Bidding on State Land Trust Leases: Even the Top Revenue-Generating Bids Must be Balanced Against Qualitative “Best Use” Factors Designed to Protect the Land

by Snell & Wilmer
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The Court of Appeals recently held that that the Commissioner of the State Land Trust Department properly balanced Wildearth Guardians, Inc.’s higher revenue-generating bid against “best use” qualitative factors set forth in the Arizona Administrative Code.  As a result, the appellate court affirmed the Commissioner’s decision to award a 10-year grazing lease to the Knights for their 28-year record of stewardship and protection of the leased land near Springerville, Arizona, despite the $79,344 in additional revenue over 10 years which would have been generated for the benefit of Arizona’s public schools by the Wildearth Guardian’s bid.  Wildearth Guardians, Inc. v. Hickman, 670 Ariz.Adv.Rep. 28 (App. 9/12/13) (the Knights were also defendants-appellees with Hickman, the Arizona State Land Commissioner).

Congress passed the Arizona New Mexico Enabling Act in 1910 (“Act”), which authorized those two territories to form state governments and granted the future State of Arizona approximately 10 million acres of land to be held in trust and used to provide support for public schools.  The Act further required all sales or leases of trust lands to be made to the “highest and best use bidder at a public auction,” and those requirements were incorporated into the Arizona State Constitution.

As the Knights and Wildearth Guardians had submitted conflicting applications and bids, the Commissioner reviewed both the revenue to be generated (“highest use”) and qualitative factors relating to which bidder would more likely protect the land (“best use”).  Ultimately, the appellate court upheld the Commissioner’s decision to award the lease to the Knights based on their 28-year track record of protecting the land by monitoring the land daily, having 10-14 people who lived either on or within eight miles of the property and their historical efforts to preserve Native American ruins and fossil beds and prevent illegal dumping and looters.  The Commissioner noted that although Wildearth Guardians proposed “to pay $10 per animal unit month (“AUM”)…[compared to the] $2.40 per AUM the Knights had offered to pay” (which would have generated another $79,344 over 10 years for the State), Wildearth only planned to monitor the property “once every two weeks by several people living between one to one and one-half hours away.”

Finally, after a three-day property visit and inspection, a resulting 39-page report, a decision by the Commissioner, administrative proceedings by an administrative law judge, judicial review by the Superior Court, and now this decision by the Court of Appeals, the case may be resolved some seven years after the conflict first arose in late 2006 – absent further legal challenges.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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