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American Elite Travelers to Get Special Check-In, Security and Boarding Lines (at The Wall Street Journal Online)
blogs.wsj.com | Sep 23, 2008
Elite fliers on American Airlines will have their own check-in, security and boarding lanes at many domestic airports beginning Sept. 30.
UAL Shares Swoon After Incorrect Reports on Possible Bankruptcy (at The Wall Street Journal Online)
us.rd.yahoo.com | Sep 8, 2008
It's still unclear exactly how -- and even if -- a six-year old story about United Airlines' 2002 bankruptcy filing was republished today, sending the carrier's share prices plummetting early today.
U.S. Airlines Grounding 500+ Planes This Fall (at The Wall Street Journal Online)
blogs.wsj.com | Sep 22, 2008
A tally of all the U.S. aircraft on their way to retirement this fall turns out to be a rather staggering number. All told, U.S. airlines are grounding 512 airplanes. That's the same number of passenger jets in Northwest Airlines Corp.'s entire fleet.
http://blogs.wsj.com/middleseat/2008/09/22/us-airlines-grounding-500-planes-this-fall/?mod=yahoo_hs
Delta, Northwest Merger Goes to Shareholders for a Vote (at The Wall Street Journal Online)
blogs.wsj.com | Sep 24, 2008
Shareholders vote Thursday on whether Delta and Northwest should merge in a deal that would form the world's biggest airline as measured by passenger traffic.
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Video: Dallas Love Field Time Lapse
aircrewbuzz.com
This Southwest Airlines video was posted to YouTube earlier this month. The introduction says:This time-lapse sequence was shot at 1 frame per second.It was shot from the roof (deck) of Southwest Airlines Headquarters and begins with a segment at 6:00 a.m. as the airport and
http://aircrewbuzz.com/2008/06/video-dallas-love-field-time-lapse.html
Easy Eagle 1 Bi Plane from Great Plains Aircraft Supply Co., Inc.
The Easy Eagle I Plans come complete with cad drawings, Info Pack, Construction Manual, Flight Manual and DVDs of the wing construction. Freight will be charged for all orders.
ROUTES_Stk_day_one.qxd
www.flightglobal.com
One of the largest-ever gatherings of aviation industry experts will convene in Stockholm tomorrow (Monday) morning for the opening of the inaugural Routes Leaders’ Forum. More than 250 senior industry leaders representing airlines, airports, governmental authori-
http://www.flightglobal.com/assets/getasset.aspx?ItemID=19445
F-15E Strike Eagle (1) Model Airplane: U.S. Air Force Aircraft Model Airplanes (1947 - Present):
Majority of our replicas are sculpted by master craftsmen, from specially treated Mahogany wood. All models are made to recognized collector scales for enhanced value. Each model airplane is painted and detailed with historically correct markings.
News from Zibb.com
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Danaos Corporation Reports Third Quarter and Nine Months Results for the Period Ended September 30,
ATHENS, GREECE, Oct 31, 2008 (MARKET WIRE via COMTEX) --
Danaos Corporation ("Danaos") (NYSE: DAC), a leading international owner of containerships, today reported unaudited results for the period ended September 30, 2008.
Highlights for the Third Quarter and Nine Months Ended September 30, 2008:
-- Net earnings from continuing operations of $28.0 million or $0.51 per
share and $93.2 million or $1.71 per share for the quarter and the nine
months ended September 30, 2008, respectively, compared to $25.5 million or
$0.47 per share and $78.4 million or $1.44 per share for the respective
periods of 2007.
-- Operating revenues from continuing operations of $76.4 million and
$220.2 million for the quarter and the nine months ended September 30,
2008, respectively, compared to $62.6 million and $187.5 million for the
respective periods of 2007.
-- EBITDA from continuing operations of $51.0 million and $156.9 million
for the quarter and the nine months ended September 30, 2008, respectively,
compared to $40.3 million and $122.8 million for the respective periods of
2007.
-- Paid dividends of $0.465 per share on August 20, 2008, for the second
quarter of 2008 and declared dividends of $0.465 per share for the third
quarter of 2008, payable on November 19, 2008, for all shareholders on
record as of November 5, 2008.
Danaos' CEO Dr. John Coustas commented:
Our nine month and 3rd quarter results were excellent. Our combined fleet today stands at 70 large cellular containerships, all of which are chartered for long periods at fixed rates. Out of these 70 vessels, we expect 32 to be gradually delivered for operations until the third quarter of 2011.
During the third quarter we were able to once more successfully continue expanding our credit facilities and implementing our growth strategy by adding new vessels to our fleet. We also managed to extend our chartering arrangements while we further applied cost control strategies to boost the quality of our operations and the overall performance of our business.
Since the beginning of the year we have managed to arrange $1.1 billion in new credit facilities. Out of those $560 million were negotiated during the first quarter, while since the beginning of the third quarter we have arranged additional credit lines for an impressive $550 million. We believe that this fact alone further underscores the strength of Danaos' credit and the faith of our lenders in our business model and our hands-on management. We will continue to arrange further credit facilities in line with our financing program and strategy.
On the operations side we added two 4,250 TEU new-building containerships in our fleet which immediately entered into 12 year charters with ZIM Lines. In September we also extended the employment of the MAERSK Deva at an increased charter rate for another two years until March 2011.
Last, but equally important, we will refer to our successful cost management. Slow steaming and a rapidly falling average age of our fleet combined with our efforts to further control costs related to crews and maintenance have led to notable results. Our daily operating cost per vessel for the first nine months in 2008 increased by just 2.8% compared to that for the same period in 2007. At the same time our daily operating cost was 2.9% lower this quarter compared to that of the second quarter.
We believe that our business model, which is based on long term fixed rate chartering to some of the largest liner companies in the world, gives protection to our top line against volatility and weakness in the charter market. Furthermore, our continued and recently demonstrated ability to raise debt during a period where credit has become very scarce, underlines both our solid strategy and the continued confidence in Danaos by our lending banks. We continue to have a strong balance sheet which together with our strong cash flow allows us to closely monitor the sale & purchase market and consider any opportunities for further growth as they may arise.
Finally, on October 24, 2008, our Board of Directors declared a dividend of $0.465 per share for the third quarter, which will be paid on November 19, 2008. The dividend reflects the continuing growth of our operations, our confidence in the stability of our business model and our dedication to support shareholder value through enhanced distributable cash flows.
Three months ended September 30, 2008 compared to the three months ended September 30, 2007
During the quarter ended September 30, 2008, Danaos had an average of 38.1 containerships as opposed to 31.1 containerships for the same period of 2007. During the third quarter we acquired two vessels the Zim Rio Grande on July 4, 2008 and the Zim Sao Paolo on September 22, 2008. Our fleet utilization was 98.8% in the third quarter of 2008.
Given the sale of our entire dry bulk fleet in the beginning of 2007, management has determined that the dry bulk business constituted discontinued operations. The management and discussion analysis solely reflects results from continuing operations (containerships), unless otherwise noted.
Our net income was $28.0 million or $0.51 per share for the third quarter of 2008 compared to $25.5 million or $0.47 per share for the third quarter of 2007, which represents an increase of 9.8% or $2.5 million. Distributable cash flow, defined as net income before depreciation & amortization, less payments for drydocking and special survey costs was $40.5 million for the third quarter of 2008. Our declared dividend of $25.4 million for the third quarter of 2008 represents 62.7% of our distributable cash flow.
