Land Exchanges; Final Rule

DEPARTMENT OF AGRICULTURE

Forest Service

36 CFR Part 254

RIN 0596-AA42

Land Exchanges

AGENCY: Forest Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule revises the requirements that are applicable

to the land exchange activities of the Forest Service. The principal

provisions of the rule pertain to exchange agreements, assembled land

exchanges, segregation, compensation for costs assumed, appraisal

standards, bargaining, arbitration, approximately equal value

exchanges, value equalization, cash equalization waiver, and

simultaneous transfer of title. The intended effect is to fully

implement the authorities granted by the Federal Land Exchange

Facilitation Act of August 20, 1988.

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

FOR FURTHER INFORMATION CONTACT:

James M. Dear, Lands Specialist, Lands Staff, Forest Service, USDA,

P.O. Box 96090, Washington, DC 20090-6090, (202) 205-1361.

SUPPLEMENTARY INFORMATION:

Background

On October 2, 1991, the Forest Service and the Bureau of Land

Management published separate proposed rules (56 FR 49948-49977) for

implementing the amendments to section 206 of the Federal Land Policy

and Management Act of 1976, made by the Federal Land Exchange

Facilitation Act of August 20, 1988 (43 U.S.C. 1716).

The purpose of the Act is to facilitate and expedite land exchanges

under the authority of the Secretary of Agriculture and the Secretary

of the Interior by streamlining and improving the procedures for such

exchanges. The Act endorses the long-standing policy that land exchange

is an important tool to consolidate landownership for purposes of more

efficient management; to secure important objectives of resource

management, enhancement, development, and protection; and to fulfill

other public needs. The Act requires each Secretary to promulgate rules

for exchanges of land.

The proposed rules also incorporated other authorities and

procedural requirements applicable to each agency. Included in the

rules were provisions to streamline and expedite exchanges involving

Federal and non-Federal lands such as exchange agreements, assembled

land exchanges, segregation, compensation for costs assumed, appraisal

standards, bargaining, arbitration, approximately equal value

exchanges, value equalization, cash equalization waiver, and

simultaneous transfer of title. A 60-day public comment period was

provided.

Summary of Public Comments Received and Agency Response to Comments

The Forest Service and BLM received comments from 58 sources

including: 6 individuals, 18 business and industrial entities, 2 civic

organizations, 2 environmental organizations, 2 professional societies,

and 28 Federal, State, and local government entities.

All comments received on the rules were shared and jointly analyzed

by the Forest Service and BLM. The analysis of comments pertaining to

the Forest Service rule, and the corresponding responses and changes

are discussed as follows. Editorial and grammatical corrections also

have been made as necessary.

General Comments

Comment. Two respondents stated that the timeframes in the rule are

too lengthy, particularly those related to the initiation and review

process.

Response. The time periods specified in various sections of the

rule were either imposed by the Federal Land Exchange Facilitation Act

or are administratively necessary to comply with the Forest Service's

public participation and environmental analysis procedures. However,

the Forest Service and BLM have made further adjustments in their

scheduling requirements in order to develop more uniform final

regulations and to reduce the time periods wherever possible.

Comment. One respondent felt that streamlining the process to

expedite exchanges may promote rapid disposal of Federal holdings in

urban areas and forego revenue-making opportunities on those

properties. It was further suggested that a process for mid-course

review, at the highest departmental levels, should be built into the

regulations.

Response. The land management agencies generally do not administer

lands for intense development in urban areas. Moreover, each exchange

opportunity must be analyzed on an individual basis. Certain high value

or complex exchanges may involve Secretarial review, but to require a

mid-course review of all exchanges would create unnecessary delay and

inefficiency. Therefore, this suggestion was not adopted.

Comment. It was pointed out by one reviewer that there is no

provision in the rule for conducting public hearings.

Response. In conjunction with the written notification requirements

in Secs. 254.8 and 254.13 of the final rule, the authorized officer may

hold public hearings or public meetings whenever appropriate to solicit

information from the public. The need to conduct hearings or meetings

will vary depending on the level of interest and potential controversy

associated with a land exchange. Therefore, a separate provision to

cover public hearings or meetings is considered unnecessary.

Comment. One respondent suggested that the rule require the

preparation of an ``environmental values document'' to compare relative

ecological values to be exchanged.

Response. All resource values associated with the lands involved in

an exchange are examined through an environmental analysis completed

pursuant to Council on Environmental Quality regulations at 40 CFR

parts 1500-1508 and Forest Service directives (FSM 1950; FSH 1909.15).

Therefore, a separate ``environmental values'' document is not

required.

Specific Comments

Section 254.1--Scope and applicability. One respondent suggested

that paragraph (b) of this section of the proposed rule should give a

specific citation to the Small Tracts Act regulations. This suggestion

has been adopted in the final rule.

Two parties commented on paragraph (c) of this section of the

proposed rule, which would permit application of the rule to land

exchanges in Alaska to the extent the regulations did not conflict with

the Alaska Native Claims Settlement Act or the Alaska National Interest

Lands Conservation Act. One suggested separate regulations for such

exchanges, similar to the Small Tracts Act situation. The other felt

the rule should allow the authorized officer to depart from this rule

to the degree consistent with the Alaska National Interest Lands

Conservation Act. These suggestions have not been adopted. Paragraph

(c) provides the authorized officer the latitude allowed by law to

pursue land exchanges in Alaska and is unchanged from the language of

the proposed rule.

Three comments were received on paragraph (d) of this section of

the proposed rule. One respondent recommended that, in the name of

uniformity, once the final rule is adopted all exchanges should be

subject to the new regulations. Another suggested changing the

provision related to proceeding with exchanges under prior agreements

from ``may'' to ``shall''. The third asked for clarification on the

handling of exchanges begun prior to this rule. In response, the rule

has been revised to clearly state that, unless the parties agree

otherwise, any written agreement based on prior regulations shall

continue in accordance with that procedure.

Paragraph (e) of the proposed rule provided that the boundary of

the national forest be automatically extended to encompass lands

acquired under the Weeks Act of March 1, 1911, as amended. There were

two suggested changes to paragraph (e). One response recommended adding

the clause ``upon acceptance of title by the authorized officer,'' as a

condition upon the automatic extension of the boundary. The other

questioned both the apparent limitation and expansion of Weeks Act

authority that the current wording suggests. Both recommended removing

the words ``by exchange'' and made an observation that the Weeks Act

refers only to acquired lands within the exterior boundaries of

national forests. The recommendation to delete the words ``by

exchange'' was adopted. However, the reference to acceptance of title

by the authorized officer would be inconsistent with Sec. 254.16 of the

rule and, therefore, was not adopted.

Section 254.2--Definitions. Two respondents suggested that the term

``eminent domain'' not be used in the definition of ``acquisition''

because of the negative implication associated with condemnation and

the erosion of private property rights. This suggestion was not

adopted, because this is the standard definition used by the Forest

Service to explain the various methods available to the Secretary of

Agriculture to acquire land on behalf of the United States. It should

be noted that Sec. 254.3(a) of the rule states that land exchanges are

discretionary, voluntary real estate transactions between the Federal

and non-Federal parties. Moreover, the Forest Service typically

acquires land through exchange, purchase, or donation. Condemnation is

rare and is considered as a last resort for acquisition.

One respondent recommended that language be added at the end of the

definition of ``agreement to initiate'' to clarify that the signing of

such an agreement is not required for preliminary discussions between

the parties to assess the feasibility of an exchange. This revision was

not considered necessary or appropriate to a definition, as

Sec. 254.4(a) and (b) of the final rule allow the parties to assess the

feasibility of an exchange proposal before entering into an agreement

to initiate.

It was recommended that the definition of ``approximately equal

value'' be replaced with the definition of that term as used in the

Small Tracts Act regulations at 36 CFR 254.31. This recommendation was

adopted.

One reviewer recommended that the definition of ``bargaining''

include other issues such as minerals, access, reservations, etc. This

suggestion was not adopted, because Sec. 254.10(a) of the rule states

that bargaining shall be based upon an objective analysis of the

valuation in the appraisal report(s), which takes into account all

factors which might influence the value of the estate to be conveyed.

One respondent stated that the definition of ``highest and best

use'' in the proposed rule might be too broad and recommended that the

phrase ``and present uses of adjacent property'' be added after the

words ``based on market evidence''. The definition in the proposed rule

is that used throughout the appraisal profession. The uses of nearby

properties are always considered by the appraiser in determining

highest and best use, but limiting consideration to adjacent properties

could result in inaccurate estimates of value. Therefore, this

suggestion was not adopted.

It was suggested that the definition of ``market value'' include

mineral and timber interests, archaeological sites, and cultural

resources. This revision is not necessary. Market value is applicable

to property as though it were in private ownership and anything that

may affect value is considered by the appraiser.

One respondent asked if the mineral leasing laws referred to in the

definition of ``mineral laws'' include mineral resources on Weeks Act

lands. In response, the definition has been revised to make clear that

the mineral laws apply only to those lands reserved from the public

domain for National Forest purposes.

It also was recommended that the definition of ``party'' be revised

to recognize States as full parties to an exchange. This change is not

necessary. The definition in the proposed rule clearly recognized the

States as being eligible to enter into an agreement to initiate an

exchange and is adopted without change in the final rule.

One respondent recommended that the definition of ``segregation''

be amended to clarify that Federal lands may be segregated from

operation of the public land laws ``and/or'' mineral laws and further

suggested adding the phrase ``or by operation of law'' after the word

Secretary. This recommendation was not adopted. The purpose of

segregation is to avoid the appropriation of long-term encumbrance of

Federal lands being considered for conveyance in an exchange. The

intent is to segregate from entry under both the public land laws and

the mineral laws, and the term has long been interpreted to cover both

types of entry. The term ``by operation of law'' would add nothing

because this authority already lies with the Secretary.

Another reviewer indicated that the definition of ``statement of

value'' did not appear to conform to the Uniform Standards of

Professional Appraisal Practice and could place appraisers at risk in

violating their professional standards if they produced a statement of

value rather than a full appraisal report. The Department disagrees.

The regulations only require the qualified appraiser to determine if

the Federal lands exceed $150,000. Although a full appraisal report is

not needed, the appraisal analysis must meet the minimum standards

contained in the Uniform Standards.

One reviewer suggested adding definitions for ``resource values''

and ``management objectives'' in order to clarify the determination of

public interest that must be made under Sec. 254.3(b). The Department

agrees that a definition of ``resource values'' would be helpful and

has included the term in the definition section. However, a definition

of ``management objectives'' was not included, as the generic term is

of widespread common usage.

It also was suggested that the term ``presence of environmental

values'' be defined in the rule and that the definition address

cultural resource values and the associated costs of survey,

mitigation, tests, excavations, etc. to ensure that such values are not

overlooked in the determination of public interest, agreement to

initiate an exchange, and assumption of costs. This suggestion was not

adopted. Section 254.3(b) of the rule mentions cultural resources as

one of several factors to be considered in the determination of public

interest, and Sec. 254.7 of the rule allows for compensation for costs

associated with cultural resource surveys and mitigation. Additionally,

Sec. 254.3(g) requires that an environmental analysis be prepared. This

analysis ensures that environmental values such as cultural resources

are not overlooked in the determination of public interest.

Section 254.3--Requirements.

(a) Discretionary nature of exchanges. One respondent recommended

that this paragraph be amended to clarify that the discretionary

authority of the Secretary in determining public and State interests is

subject to public review. This suggestion was not adopted, as

Sec. 254.3(b) of the rule requires consideration of the needs of State

and local residents, and Sec. 254.13 of the rule sets forth the

requirements for public notice of decisions and subsequent review.

Therefore, paragraph (a) is adopted without change from the proposed

rule.

(b) Determination of public interest. Extensive comments were

received on this paragraph. One respondent suggested that protection of

watersheds be added as a factor in the determination of public

interest. This suggestion has been adopted.

Proposed paragraph (b) provided that the authorized officer may

complete an exchange only after a determination that the public

interest will be well served. It was suggested that the term ``best

served'' be used, instead of ``well served''. However, the term ``well

served'' is retained in the final rule, because it is the term used in

section 206(a) of the Federal Land Policy and Management Act of 1976.

The same respondent pointed out that there was nothing in the

regulations on what type of lands would be acquired and suggested the

rule include a list of lands would be acquired and suggested the rule

include a list of lands most desirable. It would be impracticable to

list in these regulations all the types of lands that would be acquired

through exchange, due to the variety of resources on involved lands and

the variety of objectives and circumstances that lead to initiation of

exchange proceedings. Identification of types of lands suitable for

exchange is more appropriate during the land and resource management

planning process.

One respondent stated that use of the phrase ``accommodation of

land use authorizations'' as one of the factors to be considered in a

public interest determination was ambiguous and suggested wording to

ensure that right-of-way corridors for energy transportation and

utility purposes are considered in the determination of public

interest. This suggestion was adopted by expanding on the term

``authorized uses'' in Sec. 254.4(c)(4) of the rule to include grants,

permits, easements, or leases and by providing a cross reference to

this provision in Sec. 254.3(b).

One respondent recommended that paragraph (b) emphasize the

management and development of private lands as a factor to consider in

determining public interest and suggested working for inclusion into

the final rule. Additionally, two respondents recommended that this

paragraph include an analysis of a State's economic needs and that the

rationale and decision of the authorized officer be included in the

public record. They specifically requested that additional regulatory

requirements be imposed to provide an analysis of coal development, the

feasibility of future leasing, and any possibility of royalty losses

and the attendant impacts to States. In response to these comments,

paragraph (b) has been revised in the final rule to include

consideration of the opportunity ``* * * to meet the needs of State

and local residents and their economies * * *,'' thus emphasizing the

importance of these criteria in the determination of public interest.

Additionally, it should be noted that the ``Notice of Exchange

Proposal'' at Sec. 254.8 of the rule allows the public to participate

early in the exchange process and to identify any issues or concerns

they may have regarding an exchange proposal. This could include issues

such as mineral resource development potential on the involved Federal

lands, the potential loss of royalties, and the related impacts to

State and local economies. The information received in response to the

notice of exchange proposal would be considered in the development of

an environmental analysis. The environmental analysis and related

studies would serve as the basis for the ``Notice of Decision'' at

Sec. 254.13 of the rule, and this decision and all supporting documents

would be included in the public record.

Another respondent suggested adding coal as a specific value to be

considered. This is not necessary, since coal is included within the

reference to mineral values throughout the rule.

A local government suggested that an exchange should not be

approved if it may adversely affect recreation, open space

preservation, habitat, air quality, or other resources. No change was

made in the final rule to accommodate this suggestion, since all

potential impacts must be considered in the environmental analysis

pursuant to paragraph (g) of this section, and a decision to proceed

with an exchange must consider any adverse impacts identified in the

analysis.

