Montana Grazing Preference Overturned

[Nemont]

Judge axes grazing preference

By Mike Dennison
Tribune Capitol Bureau

HELENA -- A judge has issued a stunning reversal of state grazing law, saying current holders of state livestock grazing leases cannot renew their lease simply by matching the highest competing bid.

State District Judge Jeffery Sherlock of Helena said the long-standing "preference right" law is unconstitutional because it prevents the state Land Board from deciding who would be the best lessee of state lands.

Tommy Butler, chief attorney for the Department of Natural Resources and Conservation, said Tuesday the ruling is "the most profound case I've encountered since I've been here as far as state lessees," affecting more than 10,000 lessees on millions of acres of state land.

Most of these lessees are Montana ranchers, who rely on the leased land as part of their operation.

Jay Bodner, natural resource coordinator for the Montana Stock Growers Association, said it's a huge decision that could undercut ranching across the state.

If the preference law is void, the land could be open for lease strictly to the highest bidder, he said.

"You open it up to a can of worms if you open it up to the highest bidder," Bodner said. "An environmental group could outbid you and there is no grazing on that land."

Butler said the state and the governor's office will analyze the case and decide whether to appeal. Bodner said his organization hasn't decided whether the ruling should be appealed or perhaps addressed by the 2005 Legislature.

"It certainly was kind of a surprise on our end that that was the final decision," he said.

Sherlock, however, did not say the highest bidder for the lease must prevail.

His order sent the case back to the state Land Board, saying it must decide who the best lessee of the land will be -- without considering the unconstitutional "preference right."

Sherlock issued his order late last week, in a case involving two Judith Basin County landowners north of Geyser.

Bill Broadbent, a New Yorker who bought an area ranch several years ago, bid $23 per animal unit month to lease the 640-acre state section of land currently held by local ranchers Gale and Andrea Harlow.

The Harlows, whose 10-year lease expired in February 2003, were paying the minimum of $5.77 per animal-unit month to graze cattle on the section of state land.

An animal-unit is defined as one mature 1,000 pound cow and her suckling calf.

Under the preference law, the Harlows were allowed to match Broadbent's bid and thus keep the lease. But they also were allowed to petition the state to reduce the price from $23 per AUM. The state agreed to set the rate at $10.52 per AUM and the State Land Board approved it.

Broadbent sued to overturn the preference law, leading to last Thursday's decision.

Broadbent's attorney, Harley Harris of Helena, said Tuesday his client thought the Land Board's decision was based on an unconstitutional law, "and we're happy to see that the judge agreed with us."

Gale Harlow, reached at his ranch north of Geyser, said losing the grazing lease would be "a detriment to our livelihood, because that's what we do, raise cattle for a living."

"Broadbent has been there five years and he doesn't even own a cow," Harlow said.

Harlow said he hopes the state will appeal the decision or somehow act to reverse it.

"I don't know what would happen to all the leases in Montana if they set free the environmentalists to pick up all the leases," he said. "That's what they're up to. (The state) just can't possibly let this thing go. It's just too big of a thing."

Sherlock said the preference law is unconstitutional because it gives the current lessee, rather than the Land Board, the power to decide who gets to lease state land.

The Land Board has a constitutional and legal duty to act as trustee for state lands and get the "maximum benefit in return from the use of trust property," he wrote. Money from leasing state lands goes into a trust that helps finance public schools.

"The (preference) statute creates a situation where the Land Board cannot choose a lessee who may actually improve the quality of the state lands, which would benefit the (state)," Sherlock said. "The plain language of the statute deprives the Land Board of the discretion to provide the maximum return with the least injury to the trust estate."

Court records said Broadbent wanted to obtain the lease so he could "implement mixed conservation and light-tough ranching techniques to conserve traditional values of ranching, while balancing that with wildlife preservation."

The Montana Land Reliance and the Montana Audubon Society submitted letters of support for Broadbent's plans.

Harris argued that Broadbent's offer was more money to run fewer cows, and thus increase the value of the land for the state.

The Harlows suggested Broadbent entered the high bid to spite them because of a water rights dispute between the two, court records said.

 

[Ithaca 37]

WOW! "The Harlows, whose 10-year lease expired in February 2003, were paying the minimum of $5.77 per animal-unit month to graze cattle on the section of state land."

This oughta generate lots of turmoil in MT.

I wonder how that state land is different from BLM where the AUM rate is $1.35?

