M E M O R A N D U M. Subject: Annual Report on Land Asset Management for Fiscal Year 2012 (July 1, 2011 to June 30, 2012)

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1 Oregon John A. Kitzhaber, MD, Governor Department of State Lands 775 Summer Street NE, Suite 100 Salem, OR (503) FAX (503) February 12, 2013 M E M O R A N D U M State Land Board John A. Kitzhaber, MD Governor To: From: Governor John Kitzhaber Secretary of State Kate Brown State Treasurer Ted Wheeler Mary M. Abrams, Director Kate Brown Secretary of State Ted Wheeler State Treasurer Subject: Annual Report on Land Asset Management for Fiscal Year 2012 (July 1, 2011 to June 30, 2012) The Department s Land Management Division annually provides a report to the Board concerning a broad range of land management activities (land assets) including leases, easements, licenses, property management activities and issues. Annual revenues and expenditures are also to be reported. This annual report is designed to provide the Board with a compilation of land management activities for the past fiscal year (July 1, 2011 to June 30, 2012 or FY12). Land Asset Classes Under the direction of the 2012 Real Estate Asset Management Plan (REAMP), DSL manages approximately 2.8 million acres of common school lands. Appendix A shows how these lands are distributed across the state. These lands are categorized into seven different land asset classes: Forestlands; Agricultural Lands; Rangelands; Industrial, Commercial, Residential (ICR) Lands; Mineral and Energy Resource Lands; Waterways; and Special Stewardship Lands: Forestlands Agricultural Lands Rangelands Industrial/Commercial/Residential Mineral and Energy Resource Waterways Special Stewardship Lands 124,522 acres 5,827 acres 625,294 acres 7,047 acres 760,531 acres (surface & subsurface) 1,264,128 acres 11,005 acres

2 Overview of Revenues and Expenditures by Land Asset Class Appendix B shows the revenues, expenditures and net operating income by land class for FY Land Management authorizations generated gross revenues of $15,423,223 during the past fiscal year (2012), including timber sale payments and excluding land sales and land sale applications. This represents a $2,258,035, or 17.2%, increase over the previous fiscal year (2011). The increase is due to the higher level of forestry sales in FY12 versus FY11 (increase of $2,356,534). Revenues in other land classes were slightly down, except Rangeland (15% increase, or $77,968) and Mineral & Energy Resources (141% increase, or $216,816). Common School Fund land sales generated $232,906 in FY 2012, which was deposited into the Land Sale Revolving Fund for future land improvements and acquisitions (see Appendix C). This revenue was predominantly from the spring 2012 auction which had total sales of approximately $1,123,000, the bulk of which will be credited to FY13 (starting July 1, 2012). Direct expenditures by the Land Management Division for FY12, not including land purchases and including forest management costs, totaled $7,584,411; an increase of $641,096 from FY11. The total net operating income was $7,838,812, or 51% of total revenue. Excluding forestland expenditures, net operating income (NOI) decreased by $326,249 to $1,769,211 (18% reduction). Appendix D provides information on market value and performance by land class. In FY12, gross revenues from forestlands represented 77.5% of the total net operating income from land management, followed by waterways at 16.8%, and then Industrial/Commercial/Residential (ICR) lands at 3.9%. The overall return on asset value (ROAV) for all lands for FY 2012 was about 1.5% (see Appendix D). Asset Management Performance Measures and Targets While performance measures and targets are compiled each year, the stated aim of the REAMP is to achieve the targets over its ten-year life. In addition, the REAMP recognizes that year-to-year fluctuations will likely occur and that some asset classes may not achieve the targets. The FY11 Annual Land Management Report included an estimate of total market value by land class. For the FY12 report, this estimate has remained the same. While some fluctuations in market value have likely occurred, it is assumed that there has not been a significant change. This market value estimate allows Return on Asset Value (ROAV) to be calculated for land classes (excluding Special Stewardship, Waterways and Mineral and Energy Resources). Appendix D presents this value estimate, including Net Operating Income (NOI) and ROAV by land class. Agenda Item 5 February 12, 2013 Page 2 of 9

