House Report 107-563 - REASONABLE RIGHT-OF-WAY FEES ACT OF 2002

[House Report 107-563]
[From the U.S. Government Publishing Office]

107th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 107-563

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REASONABLE RIGHT-OF-WAY FEES ACT OF 2002

_______

July 11, 2002.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed

_______

Mr. Hansen, from the Committee on Resources, submitted the following

R E P O R T

[To accompany H.R. 3258]

[Including cost estimate of the Congressional Budget Office]

The Committee on Resources, to whom was referred the bill
(H.R. 3258) to amend the Federal Lands Policy and Management
Act of 1976 to clarify the method by which the Secretary of the
Interior and the Secretary of Agriculture determine the fair
market value of rights-of-way granted, issued, or renewed under
such Act to prevent unreasonable increases in certain costs in
connection with the deployment of communications and other
critical infrastructure, having considered the same, report
favorably thereon with amendments and recommend that the bill
as amended do pass.
The amendments are as follows:
Strike all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Reasonable Right-of-Way Fees Act of
2002''.

SEC. 2. CLARIFICATION OF FAIR MARKET RENTAL VALUE DETERMINATIONS FOR
PUBLIC LANDS AND FOREST SERVICE RIGHTS-OF-WAY.

(a) Linear Rights-of-Way Under Federal Land Policy and Management
Act.--Section 504 of the Federal Land Policy and Management Act of 1976
(43 U.S.C. 1764) is amended by adding at the end the following new
subsection:
``(k) Determination of Fair Market Value of Linear Rights-of-Way.--
(1) Effective upon the issuance of the rules required by paragraph (2),
for purposes of subsection (g), the Secretary concerned shall determine
the fair market rental for the use of land encumbered by a linear
right-of-way granted, issued, or renewed under this title using the
valuation method described in paragraphs (2), (3), and (4).
``(2) Not later than one year after the date of enactment of the
Reasonable Right-of-Way Fees Act of 2002, and in accordance with
subsection (k), the Secretary of the Interior shall amend section
2803.1-2 of title 43, Code of Federal Regulations, as in effect on the
date of enactment of such Act, 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. The Secretary of
Agriculture shall make the same revisions for linear rights-of-way
granted, issued, or renewed under this title on National Forest System
lands.
``(3) The Secretary concerned shall update annually the schedule
revised under paragraph (2) by multiplying the current year's rental
per acre by the annual change, second quarter to the second quarter
(June 30 to June 30) in the Gross National Product Implicit Price
Deflator Index published in the Survey of Current Business of the
Department of Commerce, Bureau of Economic Analysis.
``(4) Whenever the cumulative change in the index referred to in
paragraph (3) exceeds 30 percent, or the change in the 3-year average
of the 1-year Treasury interest rate used to determine per acre rental
fee zone values exceeds plus or minus 50 percent, the Secretary
concerned shall conduct a review of the zones and rental per acre
figures to determine whether the value of Federal land has differed
sufficiently from the index referred to in paragraph (3) to warrant a
revision in the base zones and rental per acre figures. If, as a result
of the review, the Secretary concerned determines that such a revision
is warranted, the Secretary concerned shall revise the base zones and
rental per acre figures accordingly.''.
(b) Rights-of-Way Under Mineral Leasing Act.--Section 28(l) of the
Mineral Leasing Act (30 U.S.C. 185(l)) is amended by inserting before
the period at the end the following: ``using the valuation method
described in section 2803.1-2 of title 43, Code of Federal Regulations,
as revised pursuant to section 504(k) of the Federal Land Policy and
Management Act of 1976 (43 U.S.C. 1764(k))''.

Amend the title so as to read:

A bill to amend the Federal Land Policy and Management Act of 1976
and the Mineral Leasing Act to clarify the method by which the
Secretary of the Interior and the Secretary of Agriculture determine
the fair market value of certain rights-of-way granted, issued, or
renewed under these Acts.

Purpose of the Bill

The purpose of H.R. 3258, as ordered reported, is to amend
the Federal Land Policy and Management Act of 1976 and the
Minerals Leasing Act to clarify the method by which the
Secretary of the Interior and the Secretary of Agriculture
determine the fair market value of certain rights-of-way
granted, issued, or renewed under these Acts.

