fenced govern-
ment lands were reported in other range states.
By 1885 fencing of public lands had become so preva-
lent and complaints so numerous that congress passed a
law making illegal the erection of any obstacle to free
passage on the public domain.*? The next year President
Cleveland ordered the removal of all fences, and the
Secretary of Interior moved to carry out his orders.* By
1891 the Commissioner of the General Land Office was
able to state that only thirteen cases of illegal enclosure of
public lands had been reported during the previous year
and that these cases had involved only 34,358 acres.%
The illegal fences had some stabilizing influence on
the range. Stockmen made some attempt to manage
fenced public domain lands. With the passage and
enforcement of the act of 1885, however, the range once
more became wide open to the first comer. By mutual
agreements stockmen were sometimes able to keep out of
each other's way, but sooner or later someone would slip
over the boundaries and range wars would result.
Nomadic sheep operators generally ignored local agree-
ments and grazed wherever they were strong enough to
stay. When they were forced off one range they moved to
another and repeated the process.
App. 8
After the first years of enforcement of the law of
1885, stockmen gradually began fencing off the public
domain again. When complaints of illegal fencing became
serious enough the government caused the fences to be
removed but when the pressure was off they were usually
built up again. When the Taylor Grazing Act was passed,
these privately owned fences on the public range were
considered evidence of prior use of the lands and thus
gave the owner preference in obtaining “range rights” tor
his livestock.
Many of the homesteaders who were able to stay on
their claims long enough to gain title later gave up and
moved off the land but retained title to it. During the big
cattle boom many eastern and foreign companies, as well
as western stockmen, acquired large tracts and later went
into bankruptcy, with the lands passing into the hands of
their creditors. We have already noted the grants of land
to states and railroads. Part of these lands are retained by
their original owners. All these factors have contributed
to a situation in the West where much of the land is held
by absentee owners in parcels of various sizes and is
rented, leased, or used without charge by local stockmen.
Such leased or vacant land is ordinarily overgrazed and
has deteriorated considerably.
Results of Land Policies on Stockmen’s
Tenure and Methods
The old lawless West of range wars and conflicts
between homesteaders and stockmen, and between cattle-
men and sheepmen, was lawless not because it was popu-
lated by a peculiar breed of hyperaggressive and
unscrupulous people, but because of political acts which
App. 9
resulted in land policies that were not suited to the region
and that had the effect of encouraging conflict, insecurity,
and disrespect for law.
Congress offered the homesteader a piece of land so
small that he was forced to use public land that did not
belong to him. When he used public land be came into
conflict with others who desired to use the same land and
whose legal (or illegal) rights were as good as his. Since
this was an illegal or extralegal matter, there existed no
means of arbitrating or settling disputes except by mutual
agreement or conflict.
When stockmen were able to agree on a division of
the public range, they found their plans thwarted by the
homesteader who had a legal right which they did not
possess. But the homesteader enjoyed a legal right only
on his claim, and this was usually insufficient to provide
a livelihood. So he did the same thing the old stockman
did: he ran his cattle on the public domain. In so doing he
had not only deprived the pioneer stockman of the area
within his homestead but also competed with the stock-
man for the public domain. If and when he became estab-
lished, he resented the intrusion of succeeding
homesteaders as much as did the oldtime cattleman.
Range “Rights”
The avowed purposes of the Taylor Grazing Act were
to “stop injury to the public grazing lands by preventing
overgrazing” and to “stabilize the livestock industry
dependent upon the public range.” To carry out these
Purposes it was first necessary to determine the grazing
App. 10
capacity of the district - that is, the maximum number of
livestock that could be grazed without injury to the
range.
* * *
The act furnished a clue to the method of allocating
grazing privileges. “Preference,” said the statute, “shall
be given in the issuance of grazing permits to those
within or near a district who are landowners engaged in
the livestock business . . . or owners of water or water
rights, as may be necessary to permit the proper use of
lands, water, or water rights owned, occupied, or leased
by them.”’* This clause restricted grazing rights to land-
owners or owners of water or water rights; the property-
less nomad was thereby eliminated from consideration.
The clause, “as may be necessary to permit the proper use
of lands” was interpreted to mean that the applicant must
have private holdings sufficient to sustain his livestock
when they were off the district, and conversely, that the
district lands should complement his private holdings.””
The words “in or near a district” caused considerable
dispute at first because some operators had customarily
trucked cattle in or had driven stock for long distances.
But after these requirements of the statute had been satis-
fied, there was still “three times as much private land
devoted to supporting livestock which was ‘in or near a
district,’ as there was range to complement such private
lands and give them a ‘proper use,’ ““’ so some addi-
tional restrictive device was necessary. The director, after
meetings with the stockmen, decided upon an additional
system of preferences based on customary past use of the
federal lands. This modified “squatter’s right” idea was
based on the old western common law of “first in time is
App. 11
first in right.”*' The director found legal justification for
this concept in the language of the statute which stated
“grazing privileges recognized and acknowledged shall
be adequately safeguarded.”*?
Since it was impractical and impossible to determine
who was originally “first in time” on the range a “priority
period” was established as the five years immediately
prior to passage of the act. A stockman who had made
substantial use of the public range in connection with his
private properties for two consecutive years or any three
years during this priority period had priority “rights.”
In summary, preference in obtaining grazing privi-
leges was accorded to owners of land or water who could
support their livestock during the seasons when they
were off the grazing district, who required the federal
lands in conjunction with their own to form an economic
ranching unit, and who had used the range during the
priority period.
* oJ *
Finally a range regulatory bill, the Taylor Grazing
act, was passed in 1934. The avowed purposes of the act
were to stop further injury to the public lands, to provide
for their orderly use and development, and to stabilize
the livestock industry dependent on them. The Secretary
of Interior was authorized to carry out these objectives by
the establishment of grazing districts and the issuance of
grazing permits to qualified applicants for a “reasonable”
fee.
Preference in awarding grazing permits was given to
those stockmen who lived “in or near” a grazing district,
App. 12
who owned private lands capable of supporting their
livestock when they were off the district (commensurate
properties), and who had a history of use of the public
range during the five years immediately prior to the
passage of the act.
The permit system automatically disqualified
nomadic stockmen, those who did not own commensu-
rate properties “in or near” a grazing district and those
who had not used the range during the priority period.
* * *
On the basis of this arrangement both class 1 and
class 2 applicants were “set-up” in the district office
records on an equal basis for the full amount their base
properties would support. In other words, priority rights
were ignored and the estimated carrying capacity of the
unit was also ignored. Commensurate base property was
the only factor considered. The total of these commensu-
rate base property rights for Soldier Creek amounted to
77, 419 A.U.M.’s. However, it was recognized that the
unit would not support this total. The advisory board
estimated the carrying capacity of the unit at 43,260
A.U.M.’s.'© Ross has insisted, over the years, that the
estimated carrying capacity was 45,000 A.U.M.’s but both
the board and the administration generally accepted the
43,260 figure. The applicants agreed that the 77,419 figure
would be used only as a starting point for making the
downward adjustments necessary to keep licensed use
within the carrying capacity of the unit. However, each
permittee’s “rights” were not proportionately reduced.
Each permittee still had “rights,” on paper at least, for the
full amount his commensurate properties would support.
App. 13
There were two reasons, in 1943, for not proportionately
reducing each permittee’s “rights” to bring the total
down to the estimated carrying capacity of the unit. First,
the stockmen planned eventually to build bridges across
the Owyhee Canyon and consolidate the Jackie’s Butte
area with Soldier Creek.'” If this had been accomplished,
the total capacity of Soldier Creek would have been
increased considerably. Secondly, this system, or lack of
system, permitted more flexibility in allocating annual
licensed use. Thus, in a particular year, operator A might
not desire to use the range at all so operator B could
conceivably be licensed for the total amount his base
properties would support.
* * +
App. 14
F. R. Carpenter, Establishing Management Under the Tay-
lor Grazing Act
* * *
Well fortunately or unfortunately, the Act contained a
clause that said we should respect prior rights. What
were prior rights? Prior rights were previous use of the
range. These sheepmen had the range for 20 years. Maybe
some operator had just bought an outfit the year before.
So all the fellows that had been on 5 years voted for 5
years. All the fellows that had only been on 1 year voted
for 1 year. Each fellow was voting so that he got on. What
were you going to do? What was going to be the role of
prior rights. How much prior use of the range did you
have to have in order to submit your commensurability
right and get a permit? I didn’t know what to say. So the
first year we said, “Now we'll tell you how we are going
to do this. The Board meets and your to 10 representative
sheepmen are there, your 10 representative cowboys are
there and you're going to have to agree by */; majority on
some rule for prior use of the range and that first year
that rule will apply to that district. And every district will
vote their own rule and then we'll all get together in Salt
Lake City at the Hotel Utah in the ballroom and we'll
fight it out and we'll have one rule for the United States.”
So then they started out. Here was a district that was
largely all old-time operators, and they had no trouble
voting the rule that you had to show 20 years continuous
use of the range. Well then some of them found out they
hadn’t used it continuously. So they said 15 out of 20
years gives you a prior right. There were other sanctions
of the range for one reason or another had just been
App. 15
opened up. These operators said anybody using it last
year should have prior rights. The Act went in effect June
28, 1934, so anybody using it in 1933 should have the
prior rights. Well it sounded pretty good but then a man
came in and said, “My wife had a stroke that year and |
had to move down to Arizona. I let my neighbors use that
range and I didn’t use the range in 1933 but I’ve been
here all my life. Are you going to kick me out?” Well we
couldn’t go that way. So the really hot battle in setting up
the regulations of the Taylor Act was what was prior use
of the range. And we were close to 3 years solving it.
After we solved it for the north, it wouldn’t go in the
south because of the water rights. In the south it didn’t
matter how long you had used the range, if you didn’t
have water rights you couldn’t continue to use it.
So we had to reach a conclusion. After many, many
battles this is what they finally decided. The rule was
finally worked out that anyone who in the 5 years imme-
diately preceding the passage of the Taylor Act had used
the range in connection with his land, either, continu-
ously for 2 years or any 3 years in that period had prior
use rights.
App. 16
Public Domain Grazing Adjudications Under
the Taylor Grazing Act
Frederick W. Obermiller
Oregon State University
October 30, 1998
A history of grazing forage adjudications based on
“Range Surveys” conducted by the predecessors of the
Bureau of Land Management currently is being compiled
by Bureau of Land Management Land Law Historian
James Muhn who is with the BLM Service Center in
Denver, Colorado.' The original surveys and adjudica-
tions were directed by the Division of Grazing Control
organized in 1934, renamed the Division of Grazing in
1935, and again renamed the Grazing Service in 1938 - all
of which were units of the United States Department of
the Interior organized for the purpose of implementing
the Taylor Grazing Act of 1934 (43 U.S.C. 315). The
Bureau of Land Management (BLM) is the modern suc-
cessor to these earlier units, created through merger of
the Grazing Service and the General Land Office in 1946.
Although the historical record is both clear and decisive
in its documentation of the public domain grazing adjudi-
cation process, nonetheless some have questioned
whether, in fact, such an adjudication ever happened. For
example:
The dissent attempts to find [prior recognition
of adjudicated grazing preferences] in its own
“historical understanding of grazing preferences
and the importance that they assumed in the
1 Persona! communication with the author, October 29,
1998.