Operating Revenue
Operating revenue increased 22.0%, or $13.8 million, to $76.4 million in the quarter ended September 30, 2008 from $62.6 million in the quarter ended September 30, 2007. The increase was primarily attributed to the addition to our fleet of nine vessels, as follows:
Vessel Name Vessel Size (TEU) Date Delivered ----------------- ------------------ ----------------------- Hyundai Future 2,200 October 2, 2007 YM Singapore 4,300 October 9, 2007 Hyundai Sprinter 2,200 October 15, 2007 YM Vancouver 4,253 November 27, 2007 Hyundai Progress 2,200 February 11, 2008 Hyundai Highway 2,200 March 18, 2008 Hyundai Bridge 2,200 March 20, 2008 Zim Rio Grande 4,253 July 4, 2008 Zim Sao Paolo 4,253 September 22, 2008
These additions to our fleet contributed revenues of $14.3 million during the three months ended September 30, 2008. Moreover, a 4,253 TEU containership, the YM Seattle and three 2,200 TEU containerships, the Hyundai Vladivostok, the Hyundai Advance and the Hyundai Stride, which were added to our fleet on September 10, 2007, July 23, 2007, August 20, 2007 and September 5, 2007, respectively, contributed incremental revenues of $4.1 million during the three months ended September 30, 2008 compared to the three months ended September 30, 2007. In addition, the Company sold three vessels as follows:
Vessel Name Vessel Size (TEU) Date Sold ------------------ ------------------ -------------------- APL Belgium 5,506 January 15, 2008 Winterberg 3,101 January 25, 2008 Maersk Constantia 3,101 May 20, 2008
These vessel sales reduced operating revenue by $4.3 million during the three months ended September 30, 2008. Moreover a 5,506 TEU containership, the APL Holland, which was sold on August 3, 2007, contributed $0.9 million less revenue during the three months ended September 30, 2008 compared to the three months ended September 30, 2007.
We also had a further increase in revenues of $0.6 million attributed to higher charter rates achieved due to the re-chartering of certain vessels.
Vessel Operating Expenses
Our daily operating expenses per vessel increased 4.3% compared on a quarter on quarter basis. The increase was mainly due a general increase in costs experienced by the overall industry. At the same time, our daily operating expenses per vessel compared to those of the second quarter of 2008 decreased by 2.9%, which was mainly attributed to the decrease of the average age of our fleet as a result of the addition of two new building vessels during the third quarter of 2008, as well as lower lubricant expenses attributed to slow steaming and lower insurance cost.
In absolute numbers, vessel operating expenses increased 47.1% or $7.3 million, to $22.8 million in the quarter ended September 30, 2008, from $15.5 million in the quarter ended September 30, 2007. The increase was mainly due to the increase in the average number of our vessels in our fleet during the quarter ended September 30, 2008 compared to the quarter ended September 30, 2007.
Depreciation & Amortization
Depreciation & Amortization includes Depreciation and Amortization of Deferred Dry-docking and Special Survey Costs.
Depreciation
Depreciation expense increased 36.8%, or $3.5 million, to $13.0 million in the quarter ended September 30, 2008, from $9.5 million in the quarter ended September 30, 2007. The increase in depreciation expense was due to the increased average number of vessels in our fleet during the quarter ended September 30, 2008 compared to the same period of 2007.
Amortization of Deferred Dry-docking and Special Survey Costs
Amortization of deferred dry-docking and special survey costs increased 18.8%, or $0.3 million to $1.9 million in the quarter ended September 30, 2008, from $1.6 million in the quarter ended September 30, 2007. The increase reflects higher drydocking costs incurred, which were subject to amortization during the three months ended September 30, 2008 as compared to the same period of 2007.
General and Administrative Expenses
General and administrative expenses increased 12.0%, or $0.3 million, to $2.8 million in the quarter ended September 30, 2008, from $2.5 million in the same quarter of 2007. The increase was primarily a result of increased fees of $0.4 million paid to our Manager in the third quarter of 2008 compared to the same period of 2007, attributed to the increase in the average number of our vessels in our fleet.
Other Operating Expenses
Other Operating Expenses include Voyage Expenses
Voyage Expenses
Voyage expenses decreased 10.0% or $0.2 million, to $1.8 million in the quarter ended September 30, 2008, from $2.0 million for the quarter ended September 30, 2007.
Interest Expense and Interest Income
Interest expense increased 108.3%, or $5.2 million, to $10.0 million in the quarter ended September 30, 2008, from $4.8 million in the quarter ended September 30, 2007. The change in interest expense was due to the increase in our average debt by $1,107.5 million to $1,856.3 million in the quarter ended September 30, 2008 from $748.8 million in the quarter ended September 30, 2007, partially offset by the financing of our extensive new-building program which resulted in interest capitalization of $12.6 million for the quarter ended September 30, 2008 as opposed to $6.1 million of capitalized interest for the quarter ended September 30, 2007.
Interest income increased by $0.8 million, to $1.9 million in the quarter ended September 30, 2008, from $1.1 million in the quarter ended September 30, 2007. The increase in interest income is mainly attributed to higher average cash deposits during the three months ended September 30, 2008 as opposed to the three months ended September 30, 2007, partially offset by lower interest rates.
The increase in restricted cash is attributed to $282.0 million additional cash which we raised through our revolving credit facilities during the third quarter of 2008. These funds are now designated to finance certain of our new buildings and will be gradually utilized to fund progress payments of these new buildings up to their deliveries through the second quarter of 2010.
EBITDA
EBITDA from continuing operations increased by $10.7 million, or 26.6%, to $51.0 million in the quarter ended September 30, 2008, from $40.3 million in the quarter ended September 30, 2007. A table reconciling EBITDA to net income can be found at the end of this earnings release.
Nine months ended September 30, 2008 compared to the nine months ended September 30, 2007
During the nine months ended September 30, 2008, Danaos had an average of 37.3 containerships as opposed to 31.0 containerships for the same period of 2007. During the nine months of 2008, we acquired five vessels, the Hyundai Progress on February 11, 2008, the Hyundai Highway on March 18, 2008, the Hyundai Bridge on March 20, 2008, the Zim Rio Grande on July 4, 2008 and the Zim Sao Paolo on September 22, 2008. In addition, we sold three vessels, the APL Belgium on January 15, 2008, the Winterberg on January 25, 2008 and the Maersk Constantia on May 20, 2008.
Given the sale of our entire dry bulk fleet in the beginning of 2007, management has determined that the dry bulk business constituted discontinued operations. The management and discussion analysis solely reflects results from continuing operations (containerships), unless otherwise noted.
Our net income was $93.2 million or $1.71 per share for the nine months ended September 30, 2008 compared to $78.4 million or $1.44 per share for the nine months ended September 30, 2007, an increase in net income of 18.9% or $14.8 million. Earnings per share, excluding the gain on sale of vessels of $14.9 million, were $1.44 for the nine months ended September 30, 2008. Distributable cash flow, defined as net income before depreciation & amortization, less payments for drydocking and special survey costs, was $126.9 million for the nine months ended September 30, 2008. We paid a dividend of $25.4 million for the first and the second quarter of 2008, respectively, and we declared a dividend of $25.4 million for the third quarter of 2008, which in aggregate represent 60.0% of our distributable cash flow for the nine months ended September 30, 2008.