Background and Need for Legislation

Rights-of-way (ROW), similar to long term leases, are
grants conveying the right to construct, operate, maintain,
remove, and terminate facilities used for the generation,
transmission and distribution of electric energy and electric
signals, communication services, and oil and gas lines crossing
Federal lands. Section 501 of the Federal Land Policy and
Management Act (FLPMA) authorizes the Bureau of Land Management
(BLM) to issue and renew rights-of-way under, over, and through
lands under its jurisdiction while Section 505 of FLPMA
authorizes the BLM to recover the reasonable costs of
processing and monitoring rights-of-way issued under the Act.
Prior to 1986, the BLM and the USFS used various market
approaches (appraisals, negotiations, percentage of land
estimated value, and permittee investment percentages) to
determine the fair market valuation of lands. Both agencies,
however, found these methods inconsistent, unpredictable, and
subject to appeal, which slowed the process of permit
authorization. Starting in 1986, both the BLM and United States
Forest Service (USFS) decided to utilize a system of ROW
valuation known as the ``linear fee rent method.'' This method
requires the two agencies to evaluate the fair market value (as
defined in the 1973 Interagency Land Acquisition Conference)
based upon a rent schedule taking into account inflation
determined by the GDP-deflator.
In 1995, the Office of the Inspector General for the
Department of the Interior and the Government Accounting Office
(GAO) in 1996 evaluated the rent schedule and found that the
two agencies were not receiving fair market rent. In 1999, both
agencies announced that they would begin developing policies to
change the manner in which they determined rent of right-of-way
access across Federal lands. Specifically, the agencies would
abandon the traditional linear fee rent method, where rent is
calculated based on the area of the right-of-way times the
market value of the land, in favor of a method where the rent
would be based on the value of the throughput. This method
became known as fiberent. In affect, this meant that fiber
optic telecommunication lines would be charged separate ROW
value for each strand of cable, instead of the whole cable as a
single ROW. Concerns were raised that this new valuation method
would slow the expansion of telecommunications in rural areas,
and that rents charged for ROW permits would become
unreasonable.
For example, the current National Energy Policy indicates
that approximately 38,000 miles of additional gas and oil
pipeline is needed to meet current and projected energy demand.
These pipelines will need to pass through vast areas of public
lands. If throughput valuation methods are used on these
pipelines, the ROW rates could increase by as much as 1000%
over the current linear fee method.
To address these concerns, Congress included in the 2001
Interior and Related Agencies Appropriations Act, a provision
requiring that any changes made in ROW rent policies must be
completed through a formal rulemaking process.
H.R. 3258 would end the need for the rulemaking process by
codifying existing regulations for linear rights-of-way, while
at the same time, requiring the Secretaries of the Interior and
Agriculture to revise the per acre rental fee zone value
schedule to reflect current values of land in each zone.

Committee Action

H.R. 3258 was introduced on November 8, 2001, by
Congresswoman Barbara Cubin (R-WY), and was referred to the
Committee on Resources. On November 13, 2001, the bill was
referred within the Committee to the Subcommittee on National
Parks, Recreation, and Public Lands, and the Subcommittee on
Forests and Forest Health. On April 11, 2002, the Subcommittee
on National Parks, Recreation, and Public Lands held a hearing
on the bill. On June 26, 2002, the Full Resources Committee met
to consider the bill. The Subcommittee on National Parks,
Recreation, and Public Lands, and the Subcommittee on Forests
and Forest Health were discharged from further consideration of
H.R. 3258 by unanimous consent. Congresswoman Cubin offered an
amendment in the nature of a substitute that changed the
original text as follows: (1) eliminated the concept of
multiple appraisals; (2) required the Secretary to update the
rental fee schedule to reflect current land values, and (3)
codified the regulations under the Federal Land Management and
Policy Act and the Minerals Leasing Act relating to the rental
fee schedule. The amendment was adopted by unanimous consent.
There were no further amendments and the bill, as amended, was
then ordered favorably reported to the House of Representatives
by unanimous consent.

Committee Oversight Findings and Recommendations

Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of
rule XIII of the Rules of the House of Representatives, the
Committee on Resources' oversight findings and recommendations
are reflected in the body of this report.

Constitutional Authority Statement

Article I, section 8 and Article IV, section 3 of the
Constitution of the United States grant Congress the authority
to enact this bill.

