Update of Linear Right-of-Way Rent Schedule, 65040-65118 [E8-25159]

Agencies

• DEPARTMENT OF THE INTERIOR
• Bureau of Land Management
• Land Management Bureau

[Federal Register Volume 73, Number 212 (Friday, October 31, 2008)]
[Rules and Regulations]
[Pages 65040-65118]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-25159]



[[Page 65039]]

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Part II





Department of the Interior





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Bureau of Land Management



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43 CFR Parts 2800, 2880, and 2920



Update of Linear Right-of-Way Schedule; Final Rule

Federal Register / Vol. 73, No. 212 / Friday, October 31, 2008 / 
Rules and Regulations

[[Page 65040]]


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DEPARTMENT OF THE INTERIOR

Bureau of Land Management

43 CFR Parts 2800, 2880, and 2920

[WO-350-07-1430-PN]
RIN 1004-AD87


Update of Linear Right-of-Way Rent Schedule

AGENCY: Bureau of Land Management, Interior.

ACTION: Final rule.

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SUMMARY: The Bureau of Land Management (BLM) is amending its right-of-
way regulations to update the linear right-of-way rent schedule in 43 
CFR parts 2800 and 2880. The rent schedule covers most linear rights-
of-way granted under Title V of the Federal Land Policy and Management 
Act of 1976, as amended (FLPMA), and Section 28 of the Mineral Leasing 
Act of 1920, as amended (MLA). Those laws require the holder of a 
right-of-way grant to pay annually, in advance, the fair market value 
to occupy, use, or traverse public lands for facilities such as power 
lines, fiber optic lines, pipelines, roads, and ditches.
    Section 367 of the Energy Policy Act of 2005 (the Act) directs the 
Secretary of the Interior to update the per acre rent schedule found in 
43 CFR 2806.20. The Act requires that the BLM revise the per acre 
rental fee zone value schedule by state, county, and type of linear 
right-of-way use to reflect current land values in each zone. The Act 
also requires the Secretary of Agriculture (Forest Service) to make the 
same revisions for rights-of-way on National Forest System (NFS) lands.

DATES: This final rule is effective December 1, 2008.

FOR FURTHER INFORMATION CONTACT: For information on the substance of 
the final rule, please contact Bil Weigand at (208) 373-3862 or Rick 
Stamm at (202) 452-5185. For information on procedural matters, please 
contact Ian Senio at (202) 452-5049. Persons who use a 
telecommunications device for the deaf (TDD) may call the Federal 
Information Relay Service (FIRS) at 1-800-877-8339 to contact the above 
individuals during business hours. FIRS is available twenty-four hours 
a day, seven days a week, to leave a message or question with the above 
individuals. You will receive a reply during normal business hours.

SUPPLEMENTARY INFORMATION:

I. Background
II. Final Rule as Adopted and Response to Comments
III. Procedural Matters

I. Background

    Statutory: Section 367 of the Act, entitled ``Fair Market Value 
Determinations for Linear Rights-of-Way Across Public Lands and 
National Forests,'' directs the Secretary of the Interior to: (1) 
Update 43 CFR 2806.20, which contains the per acre rent schedule for 
linear rights-of-way; and (2) Revise the per acre rental fee zone value 
schedule by state, county, and type of linear right-of-way uses to 
reflect current values of land in each zone. In addition, pursuant to 
section 367(a) and (b), the Secretary of Agriculture is adopting BLM's 
rent schedule in 43 CFR subpart 2806, as updated by Section 367, for 
linear rights-of-way granted, issued, or renewed for use of National 
Forest System lands under Title V of FLPMA or Section 28 of the MLA.
    Advance Notice of Proposed Rulemaking: The BLM published an advance 
notice of proposed rulemaking (ANPR) in the Federal Register on April 
27, 2006 (71 FR 24836). The comment period for the ANPR ended on May 
30, 2006. The purpose of the ANPR was to encourage members of the 
public to provide comments and suggestions to help with updating the 
BLM's and the Forest Service's (FS) rent schedule, as described in the 
Act. The BLM received ten responses to the ANPR, including comments on 
six specific questions posed there. The BLM utilized the comments 
received from the ANPR extensively in the development of the proposed 
and final rule.
    Proposed Rule: The BLM published a proposed rule in the Federal 
Register on December 11, 2007 (72 FR 70376). The comment period for the 
proposed rule ended on February 11, 2008. The purpose of the proposed 
rule was to provide members of the public an opportunity to comment on 
the BLM's proposal to update the linear rent schedule, as described in 
the Act. The BLM received twelve responses to the proposed rule, 
including comments on six specific questions posed there. The BLM 
utilized the comments received on the proposed rule extensively in the 
development of the final rule.
    Previous (1987) Linear Rent Schedule: On July 8, 1987, and 
September 30, 1987, the BLM published regulations establishing rent 
schedules for linear rights-of-way granted under Section 28 of the MLA 
and Title V of FLPMA (52 FR 25818 and 52 FR 36576). The FS used these 
same schedules to charge rent for rights-of-way across NFS lands. The 
update to these previous schedules contained in this final rule also 
affects the FS and users of NFS lands.
    The 1987 rent schedule was developed to set fair market rent and 
minimize the need for individual real estate appraisals for each right-
of-way requiring rent payments, as well as to avoid the costs, delays, 
and unpredictability of the appraisal process in reasonably setting 
fair market rent.
    The 1987 rent schedule established eight fee zones based on the 
distribution of average land values by county in Puerto Rico and in 
each of the states, except Alaska and Hawaii. (The 1987 rent schedule 
did not apply to Alaska and Hawaii; however, the rent schedule in this 
final rule applies to all 50 states and the commonwealth of Puerto 
Rico. Linear right-of-way rental fees in Alaska were previously 
determined on a case-by-case basis based on local market values. There 
are no linear rights-of-way in Hawaii currently administered by either 
the BLM or the FS). Under the 1987 regulations, a county was assigned 
to one of the eight zone values, based on average land values in the 
county: lower-value counties were assigned lower-numbered zones. The 
eight zone values contained in the 1987 schedule were set at $50, $100, 
$200, $300, $400, $500, $600, and $1,000 per acre. A county's zone 
value was translated into a per acre zone rent by use of the adjustment 
formula described below. To calculate the annual right-of-way rental 
payment, the zone rent was multiplied by the total acreage within the 
right-of-way. The formula for zone rent was:

Zone rent = (zone value) x (impact adjustment) x (Treasury Security 
Rate) x (annual adjustment factor)

    The zone value term in the formula was the land value that was 
established for each of the eight zones. The zone values established in 
1987 were never updated, although it is generally recognized that land 
values increased significantly in most areas from 1987 to the present.
    The impact adjustment term (or encumbrance factor) in the formula 
reflected the differences in land-use impacts between: (1) Oil, gas, 
and other energy-related pipelines, roads, ditches, and canals; and (2) 
Electrical transmission and distribution lines, telephone lines, and 
non-energy related pipelines. Energy-related pipelines and roads were 
considered as having a greater surface disturbance impact on the land, 
and were adjusted to 80 percent of the zone value. Electrical 
transmission and distribution lines, phone lines, and non-energy 
related pipelines with a smaller area of disturbance were adjusted to 
70 percent of the zone value.