App. 17
Operation of permittees’ livestock busi-
nesses .. . Without citation to any authority, the
dissent then describes at length a process
whereby the Secretary made permit renewal
decisions by “reference to” or in “recognition
of” the original grazing adjudications. We know
of no principle of administrative law that allows
us to substitute our own unattributed assertions
for the plain meaning of the regulations in seek-
ing to review a regulatory scheme.” [emphasis
added] (10th Cir. Filing No. 96-8083, Public
Lands Council et. al. v. Babbitt et. al. September 1,
1998)
The purpose of this short statement is to provide the
authority for the assertions by the dissent in the above-
captioned case. This is easy to do.
Grazing Adjudication Described by Professor Foss in
Politics and Grass
First, we have the detailed description of the adjudication
process provided by Professor Foss.”
F. R. Carpenter [first Director of the Division of
Grazing (Control)] expressed it this way: The
Taylor Act says preference rights shall be given
“FOR THE PROPER USE OF LANDS.” Not of
people; not the proper use of the livestock, but
of the LANDS .. . these rights will be given to
you not as individuals, nor as owners of live-
stock —- we do not care how many cattle or sheep
you have or how much experience or lack of
experience you have in the livestock business.
2 Phillip O. Foss, 1960, Politics and Grass, Seattle: University
of Washington Press.
App. 18
We care only for your lands. We want to build
up your lands and give them stability and value.
In doing that we wish to give them the adjunc-
tive pasture rights which naturally belong to
them, and in proportion to their carrying capac-
ity, fertility and crop yield.*
Foss states that BLM permittees may transfer their public
domain grazing rights together with, or as an appurte-
nance to, their commensurate privately owned lands. In
this manner, grazing rights are usufructuary property
interests standing as incidents to private property, as, for
example, are irrigation ditch rights-of-way incidents to
diversionary water rights.
Then, Foss describes the manner in which the scope, or
quantity, of adjudicated usufructuary grazing rights were
originally determined.
The original carrying capacity of the districts
was usually established by estimates of the
[grazing district] advisory boards, since funds
and personnel were not initially available to
make scientific range surveys. Probably most of
the boards tended to overrate the capacity of the
range, but some limits had to be set, and this
was probably the quickest and best method
available under the circumstances. If scientific
surveys later disagreed with the board’s original
estimate, a new carrying capacity was estab-
lished and the number of animals licensed on
each permit was adjusted accordingly.”
[emphasis added] (Foss, page 64)
’ Transcript of remarks of F. R. Carpenter, Director,
Division of Grazing Control, Vale, Oregon, December 15, 1934,
pages 32, 39-40.
App. 19
Foss goes on to describe in detail the adjudication and
appeals processes, at which point he states that grazing
permits are not issued unless and until both the scope of
the grazing forage right is determined via the range
survey and the seniority of the user is established.
Grazing permits [licenses] are issued on a year-
to-year basis until such time as the grazing
capacity of the range is established, the charac-
ter and amount of base property is substanti-
ated, and livestock operations have become
generally stabilized. Once these objectives have
been accomplished, term permits may be issued
for periods up to ten years.” (Id., page 67)
To further substantiate the compensable value of the
adjudicated grazing right, consider the following state-
ment by Foss:
When the Taylor Grazing Act was in the process
of passage, Senator McCarran of Nevada pro-
posed an amendment which was incorporated
in the act. The amendment read: ” . . . except
that no permittee complying with the rules and
regulations laid down by the Secretary of the
Interior shall be denied the renewal of such
permit, if such denial will impair the value of
the grazing unit of the permittee, when such
unit is pledged as security for any bona fide
loan.” (Id., page 68)
This clause in the Taylor Grazing Act is meant to preclude
the administrator of the act (i.e., the Secretary, Director,
or any authorized officer) from canceling or reducing the
scope of a grazing permit if such cancellation or reduc-
tion would reduce the carrying capacity, hence the value,
of the ranch unit serving as collateral for a loan.
App. 20
Foss provides an illustration of the advisory board judg-
mental-quasi-judicial /adjudicatory process in establish-
ing the scope of grazing rights or preference in a later
chapter (Chapter 7 - The Battle of Soldier Creek) in his
book. (Foss, pages 140-170)*
The “Range Survey” as the Basis for Grazing Adjudica-
tion
Yet, one may ask, should exclusive reliance be placed on
the writings of a professor from what is essentially a non-
public lands state? To be definitive, a deeper net must be
cast. Enter the approximately semi-annual The Grazing
Bulletin, an official report of the Division of Grazing, and,
later, of the Grazing Service.
The first detailed report of the existence and purpose of
the “Range Survey” appears in Vol. 1, No. 3, published in
September, 1936, and reproduced in full in Attachment A
to this statement. In essence, the 1936 report says that a
detailed inventory (“Range Survey”) of the carrying
capacity of all lands within grazing districts, existing
range improvements by type of improvement (fencing,
water developments, irrigation canals, etc.), and the pro-
duction capability of associated commensurate base prop-
erties is badly needed in order to effectuate the issuance
of long-term grazing permits. that survey is to commence
immediately in two trial areas: District 5 in New Mexico
and District 6 in Colorado.
4 Foss’s sources are the Act itself, the Annual Report of the
Secretary of the Interior, 1935, and other citations given on pages
214 and 215 of his book.
'
App. 21
There seems to be very little doubt in the minds
of the majority of the board members and the
Division of Grazing personnel that simple but
effective management plans must be prepared.
It is the primary purpose of the range survey
program to furnish all of the factual material
needed in the preparation of plans for making a
proper use of all available resources. There is
little question that such plans based on actual
facts, incorporating all the knowledge of local
conditions supplied by the advisory board
members and correlated by experienced range
administrators, would be the best obtainable.
(page 13)
The New Mexico District 5 range survey was completed
and reported in full in Vol. 1, No. 5 of The Grazing
Bulletin. The preface to the report states that the range
survey was “assembled preparatory to determination of
preferences for term permits under section 3 of the act of
June 28, 1934 (48 Stat. 1296) as amended June 26, 1936 (49
Stat. 1976),” i.e., the Taylor Grazing Act, as amended. (Id.,
page 1). The first ten year term permits were to be issued
in 1939.
At the time the Taylor Grazing Act was passed,
accurate data were not available either as to the
proper carrying capacity of the public range or
as to the carrying capacity and facilities of pri-
vate properties used in connection therewith.
Range surveys in all of the ten States were
begun by the Division of Grazing shortly after
the creation of the first grazing district in 1935.
The survey of two typical district, one in the
south where water controls the use of the range
and one in the north where feed controls the use
of the range, has been carried to completion in
App. 22
order to furnish the facts upon which to establish
the principle governing the tssuance of term permits.
The results of the survey and study of New
Mexico Grazing District No. 5 are presented
herewith and show that prior to the passage of
the Taylor Grazing Act 98.4 percent of the public
range within that district was properly serviced
with artificially developed water and that the
issuance of grazing term permits in that district
based upon a proper valuation of such water will by
|sic] accepted by all of the local users as a fair and
proper distribution of public range. [emphasis
added] (Id., page 2)
The purpose of the Taylor Grazing Act was said to be, in
part, stabilization of the public land dependent livestock
industry by affording ranchers assurance of exclusive
grazing rights based on the principle of prior possession,
and that the range survey would establish the scope, or
amount, of forage to which each such prior user would be
entitled. (Id., page 4)
Upon the recommendation of the advisory
boards and the approval of the regional grazier,
permits for a period not to exceed ten years will
be issued. As there are many factors involved,
however, permits of this nature cannot be issued
until all necessary data are obtained. This includes
the carrying capacity of the public range and the
set-up of each applicant. Essentially, a systematic
inventory of range and ranch ts necessary for equita-
ble determination of range privileges.
Rules approved by the Secretary of the Interior
March 2, 1936, provided that “permits within
section 3 of the act... shall be issued as soon as
the necessary data are available upon which to
App. 23
ascertain the proper use of the lands and water
which entitle their owners, occupants, or lessees
to preferential grazing privilege. During the
intervening period, temporary licenses will be
issued under authority of section 2 of said act to
provide for the existing livestock industry using
the public lands in such districts.” As amended
January 28, 1937, authority to issue temporary
licenses was continued in each grazing district until
such time as necessary data are available upon which
to issue permits. Meanwhile a range survey program
of sufficient scope to obtain all basic facts was under-
way. [emphasis added] (Id., page 4)
In short, the range surveys were detailed land use analy-
ses consisting of maps, charts, and data used to decide
which public land ranchers were to receive spatially fixed
grazing allotments containing specified quantities of for-
age — preference AUMs incident to federal ranges cus-
tomarily used by ranchers who owned or controlled
private land and/or water rights. Prior to issuance of
term permits, forage adjudication was required, and so
annual temporary grazing licenses were issued pending
resolution of complete public domain forage use claims.
The authority of the Secretary to issue temporary licenses
pending the issuance of ten year term permits was
upheld by the U.S. Supreme Court in Brooks v. Dewar et
al., 313 U.S. 979 (1941). In reality, there was little alterna-
tive other that [sic] to grant temporary licences while the
grazing adjudication process was underway for, as Direc-
tor Carpenter noted within weeks of his appointment as
the first Director in 1934.
The Taylor Act, Public No. 482, provides in Sec.
3, that the Secretary of the Interior can issue
App. 24
permits to graze livestock on the public domain,
for not to exceed ten years.
In further provides in said section that the
renewal of permits once issued shall not be
denied if they would impair the value of the
grazing unit of the permittee when the same is
pledged as security for any bona fide loan.
As 90% of the applicants for permits have bona
fide loans on their stuff, any and all permits
issued will become irrevocable for all practical
purposes. This will in a practical way defeat
many of the benefits which the Act means to
confer to the permittees on grazing districts.
Furthermore in setting these districts up, it is
impossible to get sufficient data to issue a
longer than one year permit at a time under the
going concerns. Nevertheless, a one year permit
under the above provision would become as
irrevocable and ultimately as unjust to the other
users of the range as a ten year permit.
In order to avoid this obstacle I would like to
issue a revocable temporary grazing license for
a period of not to exceed one year without the
entailment of any fee, and as a preparatory mea-
sure and trial before issuing permits.°
In a responding letter to Director Carpenter dated Sep-
tember 21, 1934, Solicitor Margold responded in the affir-
mative, “I am of the opinion, therefore, that temporary,
revocable grazing licenses for the necessary period of
adjustment are legally justified, and that if the licenses as
° Letter from Director of Grazing F. R. Carpenter to Nathan
Margold, Solicitor, Department of the Interior, September 12,
1934.
App. 25
issued so specify they will be free from the nonrevocable
conditions set out in the act.
App. 26
PART 501 - THE FEDERAL RANGE CODE
Section 501.2(e)
* * *
(e) Base property. Property used for the support of
the livestock for which a grazing privilege is sought and
on the basis of which the extent of a license or permit is
computed, without reference to forest permits or comple-
mentary feed.
Section 501.4 Rating and classification of properties -
(a) Base properties; classes; carrying capacity of land;
service value of water. For the purpose of determining
the proper use of the base properties of all applicants and
their relative dependence upon the Federal range, water
conditions and other factors affecting livestock opera-
tions in the area will be considered. Base properties will
be classified as land or water and further in the following
manner:
Class 1. Forage land dependent by both location and
use, and full-time prior water.
