Leroy and Linda DuBray, Cheyenne River Sioux Tribe, et al. v. Great Plains Regional Director, 48 IBIA 1 (2008)

INTERIOR BOARD OF INDIAN APPEALS Leroy and Linda DuBray, Cheyenne River Sioux Tribe, et al. v. Great Plains Regional Director, Bureau of Indian Affairs 48 IBIA 1 (10/16/2008) Related Board cases: 48 IBIA 44 48 IBIA 70 48 IBIA 75

United States Department of the Interior

OFFICE OF HEARINGS AND APPEALS INTERIOR BOARD OF INDIAN APPEALS 801 NORTH QUINCY STREET SUITE 300 ARLINGTON, VA 22203

LEROY AND LINDA DUBRAY, CHEYENNE RIVER SIOUX TRIBE, CLAY CLAYMORE, DUANE GRAY, JAMES R. PEARMAN, FREDRIC DUBRAY, IONE OPP, MARIE LONG, TINA CLEMENT, RUSSELL AND KAREN PEARMAN, DUANE PEARMAN, FLOYD T. HILL, EDWINA AND GREG MOWRER, DAVID LONG, LYLE DUCHENEAUX, PATRICK M. GRAY, NELLIE HOLLENBECK, and ROBERT DUCHENEAUX, Appellants, v. GREAT PLAINS REGIONAL DIRECTOR, BUREAU OF INDIAN AFFAIRS, Appellee.

Order Vacating Decision and Remanding

Docket Nos. IBIA 06-114-A 06-121-A through 06-123-A 07-3-A through 07-16-A

October 16, 2008

These consolidated appeals seek review of an August 3, 2006, decision of the Great Plains Regional Director, Bureau of Indian Affairs (Regional Director; BIA), which adjusted the grazing rental rate from $9.60/Animal Unit Month (AUM)1 to $16.10/AUM for the 2007 grazing season for individually-owned Indian trust lands on the Cheyenne River Reservation (Reservation) in South Dakota. In setting the rate, the Regional Director accepted a recommended rate, based on an opinion of the Reservation-wide value of an AUM, contained in a market study titled "Reservation Grazing Rate Analysis of the Cheyenne River and Standing Rock Reservations for the 2007 Grazing Season" (Market An AUM is defined as "the amount of forage required to sustain one cow or one cow with one calf for one month." 25 C.F.R. § 166.4. 48 IBIA 11

166.302, and establishes a grazing rental rate for those lands, id. § 166.400(b).3 The grazing regulations allow the grazing rental rate to be set either as a price-per-AUM or a price-per-acre, based on the fair annual rental value. See 25 C.F.R. §§ 166.4 (definition of "grazing rental rate"), 166.409. "Fair annual rental" is defined to mean "the amount of rental income that a permitted parcel of Indian land would most probably command in an open and competitive market." Id. § 166.4.4 When BIA establishes a grazing rental rate on a price-per-AUM basis, the rental payment due under a permit is the rental rate multiplied by the number of AUMs included in the permit. 25 C.F.R. § 166.409. The number of AUMs in a permit is based on the range unit's grazing capacity, which in turn is based on the permitted parcel's productivity (e.g., amount and quality of forage). Id. § 166.305. The regulations include separate provisions for BIA to adjust grazing capacity, id. § 166.306, and to adjust the grazing rental rate, id. § 166.408, for existing permits. Section 166.408 provides in relevant part that "[t]o ensure that Indian landowners are receiving the fair annual return, [BIA] may adjust the grazing rental rate . . . based upon an appropriate valuation method, taking into account the value of improvements made under the permit, unless the permit provides otherwise, following the Uniform Standards of Professional Appraisal Practice [(USPAP)]." The regulation also authorizes BIA to set the grazing rental rate at less than the fair annual rental if BIA determines that it is in the best interest of the Indian landowners to do so. Id.3

Memorandum from Regional Director to OST Appraiser, Jan. 31, 2006. The OST Appraiser forwarded the Regional Director's memorandum to Baker as additional direction for his Market Study. 2. Baker's Market Study