A State government wrote that the Regional Coal Team should be

provided the opportunity for full participation in reviewing any

exchange proposal. The Department agrees. Notice and review procedures

are set out in Sec. 254.8 of the final rule. When processing exchanges

involving coal, the appropriate Regional Coal Team will have an

opportunity to review the exchange; however, it is impracticable to

list in Sec. 254.8 all the appropriate entities that should be given

review opportunities.

One respondent suggested that the provision of the proposed rule

that the intended use of conveyed Federal land not be in conflict with

management objectives of adjacent Indian Trust lands be deleted or

limited to those uses of conveyed Federal lands that conflict with

management objectives of `adjoining'' Indian Trust lands that were

established formally prior to the exchange proposal. This suggestion

has been partially adopted by making clear that the intended use of

conveyed Federal land will not ``substantially conflict with

established'' management objectives (Sec. 254.3(b)(2)(ii) of the final

rule).

The local government respondent also suggested that as a condition

of exchange, the Federal lands that may be used for landfills which may

affect air quality must use LAER (lowest achievable emission rates)

technology, not the less stringent BDT (best demonstrated technology).

The environmental analysis conducted pursuant to paragraph (g) of this

section of the rule should consider all potential impacts and measures

their effects by whatever standards are appropriate. Rather then

defining specific technologies in this rule, the appropriate method of

analysis of air quality and other considerations will be identified as

proposals are developed. Public input will be considered in selecting

assessment methods. Therefore, the suggestion has not been adopted in

the final rule.

In order to consider the objective of meeting the needs of State

and local residents, one respondent suggested that this paragraph be

revised to require that an exchange be consistent with the zoning and

the land use element of the general plan for adjacent non-Federal lands

and include a land use consistency determination by each local agency

with land use (planning and zoning) authority over adjacent lands. The

authority of State and local governing bodies to regulate and zone non-

Federal land, including land that has been conveyed from Federal

ownership, is recognized in paragraph (h) of this section of the rule.

Since those bodies would have jurisdiction over lands conveyed to non-

Federal ownership, it would be meaningless to include in the rule that

the use of the conveyed lands must be consistent with local zoning.

Five respondents felt that the proposed requirement that the land

exchanged into non-Federal ownership must be used or managed to conform

to or enhance adjacent Federal lands uses was costly, inequitable,

unfair, or could otherwise limit exchange opportunities. However, this

paragraph of the proposed rule simply required the authorized officer

to consider the intended uses as part of the public interest

determination. The language of paragraph (b)(2) of this section of the

proposed rule did not imply control over future uses or place any

requirement on the management of the land after conveyance to the non-

Federal party, unless specific reservations, covenants, or restrictions

are included in the deed or patent pursuant to paragraph (h) of this

section of the final rule. It would not be in the public interest to

convey Federal lands if the intended uses were to create substantial

management conflicts on adjacent Federal lands; therefore, this

provision is retained in the final rule as one of the findings the

authorized officer must be able to make in order to determine that the

public interest is well served by the exchange.

One respondent felt that the two-part finding of public interest

must be broad enough to encompass all management objectives

contemplated and that emphasis should not be placed on non-commodity

resources. Paragraph (b) of this section of the rule is sufficiently

broad to include all involved resource values and all identified

management objectives. Further, a definition of ``resource values'' has

been added to Sec. 254.2 of the final rule. That definition includes

both commodity and non-commodity values, surface and subsurface.

It was requested that the reference to cultural resources be

strengthened in the final regulations. In response, cultural resources

is now specified as a resource to consider in reaching a public

interest determination.

Another party wanted ``promotion of multiple-use values'' changed

to ``continuation of multiple-use values''. The language of the

proposed rule has been retained, because it is the language used in

section 2(a)(1) of the Federal Land Exchange Facilitation Act of 1988

in which Congress finds that land exchange is an important tool for

``the promotion of multiple-use values''.

One respondent felt that the regulation ``guts'' the entire public

interest test set forth in the Federal Land Policy and Management Act

of 1976, by mandating that regardless of the Secretary's determination

of public interest, an exchange must not occur if the specified

conditions are not met. That respondent recommended deletion of this

section. The Department disagrees. Section 206(a) of the Federal Land

Policy and Management Act of 1976 provides a listing of considerations

to be included in any public interest determination. That listing

includes ``better Federal land management and the needs of state and

local people.'' In addition to the substantive changes made in response

to comments received, paragraph (b) of the final rule has been

subdivided into paragraphs (b)(1)-(b)(3) for ease of use and reference.

(c) Equal Value Exchanges. One respondent recommended that this

paragraph of the rule be amended by adding ``Equal value can include

the use of a public interest finding as authorized by specific statutes

such as the Alaska National Interest Lands Conservation Act.'' This

recommendation cannot be adopted. Section 206(b) of the Federal Land

Policy and Management Act of 1976 requires equal value exchanges on a

monetary basis. The elements of a public interest finding may be

considered in the valuation of a property, only to the degree that

those elements are reflected in the real estate market.

Finally, it was suggested that a cross reference to the provisions

for approximately equal value exchanges in Sec. 254.11 of the rule be

included in this paragraph. This suggestion was adopted.

(d) Some State exchanges. Four respondents recommended that this

paragraph of the rule be amended to allow for interstate exchanges.

This suggestion cannot be adopted, because section 206(b) of the

Federal Land Policy and Management Act of 1976 requires that the

Federal and non-Federal lands involved in an exchange must be located

in the same State.

(e) Congressional designations. It was suggested that in the phrase

``upon acceptance of title by the United States,'' the words ``United

States'' be replaced with ``authorized officer.'' This change would not

be legally correct, since title may be accepted in the name of the

United States by means other than formal acceptance by an authorized

officer. (See Sec. 254.16(a) of the final rule.)

(f) Land and resource management planning. Several reviewers felt

the proposed rule limited the consideration of exchange proposals to

those consistent with existing agency land management plans. No change

in the rule is necessary to be responsive to this concern. Agency land

and resource management plans can be amended to recognize new

information or changes in conditions.

Another respondent felt that the regulations should not require

that land use plans specifically authorize exchange of Federal land in

question, stating that the land use plan could not foresee all exchange

proposals. The proposed rule did not require that a land and resource

management plan specifically authorize an exchange--only that an

exchange proposal be consistent with the goals and objectives of the

plan. This criterion is a requirement of the National Forest Management

Act and agency policy, and, therefore, is retained in the final rule.

Concern was also expressed that there was nothing in the

regulations on identifying non-Federal lands for exchange; this

respondent called for involving the private landowner from the

beginning. This suggestion was not incorporated in the final rule,

because land and resource management plans identify areas or specific

tracts of non-Federal lands which the agency is interested in acquiring

to effect consolidation. Private landowners have the opportunity to

provide input in the planning process to help identify long-range goals

and opportunities to pursue land exchanges. Since exchanges are

voluntary, both the non-Federal landowner and the United States must

agree to the exchange.

Sometimes BLM lands are identified as needed to complete a land

exchange involving non-Federal lands which would be suitable for

National Forest System purposes. One respondent suggested that BLM

lands suitable for such exchanges be identified in the BLM planning

process. No change was made in the rule to respond to this question.

Land and resource management plans for National Forest System lands do

not identify BLM lands to be used in exchanges. Such exchanges occur

only after negotiation between the non-Federal party and the agencies

and must be consistent with BLM land use plans. The public interest

determination will be made by BLM using the criteria specified in 43

CFR 2200.0-6(b).

(g) Environmental analysis. One respondent pointed out that this

paragraph of the proposed rule suggested that the public is not invited

to submit comments on the environmental consequences of the proposed

land exchange. The Council on Environmental Quality regulations and

Forest Service environmental analysis policy and procedure already

address public notice and comment on environmental documents;

therefore, it is not necessary to repeat these opportunities in this

rule. In addition, Sec. 254.8 of the rule provides for public notice of

the proposed exchange, with an opportunity for the public to submit

timely comments which shall be considered in the environmental analysis

of the proposed exchange.

Finally, a concern was expressed that compliance with section 106

of the National Historic Preservation Act is not mentioned. It would be

impracticable to list in this paragraph all the statutory and

regulatory requirements that must be considered in an environmental

analysis. Cultural resources is only one of the many significant

resources which must be considered. This rule does not limit or exclude

any resources from consideration.

(h) Reservations or restrictions in the public interest. Several

respondents questioned the authority and need to use reservations or

restrictions in the conveyance of Federal land. Two comments regarding

authority focused on perceived conflicts between the Federal Land

Exchange Facilitation Act and the Federal Land Policy and Management

Act of 1976. One comment suggested that reservations or restrictions

are not needed if the exchange is in the public interest. Another

comment suggested conveying partial interests to third parties, in lieu

of reservations or restrictions. Two respondents were concerned with

the burden placed on the Federal and non-Federal parties by

reservations or restrictions. One respondent suggested that the first

sentence be deleted, since covenants create continuing administrative

burdens for agencies and invite reciprocal restrictions.

Section 206 of the Federal Land Policy and Management Act of 1976

(FLPMA) and other statutory authorities provide for the use of

reservations or restrictions, and the Department is unaware of any

conflicts between FLPMA and the Land Exchange Facilitation Act.

Identification of a need for reservations or restrictions begins with

an agreement to initiate an exchange. Subsequent analysis will

determine if the exchange is in the public interest, and if so, confirm

whether reservations or restrictions are needed. The final rule allows

alternative methods to protect resources other than reservations or

restrictions, such as third party participation. Although reservations

or restrictions may place burdens on both the Federal and non-Federal

parties, the effects of reservations or restrictions would be

considered by each party prior to a decision to proceed.

A major utility company representative expressed the thought that

the United States could retain title to, or administration of, lands

involved in an exchange that are subject to rights-of-way. This is

correct, the authority to reserve and retain any rights and interests,

including rights-of-way permits, easements, or grants, when it is in

the public interest, is provided in paragraph (h) of this section of

the final rule.

It was suggested that any covenants be developed in consultation

with appropriate Federal and State agencies including the State

Historic Preservation Officer. Covenants and restrictions may be

developed to protect any Federal interests, including cultural

resources, and consultation with appropriate Federal and State agencies

occurs as a matter of course. Therefore, the final rule does not

incorporate explicit language on consultation with State Historic

Preservation Officers.

One respondent stated that the Federal Land Policy and Management

Act of 1976 exempts land exchange patents from including terms,

covenants, or conditions. This is not correct. Section 206 of the

Federal Land Policy and Management Act of 1976 supplements other

existing Forest Service land exchange authorities and specifically

provides authority to exchange an interest in land of less than fee

estate. The authority to convey less than fee estate confers authority

to accept terms and impose covenants, conditions, and reservations as

determined by the Secretary as needed to protect the public interest.

Three respondents suggested the United States retain a mineral

royalty when exchanging Federal land. There is no statutory authority

requiring the reservation of a royalty interest.

One comment suggested that if Federal property has public interests

so critical that they should be retained then the lands should not be

exchanged. That is certainly a true statement and is the basis for

turning down many proposals for land exchanges. However, in some cases

both parties may be willing to accept reservations or covenants to

protect critical interests, in order to make tenable an exchange that

would otherwise be untenable.

(i) Hazardous substances. One respondent suggested that the

agencies require ``hold harmless agreements'' when conveying Federal

lands affected by hazardous substances to a ``potentially responsible

party.'' While ``hold harmless agreements'' are desirable, it is

necessary to maintain the option for providing ``hold harmless

agreements'' in negotiating land exchanges of critical public

importance, in order to avoid discouraging non-Federal parties who are

unable to assume such liability.

One respondent pointed out a perceived inconsistency in the

requirements for notification for private parties and the Federal

government. The notice to the private party requires that ``known''

storage, release, or disposal of hazardous substances be addressed,

whereas, the private party must notify the government of ``known or

suspected * * *'' The respondent favored the broader application but

suggested that, in any case, they should be consistent. The Department

agrees. The rule has been revised to require both parties to give

notice of only ``known'' storage, release, or disposal, in accordance

with the minimum standard of the Environmental Protection Agency

regulations at 40 CFR Part 373.

The same respondent pointed out that the proposed regulations would

require the Federal officer to determine whether hazardous substances

are present on non-Federal lands but would not require such on Federal

lands and recommended that the provisions be made consistent. This

suggestion has been adopted. Paragraph (h)(1) of the final rule also

requires the authorized officer to determine whether hazardous

substances are present on the Federal lands.

Several respondents proposed that the private parties only be

required to provide a broad ``hold harmless'' indemnification if the

government will reciprocate. This suggestion cannot be adopted. Under

42 U.S.C. 9620, the United States is required not only to clean up any

hazardous substances found on the Federal lands prior to conveyance,

but also to warrant in the conveyance document to other than a

``potentially responsible party'' that the United States will be

responsible for any further cleanup necessary.

Another respondent stated that a ``hold harmless agreement'' may

not protect Federal interests from cleanup liability imposed by a third

party. This comment is correct. A ``hold harmless agreement'' would not

relieve the United States of any appropriate liability; however, it

would provide a mechanism for compensating the United States for

cleanup costs and claims after conveyance.

It was suggested that the regulations state that the government is

acquiring lands as an ``innocent purchaser.'' This suggestion was not

adopted as it is doubtful that such a disclaimer in the rule would, in

fact, establish the United States as an ``innocent purchaser'' in every

case. In many cases, courts recognize that the owner of the property

shares in whatever liability may exist.

Two comments indicated the regulations failed to take into account

a recent court ruling (Hercules, Inc. v. U.S. EPA, 938 F.2d 276, DC

Cir. 1991) that the United States is responsible for hazardous

substances on Federal land regardless of ownership at the time the

substances were present, and suggested the phrase ``* * * during time

of Federal ownership * * *'' be deleted. This suggestion was adopted

and the phrase was deleted in the final rule.

Another reviewer mentioned that 42 U.S.C. 9620 requires the

conveyance document to contain a notice of hazardous substances on the

Federal lands to be conveyed. The first sentence of paragraph (i)(1) of

Sec. 254.3 was modified to include reference to this requirement.

It should be noted that the Community Environmental Response

Facilitation Act (106 Stat. 2174) was signed into law on October 19,

1992, about one year after the proposed land exchange rules were

published in the Federal Register. The procedural requirements of this

statute, which amended the Comprehensive Environmental Response,

Compensation, and Liability Act of 1980 (42 U.S.C. 9620(h)(4)), will be

followed to the extent applicable to land exchanges, and the agencies

will consider whether there is a need for future rulemaking in

connection with this new law.

(j) Legal description of properties. One respondent said that

property description by legal survey is sometimes difficult and

suggested that the rule be amended to provide for use of a map as an

alternative. This suggestion cannot be adopted. Department of Justice

standards and Public Land Survey System laws do not permit use of a map

reference as a legal description of lands.