Class 2. Forage land dependent by use only, and full-
time water.
Class 3. Forage land dependent by location only, and
full-time water which otherwise would be in class 2 but
which was developed later than other water servicing a
part or all of the same area.
eee
App. 27
Base property which is forage land will be rated, for its
carrying capacity. Water will be rated for its service value
by deducting therefrom the carrying capacity of half of
the area serviced jointly by competing water of the same
class, and the carrying capacity of all private or State land
located within such service area and not owned or con-
trolled by the applicant. In computing the service value
of water in class 3, there will also be deducted therefrom
the carrying capacity of any portion of its service area
which is serviceable from any other full-time water ante-
dating it in development.
* * *
App. 28
Penny and Clawson, Administration of
Grazing Districts in the Public Land
* * *.
Possession of sufficient privately owned or controlled
base property, land or water, to insure a year-round oper-
ation for the permitted livestock, was required of all
users. In areas where private land is the backbone of
ranching operations, land was considered as the base
property. In such areas the permitted livestock was
required to spend a specified amount of time on the
private land being offered as a basis for securing grazing
privileges. However, in the arid southwestern United
States water is considered the principal basis for receiv-
ing grazing privileges. Applicants there were required to
have privately owned or controlled water suitable for
consumption by livestock and available, accessible, and
adequate during those months for which the range was
classified as suitable for use.
Preference for grazing privileges was given operators
who made substantial grazing use of the public lands in
connection with their private properties for two consecu-
tive years or any three years in the five years preceding
the Taylor Grazing Act (known as the “priority period,”
June 28, 1929, to June 28, 1934). For districts established
or for additions to districts after June 28, 1938, the prior-
ity period for land base property is the five years imme-
diately preceding the date of the order establishing them.
This provision was extended to water base property on
March 16, 1942. Thus grazing privileges were attached to
the land rather than to the individual or the livestock.!?
eR ee Oe nt I ee ee Pe ee
ee + et See
App. 29
By later amendment provision was made for the transfer
of grazing privileges from one property to another.
The amount of available forage to be apportioned
was at first estimated very largely upon the knowledge
and advice of advisory boards. These estimates, although
often too liberal, in a surprising number of cases were in
accord with detailed range surveys and studies made
later. They were altered or supported according to those
findings.
* * *
Grazing privileges within grazing districts have the
distinction of being tied to dependent base property. The
transferring of these privileges under Bureau of Land
Management administration is unique. Operators owning
properties without privileges benefit by acquiring privi-
leges through transfer from other properties. Livestock
operations may be stabilized by transferring privileges
from leased to owned lands or from relatively unproduc-
tive to highly productive lands.
* * a7
App. 30
Dr. John M. Fowler, Statement to the Committee for
Energy and Natural Resources United States Senate on
Rangeland Reform ‘94 Presented on May 14, 1994
Albuquerque, New Mexico
* * *
STEWARDSHIP DISINCENTIVES:
Removing private incentive for investing in federal
rangeland by retaining federal ownership of improve-
ments and water rights, eliminating equity, and increas-
ing annual costs will not encourage better stewardship.
The federal government will have to fill the void in
management and investment; this will be extremely diffi-
cult in an era of reduced funding and down-sizing of
agencies.
Improvements:
The regulations as proposed have two distinct provi-
sions that will preclude economically justifiable long term
private sector investment in federal rangelands. The first
disincentive is that permanent improvements and tempo-
rary improvements will be retained in ownership by the
United States; this holds for all future permanent
improvements and any temporary improvement if any
portion of its cost was borne by the United States. In
addition, exclusive right to use the improvement is not
conferred. Even with a 10 year permit the long run nature
of the improvement will not allow the private sector to
recapture dollars expended.
Figure 1 readily displays the reluctance of the private
sector to invest in improvements. Since the peak level of
App. 31
private investment in 1985 of 2.5 million, the private
sector has reduced its investment level until it now repre-
sents only 26% of the former level. This reduction in
private sector investment is hypothesized to continue
further. On a per AUM basis the reduction has been from
$.22/AUM to $.15/AUM.
Market value of federal permits will further decline
as this value is a reflection of carrying capacity and
improvements.
Will the record of contributed funds that shall be
documented by the authorized officer be used to compen-
sate the permittee if his/her permit is not cancelled but
rather is forfeited if the fee is perceived to be too high too
allow continuation in the range livestock business?
Water Developments:
The proposed water right language that any water
right acquired to use water on public land for the pur-
pose of livestock watering shall be acquired, perfected,
maintained and administered in the name of the United
States is a further disincentive to private investment from
the range livestock sector. Similar language passed by the
State Lands Office (SLO) in 1987 reveals some interesting
results. Of the 20 water developments on file with the
SLO since 1987 not a single development has been issued
for the purpose of a stock watering by a lessee. With this
precedence it is reasonable to assume that the federal
government will have to assume the expense of water
developments. Fifty-seven percent of private sector dol-
lars were expended on water development by the 14
Western States in 1991.
* * *
App. 32
Permitted Use
Removing the term “grazing preference” as specified
in the former rules, Taylor Grazing Act, and FLPMA, and
adding in its place the term “permitted use” provides
unusual latitude for the BLM to redefine authorized live-
stock use. “Temporary suspended use” and “conservation
use” provide the same intent of lower livestock numbers
thus isn’t the use of these terms redundant? Provisions
are available to withdrawal livestock use or provide con-
servation use under the existing language in FLPMA thus
why is there a need to change or eliminate the term
“grazing preference”?
* * .
|
|
App. 33
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
No. 96-8083
PUBLIC LANDS COUNCIL, ET AL.,
Plaintiffs / Appellees
V.
BRUCE C. BABBITT,
SECRETARY OF THE INTERIOR, ET AL.,
Defendants / Appellants
APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF WYOMING
AFFIDAVIT OF FREDERICK W. OBERMILLER
I, Frederick W. Obermiller, do hereby swear on oath
as follows:
1. My name is Frederick W. Obermiller.
2. Iam over the age of 18 years and make this affidavit
based on my personal knowledge.
3. My office is at 232C Ballard Extension Hall, Oregon
State University, Corvallis, Oregon 97331. My tele-
phone number is (541) 737-1425.
4. I hold a Ph.D. in Agricultural Economics from the
University of Missouri. I was awarded this degree in
1969.
5. I am a full Professor of Agricultural and Resource
Economics at Oregon State University. | have been a
Professor at Oregon State University since 1974. I
teach courses in public land policy, public land law,
App. 34
agricultural law, and an honors college colloquia
entitled “Public Land Law Reform.” Before coming
to Oregon State, | spent two years as an Assistant
Professor at Purdue University.
I have produced well over 100 scholarly publications
regarding public lands issues. Almost all of these
publications concern livestock grazing issues.
Commercial cattle ranches are bought and sold on
the basis of their livestock carrying capacity, not on
acreage. If the carrying capacity of a ranch is
reduced, the value of the ranch will suffer a corre-
sponding reduction. Ranch appraisals have histori-
cally considered adjudicated animal unit months
(“AUMs”) including suspended use AUMs as well as
active use AUMs. The Tenth Circuit's decision in
Public Lands Council v. Babbitt (“PLC”), to uphold
regulations extinguishing suspended use AUMs and
linking permitted livestock numbers to the shifting
sands of continuous land use planning, decreases the
value of virtually every ranch relying on Bureau of
Land Management (“BLM”) grazing permits.
Although livestock operations have seldom been
permitted to utilize all of their adjudicated AUMs,
the adjudication of maximum AUMs (“Preference”)
provided a stable baseline from which to measure
management changes in permitted grazing. Since the
1995 regulations do away with this baseline Prefer-
ence adjudication and with the requirement that
grazing levels not be reduced without good cause,
ranchers’ and lenders’ business confidence in BLM
permits is likely to be substantially reduced, and the
western livestock industry will undoubtedly be
destabilized if these regulations are upheld.
Ranches will BLM grazing permits attached have
aggregate value of between $8,000,000,000 and
$10,000,000,000 dollars. The permits themselves have
10.
11.
12.
13.
14.
App. 35
an aggregate value of approximately $1,000,000,000.
Based on these statistics, it is reasonable to suggest
that weakening business confidence in BLM grazing
permits will result in approximately $1,000,000,000
in losses to the livestock industry, if the permits
themselves are rendered valueless due to markedly
increased tenure insecurity.
Given that many overhead costs of operating a ranch
are constant regardless of the number of cattle, the
average cost of production increases as herd size
decreases. Based on the Tenth Circuit’s decision in
PLC, herd sizes are likely to decrease. Since the
average BLM dependent ranch runs approximately
350 to 400 cows, I doubt most ranches could not
sustain a reduction of more than 35 head in carrying
capacity. Many BLM dependent ranches are already
approaching the threshold where costs of production
exceed income. For these reasons, a very marginal
decrease in AUMs would be sufficient to cause a
substantial portion of BLM dependent ranches to be
destabilized.
75 percent of commercial size ranching operations in
eastern Oregon are BLM dependent. Oregon is typi-
cal of the other western states in this respect.
Rancher investment in range improvements on BLM
land has been consistently decreasing in recent years
due to increasing uncertainty in livestock tenure on
BLM lands and because of the convergence of live-
stock price and cost of production.
The 1995 rule prospectively vesting title to all future
range improvements in the federal government, will
eliminate the desire of rational ranchers to invest in
range improvements.
This rule will also make it impossible to secure
financing for such improvements, since such
App. 36
improvements no longer have any collateral value.
For these reasons range improvements are likely to
deteriorate and will not be replaced when they are
fully obsolete. These consequences would result in
poorer range conditions on the public lands and will
further decrease the monetary value of BLM depen-
dent ranching operations. FURTHER AFFIANT SAY-
ETH NAUGHT.
/s/ Frederick W. Obermiller
Frederick W. Obermiller
STATE OF Oregon )
)ss.
COUNTY OF Benton )
The foregoing instrument was acknowledged before
me this 28th day of October, 1998 by Frederick W. Ober-
miller.
Witness my hand and official seal.
/s/ Louise E. Barker
Notary Public
My Commission Expires: 4/30/02
[SEAL]
OFFICIAL SEAL
LOUISE E BARKER
NOTARY PUBLIC - OREGON
COMMISSION NO. A309034
MY COMMISSION EXPIRES
APRIL 30, 2002
App. 37
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
No. 96-8083
PUBLIC LANDS COUNCIL, ET AL.,
Plaintiffs / Appellees
v.
BRUCE C. BABBITT,
SECRETARY OF THE INTERIOR, ET AL.,
Defendants/ Appellants
APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF WYOMING
AFFIDAVIT OF JOHN FOWLER
1, John Fowler, do hereby swear on oath as follows:
My name is John Fowler.
I am over the age of 18 years and make this affidavit
based on my personal knowledge.
My Address is: Department of Agricultural Eco-
nomics, New Mexico State University, Box 30003,
MSC 3169, Las Cruces, New Mexico 88003. My tele-
phone number is (505) 646-2841.
I hold a Ph.D in Agricultural Economics from lowa
State University. | was awarded this degree in 1979.
A more complete statement of my professional cre-
dentials and published works is appended to this
affidavit.
5.
10.
App. 38
I have been a full Professor of Agricultural Eco-
nomics at New Mexico State University for Approxi-
mately 12 years.