3 The REAMP identifies four different financial performance standards and targets: 1. Return on Asset Value (ROAV) 3% to 5% The ROAV for all land classes (excluding Special Stewardship, Waterways, and Mineral and Energy Resources) ranges from a low of -0.2% for rangeland, to a high of 1.9% for forestland (Appendix D). Rangeland had a net loss this fiscal year primarily due to a one-time payment to the BLM for rangeland fire control. It is anticipated that ICR returns will significantly increase for FY13 due to the addition of commercial property and the potential leasing of current vacant space in the DSL building. Forestland returns will decrease significantly in FY13 due to adjustments in timber harvest plans that have occurred related to pending litigation directed at Common School Forest Land managed for DSL by the Oregon Department of Forestry. 2. Annual Increase in Net Operating Income (NOI) 3% to 5% As noted above, the NOI for FY12 was $7,838,812, an increase of $1,616,938, or 26.0% from FY11 (Appendix B). A decrease of $326,249 to $1,769,211(18.4%) occurred for land classes other than forestland. 3. Annual Increase in Gross Annual Revenue (AR) 5% to 7% The FY12 Gross Annual Revenue was $15,423,223, an increase of $2,257,035 from FY11, or 17.1% (Appendix B). This increase was due to the higher level of forestry sales occurring in FY Annual Land Value Appreciation (LVA) 3% to 5% As noted above, a new land value estimate was not prepared for FY12. It is assumed that land values have not significantly changed over the past year. Summary of Major Land Management Activities 1. General DSL currently manages 4,869 total authorizations for uses or activities on stateowned land. Of this total, 209 are on Rangeland, 186 on Forestland, 4,342 are on Waterways, 89 on ICR lands, 23 on Special Stewardship lands and 20 for Mineral/Energy Resources. Staff works with holders of authorizations to answer questions concerning the terms and conditions of agreements. Staff resolved conflicts between the holders of authorizations and the public regarding public use of DSL-managed lands. Bringing resolution to these good neighbor issues often requires considerable staff involvement and usually results in little, if any, revenue to the Common School Fund. Staff prepared, and the Land Board adopted, the Real Estate Asset Management Plan (REAMP) to replace the Asset Management Plan. Agenda Item 5 February 12, 2013 Page 3 of 9

4 2. Waterway Management The Land Management Division authorized 617 uses or structures on or within stateowned submerged and submersible lands. This included new authorizations as well as renewals. The types of authorizations include leases, licenses, easements and access agreements. Land Management staff continues to work with information technology staff to streamline the registration process. The result of this effort will allow customers to easily obtain an online authorization for docks, piling, boathouses, etc. This process is expected to be completed in Staff participated in an interagency, multi-state task force the Abandoned and Derelict Vessel Task Force to coordinate on identifying and resolving the problem of a number of vessels within Oregon waters that are a hazard to navigation or are a pollution threat. The vessels range from small recreational boats to very large ex-military and oceangoing vessels that have been decommissioned. This collaboration has resulted in a database listing of all vessels of interest within Oregon, as well as Washington. Staff completed an update to the waterway lease program rules (Division 82), which went into effect January These updated rules result in minor changes to the program as well as an incremental increase in the five-year registration fees from $125 to $250. Staff also worked with recreational users, law enforcement and the public to address a number of conflicting uses primarily along the John Day River, the Chetco River, Jones Beach and Dibblee Point. The conflicting uses entailed extensive ATV/OHV use, overnight camping, illegal activity, access and damage to natural resources. These activities have resulted in the division s initiating administrative rule changes in FY12 with an expected effective date of spring Rangeland Rangelands comprise over 80% of the uplands acreage DSL actively manages. Rangelands are primarily desert and shrub steppe ecosystems of relatively low economic value, producing modest returns. 97% of rangelands are under long term forage leases which pay grazing fees based on their productivity or carrying capacity. Rates are based on a formula which was updated several years ago through the work of a grazing fee advisory committee. Changes were phased in over the last several years, culminating with full implementation in This has resulted in significant increases in forage lease income. In 2008, the grazing fee was $5.06 per animal unit month (AUM), the commonly used basis for setting carrying capacity and fees. The rate increased to $8.48/AUM in 2012 with full implementation of the new formula and with strong calf prices. The only changing value in the formula now is average calf prices. With continued strong Agenda Item 5 February 12, 2013 Page 4 of 9