Operating Revenue
Operating revenue increased 17.4%, or $32.7 million, to $220.2 million in the nine months ended September 30, 2008 from $187.5 million in the nine months ended September 30, 2007. The increase was primarily attributed to the addition to our fleet of nine vessels, as follows:
Vessel Name Vessel Size (TEU) Date Delivered ---------------- ------------------ -------------------- Hyundai Future 2,200 October 2, 2007 YM Singapore 4,300 October 9, 2007 Hyundai Sprinter 2,200 October 15, 2007 YM Vancouver 4,253 November 27, 2007 Hyundai Progress 2,200 February 11, 2008 Hyundai Highway 2,200 March 18, 2008 Hyundai Bridge 2,200 March 20, 2008 Zim Rio Grande 4,253 July 4, 2008 Zim Sao Paolo 4,253 September 22, 2008
These additions to our fleet contributed revenues of $35.3 million during the nine months ended September 30, 2008. Moreover, two 4,253 TEU containerships, the YM Colombo and the YM Seattle and three 2,200 TEU containerships, the Hyundai Vladivostok, the Hyundai Advance and the Hyundai Stride, which were added to our fleet on March 12, 2007, on September 10, 2007, on July 23, 2007, on August 20, 2007 and on September 5, 2007, respectively, contributed incremental revenues of $19.4 million during the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007. In addition since January 1, 2007, the Company sold six vessels as follows:
Vessel Name Vessel Size (TEU) Date Sold ---------------- ------------------ -------------------- APL England 5,506 March 7, 2007 APL Scotland 5,506 June 22, 2007 APL Holland 5,506 August 3, 2007 APL Belgium 5,506 January 15, 2008 Winterberg 3,101 January 25, 2008 Maersk Constantia 3,101 May 20, 2008
These sales reduced operating revenue by $21.8 million during the nine months ended September 30, 2008 compared to the same period in the prior year.
Vessel Operating Expenses
Our daily operating expenses per vessel between the nine month periods of 2007 and 2008 increased by 2.8%. The increase was mainly due to higher crew wages partially offset by lower lubricant expenses attributed to slow steaming and lower insurance cost.
In absolute numbers vessel operating expenses increased 39.7% or $18.5 million, to $65.1 million in the nine months ended September 30, 2008, from $46.6 million in the nine months ended September 30, 2007. The increase was mainly due to the increase in the average number of our vessels in our fleet during the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007.
Depreciation & Amortization
Depreciation & Amortization includes Depreciation and Amortization of Deferred Dry-docking and Special Survey Costs.
Depreciation
Depreciation expense increased 27.8%, or $8.1 million, to $37.2 million in the nine months ended September 30, 2008, from $29.1 million in the nine months ended September 30, 2007. The increase in depreciation expense was due to the increased average number of vessels in our fleet during the nine months ended September 30, 2008, compared to the same period of 2007.
Amortization of Deferred Dry-docking and Special Survey Costs
Amortization of deferred dry-docking and special survey costs increased 20.5%, or $0.9 million, to $5.3 million in the nine months ended September 30, 2008, from $4.4 million in the nine months ended September 30, 2007. The increase reflects higher dry-docking costs incurred, which were subject to amortization during the nine months ended September 30, 2008 as compared to the same period of 2007.
General and Administrative Expenses
General and administrative expenses increased 17.8%, or $1.3 million, to $8.6 million in the nine months ended September 30, 2008, from $7.3 million in the same period of 2007. The increase was mainly a result of increased fees of $1.0 million paid to our Manager in the nine months ended September 30, 2008 compared to the same period of 2007 attributed to the increase in the average number of our vessels in our fleet. Moreover, public company related and other administrative expenses were higher by $0.3 million in the nine months ended September 30, 2008 compared with the nine months ended September 30, 2007.
Gain / (loss) on sale of vessels
The gain on sale of vessels for the nine months ended September 30, 2008, reflects the sale of the APL Belgium, the Winterberg and the Maersk Constantia for $44.5 million, $11.2 million and $15.8 million, respectively, resulting in an aggregate net gain of $14.9 million.
Other Operating Expenses
Other Operating Expenses include Voyage Expenses
Voyage Expenses
Voyage expenses increased 9.3% or $0.5 million, to $5.9 million in the nine months ended September 30, 2008, from $5.4 million for the nine months ended September 30, 2007. The increase was mainly a result of increased bunker costs of $0.7 million, attributed to the repositioning of two of our vessels, during the second quarter of 2008. Our vessels are not otherwise subject to fuel costs, which are paid by our charterers.
Interest Expense and Interest Income
Interest expense increased 73.1%, or $10.6 million, to $25.1 million in the nine months ended September 30, 2008, from $14.5 million in the nine months ended September 30, 2007. The change in interest expense was due to the increase in our average debt by $909.3 million to $1,603.2 million in the nine months ended September 30, 2008 from $693.9 million in the nine months ended September 30, 2007, partially offset by the financing of our extensive new-building program which resulted in capitalized interest of $35.4 million for the nine months ended September 30, 2008 as opposed to $13.1 million of capitalized interest for the nine months ended September 30, 2007.
Interest income increased 5.4%, or $0.2 million, to $3.9 million in the nine months ended September 30, 2008, from $3.7 million in the nine months ended September 30, 2007. The increase in interest income is mainly attributed to higher average restricted cash deposits, partially offset by lower interest rates, during the nine months ended September 30, 2008 as opposed to the nine months ended September 30, 2007.
The increase in restricted cash is attributed to $282.0 million additional cash which we raised through our revolving credit facilities during the third quarter of 2008. These funds are now designated to finance certain of our new buildings and will be gradually utilized to fund progress payments of these new buildings up to their deliveries through the second quarter of 2010.
EBITDA
EBITDA from continuing operations increased by $34.1 million, or 27.8%, to $156.9 million in the nine months ended September 30, 2008, from $122.8 million in the nine months ended September 30, 2007. A table reconciling EBITDA to net income can be found at the end of this earnings release.
Dividend Payment
On July 25, 2008, the Board of Directors declared a dividend of $0.465 per common share for the second quarter of 2008 for all shareholders of record as of the close of business on August 6, 2008, paid on August 20, 2008. On October 24, 2008, the Board of Directors declared a dividend of $0.465 per common share for the third quarter of 2008 for all shareholders of record as of the close of business on November 5, 2008, payable on November 19, 2008.
Recent News
Since the beginning of the 3rd quarter of 2008 the Company has entered into two credit agreements for term loan facilities in the total amount of $550 million to finance part of its new-building program. The facilities have been fully underwritten by Fortis Bank, Lloyds TSB, National Bank of Greece, Deutsche Schiffsbank, Credit Suisse and Emporiki Bank, a subsidiary of Credit Agricole.
Conference Call and Webcast
On Monday, November 3, 2008 at 9:00 A.M. EST, the Company's management will host a conference call to discuss the results.
Conference Call details: Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 866 819 7111 (US Toll Free Dial In), 0800 953 0329 (UK Toll Free Dial In) or +44 (0)1452 542 301 (Standard International Dial In). Please quote "Danaos" to the operator.
A telephonic replay of the conference call will be available until November 10, 2008 by dialing 1 866 247 4222 (US Toll Free Dial In), 0800 953 1533 (UK Toll Free Dial In) or +44 (0)1452 550 000 (Standard International Dial In). Access Code: 1186615#.
Audio webcast: There will also be a live and then archived webcast of the conference call through the Danaos website (www.danaos.com). Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.
About Danaos Corporation
Danaos Corporation is an international owner of containerships, chartering its vessels to many of the world's largest liner companies. Our current fleet of 38 containerships aggregating 152,022 TEUs ranks Danaos among the largest containership charter owners in the world based on total TEU capacity. Danaos is the largest US listed containership company based on fleet size. Furthermore, the company has a contracted fleet of 32 additional containerships aggregating 234,962 TEU with scheduled deliveries up to 2011. The company's shares trade on the New York Stock Exchange under the symbol "DAC."