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    The Treasury Security term in the formula reflected a reasonable 
rate of return to the United States for the use of the land within the 
right-of-way. The 1987 regulations were based on a rate of return of 
6.41 percent for a 1-year Treasury Security.
    The zone rent was adjusted annually by the change in the Gross 
Domestic Product, Implicit Price Deflator index.
    BLM Right-of-Way Program and Revenues: The BLM administers 96,000 
rights-of-way, of which 66,000 are authorized under FLPMA and 30,000 
are authorized under the MLA. However, only 48,600 are subject to a 
rental payment. Wyoming and New Mexico together account for slightly 
more than 30,000 of the rights-of-way subject to rent. The BLM 
collected approximately $20.6 million in right-of-way rental receipts 
for fiscal year 2007. This total includes receipts from both linear and 
site-type rights-of-way. Seventy-seven percent of all right-of-way rent 
receipts were collected by five BLM State Offices. These five State 
Offices and the revenues collected are listed in Table 1.

Table 1--Right-of-Way Rental Receipts for ``Top Five'' BLM State Offices
------------------------------------------------------------------------
                                                           Total rental
                      State office                         receipts (FY
                                                               2007)
------------------------------------------------------------------------
Nevada..................................................      $4,386,150
Wyoming.................................................       4,086,382
California..............................................       3,210,892
New Mexico..............................................       2,669,556
Arizona.................................................       1,408,414
 
    Total...............................................      15,761,394
------------------------------------------------------------------------

    Rent receipts from communication uses, which have their own rent 
schedule, totaled approximately $5 million, while receipts from other 
site-type rights-of-way, which normally require an appraisal to 
determine rent, and/or initial ad hoc billings, totaled approximately 
$9 million.
    In fiscal year 2007, the BLM collected $6.5 million total rent for 
12,545 linear rights-of-ways using the previous schedule. Of this 
amount, only 133 bills (for $52,400) were for rental payment periods 
(the length of time for which the holder is paying rent) of less than 1 
year. The largest number of bills (5,864) was issued for one-year 
rental payment periods. The rent collected from these one-year bills 
totaled $4,781,000 ($815 per bill) and included approximately $852,000 
for linear rights-of-way located in high value areas, such as in Clark 
County, Nevada, near the city of Las Vegas. The rent for these bills 
was generated using a similar methodology as the linear rent schedule, 
but was calculated using higher land values supported by appraisal data 
(used to develop ``unique zones'' with annual per acre rent values 
ranging from $280 to $6,000). Another 4,993 bills were issued for 
$133,172, covering a 5-year rental payment period. The average 5-year 
bill totaled $27, or less than $6 per bill on an annual basis. Lastly, 
a total of $89,000 was billed for rental payment periods of between 6 
and 30 years.
    To summarize, in fiscal year 2007 the BLM collected a total of 
$20.6 million in right-of-way rent receipts, but of that only $5.6 
million was calculated using the previous Per Acre Rent Schedule. 
Another $852,000 was calculated using similar methodology as the Per 
Acre Rent Schedule, but was calculated using higher land values (unique 
zones) supported by appraisal data. In addition, over half of all bills 
generated for linear right-of-way grants in fiscal year 2007 were for 
multi-year periods of 2 years or more.
    Interagency Coordination: The United States Department of 
Agriculture, Forest Service (FS), will adopt without rulemaking the 
revisions to the linear right-of-way rent schedule at 43 CFR 2806.20 
promulgated by the BLM through this final rule. To enhance consistency 
between the BLM and the FS, the FS has indicated that it will 
incorporate some of the procedural or otherwise nonsubstantive changes 
into its directive system. The FS will be publishing a notice of its 
adoption of BLM's rental schedule pursuant to this rule and its 
incorporation of other changes in subpart 2806.

II. Final Rule as Adopted and Response to Comments

Part 2800 Rights-of-Way Under FLPMA

    The BLM is amending the Per Acre Rent Schedule in its right-of-way 
regulations in 43 CFR parts 2800 and 2880. The rent schedule covers 
most linear rights-of-way granted under Title V of FLPMA and Section 28 
of the MLA. These laws require the holder of a right-of-way grant to 
pay annually, in advance, the fair market value to occupy, use, or 
traverse public lands for facilities such as power lines, fiber optic 
lines, pipelines, roads, and ditches.
    As mentioned above, the Act directs the Secretary of the Interior 
to update the per acre rent schedule in the BLM's previous regulations 
at 43 CFR 2806.20. The Act specifically requires that the BLM revise 
the per acre rental fee zone value schedule by state, county, and type 
of linear right-of-way use to reflect current land values in each zone. 
The Per Acre Rent Schedule applies to linear rights-of-way the BLM 
issues under 43 CFR parts 2800 and 2880. So as not to be redundant, we 
discuss the components and application of the rent schedule primarily 
in part 2800 and will not repeat those discussions in part 2880. 
However, we will note any differences in part 2880 that are necessary 
based upon specific statutory provisions of the MLA.
    In addition to revising the Per Acre Rent Schedule, the final rule 
makes minor amendments to parts 2800 and 2880 to bring the previous 
regulations into compliance with the statutory rent schedule changes. 
Finally, there are a number of minor corrections and changes in the 
final rule that are not directly related to the rent schedule. These 
changes are limited in scope and address trespass and the new rental 
payments, land status changes, annual rental payments, MLA hardship 
provisions, and reimbursements of monitoring costs and processing fees. 
These latter items correct some errors in the previous regulations and 
clarify others. This final rule:
    (1) Makes clear that the rent exemptions listed in section 2806.14 
do not apply if the applicant/holder is in trespass;
    (2) Provides that only the Per Acre Rent Schedule will be used to 
determine rent for linear right-of-way grants, unless the land 
encumbered by the grant is to be transferred out of Federal ownership;
    (3) Provides for an annual rent payment term when the annual rent 
for non-individuals is $500 or more;
    (4) Provides for a one-time rent payment for grants and easements 
when the land encumbered by the grant or easement is to be transferred 
out of Federal ownership;
    (5) Provides for a limited phase-in provision to all holders for 
calendar year 2009, and, a possible additional phase-in period upon 
revision of the rent schedule under sections 2806.22(b) and 2885.19(a);
    (6) Revises section 2920.6 to require reimbursement of processing 
and monitoring costs under sections 2804.14 and 2805.16 for 
applications for leases and permits issued under Title III of FLPMA;
    (7) Amends section 2920.8(b) to assess a non-refundable processing 
fee and monitoring fee under sections 2804.14 and 2805.16 for each 
request for renewal, transfer, or assignment of a lease or easement;
    (8) Amends sections 2805.11(b)(2) and 2885.11(a) so that all 
grants, except those issued for a term of 3 years or less and those 
issued in perpetuity under