5 markets in 2012, the billing rate for 2013 will be $10.36/AUM, more than double the rate five years ago. This rate could decrease in future years if calf market prices drop. By general agreement with lessees, DSL apportions 12.5% of receipts from grazing leases back to various range improvement efforts. This is commonly done in cooperative projects with lessees providing equipment and labor and DSL providing materials. DSL also has an ongoing noxious weed treatment program which includes direct contracting and participation in cooperative weed management areas. 750 acres were treated through cooperative agreements and 120 acres by contract in acres were treated as part of burned-area rehabilitation efforts to reduce the likelihood of annual grass invasion and to give native perennials a better chance to recover. DSL continues an intensive rangeland inventory and analysis program with a target of 30,000 acres completed per year. In 2012, due to dry conditions and early curing of vegetation, the inventory was stopped at approximately 20,000 acres. DSL uses the information collected from rangeland analysis to develop long-term leasehold management plans and annual operating plans. Leasehold management plans stipulate livestock stocking rates upon which lease rates are determined, season of use, and needed improvements, such as fencing and stock watering facilities. Rangeland analysis also identifies areas of specific management concerns (i.e. invasive weeds, erosion and western juniper encroachment). In FY12, six annual operating plans were completed. State lands were relatively unscathed by the extreme fires in calendar year 2012, although about 4,500 acres were burned. One very early season fire (FY12) accounted for most of the acreage lost, and was considered largely beneficial requiring no suppression and no rehabilitation. DSL did pay in excess of $432,000 for 2011suppression costs billed under DSL s suppression agreement with BLM suppression costs are expected to be minimal in comparison. 4. Agricultural Lands DSL completed the conversion of 250 acres of rangeland to irrigated agriculture in a cooperative project which also included an equal acreage on adjacent private land. The increase in return per acre is in the range of twenty-five times that received for grazing. Staff is targeting a return of 7% on its investment in cost-sharing the conversion by acquiring water permits, drilling wells, and extending power to the wellheads. The lessee provided irrigation pumps and aboveground irrigation equipment, and prepared and seeded the ground. An additional conversion project in another location is being evaluated. Total agricultural conversions are expected to be limited, but there are additional opportunities where water permits are obtainable, and projected development costs will produce an acceptable return on investment. Agenda Item 5 February 12, 2013 Page 5 of 9

6 On the downside, DSL experienced the unexpected abandonment of a acre agricultural lease with the bankruptcy of the lessee s associated 14,000-acre surrounding farm operation, which was operated under a different business name. At the point of filing, the state lease was current, but because of the difference in operating names, DSL was not informed of, or able to make any claims in the bankruptcy. The situation is further complicated by the state not having any secured and independent water rights. The private lands have been sold, but the purchaser may not choose to lease the state lands or apply irrigation to them. 5. Special Stewardship Lands Special Stewardship Lands are generally managed for uses other than income production. The state-owned summit of Steens Mountain in southeast Oregon is a unique combination of renowned scenic values and critical communication facilities for public agencies and private companies. A new wireless communication lease was added and construction is nearing completion. 6. Archaeological Clearance DSL s full-time archaeologist conducts field cultural resource surveys prior to all planned ground disturbing activities such as range improvement projects (including waterline and fence construction, and seeding) and proposed agricultural conversions. In FY12 Land Management staff surveyed 913 acres. Project background research of records at the State Historic Preservation Office in Salem is also completed on all applications for Land Management authorizations, land sales or exchanges statewide. In FY 2012 Land Management reviewed 42 applications and 112 parcels. 7. Land Sales/Exchanges DSL is in the process of completing two land exchanges, known as the Coats Exchange and the Desert Creek Exchange, that were initiated in FY12. These exchanges are intended to acquire private inholdings within larger blocks of State land and improve management efficiencies for both the state leaseholds and the private landowners. 8. Portland Harbor Superfund Site and Other Projects DSL is working on the development of new administrative rules governing the processes to be used to authorize environmental remediation and/or restoration activities undertaken by, or pursuant to an order issued by, the Oregon Department of Environmental Quality (DEQ) or the Environmental Protection Agency (EPA) within the Portland Harbor Superfund Site and other locations throughout Oregon. The Department currently administers these activities on a site by site basis under its broad statutory authority. DSL is working to get these administrative rules in place prior to the EPA publishing a record of decision on the Portland Harbor Superfund Site. These rules are currently out for public comment; DSL anticipates that the Land Board will consider these rules in DSL continued to work with Portland Harbor Regional Partners in a cooperative effort to resolve issues concerning allocation of cleanup costs and to work with the Natural Agenda Item 5 February 12, 2013 Page 6 of 9