 

[Bambistew]

Wow! That could have a huge impact. The part I don't get is existing leasee matched the bid, but then petioned to have it lowered... to less than half the bid price WTF, why even have it open for bid?

 

[Nemont]

Bambistew,

That is the heart of the question. The judge went on to say the way the land board treated current lease holders as having the ultimate say in who got the lease. This took the power to choose lease holders away from the land board.

The petition process has been in place for a while. It allowed a current lease holder to match any bid price and then petition to reduce the cost if they could show the "fair" price that should be charged per AUM.

You know the interesting part is if they would have just matched the bid then this whole thing would not have gone to court. It was in response to the lowering of the price after the fact that forced the issue. Kind of like winning the battle and losing the war.

It didn't even take a beligerent Dickhead like Jon Marvel to get this one going. I bet the coffee clatch at the cafes in all the towns were buzzing this morning.

Ithaca,
That is a good argument about the difference between state and federal land. They often are adjacent to each other.

The funny thing is that on the land board the Democrats have a 3 to 2 majority. John Morrison, Mike McGrath and Linda McColluch are all dems. Judy Martz and Bob Brown are the two republicans.

Nemont

[ 07-21-2004, 10:49: Message edited by: Nemont ]

 

[BuzzH]

I think its a good ruling.

The States lands are in place to maximize money for school trust, not subsidize ranching.

The bottom line is that the highest bidder should get the lease, end of story.

Giving preference to someone just because their grandpappy had a cattle ranch is BS.

The laws are finally starting to catch up with the times.

 

[JoseCuervo]

This is exactly how Marvel got his first leases, by outbidding the rancher, and the Land Board ignoring their Constitutional duty, and awarding the lease to the rancher.

How does the MT Land Board justify that they are maximising the School Trust, if they allow the Rancher to petition to a lower rate???

It seems like if you have two bidders, you have, by de facto, found the Market Rate, and no adjustments should be allowed.

Nemont,
What is the law up there, if I have a public lease INSIDE of your deeded property? Do you have to give me access? Do you have to fence your cows off of my leased land? Or do I have to fence my public Land?

 

[Nemont]

EG,
Access is an iffy thing if you have to cross deeded land. Montana is also open range and I believe, I am not certain but will check, that you have to fence my cows out if you want them off.

I know of many cases where huge blocks of both federal and state land are blocked by deeded properties. If no historical easements or public right of ways lead to these properties. Then it is difficult to access.

Nemont

 

[JoseCuervo]

If I put my cows on my leased, land, and they wander on to your deeded land, who is in trouble???

If your private cows, come onto my leased land (Public Land), wouldn't they be "trespassing", as far as being on public land, and not paying lease fees, in the eyes of the Agency???

It looks like Montana is about 5-8 years behind Idaho, if these issues start to play out in the same way as Idaho. The MT ranchers/legislators better act quickly, or will find themselves cussing Judges under their hats....

 

[Ithaca 37]

Nemont, "Under the preference law, the Harlows were allowed to match Broadbent's bid and thus keep the lease. But they also were allowed to petition the state to reduce the price from $23 per AUM. The state agreed to set the rate at $10.52 per AUM and the State Land Board approved it."

So the law in MT has been allowing welfare ranchers to be subsidized at the expense of school children. How do the people of MT feel about that?

Ya gotta give those welfare ranchers credit for having a lotta nerve! Imagine thinking you should be able to cheat schools out of money paid for grazing leases by petitioning for lower fees when somebody else is willing to pay more! Kinduv a stacked deck for the ranchers, isn't it? And who makes up the difference when schools are cheated, the taxpayers of MT?

 

[BuzzH]

Gunner, I think legally, you're right that if your cows enter a state or federal lease they are trespassing.

At the same time, if they wander off your lease onto deeded land, the owner of the land would have to FENCE your cattle out.

Its a mess trying to figure out open range/lease/deeded property issues.

 

[JoseCuervo]

Buzz,

And if you use Idaho as a bad example, to consolidate holdings, the State Land Board trades good land for the rancher's worst land in an attempt to make contiguous parcels.

I know Wyoming is bad with the Checkerboard, but not sure how MT is split up.

 

[BuzzH]

Montana is checkerboarded as well, but with the few dealings I've had with consolidating, MT usually comes out pretty good...sometimes REALLY good.

One rancher I know of, and worked for, took a pretty good beating by MT on a land swap...about 2-1.