Forward-Looking Statement
Matters discussed in this release may constitute forward-looking statements within the meaning of the safeharbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although Danaos Corporation believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, Danaos Corporation cannot assure you that it will achieve or accomplish these expectations, beliefs or projections. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charter hire rates and vessel values, shipyard performance, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled drydocking, changes in Danaos Corporation's operating expenses, including bunker prices, dry-docking and insurance costs, actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists.
Risks and uncertainties are further described in reports filed by Danaos Corporation with the U.S. Securities and Exchange Commission.
Visit our website at www.danaos.com
Appendix
Fleet Utilization
Danaos had 42 off-hire days in total in the third quarter of 2008. The following table summarizes vessel utilization and the impact of the off-hire days on the company's revenue relating to the last four quarters.
Fourth First Second Third
Quarter Quarter Quarter Quarter
2007 2008 2008 2008 Total
--------- --------- --------- --------- ---------
No. of No. of No. of No. of No. of
Vessel utilization Days Days Days Days Days
--------- --------- --------- --------- ---------
Ownership days 3,324 3,301 3,417 3,502 13,544
Less Off-hire Days:
Scheduled off-hire
Days (81) (159) (78) (40) (358)
Other off-hire Days (24) (1) -- (2) (27)
--------- --------- --------- --------- ---------
Operating Days 3,219 3,141 3,339 3,460 13,159
Vessel Utilization 96.8% 95.2% 97.7% 98.8% 97.2%
Revenue - Impact of
Off-hire (in '000s
of US dollars)
--------- --------- --------- --------- ---------
100% fleet
utilization $ 72,006 $ 70,689 $ 74,482 $ 77,303 $ 294,480
Less Off-hire Days:
Scheduled off-hire
Days (46) (796) (573) (807) (2,222)
Other off-hire Days (625) (16) -- (80) (721)
--------- --------- --------- --------- ---------
Actual Revenue
Earned $ 71,335 $ 69,877 $ 73,909 $ 76,416 $ 291,537
========= ========= ========= ========= =========
Fleet List
The following table describes in detail our fleet deployment profile as of October 31, 2008.
Vessel Size Expiration of
Vessel Name (TEU) Year Built Charter(1)
------------------ -------------- -------------- --------------------
Containerships
CSCL Le Havre 9,580 2006 September 2018
CSCL Pusan 9,580 2006 July 2018
MSC Baltic 8,468 2004 September 2016
CSCL Europe 8,468 2004 June 2016
MSC Marathon(5) 4,814 1991 September 2011
Maersk Messologi 4,814 1991 September 2011
Maersk Mytilini 4,814 1991 September 2011
MOL Affinity(3) 4,651 1992 March 2011
Hyundai Duke 4,651 1992 February 2011
APL Confidence(4) 4,651 1994 September 2012
YM Colombo 4,300 2004 March 2019
YM Singapore 4,300 2004 October 2019
YM Seattle 4,253 2007 July 2019
YM Vancouver 4,253 2007 September 2019
Maersk Derby 4,253 2004 February 2009
Maersk Deva 4,253 2004 January 2011
ZIM Rio Grande 4,253 2008 May 2020
ZIM Sao Paolo 4,253 2008 August 2020
Al Rayyan 3,908 1989 January 2011
YM Yantian 3,908 1989 July 2011
YM Milano 3,129 1988 May 2011
Sederberg 3,101 1978 March 2009
CMA CGM Lotus 3,098 1988 July 2010
CMA CGM Vanille 3,045 1986 July 2010
CMA CGM Passiflore 3,039 1986 May 2010
CMA CGM Elbe 2,917 1991 June 2010
CMA CGM Kalamata 2,917 1991 June 2010
CMA CGM Komodo 2,917 1991 June 2010
Hyundai Advance 2,200 1997 June 2017
Hyundai Future 2,200 1997 August 2017
Hyundai Sprinter 2,200 1997 August 2017
Hyundai Stride 2,200 1997 July 2017
Hyundai Progress 2,200 1998 December 2017
Hyundai Bridge 2,200 1998 January 2018
Hyundai Highway 2,200 1998 January 2018
Hyundai Vladivostok 2,200 1997 May 2017
Montreal Senator (2) 2,130 1984 March 2010
MSC Eagle 1,704 1978 January 2010
(1) Earliest date charters could expire. Some charters include options to
extend their term.
(2) On April 8, 2008, the Pacific Bridge was renamed to Montreal Senator at
the request of the charterer of this vessel.
(3) On April 15, 2008, the Hyundai Commodore was renamed to MOL Affinity at
the request of the charterer of this vessel.
(4) On June 2, 2008, the MOL Confidence was renamed to APL Confidence at
the request of the charterer of this vessel.
(5) On August 22, 2008, the Maersk Marathon was renamed to MSC Marathon at
the request of the charterer of this vessel.
New Deliveries
The following table describes the expected additions to our fleet as a result of our new building containership program.
Vessel Size Time Charter
Vessel Name (TEU) Expected Delivery Term
---------------- -------------- -------------------- --------------
HN 1672 4,253 November 2008 12 years
HN 1673 4,253 December 2008 12 years
HN 1698 4,253 March 2009 12 years
HN S4001(1) 6,500 April 2009 12 years
HN 1699 4,253 June 2009 12 years
HN S4002(1) 6,500 June 2009 12 years
HN S4003(1) 6,500 August 2009 12 years
HN S4004(1) 6,500 October 2009 12 years
HN N-214 6,500 November 2009 18 years
HN N-219 3,400 November 2009 10 years
HN S4005(1) 6,500 December 2009 12 years
HN N-220 3,400 January 2010 10 years
HN N-215 6,500 January 2010 18 years
HN N-221 3,400 February 2010 10 years
HN N-216 6,500 March 2010 15 years
HN N-222 3,400 April 2010 10 years
HN N-223 3,400 May 2010 10 years
HN N-217 6,500 May 2010 15 years
HN Z00001 8,530 May 2010 12 years
HN Z00002 8,530 May 2010 12 years
HN Z00003 8,530 July 2010 12 years
HN Z00004 8,530 July 2010 12 years
HN N-218 6,500 July 2010 15 years
HN H 1022A 8,530 September 2010 12 years
Hull No S-461 10,100 January 2011 12 years
Hull No S-456 12,600 January 2011 12 years
Hull No S-462 10,100 February 2011 12 years
Hull No S-463 10,100 March 2011 12 years
Hull No S-457 12,600 March 2011 12 years
Hull No S-458 12,600 May 2011 12 years
Hull No S-459 12,600 June 2011 12 years
Hull No S-460 12,600 August 2011 12 years
(1) Vessel subject to charterer's option to purchase vessel after first
eight years of time charter term for $78.0 million.
