UP Standards

4.11.1. Riparian Lands and the Federal Navigational Servitude.Special valuation rules apply in acquisitions affected by the navigational servitude, a dominant federal easement over the nation’s navigable waters.1047 Arising under the U.S. Constitution, the federal navigation servitude is a preexisting limitation on the ownership of the flow of navigable waters and underlying streambeds.1048 This has important ramifications for the compensation due not only for navigable waters, which encompass the entire streambed up to the high-water mark, but also for riparian fast lands (upland) lying above the high-water mark.1049 In addition, by federal statute, Congress has increased compensation above what the Constitution requires in certain acquisitions of fast lands.1050 These constitutional and statutory requirements establish when market value due to a property’s…

4.11. Special Rules.Federal acquisitions of certain types of property involve special valuation rules to comply with constitutional or specific statutory provisions. The special valuation rules discussed in Section 4.11.1 (Riparian Lands [Navigation Servitude]) and Section 4.11.2 (Federal Grazing Permits) arise from the general principle that the United States is not compelled to compensate “for elements of value that the Government has created, or that it might have destroyed under the exercise of governmental authority other than the power of eminent domain.”1041 In the words of Justice Jackson: “Such losses may be compensated by legislative authority, not by force of the Constitution alone.”1042 Specifically, Section 4.11.1 addresses the valuation of property involving the federal navigation servitude over waters of the United…

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…

4.8.5. Water Rights.Water rights may have a substantial impact on the uses to which property can be put and, as a result, on market value.1011 The laws governing water rights vary significantly by state, county, or other local jurisdiction. Water-rights law may also be an important consideration in determining liability in inverse takings.1012 Applicable water laws must be taken into account in determining market value for purposes of just compensation,1013 and appropriate legal instructions may be required.  State laws on surface water rights generally follow one of three systems. In most Eastern states, water law is based on the doctrine of riparian rights. Broadly, water rights are allocated to owners of riparian land—that is, land adjacent to a body of…

4.8.4. Timber.The sales comparison approach is also typically the most reliable approach to value for properties involving timber.1005 Appraising property with a potential highest and best use for timber production typically requires special expertise and analysis, including a timber cruise to inventory the timber involved, evaluation of logging conditions, and investigation of potential timber sales.1006 Such information may be particularly useful as a “check” on the appraiser’s estimate of contributory timber values gleaned from comparable sales and other market data.1007 But it is never appropriate to simply add timber value to land value to determine the market value of the property as a whole.1008  Important considerations in valuing timber properties may include the quantity and quality of merchantable timber, topography,…

4.8.3. Valuation Approaches for Mineral Resources.Under federal law, the sales comparison approach is normally the most reliable approach to value for properties involving minerals.986 As a result, in federal acquisitions the appraiser cannot default to using an income approach or other valuation method that may be acceptable for typical industry purposes.987 Indeed, both federal courts and industry professionals have criticized valuations of mineral property for just compensation purposes that improperly disregard the sales comparison approach.988 An unsupported statement that comparable sales do not exist is insufficient.989 Moreover, in appraising property involving minerals, “[e]lements of sales of quite distant properties, even those with different mineral content, may be comparable in an economic or market sense when due allowance is made for…

4.8.2. Highest and Best Use and Natural Resources.The mere presence of minerals or other resources in a property does not allow the appraiser to forego a careful analysis of highest and best use (discussed in Section 4.3).969 “The mere adaptability of [a mineral] deposit to a use does not establish a market.”970 Federal courts require “a showing of some sort of sort of market, poor or good, great or small, for the commodity in question before the quantity and price of the commodity or substance may . . . be used as a factor in the expert’s opinion . . . .”971  In valuing property with mineral or other subsurface resources, appraisers must carefully distinguish between a highest and best…

4.8.1. Unit Rule and Natural Resources.The unit rule, discussed in Section 4.2.2, is often misapplied in the valuation of properties with possible or proven natural resources such as minerals, timber, or oil and gas. For just compensation purposes, property must be valued as a whole—not by summation of its constituent parts.965 Thus, the possible or actual existence of a resource in a property can only be considered to the extent its possible or actual existence would contribute to the market value of the whole property.966 For example, [for] land that is underlaid with marketable minerals, . . . the existence of those minerals is a factor of value to be considered in determining the market value of the property, but…

4.8. Natural Resources Acquisitions.Property acquisitions involving natural resources—such as minerals, timber, or water rights—are subject to the same valuation standards as any other type of property acquisition.961 While such acquisitions may present particularly complex valuation problems for purposes of just compensation, “whatever the difficulties may be in making such appraisals with complete accuracy, it does not defeat the existence of a ‘market value’ . . . and it does not suffice as a reason to depart from the ordinary requirements that the law imposes on such transactions.” 962 Moreover, “the degree of speculation can and should be minimized.”963 Specialized expertise is typically required, either by the appraiser or through appropriate subsidiary experts, subject to the requirements discussed in Sections 1.11…