Of course, I was all tore up over it, the guy was just about on food stamps after the deal went through...

Actually, I just think the Atlanta Braves all took a small salary cut.

 

[Nemont]

I spoke to my attorney today regarding the issue of access. He said that the lease holder of a state lease is allowed access across deeded land.

Apparently there are several rulings in different cases that conflict with this and so the question is at best ambigious. He went on to say that it does not necessarily mean public access to the state lands but to the lease holder.

Cattle wandering from deeded to state land would be trespassing. I think the problem is monitoring and enforcement.

Ithaca,
I am willing to bet the bulk of Montana voters do not even know that the state school trust land is managed the way it is. Here is my opinion so take it for what it is worth.

Allowing a current lease holder to match the highest bid is not a bad thing. If the market price has been set by willing payors then that is the value the state should get. What isn't right is the petition process which allows the incumbent lease holder to pay less then what was another willing payor would pay.

Matching the highest bid would also allow conservation groups who want to get grazing stopped to outbid any rancher. That seems fair and in line with the mandate for the state to get max. value for their land.

Nemont

 

[Nemont]

Local News - Thursday, July 22, 2004

State Land Board weighs fallout of grazing decision

By Mike Dennison
Tribune Capitol Bureau

--------------------------------------------------------------------------------

HELENA -- Gov. Judy Martz and other members of the State Land Board said Wednesday they need to take a closer look at a landmark court ruling on state grazing leases, before deciding whether to appeal it to the Montana Supreme Court.

However, an adviser to state Auditor John Morrison, one of five Land Board members, said there's "a general feeling that it's likely to be appealed."

Dore Schwinden echoed the words of many elected officials and their advisers Wednesday, saying they need to evaluate the impact of District Judge Jeffrey Sherlock's ruling that said lessees of state lands cannot retain their grazing lease simply by matching a competing bid.

The law granting this "preference right" is unconstitutional because it does not allow the Land Board to decide who's the best lessee for that piece of state land, Sherlock ruled last Thursday.

"It will take a few days for us to figure everything out," Schwinden said. "I'm not sure what the fallout of the preference-right decision is."

The Land Board comprises the state's top five elected officials: The governor, attorney general, state auditor, secretary of state and state superintendent of public instruction.

It has a constitutional duty to manage state lands, including decisions on grazing leases.

About 5,500 people hold grazing leases on 4.3 million acres of state land in Montana.

The Land Board was a defendant in the lawsuit that led to last Thursday's decision.

Bill Broadbent, who owns ranchland north of Geyser, challenged the preference right that allowed neighbors and current leaseholders Gale and Andrea Harlow to match his high bid for grazing on 640 acres of state land.

The Harlows, who use the parcel to graze cattle, retained the lease by matching Broadbent's bid, which was four times what they had been paying. They later petitioned the Land Board to reduce their rent to less than half that amount.

Secretary of State Bob Brown, a Republican running for governor, said it's important to keep "reliable stewards on the land ... not only for the economic viability of thousands of men and women in production agriculture, but also for the long-term sustainability of the land itself."

"Keeping agricultural and grazing leases in the hands of people with first-hand knowledge of the land will far outweigh any short-term economic benefits that might be derived from out-of-state lessees driving the price of grazing leases over the prevailing community standard," he said.

Chuck Butler, spokesman for Gov. Martz, said she wants to consult with state Natural Resources and Conservation Director Bud Clinch and legal advisers before deciding whether to support an appeal of the decision.

Clinch is on vacation this week.

Superintendent of Public Instruction Linda McCulloch said she hopes Martz will consult with other Land Board members before deciding on the appeal.

The Land Board should be making final decisions on state lands, but must do so based on many factors, "including a judge's opinion on the constitutionality" of governing laws, she said.

McCulloch earlier had asked Clinch's department (DNRC) to study whether the preference right has led to the best use and health of the land. The study was placed on hold, however, waiting for the outcome of Broadbent's lawsuit.

Attorney General Mike McGrath said he hasn't had a chance to read the decision, and that his office hasn't had any discussions about whether to appeal it.

If the decision is upheld by the Supreme Court, the Land Board would have to work out criteria for awarding grazing leases when they come up for renewal, he said.

Kevin Chappell, chief of DNRC's Agriculture and Grazing Management Bureau, said the ruling has no immediate effect because only one-tenth of grazing leases expire each year -- and the expiration isn't until February. Competitive bidding occurs in only 60 to 80 renewals each year.

