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Cobell v. Norton

August 20, 2003


The opinion of the court was delivered by: Alan L. Balaran Special Master


On March 6, 2003, the Special Master, in the company of attorneys representing the Department of Justice and the Office of the Solicitor, visited the Office of Appraisal Services ("OAS") of the Navajo Regional Office ("NRO") of the Office of the Special Trustee for American Indians ("OST") located in Gallup, New Mexico and the Bureau of Indian Affairs ("BIA") Realty Office in Window Rock, Arizona. The purpose of the site visit was to determine whether individual Indian trust information concerning the appraisal of the value of rights-ofway ("ROWs")*fn1 and easements running across Navajo allotments was being preserved, maintained, and safeguarded in accordance with Court orders.*fn2

During the site visit, the Special Master examined appraisal files located in the Gallup Regional Appraisal Office and easement files located in the Window Rock BIA Realty Office. The Special Master also interviewed former Chief Appraiser Anson Baker (who was present during the Special Master's site visit),*fn3 Regional Appraiser Robert Hatfield (who was being trained by Baker at the time), and BIA Realty Officer Stephen Graham.

The site visit uncovered several problems. At the outset, Baker admitted to the Special Master that, before he transferred to the OST-OAS-Northwest Regional Appraisal Office in September 2002, he "erased" all of the appraisal information stored on his computer.*fn4 He also admitted he was unable to locate "two memoranda," which he utilized to formulate his appraisal valuations; that his appraisal workfiles lacked documentation supporting his ROW valuations;*fn5 and that based on those valuations, Navajo allottees receive payments for ROWs "much less" than those payments received by neighboring tribes and private landowners. When the Special Master asked Baker why he appraised allottee ROWs at a value lower than the amount paid for ROWs running across private and tribal lands, the Chief Appraiser responded that he did so out of concern that a valuation commensurate with the valuation of private and tribal holdings would invite protracted condemnation proceedings by Oil and Gas ("O&G") Companies.

At the Window Rock Office of the BIA, Realty Officer Graham asserted Navajo allottees do not receive "the benefit of their bargain," i.e., ROW payments comparable to those received by similarly situated private and tribal landowners. He also described a process whereby O&G Company representatives – not delegates of the Secretary – contact, negotiate with, and secure the approval of Navajo allottees to the proposed ROWs.

This Report examines these findings and representations in the context of the Court's orders and the Secretary's trust responsibilities to maintain a complete and accurate set of appraisal documentation and ensure that the Navajo allottees receive "fair market value" for ROW leases running across their lands.*fn6 For the reasons stated below, it is the conclusion of the Special Master that the failure of the Secretary's appraisal-delegates to safeguard appraisal information as required by court order, federal regulation, industry standard, and fiduciary law, has directly harmed Navajo trust beneficiaries by denying them access to information necessary to meaningfully evaluate and potentially challenge the ROW valuation process.

As context for this conclusion, it is necessary to describe the functions of the Office of Appraisal Services and the geographical area served by the Office of the Special Trustee's Regional appraisers. This report will then examine the ROW appraisal reports reviewed by the Special Master in the context of the standards regulating the appraisal industry and the fiduciary duties governing the Secretary and her appraisal-delegates. Finally, this report will focus on the practical consequences of the Secretary's failure to retain and safeguard vital individual Indian trust information.

Office of Appraisal Services

Appraisals performed by OAS are among the functions performed by the BIA Regional Real Estate Services Program ("RESP"). Under this program, BIA oversees more than 16 million acres of Tribal trust, allotted, and government-owned lands. Beginning in June 2002, RESP has operated under the authority of the Office of the Special Trustee.*fn7

In addition to the locations in Gallup, New Mexico and Window Rock, Arizona, the BIA Navajo Region maintains agency offices in Tuba City, Arizona (Western Navajo); Chinle, Arizona (Chinle Agency); Fort Defiance, Arizona (Fort Defiance Agency); Shiprock, New Mexico (Shiprock Agency); and Crownpoint, New Mexico (Eastern Navajo Agency). Although the authority of the Navajo Regional Director to administer O&G leases on Navajo allotted lands was rescinded in November 2000 and re-delegated to the Farmington Indian Minerals Office (FIMO), (see Shii Shi Keyah Association, et al. v. Hodel (Case No. 84-1622M)), the Regional Director maintains authority over all other real property transactions, including ROWs. See Memorandum from M. Sharon Blackwell, Deputy Commissioner - Indian Affairs, to the Regional Director, Navajo Region and FIMO Director (Nov. 28, 2000). (Exhibit 4.)

The Eastern Navajo Agency Real Estate Services Office, "as the trustee to the Navajo Tribe," has jurisdiction over Navajo lands located in New Mexico, Arizona, and Utah, and is charged with providing "professional and quality services in all areas of realty transactions affecting tribal and individual Indian trust lands and natural resources, through education and management." Mission Statement of ENARESO (OTRM09646).*fn8

Eastern Navajo Agency

The Navajo Nation occupies the largest Indian reservation in the United States, comprising approximately 16 million acres, or about 25,000 square miles. The Eastern Navajo Region spans approximately 2,806,632 acres of land, including reservation land, tribal trust land, tribal fee land, areas privately owned by Navajo, land belonging to the Canoncito and Alamo Bands, U.S. Government Reserve, public land (leased by the Navajo Tribe and individual Navajo Indians), public land (permitted to individual Navajo Indians by the Bureau of Land Management), New Mexico State Lands (leased by the Navajo Tribe), and individual Indian Allotments that comprise 623,354.21 acres.