I currently serve on a team commissioned by the
Lieutenant Governor of New Mexico to prepare a
portion of a Environmental Impact Statement (“EIS”)
as a joint lead agency with the federal Bureau of
Land Management (“BLM”). A copy of relevant por-
tions of the EIS is appended to this affidavit. This
team’s portion of the EIS concerns economic, social,
and cultural impacts associated with implementation
of standards and guidelines for the management of
BLM land. The EIS analyzed alternatives generated
from: (a) the 1995 range reform regulations; (b) The
New Mexico Resources Advisory Council (“RAC”)
proposal; (c) the Arizona and New Mexico Coalition
of Counties for Stable Economic Growth; and (d)
taking no action whatever.
The “fall back” proposal, based on the 1995 regula-
tions, considers only the health of the physical envi-
ronment but does not consider impact to humans.
The RAC proposal considers the impact of range
policy to humans, but gives the physical environ-
ment priority over human needs.
The Coalition of Counties proposal considers human
needs and ecosystem health to be equally important
considerations, and proposes livestock reductions in
the interest of range health only when there is no
other reasonable alternative.
New Mexico is a water-based state, meaning that
almost all of the BLM grazing permits in the state
are based on water rights rather than on land owner-
ship. The 1995 rule eliminating historic preference
rights from the BLM grazing system will erase the
tie between the grazing permit and its water base.
—*
11.
12.
13.
14.
App. 39
Historically, BLM grazing preferences provided the
means for livestock operators to utilize their water
rights and were therefore intrinsically tied to such
water rights. In New Mexico, BLM grazing permit is
virtually worthless without water rights, and water
rights are virtually useless without a BLM grazing
permit.
If the connection between water rights and BLM
grazing permits is severed, and the continuity of the
grazing permit is interrupted, agricultural lenders
can capitalize the value of the permit only for the
term of the permit. Before the 1995 permitted use
rule, grazing preferences were considered by lenders
to be indefinitely continuing rights with much
higher collateral value than temporary use permits.
As a result, lenders have drastically reduced the
number and size of their loans to BLM dependent
livestock operations.
Because of the 1995 permitted use rule and the
resulting lack of security of tenure in grazing per-
mits, the majority of agricultural lenders in New
Mexico will no longer accept BLM permits as collat-
eral for loans.
In 1982, BLM grazing permits were worth approxi-
mately $1,600 per animal unit. Today, such permits
are worth approximately $800 per animal. This dra-
matic devaluation is a result of uncertainty regard-
ing the security of tenure in BLM grazing
arrangements. The 1995 permitted use rule increased
this uncertainty substantially.
Investments in improvements on public lands
require a significant period of time to pay for them-
selves. Permittees must, therefore, feel secure in
their long-term tenure before they will commit
financial resources to making improvements. During
public debate over the 1995 permitted use rule,
15.
16.
17.
18.
App. 40
uncertainty regarding permittee tenure in grazing
arrangement was heightened and remains high
because of the elimination of the historic prefer-
ences. As a result, BLM permittees have stopped
making improvements on public lands.
The 1995 regulation prospectively vesting title to all
future range improvements in the federal govern-
ment has further removed the incentive of permit-
tees to invest in range improvements. In 1986, using
a similar rule, the State of New Mexico took title to
all future livestock water developments on state
lands. Since that rule was adopted, livestock permit-
tees have literally made no livestock water improve-
ments. I predict that the 1995 range improvement
rule will have a similarly dramatic result throughout
BLM lands.
The BLM simply does not have the financial or man-
power resources to construct all of the improve-
ments necessary for the protection and enhancement
of range resources. I therefore predict that the 1995
regulations, with their built-in disincentives for
grazing private investment in range improvements,
will result in serious damage to the environment.
The historic rate of return on invested capital in
New Mexico livestock operations is between one and
two percent. New Mexico is reasonably typical of the
other western states in this respect. This small profit
margin illustrates that livestock operations are
highly vulnerable to policy changes, and do not have
a great tolerance for increased costs or decreased
income resulting from public policy changes.
Historically, livestock producers attempt to remain
in business to preserve their culture and way of life,
even though their assets could generate more
income and provide greater security in other invest-
ments.
Ee el
a a ee
App. 41
FURTHER AFFIANT SAYETH NAUGHT
/s/ John Fowler
John Fowler
STATE OF New Mexico )
)ss.
COUNTY OF Dona Ana )
The foregoing instrument was acknowledged before
me this 22 day of June, 1999 by John Fowler.
Witness my hand and official seal.
/s/ Elizabeth A. Crabb
Notary Public
My Commission Expires: February 3, 2003
BIOGRAPHICAL SKETCH
Dr. John M. Fowler
PROFESSIONAL
TITLE Coordinator-Range Improvement Task
Force
Professor Agricultural Economics and
Agricultural Business
ADDRESS Department of Agricultural Economics
New Mexico State University
Box 30003, MSC 3169
Las Cruces, NM 88003
(505) 646-2841 — Business
(505) 646-3808 -— Fax
(S05) 524-2482 - Home
EDUCATIONAL
BACKGROUND
App. 42
B.S. Forestry, lowa State University,
1972
M.S. Agricultural Economics, New
Mexico State University, 1974
Ph.D. Agricultural Economics, lowa
State University, 1979
- Range and Forestry Economics
HONORARIES AND
PROFESSIONAL
SOCIETIES
EXPERIENCE
Society for Range Management
Western Agricultural Economics
Association
Society of American Foresters
Fabian Garcia Founders Award of
Excellence, NMSU Agricultural
College, 1987
Distinguished Service, U.S. Forest
Service, Region #3, 1989
Academic Advisor to Public Lands
Council of National Cattleman’s
Association, Distinguished Service,
U.S. Forest Service, Region 3, 1992
NMSU Board of Regents, Outstanding
Service Award, 1996
Farm Bureau Distinguished Service
Award, 1996
Inter regional Fire Suppressionist-
USFS, 1970-71
Management Trainee, Timber and
Range Management, USFS,
Washington Office - Summer
Experience, 1972-73
Teaching Assistant, New Mexico State
University, 1974-76
RELEVANT
ACTIVITIES
App. 43
Research Assistant, lowa State
University, 1974-76
Research Associate, lowa State
University, 1976-79
Assistant Professor, New Mexico State
University, 1979-83
Associate Professor, New Mexico State
University, 1983-86
Professor, New Mexico State
University, 1986-present
Agricultural Economist, Range
Improvement Task Force, 1979-86
Coordinator, Range Improvement Task
Force, 1986-present
Expert Witness on State and Federal
Grazing Fees:
— Invited statement at Senator
Dominici U.S. Senate
Subcommittee of
Parks, Recreation and Renewable
Resource Hearings, 1991
- Invited statement at Senator
Schmidt U.S. Senate
Appropriations Subcommittee
Hearings, 1989
- Invited statement at Congressional
Hearing before Subcommittee on
National Parks and Public Lands,
1989 and 1990
- Presentation to Senate Grazing Fee
Hearings, August 1992.
- Presentation to Public Forum in
Economics of Ranching, Jan. 1994
1993
1992
App. 44
Statement to Senate Energy and
National Resources Committee,
May 14, 1994
Statement to the Senate Forests
and Public Land Management
Subcommittee of the Senate
Energy and National Resources
Committee, June 22, 1995
- Statement to U.S. House of
Representatives, National Parks,
Forests, and Lands Subcommittee
of the committee on Resources,
July 11, 1995
- Statement to U.S. House of
Representatives, Committee on
Agriculture, Subcommittee on
Livestock, Dairy and Poultry,
September 17, 1997
CONSULTING EXPERIENCE
1985-1996
Employer
Corralitos Venture
Ranches
Martin Koldyke
Navajo Board of
Supervisors
Arizona Cattleman’s
Assoc.
Navajo/ Hopi
Responsibility
Easement Valuation
Charles R Ranch, Las
Vegas, Operational
Opportunities
Equitable Lease
Arrangements
Leasehold Valuations
& Analysis
Range Renovation
Costs
ee et IS ae be a RE RS Soe
ee
1991
1990
1990
1988-89
1988
1988
1987-88
1987
1987
1986
1986
App. 45
Livingston & Associ-
ates
Craig S. Barnes
Frontenac Company
Federal Deposit Insur-
ance Corp.
(Kemp, Smith, Dun-
can, Hammond)
Jones, Snead,
Wertheim, Wentworth
(for Bill Sanders)
Shafie Hindie, Inc
Jones Firm (w/J.C.
Heimann)
American Farm
Bureau Federation
Hinkle Law Fimm
[sic]
Howard McDonald
Benally & Associates
N.M. Ranch Valuation
& Income
Arizona Allotment
Management Develop-
ment of Ranch
Management Profit
Plan
N.M. Ranch Valuation
of Midland Bank Asset
Obtain easement
through State Land
Office
Easement Valuation
and Ranch Impact
Analysis
Impact Analysis of Oil
& Gas Development
on Ranch Profitability
Analysis of Federal
Grazing Fees in Public
Rangelands Improve-
ment Act
Ranch Valuation for
White Sands Missile
Range
Range Improvement
Valuation, White
Sands
Jemez Recreational
Plan Development
App. 46
1986 South Research & Ute Mountain, Ute &
Development Southern Mountain
Ute Recreational Plan
Development
1985-86 Soil Conservation Ser- Analysis of Resource
vice (Jim Maetzold) Conservation Act and
Development of Eco-
system Ranch Budgets
Selected Research Publications
Fowler, John M., D. Rush, J. Hawkes, “Economic Charac-
teristics of the Western Livestock Industry,” Range
Improvement Task Force Report #35, New Mexico
State University AES/CES, 1995.
Fowler, John M., L.A. Torell, and G. Gallacher, “Competi-
tive Pricing for the McGregor Range: Implications
for Federal Grazing Fees,” Journal of Range Manage-
ment, 47:155-158, March 1994.
Fowler, John M., “The Art and Science of Being an Effec-
tive Expert Witness on Natural Resource Issues,”
Rangelands, Vol. 12, No. 4, August 1990.
Fowler, John M. and J.R. Gray, “Rangeland Economics in
the Arid West,” Chapter 6 in Rangelands, University
of New Mexico Press, 1988.
Fowler, John M. Grazing Fees and Public Rangeland Man-
agement. Hearing before Subcommittee on National
Parks and Public Lands of the Committee on Interior
and Insular Affairs. House of Representatives, 100th
Congress, Washington, DC. Serial #100-18, pp.
192-217.
Fowler, John M. and L.A. Torell, Economic Conditions
Influencing Ranch Profitability,” Rangelands, Vol. 9,
No. 2, April 1987.
App. 47
Fowler, John M. and J. Witte, “Growth Characteristics and
Thinning Response for P-J Woodland Type in New
Mexico,” Proceedings of Pinyon-Juniper Conference,
USDA-Forest Service General Technical Report
INT-215, January 1987, pp. 266-272.
Workman, J.P. and J.M. Fowler, “Optimum Stocking Rate
- Biology vs. Economics,” Proceedings of Second
International Rangeland Congress, Australian Acad-
emy of Science, 1986, 634p.
Fowler, John M. M. Blake, and L.A. Torell, Heterogeneity
of Data: Implications for a Variable Federal Grazing
Fee,” Journal of Range Management, 39(3), May 1986.
Fowler, John M. and J.M. Witte, “Oil and Gas Activity on
Ranch Operations and Rangelands,” Rangelands,
7(1):35-37.
