BLM land leases and fairy dust

On March 29, a letter to the editor from Dr. Jesus Camacho was published that purported to represent an academic explanation of the Federal Bureau of Land Management policies on lease rents and royalties of public lands. It went on to attempt to convince the citizenry of the CNMI that the Azmar proposal for mineral extraction on Pagan was grossly less than those required by the BLM and that the CNMI should mimic federal standards regarding the removal of precious elements from the CNMI.

Let’s examine the fairy dust and misrepresentations postulated by Dr. Camacho, possibly at the behest of PaganWatch and/or one or more of those who would continue to lead the CNMI down the road to economic ruin by denigrating every proposal that comes our way through misleading representations or a conglomeration of enumerated, irrelevant data taken out of context and compiled as if it were some sort of scholarly endeavor.

In the first place, there are NO public federal lands in the CNMI subject to BLM control or permitting and leasing requirements. Even so, Dr. Camacho drones at length regarding BLM oil and gas leases in 31 states east of the Mississippi River and the millions of dollars these states purportedly reaped by a returned share of the federal leases—as if the CNMI were rich in such elements.

However, Dr. Camacho appears to have compiled much of his list of representations about the BLM directly and almost verbatim from the following web site: http://www.ca.blm.gov/caso/iac/faq.html. The letter that appeared involved no more doctoral insight than a simple copy and print from an already prepared document. He cites Section 302 of the Federal Land Policy and Management Act of 1976 (FLPMA) as the source of authority and it is for gas and oil leases and a few others.

Such is not the case here.

Misrepresentation number 1: The FLPMA, Sec. 302 does not regulate surface mineral extraction used for industrial purposes. These elements may only be extracted (on federally owned lands) under the statutory authority of Title 43 of the Code of Federal Regulations (CFR), Part 3500 (1999). (More on this regulation later).

Misrepresentation number 2: Dr. Camacho states that pozzolan is a valuable element and further calls it a precious mineral. Pozzolan is not a valuable or precious element. No one really wants it. No one really needs it. It can be used to make better cement. Few now use it but would use it if a reasonable supply can be secured at a reasonable cost and if they can be convinced to purchase it. Do you think cement manufacturers would use pozzolan if the resultant cement cost so much that no one would buy it? Do you see any prospective purchasers (other than Azmar) banging at the door of MPLA to get a permit? This goes right to the heart of Economics 101: supply and demand.

Misrepresentation number 3: Dr. Camacho states that the royalties the CNMI would receive from Azmar would be only 7 percent and that this is far below the average royalties the federal government requires from companies leasing their land. The 7 percent figure used is misleading and favored by PaganWatch in order to foster a misplaced feeling of betrayal in its membership and the citizens of the CNMI. (More on federal royalties and the Azmar proposed royalty below).

Currently, the MPLA requires a small lease royalty from companies doing business on CNMI controlled lands—usually 3.5 percent of the value of the business. Azmar voluntarily raised its offer to double the requirement, or 7 percent. But that is not all; there is the upfront money amounting to about $1.3 million Azmar will immediately place in the MPLA coffers upon receipt of a permit. There is the 2 percent rent Azmar must pay the CNMI. There is the 5 percent BGR tax Azmar must pay the CNMI. There is the 5 percent excise tax Azmar must pay on all equipment or business use materials brought into the CNMI. There are the payroll and other taxes Azmar must pay the CNMI. There is the benefit of local employment of U.S. citizens only. There are the peripheral businesses that will feed on the Azmar business. There are the several millions of dollars of infrastructure brought to Pagan and shared (at no cost to the CNMI) with the legitimate residents therein: roads, airport, harbor, housing, power, water, etc. All of this adds up to somewhere between a minimum of 15 percent and 20 percent of the value of the extracted mineral—nearly twice as high as the requirements of BLM or the federal government (for similar mineral extractions and not for oil and gas) and more then 10 times higher than states normally receive as shared royalties. Remember, federal BLM rents are not shared with the states; only the royalties are shared.