Compliance With House Rule XIII

1. Cost of Legislation. Clause 3(d)(2) of rule XIII of the
Rules of the House of Representatives requires an estimate and
a comparison by the Committee of the costs which would be
incurred in carrying out this bill. However, clause 3(d)(3)(B)
of that rule provides that this requirement does not apply when
the Committee has included in its report a timely submitted
cost estimate of the bill prepared by the Director of the
Congressional Budget Office under section 402 of the
Congressional Budget Act of 1974.
2. Congressional Budget Act. As required by clause 3(c)(2)
of rule XIII of the Rules of the House of Representatives and
section 308(a) of the Congressional Budget Act of 1974, this
bill does not contain any new budget authority, spending
authority, credit authority, or an increase or decrease in
revenues or tax expenditures. According to the Congressional
Budget Office, enactment of this legislation would result in a
$14 million net reduction in direct spending.
3. General Performance Goals and Objectives. This bill does
not authorize funding and therefore, clause 3(c)(4) of rule
XIII of the Rules of the House of Representatives does not
apply.
4. Congressional Budget Office Cost Estimate. Under clause
3(c)(3) of rule XIII of the Rules of the House of
Representatives and section 403 of the Congressional Budget Act
of 1974, the Committee has received the following cost estimate
for this bill from the Director of the Congressional Budget
Office:

U.S. Congress,
Congressional Budget Office,
Washington, DC, July 3, 2002
Hon. James V. Hansen,
Chairman, Committee on Resources, House of Representatives, Washington,
DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3258, the
Reasonable Right-of-Way Fees Act of 2002.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Megan
Carroll.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.

H.R. 3258--Reasonable Right-of-Way Fees Act of 2002

Summary: The Federal Land Policy and Management Act (FLPMA)
and the Mineral Leasing Act (MLA) direct the Secretary of the
Interior and the Secretary of Agriculture to charge fees for
linear rights-of-way across federal lands. H.R. 3258 would
amend current law to require the two agencies to revise the
rates used to establish those fees.
CBO expects that enacting H.R. 3258 would increase
offsetting receipts (a credit against direct spending) from
fees for rights-of-way. We also expect that the bill would
increase direct spending for payments to share a portion of
those increased receipts with the counties in which the fees
are collected. On balance, CBO estimates that the bill would
reduce direct spending by $14 million in 2005. Because the bill
would affect direct spending, pay-as-you-go procedures would
apply.
H.R. 3258 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would impose no significant costs on state, local, or
tribal governments.
Estimated Cost to the Federal Government: The estimated
budgetary impact of H.R. 3258 is shown in the following table.
The costs of this legislation fall within budget functions 300
(natural resources and environment) and 800 (general
government).

Estimated Budget Authority............................... 0 0 -14 0 0
Estimated Outlays........................................ 0 0 -14 0 0
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Basis of Estimate: The Forest Service (within the
Department of Agriculture) and the Bureau of Land Management
(BLM, within the Department of the Interior) issue linear
rights-of-way across federal land for infrastructure such as
pipelines, electric and telephone lines, and other uses. FLPMA
and the MLA authorizes the agencies to charge fair market value
for such rights-of-way. The fees that the agencies charge are
based in part on estimates of the value of the federal lands
where the rights-of-way are located. Those land values are
based on an assessment that was completed in 1986 and has not
since been updated except to account for inflation. H.R. 3258
would require the agencies to update those estimates of land
values and establish a revised fee schedule for linear rights-
of-way within one year of enactment.
In recent years, the Forest Service and BLM began to pursue
a revised fee schedule for linear rights-of-way. Based on
information from the agencies, CBO expects that, under current
law, they would complete the revisions and impose new fees in
2006. According to the Forest Service and BLM, the revisions to
fees that they would make under H.R. 3258 would be similar to
those that the agencies are pursuing administratively under
current law. The bill would require the agencies to revise the
fees within one year of enactment, but based on information
from the agencies about the length of time typically required
to complete such a revision, CBO expects that the agencies
would not impose the revised fees until 2005, one year sooner
than under current law.
According to the Forest Service and BLM, the agencies
currently collect about $20 million a year in fees for linear
rights-of-way. Although the agencies are uncertain about how
much land values have changed, preliminary information suggests
that collections under the revised schedule may increase by
between 50 percent and 100 percent. Based on information from
the agencies, we estimate that H.R. 3258 would increase
offsetting receipts by at least $15 million in 2005. Of that
amount, about $1 million would be required to be paid to the
counties where the fees are generated; hence, the net increase
in offsetting receipts would be $14 million.
Pay-as-you-go Considerations: The Balanced Budget and
Emergency Deficit Control Act sets up pay-as-you-go procedures
for legislation affecting direct spending or receipts. The net
changes in outlays that are subject to pay-as-you-go procedures
are shown in the following table.