7 Resource Trustees on issues concerning the Natural Resource Damage Assessment process. DSL continued to monitor cleanup planning efforts in the Portland Harbor at the following locations: Port of Portland s Terminal 4, NW Natural s GASCO, Arkema, McCormick & Baxter, Siltronic, Oregon Steel Mills and the City of Portland downtown sediment sampling efforts. Other environmental cleanup sites outside of the Portland Harbor, where DSL involvement is critical as manager of the state-owned submerged and submersible lands, include cleanup efforts directed by DEQ in the Columbia Slough in Portland. DSL also is involved in the DEQ ordered cleanup of submerged and submersible lands fronting the Zidell, Moody Avenue facility in Portland, Canoe Bay and the former Fred Wahl Marine site (now operated by the Port of Toledo) in Toledo. 9. ICR Lands Following adoption of the REAMP in February 2012, staff initiated a review of ICR properties to implement the REAMP policy of disposing of underperforming properties and acquiring higher performing properties. After reviewing numerous properties initially identified by DSL s contracted real estate brokers, staff entered into Purchase and Sale Agreements, and subsequent due diligence, on two of the properties. One was subsequently acquired in FY 2013 with Land Board approval. The other property was not pursued following extensive due diligence. Stevens Road Tract The Stevens Road Tract (640 acres) is an undeveloped vacant property located in southeast Bend abutting the Bend City Limits and Urban Growth Boundary (UGB) on three sides. The Tract was acquired from the Bureau of Land Management (BLM) in the 1990s as an in-lieu selection asset of the Common School Fund. In order to improve the chances of the property being included in the UGB, staff has been working toward the goal of rezoning the land to Rural Residential land. Land Management staff submitted an application to the Deschutes County Planning Department for a zone change from EFU to Rural Residential, following a soils analysis that demonstrated the property did not meet the definition of agricultural land under state law. If ultimately successful, this rezoning will significantly increase the property s value, and will position it more favorably under Oregon land use rules as non-resource land for potential future inclusion in the Bend UGB. Ward Road Parcel The Ward Road property is a forty-acre, undeveloped property that lies in a rural residential area approximately five miles southeast of Bend. The property is zoned RR-10, Rural Residential with 10-acre minimum lot size. In late 2009, staff submitted a subdivision application to Deschutes County for the property. The application was for five lots and open space as described above. The county approved the subdivision in spring Staff has not pursued construction Agenda Item 5 February 12, 2013 Page 7 of 9

8 of the subdivision due to the poor real estate market but has pursued certain improvements; i.e. water rights that will enhance the property s future value. Staff continues to monitor the real estate market to make the decision to move to completing the subdivision and taking the lots to market. South Redmond Tract (SRT) The South Redmond Tract is a 951-acre property in southeast Redmond just outside the current UGB and city limits. It was acquired in 2007 from the BLM as an in lieu selection. The Tract has the potential to become one of the Common School Fund s most valuable properties as well as a very productive source of real estate revenue from land sales and potentially, industrial land leases. The 951 acres is configured as a contiguous block adjacent to and south of the Deschutes County Fairgrounds and Exposition Center, south and east of the City of Redmond s Juniper Golf Course, and southwest of Roberts Field-Redmond Municipal Airport. It abuts the Burlington Northern-Santa Fe (BNSF) railroad mainline to the west. Land Management staff has been working on the many actions necessary for entitling a large property of this nature, including: master planning; land use planning involvement (e.g. Regional Large Lot Industrial Land Study, city UGB advocacy). The ultimate goal is to develop a large lot industrial site that is designated shovelready by the Oregon Business Development Department. Millican Road Site At its June 12, 2012 meeting, the Land Board approved an exchange agreement with Premier West Bank (PWB) for property adjacent to the Prineville city limits. The exchange is an equal area exchange and will reconfigure the abutting 160 acre parcels from long and narrow to square. Each of the reconfigured parcels will have greater market value and are deemed ideal sites for large lot industrial use, quite possibly data centers. The PWB property was already in the city limits and the DSL parcel was not. In addition to the improved configuration, the DSL parcel did not have access and will upon completion of the exchange. The exchange agreement included a future joint marketing agreement with PWB for the two parcels. Staff is continuing work on this project as of the date of this report, to get the property included in the urban growth boundary and city limits and appropriately zoned. 10. Forestlands See the FY12 Common School Forest Land Annual Report. 11. Land Sales/Exchanges One land sale auction was held during the fiscal year in Spring A summary of all land and mineral rights transactions can be seen in Appendix C. Agenda Item 5 February 12, 2013 Page 8 of 9