Coordination with State and local governments. It was suggested

that the Forest Service add a paragraph on Coordination with State and

Local Governments similar to that included in the BLM proposed rule. In

response, the final rule was amended at Sec. 254.8(a) to specifically

provide for notifying State and local governments of proposed

exchanges. In addition, Sec. 254.13(a)(2) of the final rule also

provides for Forest Service notice to State and local governments when

a decision is made to proceed with an exchange.

Two respondents expressed concern that local government plans and

land use ordinances be noted and respected in the exchange process. One

suggested including a provision to require a consistency review by the

State government. Paragraph (h) of this section of the rule states that

the lands conveyed out of Federal ownership shall be subject to local

government laws, regulations, and zoning, and Sec. 254.8 provides for

notification of State and local governments. These provisions afford

State and local governments full opportunity to conduct whatever

reviews they feel are needed, including consideration of land uses and

zoning, in commenting on a proposed exchange. Therefore, no additional

reference to local plans and ordinances was felt to be needed in this

final rule.

Section 254.4--Agreement to initiate an exchange. A representative

of an environmental group suggested a provision requiring full public

input and, also, specifying that the National Environmental Policy Act

(NEPA) process must begin as soon as the agreement is executed. The

opportunity for public input will occur in accordance with the public

notice and comments provisions of Sec. 254.8 of the rule. Additional

public input opportunities will be dependent upon the level of NEPA

analysis and documentation, which, in turn, is dependent upon the

complexity of each exchange proposal. Generally, the NEPA process is

begun soon after an agreement to initiate is executed.

Another respondent suggested that the agreement to initiate should

additionally detail who would be responsible for costs incurred to date

in the event the exchange process is terminated prior to execution of

an exchange agreement (or an exchange of titles). Such a requirement

would be in direct conflict with paragraph (f) of this section and

Sec. 254.14(d) of the rule, which provide that there are no obligations

or reimbursement requirements in exchanges which are terminated short

of a binding exchange agreement.

One respondent questioned if a non-Federal party were to propose

exchanging non-Federal lands within the boundaries of the National

Forest System for public lands under the jurisdiction of BLM, would

that party be required to indicate as a part of the proposal document

that the offered land is covered by a Forest Plan showing the land is

essential to the programs of the National Forest Sytem? No; the non-

Federal party would have no responsibility to determine whether the

acquisition of the non-Federal land is consistent with the land and

resource management plan. This would be a Federal responsibility.

Another respondent suggested adding language requiring the

authorized officer to meet with the non-Federal party and discuss

proposed exchanges to the extent necessary prior to determining whether

an agreement to initiate an exchange should be executed. The Department

does not believe the rule needs to be burdened with such a requirement.

Such advance meetings and discussions are commonplace and necessary to

reach the point of entering an agreement to initiate. However, a

meeting is not always needed, especially where a proposal is clearly

infeasible or without merit.

One respondent suggested language requiring the prospective parties

to agree to a preliminary estimate of value prepared by a qualified

appraiser if the property to be conveyed out of Federal ownership

exceeds $150,000 in value. The preliminary estimate of value is a tool

available to the parties to evaluate the feasibility of an exchange

proposal. However, its use should remain discretionary, due to the

added cost and to the fact that such an estimate by an appraiser is not

always needed to estimate relative values of properties to be

exchanged.

One comment suggested that the preliminary estimate of value should

reflect the intended use of the lands, thus eliminating the potential

for unwarranted, substantial (``windfall'') profits by the non-Federal

landowner. This suggestion was not adopted. The appraisal process

cannot be used to identify windfall profits. However, in preparing any

estimate of value, an appraiser must take into consideration all

probable uses of the property, including the proposed or intended use.

Appraisal standards require that these uses be legal, economically

feasible, and physically possible and that appraisals reflect the

highest and best use (i.e., the most profitable use) of the property.

The intended use may not always be the highest and best use of the

property, the value of which, nevertheless, must be considered in

arriving at the estimated land values. To disregard an important

element of information that may influence market value would be

improper.

A number of comments were received on the listed requirements for

an agreement to initiate an exchange. One respondent suggested that a

form be developed listing the information needs for a Federal land

exchange to help determine whether an exchange is feasible. This

suggestion was not adopted. A standard form listing all the information

necessary to determine the feasibility of a Federal land exchange is

impracticable because the information required depends upon the

particular situation.

Another respondent was of the opinion that identification of the

non-Federal lands should not be mandatory in the agreement to initiate,

since the environmental review process could result in changes of

included lands. While amendment of the involved lands may occur at any

time during the process, identification of all lands which might be

included in the final transaction of the exchange is necessary in the

agreement to initiate, as that document is the source of the

descriptions in the public notice of the proposal. Therefore, this

recommendation was not adopted in the final rule.

Several additions to the current list of requirements were

suggested. These included: a citation of the exchange authority; a

statement regarding the need for segregation of the Federal lands once

the exchange is started; and identification of the status which the

acquired lands would assume following title acceptance by the United

States and termination of the 90-day segregation period. It was also

suggested that the appropriate U.S. officer having jurisdiction over

title records for lands and minerals review these items. Such

considerations, while essential to completion of an exchange, are

generally not elements of the exchange upon which agreement must be

reached, rather, they are administrative processes and considerations

that occur in analyzing a proposed exchange. Therefore, this suggestion

is not included in the final rule.

Two respondents suggested revisions to the requirements for

identification of the parties involved in the exchange. One respondent

suggested a full disclosure of any holding companies, officers,

directors, holders of significant blocks of stock, campaign

contributions made to holders of Federal office, and any agreements

made for subsequent sale or exchange of lands to be acquired from the

Federal government. This suggestion cannot be adopted.

One industry representative had dual concerns that all known uses

be identified in the ``agreement to initiate'' and that right-of-way

grants be specifically identified as an authorized use. Paragraph (c)

of Sec. 254.4 was amended to adopt this recommendation, in order to

assure that all affected parties can be considered and notified.

Another industry respondent pointed out that proposed

Sec. 254.4(c)(7) would require documentation of any agreed upon

compensation of assumed costs which are normally the responsibility of

the other party, but that nowhere in the regulation are these

responsibilities laid out. It was suggested that the final rule spell

out what costs are normally to be borne by either party. Section 254.7

of the rule gives a partial listing of costs for which compensation may

be made, but it would be inappropriate to assign responsibility in this

rule, as responsibilities may vary between localities. The assignment

of responsibility is best made by the authorized officer, in accordance

with local common practices.

Another respondent suggested that the requirement of paragraph

(c)(11) of this section of the proposed rule, regarding relocation of

tenants on involved non-Federal lands, should apply on an equal basis

to the Federal lands and any occupants. This suggestion was not

adopted. The application of relocation benefits pursuant to the Uniform

Relocation Assistance and Real Property Acquisition Policies Act of

1970 (42 U.S.C. 4601, 4651) applies only to qualified displaced parties

on acquired non-Federal lands. Under paragraph (c)(3) of this section

of the rule, there is a requirement to identify any legitimate users of

the involved Federal lands authorized to occupy those lands. Section

254.15(c)(2) of the rule specifies the measures required to protect

such authorized users.

Two parties asked that paragraph (c)(11) also be used to establish

the sequence and timelines for other required reports or clearances.

The requirement that the agreement provide a timeline is already

specified in paragraph (c)(5) of this section; the sequence of

preparing or approving required reports is subject to negotiation and

agency administrative procedures.

Another respondent recommended deleting the entire second sentence

of paragraph (d) of this section of the proposed rule, which provided

that, in the absence of current market information reliably supporting

values, the parties may agree to use other acceptable and commonly

recognized methods to estimate values. This respondent said that this

provision is ``inconsistent with'' and would ``eviscerate'' Sec. 254.9

of the rule. To the contrary, this provision is identical to the

provision of Sec. 254.9(b)(3) of the rule. This provision allows the

use of other methods to determine the value of unique properties, for

which there are no comparable sales.

Several respondents questioned whether any authority exists to deny

appeal rights to exchange proponents, or anyone else, when the Federal

or non-Federal parties withdraw from an exchange proposal as provided

in paragraph (g) of this section of the proposed rule. One of the

parties recommended deleting this paragraph. Another felt there should

be no appeal if the non-Federal party withdraws. The final rule retains

paragraph (g) as proposed. As provided by Sec. 254.4(c) of the rule, an

agreement to initiate an exchange is nonbinding on all parties. An

administrative appeal opportunity is, therefore, illogical and

meaningless. However, pursuant to Sec. 254.13, final notices of

decision of the Federal authorized officer are appealable.

Section 254.5--Assembled land exchanges. This section of the

proposed rule addressed procedures to be followed when an entity has

assembled non-Federal parcels from multiple ownerships and offers the

assembled parcels for exchange as one transaction. Several States

expressed concern that under the proposed regulations States might be

considered single owners of multiple parcels involved in an exchange,

resulting in lower appraised values, when compared with an assembled

multiple ownership exchange. States or any other landowners may qualify

for assembled land exchanges and the valuation procedures discussed in

Sec. 254.9(b), if they assembled the offered non-Federal parcels from

multiple ownerships, in accordance with the terms of an agreement to

initiate. This provision of the final rule did not change from the

proposed.

Section 254.6--Segregative effect. This section of the proposed

rule provided for withdrawal of Federal lands and interests in lands

from entry under public land and mineral laws for up to 5 years when a

proposal is made to exchange Federal lands. One respondent felt that no

further segregation authority should be provided because too much land

has been withdrawn in the past. Another felt the statutory authority

for the five-year segregation is limited to the ``mining laws'' not the

``public land laws.'' This rule provides no additional segregation

authority, but merely allows segregation by record notation in lieu of

publication in the Federal Register. It is true that the Federal Land

Exchange Facilitation Act only allows for segregation from

appropriation under the mining laws. However, public land law

segregation to protect the Federal and non-Federal parties from

competing lands actions during consideration of an exchange is

authorized by section 204(b) of the Federal Land Policy and Management

Act of 1976; that authority was not rescinded by the Federal Land

Exchange Facilitation Act. Segregation of lands provides stability

which allows appraisal of values and processing toward conveyance

without disruption from subsequent entry onto the Federal lands.

Accordingly, this provision was retained in the final rule.

One respondent raised a question regarding the effect on right-of-

way authorizations that expire during the segregative period. That

respondent felt that the holder of a right-of-way should have the

ability to renew during the period of segregation. The rule would not

prohibit such renewal. The segregation is from the mining laws and the

public land laws only. The public land laws as defined in Sec. 254.2 of

the rule deal with the disposal of National Forest lands reserved from

the public domain. Rights-of-way are not disposal actions and,

therefore, are not affected by the segregation.

Section 254.7--Assumption of costs. This section of the proposed

rule sets out those costs the authorized officer may assume without

compensation and how parties may be compensated for assumption of costs

normally borne by the other party. Thirty-one comments were received on

this section of the proposed rule. A major concern of the respondents

related to the criteria in paragraph (b) that determine if the

authorized officer can compensate the other parties for assumption of

costs or assume the costs without compensation from the other parties.

They felt these criteria placed unwarranted limitations on the exercise

of the cost compensation authority granted by the Federal Land Exchange

Facilitation Act. The Act requires the Secretary to determine if it is

in the public interest to make adjustments to values by compensating

the non-Federal party for assuming certain costs. Therefore, it is

necessary in the rule to establish when Federal compensation or

assumption of costs is in the public interest. Failure to do so would

provide an environment that could foster arbitrary, capricious, and

inconsistent decisions. These criteria are retained without change in

the final rule to ensure that compensation for costs assumed is in the

public interest.

A concern was expressed that cash equalization funds for

compensation not be restricted to specific exchanges but be available

in a general exchange fund so processing is not affected by budget

delays. Cash equalization funds are appropriated and made available to

the Forest Service in a general fund for use in any qualifying land

exchange. Therefore, Federal cash equalization needs seldom delay case

processing.

One respondent suggested that compensation be allowed whenever it

is in the best interest of both parties, rather than on an

``exceptional basis.'' Mutual interest is an essential ingredient of

every land exchange; however, the government must be concerned with the

aggregate effect of cost compensation. Without a limitation on Federal

cost assumption compensation, the United States taxpayer could end up

paying disproportionate costs in the aggregate for land exchange.

Therefore, the Department believes the ``exceptional circumstance''

limitation is appropriate and necessary to protect the public interest

and it has been retained in the final rule.

It appeared to one respondent that there was no restriction on the

adjustment of relative values, other than the 25 percent cap, to

adequately protect the government from bearing undue costs. In fact,

however, the Federal Land Exchange Facilitation Act states that the

amounts to be compensated must be reasonable and must accurately

reflect the value of the cost and service. This wording is incorporated

in paragraph (b)(1) of this section of the rule as one of the five

criteria that must be met before compensation can be paid. Each

exchange has specific circumstances, so anything other than general

restrictions could impede an exchange, which would be counter to the

intent of the Act. The five criteria contained in paragraph (b), along

with the 25 percent limitation of Sec. 254.12, offer the authorized

officer reasonable parameters for ensuring that Federal assumption of

costs or compensation for costs assumed by other parties is in the

public interest.

It was suggested that the term ``in the public interest'' be

defined. A public interest determination involves many factors, as

described in Sec. 254.3(b) of the rule. However, for purposes of

assumption of non-Federal costs without compensation and for

compensation of non-Federal parties who assume Federal processing

costs, Sec. 254.7(b) of the rule sets forth the circumstances under

which such purposes are deemed to be in the public interest. Therefore,

this suggestion was not adopted.

A suggestion was made to spell out which costs will be borne by

whom within the agreement to initiate an exchange. As previously noted,

Sec. 254.4(c) of the rule provides that an agreement to initiate must

assign responsibility for costs and specify whether certain costs will

be compensated.

Two respondents stressed the need to list the costs associated with

the completion of NEPA documentation as not necessarily being costs

associated with the Federal government's portion of the exchange. This

suggestion was not adopted. There are many requirements involved in a

land exchange. Section 254.4(c)(6) of the rule requires an assignment

of responsibility for performance of required functions and for costs

associated with processing an exchange in the agreement to initiate.

NEPA documentation is one of those required functions and is typically

a responsibility of the Federal agency.

One respondent wanted to make sure that the costs associated with

the cultural resources survey, mitigation including excavation,

reports, and coordination with the State Historic Preservation Officer

(SHPO), are considered. This was adequately covered in the proposed

rule and is retained in the final rule at Sec. 254.7(a)(2) which states

that parties may agree to make adjustments in relative values to cover

costs which include cultural resource surveys and mitigation.