Baker prepared the Market Study, which the OST Appraiser reviewed and certified as acceptable on May 31, 2006. The Market Study reported information, from several sources, on market rents for rangeland in the vicinity of the Cheyenne River and Standing Rock Reservations: (1) the U.S. Department of Agriculture's National Agricultural Statistics Service (NASS) annual surveys for North and South Dakota for 2006; (2) a South Dakota State University survey from 2005; (3) North and South Dakota State School Lands11 rents for 5-year leases, beginning in 2006; and (4) eighty-one private lease "rental comparables" (comparables). Sixty-three of the comparables were located in South Dakota: five allowed year-long grazing and fifty-eight allowed seasonal grazing. The remaining eighteen comparables were located in North Dakota.12 Baker concluded that the comparables supplied the most reliable grazing rate data for determining rangeland rental values on the two reservations because they reflected actual market transactions. Market Study at 37. For each of the comparables, Baker identified its location by county and state, the acreage, the rental rate per AUM, and the period of allowable use (e.g., 5-month seasonal11

provided" by sources such as stock dams, dugouts, live streams, or a combination. See, e.g., id. at 15-17 (Comps. 3, 4, 6, 9). Baker stated that "[t]he analysis of the data sample indicated that there was not a significant correlation between a lessee providing livestock water facility maintenance and rental value." Id. at 41. Therefore, he did not make any adjustment for the cost of water facility maintenance. For each of the five remaining categories (salt/mineral supplements, weed control, hunting access, herding/counting services, imposition of first liens for unpaid rent), Baker repeated the conclusion, with no additional explanation, that the analysis of the data sample indicated that there was not a significant correlation between which party to the lease provided a particular service (or controlled a particular factor) and rental value. See id. at 41-42. Baker did not address whether differing terms among the leases (e.g., 1-year leases, 3-year leases), as compared to BIA's 5-year grazing permits (with the possibility of annual rate adjustments), affected value. Baker concluded the Market Study by offering his opinion of the year-long grazing rate for the Reservation: $19.98/AUM.16 This figure represented the average of the 58 seasonal South Dakota leases, reduced by the 5% seasonal-to-year-long conversion factor, and from which deductions had been made for BIA's preparation fee and the prepayment requirement, but which had not been adjusted for any non-fee factors. Baker described the $19.98/AUM figure as the "grass-only" year-long rental value for the permitted lands on the Reservation, which "does not include any costs or services that are typically paid by the lessee." Id. at 39. Baker certified that his report had been prepared in conformity with the USPAP. In his certification, he also stated that "[c]orrelation and regression techniques were used in the analysis of market data in order to identify the significant factors applicable to the property under appraisement," and explained that the techniques were used "because they objectively test for the correlation of property characteristics with value." Id. at 43. The Market Study does not include any documentation showing how and for which data correlation and regression techniques were used. Baker's report was reviewed by Geoff Oliver, the OST Appraiser, to determine if it had been prepared in accordance with recognized methods and techniques of appraisal practice and written in compliance with USPAP Standards Rule 2-2(a). See OST Appraiser

As noted earlier, supra note 12, the year-long rate for the Reservation was reported as the year-long rate for "Cheyenne River and Corson County," for both the Cheyenne River Reservation and the Corson County portion of the Standing Rock Reservation. 48 IBIA 1316

fee factors], can not be measured and verified, the [OST] Office of Appraisal Services can not support an adjustment to the estimated rate per AUM. Id. On September 28, 2006, the Acting Regional Director rejected the Tribe's request for reconsideration or waiver of the grazing rate decision. The Acting Regional Director recounted her correspondence with the OST Appraiser, and reported that the OST Appraiser had stated "that there is no measurable adjustment which could be applied to the recommended rental rate for drought conditions," and "[t]herefore, I cannot give any consideration to the Tribe's request for a waiver" of the decision. Memorandum from Acting Regional Director to Board, Sept. 28, 2006.20 In this appeal to the Board, the Ranchers, the Tribe, and the Regional Director all filed briefs. Standard of Review The Board has a well-established standard of review of grazing rental rate decisions. The Board's role is to determine whether the adjustment or rental value determination is reasonable; that is, whether it is supported by law and by substantial evidence. If BIA's determination is reasonable, the Board will not substitute its judgment for BIA's. The burden is on the appellant to show that BIA's action is unreasonable. Rosebud Indian Land and Grazing Ass'n v. Acting Great Plains Regional Director, 41 IBIA 298, 301 (2005) (internal citations omitted). We review questions of law de novo. See Frank v. Acting Great Plains Regional Director, 46 IBIA 133, 140 (2007).20

The Regional Director argues that the Ranchers lack standing because the rate adjustment authority in the grazing regulations, section 166.408, is solely for the benefit of ensuring that Indian landowners receive fair annual rental for their lands, and thus the Ranchers derive no right or interest from the regulations. The flaw in the Regional Director's argument is in suggesting that the regulatory source of authority for the Regional Director's decision is also the source of the interest asserted by the Ranchers. It is not. The Ranchers' interest derives from their permits, and an unlawful application of regulatory authority would interfere with those permits rights. Thus, we reject the Regional Director's argument. The Regional Director also challenges the Tribe's standing to bring this appeal, noting that the Tribe does not argue as a...