Torell, L. Allen and J.M. Fowler, “The Impact of Public
Land Grazing Fees on New Mexico Ranch Values,”
Journal of the American Society of Farm Managers and
Rural Appraisers, Vol. 50, No. 2, October 1986.
Fowler, John M., J. Witte, and J. Schickedanz, “Oil and
Gas Interactions with the Ranching Industry in New
Mexico,” New Mexico State University, Agric. Exp.
Sta. Bulletin #715, February 1985, 32p.
Fowler, John M. L.A. Torell, J.M. Witte, and R.D. Bowe,
“Private Land Grazing Transactions in New Mexico
1983-84, Implications for State Trust Lands Grazing
Fees,” New Mexico State University, Agric. Exp. Sta.
and Coop. Ext. Service, Range Improvement Task
Force Report #18, March 1985, 44p.
Torell, L. Allen and J.M. Fowler, “Market Values of
Ranchers and Grazing Permits in New Mexico,
1984,” Agric. Exp. Sta. Research Report 570, June
1985, 10p.
App. 48
Fowler, John M., B. Peacock, and M. Schaber, “Pinyon-
Juniper Woodland Type in New Mexico: Asset or
Liability,” New Mexico State University, Agric. Exp.
Sta. Bulletin 18, October 1985, 67p.
—— = —— 7
App. 49
The Bureau of Land Management, United States Depart-
ment of the Interior, New Mexico Standard for Public
Rangeland, Health and Guidelines for Livestock Graz-
ing Management: Draft Statewide Resources Manage-
ment Plan Amendment/Environmental Impact
Statement, 1999
+ * *
ECONOMIC CONDITIONS
This section describes the current economic situation of
the State of New Mexico. As a part of the entire New
Mexico economy; the range livestock sectors are a very
minor portion; however, when New Mexico is considered
as a group of economics (counties), the number of agri-
cultural economies are greater than the number of urban
economies. The total level of economic output for New
Mexico is approximately $60 billion, including the $18
billion household sector. The impact from changes to the
range livestock industry will be negligible to the urban
economies, but highly imposing to the rural counties with
large acreage of BLM land.
* * *
Financial, Social and Cultural Conditions
Financial
Financial Conditions for a Properly Functioning
Rangelands:
Allen and Hokstra, (1994) state that “ .. . a stable and
adequate economic base is a requirement for sus-
tainability” (for reaching a properly functioning healthy
rangeland condition). As a business, the public land
App. 50
rancher looks at the net return on his/her investment,
according to resource economist John Nalivka, (1993):
The net return to the rancher is the result of combining all
of the resources (feed, water, capital, and management)
and because it results in an economic return to the
rancher, his long term incentive is to enhance the total
productivity of these resources and use them more effec-
tively. The management of these resources in an environ-
ment of risk and uncertainty to produce a marketable
product at a competitive cost is the essence of determin-
ing the value of the ranch. In other words, the economic
condition of the business which is dependent upon scien-
tific condition and sustained yield of the renewable graz-
ing resource determines the economic value of the ranch.
The economic well-being of each ranch subsequently con-
tributes to the economic health of the industry and the
industry contributes to the economy of the county, state
and Western U.S. as a whole. A secure and optimal bal-
ance of forage, water, market access, and capital access is
the key to the long term viability of any operation more
specifically, the public land rancher, whether the major
consideration of range livestock operations and their abil-
ity to manage risk and maintain economic viability is
access to and the ability to utilize a forage base, which is
well balanced with regard to availability, quality, and
seasonal use.
In short, as the range improves in productivity with the
help of the rancher, the rancher should re-establish his or
her profitability and pay the variable costs. Once the
profitability is achieved, the rancher will invest capital to
improve the healthy ranges. The improved healthy ranges
will provide a more secure environment for family and
fadine to
App. 51
community stability. With improved security and stabil-
ity, the rancher will have greater incentive to further
invest in public land improvements.
John Fowler states that historically “federal land policies
have encouraged development and investment by the
grazing permittee. The TGA provided enhanced steward-
ship, financially stable communities and livestock indus-
try” (Fowler, 1994). The key TGA policy is the Grazing
Preference, which was adjudicated to provide security of
tenure to encourage investment and commitment on the
part of the rancher. In return, TGA states that “Grazing
privileges recognized and acknowledged shall be ade-
quately safeguarded, but the creation of grazing district
or the issuance of a permit pursuant to the provisions of
this Act shall not create any right, title, interest, or estate
in or to the land”.
* * *
In 1934, the U.S. Congress enacted the Taylor Grazing Act
which provides for grazing leases and permits:
... permits to graze livestock . . . to such bona
fide settlers, residents, and other stock own-
ers .. . Preference shall be given in the issuance
of grazing permits to those within or near a
[grazing] district who are landowners engaged
in the livestock business, bona fide occupants or
settlers, or owners of water or water rights. The
Taylor Grazing Act goes on to state, PROVIDED
FURTHER. That nothing in the Act shall be con-
strued or administered in any way to diminish
or impair any right to possession and use of
water for mining, agriculture, manufacturing, or
other purposes which has heretofore vested or
accrued under existing law validly affecting the
App. 52
public lands or which way [sic] be hereafter
initiated or acquired and maintained in accor-
dance with such law. So far as consistent with
the purposes and provisions of this Act, grazing
privileges recognized and acknowledged shall
be adequately safeguarded, but the creation of a
grazing district or the issuance of a permit pur-
suant to the provisions of this Act shall not
create any right, title, interest, or estate in or to
the lands”.
The intent of Congress was to provide stockholders with
“... some type of assurance as to where and what kind
of range they may have and depend upon in the way of
pasturage” (78 Congressional Record). The grazing privi-
leges were subsequently adjudicated to determine who
was eligible for a grazing preference. The term “grazing
preference” represents a preference for a grazing permit.
The grazing preference was attached to the base property
of the ranch and was transferred to the party who owned
or controlled the base property. The completion of the
adjudication process provided predictability and security
of tenure to livestock operators. This predictability and
certainty in grazing permits provides the security to
obtain financing for livestock capital, operations and
improvements on the public land.
The Secretary of the Interior has the authority to regulate
the grazing to protect the rangeland. Good range man-
agement and proper stewardship of the rangeland is ulti-
mately linked to the security and tenure of the
adjudicated preference grazing permit/lease, as
expressed and demonstrated by a variety of public land
research economists (Martin, 1981, Kelso, 1983, Archer,
and Snider, 1984). When predictability and certainty are
App. 53
removed, not only do the ranch finances and family suf-
fer, but the incentive for good stewardship and invest-
ment into healthy rangeland improvements is thwarted.
The existence of rural families and communities con-
tinues to depend foremost on the availability of land for
livestock, crops, timber, and other resources. Land is the
life and well-being of the rural culture in New Mexico.
Working the land is the center piece of their livelihood;
supported by multiple sources of supplemental income
from wages and jobs in town. The land and water based
cultures of New Mexico depend on use of natural
resources that are derived from iand and water. Such uses
include ranching, farming, mining, and timber harvesting
which leads to sustainability of these communities. These
customs include long term use, land ethics and steward-
ship of the land by individuals and communities. Slowly
these communities are changing due to influences outside
the community. Televisions, new restrictions on the con-
sumptive use of resources on the public lands, computers,
immigration, and out-migration are all examples of influ-
ences that are modifying the unique character of the
communities. In spite of the modifying influences to their
communities, many communities do not have a program
to maintain custom and culture on a sustainable manner.
Customs & Cultures of Counties
The counties, Indian tribes and pueblos of New Mexico
were asked to define their customs and cultures in their
own terms. Their statements have been included in
Appendix E.
App. 54
The customs and cultures of rural New Mexico are out-
growths of the people’s values, beliefs, and ways of life,
combined with ali other aspects of living, which weave a
complex whole. These customs and cultures are practiced
within a relationship between people and place.
Place is the site or sites marking the life of a person the
story of their life and that of the lives that came before
them. All of these attributes are embodied in the struc-
tures they call home, the communities they live near or
within, and the environment.
The customary uses of the lands continue to be for crop-
lands, grazing, timber and mining that support rural
communities and are [sic] contribute to the overall state’s
economy. The commitment to the land they live and work
on is so powerful as to evoke words like: “I don’t want to
be here [alive], if I can’t live here [this person’s ranch].” It
should be clear then that place and identity are virtually
inseparable. This is especially true of rural New Mexico
where people often cannot, will not, separate themselves
from the land they call home (Smith, 1994). Such a sep-
aration would destroy the very identity of those people.
The customs and cultures that rural New Mexicans prac-
tice on their landscape is inclusive of their home and
family and the community they consider themselves a
part of. It is a bond between people and place that is no
less than the bond between flesh and blood; it is wholly
dependent upon the fabric of land, people, and commu-
nity being intact and stable.
The importance of community stability is expressed in
the statements of custom and culture form the counties.
App. 55
An example of a commonly held feeling on the commu-
nity is 1: “will pass along many of the beliefs and values
that are cherished by our rural society .. . ” It is within
place that the values of a region are cultivated. For the
people of rural New Mexico, values are products of their
history and their experiences with the land that are essen-
tial to the continuation of their way of life. These values
include the “meaning of heroism, the relation of the
individual to family and community, the nature of patrio-
tism, the value of freedom, the challenge of making a
home” (Cronon 1992).
Concept of Public Land Usage
The core values of the people of rural New Mexico form
the basis of their concept of their use on the public lands
~ lands that are so crucial to the security and stability of
their rural way of live.
* * *
Range improvements are long term investments in the
basic land resource that require years to yield a positive
return to amortize the dollars invested.
e * *
Methodology
With the identification of ranches affected by region, as
shown in Figure 4-2 and an average budge for each ranch
size within each region, impacts to the ranches needed to
be identified. This was done with the help of industry
representatives and the BLM. The BLM and ranchers
cooperatively identified the improvements that were
App. 56
most probable for an allotment in each region to achieve
the standard. With this information the industry repre-
sentatives estimated, as a percentage, the increased
variable costs that would be associated with the improve-
ments recommended. These percentages were then
applied to the average budget for that particular region
and ranch size. At this point there were two options
applied to the analysis for all three alternatives:
1. That all of the allotments not meeting the
standard could be improved without a reduction
in AUMs. Ranches would attempt to feed their
way out of the forage deficiency and that the
allotment would improve.
2. That some of the allotments would require
the removal of AUMs for that allotment to
improve and meet the standard. For this option
all allotments, not meeting the standard, were
analyzed with the removal of 20% of the autho-
rized AUMs.
It should be recognized that both are unlikely and that
the real impact would be some point between the two
options. After implementing these two options into the
analysis, three additional options for the previous 2
options for each alternative, were analyzed for each
region, ranch size, and AUM reduction, they were:
1. That the BLM would provide all of the fund-
ing for the establishment of the improvements
to bring the allotment to standard.
2. That the BLM would provide the funding
for the materials and the ranch would provide
the labor of constructing the improvement.
App. 57
3. That the ranch would provide all of the
funding for the establishment of the improve-
ments to bring the allotment to standard.
These three options were considered because of the lim-
ited funding available to the BLM for range improve-
ments. Neither of the options are likely; but, some
combination of all three is most probable to happen.
Another possibility considered in the analysis was that
with increased regulation and operating costs to the
ranch, some of the ranches would sell the base property
for development and no longer use the federal permit.