Misrepresentation number 4: Dr. Camacho stated that MPLA made public that documentation required for a permit to mine Pagan had not been submitted by Azmar. This is a public lie. All of the required documentation was submitted but suppressed from most members of the board and the public by certain unscrupulous elements within the board’s hierarchy.

Misrepresentation number 5: Dr. Camacho states that had an auction of the pozzolanic land area been held in 1995 (presumably in place of the direct award by MPLA to J. G. Sablan), the CNMI would have by now received a lot more money. Well, I guess anything more than zero is more money. As stated previously by me and other Azmar officials, there was no one willing, able or desirous of extracting the mineral from this remote location. It is far less costly to extract anything if you don’t have to cross several thousand miles of ocean to get to a fly speck of land with no facilities whatsoever and then try to get the product to a market even farther away. It’s just not the same as in California (or any other state) where you can just drive up, scoop up and deliver. Indeed, even J. G. Sablan found himself without any buyers or market. So, what would an auction of an unwanted product have produced? Nothing.

Misrepresentation number 6: Dr. Camacho states that a land leasing price tag of $3 million dollars is not unreasonable. Where did this figure come from? How was it calculated? Especially in light of the fact that Azmar has already offered $1.3 million up front and lease rent of 2 percent of the value of the mineral. Remember, federal lease rent is calculated by the acre, not by value of the mineral. Thus Azmar’s offer is far more than his $3 million price tag. The CNMI would be seriously shortchanged by those who would be required to pay only $3 million up front and a BLM calculated rent (see below for BLM rent calculations).

Misrepresentation number 7: Dr. Camacho states that the royalties to the government would be from 12 percent to 20 percent depending on what element is being mined, as if all of this purported 12 percent to 20 percent would belong to the CNMI (12 percent to 20 percent of what?). Again, such is not the case (see below for BLM royalty calculations).

A good—and the most relevant—example is the State of California where Dr. Camacho resides but obviously is not aware of what transpires from BLM surface mineral leases in that state. In 2001 (the last year from which complete data has been posted) there were 46 federal land leases covering the removal of surface minerals on public lands and 5 leases on Indian-owned lands. For purposes of clarity, I will compare apples to apples, unlike the apples to pickles approach of Dr. Camacho (he compared oil and gas leases east of the Mississippi river to surface mining on Pagan). These California leases covered an area many, many times larger than Pagan and removed millions of tons of surface minerals far more than would be removed in a single year from Pagan. After all, California is a very large state. So how many millions of dollars did California get out of all this? It must have been very large indeed. After all, the BLM granted California an unparalleled whopping 50 percent of the land lease royalties from all this mining. Fifty percent. Imagine that, and to think the CNMI was offered only 7 percent plus 2 percent plus 5 percent plus 5 percent plus. All those plusses would have placed a mere $12 million from Azmar on the CNMI’s coffers in 2004. So, just how did the state of California make out from a program a hundred or so times larger than that proposed in the CNMI? Two billion? Three billion? Think again; their legitimate share of surface mineral mining in all of California in 2001 was a whopping $1.85 million ($1,850,000)—in total and that is what they got. Go to: http://www.ca.blm.gov/pa/minerals/solid_lse.html.

And Dr. Camacho (and PaganWatch) wants the CNMI to emulate the federal government’s lease program? Now, please tell me which sounds better to you: the $12 million offered the CNMI or the $1.85 million received by California? Who got screwed here and who was the screwer?

Let’s take a look at BLM lease royalties and rents and how they are determined. You can look it up yourself at http://straylight.law.cornell.edu/cfr/ or http://www.gpoaccess.gov/cfr/index.html and search for Title 43, CFR 3504.15. This CFR was published on Oct. 1, 1999 in the Federal Register, Vol. 64, No. 190, pages 53512 to 53556.

The BLM rental rates for the mining of surface minerals range from a low of $0.25 per acre per year to a high of $1 per acre per year. Note carefully that this is computed on acres, not value.