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FLPMA, expire on December 31 of the final year of the grant; and
    (9) Amends sections 2805.14(f) and 2885.12(e) to make it clear that 
you may assign your grant, without the BLM's prior written approval, if 
your authorization so provides.
    We received many comments on the proposed rule that addressed 
issues common to both the part 2800 and part 2880 regulations. So as 
not to be redundant, we address the comments only in the section they 
pertain to in the part 2800 regulations. Comments that specifically 
address the part 2880 regulations are discussed in that section of the 
preamble.
Subpart 2805--Terms and Conditions of Grants
    The BLM is making two minor amendments in 2 sections in subpart 
2805, which addresses the terms and conditions of FLPMA right-of-way 
authorizations.
Section 2805.11 What does a grant contain?
    Previous section 2805.11(b)(2) stated that all grants, except those 
issued for a term of less than 1 year and those issued in perpetuity, 
expire on December 31 of the final year of the grant. The BLM uses the 
calendar year, not the fiscal year or the anniversary date, to 
establish the rental period for grants. Expiration of grants on 
December 31 allows for consistency and ease of administration, because 
after the initial billing period only full calendar years are included 
in subsequent billing periods. However, the BLM often issues short-term 
right-of-way grants for 3 years or less to allow the holder to conduct 
temporary activities on public land. Previous section 2806.23(b) and 
final section 2806.24(c) both explain that the BLM considers the first 
partial calendar year in the rent payment period to be the first year 
of the rental term. Therefore, under previous section 2805.11(b)(2), a 
3-year grant actually had a term period of 2 years plus the time period 
remaining in the calendar year of issuance. A 2-year grant had a term 
period of 1 year plus the time period remaining in the calendar year of 
issuance. Depending on when the grant was issued, the actual term could 
have been just over 2 years for a 3-year grant and could have been just 
over 1 year for a 2-year grant. Under the final rule, all grants, 
except those issued for a term of 3 years or less and those issued in 
perpetuity, expire on December 31 of the final year of the grant. The 
changes to this section allow holders to use short-term grants for the 
full period of the grant. For example, if a 3-year grant is issued 
under the final rule on October 1, 2008, it would expire on September 
30, 2011, instead of December 31, 2010, under the previous rule. If a 
2-year grant is issued under the final rule on October 1, 2008, it 
expires on September 30, 2010, instead of December 31, 2009, under the 
previous rule. In most cases, the BLM would assess a one-time rental 
bill for the term of the grant, which would reduce any administrative 
impact which might otherwise result from this change. We received no 
comments on the proposed changes to this section, and the final rule 
adopts the proposed section without change.
Section 2805.14 What rights does a grant convey?
    Previous section 2805.14(f) stated that you had a right to assign 
your grant to another, provided that you obtained the BLM's prior 
written approval. The BLM proposed adding the phrase ``unless your 
grant specifically states that such approval is unnecessary'' at the 
end of this sentence to indicate that BLM's prior written approval may 
be unnecessary in certain cases. In most cases, assignments would 
continue to be subject to the BLM's written approval. However, with 
this change, the BLM could amend existing grants to allow future 
assignments without the BLM's prior written approval. This may be 
especially important to the future administration of a grant when the 
land encumbered by a grant is being transferred out of Federal 
ownership, and there is a request to convert an existing grant to an 
easement or a perpetual grant under section 2807.15(c). We received no 
comments on the proposed changes to this section and the final rule 
adopts the proposed section without change.
Subpart 2806--Rents
    Sections 2806.10 through 2806.16 of subpart 2806 contain general 
rent provisions that apply to grants. No changes were proposed to these 
general provisions except to section 2806.14.
Section 2806.14 Under what circumstances am I exempt from paying rent?
    Previous section 2806.14 identified those circumstances where a 
holder or facility is exempt from paying rent. None of the previous 
circumstances change under the final rule. We have, however, added a 
provision (final section 2806.14(b)) that states that the exemptions in 
this section do not apply if you are in trespass. The addition of this 
provision makes it clear that the penalties specified in subpart 2808--
Trespass, which include the assessment of rent for use of the public 
land, and possible additional penalties based upon the rent value, 
apply to all entities in trespass, even those entities that may 
otherwise be exempt from paying rent under section 2806.14. This is 
consistent with how trespass penalties are assessed under current 
policy, and provides for consistency with similar provisions in subpart 
2888--Trespass. Current section 2888.10(c) states that the BLM will 
administer trespass actions for MLA grants and temporary use permits 
(TUPs) as set forth in sections 2808.10(c) and 2808.11, except that the 
rental exemption provisions of part 2800 do not apply to grants issued 
under part 2880. Adding a new provision at section 2806.14(b) makes it 
clear that the rental exemption provisions do not apply to trespass 
situations covered under subpart 2808, as they likewise do not apply to 
trespass situations covered under subpart 2888. The final rule removes 
the existing phrase ``except that the rental exemption provisions of 
part 2800 (section 2806.14) do not apply to grants issued under this 
part'' from section 2888.10(c), because the cross reference is no 
longer necessary (see preamble discussion for proposed section 
2888.10(c)). We received no comments on the proposed changes to this 
section and the final rule adopts the proposed section without change.
Section 2806.20 What is the rent for a linear right-of-way grant?
    This section explains that the BLM will use the Per Acre Rent 
Schedule, except as described in section 2806.26, to calculate annual 
rent for linear right-of-way grants. The per acre rent from the 
schedule (for all types of linear right-of-way facilities regardless of 
the granting authority, e.g., FLPMA, MLA, and their predecessors) is 
the product of 4 factors: The per acre zone value multiplied by the 
encumbrance factor multiplied by the rate of return multiplied by the 
annual adjustment factor. The following discussion explains how the BLM 
adjusted these factors in the previous and proposed Per Acre Rent 
Schedule to arrive at the Per Acre Rent Schedule in the final rule, 
including the determination of per acre land values by county, as 
directed by the Act.

Use of a Schedule

    Section 367 of the Act directs the Secretary of the Interior to 
``revise the per acre rental fee zone value schedule by State, county, 
and type of linear right-of-way use to reflect current values of land 
in each zone.'' Therefore, the final rule retains the use of a schedule

[[Page 65043]]

and no alternative rental fee options were considered.