For additional analysis it was assumed that 22%! of the
ranches not meeting the standard would convert to real
estate rather than shoulder the cost of additional
improvements and regulation. These ranches, including
the permit/lease, were assumed as permanent losses and
no longer maintained in production. Although it is possi-
ble that the federal permits/leases may be purchased by
another ranch, it was not considered in this analysis due
to the insecure tenure of federal permits. When 22% of
the impacted ranches not meeting the standard were
removed, the same assumptions that applied to the sce-
nario that no ranches quit were applied to the remaining
78% of these ranches.
1 Percent of ranches identified in “Economic
Characteristics of the Western Livestock Industry” as ranches in
New Mexico that would convert to real estate with the loss of
federal AUMs.
App. 58
Cultural
This alternative could have adverse impacts on ranches
with public lands not meeting the standard. Most public
land ranches in New Mexico are family run businesses.
The effect of one person losing his or her connection to
the land ripples throughout the communities. The com-
munities of the arid southwest are made up of people
who share beliefs and values which are, if not embodied
by, closely linked to the culture of ranching. As the indi-
viduals who ranch their lands because of increased eco-
nomic pressures and/or the demand for changing uses,
the values of the communities as a whole begin to
unravel in the descent toward a less centered, less self-
reliant, and more homogenous monoculture.
The financial and social impacts could have adverse
effects on ranch traditions, heritage, attitudes, beliefs and
values. The culture of ranching depends on the interac-
tion of the ranchers lives with the land and livestock. Any
one of these components taken away dismantles the
entire weave. To protect the irreplaceable cultures, the
weave of people and land must remain intact in those
traditional forms of interaction. Cultural values of self
sufficiency, hard work, and other traits, such as commu-
nity cohesion, collaboration and leadership associated
with agrarian communities, could be altered. As dis-
cussed in chapter three, the sense of place with its asso-
ciation with a sense of well-being and community
stability would be further eroded for some of the ranch-
ing communities.
App. 59
* * *
The Range Reform ‘94 Draft EIS briefly raised the poten-
tial effects on rural communities:
Generally, small isolated communities are more
vulnerable . . . due to weaker links to centers of
political and economic influence . . . these
smaller communities are more likely to experi-
ence unemployment, increased poverty, and
social disruption in the face of policy shifts in
management policy.
When ranchers go out of business, sell base property for
housing development, and are not replaced, the loss of
social mobility, erosion of the agrarian way of life, and
out-migration would lead to reduced family spending
and secondary effects on businesses, infrastructure and
services (schools, medical care, emergency services, envi-
ronmental services, etc.).
Cultural
This alternative could have adverse impacts on ranches
with public lands not meeting the standard. Most public
land ranches in New Mexico are family run businesses.
The effect of one person losing his or her connection to
the land ripples throughout the communities. The com-
munities of the arid southwest are made up of people
who share beliefs and values which are, if not embodied
by, closely linked to the culture of ranching. As the indi-
viduals who ranch leave their lands because of increased
economic pressures and/or the demand for changing
uses, the values of the communities as a whole begin to
App. 60
unravel in the descent toward a less centered, less self-
reliant, and more homogenous monoculture.
The financial and social impacts could have adverse
effects on ranch traditions, heritage, attitudes, beliefs and
values. The culture of ranching depends on the interac-
tion of the ranchers lives with the land and livestock. Any
one of these components taken away dismantles the
entire weave. To protect the irreplaceable cultures, the
weave of people and land must remain intact in those
traditional forms of interaction. Cultural values of self
sufficiency, hard work, and other traits, such as commu-
nity cohesion, collaboration and leadership associated
with agrarian communities, could be altered. As dis-
cussed in chapter three, the sense of place with its asso-
ciation with a sense of well-being and community
stability would be further eroded for some of the ranch-
ing communities.
App. 61
UNITED STATES SUPREME COURT
No.
PUBLIC LANDS COUNCIL, ET AL.,
Petitioners
Vv.
BRUCE C. BABBITT, SECRETARY OF
THE INTERIOR, ET AL.,
Respondents
ON PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
TENTH CIRCUIT
AFFIDAVIT OF JACK C. McCALL
I, Jack C. McCall, do hereby swear on oath as fol-
lows:
My name is Jack C. McCall.
I am over the age of 18 years and make this affidavit
based on my personal knowledge.
My Address is: P.O. Box 1598, Twin Falls, Idaho
83303.
I am the owner of Clear Creek Land and Mortgage,
in Twin Falls, Idaho. My company operates in Idaho,
Utah, Nevada, Wyoming and Montana. I am almost
exclusively engaged in the business of agricultural
lending. A more complete statement of my profes-
sional credentials and experience is appended to this
affidavit.
App. 62
The 1995 regulation replacing the grazing preference
with “permitted use” (“Permitted Use Rule”)
deprives Bureau of Land Management (“BLM”)
grazing permit holders of the right to activate their
suspended animal unit months (“AUMs”) when
increasing forage becomes available. the Permitted
Use Rule also bases BLM allotment stocking rates on
land use planning rather than on predictable prefer-
ence limits, reduced as necessary to protect the
range.
Because suspended use AUMs may no longer be
activated by the BLM permit holder, they no longer
add any value to the ranching operation. Further-
more, the fact that BLM allotment stocking rates are
based on the ever-changing land use planning pro-
cess has resulted in substantial tenure insecurity for
the permit holder.
A secure BLM permit enhances the value of a ranch-
ing operation by increasing the total livestock carry-
ing capacity of the business. The Permitted Use Rule
has significantly harmed the security of tenure and
has caused a loss of ranch property values for pur-
poses of sale or as collateral for loans. This loss of
value has drastically reduced the availability of loan
capital for BLM dependant ranching operations and
is forcing many of these operations into insolvency
and out of business.
Approximately fifty percent of the agricultural
lenders in Idaho and elsewhere in the Northwest
will no longer make loans to BLM dependant ranch-
ing operations because of tenure insecurity occa-
sioned by the Permitted Use Rule. The remaining
fifty percent that continue to make loans to BLM
dependant operations will only do so where the
ranch has sufficient private land to sustain its opera-
tion without the BLM permit.
10.
11.
App. 63
My firm has approximately $25,000,000 currently at
risk in loans to BLM dependant ranching operations.
This figure accounts for approximately twelve to
fifteen percent of my firm’s investment in loans. If I
were forced to write off these loans, underwriters
would lose confidence in my firm and the firm
would lose the access to capital that it currently
enjoys. The combined financial loss and loss of
access to capital would immediately force my firm
out of business. The Permitted Use Rule has placed
the financial solvency of my firm, and of agricultural
lenders in general, in serious jeopardy.
Because the Permitted Use Rule has decreased the
tenure security of BLM permit holders, most permit
holders are no longer willing to make long-term
investments of private funds in range improvement
projects which benefit wildlife and serve other
important conservation purposes. Because the Per-
mitted Use Rule removes the promise that the per-
mit holder can recover suspended use AUMs when
the range improves, most permit holders are no
longer willing to expend significant private
resources to improve the range. The permitted use
rule actually discourages responsible range manage-
ment and encourages short-term profiteering and
abuse of the public range.
The rule vesting title to all future range improve-
ments in the United States (“Range Improvements
Rule”) has deprived lenders of potential collateral
interests in range improvements. Furthermore, it is
easier for the BLM to remove permit holders from
the public range if the permit holders do not hold
title to permanent fixtures on the range. The Range
Improvements Rule, therefore, substantially
decreases the tenure security of BLM permit holders.
12.
13.
14.
15.
App. 64
Because of tenure insecurity resulting from the Per-
mitted Use Rule and the Range Improvements Rule,
and because the Range Improvements Rule prevents
lenders from gaining collateral interests in range
improvements, most financial services organizations
will no longer loan money for the construction of
range improvements on public land. The inability to
secure private funding for range improvements will
cause pervasive ecological damage on the public
ranges.
Because many portions of public land are fenced in
and managed indistinguishably with private land,
forcing the private rancher off the public land would
also require the building of fences around private
lands that are intermingled with BLM lands. In
many cases, these fences will not make ecological
sense and will disrupt wildlife and recreationists.
Similarly, if the BLM dependent ranchers are forced
to give up ranching because their grazing permits
are no longer sufficient, many of them will have no
alternative but to sell their private lands, which are
intermingled with the public lands, to real estate
developers for the construction of recreation cabins
or condominiums. Such construction projects would
deter wildlife from inhabiting the public lands and
disrupt the scenic quality and other conservation
values of the public lands.
Many BLM dependent ranchers have already made
improvements which transport water from their own
private lands to public lands for purposes of water-
ing their livestock. If these improvements must be
rebuilt, or if the owners of these improvements are
no longer able to continue their livestock operations,
they will almost certainly remove their improve-
ments and thereby deny the use of their private
App. 65
water resources to wildlife and other conservation
purposes on the public lands.
16. The instability to the livestock industry caused by
the Range Improvements Rule and Permitted Use
Rule threatens the livelihood and way of life of
many families in many states throughout the West.
Many of the affected families have been engaged in
the livestock business for several generations and
geno be deeply harmed if they were forced to give
it up.
17. The instability to the livestock industry caused by
the Range Improvements Rule and Permitted Use
Rule also threatens the culture and unique way of
life of many rural communities throughout the West.
FURTHER AFFIANT SAYETH NAUGHT.
/s/ ha C. McCall
ac . McCa
STATE OF Idaho )
) ss.
COUNTY OF Twin Falls )
The foregoing instrument was acknowledged before
me this 16th day of June, 1999 by Jack C. McCall.
Witness my hand and official seal.
/s/ on Gadsby
Otary Public
[seal]
My Commission Expires: 3/24/2003
App. 66
Clear Creek Land & Mortgage
JACK C. McCALL, ARA
App. 67
EDUCATION:
Graduate of Oregon State University, Corvallis, Oregon -
Bachelor of Science Degree in Agricultural Economics -
Minor in Range Management.
Retired
PRESENT AFFILIATIONS:
Partner - CLEAR CREEK LAND & MORTGAGE
Farm & Ranch Loan Correspondents
Completed Rural Appraisal School of the American Soci-
ety of Farm Managers and Rural Appraisers in 1974.
Owner - CLEAR CREEK PROPERTIES, INC.
Farm, Ranch and Land Brokers,
Managers and Consultants
Owner - CLEAR CREEK FARMS
Irrigated Agricultural Lands and Beef
Cattle Operation
PAST AFFILIATIONS AND EXPERIENCE:
Private Appraising — 20 years
Appraised properties in Idaho, Oregon, Utah,
Colorado, Wyoming, Montana and Nevada for
insurance companies, banks, attorneys and
numerous business enterprises and individuals.
Appraisals have been for various purposes
including real estate loans, estate settlements,
guide for sale purposes, etc. Specialize in farm,
American Society of Farm Managers & Rural
Appraisers
- Report Writing Seminar
- Eminent Domain Seminar
American Institute of Real Estate Appraisers
- Standards of Professional Practice
- Various Seminars and workshops on
appraisal problems and techniques
including Report Writing, Professional
Ethics, Court Testimony & Conduct, etc.
National Association of Realtors
- Numerous courses and seminars in Real
Estate Law, Finance, Administration,
Ethics, Appraising, Management, etc.
ranch, and commercial agri-business properties.