----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
------------------------------------------------------------------------------
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
----------------------------------------------------------------------------------------------------------------
Changes in outlays............... 0 0 0 -14 0 0 0 0 0 0 0
Changes in receipts.............. Not applicable
----------------------------------------------------------------------------------------------------------------

Intergovernmental and Private-Sector Impact: H.R. 3258
contains no intergovernmental or private-sector mandates as
defined in UMRA and would impose no significant costs on state,
local, or tribal governments. Enacting this legislation would
benefit some county governments because they currently receive
a portion of these fees and would share in the increase brought
about by this bill. CBO estimates that the counties where fees
are generated would receive additional payments totaling about
$1 million in 2005.
Estimate Prepared by: Federal Costs: Megan Carroll. Impact
on State, Local, and Tribal Governments: Majorie Miller. Impact
on the Private Sector: Lauren Marks.
Estimate Approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.

Compliance With Public Law 104-4

This bill contains no unfunded mandates.

Preemption of State, Local or Tribal Law

This bill is not intended to preempt any State, local or
tribal law.

Changes in Existing Law Made by the Bill, as Reported

In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):

SECTION 504 OF THE FEDERAL LAND POLICY AND MANAGEMENT ACT OF 1976

GENERAL PROVISIONS

Sec. 504. (a) * * *

* * * * * * *

(k) Determination of Fair Market Value of Linear Rights-of-
Way.--(1) Effective upon the issuance of the rules required by
paragraph (2), for purposes of subsection (g), the Secretary
concerned shall determine the fair market rental for the use of
land encumbered by a linear right-of-way granted, issued, or
renewed under this title using the valuation method described
in paragraphs (2), (3), and (4).
(2) Not later than one year after the date of enactment of
the Reasonable Right-of-Way Fees Act of 2002, and in accordance
with subsection (k), the Secretary of the Interior shall amend
section 2803.1-2 of title 43, Code of Federal Regulations, as
in effect on the date of enactment of such Act, 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. The Secretary of Agriculture shall make the
same revisions for linear rights-of-way granted, issued, or
renewed under this title on National Forest System lands.
(3) The Secretary concerned shall update annually the
schedule revised under paragraph (2) by multiplying the current
year's rental per acre by the annual change, second quarter to
the second quarter (June 30 to June 30) in the Gross National
Product Implicit Price Deflator Index published in the Survey
of Current Business of the Department of Commerce, Bureau of
Economic Analysis.
(4) Whenever the cumulative change in the index referred to
in paragraph (3) exceeds 30 percent, or the change in the 3-
year average of the 1-year Treasury interest rate used to
determine per acre rental fee zone values exceeds plus or minus
50 percent, the Secretary concerned shall conduct a review of
the zones and rental per acre figures to determine whether the
value of Federal land has differed sufficiently from the index
referred to in paragraph (3) to warrant a revision in the base
zones and rental per acre figures. If, as a result of the
review, the Secretary concerned determines that such a revision
is warranted, the Secretary concerned shall revise the base
zones and rental per acre figures accordingly.
----------

SECTION 28 OF THE MINERAL LEASING ACT

GRANT OF AUTHORITY

Sec. 28. (a) * * *

* * * * * * *

REIMBURSEMENT OF COSTS

(l) The applicant for a right-of-way or permit shall
reimburse the United States for administrative and other costs
incurred in processing the application, and the holder of a
right-of-way or permit shall reimburse the United States for
the costs incurred in monitoring the construction, operation,
maintenance, and termination of any pipeline and related
facilities on such right-of-way or permit area and shall pay
annually in advance for the fair market rental value of the
right-of-way or permit, as determined by the Secretary or
agency head using the valuation method described in section
2803.1-2 of title 43, Code of Federal Regulations, as revised
pursuant to section 504(k) of the Federal Land Policy and
Management Act of 1976 (43 U.S.C. 1764(k)).

* * * * * * *