County Land Values--Use of Published Data

    In the 1987 rent schedule, the average per acre land value for each 
county was based upon a review of the typical per acre value for the 
types of lands that the BLM and the FS had allocated to various utility 
and right-of-way facilities. These values were mapped, reviewed, and 
adjusted, resulting in the placement of each county (except Coconino 
County, Arizona, which was split by the Colorado River) in one of eight 
zones ranging in value from $50 to $1,000 per acre.
    In the ANPR, the BLM requested comments regarding what available 
published information, statistical data, or reports the BLM should use 
to update the current linear right-of-way rental fee zone values. The 
BLM stated in the ANPR that it was considering using existing published 
information or statistical data for updating the rent schedule, such as 
information published by the National Agricultural Statistics Service 
(NASS). The NASS publishes two reports:
    (1) The Census of Agriculture, published every 5 years (NASS 
Census); and
    (2) The annual Land Values and Cash Rents Summary (Annual Report).
    The NASS Census provides average per acre land and building values 
by county, or other geographical areas, for each state. The land values 
are reported individually for cropland (including irrigated and non-
irrigated cropland), woodland, pastureland, and rangeland, and an 
``other'' category that includes non-commercial, non-residential 
building lots, wasteland, and land with roads and ponds. The average 
per acre land and building values do not include any value for the 
crop, forage, or woodland products produced from the land.
    The NASS data in the Annual Report, as compared to the data in the 
NASS Census (see previous paragraph), includes average per acre values 
for cropland, pastureland, and farm real estate, but only on a regional 
or statewide basis, and not on a countywide basis. Another difference 
between the Annual Report and the NASS Census is the absence of any 
data for Alaska, Hawaii, and Puerto Rico in the Annual Report. You can 
find more detailed information about the NASS Census and the Annual 
Report at the NASS Web site at: https://www.nass.usda.gov/index.asp.
    The BLM received four comments in response to our request in the 
ANPR for comment on the use of available published information. One 
commenter said that the NASS data is appropriate. Two commenters 
recommended using the NASS Census of Agriculture (5-year census) for 
county-level data. One commenter stated that the NASS data seems 
appropriate for updating the schedule, so long as agricultural uses are 
not reflected in the land values used.
    In the development of the proposed rule, the BLM generally agreed 
with the commenters on the ANPR that supported the use of the NASS 
Census data to determine the average per acre value for each county, 
except for the commenter that supported its use so long as agricultural 
uses are not reflected in the land values used. The NASS publishes 
average per acre land and building values, by state and county, each 5-
year period in its NASS Census report. The most recent county values 
are from the 2002 NASS Census, which was published in June 2004. The 
next NASS Census report will provide 2007 data, and it is due to be 
published in June 2009. However, the NASS county per acre land and 
building value data is reflective of the types of agricultural uses 
generally occurring in that county, including land value data reported 
for cropland (including irrigated and non-irrigated cropland), 
woodland, pastureland, and rangeland, and an ``other'' category that 
includes non-commercial, non-residential building lots, wasteland, and 
land with roads and ponds. Land administered by the BLM and FS have 
many of the same agricultural values (grazing, commercial timber 
production, woodland and vegetative sales (Christmas trees, firewood, 
mushrooms, pine nuts, seed crops from native species, etc.). The 
average per acre land and building values do not include any value for 
the crop, forage, or woodland product produced from the land. In the 
proposed rule, we further explained that other Federal and state 
agencies regularly use the NASS Census data when it is necessary to 
obtain average per acre land value for a particular state or county. In 
addition, Congress specifically endorsed the use of this data for 
rental determination purposes when it passed the ``National Forest 
Organizational Camp Fee Improvement Act of 2003'' (Pub. L. 108-7) (16 
U.S.C. 6231). This law established a formula for determining rent for 
organizational camps located on NFS lands by applying a 5 percent rate 
of return to the average per acre land and building value, by state and 
county, as reported in the most recent NASS Census. That law also 
provided for a process to update the per acre land values annually 
based on the change in per acre land value, by county, from one census 
period to another. The law does not mandate the use of zones or a 
schedule, which eliminates the need for an annual index adjustment to 
keep the schedule or zones current. However, the range between the high 
and low county values which results from using the components mandated 
under Public Law 108-7, including the use of a 100 percent encumbrance 
factor, is significantly greater than the range between the high and 
low zone values which result from using the components established 
under either the proposed or final rule.
    The proposed rule used the entire average per acre land and 
building value (by state and county) from the 2002 NASS Census to place 
the county or geographical area into the proper zone value in the rent 
schedule. We used the entire average per acre land and building value 
to be consistent with how Congress used the same data in determining 
annual per acre rent for organizational camps located on NFS lands as 
described above. We also used the entire per acre land and building 
value from the NASS Census because both BLM and FS lands have many of 
the same agricultural values reflected in the NASS Census data.
    The BLM received several comments on the proposed rule's use of the 
entire average per acre land and building value (by state and county) 
from the NASS Census to place the county or geographical area into the 
proper zone value in the rent schedule. The majority of the commenters 
stated that the average per acre land and building value should be 
reduced to remove land with buildings or other improvements, but 
offered no recommendations on how this should be accomplished. Some of 
the commenters stated that irrigated cropland should also be removed 
from the average per acre land and building value, pointing out that in 
most cases the average per acre value of irrigated land is 
significantly higher than non-irrigated land. These commenters 
recommended reducing the average per acre land and building value in 
the NASS Census by 50 percent, but offered no data to support a 50 
percent reduction, except to state that lands administered by the BLM 
and FS are not used for irrigated cropland production, nor do they 
contain rural farm buildings, and therefore, the average per acre land 
and building value should be reduced by at least 50 percent.
    We agree that the average per acre land and building value for each 
county should be reduced by an amount that

[[Page 65044]]