DANAOS CORPORATION
Statements of Income
(Expressed in thousands of United States dollars, except share and per
share amounts)
Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
30, 30, 30, 30,
--------- --------- --------- ---------
2008 2007 2008 2007
--------- --------- --------- ---------
(unaudited)(unaudited)(unaudited)(unaudited)
OPERATING REVENUES $ 76,416 $ 62,643 $ 220,202 $ 187,510
OPERATING EXPENSES
Vessel operating expenses (22,771) (15,543) (65,135) (46,631)
Depreciation & amortization (14,992) (11,130) (42,484) (33,515)
General & administrative (2,781) (2,450) (8,614) (7,260)
Gain / (loss) on sale of
vessels - (51) 14,928 (286)
Other operating expenses (1,759) (2,030) (6,099) (5,393)
--------- --------- --------- ---------
Income From Operations 34,113 31,439 112,798 94,425
--------- --------- --------- ---------
OTHER EARNINGS (EXPENSES)
Interest income 1,921 1,118 3,861 3,677
Interest expense (10,004) (4,794) (25,083) (14,471)
Other finance cost, net (372) (689) (1,648) (1,586)
Other income / (expenses),
net 822 (1,568) 740 (4,527)
Gain / (loss) on derivatives 1,491 (12) 2,562 930
--------- --------- --------- ---------
Total Other Income (Expenses),
net (6,142) (5,945) (19,568) (15,977)
--------- --------- --------- ---------
Net income from continuing
operations $ 27,971 $ 25,494 $ 93,230 $ 78,448
--------- --------- --------- ---------
Net (loss) income from
discontinued operations (38) (3) (1,560) 92,174
--------- --------- --------- ---------
Net Income $ 27,933 $ 25,491 $ 91,670 $ 170,622
========= ========= ========= =========
EARNINGS PER SHARE (from
continuing operations)
Basic and diluted net income
per share $ 0.51 $ 0.47 $ 1.71 $ 1.44
========= ========= ========= =========
EARNINGS PER SHARE
Basic and diluted net income
per share $ 0.51 $ 0.47 $ 1.68 $ 3.13
========= ========= ========= =========
Basic and diluted weighted
average number of shares (in
thousands of shares) 54,558 54,558 54,558 54,558
========= ========= ========= =========
DANAOS CORPORATION
Balance Sheets
(Expressed in thousands of United States dollars)
As of As of
September 30, December 31,
------------- -------------
2008 2007
------------- -------------
(unaudited) (audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 66,495 $ 63,495
Restricted cash 323,021 46,179
Accounts receivable, net 2,504 4,321
Other current assets 27,957 18,993
------------- -------------
419,977 132,988
NON-CURRENT ASSETS
Fixed assets, net 1,293,419 1,182,505
Advances for vessel acquisitions and
vessels under construction 1,011,943 745,534
Deferred charges, net 15,358 10,431
Other non-current assets 966 333
------------- -------------
2,321,686 1,938,803
------------- -------------
TOTAL ASSETS 2,741,663 2,071,791
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Long-term debt, current portion 32,219 25,619
Accounts payable, accrued liabilities &
other current liabilities 29,436 24,092
Fair value of financial instruments,
current portion - 1,402
------------- -------------
61,655 51,113
LONG-TERM LIABILITIES
Long-term debt, net of current portion 1,986,660 1,330,927
Fair value of financial instruments, net
of current portion 112,923 56,537
Other long-term liabilities 6,666 8,310
------------- -------------
2,106,249 1,395,774
STOCKHOLDERS' EQUITY
Common stock 546 546
Additional paid-in capital 288,577 288,530
Accumulated other comprehensive income (121,640) (54,886)
Retained earnings 406,276 390,714
------------- -------------
573,759 624,904
------------- -------------
Total liabilities and stockholders' equity $ 2,741,663 $ 2,071,791
============= =============
DANAOS CORPORATION
Statements of Cash Flows
(Expressed in thousands of United States dollars)
Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
30, 30, 30, 30,
---------- ---------- ---------- ----------
2008 2007 2008 2007
---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited) (unaudited)
Cash Flows provided by /
(used in):
Operating Activities:
Net income $ 27,933 $ 25,491 $ 91,670 $ 170,622
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 13,043 9,530 37,168 29,548
Amortization of deferred
charges 2,018 1,640 5,452 4,664
Written off amount of
deferred charges -- 160 309 444
Stock based compensation 24 -- 47 --
Payments for drydocking /
special survey (2,509) (1,445) (8,765) (6,071)
Change in fair value of
debt and financial
instruments (5,483) 13 (12,585) (1,046)
(Gain) / Loss on sale of
vessels -- 51 (14,928) (88,349)
Accounts receivable (227) 414 1,817 897
Other assets, current and
non-current (2,039) (3,150) (2,669) (9,386)
Accounts payable and
accrued liabilities (2,577) (938) 4,668 (2,118)
Other liabilities,
current and non-current (338) (569) (968) 15,182
---------- ---------- ---------- ----------
Cash provided by Operating
Activities 29,845 31,197 101,216 114,387
---------- ---------- ---------- ----------
Investing Activities:
Vessel acquisitions
including advances (45) (99,372) (76,525) (155,107)
Vessels under
construction (151,318) (158,370) (397,188) (320,238)
Proceeds from sale of
vessels -- 44,481 69,103 275,768
---------- ---------- ---------- ----------
Cash (used in) / provided
by Investing Activities (151,363) (213,261) (404,610) (199,577)
---------- ---------- ---------- ----------
Financing Activities:
Debt draw downs 399,760 305,000 715,213 541,177
Debt repayment (9,217) (87,217) (53,026) (318,844)
Dividends paid (25,369) (24,005) (76,108) (72,016)
Deferred costs (1,265) -- (2,843) (870)
Increase in restricted
cash (277,559) 7,393 (276,842) (31,810)
---------- ---------- ---------- ----------
Cash provided by / (used
in) Financing Activities 86,350 201,171 306,394 117,637
---------- ---------- ---------- ----------
Net change in cash and cash
equivalents (35,168) 19,107 3,000 32,447
Cash and cash equivalents,
beginning of period 101,663 56,415 63,495 43,075
---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period $ 66,495 $ 75,522 $ 66,495 $ 75,522
========== ========== ========== ==========
Reconciliation of Three months Three months Nine months Nine months
Net Income to ended ended ended ended
EBITDA September 30, September 30, September 30, September 30,
------------ ------------ ------------ ------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
(unaudited)
Net income $ 27,971 $ 25,494 $ 93,230 $ 78,448
Depreciation 13,043 9,530 37,168 29,077
Amortization of
deferred
charges 1,949 1,600 5,316 4,438
Interest income (1,921) (1,118) (3,861) (3,677)
Interest expense 10,004 4,794 25,083 14,471
------------ ------------ ------------ ------------
EBITDA (1) from
continuing
operations $ 51,046 $ 40,300 $ 156,936 $ 122,757
------------ ------------ ------------ ------------
EBITDA (1) from
discontinued
operations (38) (5) (1,560) 93,120
------------ ------------ ------------ ------------
EBITDA (1) $ 51,008 $ 40,295 $ 155,376 $ 215,877
============ ============ ============ ============
(1) EBITDA represents net income before interest, income tax expense,
depreciation and amortization. However, EBITDA is not a recognized
measurement under U.S. generally accepted accounting principles, or
"GAAP." We believe that the presentation of EBITDA is useful to
investors because it is frequently used by securities analysts,
investors and other interested parties in the evaluation of companies
in our industry. We also believe that EBITDA is useful in evaluating
our ability to service additional debt and make capital expenditures.
In addition, we believe that EBITDA is useful in evaluating our
operating performance and liquidity position compared to that of
other companies in our industry because the calculation of EBITDA
generally eliminates the effects of financings, income taxes and the
accounting effects of capital expenditures and acquisitions, items
which may vary for different companies for reasons unrelated to
overall operating performance and liquidity.
