4.10. Land Exchanges.Federal land exchanges are voluntary real estate transactions between the United States and a nonfederal landowner. The parties must agree on the market value of the properties being exchanged, and neither the United States nor a nonfederal landowner is required to participate in an exchange.1021 Nevertheless, federal land exchanges may still result in litigation relating to the valuation of the property involved and/or the adequacy of the appraisal supporting the transaction.1022 Most federal land exchanges are authorized under the Federal Land Policy and Management Act of 1976 (FLPMA).1023 Exchanges can be initiated by any party. By law, for an exchange to occur the public interest must be well served, and the estimated value of the nonfederal land must be within 25 percent of the estimated value of the federal land, among other requirements.1024 Some land exchanges are specifically legislated by Congress, sometimes with special provisions that differ from the usual federal exchange process.1025

Federal land exchanges are subject to the same valuation requirements as other types of federal acquisitions. In fact, federal regulations specifically require appraisals in many federal land exchanges to comply with these Standards.1026 But special legal instructions may be necessary due to statutory or regulatory requirements for land exchanges. Special rules commonly dictate the larger parcel determination, reflecting federal statutes and agency regulations.1027 The appraiser must also obtain instructions regarding the appropriate date of valuation,1028 which may be negotiated by the parties involved in the exchange in accordance with agency regulations1029 or dictated by statute.1030 For example, following the volcanic eruption at Mount St. Helens in 1980, Congress authorized the acquisition of lands by donation or exchange in what is now the Mount St. Helens National Volcanic Monument.1031 Most of these acquisitions required appraisal of the properties’ current market value, but the statute expressly provided for timber acquisitions to be valued as of July 1, 1982, in recognition of rapid deterioration of timber in the area.1032 

As in other types of acquisitions, analysis of a property’s highest and best use is critical in appraising property for federal land exchanges.1033 As discussed in Section 4.3.2, a property’s existing use is normally its highest and best use on the date of value because “economic demands normally result in an owner’s putting his land to the most advantageous use.”1034 But federal lands typically involve other considerations: as the Supreme Court observed over a century ago, “property may have to the public a greater value than its fair market value . . . .”1035 As a practical matter, then, the federal lands to be exchanged likely are not being put to their highest and best use on the date of value,1036 while the nonfederal party’s proposed use may well be a feasible highest and best use that must be considered.1037 For this reason, a nonfederal party’s proposed use, if reasonably probable, must be analyzed as a part of the highest and best use determination.1038 As with any possible highest and best use, neither an existing federal use nor a nonfederal party’s proposed use can be considered unless there is competitive demand for that use in the private market.1039 And of course, any proposed use, no matter how probable or  profitable, is to be considered only “to the full extent that the prospect of demand for the use affects market value.”1040