PROFESSIONAL MEMBERSHIPS:
Alpha Zeta Agricultural Honorary
Court appointed receiver on various properties
Field Appraiser, The Traveler’s Insurance Company ~— 6'/2
years in Idaho, Nevada and Utah. Idaho Society of Rural Appraisers and Farm
Managers
Loan Correspondent for Metropolitan Life Insurance Co.,
The Mony Group, and Zions Agricultural Finance.
American Society of Farm Managers and
Rural Appraisers
* Past Farm President - Idaho Society of Rural
Appraisers and Farm Managers
App. 68
* Past Chairman - Magic Valley Society of
Rural Appraisers
* Licensed Real Estate Salesman for the State
of Idaho
* Board Member of Little Pilgram Irrigation
Company
PROFESSIONAL DESIGNATION:
ARA-— Accredited Rural Appraiser #538 Amer-
ican Society of Farm Managers and
Rural Appraisers
COURT TESTIMONY:
I qualify as an expert witness in matters pertaining to real
estate value and management in Probate, District and
Federal Courts, in addition to appearing as an expert
witness in Bankruptcy Courts, various Tax Appeal Courts
and before Legislative Committees.
CURRENT STATUS:
In addition to having the previous experience of servicing
various clients, | have also owned office buildings, farm-
land and subdivision development land myself, as well as
being a ranch owner. This has given me a knowledge of
the income, expenses and management of property from
an owner’s standpoint as well as appraisal, mortgage
lending, consultation, and management for other prop-
erty owners.
App. 69
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
No. 96-8083
PUBLIC LANDS COUNCIL, ET AL.,
Plaintiffs/ Appellees
v.
BRUCE C. BABBITT,
SECRETARY OF THE INTERIOR, ET AL.,
Defendants / Appellants
APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF WYOMING
AFFIDAVIT OF JACQUELINE A. BUCHANAN
I, Jacqueline A. Buchanan, do hereby swear on oath
as follows:
1. My name is Jacqueline A. Buchanan.
2. Iam over the age of 18 years and make this affidavit
based on my personal knowledge.
3. My office is at 951 Warner Court, Casper, Wyoming
82601-1307. My telephone number is (307) 261-5305.
4. I received a Bachelor of Science degree from Penn-
sylvania State University in 1988, with a major in
Animal Science.
5. Ever since graduating from college approximately 10
years ago, I have worked in agricultural lending.
6. I am currently employed as a Farm Loan Program
Specialist at the Casper Wyoming office of the Farm
™
10.
App. 70
Service Agency (“FSA”). Prior to taking this posi-
tion, | was employed as Area Agriculture Credit
Manager in the New Mexico office of FSA. I have
also worked for FSA in Washington, D.C. and North
Carolina.
The “Permitted Use Rule,” upheld by the Tenth Cir-
cuit in Public Lands Council v. Babbitt (“PLC”) signifi-
cantly jeopardizes a lender's ability to lend money
to livestock operations. Because the Bureau of Land
Management (“BLM”) no longer uses adjudicated
preference rights as a standard for measuring stock-
ing levels, FSA cannot rely on stable future livestock
numbers as security for loans, nor to calculate the
borrower's ability to service the debt.
The new “permitted use” rule has substantially
decreased the value of grazing permits as security
for loans, and in some cases has rendered such per-
mits completely valueless. Many ranchers rely on
federal grazing permits for most of their debt secu-
rity. In some cases, the permits represent up to 95
percent of the security. Since permitted livestock
numbers are no longer founded on a reliable stan-
dard, lenders are deprived of most of their security
for these loans, and is therefore unwilling to lend as
freely as it used to. In New Mexico, I estimate that
this problem will seriously affect approximately 40
to 60 percent of FSA's livestock loan portfolios.
The inability of many ranchers to obtain sufficient
financing for their operations is likely to make a
number of them insolvent, and force them out of
business. This, in turn, will place their existing loans
in default, causing financial losses to lenders.
The “range improvements” rule, upheld by the
Tenth Circuit in PLC, also decreases the value of
BLM grazing permits as security for loans. Since the
BLM holds title to all improvements constructed
11.
12.
13.
14.
App. 71
after July 21, 1995, FSA is unwilling to value those
improvements as security for any loan.
Lenders are unwilling to loan money for range
improvements on federal land, because the improve-
ments can no longer adequately secure such loans.
This is regrettable because it impairs the livestock
operators’ ability to manage their businesses, as well
as their capacity to make improvements for the ben-
efit of the range.
FSA is fearful that the 1995 “range improvements”
rule removes incentives for the BLM to continue
grazing. Since livestock permittees are unable to
own any interest in their improvements on federal
land, and the government has no duty to compen-
sate permittees for such improvements if grazing
privileges are suspended or removed. FSA’s business
confidence in the reliability of grazing permits as
security for loans has therefore decreased, and the
business of lending to ranchers has been signifi-
cantly impaired.
If the “permitted use” rule and the “range improve-
ments” rule were invalidated, lenders such as FSA
would be substantially more confident in lending
money to livestock businesses with operations on
federal lands. By mentioning these two rules, I
express no opinion whatever with respect to the
“qualifications rule.”
My statements herein are based on my experience as
an FSA employee. However, because of my involve-
ment with many guaranteed lenders, I am certain
that the regulations mentioned herein will have
equally serious impacts on other agricultural
lenders.
App. 72
FURTHER AFFIANT SAYETH NAUGHT
/s/ Jacqueline A. Buchanan
Jacquelyne A. Buchanan
STATE OF Wyoming )
)ss.
The foregoing instrument was acknowledged betore
me this 26th day of October, 1999 by Jacquelyne A.
Buchanan.
Witness my hand and official seal.
/s/ Julie L. Caves
Notary Public
JULIE L. CAVES NOTARY PUBLIC
[SEAL]
County Of State Of
Converse Wyoming
My Commission Expires
Mar. 19, 2000
My Commission Expires: 3-19-2000
App. 73
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
No. 96-8083
PUBLIC LANDS COUNCIL, ET AL.,
Plaintiffs / Appellees
V.
BRUCE C. BABBITT,
SECRETARY OF THE INTERIOR, ET AL.,
Defendants/ Appellants
APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF WYOMING
AFFIDAVIT OF JIMMIE C. HALL
I, Jimmie C. Hall, do hereby swear on oath as follows:
My name is Jimmie C. Hall.
| am over the age of 18 years and make this affidavit
based on my personal knowledge.
My offices may be reached at P.O. Box 3915 Carlisle,
New Mexico 87109 or P.O. Box 3694 Albuquerque,
New Mexico 87190. My telephone number is (800)
722-4679.
I am President and CEO of Production Credit Asso-
ciation of New Mexico (“PCANM”). I have served in
this capacity for approximately ten years. PCANM is
primarily engaged in lending to livestock producers.
Calf production is significantly more expensive for
public lands ranchers than for purely private opera-
tions. Weaning weights for calves grazed on public
~
App. 74
lands also tend to be lower than for calves grazed on
purely private lands.
Because of the 1995 Permitted Use Rule, (“PUR”)
sustained by the Tenth Circuit, PCANM and other
agricultural lenders have been forced to reduce lend-
ing to public lands dependent ranching operations.
Because the PUR does not permit the permit holder
to retain suspended use animal unit months
(“AUMs”), such suspended use AUMs can no longer
be considered security against any loan. Livestock
operators may, therefore, only borrow against active
use AUMs for the limited duration of their permits.
These limitations are serious and substantial reduc-
tions in available credit for livestock producers.
PCANM is currently studying further reductions in
security for future loans because of the PUR.
Because of the new BLM rule vesting title to all
future range improvements in the federal govern-
ment, PCANM and most other agricultural lenders
are unwilling to make loans for range improvements,
since such improvements could no longer be
reclaimed as security. Furthermore, since the 1995
Range Improvements Rule (“RIR”) was enacted,
there have been very few requests for loans to make
range improvements. This is, presumably, because
ranchers are unlikely to spend time, effort, and
money to construct improvements they cannot
legally own.
The 1995 RIR also makes loans to water-based per-
mittees less secure. Because the government asserts
ownership of improvements which are necessary to
take advantage of vested water rights, these water
rights are less secure than if the improvements
belonged to the owner of the water rights. Such
water rights and any attached permit are, therefore,
10.
11.
App. 75
not as valuable for securing a loan as they were
before the 1995 RIR was adopted.
Many water-based permittees are unable to utilize
their water rights without improvements. The 1995
RIK therefore forces such permittees to expend
resources building improvements that they cannot
own in order to exercise their water rights, confer-
ring unjust enrichment on the government. It is
likely that the government will require that such
improvements be constructed in a specified way to
benefit wildlife and other conservation uses, and
which may be more expensive than the permittee
might have chosen to build for stock watering pur-
poses. The RIR therefore devalues the permittees’
water rights and the grazing permits attached
thereto. The above-described decrease in the stability
and value of water based permits makes such per-
mits less valuable as security for loans, and will
result in loan denials or substantial reductions in the
amounts that will be loaned against such permits.
The 1995 rule permitting individuals and entities not
engaged in the livestock business to obtain grazing
permits opens the possibility that conservation
groups may acquire such permits. This rule makes
such permits less secure as security for loans,
because conservation groups could potentially
obtain such permits and find a way to place such
permits in non-use.
The attached documents are studies done by
PCANM regarding the predicted effect of increases
in livestock permit fees. Although the Tenth Circuit's
decisions to uphold the three rules discussed in this
aftidavit do not involve increases in fees, they can be
expected in increased costs of production per animal
by bringing about reductions in permitted livestock
numbers and devaluing the underlying ranching
App. 76
operations. These studies are, therefore, helpful in
demonstrating the fragility of the western livestock
industry and the likely effects of even minor
increases in the cost of production.
FURTHER AFFIANT SAYETH NAUGHT
/s/ Jimmie C. Hall
Jimmie C. Hall
STATE OF New Mexico )
)Ss.
COUNTY OF Bernalillo)
The foregoing instrument was acknowledged before
me this 27th day of October, 1998 by Jimmie C. Hall.
Witness my hand and official seal.
/s/ Kim L. Peters
Notary Public
[SEAL] OFFICIAL SEAL
KIM L. PETERS
Notary Public
State of New Mexico
My Commission Expires 03/01/2000
My Commission Expires: 03/01/2000
App. 77
INTERNAL ANALYSIS OF THE IMPACT TO
ALBUQUERQUE PRODUCTION CREDIT
ASSOCIATION’S LOAN PORTFOLIO OF PROPOSED
GRAZING FEE INCREASE
AS OF DECEMBER 31, 1992
BY: ASSOCIATION OFFICERS
Albuquerque Production Credit Association (APCA), part
of the Farm Credit System, is authorized to make short
and intermediate term loans to agricultural producers.
APCA, originated in 1934, is chartered to provide agri-
cultural credit in 32 of New Mexico's 33 counties. Histori-
cally, APCA’s loan portfolio has consisted of cattle and
sheep loans. The following study is in response to the
proposed federal grazing fees increase by the Clinton
administration. President Clinton’s budget plan called for
an increase in grazing fees from $1.92 to $2.95. Another
proposed hike in fees is from $1.92 to $5.36. Under pres-
sure from western state Democratic senators, the Clinton
administration has dropped the grazing fee hikes from its
proposed budget. This study looks at the effects of these
proposed incremental increases if they were to become lau
The association's total portfolio was reviewed baised [sic]
on the following selection criteria, the borrowers opera-
tion being 10% or more dependant [sic] on federal leases
(public group) or the operation being less than 10%
dependant [sic] on tederal leases (private group). Forty
borrowers from APCA’s loan portfolio of 120 borrowers
were randomly selected. All of the 40 borrowers selected
are cow/calf operations per the Tenth Farm Credit Dis-
trict Internal Review manual enterprise code definition -
50% or more of income of the operation is derived from
the sale of calves.