9 12. Land Records DSL is the land record keeper and mineral resources manager for all state agencies. Under ORS , all real property conveyance documents are sent from the originating agency to DSL for cataloging and storage. During FY12, DSL received, catalogued, and stored 353 deeds and numerous other land conveyance documents from six agencies (ODOT, Forestry, Parks, Aviation, Youth Authority and Dept. of Human Services). During FY12, staff removed approximately 120 boxes of old files from a formerly rented outside storage unit. Over 50 boxes of the files were logged in, purged and/or shredded as needed, in an effort to get back on track with the Division s record retention schedule. The remaining boxes are being stored in the DSL building and will be processed as time allows. 13. Rulemaking Land Management was very active with rulemaking in FY12. Rulemaking was initiated in the following areas: related to granting easements on Trust and non-trust lands; a new division of administrative rules governing the processes to be used by the agency to authorize use of state-owned submerged and submersible land needed to facilitate remediation and restoration activities; governing the management and leasing of rangeland forage; at the request of the Chetco River Watershed Council addressing vehicles driving in the Chetco River; amending the appraisal process for lower value land sales and exchanges; for the release and sale of mineral rights in urban areas or rural areas of 3 acres or less (this evolved into proposed legislation); governing the management of and issuing of leases, licenses and registrations for structures on state-owned submerged/submersible lands; establishing marine reserves and protection areas at Cape Falcon, Cascade Head, and Cape Perpetua in the Territorial Sea; and at the request of adjacent property owners addressing recreational uses at Jones Beach in Columbia County. APPENDICES A. Map of DSL-owned lands by Land Use Class B. FY Revenue, Expenditures (Direct only) and Net Operating Income by Land Class C. FY12 Land and Mineral Rights Sales and Transfers D. FY12 Market Value and Performance by Land Class E. FY12 Revenue and Expenditures by Land Class Agenda Item 5 February 12, 2013 Page 9 of 9

10 APPENDIX A W a s h i n g t o n I d a h o State of Oregon Department of State Lands CLATSOP COLUMBIA This product is for informational purposes and may not have been prepared for, or be suitable for legal, engineering, or surveying purposes. Users of this information should review or consult the primary data and information sources to ascertain the usability of the information. TILLAMOOK WASHINGTON YAMHILL MULTNOMAH CLACKAMAS HOOD RIVER WASCO SHERMAN GILLIAM MORROW UMATILLA UNION WALLOWA Land Use Class Agriculture Forest ICR Mineral & Energy LINCOLN POLK BENTON MARION LINN JEFFERSON WHEELER GRANT BAKER Rangeland Special Stewardship Waterway Navigable Rivers Territorial Sea & Meandered Lakes CROOK LANE DESCHUTES COOS DOUGLAS KLAMATH LAKE HARNEY MALHEUR µ Printing Date: December 20, 2012 Map Projection: Oregon Lambert Conformal Conic Datum NAD83 International Feet CURRY JOSEPHINE JACKSON Department of State Lands 775 Summer St. N.E., Suite 100 Salem, OR C a l i f o r n i a N e v a d a Software: ESRI ArcMap 10 O:\GIS_Projects\LM\GIS Analyst\Land\MXDs\Common_School_Lands_FY2012_11x8.mxd

11 APPENDIX B APPENDIX B Revenues, Expenditures (Direct only) and Net Operating Income by Land Class (Does not include land sales/applications, South Slough expenditures/revenues or capital expenditures) Fiscal Year 2009 Fiscal Year 2010 Fiscal Year 2011 Fiscal Year 2012 Land Class Revenue Expenditures Net Operating Income Revenue Expenditures Net Operating Income Revenue Expenditures Net Operating Income Revenue Expenditures Net Operating Income Agricultural Land 216,661 51, , ,053 77,164 96, ,649 92, , ,968 96, ,931 Rangeland 347, ,905 35, , ,732 34, , , , , ,639 (210,087) ICR 876, , , , , , , , , , , ,553 Forest Land 13,585,861 4,767,874 8,817,987 9,669,065 4,138,095 5,530,970 8,722,055 4,595,642 4,126,413 11,078,589 5,008,988 6,069,601 *1 *2 *3 *5 *4 Waterways 2,162, ,482 1,254,310 2,059,244 1,106, ,949 2,512,752 1,241,190 1,271,562 2,375,077 1,056,208 1,318,869 Mineral & Energy Resource 227,519 63, , ,341 53,616 75, ,900 64,921 88, ,716 65, ,109 Special Stewardship 19,954 87,196 (67,242) 17,484 53,902 (36,418) 13,204 63,001 (49,797) 17,201 70,365 (53,164) Revenues do not include land sales or mineral releases. Totals 17,436,452 6,725,358 10,711,094 13,298,370 6,284,315 7,014,055 13,165,188 6,943,315 6,221,873 15,423,223 7,584,411 7,838,812 Totals w/o Forest Land 3,850,591 1,957,484 1,893,107 3,629,305 2,146,220 1,483,085 4,443,133 2,347,673 2,095,460 4,344,634 2,575,423 1,769,211 Totals w/o Forest Land & Waterways 1,687,799 1,049, ,797 1,570,061 1,039, ,136 1,930,381 1,106, ,898 1,969,557 1,519, ,342 *1 Excludes New Carissa removal ($13,755,584) and Portland Harbor Cleanup ($235,379) *2 Excludes Portland Harbor Cleanup ($525,428) and New Carissa Settlement ($2,233,624) *3 Excludes Portland Harbor Cleanup ($2,720,939) and New Carissa Settlement ($464,244) *4 Excludes Portland Harbor Cleanup ($1,847,070) and New Carissa Settlement ($255,846) *5 Includes $333,344 Portland Harbor Insurance payment

