Grazing lease on state land is upheld

Court rejects argument that AZ must consider 'highest, best' bid
2013-07-06T00:00:00Z Grazing lease on state land is upheldHoward Fischer Capitol Media Services Arizona Daily Star
July 06, 2013 12:00 am  • 

PHOENIX - The Arizona Court of Appeals has rejected a constitutional challenge to the legality of procedures used by the Land Department to determine who gets to lease state land for grazing.

In a unanimous ruling, the judges rejected WildEarth Guardians' contention that it should have been awarded a new 10-year lease. Instead, the state Land Department opted to give a new lease to ranchers who had leased the land before.

Appellate Judge Kent Cattani, writing for the court, rejected arguments by attorney Tim Hogan of the Arizona Center for Law in the Public Interest that the Land Department ignored a constitutional requirement that the leasing of public lands be made to the "highest and best bidder at a public auction."

In this case, Hogan said, the department never even opened the bid by WildEarth Guardians, instead determining that the ranchers would be better stewards of the land. That action, said Hogan, may have cheated the state and the public schools that benefit from trust land proceeds.

Hogan said he will seek Supreme Court review.

The case involves a 6,237-acre grazing lease held by Galyn and Roxanne Knight adjacent to property they own near Springerville. That lease was set to expire in November 2006.

Before the end of the lease, WildEarth filed an application to lease the same land, not to graze animals but instead to let it rest. That conflict required the Land Department to ask each applicant to submit information for it to determine which had the highest and best bid.

The director of the department's natural resource division concluded that the Knights had a superior offer, even outweighing WildEarth's offer of additional rent. But Maria Baier, who was land commissioner at the time, directed the parties to submit sealed bids for additional rent.

Baier subsequently accepted the recommendation of a hearing officer and agreed to let the Knights have the land, at 40 cents per acre per year, without looking at the bids.

Cattani noted that the federal government gave Arizona about 10 million acres of land when it became a state in 1912, with the proceeds used mostly to support public schools. About 9.2 million acres remain in state holdings.

He acknowledged the requirement for leases to be made to the highest and best bidder, and that leases not made in "substantial conformity" with this requirement are void.

But Cattani said state law allows the land commissioner not to take bids if one bidder's right or equity on the lease outweighs an offer of additional rent. And he said that meets what the Arizona Constitution requires.

Looking specifically at Baier's decision, Cattani said she considered the ability to protect the land.

The Knights, Cattani said, monitor the land daily, with at least 10 people who live either on or or within eight miles of the property.

By contrast, WildEarth indicated the land would be monitored once every two weeks.

Cattani said the property has sand, gravel and timber, includes "irreplaceable Native American ruins and fossil beds" and has been the target of illegal dumping and looters. The judge said the record shows that the Knights have better ability to monitor and protect the land, which they had leased for 28 years.

But Hogan said the constitutional requirements to take and open bids are mandatory, and all that trumps the statutory authority given to the land commissioner.

"The constitution says 'highest and best bidder,'" he said. "How do you determine that without a bid?"

Hogan acknowledged that even the constitution does not guarantee a lease goes to the highest bidder. He said the Land Department also is entitled to weigh what is best for the land and the state.

But he said that does not give the department the right to "ignore the 'highest' part and determine the 'best' part."

"They're a trustee here," Hogan said. "They don't seem to care how much money they could make off this lease. And it's very clear that no amount of money was going to convince them that (higher bid) would overcome what they say are the 'superior equities' of the rancher."

Cattani said there was some evidence that what WildEarth was offering would have resulted in $79,344 additional rent over the 10-year period. Hogan countered there is nothing to show how much more WildEarth was offering since Baier never opened the bids.

"It could have been $10 million," Hogan said. "Is that enough?"

If nothing else, Hogan said, opening the bids would have given the Land Department the opportunity to ask the Knights if they were willing to pay more. That did not happen.

"The rancher gets the lease at the minimum appraised rate," Hogan said.

"How does that benefit the trust here, the public schools?" he asked, contending, "It's the worst of all worlds here."

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