 

[Ithaca 37]

Nemont, I agree with your last comments to me 100%.

Now that this issue is getting some publicity I hope the MT residents will start to understand it better.

 

[JoseCuervo]

Originally posted by Nemont:
I spoke to my attorney today ..........

Nemont

Whoa Nemont.... For a minute there, I thought you were going "paws" on me....

I still question the "matching", where an incumbent can match the new bidder's winning bid. Why shouldn't the "newbie" be able to raise their bid, if it gets matched, thus, keeping the auction going. I would think the incumbent is always free to bid MORE than the new guy....

"Keeping agricultural and grazing leases in the hands of people with first-hand knowledge of the land will far outweigh any short-term economic benefits that might be derived from out-of-state lessees driving the price of grazing leases over the prevailing community standard," he said.

How does that make sense???

 

[Lostagain]

Then it would make more sense just to have a public auction on every piece, highest bidder takes the lease. The state should then also PAY for all improvements done to that parcel.

 

[Nemont]

EG,
Matching should be allowed as it is a true price. If a section of state land integrated into a place then matching should be allowed. What does the state care. The market has been established and the money will be paid.

If the highest bidder is doing it just to be a butt head and wants to drive cattle off of the land then the politicians will get involved.

Why would you care if the current lease holder is allowed to match?

Nemont

 

[Lostagain]

Then state should be deciding what is best for the ground, not for the schools. If they aren't taking care of the land then fire all the rangebiologists and just hire accounants.

 

[Nemont]

Then state should be deciding what is best for the ground, not for the schools. If they aren't taking care of the land then fire all the rangebiologists and just hire accounants.

Lostagain,
Have you read the enabling legislation for the school trust lands in Montana? Here is an overview. They are required by law to do what is best for the schools. It would be difficult to argue that getting more money and grazing fewer cows would be bad for the long term future of the schools and the land.

OVERVIEW OF SCHOOL TRUST LANDS


By the Enabling Act approved February 22, 1889, the Congress of the United States granted to the State of Montana, for common school support, sections sixteen and thirty-six in every township within the state. Some of these sections had been homesteaded, some were within the boundaries of Indian reservations, and yet others had been otherwise disposed of before passage of the Enabling Act. To make up for this loss, and in lieu thereof, other lands were selected by the State of Montana.




The Enabling Act and subsequent acts also granted acreage for other educational and state institutions, in addition to the common schools. The original common school grant was for 5,188,000 acres. The additional acreage provided for other endowed institutions included 668,720 acres, for a total of 5,856,720 acres. The total acreage figure fluctuates through the years due to land sales and acquisitions. Mineral acreage now exceeds surface acreage because the mineral estate has been retained when lands are sold. Surface acreage at the end of FY 2003 totals over 5.1 million acres; mineral acreage exceeds 6.3 million acres.

The Enabling Act provided that proceeds from the sale and permanent disposition of any of the trust lands, or part thereof, shall constitute permanent funds for the support and maintenance of the public schools and the various state institutions for which the lands had been granted. The Montana Constitution provides that these permanent funds shall forever remain inviolate, guaranteed by the State of Montana against loss or diversion.

The Enabling Act further provided that rentals received on leased lands, interest earned on the permanent funds arising from these lands, interest earned on deferred payments on lands sold, and all other actual income shall be available for the maintenance and support of such schools and institutions.
Each section of state trust land is assigned to a specific trust. Distribution of revenues is handled in different ways depending on the section of trust land that generated the revenue.


The Trust Land Management Division administers land for some other state agencies, in addition to state trust land. Revenue generated from that land is transferred directly to the state agency.

The purpose of the Trust Land Management Division is to administer and manage the state trust timber, surface, and mineral resources for the benefit of the common schools and the other endowed institutions in Montana , under the direction of the State Board of Land Commissioners. The board consists of Montana's top elected officials:

Judy Martz, Governor
Linda McCulloch, Superintendent of Public Instruction
Bob Brown, Secretary of State
Mike McGrath, Attorney General
John Morrison, State Auditor
The division is divided into four bureaus: Agriculture and Grazing Management, Forest Management, Minerals Management, and Real Estate Management.
The department's obligation is to obtain the greatest benefit for the school trusts . The greatest monetary return must be weighed against the long-term productivity of the land to ensure continued future returns to the trusts.

State of Montana Land Ownership Map

Nemont