12 FY12 LAND & MINERAL RIGHTS SALES APPENDIX C Land Sale Applications Formerly Submerged/Submersible: ( 2 applications)... $1,500 Land Sales Forestland: (3 sold)... $162,006 Rangeland: (7 sold)... $97,535 Expenses representing costs incurred to analyze properties that didn t go to auction... ($26,635) Amount towards Revolving Fund (less commission)... $232,906 Mineral Rights Sales or Releases Release of Mineral Rights for Other Agencies: ( 3 releases)... $150 Sale of Mineral Rights: (1 sale)... $1,550 FY12 LAND TRANSFERS Land Exchanges Application for Millican Road property exchange in Prineville, OR... $750 TOTAL LAND & MINERAL SALES & APPLICATION REVENUE... $236,856 TOTAL REVOLVING FUND DEPOSITS*... $236,856 *Only proceeds from the sale of Common School Fund trust lands or interests are deposited in the Land Revolving Fund In-Lieu Transfers US Bureau of Land Management transfer to the State Land Board:... 0 acres Note: The federal government continues to owe the Common School Fund over 1500 acres of grant land stemming from the Oregon Admission Act of 1859.

13 Appendix D: Market Value and Performance by Land Class (2012) Land Classification Total Acres Approximate Market Value (millions) % of Total Market Value Net Operating Income (NOI) % of Total NOI Return on Asset Value (ROAV) Forest Lands 124,522 $ (1) 57-62% $6,069, % % Agricultural Lands 5,827 $ (1) % $146, % 1.1% Rangelands 625,294 $109.5 $125.1 (1) 21-22% ($210,087) -2.7% -0.2% ICR Lands 7,047 $ (1) % $261, % 0.3% Special Stewardship Lands 12,585 (2) (2) ($53,164) -0.7% (2) Waterways 1,264,128 (2) (2) $1,318, % (2) Mineral and Energy Resources 760,531 (2) (2) $305, % (2) Totals 2,799,934 $ % $7,838, % % Notes: (1) These values have not changed from the FY 11 report (2) Adequate data not available

14 APPENDIX E FY12 REVENUE AND EXPENDITURES BY LAND CLASS This appendix contains a brief discussion of the uses under authorization within each land asset class and the revenue, expenditures and NOI for the fiscal year. Agricultural Land Agricultural lands are either Constitutional or Statutory lands that possess a combination of factors such as, but not limited to, Class I-VI soils (as identified by Natural Resources Conservation Service s Soil Capability Classification System) and favorable precipitation, growing season and water availability. The lands may be developed (e.g. cultivated, irrigated, fenced, etc.) for the production of all types of agricultural commodities. Agricultural land is managed primarily for the production of agricultural commodities. Secondary uses (for example, communication sites or pipeline easements) are allowed as long as they do not substantially interfere with the primary use. All of DSL s agricultural leases are in Eastern Oregon. The crops grown within these leaseholds include hybrid poplar trees, alfalfa, barley, oat and wheat. There are a total of 17 authorizations for agricultural land. Total acres: 5,827 Types of authorizations: agricultural lease, easements. FY12 Gross Annual Revenue: (Constitutional) $242,968 FY12 Annual Expenditures: $96,037 FY12 Net Operating Income: $146,931 Rangeland Rangeland is land used primarily for the grazing of livestock. Located mainly in arid or semi-arid climate zones of Eastern Oregon, the land generally receives insufficient rainfall to support commercial agricultural production or growth of forest products. The native vegetation is predominately grasses, forbs or shrubs. Rangeland is typically zoned as agriculture, exclusive farm use or forest and range in local comprehensive plans. Alternate uses (e.g. agriculture; forestry; mineral, energy development; and commercial uses) may be allowed. Rangeland leases are located in Eastern Oregon, primarily in Lake, Harney and Malheur Counties. Forty-four of these leases (559,483 acres) are on large blocked parcels of land of more than 1,000 acres each; the remaining 96 leases (68,565 acres) are on smaller, often isolated parcels; a total of 628,048 acres are leased for grazing. Together, the leases provide for about 66,196 animal unit months (AUMs). The annual rental rate for calendar year 2011