reflects the value of irrigated cropland and land encumbered by 
buildings because BLM- and FS-administered lands do not include these 
land categories. The BLM consulted with officials from the NASS on an 
appropriate methodology to arrive at this figure. The NASS advised us 
that this calculation can be accomplished by comparing the total value 
of irrigated acres and acres in the ``other'' category, to the total 
value of all farmland acres. In 2002, there were a total of 938,300,000 
acres of rural farmland, composed of 434,200,000 acres of cropland 
(50,300 acres irrigated); 395,300,000 acres of pasture/rangeland 
(5,000,000 acres irrigated); 75,900,000 acres of woodland; and 
32,900,000 acres in an ``other'' category (roads, ponds, wasteland, and 
land encumbered by non-commercial/non-residential buildings). In 2007, 
the average per acre value of all land in all categories equaled $2,160 
for a total farm real estate value of $2,026,728,000,000. This compares 
to an average per acre land value of $4,736 for all irrigated cropland 
(a total value of $261,900,000,000 for the 55.3 million acres of 
irrigated cropland) or approximately 12.9 percent of the total value of 
all farmland. Thus, to eliminate the irrigated cropland value from the 
average per acre land and building value of each county, a 13 percent 
reduction is necessary.
    To determine a similar value for the ``building'' component of the 
average per acre land and building value is more difficult, since only 
the total number of acres in the ``other'' category is known (32.9 
million acres, which includes acres encumbered by roads, ponds, non-
commercial/non-residential buildings, and wastelands). In addition, 
unlike the average per acre values that have been determined by NASS 
for pastureland/rangeland ($1,160), all cropland ($2,700), irrigated 
cropland ($4,736) and all farm real estate ($2,160), the average per 
acre value for the ``other'' category is not available. However, since 
the lands in this category are basically non-productive, their average 
per acre value is likely less than the average per acre value for 
pastureland/rangeland ($1,160). Even so, if all 32.9 million acres were 
valued at $1,160 per acre, the total value of all lands in the 
``other'' category would equal $38,164,000,000, or less than 2 percent 
of the total value of all farm real estate. If all lands in the 
``other'' category are valued the same as irrigated cropland ($4,736), 
their total value would still only be 7.7 percent of all farm real 
estate. Therefore, in the final rule we reduced the average per acre 
land and building value by 20 percent (a 13 percent reduction for all 
irrigated acres and a 7 percent reduction for all lands in the 
``other'' category which includes all improved land or land encumbered 
by buildings) to eliminate the value of all land that could possibly be 
encumbered by buildings or which could possibly have been developed, 
improved, or irrigated.
    One commenter suggested that the value for non-irrigated cropland 
should also be deleted from the average per acre land and building 
value because of its commercial nature and its dissimilarity to public 
and NFS lands. The BLM disagrees with this comment. In the 2007 Annual 
Report, the NASS provided the average value per acre of non-irrigated 
land in 20 states, including most of the states in the west with large 
acreages of public and NFS lands, except for the states of Arizona and 
Nevada where there is very little cropland that is not irrigated. The 
average value per acre of non-irrigated land is $1,963, and the average 
value per acre of pasture land in these same 20 states (excluding 
Arizona and Nevada) is $1,976. If the average per acre pastureland 
values were included for Arizona and Nevada, the average value per acre 
of pasture land for all 22 states is $1,926. Thus, there is little 
difference in the mid-western and western states between the average 
per acre values of non-irrigated cropland and pastureland/rangeland. In 
the eastern United States, Federal land holdings, including NFS lands, 
have largely been acquired from the private sector (primarily farm real 
estate) and would likely fall into the same land categories covered by 
the NASS Census. As a result, no further reductions to the average per 
acre land and building value (other than the 20 percent reduction 
discussed above for irrigated lands and buildings) are made in the 
final rule.
    In the ANPR the BLM requested comments regarding whether the 
proposed Per Acre Rent Schedule should split some states and counties 
into more than one zone. The BLM received three ANPR comments 
addressing whether some counties should be split into more than one 
zone. One commenter said that any consideration of splitting states or 
counties into more than one zone should involve discussions with 
stakeholders. One commenter said that zones smaller than a single 
county may lead to undue administrative burden for the BLM 
(establishing boundaries and collecting data). For very high-valued 
lands, rent could be based on 25 percent of the assessed value, 
according to one commenter. Alternatively, high-valued BLM lands could 
be sold or exchanged. One commenter said that wide variations in land 
values within a state or county may require applying the zone 
methodology at the sub-state or sub-county level. In the proposed rule, 
the BLM did not split any county into more than one zone because there 
was no published data, easily obtainable, that would support making 
such a split. We received one comment on the proposed rule suggesting 
that multiple zones be established where land values vary greatly 
within a single county. However, the commenter did not indicate how 
such variations in land values could be easily obtained or identified 
within each county entity. The BLM believes that it is not possible to 
make easy or accurate determinations of variations in land values 
within each county, and therefore the final rule does not split any 
county into more than one zone.
    The BLM also requested in the ANPR comments regarding whether the 
proposed Per Acre Rent Schedule should apply to Alaska. One commenter 
stated that the new linear right-of-way rent schedule should apply to 
public and NFS lands in Alaska if similar published data for land 
values is available for Alaska as for the lower 48 states and the data 
produces a reasonable per acre rental value. As a result, we proposed 
that the schedule apply to Alaska since the NASS Census does include 
average per acre land and building values for 5 Alaska areas: 
Fairbanks; Anchorage; Kenai Peninsula; Aleutian Islands; and Juneau. 
These NASS data produce a reasonable per acre rental value and are 
comparable to the per acre rental values from contracted appraisals 
and/or local rent schedules now in effect in some BLM and FS offices. 
The NASS Census data does not define the actual boundaries for the 5 
areas, and therefore we specifically asked for comments to assist the 
BLM and the FS in determining and identifying the on-the-ground area to 
be included in each of the 5 Alaska areas in the NASS Census. For 
example, the NASS Census average per acre land and building value for 
the Fairbanks ``area'' could be used for all public lands administered 
by the BLM Fairbanks District Office and the NASS Census average per 
acre land and building value for the Anchorage ``area'' could apply to 
all public lands administered by the BLM Anchorage District Office, and 
so forth. Another approach, which both the BLM and the FS prefer, would 
be to identify specific geographic or management areas and apply the 
most appropriate per acre land and building value from the 5 Alaska 
NASS Census areas to the BLM/FS identified

[[Page 65045]]

geographic or management areas based on similar landscapes and/or 
similar average per acre land values. The proposed rule stated that the 
FS planned to use the NASS census data for the Kenai Peninsula for all 
NFS lands in Alaska, except for NFS lands located in the Anchorage and 
Juneau areas. For NFS lands located in the Municipality of Anchorage, 
the NASS Census data for the Anchorage area would apply. For NFS lands 
in the downtown Juneau area (Juneau voting precincts 1, 2, and 3), the 
NASS Census data for the Juneau area would apply.
    The BLM received 2 comments on how the NASS Census data should be 
applied to public and NFS lands in Alaska. Both commenters generally 
supported the methodology of the proposed per acre rent schedule (with 
minor exceptions), but varied slightly in the geographical application 
of the five NASS Census areas for Alaska. One commenter agreed with the 
proposal of using the NASS Census data for the Kenai Peninsula for all 
NFS lands in Alaska, except for NFS lands located in the Anchorage and 
Juneau area. The commenter stated that for NFS lands located in the 
Municipality of Anchorage, the NASS Census data for the Anchorage area 
should apply, and for NFS lands in the downtown Juneau area, the NASS 
Census data for the Juneau area should apply. For the BLM, the 
commenter proposed that the NASS Census data for the Kenai Peninsula 
(Zone 4) apply to all public lands within the BLM Anchorage District 
boundaries, except for public lands in the Anchorage (Zone 6 in the 
proposed rule; Zone 5 in the final rule due to the 20 percent reduction 
in the average per acre land and building value--see discussion above), 
Juneau (Zone 11), and the Aleutian Island Chain (Zone 1) areas. The 
commenter said that for public lands located in the Municipality of 
Anchorage, the NASS Census data for the Anchorage area (Zone 5 in the 
final rule) should apply and for public lands in the downtown Juneau 
area (Juneau voting precincts 1,2, and 3), the NASS Census data for the 
Juneau area (Zone 11) should apply. For public lands in the Aleutian 
Island Chain, the NASS Census data for the Aleutian Islands Area (Zone 
1) should apply. In addition, the NASS Census data for the Fairbanks 
Area (Zone 3) should apply to all public lands within the BLM Fairbanks 
District boundaries. The commenter stated that these zone definitions 
and values would be consistent with both the suggestion in the proposed 
rule and the general fee schedule previously developed by the Appraisal 
Services Directorate (ASD), Alaska, for the BLM and the United States 
Fish and Wildlife Service. The BLM agrees with the commenter's 
suggestions because these zone definitions and values closely match 
previous rent schedules/values developed by the ASD for these same 
geographical areas. Therefore, in the final rule the BLM will apply the 
NASS Census data for Alaska to the geographical and administrative 
areas as follows:

Aleutian Islands Area--all lands within the Aleutian Islands Chain--
Zone 1;
Fairbanks Area--all lands within the BLM Fairbanks District 
boundaries--Zone 3;
Kenai Peninsula Area--all lands within the BLM Anchorage District 
boundaries excluding the Aleutian Islands Chain, the Anchorage Area, 
and the Juneau Area--Zone 4;
Anchorage Area--all lands within the Municipality of Anchorage--Zone 5; 
and
Juneau Area--all lands within downtown Juneau (Juneau voting precincts 
1, 2 and 3)--Zone 11.

    The second commenter, while disagreeing with some of the individual 
elements in the formula, stated that the rent formula, when taken as a 
whole, is well structured and should be extended, as described, to 
Alaska. This commenter did note, however, that the 2002 appraisal 
completed for the Trans-Alaska Pipeline System (TAPS) right-of-way set 
a $391 per acre land value for Federal lands north of the Yukon River 
and suggested that the BLM use this as justification to place these 
lands into Zone 2 instead of Zone 3, as proposed. We do not dispute the 
per acre value of Federal lands north of the Yukon River as determined 
by the 2002 TAPS appraisal. We do, however, note that in arriving at an 
annual per acre rental value for these lands, the 2002 TAPS appraisal 
utilized an encumbrance factor of 100 percent (later reduced to 
approximately 86.49 percent) and an 8 percent rate of return. When 
taken together, these components of the TAPS appraisal produced an 
annual per acre rental value of approximately $31 (later reduced to 
$27) for Federal lands north of the Yukon River and an average per acre 
rental value of approximately $35 (later reduced to $30) for all 
Federal lands along the TAPS corridor. In comparison, the proposed rent 
schedule would have generated an annual per acre rental value of $32.35 
in 2002, while the final rule would have generated $26.35. Therefore, 
the BLM agrees with the commenter, that while issue can be taken with 
individual elements of the final per acre rent schedule, when taken as 
a whole, the schedule is well constructed and produces a reasonable per 
acre rent for all zones. In the final rule, the TAPS will be assessed 
Zone 3 rates for all public land acres within the BLM Fairbanks 
District boundaries, and Zone 4 rates for all public land and NFS land 
acres within the BLM Anchorage District boundaries and the Chugach 
National Forest.
    Puerto Rico, which has no public lands administered by the BLM, is 
not divided into counties. However, the NASS publishes average farmland 
values for the entire Commonwealth of Puerto Rico. The proposed rule 
stated that the FS planned to use the NASS average farmland values 
($5,866 per acre in 2002) for linear right-of-way authorizations 
located on NFS lands in Puerto Rico. The BLM included this same amount 
($5,866 per acre in 2002) for Puerto Rico in the proposed rule for use 
by the BLM in the event that the BLM were to issue and administer 
future linear authorizations in Puerto Rico (for example, a MLA grant 
which involved lands administered by two or more Federal agencies could 
be issued/administered by the BLM). We received no comments on this 
issue and made no changes to the final rule.

Per Acre Zone Values

    The 1987 linear rent schedule contained eight separate zones 
representing average per acre land value from $50 per acre to a $1,000 
per acre. The schedule contained two zones with a $50 range, five zones 
with a $100 range, and one zone with a $400 range. All the counties in 
the 48 contiguous states, except one, and Puerto Rico were in one of 
the eight zones based on their estimated average per acre land value. 
The lone exception was Coconino County, Arizona, where the area north 
of the Colorado River was in one zone, and the area south of the river 
was in a different zone.
    In the ANPR, the BLM requested comments regarding the appropriate 
number of rental zones for the revised rent schedule, and received 
three comments. One commenter said that the number of zones (8) in the 
current schedule is sufficient. Two commenters said that the number of 
zones should not be changed, unless the NASS Census data indicates the 
need for a change.
    In the proposed rule, the number of zones was increased from the 
previous 8 to 12 in order to accommodate the range of 3,080 county land 
values contained in the NASS Census. For the same reason, it was 
necessary to increase the dollar value per zone. In

[[Page 65046]]

the 2002 NASS Census, the county land and building value per acre 
ranged from a low of $75 to a high of $98,954. To accommodate such a 
wide range in average per acre land values, the BLM proposed 2 zones 
with $250 increments, 3 zones with $500 increments, 1 zone with a 
$1,000 increment, 1 zone with a $2,000 increment, 1 zone with a $5,000 
increment, 2 zones with $10,000 increments, 1 zone with a $20,000 
increment, and 1 zone with a $50,000 increment (see Table 2--Zone 
Thresholds).

                        Table 2--Zone Thresholds
------------------------------------------------------------------------
                                         2002 county land and building
                Zone                                 value
------------------------------------------------------------------------
Zone 1..............................  $1 to $250.
Zone 2..............................  $251 to $500.
Zone 3..............................  $501 to $1,000.
Zone 4..............................  $1,001 to $1,500.
Zone 5..............................  $1,501 to $2,000.
Zone 6..............................  $2,001 to $3,000.
Zone 7..............................  $3,001 to $5,000.
Zone 8..............................  $5,001 to $10,000.
Zone 9..............................  $10,001 to $20,000.
Zone 10.............................  $20,001 to $30,000.
Zone 11.............................  $30,001 to $50,000.
Zone 12.............................  $50,001 to $100,000.
------------------------------------------------------------------------

    The proposed rule's zones accommodate the per acre land and 
building values of 100 percent of the total number of counties in the 
2002 NASS Census (see Table 3). As land values increase or decrease, it 
may be necessary to adjust the number of zones and/or the dollar value 
per zone. The proposed rule allowed adjustments to the number of zones 
and/or the dollar value per zone after the publication of every other 
NASS Census (once each ten-year period). The adjustments must 
accommodate 100 percent of the county per acre land and building values 
reflected in the 5-Year Census. In the proposed rule, the BLM 
specifically asked for comments on whether 100 percent of the counties 
should be covered by the per acre rent schedule.
[GRAPHIC] [TIFF OMITTED] TR31OC08.000