For further information please contact: Company Contact: Dimitri J. Andritsoyiannis Chief Financial Officer Danaos Corporation Athens, Greece Tel.: +30 210 419 6481 E-Mail: cfo@danaos.com Iraklis Prokopakis Chief Operating Officer Danaos Corporation Athens, Greece Tel.: +30 210 419 6400 E-Mail: coo@danaos.com Investor Relations and Financial Media Nicolas Bornozis President Capital Link, Inc. New York Tel. 212-661-7566 E-Mail: nbornozis@capitallink.com
SOURCE: Danaos Corporation
mailto:cfo@danaos.com mailto:coo@danaos.com mailto:nbornozis@capitallink.com
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Companies: Danaos Corp (DAC)
Update of Linear Right-of-Way Rent Schedule - Zibb.com
Oct 31, 2008 (FIND, Inc. via COMTEX) --
SUMMARY: The Bureau of Land Management (BLM) is amending its right-of-way regulations to update the linear right-of-way rent schedule in 43 CFR parts 2800 and 2880. The rent schedule covers most linear rights-of-way granted under Title V of the Federal Land Policy and Management Act of 1976, as amended (FLPMA), and Section 28 of the Mineral Leasing Act of 1920, as amended (MLA). Those laws require the holder of a right-of-way grant to pay annually, in advance, the fair market value to occupy, use, or traverse public lands for facilities such as power lines, fiber optic lines, pipelines, roads, and ditches.
Section 367 of the Energy Policy Act of 2005 (the Act) directs the Secretary of the Interior to update the per acre rent schedule found in 43 CFR 2806.20. The Act requires that the BLM revise the per acre rental fee zone value schedule by state, county, and type of linear right-of-way use to reflect current land values in each zone. The Act also requires the Secretary of Agriculture (Forest Service) to make the same revisions for rights-of-way on National Forest System (NFS) lands.
EFFECTIVE DATE: This final rule is effective December 1, 2008.
FOR FURTHER INFORMATION CONTACT: For information on the substance of the final rule, please contact Bil Weigand at (208) 373-3862 or Rick Stamm at (202) 452-5185. For information on procedural matters, please contact Ian Senio at (202) 452-5049. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-800-877- 8339 to contact the above individuals during business hours. FIRS is available twenty-four hours a day, seven days a week, to leave a message or question with the above individuals. You will receive a reply during normal business hours.
SUPPLEMENTARY INFORMATION:
I. Background
II. Final Rule as Adopted and Response to Comments
III. Procedural Matters
I. Background
Statutory: Section 367 of the Act, entitled "Fair Market Value Determinations for Linear Rights-of-Way Across Public Lands and National Forests," directs the Secretary of the Interior to: (1) Update 43 CFR 2806.20, which contains the per acre rent schedule for linear rights-of-way; and (2) Revise the per acre rental fee zone value schedule by state, county, and type of linear right-of-way uses to reflect current values of land in each zone. In addition, pursuant to section 367(a) and (b), the Secretary of Agriculture is adopting BLM's rent schedule in 43 CFR subpart 2806, as updated by Section 367, for linear rights-of-way granted, issued, or renewed for use of National Forest System lands under Title V of FLPMA or Section 28 of the MLA.
Advance Notice of Proposed Rulemaking: The BLM published an advance notice of proposed rulemaking (ANPR) in the Federal Register on April 27, 2006 (71 FR 24836). The comment period for the ANPR ended on May 30, 2006. The purpose of the ANPR was to encourage members of the public to provide comments and suggestions to help with updating the BLM's and the Forest Service's (FS) rent schedule, as described in the Act. The BLM received ten responses to the ANPR, including comments on six specific questions posed there. The BLM utilized the comments received from the ANPR extensively in the development of the proposed and final rule.
Federal Register on December 11, 2007 (72 FR 70376). The comment period for the proposed rule ended on February 11, 2008. The purpose of the proposed rule was to provide members of the public an opportunity to comment on the BLM's proposal to update the linear rent schedule, as described in the Act. The BLM received twelve responses to the proposed rule, including comments on six specific questions posed there. The BLM utilized the comments received on the proposed rule extensively in the development of the final rule.
Previous (1987) Linear Rent Schedule: On July 8, 1987, and September 30, 1987, the BLM published regulations establishing rent schedules for linear rights-of-way granted under Section 28 of the MLA and Title V of FLPMA (52 FR 25818 and 52 FR 36576). The FS used these same schedules to charge rent for rights-of-way across NFS lands. The update to these previous schedules contained in this final rule also affects the FS and users of NFS lands.
The 1987 rent schedule was developed to set fair market rent and minimize the need for individual real estate appraisals for each right-of-way requiring rent payments, as well as to avoid the costs, delays, and unpredictability of the appraisal process in reasonably setting fair market rent.
The 1987 rent schedule established eight fee zones based on the distribution of average land values by county in Puerto Rico and in each of the states, except Alaska and Hawaii. (The 1987 rent schedule did not apply to Alaska and Hawaii; however, the rent schedule in this final rule applies to all 50 states and the commonwealth of Puerto Rico. Linear right-of-way rental fees in Alaska were previously determined on a case-by-case basis based on local market values. There are no linear rights-of-way in Hawaii currently administered by either the BLM or the FS). Under the 1987 regulations, a county was assigned to one of the eight zone values, based on average land values in the county: lower-value counties were assigned lower-numbered zones. The eight zone values contained in the 1987 schedule were set at $50, $100, $200, $300, $400, $500, $600, and $1,000 per acre. A county's zone value was translated into a per acre zone rent by use of the adjustment formula described below. To calculate the annual right-of-way rental payment, the zone rent was multiplied by the total acreage within the right-of-way. The formula for zone rent was:
Zone rent = (zone value) x (impact adjustment) x (Treasury Security Rate) x (annual adjustment factor)
The zone value term in the formula was the land value that was established for each of the eight zones. The zone values established in 1987 were never updated, although it is generally recognized that land values increased significantly in most areas from 1987 to the present.
The impact adjustment term (or encumbrance factor) in the formula reflected the differences in land-use impacts between: (1) Oil, gas, and other energy- related pipelines, roads, ditches, and canals; and (2) Electrical transmission and distribution lines, telephone lines, and non-energy related pipelines. Energy-related pipelines and roads were considered as having a greater surface disturbance impact on the land, and were adjusted to 80 percent of the zone value. Electrical transmission and distribution lines, phone lines, and non- energy related pipelines with a smaller area of disturbance were adjusted to 70 percent of the zone value.
[Page Number 65041]
The Treasury Security term in the formula reflected a reasonable rate of return to the United States for the use of the land within the right-of-way. The 1987 regulations were based on a rate of return of 6.41 percent for a 1- year Treasury Security.
The zone rent was adjusted annually by the change in the Gross Domestic Product, Implicit Price Deflator index.
BLM Right-of-Way Program and Revenues: The BLM administers 96,000 rights- of-way, of which 66,000 are authorized under FLPMA and 30,000 are authorized under the MLA. However, only 48,600 are subject to a rental payment. Wyoming and New Mexico together account for slightly more than 30,000 of the rights- of-way subject to rent. The BLM collected approximately $20.6 million in right-of-way rental receipts for fiscal year 2007. This total includes receipts from both linear and site-type rights-of-way. Seventy-seven percent of all right-of-way rent receipts were collected by five BLM State Offices. These five State Offices and the revenues collected are listed in Table 1.
TABLE GOES
Table 1--Right-of-Way Rental Receipts for "Top Five" BLM State Offices
State office Total rental
receipts
(FY 2007)
Nevada $4,386,150
Wyoming 4,086,382
California 3,210,892
New Mexico 2,669,556
Arizona 1,408,414
Total 15,761,394
Rent receipts from communication uses, which have their own rent schedule, totaled approximately $5 million, while receipts from other site-type rights- of-way, which normally require an appraisal to determine rent, and/or initial ad hoc billings, totaled approximately $9 million.