15 was $6.79 per AUM; for 2012, $8.48 per AUM. The remaining acres are unleased and are being evaluated for lease potential or for disposal. Total acres: 625,294 Types of authorizations: forage lease; easement; communication site lease; special use lease. FY12 Gross Annual Revenue: $593,552 Forage lease (Constitutional & Statutory) $566,537 Easement (Constitutional) $1,000 Special Use License/Permit (Constitutional) $23,515 Communication site lease (Constitutional) $2,500 FY12 Annual Expenditures: $803,639* FY12 Net Operating Income: ($210,087) * Expenditures were much higher in FY12 due to extraordinary fire suppression costs paid to the BLM for the calendar 2011 fires in southeast Oregon ($432,125). Industrial/Commercial/Residential Urban and rural lands not having any significant resource value are classified as Industrial/Commercial/Residential (ICR) land. Such land will usually be close to service infrastructure (e.g. sewer, water and roads) and be zoned for industrial, commercial or residential uses near urban growth boundaries or in rural residential areas. Prominent ICR lands include: properties in the Astoria/Warrenton area; South and North Tongue Point in Clatsop County; four cabin sites on Lake Owhyee; the agency s headquarters building in Salem; the Stevens Road Tract (Bend); the South Redmond Tract (Redmond), large industrial tracts near Prineville (including the Millican Rd. Tract), the Ward Road Parcel (east of Bend) and other rural residential lands in Central Oregon. Revenues for these properties from sales and leases are expected to increase in the coming years as planning and development efforts begin to generate income. Costs associated with these activities are likely to increase as investment in value-added developments and entitlement efforts continue. For example, staff has invested many hours of effort in the Central Oregon Large Lot Industrial Analysis (formerly known as the Regional Economic Opportunity Analysis) to enhance the future potential of the South Redmond Tract and Prineville Industrial properties. Total acres: 7,047 Types of authorizations: special use leases; cabin site leases; easements; building tenants. FY12 Gross Annual Revenue: $745,120 DSL building rent (Constitutional) $671,189 Forage lease (Constitutional) $1,441 2

16 Easement (Constitutional) $3,408 ICR Lease (Constitutional) $40,117 Special Use Lease Rec Site (Statutory) $28,102 Special Use Permit (Statutory) $863 FY12 Annual Expenditures: $483,567 FY12 Net Operating Income: $261,553 Forestlands Forestland possesses a dominance of commercially marketable tree species with few restrictions to harvest and forest management. The tree cover may be in various stages of maturation; species composition may vary between western Oregon and eastern Oregon. Douglas fir dominates the westside forests, while ponderosa pine or mixed conifer stands dominate eastside forests. Developments are usually limited to access roads. Eastside land may be developed with fences and cattle guards; grazing may also occur on this land (e.g. Yainax Butte). Forestland is managed primarily to produce merchantable timber for periodic harvest and sale according to a specific plan developed by ODF forest managers. Secondary uses (e.g. communication sites, grazing, pipeline easements, public recreation, road rights-of-way) are allowed as long as they do not substantially interfere with the primary use. During the fiscal year, approximately 1,332 acres of forestland was sold or exchanged. All forestland is Trust land and the growth and harvest of timber from this land is managed by the Oregon Department of Forestry (ODF) under a contract with DSL. Fire protection on forestlands is provided by ODF. Forestland returns will decrease significantly in FY13 due to reductions in timber harvest plans that have occurred related to pending litigation directed at Common School forestlands, particularly the Elliott State Forest. Total acres: 124,522 Types of authorizations: timber sale, communication site lease; easement. FY12 Gross Annual Revenue: (All Constitutional) $11,078,589 Timber sales (Transfer from ODF) $11,048,356* Grazing or Forage lease $8,424 Easement $2,513 Special Use Lease $5,978 Miscellaneous Income** $13,333 * $15 added to total for accrual from FY 11 ** Special use permits FY12 Annual Expenditures: $5,008,988 FY12 Net Operating Income: $6,069,601 3