    The BLM received several comments that supported the number of 
zones, the zone values, and the placement of all NASS counties within 
the appropriate zone value. One commenter encouraged the BLM and the FS 
to verify that the zone values reflect actual undeveloped, non-
irrigated land values in rural areas of the country adjacent to the 
public and NFS lands, to ensure that the land values within each zone 
are appropriate, and the zones assigned to different counties are 
accurate. We believe that we have addressed this concern by removing 
all irrigated land and land encumbered by buildings from the 
calculation of land value and reducing the average per acre land and 
building values by 20 percent from those shown in the proposed rule. 
Even with this reduction, we do not believe that the number of zones or 
the zone values require adjustment. There are still several counties 
that would fall into Zone 12, even with the 20 percent reduction.
    Another commenter suggested that the BLM should discard the zone 
brackets entirely and use the actual NASS Census land and building 
value for each county. The BLM considered this option in the 
development of the proposed rule, but did not believe it conformed to 
the Congressional mandate provided in Section 367 of the Act to revise 
the existing schedule by state, county, and type of uses to reflect 
current land values in each zone. The commenter also suggested that in 
lieu of using the actual NASS Census value for each county, the BLM 
should utilize the midpoint of the zone value to base its calculations 
instead of the upper limit value of each zone. Again, the BLM 
considered this option in the development of the proposed rule, but did 
not adopt it because this calculation change would have been 
significantly different from the methodology used in the previous 
schedule (which utilized the upper zone amount and not the midpoint in 
making the per acre rental calculations) and its use would have 
generated significantly lower per acre rent amounts, while land values 
have generally increased. As a result, we made no adjustments to the 
number of zones in the final rent schedule, the zone amounts, or the 
methodology used

[[Page 65047]]

in the calculation of the per acre rent for each zone.
    The 2002 NASS Census per acre land and building value for each 
county (or similar area) and the corresponding zone number in the Per 
Acre Rent Schedule (based on 80 percent of the 2002 NASS Census per 
acre land and building value for each county) are listed for 
informational purposes at the end of this final rule. Most of the areas 
subject to the Per Acre Rent Schedule are called ``counties.'' 
Exceptions include Alaska ``areas,'' the ``Commonwealth'' of Puerto 
Rico, and Louisiana ``parishes.'' To make the terminology uniform in 
this rule, all such areas are referred to as counties.

Encumbrance Factor

    The BLM proposed an encumbrance factor (EF) of 50 percent for all 
types of linear right-of-way facilities. This is a change from the 
previous rule where the EF for roads and energy-related pipelines and 
other facilities was 80 percent and the EF for telephone and electrical 
transmission facilities was 70 percent. The proposed change is the 
result of public comments on the ANPR, a review of industry practices 
in the private sector, and a review of the Department of the Interior 
(DOI) appraisal methodology for right-of-way facilities located on 
Federal lands.
    The EF is a measure of the degree that a particular type of 
facility encumbers the right-of-way area or excludes other types of 
land uses. If the EF is 100 percent, the right-of-way facility (and its 
operation) is encumbering the right-of-way area to the exclusion of all 
other uses. The land use rent for such a facility would be calculated 
on the full value of the subject land (annual rent = full value of land 
X rate of return). If the EF is 40 percent, the right-of-way facility 
(and its operation) is only partially encumbering the right-of-way area 
so that other uses could co-exist alongside the right-of-way facility. 
The land use rent for such a facility would be calculated on only 40 
percent of the full value of the subject land (annual rent = full value 
of land x 40 percent x rate of return).
    Two comments received on the ANPR on this topic suggested that an 
EF could be as low as 10-15 percent if the right-of-way facility is 
located on undevelopable terrain; a 25 percent EF be used for a 
transmission line that does not affect development of land (``set-back 
areas''); a 50 percent EF be used if development is restricted, but not 
prohibited, or if other land uses are still possible; and a 70 percent 
EF be used if development or other uses are severely restricted. 
Another ANPR commenter stated that the EF should be lowered to 25-50 
percent for power lines, because in the private sector, an electrical 
utility typically makes a one-time payment of 50 percent fair market 
land value for a perpetual easement, allowing other use(s) within the 
corridor as long as the use(s) do not interfere with the power line. 
The commenter also stated that most of the uses that the BLM authorizes 
can also be conducted within a power line corridor without interfering 
with the power line and without restricting the additional use. One 
ANPR commenter encouraged the BLM to use a lower EF than 70 percent, 
based on common real estate practice relating to utility easements. The 
commenter stated that when utilities negotiate the purchase price for 
easements on private land, they typically apply a factor of 50 percent 
or less to the fee simple value of the land involved, to reflect that 
the utility easement is less than fee ownership and has a reduced 
impact. This commenter further stated that the BLM should use a 50 
percent or lower encumbrance (impact adjustment) factor and should 
allow a right-of-way applicant to demonstrate that an even lower impact 
factor should apply.
    In preparing the proposed rule, the BLM reviewed several appraisal 
reports (prepared by the DOI's Appraisal Services Directorate) for 
right-of-way facilities located on Federal lands. These appraisal 
reports showed an EF ranging from 25 percent (for buried telephone 
lines) to 100 percent (for major oil pipelines and electrical 
transmission lines). The BLM also reviewed one appraisal report that 
was prepared by a contractor for the BLM. The contractor did an 
independent solicitation of industry practices regarding this factor 
and again found anecdotal evidence that EFs vary from 25 percent to 100 
percent, with 50 to 75 percent being the most common. One holder 
provided anecdotal evidence that its company typically used a 40 
percent EF for buried facilities and a 60 percent EF for above ground 
facilities when negotiating land use rental terms for its facilities 
across private lands. One BLM grant-holder contracted with a private 
appraisal firm to determine an appropriate EF for a major pipeline and 
found that a 75 percent EF is fairly typical for major projects. 
Finally, our review showed that many state and Federal agencies have 
established an EF by statute or by policy, usually in the 70 percent to 
100 percent range. In the proposed rule, the BLM specifically asked for 
comments regarding the proposed use of a 50 percent EF, especially 
since this was a reduction from the 80 percent and 70 percent EFs used 
in the previous per acre rent schedule.
    We received many comments on the proposed rule supporting the 
reduction of the EF to 50 percent from the 80 percent and 70 percent in 
the previous per acre rent schedule. A few commenters specifically 
stated that the EF should be limited in all cases to no higher than 50 
percent. One commenter stated that the BLM has traditionally appraised 
the acquisition of non-exclusive road easements (the equivalent of a 
BLM right-of-way) using a 50 percent encumbrance factor and that a 
maximum 50 percent EF should be used whether or not the EF is applied 
to the upper limit of each zone value or the mid-point value of each 
zone. One commenter suggested that the EF should be reduced to as 
little as 10 percent, arguing that a transmission facility located on 
public lands devalues the land much less than would an easement on 
private land and that the rights obtained under a grant are also less 
than those obtained under an easement. Another commenter, while 
supporting an EF of 50 percent, believed that the final rule should 
provide holders the option to seek lower EFs via an appraisal. In 
addition, one commenter suggested that the EF be reduced below 50 
percent in those cases where a new right-of-way is granted within an 
existing road right-of-way or patent reservation for roads or utility 
purposes.
    The BLM agrees with the commenters that state that there are 
situations and circumstances where an EF of less than 50 percent may be 
appropriate, whether due to the type of facility, the rights obtained 
or granted, the impact of the facility on the land, or the co-location 
of multiple facilities within the same utility corridor. However, there 
is convincing evidence of situations where an EF greater than 50 
percent is warranted. In fact, for large right-of-way facilities, such 
as interstate pipelines and electrical transmission lines greater than 
138 kilovolts in size, the annual rent or one-time easement payment is 
typically determined using 100 percent of the land value (100 percent 
EF). These major right-of-way facilities not only encumber the greatest 
number of acres, but can have significant and continuing impacts on 
public land resources, including impacts to visual, open space, 
wildlife, vegetative, cultural, recreation, and other public land 
resources. In addition to the documented cases cited above supporting 
EFs greater than 50 percent, two articles published in a professional 
right-of-way journal also show that a 50

