The issue of leasing land in the CNMI

The Bureau of Land Management, an agency of the Department of the Interior, administers 261 million surface acres of America’s public lands, located primarily in 12 western states. The BLM sustains the health, diversity, and productivity of the public lands for the use and enjoyment of present and future generations.

According to the BLM, the agency administers public land within a framework of numerous laws. The most comprehensive of these is the Federal Land Policy and Management Act of 1976. All bureau policies, procedures, and management actions must be consistent with FLPMA and the other laws that govern the use of public lands.

The BLM manages a wide variety of resources and uses, including energy and minerals; timber; forage; wild horse and burro populations; fish and wildlife habitat; wilderness areas; archaeological, paleontological, and historical sites, and other natural heritage values.

BLM describes American values as being balanced with the use, conservation, environmental management, recreation, and tourism. Public lands are increasingly viewed from the perspective of the recreational opportunities they offer, their cultural resources, and—in an increasingly urban world—their vast open spaces. Against this backdrop are the more traditional uses of land, e.g., grazing, timber production, and mining, which are in high demand.

According to PR Newswire, the BLM has the responsibility for leasing the federally-owned minerals located in 31 states east of and adjoining the Mississippi River and offers selected parcels at quarterly competitive auctions.

The competitive auction of oil and gas leases in Arkansas, Michigan, and Mississippi brought in nearly $6 million. The bulk of this money reflected bonus bids, filing fees, and rental revenue going to the U.S. Treasury, and the remaining money was shared with the affected states.

The federal land leases in the abovementioned states are awarded typically for a term of 10 years and as long thereafter as there is production of oil or gas in paying quantities. For the above transactions, the federal government will receive a royalty of 12.5 percent of the value of production. In addition, each state government will receive a 25 percent minimum share of the bonus and royalty revenue from each lease that is issued in the affected states.

According to the financial calculator made available by PaganWatch, the royalties that the CNMI would receive from Azmar if they had a permit and were allowed to mine on Pagan would be only 7 percent. This percentage is clearly far below what the average royalties the federal government requires of companies leasing their land.

For example, the $20 million for the land lease on three islands (Tinian, Saipan, Farollon de Medinilla) for 50 years (1975-2025) from the Covenant transaction back in 1975 translates into about $400,000 a year for Tinian, Saipan, and Farollon de Medinilla. Should the option to extend the lease be made in 2025 the lease amount will drop to $200,000 annually.

Hindsight is 20-20. If we went back to 1995, right before the CNMI government issued J.G. Sablan a permit to mine Pagan for pozzolan, and did market and industry research and conducted an “auction” to lease the land for the minerals, I am almost certain that the government and indigenous peoples would have realized a substantial amount in terms of the total cost to lease the land, plus the royalties that are affiliated with the mineral pozzolan that was to be extracted from Pagan.

As indicated in the abovementioned example with the leasing of federal land, the upfront purchase of any land that may have precious elements is relatively high. The CNMI should follow the federal procedures in charging a high land leasing amount for organizations interested in taking precious elements from the islands which comprise the Northern Marianas. For example, a land leasing price tag of $3 million would not be unreasonable given what the land will produce in terms of valuable resources. These funds would, of course, make their way to the Marianas Public Land Trust and, in turn, be used to help the indigenous peoples and residents of the CNMI progress and improve their quality of life.

The leasing permit issued to J.G. Sablan in 1995 for Pagan stipulated a $20,000 annual payment, plus royalties reflecting nearly three dollars per cubic yard of pozzolan. The total land leasing amount that J.G. Sablan has been obligated to pay the MPLA over a 10-year span of time (1995-2005) is approximately $200,000.

Because of the drastic differential of what is being charged for land leasing with precious minerals in the CNMI (several thousand) versus what the property is being leased for by the feds (several million), there needs to be an adjustment by the MPLA to ask for an initial land leasing purchase, e.g., $3 million, in lieu of an annual land lease rate which is far below the value of the land. To ask for a price at a level that reflects the value of the property and the resources it holds is what the federal government is doing and considered reasonable.

The economic benefits of handling the precious Northern Marianas land in a prudent way similar to the way the feds handle their mineral-laden property will reap tremendous economic benefits for the overall island community. If the potential proceeds that could be in the several millions for just the “leasing of the land” were collected, it would be unprecedented and, of course, be an economic blessing for a monetarily-strapped CNMI.

Moreover, the royalties to the government would be from 12 to 20 percent, depending on what element is being mined. And since pozzolan is a valuable element utilized as a key ingredient in the industry of construction, then the royalties for it should be relatively high.

Had an auction by the CNMI government for the rights to mine pozzolan on Pagan been conducted back in 1995, there would have been a separation of the “financial men from the boys.”

In other words, any organization that did not provide the required financial statements, or the ones submitted that were “suspect” and did not substantiate the validity of their assets and financial disposition, would be completely eliminated from any consideration.

Looking at only “qualified” prospects to develop government-owned property would be akin to the requirement of academic transcripts prior to being considered for admission to a college or university. Applications that are submitted for admission are considered incomplete until every transcript has been received.

Thus, if the Azmar organization refused to provide all of the required documentation reflecting their financial disposition, then they would not make it to the consideration phase. The MPLA has made public that documentation required for a permit to mine in Pagan has not been submitted by the Azmar organization. Thus, the prospect for Azmar to be a recipient for a permit should not even be entertained.

Likewise, for companies that fluctuate financially and may be teetering on Chapter 11 or 7 would fall to the wayside simply because of their financial tenuousness. And if these companies are not “current” in terms of making payments of fees, royalties, etc., that are required by the government, then they would run the risk of having their leasing arrangement with the land terminated.

It has been documented that J.G. Sablan has been inconsistent with being current in terms of required fees and the like regarding its mining activity on Pagan. Have there been any reprimands and/or communication about this inconsistency jeopardizing the permit it presently has? Furthermore, the activity involving J.G. Sablan should not go unchecked. Not keeping tabs on what is going on is an invitation for potential surreptitious activity, e.g., the use of illegal aliens as laborers.

The CNMI government should seriously consider mimicking the U.S. government regarding certain areas of the island community that have precious resources, if it will allow the islands to progress and move forward. To not make any progress because the short- and long-term planning for land use was either nonexistent and/or shortsighted will hurt the prospect of the future generations in the islands having a decent quality of life, as well as providing additional revenues that are sorely needed and need to be injected into the government coffers to take care of mounting deficits, retirement fund, public school system, health care, and social services.

The time has come for the MPLA to make sound business decisions regarding CNMI real estate to protect the best interests of the island community during the first decade of the 21st century and for future generations. The creation of a task force allowing PaganWatch to provide input into that decision making process, is considered a very good start.

Dr. Jesus D. Camacho
Delano, California