One reviewer suggested clarifying paragraph (b) is as it applies to

agreement to initiate provisions under paragraph (a) of this section of

the rule. The criteria for compensation or assumption of costs listed

in paragraph (b) should be determined by the authorized officer,

documented in either the agreement to initiate or in a separate

document, and made part of the case record file for that land exchange.

It was suggested that costs incurred by the non-Federal party as a

result of the Federal government being a party to the exchange should

be compensated by the government. This respondent further stated that

paragraph (b) of this section of the proposed rule attempted to combine

compensation to the non-Federal party with compensation for Federal

costs and, thus, was vague. Each exchange is based on its own unique

situation. The special requirements of each party, including the United

States, must be addressed on a case-by-case basis. It would be

unnecessary to require compensation of the non-Federal party as a

standard matter of practice. In every exchange case, the authorized

officer is required to establish which party has the responsibility for

accomplishing and paying for each step of the exchange process. Those

processes and their costs which are the responsibility of the United

States will be borne by the Forest Service, unless the non-Federal

party voluntarily agrees to assume them.

Section 254.8--Notice of exchange proposal. Several respondents

requested that the regulation specifically state that the State

government be notified at the time of the notice of exchange rather

than waiting until the notice of decision. One of these also requested

that the congressional delegation be included in this notice of

exchange proposal. These recommendations were adopted and are included

in paragraph (a) of this section of the final rule.

A right-of-way holder requested that notice be provided to the

authorized users concurrent with the publication of the first newspaper

notice. Concurrent notice to all authorized users, including right-of-

way holders, was specified in paragraph (a) of this section of the

proposed rule and is retained in the final rule.

One respondent questioned if the notice would be published in all

newspapers in the counties in which the lands to be exchanged are

located. Paragraph (a) of this section of the rule requires a notice to

be published in a newspaper of general circulation in the counties

where the Federal and non-Federal lands involved in the exchange

proposal are located. That could require publication in one or more

newspapers, or in a single newspaper that covers several counties, as

needed to notify the public.

One respondent suggested that paragraph (a)(4) of proposed

Sec. 254.8 be revised to make it clear that public comments regarding

the environmental impacts of the proposed exchange are being sought.

This respondent also felt paragraph (a) should include a statement

describing the present use and proposed use of the lands to be

exchanged and asked for clarification of the meaning of ``description''

of the lands being considered for exchange. Paragraph (a)(4) of the

proposed rule stated that comments would be sought from the public and

that timely comments would be considered in the environmental analysis

of the proposal; however, the language was not as clear as it might be.

Therefore, in the final rule, paragraph (a)(4) has been revised to make

clear that the public is invited to submit any comments on or concerns

about the exchange proposal, including advising the agency on any liens

or other encumbrances or claims related to the lands. Paragraph (b)

then links receipt of these comments to the environmental analysis. As

previously noted, additional opportunity for public input during

environmental analysis will be offered as appropriate. A primary

purpose of the notices of exchange proposal is to identify those

persons with interests in the lands or claims against the involved

properties. To facilitate such notification, the properties must be

described legally. However, the authorized officer may include

additional information, as appropriate, for ease of identifying the

lands. Information regarding intended uses of the involved lands is

always available at the local agency office.

Two respondents expressed confusion as to when the public is

notified. The public is notified first of a proposed exchange when the

parties enter into an agreement to initiate and again when a decision

is reached.

Two respondents suggested that the notice to authorized users

should be by certified mail. However, this suggestion was not adopted;

the authorized officer needs the freedom to choose the best and most

appropriate means to notify authorized users, including certified mail.

A State government official requested that notice be given by

Federal Register publication. Although Federal Register notice would

reach groups on a national scale, newspaper publication is a more

effective way to reach most interested and potentially affected persons

and groups. This, in combination with the direct notice requirements of

paragraph (a), will ensure effective notice. Additional requirements to

give notice in the Federal Register would be administratively

burdensome, costly, and redundant.

One respondent expressed confusion as to how the notice of exchange

proposal relates to forest plan notices. Unless the proposed exchange

requires a land and resource management plan amendment or revision, the

notice of exchange proposal has no relationship to land and resource

management planning.

In addition to the changes made in response to comments, paragraph

(a) was revised in the final rule to explicitly require that the notice

of exchange proposal include the deadline for comments to be received

and the name, title, and address of the official to whom comments

should be sent and from whom additional information may be obtained.

Some respondents suggested that minor modifications to the notice

of exchange, for example, in the case of acreage adjustments to

equalize values, should not have to be republished because

republication would be counter to the intent to expedite exchanges.

Minor corrections of descriptions or acreages or reduction of published

acreages to achieve equal values do not require republication. However,

any addition of new lands to achieve equal values, not previously

published, will require republication. This was a provision of the

proposed rule and is retained in the final rule.

Section 254.9--Appraisals. A respondent expressed concern with the

reference to the Uniform Appraisal Standards for Federal Land

Acquisitions, since those standards are focused on acquisition under

threat of condemnation; the respondent recommended instead that the

Standards of Professional Practice promulgated by the American

Institute of Real Estate Appraisers (now the Appraisal Institute) be

adopted as the accepted standard. This recommendation cannot be fully

adopted. The Federal Land Exchange Facilitation Act directs the

agencies to comply with appraisal standards set forth in ``Uniform

Appraisal Standards for Federal Land Acquisitions'' to the extent

practical. The appraisal standards adopted in this rule are consistent

with that direction. However, some aspects of the Uniform Standards of

Professional Appraisal Practice regarding appraisal standards, which

the Appraisal Institute has adopted, have been incorporated in

Sec. 254.9 of this rule.

Two professional appraisal organizations suggested that BLM and the

Forest Service adopt the Uniform Standards of Professional Appraisal

Practice to assure consistency and quality in appraisals. The Uniform

Standards of Professional Appraisal Practice include standards for all

categories of appraisal, including real and personal property, and are

more general than the Uniform Federal Standards. The Uniform Appraisal

Standards for Federal Land Acquisitions set detailed requirements for

the act or process of estimating value. Since the Uniform Standards of

Professional Appraisal Practice define an appraisal report differently

from that generally recognized by Federal agencies, this suggestion was

not adopted. The appraisal standards in this rule apply specifically to

land exchanges entered into by BLM and the Forest Service. They reflect

standards applicable to exchange transactions and appraisals or

appraisal reports as defined in Sec. 254.2 of the rule. The standards

are consistent with the Uniform Standards of Professional Appraisal

Practice and incorporate the Government-wide Uniform Appraisal

Standards for Federal Land Acquisitions: Interagency Land Acquisition

Conference 1992 (Washington, DC, 1992), ISBN 0-16-038050-2 and the

Department of Transportation standards of appraisal (49 CFR part 24,

subpart B).

(a) Appraiser qualifications. Several comments were received

regarding the proposal to require appraisers to be certified or

licensed under State law. Two believed requiring all appraisers to be

State certified or licensed was impractical and possibly premature,

since many States have not fully enacted their appraisal certification

laws. One of the two suggested that State certification or licensing

should be a goal and not a requirement. Two professional appraisal

organizations expressed support for the provision.

Eighteen States currently require all appraisers to be either

certified or licensed regardless of the type of real estate

transaction. The remaining States require only those appraisers

involved in appraising property for Federally regulated financial

agencies to be certified or licensed. In some States, appraisers not

involved in Federally related financial transactions may voluntarily

become certified or licensed.

Federal real estate appraisers performing appraisal assignments

related to their jobs are generally exempt from State licensing

requirements. However, for purposes of supporting uniform national

standards for appraisers, it is important that agency appraisers be

qualified and meet training and experience standards adopted by State

regulatory agencies. To eliminate potential problems resulting from

uneven progress by the States in implementing certification or

licensing requirements, the final rule has been revised to require

qualified appraisers to possess qualifications consistent with State

regulatory requirements meeting the intent of Title XI of the Financial

Institutions Reform, Recovery, and Enforcement Act of 1989.

Consequently, the agency will assist and encourage staff appraisers

to become certified or licensed. Where it is unnecessary or impractical

to meet State requirements, staff appraisers will possess

qualifications consistent with generally accepted State regulatory

requirements in other States as established by each agency.

One State government agency explained that its staff appraisers

were exempt from certification requirements under the State law. This

official suggested that the rule be revised to clearly indicate that

State agency staff appraisers who are exempt from the State

requirements be recognized as being qualified to do exchange proposals.

This suggestion was partially adopted. Appraisers exempt from State law

do not have to be certified or licensed. However, the appraisers in

Federal land exchanges must meet standards generally comparable to

State training and experience qualifications as established by the

Forest Service and BLM.

Another comment expressed concern that criteria for a qualified

appraiser did not address reciprocity; i.e., a State agreement to

accept State certification and licenses issued by other States. This

person felt that unless the States generally agreed on qualification

standards that permitted reciprocity, it would be difficult for agency

and contract appraisers to appraise in States other than those in which

they are certified or licensed. Inconsistent State standards will

hamper the free flow of appraisal services across State boundaries;

however, reciprocity is a State issue, not a matter under Forest

Service or BLM jurisdiction. Therefore, the rule was not revised to

address reciprocity.

The definition of a qualified appraiser contained in the proposed

rule included a provision that the appraiser be approved by the

authorized officer. Three persons suggested this was unfair and that

instead, the parties should agree on selection of the appraiser. The

authorized officer must approve the appraiser agreed upon and selected

by the parties. As provided in Sec. 254.4 of the proposed rule and

retained in the final rule, the parties, in arranging for appraisals,

must agree on the selection of a qualified appraiser.

One person interpreted the first sentence in paragraph (a)(1) of

this section of the proposed rule to require the agency to use one

appraiser for both the Federal and non-Federal lands in all cases. This

respondent suggested the paragraph be changed to allow use of a second

appraiser when only one side of an exchange is in dispute. There was no

intention to require only one appraiser to appraise both the Federal

and non-Federal lands. In response, the final rule refers to

``appraisers'' to alleviate this potential misunderstanding.

(b) Market value. Paragraph (b) of Sec. 254.9 of the proposed rule

set out standards to guide appraisers. A respondent suggested that

paragraph (b)(1)(iii) be modified to require that consideration of

prices paid for similar properties be limited to properties ``in the

same general location as the subject property.'' This limitation would

severely restrict an appraiser's analysis of properties possessing

unique historic, wildlife, recreation, wilderness, scenic, or other

resource values, for which comparable property transactions may be

beyond the general location of the subject property; therefore, the

suggestion was not adopted.

Several comments were received asking that the list of resource

values in paragraph (b)(1)(iii) of this section of the proposed rule be

expanded to include watershed and archaeological values. This

suggestion was not adopted. It is impracticable to list all resource

values to be considered by the appraiser, and the list is merely

suggestive, not all inclusive. The phrase ``and other resource values

or amenities'' covers all other resources that may have value in the

private competitive market, including watershed and archaeological

values.

A reviewer suggested that paragraph (b)(1)(iv) of this section of

the proposed rule be revised to require the appraiser to consider water

rights along with timber and mineral interests. The reviewer noted that

water rights may be transferred in an exchange, but, depending on the

State, may not be considered to be an ``interest in the land.'' This

suggestion was adopted.

Several comments were received indicating an apparent conflict

between instructions in paragraphs (b)(1)(v) and those in (b)(1)(vi) of

this section of the proposed rule, regarding how to appraise multiple

properties in an assembled exchange. Paragraphs (b)(1) (v) and (vi) of

the proposed rule were combined into paragraph (b)(1)(v) of the final

rule to clarify that if stipulated in an agreement to initiate, lands

assembled from multiple ownerships can be appraised separately.

Several people commented on proposed paragraph (b)(1)(vii), which

would have required the appraiser to disregard any change in market

value caused by the intent of the agency to acquire the non-Federal

property. One recommended ``similar protection'' for the non-Federal

party. Another suggested adding an exclusion for property where the

intended use is the highest and best use. Another stated that this

paragraph ``clearly violates'' the provision of the Act that requires

that the same nationally approved appraisal standards be used in

appraising both the Federal and non-Federal lands. This respondent

further stated that the paragraph should be deleted or the non-Federal

parties should be afforded the same protection. In response, the

Department believes these are valid points and has removed this

provision from the final rule.

A mining industry association suggested that this paragraph of the

rule include a statement that appraisers should disregard any increase

in value to Federal lands resulting from a non-Federal party's

particular need to acquire the land. It was the association's belief

that appraisers overvalue Federal lands adjacent to operating mines.

This suggestion was not adopted, since the appraiser must take into

consideration all potential buyers and uses of the property, including

possible purchase by adjacent property owners. The value estimation

should reflect motivational factors evident in similar transactions,

i.e., sales of abutting lands.

One respondent thought that standardized appraisal methods may not

be applicable to exchanges in Alaska, as there are very few sales,

lands are often unsurveyed, and very little information is available

regarding resource values, particularly mineral values. This person

suggested that the authorized officer be permitted to instruct the

appraiser to use the best procedure available to provide a reasonable

estimate of value. This contingency was already provided for in

proposed paragraph (b)(2) of this section, which would allow the

authorized officer to use other acceptable methods to estimate values

when market information is not readily available. This provision is

retained as paragraph (b)(3) in the final rule.

One reviewer suggested reliance on the ``departure'' provisions of

the Uniform Standards of Professional Appraisal Practice, which would

permit an appraiser to indicate the basis for using only the market

approach to value (as opposed to all three approaches--market, cost,

and income). This suggestion was not adopted, as the principal

direction for Federal appraisals comes from the Uniform Appraisal

Standards for Federal Land Acquisitions, which specifies the direct

comparison or market approach as the preferred approach. The Uniform

Standards of Professional Appraisal Practice supplements the Federal

standards.

In addition to the changes made in response to comments, paragraphs

(b)(1)(vi)(A), (B) have been redesignated in the final rule as

paragraphs (b)(2)(i), (ii) for clarity. Paragraph (b)(2) is thus

redesignated as (b)(3) in the final rule.

(c) Appraisal report standards. Three respondents expressed concern

that language contained in paragraph (c)(5) of this section of the

proposed rule was vague and could subject appraisers to open-ended

liability regarding disclosure of potentially hazardous environmental

conditions. Upon review, the Department agrees with these comments. As

a result, this provision has been modified to require the appraiser to

disclose in the appraisal report any condition that is observed during

the inspection of the property or becomes known to the appraiser

through normal research that would lead the appraiser to believe that

hazardous substances may be present on the property being appraised.

One person expressed concern over the lack of sufficient safeguards

against potential ``windfalls.'' This respondent suggested that two

independent appraisals be required on exchanges when land values exceed

$300,000. Such a requirement is unnecessary, as dollar thresholds are

not reliable indicators that an appraisal assignment is complex and,

therefore, requires another independent valuation. Further, such a

regulatory requirement would increase processing costs and could delay

a land exchange. The need for two appraisals should be determined by

the parties involved in an exchange and should be based on the

complexity of the appraisal.