[[Page 65048]]

percent EF is indicative of a balanced-use by both the land owner and 
right-of-way/easement holder (see Donald Sherwood, Easement Valuation, 
Right-of-Way Magazine, May/June 2006 at 33). More telling are several 
quotes from utility company officials stating that the typical amount 
of compensation for permanent easements is 50 percent of the underlying 
land value, but that this amount can increase up to 100 percent 
depending on the size of the transmission line or right-of-way facility 
being sited (see William R. Lang and Brett A. Smith, Valuing a Gas 
Pipeline Easement, Right-of-Way Magazine, September/October 1998 at 
32). The BLM recognizes that the EF is closely related to the type of 
right-of-way facility authorized, as well as how it is operated and 
administered. However, to assign a specific EF for each type of 
facility, or type of terrain, or to allow the holder the option of 
completing an appraisal that may establish a lower EF would be counter-
productive to the purpose of using a schedule in the first place, i.e., 
administrative simplicity and the cost savings that a schedule provides 
to both the BLM and the applicant/holder in determining rent for right-
of-way facilities on public lands. (We note that under this final rule 
the holder has the option to complete an appraisal report to determine 
one-time rent for perpetual grants or easements under sections 2806.25, 
2806.26, and 2885.22. In these cases, involving lands to be transferred 
out of Federal ownership, the appraisal report could establish an EF 
lower than 50 percent (see section 2806.25(d)). In determining an 
appropriate EF for the final rule, the BLM has also given consideration 
to the fact that the BLM grants rights-of-way for a specified term, 
usually 20 to 30 years and that the rights granted are subject to 
renewal, relinquishment, abandonment, termination, or modification 
during the term of the grant. We also recognize that the grants issued 
for right-of-way facilities are non-exclusive, i.e., the BLM reserves 
the right to authorize other uses within a right-of-way area, as long 
as the uses are compatible. Given these considerations, and the 
research and analysis cited above, along with consideration of public 
comments and published information, the BLM has determined that a 50 
percent EF is a reasonable and appropriate component for use in the 
rent formula for linear right-of-way facilities located on public 
lands.

Rate of Return

    The rate of return component used in the Per Acre Rent Schedule 
reflects the relationship of income to property value, as modified by 
any adjustments to property value, such as the EF discussed above. The 
BLM reviewed a number of appraisal reports that indicated that the rate 
of return for land can vary from 7 to 12 percent, and is typically 
around 10 percent. These rates take into account certain risk 
considerations, i.e., the possibility of not receiving or losing future 
income benefits, and do not normally include an allowance for 
inflation. However, a holder seeking a right-of-way from the BLM must 
show that it is financially able to construct and operate the facility. 
In addition, the BLM can require surety or performance bonds from the 
holder to ensure compliance with the terms and conditions of the 
authorization, including any rental obligations. This reduces the risk 
and should allow the BLM to use a ``safe rate of return'' e.g., the 
prevailing rate on insured savings accounts or guaranteed government 
securities that include an allowance for inflation.
    The rate of return for the previous rent schedule was 6.41 percent, 
which was the 1-year Treasury Securities ``Constant Maturity'' rate for 
June 30, 1986. In response to the ANPR, two commenters stated that this 
rate of return is an acceptable rate of return for right-of-way uses on 
public lands. Another ANPR commenter stated that the Treasury-bill (T-
bill) rate of 6.41 percent in the current rent schedule is not 
unreasonably high given current T-bill rates around 5 percent. This 
commenter also stated that an annual adjustment of the T-bill rate 
would lead to uncertainty in rental fees, which would have a negative 
impact on utilities and customers, and duplicates the changes reflected 
in the Gross Domestic Product (GDP) index. Land values tend to move 
opposite to the T-bill rate, the commenter noted, so including this 
update in the formula would lead to overly-large rental rates. 
According to this commenter, a better approach would be to use the 10-
year average of the 1-year T-bill rates. Three commenters supported 
updating the rate of return annually, using some multi-year average of 
the 1-year T-bill rates. The ANPR commenters said that this approach 
would provide for a current rate of return, while avoiding abrupt 
changes.
    Given the above considerations, the BLM proposed that an initial 
rate of return based on the 10-year average (1992-2001) of the U.S. 30-
year Treasury bond yield rate would be reasonable since most right-of-
way authorizations are issued for a term of 30 years. The BLM chose the 
10-year period from 1992-2001 since it was the 10-year period 
immediately preceding the establishment of the 2002 base rent schedule. 
The ``initial'' rate in the proposed rule (6.47 percent) would have 
been effective through 2011, and then would have adjusted automatically 
to the then-existing 10-year average (2002-2011) of the U.S. 30-year 
Treasury bond yield rate. This method of establishing the rate of 
return eliminates a ``one-point-in-time'' high or low rate with a rate 
that reflects an average over the preceding decade. The proposed rule 
would have allowed for use of the 10-year average of the U.S. 20-year 
Treasury bond yield rate if the 30-year U.S. Treasury bond yield rate 
were not available. In the proposed rule, the BLM specifically asked 
for comment regarding the method that we proposed to establish the 
initial rate of return and how we proposed to update it every ten 
years.
    We received several comments in support of the proposed 6.47 
percent rate of return and the use of the 10-year average of the U.S. 
30-year Treasury bond yield rate to establish the initial rate of 
return. However, two commenters suggested using more current rates: One 
recommended using the one-year Treasury bill rate, while the other 
recommended using the most current 30-year Treasury bond yield. The BLM 
agrees that we should use the most current rates, so that the rate of 
return reflects the most recent value of money, but a 10-year average 
is more appropriate than a rate selected from one point in time. As a 
result, in the final rule, the BLM revised the rate of return downward 
from