17 Waterways The waterway classification is applied to the territorial sea and other navigable waters owned by the State of Oregon. State-owned waterways include the tidelands, beds and banks of all navigable rivers, lakes, bays and estuaries along with the Pacific Ocean to three miles offshore. Currently, the state has asserted an ownership claim to the beds and banks of 12 waterways in Oregon. These claims include all, or segments of the John Day, Chetco, Columbia, Coos, Coquille, Klamath, McKenzie, Rogue, Sandy, Snake, Umpqua and Willamette Rivers, as well as a number of lakes, among which are Klamath and the major coastal lakes such as Devils, Siltcoos, Tahkenitch and North and South Tenmile Lakes. Though the Department manages over 800,000 acres of waterway land, only about 1,320 acres are under lease. Of these, commercial and non-commercial marinas occupy the most lease area (857 acres); log rafts use about 250 acres. Marinas make up the majority of the leases accounting for 329 of the approximately 500 leases. Total acres of waterways: 1,260,000 (+/-) Types of authorizations: waterway lease; dock registration; easement/right of way; public facility license; temporary use permit; sand & gravel license; oil & gas lease. FY12 Gross Annual Revenue: (All Statutory) $2,375,077 Waterway lease $1,689,756 Easements submerged/submersible $160,673 Special Use License/permit $5,676 Temp use permit submerged/submersible ($152) Hydroelectric Lease $7,126 Dock registration $42,466 Portland Harbor Insurance Fee $333,344 Public facility license $750 Onshore Oil and Gas Lease $10,758 Sand & gravel license $122,430 Submerged Land Sale $1,500 Miscellaneous Income (Ocean Energy Permit) $750 FY12 Annual Expenditures: $1,056,208 FY12 Net Operating Income: $1,318,869 Mineral and Energy Resources The mineral and energy resources classification is applied to all state-owned parcels with surface or subsurface mineral ownership interest where mineral development activity is the dominant use or DSL s property or management interest is limited to the mineral estate. Total acres of mineral rights: 760,531 (992 under lease/permit) 4

18 Types of authorizations: oil & gas leases; hard mineral leases; upland quarry leases. FY12 Annual Revenue: $370,717 Mineral lease (Constitutional) $315,918 Prospecting Permit (Constitutional) $0 Sand & Gravel Upland Lease (Statutory) $30,000 Geothermal Lease (Constitutional) $16,818 Onshore Oil & Gas Lease (Constitutional) $5,381 Mineral Rights Sales $2,600 Miscellaneous Income $0 FY12 Annual Expenditures: $65,607 FY12 Net Operating Income: $305,110 Special Stewardship About 11,005 acres are classified as Special Stewardship lands and are managed primarily to ensure the protection of scenic, natural resource, cultural, educational or recreational values. The class includes both Trust and Non-Trust lands. Properties classified as Special Stewardship include Department lands such as: South Slough National Estuarine Research Reserve (4,800 acres); lands within State Scenic Waterways and federal Wild and Scenic Rivers; and properties registered on the Oregon State Register of Natural Heritage Resources. South Slough National Estuarine Research Reserve (SSNERR) The South Slough National Estuarine Research Reserve (SSNERR) is a 4,800-acre natural area located in the Coos estuary on the south coast of Oregon. The Reserve was designated in 1974 as the first unit of the National Estuarine Research Reserve System (NERRS), a network of estuarine habitats protected and managed for the purposes of long-term research, education, and coastal stewardship. Established by Congress in 1972 as part of the Coastal Zone Management Act (CZMA), the NERRS is administered as a partnership between the National Oceanic and Atmospheric Administration (NOAA) and the coastal states. Encompassing a mixture of open water channels, tidal and freshwater wetlands, riparian areas, and forested uplands, SSNERR supports and coordinates research, education and stewardship programs that serve to enhance a scientific and public understanding of estuaries and contribute to improved estuarine management. SSNERR uses innovative programming and delivery to increase understanding of estuarine ecosystems for four targeted audiences: 1) school-aged children, 2) university students and researchers, 3) coastal decision makers and 4) the general public. Over the past 30 years, SSNERR has grown in the depth and scope of its programs and developed facilities to meet the needs of visitors and staff. The data shown below does not include revenue or expenses for South Slough National Estuarine Research Reserve as it is separately budgeted and managed outside of traditional land management activities. 5

19 Total acres: 11,005 Types of authorizations: communication site lease; forage lease; easement. FY12 Gross Annual Revenue: $17,201 Communication Site Lease (Const) $16,022 Onshore oil & Gas Lease (Stat) $1,179 Miscellaneous $0 FY12 Annual Expenditures: $70,365 FY12 Net Operating Income: (-$53,164) 6