In fiscal year 2007, the BLM collected $6.5 million total rent for 12,545 linear rights-of-ways using the previous schedule. Of this amount, only 133 bills (for $52,400) were for rental payment periods (the length of time for which the holder is paying rent) of less than 1 year. The largest number of bills (5,864) was issued for one-year rental payment periods. The rent collected from these one-year bills totaled $4,781,000 ( $815 per bill) and included approximately $852,000 for linear rights-of-way located in high value areas, such as in Clark County, Nevada, near the city of Las Vegas. The rent for these bills was generated using a similar methodology as the linear rent schedule, but was calculated using higher land values supported by appraisal data (used to develop "unique zones" with annual per acre rent values ranging from $280 to $6,000). Another 4,993 bills were issued for $133,172, covering a 5-year rental payment period. The average 5-year bill totaled $27, or less than $6 per bill on an annual basis. Lastly, a total of $89,000 was billed for rental payment periods of between 6 and 30 years.
To summarize, in fiscal year 2007 the BLM collected a total of $20.6 million in right-of-way rent receipts, but of that only $5.6 million was calculated using the previous Per Acre Rent Schedule. Another $852,000 was calculated using similar methodology as the Per Acre Rent Schedule, but was calculated using higher land values (unique zones) supported by appraisal data. In addition, over half of all bills generated for linear right-of-way grants in fiscal year 2007 were for multi-year periods of 2 years or more.
Interagency Coordination: The United States Department of Agriculture, Forest Service (FS), will adopt without rulemaking the revisions to the linear right-of-way rent schedule at 43 CFR 2806.20 promulgated by the BLM through this final rule. To enhance consistency between the BLM and the FS, the FS has indicated that it will incorporate some of the procedural or otherwise nonsubstantive changes into its directive system. The FS will be publishing a notice of its adoption of BLM's rental schedule pursuant to this rule and its incorporation of other changes in subpart 2806.
II. Final Rule as Adopted and Response to Comments
Part 2800 Rights-of-Way Under FLPMA
The BLM is amending the Per Acre Rent Schedule in its right-of-way regulations in 43 CFR parts 2800 and 2880. The rent schedule covers most linear rights-of-way granted under Title V of FLPMA and Section 28 of the MLA. These laws require the holder of a right-of-way grant to pay annually, in advance, the fair market value to occupy, use, or traverse public lands for facilities such as power lines, fiber optic lines, pipelines, roads, and ditches.
As mentioned above, the Act directs the Secretary of the Interior to update the per acre rent schedule in the BLM's previous regulations at 43 CFR 2806.20. The Act specifically requires that the BLM revise the per acre rental fee zone value schedule by state, county, and type of linear right-of-way use to reflect current land values in each zone. The Per Acre Rent Schedule applies to linear rights-of-way the BLM issues under 43 CFR parts 2800 and 2880. So as not to be redundant, we discuss the components and application of the rent schedule primarily in part 2800 and will not repeat those discussions in part 2880. However, we will note any differences in part 2880 that are necessary based upon specific statutory provisions of the MLA.
In addition to revising the Per Acre Rent Schedule, the final rule makes minor amendments to parts 2800 and 2880 to bring the previous regulations into compliance with the statutory rent schedule changes. Finally, there are a number of minor corrections and changes in the final rule that are not directly related to the rent schedule. These changes are limited in scope and address trespass and the new rental payments, land status changes, annual rental payments, MLA hardship provisions, and reimbursements of monitoring costs and processing fees. These latter items correct some errors in the previous regulations and clarify others. This final rule:
(1) Makes clear that the rent exemptions listed in section 2806.14 do not apply if the applicant/holder is in trespass;
(2) Provides that only the Per Acre Rent Schedule will be used to determine rent for linear right-of-way grants, unless the land encumbered by the grant is to be transferred out of Federal ownership;
(3) Provides for an annual rent payment term when the annual rent for non- individuals is $500 or more;
(4) Provides for a one-time rent payment for grants and easements when the land encumbered by the grant or easement is to be transferred out of Federal ownership;
(5) Provides for a limited phase-in provision to all holders for calendar year 2009, and, a possible additional phase-in period upon revision of the rent schedule under sections 2806.22(b) and 2885.19(a);
(6) Revises section 2920.6 to require reimbursement of processing and monitoring costs under sections 2804.14 and 2805.16 for applications for leases and permits issued under Title III of FLPMA;
(7) Amends section 2920.8(b) to assess a non-refundable processing fee and monitoring fee under sections 2804.14 and 2805.16 for each request for renewal, transfer, or assignment of a lease or easement;
(8) Amends sections 2805.11(b)(2) and 2885.11(a) so that all grants, except those issued for a term of 3 years or less and those issued in perpetuity under
[Page Number 65042]
FLPMA, expire on December 31 of the final year of the grant; and
(9) Amends sections 2805.14(f) and 2885.12(e) to make it clear that you may assign your grant, without the BLM's prior written approval, if your authorization so provides.
We received many comments on the proposed rule that addressed issues common to both the part 2800 and part 2880 regulations. So as not to be redundant, we address the comments only in the section they pertain to in the part 2800 regulations. Comments that specifically address the part 2880 regulations are discussed in that section of the preamble.
Subpart 2805--Terms and Conditions of Grants
The BLM is making two minor amendments in 2 sections in subpart 2805, which addresses the terms and conditions of FLPMA right-of-way authorizations.
Section 2805.11 What does a grant contain?
Previous section 2805.11(b)(2) stated that all grants, except those issued for a term of less than 1 year and those issued in perpetuity, expire on December 31 of the final year of the grant. The BLM uses the calendar year, not the fiscal year or the anniversary date, to establish the rental period for grants. Expiration of grants on December 31 allows for consistency and ease of administration, because after the initial billing period only full calendar years are included in subsequent billing periods. However, the BLM often issues short-term right-of-way grants for 3 years or less to allow the holder to conduct temporary activities on public land. Previous section 2806.23(b) and final section 2806.24(c) both explain that the BLM considers the first partial calendar year in the rent payment period to be the first year of the rental term. Therefore, under previous section 2805.11(b)(2), a 3- year grant actually had a term period of 2 years plus the time period remaining in the calendar year of issuance. A 2-year grant had a term period of 1 year plus the time period remaining in the calendar year of issuance. Depending on when the grant was issued, the actual term could have been just over 2 years for a 3-year grant and could have been just over 1 year for a 2- year grant. Under the final rule, all grants, except those issued for a term of 3 years or less and those issued in perpetuity, expire on December 31 of the final year of the grant. The changes to this section allow holders to use short-term grants for the full period of the grant. For example, if a 3-year grant is issued under the final rule on October 1, 2008, it would expire on September 30, 2011, instead of December 31, 2010, under the previous rule. If a 2-year grant is issued under the final rule on October 1, 2008, it expires on September 30, 2010, instead of December 31, 2009, under the previous rule. In most cases, the BLM would assess a one-time rental bill for the term of the grant, which would reduce any administrative impact which might otherwise result from this change. We received no comments on the proposed changes to this section, and the final rule adopts the proposed section without change.
Section 2805.14 What rights does a grant convey?