One respondent observed that parties to an exchange would be

required to invest considerable time and expense in conducting studies,

appraisals, and title clearance before an informed decision could be

made whether to pursue the exchange. Since values can change over a

period of time, it was suggested that once the parties agree on value,

those values be binding for a period of not to exceed two years. This

suggestion was not adopted. The parties must agree to pursue an

exchange early in the process, in an agreement to initiate, before

incurring any significant investment of time and expense. However,

until a binding exchange agreement is entered all parties are subject

to loss of their investments if any party decides that the proposed

exchange is no longer feasible. The signing of a binding exchange

agreement pursuant to Sec. 254.14 fixes the agreed upon values and

commits the parties to continue until the transaction is completed.

This avoids last-minute changes in values and other elements of the

exchange which could jeopardize the stability that is necessary for

closing any real estate transaction.

Another person suggested that paragraph (c)(10)(ii) of this section

of the proposed rule, requiring all appraisers to certify that they

personally examined all comparable sales, could be unrealistic. This

reviewer felt that since comparable properties may be located in many

different areas of a State or other regions of the country, this

provision may be unnecessarily costly and lead to inordinate delays.

This suggestion was not adopted. It is a long-standing requirement of

Federal appraisal standards and a requirement of the Uniform Standards

of Professional Appraisal Practice that an appraiser must make a

personal on-site examination of the comparable sales to perform an

accurate comparative analysis.

(d) Appraisal review. There were few comments regarding appraisal

review. However, one appraisal organization concurred with the outlined

review process and suggested requiring additional education and

experience for an appraiser to be considered a qualified review

appraiser. Although additional education and experience are always

desirable, the standards set forth in paragraph (a) of this section of

the rule are adequate in that they require the appraiser to possess the

minimum qualifications consistent with State regulatory requirements

meeting the intent of Title XI of the Financial Institutions Reform,

Recovery, and Enforcement Act of 1989.

Other comments suggested that the review appraiser should be an

agency employee and that the reviewer should be appointed by the

authorized officer. These suggestions were not adopted. Paragraph (a)

of this section of the final rule would allow reviewers to be employees

or contractors of the Federal or non-Federal exchange parties, to

provide for those situations when it is in the public interest to use a

qualified non-Federal review appraiser. Additionally, it should be

noted that the authority to review appraisals is delegated by the

Secretary to the Chief Appraiser, instead of to the authorized officer,

to maintain the independence of the valuation process from the exchange

negotiation process.

Section 254.10--Bargaining; arbitration. Sixteen comments were

received on this section of the proposed rule objecting to: (1)

Appointment of an arbitrator by the Secretary; (2) allowing an

arbitration decision to be binding for a period not to exceed 2 years;

(3) allowing the agency 180 days for review of the appraisal; and (4)

limiting arbitration to issues regarding value of the property. No

change was made to the rule in response to these comments, as these

provisions are specific requirements of section 3 of the Federal Land

Exchange Facilitation Act.

One person felt this section should clarify who would pay the costs

of arbitration. This suggestion was not adopted. First, the costs of

arbitration may be addressed in an agreement to initiate. Second, if

the parties have not reached prior agreement on paying arbitration

costs, the rules of the American Arbitration Association, which the

Exchange Facilitation Act specifies must be used, provide for the

assignment of costs.

Section 254.11--Exchanges at approximately equal value. One

respondent felt the $150,000 limit was too high and recommended

establishing a level consistent with the Uniform Relocation Assistance

and Real Property Acquisition Policies Act of 1970. This suggestion was

not adopted. The $150,000 limit was established by the Federal Land

Exchange Facilitation Act of 1988.

Section 254.12--Value equalization; cash equalization waiver. One

respondent stated that the rule should provide safeguards against

windfalls, asserting that non-Federal parties acquiring property under

the guise of an equalization payment are actually purchasing that land

with no competition. This suggestion was not adopted, as section 206(b)

of the Federal Land Policy and Management Act of 1976 established

sufficient restrictions to limit the use of cash equalization payments

in land exchanges to the minimum necessary.

One respondent stated that BLM should have the same prohibition on

waiving payments as the Forest Service. Another felt that the Forest

Service should revise its rule on cash waivers to be in line with BLM.

This recommendation cannot be adopted. The Exchange Facilitation Act's

prohibition on waiver of payment of cash equalization applies only to

the Secretary of Agriculture.

It was suggested that the 25 percent limitation not be applied in

Alaska and that the guidance of the Alaska National Interest Lands

Conservation Act should be used instead. This is already accommodated

in Sec. 254.1(c) of the rule, which specifies that the rules apply to

exchanges made under the authority of the Alaska Native Claims

Settlement Act or the Alaska National Interest Lands Conservation Act,

except to the extent to which the rules conflict with provisions of

those Acts.

Two respondents were concerned about the 25 percent limitation

imposed by the regulations. One felt this limitation is not in

compliance with the Federal Land Policy and Management Act of 1976 and

the Federal Land Exchange Facilitation Act, and that while section

206(b) of the Federal Land Policy and Management Act of 1976 limits

equalization to 25 percent of the value of the Federal lands, the

Exchange Facilitation Act provides that any adjustment can be made to

the relative value of the lands for assumption of costs. The respondent

asserted that, therefore, these limitations are independent. The other

felt the agency is limiting the ability to complete exchanges with this

provision. The Exchange Facilitation Act provides discretionary

authority to the Secretary to adjust relative values to compensate for

costs assumed in accordance with terms of the Agreement to Initiate. In

accordance with Sec. 254.7 of the rule, such compensation will be made

by cash equalization payment under authority of section 206(b) of the

Federal Land Policy and Management Act of 1976, and therefore, will be

subject to the 25 percent limitation of that authority.

Section 254.13--Approval of exchange; notice of decision. A State

agency felt that notification to States will occur too late as all

appraisals and reviews will have been completed. The notice under this

section of the rule advises interested and concerned individuals and

organizations that the proposed exchange has been approved. The earlier

notice of exchange proposal sent to State and local governments, and

others, under Sec. 254.8 of the rule, is intended to provide all who

are interested an opportunity to comment on the proposed exchange

before the appraisal(s) and environmental analysis.

One respondent recommended that the Forest Service appeal

regulations be amended to incorporate land exchange decisions as

appealable actions. This recommendation was not adopted. Land exchange

decisions are subject to Forest Service appeal regulations at 36 CFR

part 217 and part 251, subpart C. This section of the land exchange

rules merely informs readers of the applicability of the appeal

regulations.

In response to a reviewer who asked when the appeal period would

begin, paragraph (b) of this section of the rule was revised to be

consistent with the administrative appeal regulations which specify

that the appeal period begins after publication of a notice of the

decision.

Some respondents addressed the duplicative publication of

information required by the two exchange notices and the associated

increased workload. While there are two publication requirements, each

serves a different purpose. The first is essential to apprise the

public of the agency's intent to initiate a land exchange and to obtain

public comment. The second notice is equally important; it provides

notice of the final decision on the proposal and affords the

opportunity for appeal.

Two respondents expressed concern that, because of the notice and

appeal procedures, appraisals may become outdated before completion of

an exchange. Paragraph (a) of Sec. 254.14 of the rule addresses that

contingency. When there is concern that consummation of a land exchange

may be delayed beyond the life of the appraisal(s), the parties to the

exchange have the option of entering a binding land exchange agreement,

upon approval of the exchange, which serves to lock in the appraised

values.

Section 254.14--Exchange agreement. One respondent suggested that

an appraisal could be reviewed and approved in advance of an exchange

agreement. No change in the rule is needed. The appraisal is always

reviewed and approved in advance of entering an exchange agreement

provided under this section of the rule.

Section 254.15--Title standards. One respondent suggested expanding

the discussion of the various types of conveyance documents and their

associated degree of warranty. Since this rule does not change

established methods of conveyance, this suggestion was not adopted.

Detailed descriptions of the various forms of conveyance are addressed

in other sources, such as Department of Justice title standards.

One respondent suggested that this section be revised to state that

title would be accepted by both parties as set forth in the agreement

to initiate. This suggestion was not adopted. While the parties to an

exchange may include general terms concerning case closing matters in

an agreement to initiate, title acceptance is dependent upon

instructions, requirements, and conditions which can be set forth only

at the end of the exchange process, rather than at the beginning. The

requirements for title acceptance are presented in Sec. 254.16 of the

rule.

Another remarked that the authorized officer should be given

discretionary authority to acquire lands with reservations or

outstanding rights that could be construed to interfere with Federal

use or management of the land. This suggestion could not be adopted.

Agency policy (Forest Service Manual 5430.3) requires that property

acquired by the United States cannot contain reservations or

outstanding rights that are inconsistent with the purpose for which the

lands are being acquired.

A spokesperson for an environmental group said that paragraph

(c)(1)(iii) of this section of the rule should require the government

to seek the costs of removing personal property from the lands to be

acquired if the non-Federal party fails to do so. This does not need to

be explicitly stated. This paragraph of the rule provides sufficient

authority to the authorized officer to condition acceptance of title

upon the removal of any personal property.

Several respondents felt the proposed rule did not provide

sufficient protection for existing third party special uses of Federal

land following an exchange of title. As previously noted, Sec. 254.4 of

the rule was revised to address authorized uses in the agreement to

initiate. Further, agency policy (Forest Service Manual 5403.1 and

5430.3) requires recognition and protection of authorized third party

uses to the extent appropriate, although, if in the public interest,

the regulations at 36 CFR 251.60(b) provide for termination or

revocation of special-use authorizations if the involved lands are

transferred out of Federal ownership.

A respondent recommended that the non-Federal exchange party be

required to offer a perpetual easement to replace the Federal

authorization. This suggestion was not adopted. The United States has

no general authority to require a non-Federal exchange party to offer

any alternative use arrangement to the holder of a Federal special-use

authorization. However, if the exchange party offers to continue the

terms of an existing permit, then the termination or revocation of the

Federal permit to facilitate an exchange is more justifiable. Although

a land exchange party and an authorized user may agree to a permanent

right of use, the users are generally granted authorizations with terms

similar to the Federal authorizations by the non-Federal exchange

party.

Three comments offered by the ski industry stated that lands

occupied by a ski area should not be exchanged without the specific

consent of the permittee. This suggestion was not adopted, as holders

of ski area permits are afforded the same consideration as is afforded

other types of special-use holders. Federal special-use authorizations

of all types are revoked or terminated to facilitate a land exchange of

the involved Federal lands only when it is found to be in the public

interest. In such case, the agency will encourage the non-Federal

exchange party to reach agreement with the holder of a Federal special-

use authorization to furnish privileges equal to those enjoyed by the

user under the Federal permit.

A suggestion was received from one respondent that when a non-

Federal exchange party offers to provide for the continued use of the

Federal lands, under substantially the same conditions after the

exchange, objections raised by the third party user should not be

permitted to prevent the completion of, or cause modifications to, a

proposed exchange. To adopt this suggestion would require amendment of

the agency's appeal rule. Moreover, it is unlikely to be in the best

interest of a third party user to appeal if the same use and

substantially same conditions have been offered. The failure of an

authorized user to agree to terms offered by the non-Federal party,

when their rights are protected generally, would not jeopardize the

consummation of an exchange. However, the agency believes that the

third party user should retain the right to an administrative appeal to

protect the third party's interests.

An industry respondent requested that the regulation clarify that

(1) a mineral lease holder would not be required to negotiate with a

non-Federal exchange party, (2) the holder of a Federal mineral lease

could reject any proposed agreement from the non-Federal exchange party

related to uses authorized by the lease, (3) the proposed regulations

would have no effect on existing lease terms and conditions, and (4)

BLM could not terminate or interfere with the exercise of valid lease

rights, unless otherwise specifically provided for in the Federal

lease. In recognition of the unique rights of holders of Federal

mineral leases, paragraph (a)(2) of Sec. 254.15 of the rule has been

revised to apply only to non-mineral leases.

Another comment from the business sector was that the regulation

should permit only those reservations to be placed on the Federal land

that were first specified in the agreement to initiate. However, after

an agreement to initiate is entered, additional rights and reservations

may be identified that must be recognized. Therefore, the rule does not

adopt this comment.

A respondent suggested that proof of an agreement between the third

party user and non-Federal exchange party should not be required at the

time the exchange is approved but should be required upon entering into

an exchange agreement. The Department disagrees. The decision to

proceed with an exchange cannot be made without considering the effects

of the proposal on authorized uses on the involved Federal lands.

Section 254.16--Case closing. It was suggested that paragraph (a)

of this section of the rule refer to patents or ``other documents of

conveyance.'' However, patents and deeds are the only forms of

conveyance by the Federal government.

It was pointed out that acceptance of title needs to be precisely

defined in order to determine when the 90-day segregation period

begins. The Department agrees. This section has been revised to clarify

that acceptance of title occurs upon recordation and that the

segregation period for the acquired non-Federal lands terminates

midnight of the 90th day after recordation.

A reviewer suggested specifying that the authorized officer accept

title and that the date of acceptance be noted on the land records.

This suggestion has been partially adopted. Paragraph (b) of

Sec. 254.16 of the final rule has been rewritten to state that title

acceptance occurs upon recordation, rather than by action of the

authorized officer, and provides for notation of the date of

acceptance.

One respondent felt that ``Case Closing'' was an inappropriate

title and suggested ``Acceptance of Title'' instead. This section of

the rule deals with automatic segregation in addition to title

acceptance. Therefore, the more general title of ``Case Closing'' was

retained.

It was suggested that paragraph (b) of this section of the rule add

the regulatory citation for withdrawal. A citation to 43 CFR part 2300

has been added.

Two respondents expressed concern that if the lands acquired are to

be withdrawn, a 90-day segregation would be insufficient to complete a

withdrawal. Although 90 days may not provide enough time to complete a

withdrawal, further segregation may be possible upon withdrawal

application under 43 CFR part 2300. Paragraph (b) has been revised to

clarify that unless a withdrawal is initiated within the 90-day period,

segregation will expire.

An environmental group pointed out that exchanges are final only

after the administrative appeal process had been completed. This is

correct but no change was needed in the rule. Title does not transfer

until any administrative appeal has been resolved, and the deed has

been recorded.

A State government respondent suggested that a time constraint be

placed on the Office of the General Counsel review. This is undesirable

and impracticable. Legal review of complicated title issues can be time

consuming, but it is a critical step in any land exchange.

Concern was expressed that in paragraph (a) of this section of the

rule the word ``only'' reverses the meaning and intent of Section 3(a)

of the Act and should be deleted. As previously noted, this paragraph

has been revised in the final rule and this problem has been eliminated

through the rewording.