App 78
Borrower Profile (Public Group)
Of the 20 borrowers selected, 3 are members of United
States Forest Service (USFS) community grazing allot-
ments. These community grazing allotments are located
in the northern halt of New Mexico. All of the 20 bor-
rowers live on the ranches and are the primary man-
agers /operators. Of the 20 borrowers, 17 conduct their
ranch operations as a sole proprietorship. Two of the 20
borrowers conduct their ranch operations as closely held
family corporations. These family members live on the
ranch and are involved in the operation as corporate
officers. They generally own 100°. of the corporate stock.
One of the 20 borrowers is a family partnership, with the
family as the individual partners and directly involved in
the daily operations of the ranch. Five of the public group
(25°) are Hispanic and one (5%) is female. Based on
outstanding balance and commiiment at 12/31/92, the
largest borrower was $369,340, and the smallest borrower
was $15,256. Their total outstanding loan balance and
commitment at vear end was $2,596,065
While no consideration was given to location in the selec-
tion process in the public group, but using Interstate 40
and 25 to divide the state into four quadrants, 3 of the
borrowers’ operations are in the southeast quadrant, 12
are in the southwest quadrant, 5 are in the northwest
quadrant, and no borrowers are in the northeast quad-
rant. Using Interstate 25 as the east-west dividing line, 17
of the borrowers ranch on the western side of New Mex-
ico, and 3 ranch on the eastern side of New Mexico.
App. 79
Borrower Profile (Private Group)
Of the 20 borrowers, 15 conduct their ranch operations as
a sole proprietorship. Three of the 20 borrowers conduct
their ranch operations as closely held family corpora-
tions. These family members live on the ranch and are
involved in the operation as corporate officers. They gen-
erally own 100% of the corporate stock. One of the 20
borrowers is a family partnership, with the family as the
individual partners and directly involved in the daily
operations of the ranch. One of the 20 borrowers’ opera-
tions is conducted as a family trust. Two of the private
group (10%) are Hispanic and one (5%) is female. Based
on outstanding balance and commitment as of 12/31/92,
the largest borrower was $1,238,847, and the smallest
borrower was $5,207. Their outstanding loan balances
and commitments at year end were $4,181,645.
While no consideration was given to location in the selec-
tion process in the private group, but using interstate 40
and 25 to divide the state into four quadrants, 12 of the
borrower's operations are in the southeast quadrant, 2
are in the southwest quadrant, 2 are in the northwest
quadrant, and 4 are in the northeast quadrant. Using
Interstate 25 as the east-west dividing line, 4 of the bor-
rowers ranch on the western side of New Mexico, and 16
ranch on the eastern side of New Mexico.
APCA’s Credit Quality
APCA’s internal review program has been accepted by
APCA’s regulators, the Farm Credit System and the Farm
Credit Bank of Texas. The proposed increase in the graz-
ing tee to $2.95 would result in 7 of the 20 borrowers or
App. 80
35° being reclassified in a lower category. If the fee was
increased to $5.36, four of the 20 borrowers would be
reclassified in a lower category. Even though APCA
would still be within District Standards, APCA’s accept-
able loan volume would decrease from 73.21% to 72.44%
if the fee was increased to $2.95. If the fee was increased
to $5.36 acceptable loan volume would be 75.67%. While
the percent of Acceptable Loan Volume under the proposed
$5.36 fee is more after the increase in fee, it should be remem-
bered that 8 borrowers would already be out of business if the
fee were increased to $5.36. Regardless of whether the fee
was increased to $2.95 or to $5.36 there would be a steady
deterioration in APCA’s Credit Quality.
Nonaccrual Loans
With the proposed increase in the grazing fee, APCA’s
nonaccrual (noninterest bearing loans) loan volume
would increase from 4 loans for $622,921 or 5.9% to 6
loans for $924,284 or 9.2% at the $2.95 rate and 9.9% at
the $5.36 rate. Two loans currently in OAEM for a total of
$301,363 would be put into substandard /nonaccrual for a
period of time pending liquidation.
The District Standard for nonaccrual loans is less than
3.00% average investment in noninterest bearing assets as
a percent of average accrual loan volume. Nonaccrual
loans would not meet district standards.
Allowance for Loan Loss Reserve (ALL)
At 12/31/92 APCA’s ALL was $470,723 or 4.5% of
APCA’s outstanding loan balance of $10,510,216. The
App. 81
projected grazing fee increase would not result in a loss
to APCA in any of the 40 borrowers included in the
study. The ALL would not need to be adjusted due to the
loss of loan volume.
Association Earning
The projected loss in volume to APCA is based on the
best estimate the fee increases would have on the bor-
rower’s total annual commitment.
Recognizing that there are many factors that affect
APCA’s earnings, the borrower spread was chosen to
analyze earnings. At 12/31/92, the Association’s spread
between its cost of funds and the Association’s interest
rate to borrowers was 3.85%. At the 12/31/92 loan vol-
ume of $10,510,216, this 3.85% spread would yield an
annual gross income of $404,643. With a fee increase to
$2.95 and loan volume of $9,949,325, the annual gross
income would be $383,434 or a $21,209 reduction in
income. At a $5.36 fee, and loan volume of $9,358,153,
annual gross income would be $360,289 or a reduction of
$44,354 in income.
The substantial increase in nonaccrual loans would also
adversely impact the earnings capacity of APCA as these
loans are excluded from APCA’s Direct Loan with the
FCBT, and high risk accounting guidelines prohibit accru-
ing interest on loans in nonaccrual. These reductions in
income would severely jeopardize the viability of APCA.
App. 82
Average Debt Per Cow
The debt per cow was figured on all forty loans. Compar-
ison were made between the public group and the private
group on debt per cow (DPC) before and after the
increases in grazing fees. Ranchers dependent on federal
grazing show debt per cow an average of $34 higher than
those ranchers operating on private, state and deeded
land. If the grazing fee increased to $2.95, that average
would increase to $41. If the grazing fee increased to
$5.36 that average would increase to $59. (Exhibits E, F &
G)
DEBT PER COW
Before Increased Fee
Public Group Private Group
Average Debt Per Cow Average Debt Per Cow
$471 $437
With the Fee Increased to $2.95
Public Group Private Group
Average Debt Per Cow Average Debt Per Cow
$478 $437
With the Fee Increased to $5.36
Public Group Private Group
Average Debt Per Cow Average Debt Per Cow
$496 $437
App. 83
Average Repayment Per Cow
Comparisons were also made between the public group
and the private group on repayment per cow (RPC). This
comparisons includes the grazing fee increases. The
repayment per cow was figured on all forty loans. Repay-
ment per cow in the public group is an average of $46 less
than those in the private group. Review of the total forty
loans indicate the cattle in the private group weigh more.
This indicates federal grazing land is more expensive to
run cattle on, and it is not as productive as deeded and
privately leased land.
REPAYMENT PER COW
Public Group Private Group
Average Repayment Per Cow Average Repayment Per Cow
$290 $336
Conclusion
Public Group ($2.95)
At 12/31/92, the total outstanding volume for APCA was
$10,510,215 to 120 borrowers. The 20 borrowers selected
represent 17% of those 120 borrowers. These 20 bor-
rowers had a combined total outstanding loan balance of
$1,888,064 or 18% of APCA’s total loan Volume. These 20
borrowers had approved but undrawn loan commitments
of $708,001 at 12/31/92. Their total outstanding loan
balances and commitments at year-end was $2,596,065.
With the grazing fee increased to $2.95, the balance sheet
analysis of the 20 loans showed a combined loss of
$50,374 in working capital and a combined decrease in
net worth of $2,234,587. The projected loss in working
App. 84
capital is the result of forced liquidation of cattle because
the borrower would no longer be able to afford the graz-
ing fee increase. The projected loss inner worth is primar-
ily due to the loss of the grazing permit as an asset. If the
grazing fee was increased to $2.95, 3 of the 20 borrowers,
or 15%, would be put out of business because of the fee
irftrease regardless of whether the grazing was available.
Nine of the 20 borrowers would be put out of business
because the fee increase would result in loss of access to
grazing. Eight of the 20 borrowers could continue their
operation, but at a reduced capacity.
Public Group ($5.36)
With the grazing fee increased to $5.36, the balance sheet
analysis of the 20 loans showed a combined loss of
$169,166 in working capital and a combined decrease in
net worth of $2,234,587. The projected loss in working
capital is the result of forced liquidation of cattle because
the borrower would no longer be able to afford the graz-
ing fee increase. The projected loss in net worth regard-
less of whether the fee is increased to $2.95 or to $5.36 is
primarily due to the loss of the grazing permit as an
asset. If the grazing fee was increased to $5.36, 8 of the 20
borrowers, or 40% would be put out of business because
of the fee increase regardless of whether the grazing was
available. Five of the 20 borrowers, or 25% would be put
out of business if the fee increase resulted in loss of
access to grazing. Seven of the 20 borrowers could con-
tinue their operation, but at a reduced capacity, and in
one case the credit classification would drop.
App. 85
Private Group
The 20 borrowers selected represent 17% of the APCA’s
120 borrowers. These 20 borrowers had a combined total
outstanding loan balance of $2,106,376 or 20% of APCA’s
total loan balance. These 20 borrowers had approved but
undrawn loan commitments of $2,075,269 at 12/31/92.
Their total outstanding loan balances and commitments
at year-end was $4,181,645. These 20 borrowers would
not be affected by the increase in grazing fees.
impact on APCA
Had the proposed grazing fee ($2.95) been implemented
prior to year-end 12/31/92, APCA’s 12/31/92 loan vol-
ume would have been reduced from $10,510,216 to
$9,956,325, or a 5.30% decrease. APCA’s nonaccrual loans
would increase 3.3% to $924,284 or 9.2%. At this level
APCA would not meet district standards for nonaccrual
loans. At the $2.95 fee, annual gross income would drop
to $383,434.
If the $5.36 fee had been implemented, APCA’s loan
volume would have been reduced to $9,358,153 or
10.96%. APCA’s loan volume would have been reduced to
$9,358,153 or 10.96%. APCA’s nonaccrual loans would
increase to 9.90% and fall below the district standards.
APCA’s gross income would be reduced to $360,289. The
projected reduction in APCA loan volume is due to lower
loan commitments as less funds would be needed to
purchase cattle and/or operating expenses.
App. 86
A fee increase limited to $2.95 may pose only a minimum
threat to APCA’s viability. An increase to $5.36 would
seriously jeopardize APCA’s viability.
App. 87
Western Commerce Bank
October 29, 1998
Connie Brooks, Esquire
C.E. Brooks & Associates, P.C.
Suite 1010 Denver Center
1776 Lincoln Street
Denver, CO 80203
Dear Ms. Brooks:
Western Commerce Bank (WCB) has been financing
farmers and ranchers for thirty-fiv
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.