Further the BLM computes lease royalties at minimums ranging from 0 percent to 5 percent of the value of the extracted minerals. Only in the case of multiple bidders for the same site might the royalties creep up, based on competition. It rarely happens for surface minerals. States generally receive from 12 to 20 percent of what the BLM gets in royalties, none of the rental charges. For example, if the BLM gets 5 percent of the value in royalties, a state might expect 15 percent of the 5 percent, or only about 0.75 percent of the value of the extracted mineral.

So, what would the CNMI have received had Pagan been under BLM control or if the CNMI could have emulated the BLM? And how does that stack up against the offer from Azmar?

The Azmar lease would have produced a royalty of 7 percent or approximately $9.66 million dollars in the first year alone. The Azmar permit would have produced rental of approximately $2.75 million dollars in its first year alone. The 5 percent excise tax would have produced approximately $0.25 million. The total would be somewhere around $12 million—per year in cash. The value of employment (and the subsequent taxes) and the created infrastructure would be incalculable.

Using the BLM formula (and that of Dr. Camacho and his cohorts at PaganWatch), the royalty received would have been approximately (at the maximum 5 percent level) $6.9 million to the federal government with about $1.035 million returned to the CNMI or all of the $6.9 million if the CNMI could emulate the federal government. Further, rental returns would be calculated at the average BLM rate of $0.50/per acre, resulting in a return to the BLM alone (or the CNMI, if the CNMI could emulate the Federal government) of approximately $1,100 or a whopping grand total of just over $1 million if controlled by BLM or $6.90011 million if the CNMI got all of it—just over half of what Azmar has already offered. Once again, I ask you who got screwed and who was the screwer?

By the way, under a BLM auction that might have been held in 1995, and assuming J. G. Sablan won the bid, the CNMI would have received a grand total of nothing. Since they haven’t sold anything, there would have been no royalties to share and the BLM lease rental of about $11,000 for the 10-year period to date would not have come to the CNMI anyway. As it is, the CNMI did receive (or has a payment due) of $200,000 from J. G. Sablan (for 10 years), a mere pittance compared to the Azmar offer, yet still nearly 20 times of what would have been derived if the CNMI had emulated the federal government. Of course, the failure to sell anything would have, under BLM rules, negated the lease long ago.

Let us now stop floundering in misrepresented compilations of selected raw fairy dust—presented by those who would mask themselves in scholarly effort or pretend to know more than anyone else. Real facts are available. They are public. They are presented by reputable people or agencies who have earned the right to hold our trust. Look them up for yourselves but use reputable web sites (such as those cited above) and other sources that have high recognition from around the world.

And now, Dr. Camacho, a final word. From past history of letters to this paper (and history frequently repeats itself), I believe that you are already flailing away at your keyboard in an attempt to dispute, smear or otherwise belittle this letter (or me personally) as you have done to others in the past. But I am no first year student; I am not myopic; I don’t need to take more courses (and neither does anyone else in order to express their rightful opinion), nor will I respond to such unprofessional tactics. I have examined legitimate resources and shown what they are and where they are. The data are available, consistent and independently verifiable.

I have a high regard for students or anyone else who express genuine opinions, especially those that differ from my own, without resorting to bullying, pistol whipping, accusing or belittling persons. Anyone can compile a simple list of selected raw data and skew its presentation to force a particular outcome or impression. Anyone can ask poll questions in a manner that elicits skewed results. The professional, however, will present all data pertinent to the subject, verify it, analyze it appropriately and present logical conclusions or suggestions based on relevant information and expertise. And in a format that allows the public to understand and draw their own unbiased conclusions based on verifiable, authentic resources and methods.

The citizens of the CNMI are good-hearted people with a keen sense and ability to see through most B.S. It is the responsibility of persons in the professions to recognize and honor this concept.

Dr. Thomas D. Arkle Jr.
San Jose, Tinian