Section 254.17--Information requirements. The agreement to initiate

an exchange and the exchange agreement required by Secs. 254.4 and

254.14 of the rule represent new information requirements as defined in

5 CFR part 1320, Controlling Paperwork Burdens on the Public. The

agency estimates that each non-Federal party to a land exchange

proposal will spend an average of 4 hours preparing and submitting the

information required in an agreement to initiate an exchange and an

exchange agreement.

In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.

3507) and implementing regulations at 5 CFR part 1320, the Forest

Service requested, in conjunction with the publication of the first

proposed rule, and, on August 3, 1989, received, approval from the

Office of Management and Budget (OMB) for the information to be

addressed in an agreement to initiate or an exchange agreement. The

information collection was assigned OMB Control No. 0596-0105 and was

approved for use through June 30, 1992. On May 1, 1992, the Forest

Service requested approval of an extension of the information

collection. That approval was granted by OMB on June 11, 1992. The

information collection has now been approved for use through June 30,

1995.

Regulatory Impact

The rule has been reviewed under USDA procedures and Executive

Order 12866 on Federal Regulations. It has been determined that this is

not a significant rule. The rule contains minimum procedures necessary

to implement the Exchange Facilitation Act. The rule will not have an

effect of $100 million or more on the economy; will not substantially

increase prices or costs for consumers, industry, or State or local

governments; nor will it adversely affect competition, employment,

investment, productivity, innovation, or the ability of United States-

based enterprises to compete in foreign markets.

The rule has been considered in light of Executive Order 12630

concerning possible impacts on private property rights. E.O. 12630

exempts from takings implications assessment activities which are

consensual in nature between the United States and non-Federal parties.

Exchanges are consensual, and, therefore, do not raise takings issues.

Accordingly, no further consideration of takings implications were

deemed necessary in this rule.

Moreover, this rule has been considered regarding the Regulatory

Flexibility Act (5 U.S.C. 601 et seq.), and it has been determined that

this action will not have a significant impact on a substantial number

of small entities.

Section 31b of Forest Service Handbook 1909.15 (57 FR 43180;

September 18, 1992) excludes from documentation in an environmental

assessment or impact statement ``rules, regulations, or policies to

establish Service-wide administrative procedures, program processes, or

instructions.'' Based on consideration of the comments received and the

nature and scope of this rulemaking, the Department has determined that

this rule falls within this category of actions and that no

extraordinary circumstances exist which would require preparation of an

environmental assessment or environmental impact statement.

This proposed rule has been reviewed under Executive Order 12778,

Civil Justice Reform. If this proposed rule were adopted, (1) all state

and local laws and regulations that are in conflict with this proposed

rule or which would impede its full implementation would be preempted;

(2) no retroactive effect would be given to this proposed rule; and (3)

it would not require administrative proceedings before parties may file

suit in court challenging its provisions.

List of Subjects in 36 CFR Part 254

Land Exchanges, National forests.

Therefore, for the reasons set forth in the preamble, part 254 of

Title 36 of the Code of Federal Regulations is hereby amended by

revising subpart A to read as follows:

PART 254--LANDOWNERSHIP ADJUSTMENTS

Subpart A--Land Exchanges

Sec.

254.1 Scope and applicability.

254.2 Definitions.

254.3 Requirements.

254.4 Agreement to initiate an exchange.

254.5 Assembled land exchanges.

254.6 Segregative effect.

254.7 Assumption of costs.

254.8 Notice of exchange proposal.

254.9 Appraisals.

254.10 Bargaining; arbitration.

254.11 Exchanges at approximately equal value.

254.12 Value equalization; cash equalization waiver.

254.13 Approval of exchanges; notice of decision.

254.14 Exchange agreement.

254.15 Title standards.

254.16 Case closing.

254.17 Information requirements.

Subpart A--Land Exchanges

Authority: 7 U.S.C. 428a(a) and 1011; 16 U.S.C. 484a, 485, 486,

516, 551, and 555a; 43 U.S.C. 1701, 1715, 1716, and 1740; and other

applicable laws.

Sec. 254.1 Scope and applicability.

(a) These rules set forth the procedures for conducting exchanges

of National Forest System lands. The procedures in these rules may be

supplemented by instructions issued to Forest Service officers in

Chapter 5400 of the Forest Service Manual and Forest Service Handbooks

5409.12 and 5409.13.

(b) These rules apply to all National Forest System exchanges of

land or interests in land, including but not limited to minerals, water

rights, and timber, except those exchanges made under the authority of

Small Tracts Act of January 12, 1983 (16 U.S.C. 521c-521i) (36 CFR part

254, subpart C), and as otherwise noted. These rules also apply to

other methods of acquisition, where indicated.

(c) The application of these rules to exchanges made under the

authority of the Alaska Native Claims Settlement Act, as amended (43

U.S.C. 1621), or the Alaska National Interest Lands Conservation Act

(16 U.S.C. 3192), shall be limited to those provisions which do not

conflict with the provisions of these Acts.

(d) Unless the parties to an exchange otherwise agree, land

exchanges for which the parties have agreed in writing to initiate

prior to April 7, 1994, will proceed in accordance with the rules and

regulations in effect at the time of the agreement.

(e) Except for exchanges requiring cash equalization payments made

available through the Land and Water Conservation Act of 1965, as

amended (16 U.S.C. 460[1]9), the boundaries of a national forest are

automatically extended to encompass lands acquired under the Weeks Act

of March 1, 1911, as amended (16 U.S.C. 516), provided the acquired

lands are contiguous to existing national forest boundaries and total

no more than 3,000 acres in each exchange.

(f) Exchanges under the Weeks Act of March 1, 1911, or the General

Exchange Act of March 20, 1922, may involve land-for-timber (non-

Federal land exchanged for the rights to Federal timber), or timber-

for-land (the exchange of the rights to non-Federal timber for Federal

land), or tripartite land-for-timber (non-Federal land exchanged for

the rights to Federal timber cut by a third party in behalf of the

exchange parties).

(g) Land exchanges involving National Forest System lands are

authorized by a number of statutes, depending upon the status

(conditions of ownership) of such lands and the purpose for which an

exchange is to be made. The status of National Forest System land is

determined by the method by which the land or interests therein became

part of the National Forest System. Unless otherwise provided by law,

lands acquired by the United States in exchanges assume the same status

as the Federal lands conveyed.

(h) The Federal Land Policy and Management Act of 1976, as amended

(43 U.S.C. 1701), is supplemental to all applicable exchange laws,

except the cash equalization provisions of the Sisk Act of December 4,

1967, as amended (16 U.S.C. 484a).

Sec. 254.2 Definitions.

For the purposes of this subpart, the following terms have the

meanings set forth in this section.

Acquisition means the attainment of lands or interests in lands by

the Secretary, acting on behalf of the United States, by exchange,

purchase, donation, or eminent domain.

Adjustment to relative values means compensation for exchange-

related costs, or other responsibilities or requirements assumed by one

party, which ordinarily would be borne by the other party. These

adjustments do not alter the agreed upon value of the lands involved in

an exchange.

Agreement to initiate means a written, nonbinding statement of

present intent to initiate and pursue an exchange, which is signed by

the parties and which may be amended by consent of the parties or

terminated at any time upon written notice by any party.

Appraisal or appraisal report means a written statement

independently and impartially prepared by a qualified appraiser setting

forth an opinion as to the market value of the lands or interests in

lands as of a specific date(s), supported by the presentation and

analysis of relevant market information.

Approximately equal value means a comparative estimate of value of

the lands involved in an exchange which have readily apparent and

substantially similar elements of value, such as location, size, use,

physical characteristics, and other amenities.

Arbitration is a process to resolve a disagreement among the

parties as to appraised value, performed by an arbitrator appointed by

the Secretary from a list recommended by the American Arbitration

Association.

Assembled land exchange means an exchange of Federal land for a

package of multiple ownership parcels of non-Federal land consolidated

for purposes of one land exchange transaction.

Authorized officer means a Forest Service line or staff officer who

has been delegated the authority and responsibility to make decisions

and perform the duties described in this subpart.

Bargaining is a process other than arbitration, by which parties

attempt to resolve a dispute concerning the appraised value of the

lands involved in an exchange.

Federal lands means any lands or interests in lands, such as

mineral and timber interests, that are owned by the United States and

administered by the Secretary of Agriculture through the Chief of the

Forest Service, without regard to how the United States acquired

ownership.

Hazardous substances are those substances designated under

Environmental Protection Agency regulations at 40 CFR part 302.

Highest and best use means an appraiser's supported opinion of the

most probable and legal use of a property, based on market evidence, as

of the date of valuation.

Lands means any land and/or interests in land.

Market value means the most probable price in cash, or terms

equivalent to cash, which lands or interest in lands should bring in a

competitive and open market under all conditions requisite to a fair

sale, where the buyer and seller each acts prudently and knowledgeably,

and the price is not affected by undue influence.

Mineral laws means the mining and mineral leasing laws applicable

to Federally owned lands and minerals reserved from the public domain

for national forest purposes and the Geothermal Steam Act of 1970 (30

U.S.C. 1001 et seq.), but not the Materials Act of 1947 (30 U.S.C. 601

et seq.).

Outstanding interests are rights or interests in property held by

an entity other than a party to an exchange.

Party means the United States or any person, State, or local

government who enters into an agreement to initiate an exchange.

Person means any individual, corporation, or other legal entity

legally capable to hold title to and convey land. An individual must be

a citizen of the United States and a corporation must be subject to the

laws of the United States or of the State where the land is located or

the corporation is incorporated. No Member of Congress may participate

in a land exchange with an agency of the United States, as set forth in

18 U.S.C. 431-433.

Public land laws means that body of non-mineral land laws dealing

with the disposal of National Forest System lands administered by the

Secretary of Agriculture.

Reserved interest means an interest in real property retained by a

party from a conveyance of the title to that property.

Resource values means any of the various commodity values or non-

commodity values, such as wildlife habitat and aesthetics, contained

within land interests, surface and subsurface.

Secretary means the Secretary of Agriculture or the individual to

whom responsibility has been delegated.

Segregation means the removal for a limited period, subject to

valid existing rights, of a specified area of the Federal lands from

appropriation under the public land laws and mineral laws, pursuant to

the authority of the Secretary of the Interior to allow for the orderly

administration of the Federal lands.

Statement of value means a written report prepared by a qualified

appraiser in conformance with the minimum standards of the Uniform

Standards of Professional Appraisal Practice that states the

appraiser's conclusion(s) of value.

Sec. 254.3 Requirements.

(a) Discretionary nature of exchanges. The Secretary is not

required to exchange any Federal lands. Land exchanges are

discretionary, voluntary real estate transactions between the Federal

and non-Federal parties. Unless and until the parties enter into a

binding exchange agreement, any party may withdraw from and terminate

an exchange proposal at any time during the exchange process.

(b) Determination of public interest. The authorized officer may

complete an exchange only after a determination is made that the public

interest will be well served.

(1) Factors to consider. When considering the public interest, the

authorized officer shall give full consideration to the opportunity to

achieve better management of Federal lands and resources, to meet the

needs of State and local residents and their economies, and to secure

important objectives, including but not limited to: protection of fish

and wildlife habitats, cultural resources, watersheds, and wilderness

and aesthetic values; enhancement of recreation opportunities and

public access; consolidation of lands and/or interests in lands, such

as mineral and timber interests, for more logical and efficient

management and development; consolidation of split estates; expansion

of communities; accommodation of existing or planned land use

authorizations (Sec. 254.4(c)(4); promotion of multiple-use values;

implementation of applicable Forest Land and Resource Management Plans;

and fulfillment of public needs.

(2) Findings. To determine that an exchange well serves the public

interest, the authorized officer must find that--

(i) The resource values and the public objectives served by the

non-Federal lands or interests to be acquired must equal or exceed the

resource values and the public objectives served by the Federal lands

to be conveyed, and

(ii) The intended use of the conveyed Federal land will not

substantially conflict with established management objectives on

adjacent Federal lands, including Indian Trust lands.

(3) Documentation. The findings and the supporting rationale shall

be documented and made part of the administrative record.

(c) Equal value exchanges. Except as provided in Sec. 254.11 of

this subpart, lands or interests to be exchanged must be of equal value

or equalized in accordance with the methods set forth in Sec. 254.12 of

this subpart. An exchange of lands or interests shall be based on

market value as determined by the Secretary through appraisal(s),

through bargaining based on appraisal(s), through other acceptable and

commonly recognized methods of determining market value, or through

arbitration.

(d) Same-State exchanges. Unless otherwise provided by statute, the

Federal and non-Federal lands involved in an exchange must be located

within the same State.

(e) Congressional designations. Upon acceptance of title by the

United States, lands acquired by the Secretary of the Interior by

exchange under the authority granted by the Federal Land Policy and

Management Act of 1976, as amended, which are within the boundaries of

any unit of the National Forest System, the National Wild and Scenic

Rivers System, the National Trails System, the National Wilderness

Preservation System, or any other system established by Act of

Congress; or the boundaries of any national conservation area or

national recreation area established by Act of Congress, immediately

are reserved for and become a part of the unit or area in which they

are located, without further action by the Secretary of the Interior,

and, thereafter, shall be managed in accordance with all laws, rules,

regulations, and land resource management plans applicable to such unit

or area.

(f) Land and resource management planning. The authorized officer

shall consider only those exchange proposals that are consistent with

land and resource management plans (36 CFR part 219). Lands acquired by

exchange that are located within areas having an administrative

designation established through the land management planning process

shall automatically become part of the area within which they are

located, without further action by the Forest Service, and shall be

managed in accordance with the laws, rules, regulations, and land and

resource management plan applicable to such area.

(g) Environmental analysis. After an agreement to initiate an

exchange is signed, the authorized officer shall undertake an

environmental analysis in accordance with the National Environmental

Policy Act of 1969 (42 U.S.C. 4371), the Council on Environmental

Quality regulations (40 CFR parts 1500-1508), and Forest Service

environmental policies and procedures (Forest Service Manual Chapter

1950 and Forest Service Handbook 1909.15). In making this analysis, the

authorized officer shall consider timely written comments received in

response to the exchange notice published pursuant to Sec. 254.8 of

this subpart.

(h) Reservations or restrictions in the public interest. In any

exchange, the authorized officer shall reserve such rights or retain

such interests as are needed to protect the public interest or shall

otherwise restrict the use of Federal lands to be exchanged, as

appropriate. The use or development of lands conveyed out of Federal

ownership are subject to any restrictions imposed by the conveyance

documents and all laws, regulations, and zoning authorities of State

and local governing bodies.

(i) Hazardous substances.