The Eastern Navajo Region, also known as the "checkerboard,"*fn9 readily lends itself to the instant discussion of missing trust information and its impact on ROW valuations and comparisons, as each pipeline crossing the region invariably runs across private, tribal, and allotted parcels of land.*fn10

ROW Approval Process on Navajo Allotted Lands

Prior to 1985, ROW transactions were processed by the BIA Realty Office in Window Rock, Arizona. In 1985, these transactions were transferred to the Eastern Navajo Agency in Crownpoint, New Mexico. All superintendent positions were later eliminated for the Navajo region,*fn11 and signature authority reverted to Window Rock, except for ROW documents which remained on file at the Eastern Navajo Agency. See Memorandum from Blackwell (Nov. 28, 2000). (Exhibit 4.) Today, as before 1985, all ROW transactions are handled by the BIA Realty Office in Window Rock.

According to Baker and Graham, an O&G Company initiating or renewing a request for a pipeline ROW over allotted land first contacts the BIA Navajo Regional Office and then the individual allottee interest holders to obtain majority approval. Once the O&G Company identifies the interest holders and obtains their consent (via signature or thumb print), it informs the BIA and provides the agency with its own appraisal report valuing the ROW.*fn12 BIA then submits the O&G Company's appraisal to the OAS for review by either the supervisor or staff appraiser. According to Realty Officer Graham, BIA does not insinuate itself in the process of advising or obtaining the approval of the interest holders.*fn13

Appraisal Files Reviewed by the Special Master

In addition to reviewing several files at the Gallup and Window Rock offices, the Special Master requested production of two ROW appraisal files. One of these files, generated in response to a request by an [unnamed] Gas Company for a nine-year renewal of a ROW crossing 55 Navajo allotments ("55 Allotment Restricted-Use Appraisal File"), contained the following documents:

(1) 56 identical (sequentially numbered) single-page "Requests For Real Estate Appraisals generated by Acting Realty Officer Genni Denetsone to the Regional Chief Appraiser;"

(2) a memorandum from Acting Realty Officer Dale Underwood to Anson Baker requesting an opinion on the [unnamed] Gas Company request;

(3) a request for appraisal dated September 30, 1977;

(4) a request for appraisal dated September 13, 1988; and

(5) 55 identical four-page "Restricted-Use Appraisal" Reports ("55 Allotment Restricted-Use Appraisal Reports") signed by Chief Appraiser Anson Baker on June 29, 2001.

(Exhibit B - Under Seal.)*fn14

The second ROW appraisal file reviewed by the Special Master contained a request for a 20-year ROW easement running across seven Navajo allotments. ("Seven Allotment Appraisal"). Attached to the request was a "Complete-Summary Appraisal Report," prepared by the requesting [unnamed] Pipeline Company (and valuing the 50-foot-wide pipeline easement at approximately $8.94 per rod*fn15) and a document entitled, "Seven Allotment Review." (Exhibit C - Under Seal.) Described as a "technical" or "desk" review, the Seven Allotment Review was purportedly generated "to determine if the appraisal report has been written in accordance with those recognized methods and techniques of appraisal that are necessary to produce a credible appraisal." Seven Allotment Review at 1.

The Special Master's review of the 55 Allotment Restricted-Use Appraisal File and the Seven Allotment Appraisal File revealed that neither contained any documentation supporting their respective valuations.*fn16 In the 55 Allotment Restricted Use Appraisal Report, for example, Baker represented that he "researched the real estate market for the comparable going rates being paid for similar right-of-way easements across Navajo Allotment lands," id. at 2, and that based on that research, "the past going rate for similar easements was $25 to $40 per rod for 20-year easements across Navajo Allotment lands," and "[t]he current going rate paid for similar easements is $25 to $40 per rod for 20-year easements across Navajo Allotment lands." Id. at 2-3. There is no documentary evidence in the appraisal file, however, substantiating that Baker's research was actually conducted, confirming past and present market conditions, or identifying the "similar easements" Baker used to formulate his comparisons.

Similarly, in the Seven Allotment Appraisal Report, Baker references his research of historical payments for ROWs across Navajo allotments as well as his "market data research" for "going rates paid." Noting that, from 1990 to the present, "the going rate paid for R/W easements across Navajo Allotments has been in the range of $25 to $40 per rod for a R/W easement with a 20-year term," Baker opined that the [unnamed] Pipeline Company's offer of $40 per rod as the market value payment for this easement "is within and [sic] acceptable rate of market value." Appraisal Review at 3. Here, too, there is no documentation in the file evidencing any "market data research," supporting Baker's assessment of the "going rates paid," attesting to the range of $25-40 paid for ROWs, or memorializing the [unmamed] Pipeline Company's offer of $40 per rod.

Whether the aforementioned supporting documentation was destroyed, erased, or misplaced is unknown.*fn17 What is known is that Baker deliberately erased all appraisal information from his computer and inadvertently misplaced at least two appraisal-related documents – all without any ...

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