(1) Federal lands. The authorized officer shall determine whether

hazardous substances are known to be present on the Federal lands

involved in the exchange and shall provide notice of known storage,

release, or disposal of hazardous substances on the Federal lands in

the contract agreement and in the conveyance document, pursuant to 40

CFR part 373 and 42 U.S.C. 9620. For purposes of this section, the

notice of hazardous substances on involved Federal lands in an

agreement to initiate an exchange or an exchange agreement meets the

requirements for notices established in 40 CFR part 373. Unless the

non-Federal party is a potentially responsible party under 42 U.S.C.

9607(a) and participated as an owner, or in the operation, arrangement,

generation, or transportation of the hazardous substances found on the

Federal land, the conveyance document from the United States must

contain a covenant warranting that all remedial action necessary to

protect human health and the environment with respect to any such

substances remaining on the property has been taken before the date of

transfer and that any additional remedial action found necessary after

the transfer shall be conducted by the United States, pursuant to 42

U.S.C. 9620(h)(3). The conveyance document must also reserve to the

United States the right of access to the conveyed property if remedial

or corrective action is required after the date of transfer. Where the

non-Federal party is a potentially responsible party with respect to

the property, it may be appropriate to enter into an agreement as

referenced in 42 U.S.C. 9607(e) whereby that party would indemnify the

United States and hold the United States harmless against any loss or

cleanup costs after conveyance.

(2) Non-Federal lands. The non-Federal party shall notify the

authorized officer of any hazardous substances known to have been

released, stored, or disposed of on the non-Federal land, pursuant to

Sec. 254.4 of this subpart. Notwithstanding such notice, the authorized

officer shall determine whether hazardous substances are known to be

present on the non-Federal land involved in an exchange. If hazardous

substances are known or believed to be present on the non-Federal land,

the authorized officer shall reach an agreement with the non-Federal

party regarding the responsibility for appropriate response action

concerning the hazardous substances before completing the exchange. The

terms of this agreement and any appropriate ``hold harmless agreement''

shall be included in an exchange agreement, pursuant to Sec. 254.14 of

this subpart.

(j) Legal description of properties. All lands subject to an

exchange must be properly described on the basis of either a survey

executed in accordance with the Public Land Survey System laws and

standards of the United States or, if those laws and standards cannot

be applied, the lands shall be properly described and clearly locatable

by other means as may be prescribed or allowed by law.

(k) Special review. Except as provided in this paragraph, land

acquisitions of $150,000 or more in value made under the authority of

the Weeks Act of March 1, 1911, as amended (16 U.S.C. 516), must be

submitted to Congress for oversight review, pursuant to the Act of

October 22, 1976, as amended (16 U.S.C. 521b). However, minor and

insignificant changes in land acquisition proposals need not be

resubmitted for congressional oversight, provided the general concept

of and basis for the acquisition remain the same.

Sec. 254.4 Agreement to initiate an exchange.

(a) Exchanges may be proposed by the Forest Service or by any

person, State, or local government. Initial exchange proposals should

be directed to the authorized officer responsible for the management of

Federal lands proposed for exchange.

(b) To assess the feasibility of an exchange proposal, the

prospective parties may agree to obtain a preliminary estimate of the

values of the lands involved in the proposal. A qualified appraiser

must prepare the preliminary estimate.

(c) If the authorized officer agrees to proceed with an exchange

proposal, all prospective parties shall execute a nonbinding agreement

to initiate an exchange. At a minimum, the agreement must include:

(1) The identity of the parties involved in the proposed exchange

and the status of their ownership or ability to provide title to the

land;

(2) A description of the lands or interest in lands being

considered for exchange;

(3) A statement by a party, other than the United States and State

and local governments, that such party is a citizen of the United

States or a corporation or other legal entity subject to the laws of

the United States or a State thereof;

(4) A description of the appurtenant rights proposed to be

exchanged or reserved; any authorized uses, including grants, permits,

easements, or leases; and any known unauthorized uses, outstanding

interests, exceptions, covenants, restrictions, title defects or

encumbrances;

(5) A time schedule for completing the proposed exchange;

(6) An assignment of responsibility for performance of required

functions and for costs associated with processing the exchange;

(7) A statement specifying whether compensation for costs assumed

will be allowed pursuant to the provisions of Sec. 254.7 of this

subpart;

(8) Notice of any known release, storage, or disposal of hazardous

substances on involved Federal or non-Federal lands and any commitments

regarding responsibility for removal or other remedial actions

concerning such substances on involved non-Federal lands (Sec. 254.3(i)

and Sec. 254.14);

(9) A grant of permission by each party to physically examine the

lands offered by the other party;

(10) The terms of any assembled land exchange arrangement, pursuant

to Sec. 254.5 of this subpart;

(11) A statement as to the arrangements for relocation of any

tenants occupying non-Federal lands pursuant to Sec. 254.15 of this

subpart;

(12) A notice to an owner-occupant of the voluntary basis for the

acquisition of the non-Federal lands, pursuant to Sec. 254.15 of this

subpart; and

(13) A statement as to the manner in which documents of conveyance

will be exchanged, should the exchange proposal be successfully

completed.

(d) Unless the parties agree to some other schedule, no later than

90 days from the date of the executed agreement to initiate an

exchange, the parties shall arrange for appraisals which are to be

completed within timeframes and under such terms as are negotiated. In

the absence of current market information reliably supporting value,

the parties may agree to use other acceptable and commonly recognized

methods to estimate value.

(e) An agreement to initiate may be amended by consent of the

parties or terminated at any time upon written notice by any party.

(f) Entering into an agreement to initiate an exchange does not

legally bind any party to proceed with processing or to consummate a

proposed exchange, or to reimburse or pay damages to any party to a

proposed exchange that is not consummated or to anyone doing business

with any such party.

(g) The withdrawal from an exchange proposal by an authorized

officer at any time prior to the notice of decision, pursuant to

Sec. 254.13 of this subpart, is not appealable under 36 CFR part 217 or

36 CFR part 251, subpart C.

Sec. 254.5 Assembled land exchanges.

(a) Whenever the authorized officer determines it is to be

practicable, an assembled land exchange arrangement may be used to

facilitate exchanges and reduce costs.

(b) The parties to an exchange may agree to such an arrangement

where multiple ownership parcels of non-Federal lands are consolidated

into a package for the purpose of completing one exchange transaction.

(c) An assembled land exchange arrangement must be documented in

the agreement to initiate an exchange, pursuant to Sec. 254.4 of this

subpart.

(d) Value of the Federal and non-Federal lands involved in an

assembled land exchange arrangement shall be estimated pursuant to

Sec. 254.9 of this subpart.

Sec. 254.6 Segregative effect.

(a) If a proposal is made to exchange Federal lands, the authorized

officer may request the appropriate State Office of the Bureau of

Management (BLM) to segregate the Federal lands by a notation on the

public land records. Subject to valid existing rights, the Federal

lands shall be segregated from appropriation under the public land laws

and mineral laws for a period not to exceed 5 years from the date of

record notation.

(b) Any interests of the United States in the non-Federal lands

that are covered by the exchange proposal may be noted and segregated

from appropriation under the mineral laws for a period not to exceed 5

years from the date of notation.

(c) The segregative effect terminates as follows:

(1) Automatically, upon issuance of a patent or other document of

conveyance to the affected lands;

(2) On the date and time specified in an opening order, published

in the Federal Register by the appropriate BLM State Office, if a

decision is made not to proceed with the exchange or upon removal of

any lands from the exchange proposal; or

(3) Automatically, at the end of the segregation period not to

exceed 5 years from the date of notation on the public land records,

whichever occurs first.

Sec. 254.7 Assumption of costs.

(a) Generally, each party to an exchange will bear their own costs

of the exchange. However, if the authorized officer finds it is in the

public interest as specified in paragraph (b) of this section, an

agreement to initiate an exchange may provide that:

(1) One or more of the parties may assume, without compensation,

all or part of the costs or other responsibilities or requirements that

the authorized officer determines would ordinarily be borne by the

other parties; or

(2) Subject to the limitation in paragraph (c) of this section, the

parties may agree to make adjustments to the relative values involved

in an exchange transaction, in order to compensate parties for assuming

costs or other responsibilities or requirements that the authorized

officer determines would ordinarily be borne by the other parties.

These costs or services may include but are not limited to: land

surveys; appraisals; mineral examinations; timber cruises; title

searches; title curative actions; cultural resource surveys and

mitigation; hazardous substance surveys and controls; removal of

encumbrances; arbitration, including all fees; bargaining; cure of

deficiencies preventing highest and best use of the land; conduct of

public hearings; assemblage of non-Federal parties from multiple

ownerships; and the expenses of complying with laws, regulations, and

policies applicable to exchange transactions, or which are necessary to

bring the Federal and non-Federal lands involved in the exchange to

their highest and best use for appraisal and exchange purposes.

(b) As a condition of an agreement to initiate, the authorized

officer may agree to assume without compensation costs ordinarily borne

by the non-Federal party or to compensate the non-Federal party for

assuming Federal costs only on an exceptional basis when it is clearly

in the public interest and when the authorized officer determines and

documents that each of the following circumstances exist:

(1) The amount of such cost assumed or compensation is reasonable

and accurately reflects the value of the cost or service provided, or

any responsibility and requirement assumed;

(2) The proposed exchange is a high priority of the agency;

(3) The land exchange must be expedited to protect important

Federal resource values, such as congressionally designated areas or

endangered species habitat;

(4) Cash equalization funds are available for compensation of the

non-Federal party; and

(5) There are no other practicable means available to the

authorized officer for meeting Federal exchange processing costs,

responsibilities, or requirements.

(c) The total amount of an adjustment agreed to as compensation for

costs pursuant to this section shall not exceed the limitations set

forth in Sec. 254.12(b) of this subpart.

Sec. 254.8 Notice of exchange proposal.

(a) Upon entering into an agreement to initiate an exchange, the

authorized officer shall publish a notice once a week for four

consecutive weeks in newspapers of general circulation in the counties

in which the Federal and non-Federal lands or interests proposed for

exchange are located. The authorized officer shall notify authorized

users, the jurisdictional State and local governments, and the

congressional delegation and shall make other distribution of the

notice as appropriate. At a minimum, the notice shall include:

(1) The identity of the parties involved in the proposed exchange;

(2) A description of the Federal and non-Federal lands being

considered for exchange;

(3) A statement as to the effect of segregation from appropriation

under the public land laws and mineral laws, if applicable;

(4) An invitation to the public to submit in writing any comments

on or concerns about the exchange proposal, including advising the

agency as to any liens, encumbrances, or other claims relating to the

lands being considered for exchange; and

(5) The deadline by which comments must be received, and the name,

title, and address of the official to whom comments must be sent and

from whom additional information may be obtained.

(b) To be assured of consideration in the environmental analysis of

the proposed exchange, all comments must be made in writing to the

authorized officer and postmarked or delivered within 45 days after the

initial date of publication.

(c) The authorized officer is not required to republish legal

descriptions of any lands that may be excluded from the final exchange

transaction, provided such lands were identified in the notice of

exchange proposal. In addition, minor corrections of land descriptions

and other insignificant changes do not require republication.

Sec. 254.9 Appraisals.

The Federal and non-Federal parties to an exchange shall comply

with the appraisal standards as set forth in paragraphs (a) through (d)

of this section, and, to the extent appropriate, with the Uniform

Appraisal Standards for Federal Land Acquisitions: Interagency Land

Acquisition Conference 1992 (Washington, DC, 1992), ISBN 0-16-038050-2

when appraising the values of the Federal and non-Federal lands

involved in an exchange.

(a) Appraiser qualifications.

(1) A qualified appraiser(s) shall provide to the authorized

officer appraisals estimating the market value of Federal and non-

Federal properties involved in an exchange. A qualified appraiser may

be an employee or a contractor to the Federal or non-Federal exchange

parties. At a minimum, a qualified appraiser shall be an individual

agreeable to all parties and approved by the authorized officer, who is

competent, reputable, impartial, and has training and experience in

appraising property similar to the property involved in the appraisal

assignment.

(2) Qualified appraisers shall possess qualifications consistent

with State regulatory requirements that meet the intent of Title XI,

Financial Institutions Reform, Recovery, and Enforcement Act of 1989

(FIRREA) (12 U.S.C. 3331). In the event a State or Territory does not

have approved policies, practices, and procedures regulating the

activities of appraisers, the Forest Service may establish appraiser

qualification standards commensurate with those generally adopted by

other States or Territories meeting the requirements of FIRREA.

(b) Market value.

(1) In estimating market value, the appraiser shall:

(i) Determine the highest and best use of the property to be

appraised;

(ii) Estimate the value of the lands and interests as if in private

ownership and available for sale in the open market;

(iii) Include historic, wildlife, recreation, wilderness, scenic,

cultural, or other resource values or amenities as reflected in prices

paid for similar properties in the competitive market;

(iv) Consider the contributory value of any interest in land such

as water rights, minerals, or timber, to the extent they are consistent

with the highest and best use of the property; and

(v) If stipulated in the agreement to initiate in accordance with

Sec. 254.4 of this subpart, estimate separately the value of each

property optioned or acquired from multiple ownerships by the non-

Federal party for purposes of exchange, pursuant to Sec. 254.5 of this

subpart. In this case, the appraiser also must estimate the value of

the Federal and non-Federal properties in a similar manner.

(2) In estimating market value, the appraiser may not independently

add the separate values of the fractional interests to be conveyed,

unless market evidence indicates the following:

(i) The various interests contribute their full value (pro rata) to

the value of the whole; and

(ii) The valuation is compatible with the highest and best use of

the property.

(3) In the absence of current market information reliably

supporting value, the authorized officer may use other acceptable and

commonly recognized methods to determine market value.

(c) Appraisal report standards. Appraisals prepared for exchange

purposes must contain the following minimum information:

(1) A summary of facts and conclusions;

(2) The purpose and/or the function of the appraisal, a definition

of the estate being appraised, and a statement of the assumptions and

limiting conditions affecting the appraisal assignment, if any;

(3) An explanation of the extent of the appraiser's research and

actions taken to collect and confirm information relied upon in

estimating value;

(4) An adequate description of the physical characteristics of the

land being appraised; a statement of all encumbrances; title

information; location, zoning, and present use; an analysis of highest

and best use; and at least a 5-year sales history of the property;

(5) A disclosure of any condition that is observed during the

inspection of the property or becomes known to the appraiser through

the normal research which would lead the appraiser to believe that

hazardous substances may be present on the property being appraised;

(6) A comparative market analysis and, if more than one method of

valuation is used, an analysis and reconciliation of the methods used

to support the appraiser's estimate of value;

(7) A description of comparable sales, including a description of

all relevant physical, legal, and economic factors such as parties to

the transaction, source and method of financing, effect of any

favorable financing on sale price, and verification by a party involved

in the transaction;

(8) An estimate of market value;

(9) The effective date of valuation, date of appraisal, signature,

and certification of the appraiser;

(10) A certification by the appraiser to the following:

(i) The appraiser has personally contacted the property owner or

designated representative and offered the owner an opportunity to be

present during inspection of the property;

(ii) The appraiser has personally examined the subject property and

all comparable sale properties relied upon in the report;

(iii) The appraiser has no present or prospective interest in the

appraised property; and

(iv) The appraiser has not received compensation that was

contingent on the analysis, opinions, or conclusions contained in the

appraisal report; and

(11) Copies of relevant written reports, studies, or summary

conclusions prepared by others in association with the appraisal

assignment which were relied upon by the appraiser to estimate value,

which may include, but is not limited to, current title reports,

mineral reports, or timber cruises prepared by qualified specialists.

(d) Appraisal review.

(1) Appraisal reports shall be reviewed by a qualified review

appraiser meeting the qualifications set forth in paragraph (a) of this

section. Statements of value prepared by agency appraisers are not

subject to this review.

(2) The review appraiser shall determine whether the appraisal

report:

(i) Is complete, logical, consistent, and supported by market

analysis;

(ii) Complies with the standards prescribed in paragraph (c) of

this section; and

(iii) Reasonably estimates the probable market value of the lands

appraised.

(3) The review appraiser shall prepare a written review report,

containing at a minimum:

(i) A description of the review process used;

(ii) An explanation of the adequacy, relevance, and reasonableness

of the data and methods used by the appraiser to estimate value;

(iii) The review appraiser's conclusions regarding the appraiser's

estimate of market value; and

(iv) A certification by the review appraiser to the following:

(A) The review appraiser has no present or prospective interest in

the property which is the subject of the review report; and

(B) The review appraiser has not received compensation that was

contingent upon approval of the appraisal report.

Sec. 254.10 Bargaining; arbitration.

(a) Unless the parties to an exchange agree in writing to suspend

or modify the deadlines contained in paragraphs (a)(1) through (a)(4)

of this section, the parties shall adhere to the following:

(1)(i) Within 180 days from the date of receipt of the appraisal(s)

for review and approval by the authorized officer, the parties to an

exchange may agree on the appraised values or may initiate a process of

bargaining or some other process to determine values. Bargaining or any

other process must be based on an objective analysis of the valuation

in the appraisal report(s) and is a means of reconciling differences in

such report(s). Bargaining or another process to determine values may

involve one or more of the following actions:

(A) Submission of the disputed appraisal(s) to another qualified

appraiser for review:

(B) Request for additional appraisals;

(C) Involvement of an impartial third party to facilitate

resolution of the value disputes, or

(D) Use of some other acceptable and commonly recognized practice

for resolving value disputes.

(ii) Any agreement based upon bargaining must be in writing and

made part of the administrative record of the exchange. Such agreement

must contain a reference to all relevant appraisal information and

state how the parties reconciled or compromised appraisal information

to arrive at an agreement based on market value.

(2) If within 180 days from the date of receipt of the appraisal(s)

for review and approval by the authorized officer, the parties to an

exchange cannot agree on values but wish to continue with the land

exchange, the appraisal(s), at the initiative of either party, must be

submitted to arbitration, unless, in lieu of arbitration, the parties

have employed a process of bargaining or some other process to

determine values. If arbitration occurs, it must be conducted in

accordance with the real estate valuation arbitration rules of the

American Arbitration Association. The Secretary or an official to whom

such authority has been delegated shall appoint an arbitrator from a

list provided by the American Arbitration Association.

(3) Within 30 days after completion of arbitration, the parties

involved in the exchange must determine whether to proceed with the

exchange, modify the exchange to reflect the findings of the

arbitration or any other factors, or withdraw from the exchange. A

decision to withdraw from the exchange may be made upon written notice

by either party at this time or at any other time prior to entering

into a binding exchange agreement.

(4) If the parties agree to proceed with an exchange after

arbitration, the values established by arbitration are binding upon all

parties for a period not to exceed 2 years from the date of the

arbitration decision.

(b) Arbitration is limited to the disputed valuation of the lands

involved in a proposed exchange and an arbitrator's award decision is

limited to the value estimate(s) of the contested appraisal(s). An

arbitrator may not include in an award decision recommendations

regarding the terms of a proposed exchange, nor may an arbitrator's

award decision infringe upon the authority of the Secretary to make all

decisions regarding management of Federal lands and to make public

interest determinations.

Sec. 254.11 Exchanges at approximately equal value.

(a) The authorized officer may exchange lands which are of

approximately equal value upon a determination that:

(1) The exchange is in the public interest and the consummation of

the proposed exchange will be expedited;

(2) The value of the lands to be conveyed out of Federal ownership

is not more than $150,000 as based upon a statement of value prepared

by a qualified appraiser and accepted by an authorized officer;

(3) The Federal and non-Federal lands are substantially similar in

location, acreage, use, and physical attributes; and

(4) There are no significant elements of value requiring complex

analysis.

(b) The authorized officer, not the non-Federal party, determines

whether the Federal and non-Federal lands are approximately equal in

value and must document how the determination was made.

Sec. 254.12 Value equalization; cash equalization waiver.

(a) To equalize the agreed upon values of the Federal and non-

Federal lands involved in an exchange, either with or without

adjustments of relative values as compensation for various costs, the

parties to an exchange may agree to:

(1) Modify the exchange proposal by adding or excluding lands; and/

or

(2) Use cash equalization, after making all reasonable efforts to

equalize values by adding or deleting lands.

(b) The combined amount of any cash equalization payment and/or the

amount of adjustments agreed to as compensation for costs under

Sec. 254.7 of this subpart may not exceed 25 percent of the value of

the Federal lands to be conveyed.

(c) The Secretary of Agriculture may not waive cash equalization

payment due the United States, but the parties may agree to waive cash

equalization payment due the non-Federal party. The amount to be waived

may not exceed 3 percent of the value of the lands being exchanged out

of Federal ownership or $15,000, whichever is less.

(d) A cash equalization payment may be waived only after the

authorized officer certifies, in writing, that the waiver will expedite

the exchange and that the public interest will be best served by the

waiver.

Sec. 254.13 Approval of exchanges; notice of decision.

(a) Upon completion of all environmental analyses and appropriate

documentation, appraisals, and all other supporting studies and

requirements to determine if a proposed exchange is in the public

interest and in compliance with applicable law and regulations, the

authorized officer shall decide whether to approve an exchange

proposal.

(1) When a decision to approve or disapprove an exchange is made,

the authorized officer shall publish a notice of the availability of

the decision in newspapers of general circulation. At a minimum, the

notice must include:

(i) The date of decision;

(ii) A concise description of the decision;

(iii) The name and title of the deciding official;

(iv) Directions for obtaining a copy of the decision; and

(v) The date of the beginning of the appeal period.

(2) The authorized officer shall distribute notices to the State

and local governmental subdivisions having authority in the

geographical area within which the lands covered by the notice are

located, the non-Federal exchange parties, authorized users of involved

Federal lands, the congressional delegation, and individuals who

requested notification or filed written objections, and others as

appropriate.

(b) For a period of 45 days after the date of publication of a

notice of the availability of a decision to approve or disapprove an

exchange proposal, the decision shall be subject to appeal as provided

under 36 CFR part 217 or, for eligible parties, under 36 CFR part 251,

subpart C.

Sec. 254.14 Exchange agreement.

(a) The parties to a proposed exchange may enter into an exchange

agreement subsequent to a decision by the authorized officer to approve

the exchange, pursuant to Sec. 254.13 of this subpart. Such an

agreement is required if hazardous substances are present on the non-

Federal lands. An exchange agreement must contain the following:

(1) Identification of the parties, description of the lands and

interests to be exchanged, identification of all reserved and

outstanding interests, stipulation of any necessary cash equalization,

and all other terms and conditions necessary to complete an exchange;

(2) Inclusion of the terms regarding responsibility for removal,

indemnification (``hold harmless'' agreement), or other remedial

actions concerning any hazardous substances on the involved non-Federal

lands; and

(3) The agreed upon values of the involved lands, until

consummation of the land exchange.

(b) An exchange agreement, as described in paragraph (a) of this

section, is legally binding on all parties, subject to the terms and

conditions thereof, provided:

(1) Acceptable title can be conveyed:

(2) No substantial loss or damage occurs to either property from

any cause;

(3) No undisclosed hazardous substances are found on the involved

Federal or non-Federal lands prior to conveyance;

(4) The exchange proposal receives any required Secretarial

approval;

(5) No objections are raised during any required congressional

oversight;

(6) In the event of an appeal under 36 CFR part 217 or 36 CFR part

251, subpart C, a decision to approve an exchange proposal pursuant to

Sec. 254.13 of this subpart is upheld; and

(7) The agreement is not terminated by mutual consent or upon such

terms as may be provided in the agreement.

(c) In the event of a failure to perform or to comply with the

terms of an exchange agreement, the noncomplying party is liable for

all costs borne by the other party as a result of the proposed

exchange, including, but not limited to, land surveys, appraisals,

mineral examinations, timber cruises, title searches, title curative

actions, cultural resource surveys and mitigation, hazardous substance

surveys and controls, removal of encumbrances, arbitration, curing

deficiencies preventing highest and best use of the land, and any other

expenses incurred in processing the proposed land exchange.

(d) Absent an executed exchange agreement, an action taken by the

parties prior to consummation of an exchange does not create any

contractual or other binding obligations or rights enforceable against

any party.

Sec. 254.15 Title standards.

(a) Title evidence.

(1) Unless otherwise specified by the USDA Office of the General

Counsel, evidence of title for the non-Federal lands being conveyed to

the United States must be in recordable form and in conformance with

the Department of Justice regulations and ``Standards for the

Preparation of Title Evidence in Land Acquisitions by the United

States'' in effect at the time of conveyance.

(2) The United States is not required to furnish title evidence for

the Federal lands being exchanged.

(b) Conveyance documents.

(1) Unless otherwise specified by the USDA Office of the General

Counsel, all conveyances to the United States must be prepared,

executed, and acknowledged in accordance with the Department of Justice

regulations and ``Standards for the Preparation of Title Evidence in

Land Acquisitions by the United States'' in effect at the time of

conveyance.

(2) Conveyances of lands from the United States are made by patent,

quitclaim deed, or deed and without express or implied warranties,

except as to hazardous substances pursuant to Sec. 254.3 of this

subpart.

(c) Title encumbrances.

(1) Non-Federal lands.

(i) Title to the non-Federal lands must be acceptable to the United

States. For example, encumbrances such as taxes, judgment liens,

mortgages, and other objections or title defects shall be eliminated,

released, or waived in accordance with requirements of the preliminary

title opinion of the USDA Office of the General Counsel or the

Department of Justice, as appropriate.

(ii) The United States shall not accept lands in which there are

reserved or outstanding interests that would interfere with the use and

management of the land by the United States or would otherwise be

inconsistent with the authority under which, or the purpose for which,

the lands are to be acquired. Reserved interests of the non-Federal

landowner are subject to the appropriate rules and regulations of the

Secretary, except upon special finding by the Chief, Forest Service in

the case of States, agencies, or political subdivisions thereof (36 CFR

part 251, subpart A).

(iii) Any personal property owned by the non-Federal party which is

not a part of the exchange proposal, should be removed by the non-

Federal party prior to acceptance of title by the United States, unless

the authorized officer and the non-Federal party to the exchange

previously agree upon a specified period to remove the personal

property. If the personal property is not removed prior to acceptance

of title or within the otherwise prescribed time, it shall be deemed

abandoned and shall become vested in the United States.

(iv) The exchange parties must reach agreement on the arrangements

for the relocation of any tenants. Qualified tenants occupying non-

Federal lands affected by a land exchange may be entitled to relocation

benefits under 49 CFR 24.2. Unless otherwise provided by law or

regulation (49 CFR 24.101(a)(1)), relocation benefits are not

applicable to owner-occupants involved in exchanges with the United

States provided the owner-occupants are notified in writing that the

non-Federal lands are being acquired by the United States on a

voluntary basis.

(2) Federal lands. If Federal lands proposed for exchange are

occupied under grant, permit, easement, or non-mineral lease by a third

party who is not a party to the exchange, the third party holder of

such authorization and the non-Federal party to the exchange may reach

agreement as to the disposition of the existing use(s) authorized under

the terms of the grant, permit, easement, or lease. The non-Federal

exchange party shall submit documented proof of such agreement prior to

issuance of a decision to approve the land exchange, as instructed by

the authorized officer. If an agreement cannot be reached, the

authorized officer shall consider other alternatives to accommodate the

authorized use or shall determine whether the public interest will be

best served by terminating such use pursuant to 36 CFR 251.60.

Sec. 254.16 Case closing.

(a) Title transfers. Unless otherwise agreed, and notwithstanding

the decision in United States v. Schurz, 102 U.S. 378 (1880), or any

other law or ruling to the contrary, title to both the non-Federal and

Federal lands pass simultaneously and are deemed accepted by the United

States and the non-Federal landowner, respectively, when the documents

of conveyance are recorded in the county clerk's or other local

recorder's office. Before recordation, all instructions, requirements,

and conditions set forth by the United States and the non-Federal

landowner must be met. The minimum requirements and conditions

necessary for recordation include the following, as appropriate:

(1) The determination by the authorized officer that the United

States will receive possession, acceptable to it, of such lands;

(2) The issuance of title evidence as of the date of recordation

which conforms to the instructions and requirements of the USDA Office

of the General Counsel's preliminary title opinion; and

(3) Continuation searches disclosing no matters of record that

would require any change in the aforementioned title evidence as

issued.

(b) Automatic segregation of lands. Subject to valid existing

rights, non-Federal lands acquired through exchange by the United

States automatically are segregated from appropriation under the public

land laws and mineral laws until midnight of the 90th day after

acceptance of title by the United States, and the public land records

must be noted accordingly. Thereafter, the lands will be open

automatically to operation of the public land laws and mineral laws,

except to the extent otherwise provided by law, unless action is taken

pursuant to 43 CFR part 2300 to initiate a withdrawal within the 90-day

period.

Sec. 254.17 Information requirements.

The requirements governing the preparation of an agreement to

initiate in Sec. 254.4 of this subpart and an exchange agreement in

Sec. 254.4 of this subpart constitute information requirements as

defined by the Paperwork Reduction Act of 1980 (44 U.S.C. 3507) and

have been approved for use pursuant to 5 CFR part 1320 and assigned OMB

Control Number 0596-0105.

Dated: February 18, 1994.

Adela Backiel,

Deputy Assistant Secretary, Natural Resources and Environment.

[FR Doc. 94-4997 Filed 3-7-94; 8:45 am]

BILLING CODE 3410-11-M