Previous section 2805.14(f) stated that you had a right to assign your grant to another, provided that you obtained the BLM's prior written approval. The BLM proposed adding the phrase "unless your grant specifically states that such approval is unnecessary" at the end of this sentence to indicate that BLM's prior written approval may be unnecessary in certain cases. In most cases, assignments would continue to be subject to the BLM's written approval. However, with this change, the BLM could amend existing grants to allow future assignments without the BLM's prior written approval. This may be especially important to the future administration of a grant when the land encumbered by a grant is being transferred out of Federal ownership, and there is a request to convert an existing grant to an easement or a perpetual grant under section 2807.15(c). We received no comments on the proposed changes to this section and the final rule adopts the proposed section without change.
Subpart 2806--Rents
Sections 2806.10 through 2806.16 of subpart 2806 contain general rent provisions that apply to grants. No changes were proposed to these general provisions except to section 2806.14.
Section 2806.14 Under what circumstances am I exempt from paying rent?
Previous section 2806.14 identified those circumstances where a holder or facility is exempt from paying rent. None of the previous circumstances change under the final rule. We have, however, added a provision (final section 2806.14(b)) that states that the exemptions in this section do not apply if you are in trespass. The addition of this provision makes it clear that the penalties specified in subpart 2808--Trespass, which include the assessment of rent for use of the public land, and possible additional penalties based upon the rent value, apply to all entities in trespass, even those entities that may otherwise be exempt from paying rent under section 2806.14. This is consistent with how trespass penalties are assessed under current policy, and provides for consistency with similar provisions in subpart 2888--Trespass. Current section 2888.10(c) states that the BLM will administer trespass actions for MLA grants and temporary use permits (TUPs) as set forth in sections 2808.10(c) and 2808.11, except that the rental exemption provisions of part 2800 do not apply to grants issued under part 2880. Adding a new provision at section 2806.14(b) makes it clear that the rental exemption provisions do not apply to trespass situations covered under subpart 2808, as they likewise do not apply to trespass situations covered under subpart 2888. The final rule removes the existing phrase "except that the rental exemption provisions of part 2800 (section 2806.14) do not apply to grants issued under this part" from section 2888.10(c), because the cross reference is no longer necessary (see preamble discussion for proposed section 2888.10(c)). We received no comments on the proposed changes to this section and the final rule adopts the proposed section without change.
Section 2806.20 What is the rent for a linear right-of-way grant?
This section explains that the BLM will use the Per Acre Rent Schedule, except as described in section 2806.26, to calculate annual rent for linear right-of-way grants. The per acre rent from the schedule (for all types of linear right-of-way facilities regardless of the granting authority, e.g., FLPMA, MLA, and their predecessors) is the product of 4 factors: The per acre zone value multiplied by the encumbrance factor multiplied by the rate of return multiplied by the annual adjustment factor. The following discussion explains how the BLM adjusted these factors in the previous and proposed Per Acre Rent Schedule to arrive at the Per Acre Rent Schedule in the final rule, including the determination of per acre land values by county, as directed by the Act.
Use of a Schedule
Section 367 of the Act directs the Secretary of the Interior to "revise the per acre rental fee zone value schedule by State, county, and type of linear right-of-way use to reflect current values of land in each zone." Therefore, the final rule retains the use of a schedule
[Page Number 65043]
and no alternative rental fee options were considered.
County Land Values--Use of Published Data
In the 1987 rent schedule, the average per acre land value for each county was based upon a review of the typical per acre value for the types of lands that the BLM and the FS had allocated to various utility and right-of-way facilities. These values were mapped, reviewed, and adjusted, resulting in the placement of each county (except Coconino County, Arizona, which was split by the Colorado River) in one of eight zones ranging in value from $50 to $1,000 per acre.
In the ANPR, the BLM requested comments regarding what available published information, statistical data, or reports the BLM should use to update the current linear right-of-way rental fee zone values. The BLM stated in the ANPR that it was considering using existing published information or statistical data for updating the rent schedule, such as information published by the National Agricultural Statistics Service (NASS). The NASS publishes two reports:
(1) The Census of Agriculture, published every 5 years (NASS Census); and
(2) The annual Land Values and Cash Rents Summary (Annual Report).
The NASS Census provides average per acre land and building values by county, or other geographical areas, for each state. The land values are reported individually for cropland (including irrigated and non-irrigated cropland), woodland, pastureland, and rangeland, and an "other" category that includes non-commercial, non-residential building lots, wasteland, and land with roads and ponds. The average per acre land and building values do not include any value for the crop, forage, or woodland products produced from the land.
The NASS data in the Annual Report, as compared to the data in the NASS Census (see previous paragraph), includes average per acre values for cropland, pastureland, and farm real estate, but only on a regional or statewide basis, and not on a countywide basis. Another difference between the Annual Report and the NASS Census is the absence of any data for Alaska, Hawaii, and Puerto Rico in the Annual Report. You can find more detailed information about the NASS Census and the Annual Report at the NASS Web site at: http://www.nass.usda.gov/index.asp.
The BLM received four comments in response to our request in the ANPR for comment on the use of available published information. One commenter said that the NASS data is appropriate. Two commenters recommended using the NASS Census of Agriculture (5-year census) for county-level data. One commenter stated that the NASS data seems appropriate for updating the schedule, so long as agricultural uses are not reflected in the land values used.
In the development of the proposed rule, the BLM generally agreed with the commenters on the ANPR that supported the use of the NASS Census data to determine the average per acre value for each county, except for the commenter that supported its use so long as agricultural uses are not reflected in the land values used. The NASS publishes average per acre land and building values, by state and county, each 5-year period in its NASS Census report. The most recent county values are from the 2002 NASS Census, which was published in June 2004. The next NASS Census report will provide 2007 data, and it is due to be published in June 2009. However, the NASS county per acre land and building value data is reflective of the types of agricultural uses generally occurring in that county, including land value data reported for cropland (including irrigated and non-irrigated cropland), woodland, pastureland, and rangeland, and an "other" category that includes non-commercial, non- residential building lots, wasteland, and land with roads and ponds. Land administered by the BLM and FS have many of the same agricultural values (grazing, commercial timber production, woodland and vegetative sales (Christmas trees, firewood, mushrooms, pine nuts, seed crops from native species, etc.). The average per acre land and building values do not include any value for the crop, forage, or woodland product produced from the land. In the proposed rule, we further explained that other Federal and state agencies regularly use the NASS Census data when it is necessary to obtain average per acre land value for a particular state or county. In addition, Congress specifically endorsed the use of this data for rental determination purposes when it passed the "National Forest Organizational Camp Fee Improvement Act of 2003" (Pub. L. 108-7) (16 U.S.C. 6231). This law established a formula for determining rent for organizational camps located on NFS lands by applying a 5 percent rate of return to the average per acre land and building value, by state and county, as reported in the most recent NASS Census. That law also provided for a process to update the per acre land values annually based on the change in per acre land value, by county, from one census period to another. The law does not mandate the use of zones or a schedule, which eliminates the need for an annual index adjustment to keep the schedule or zones current. However, the range between the high and low county values which results from using the components mandated under Public Law 108-7, including the use of a 100 percent encumbrance factor, is significantly greater than the range between the high and low zone values which result from using the components established under either the proposed or final rule.
The proposed rule used the entire average per acre land and building value (by state and county) from the 2002 NASS Census to place the county or geographical area into the proper zone value in the rent schedule. We used the entire average per acre land and building value to be consistent with how Congress used the same data in determining annual per acre rent for organizational camps located on NFS lands as described above. We also used the entire per acre land and building value from the NASS Census because both BLM and FS lands have many of the same agricultural values reflected in the NASS Census data.
The BLM received several comments on the proposed rule's use of the entire average per acre land and building value (by state and county) from the NASS Census to place the county or geographical area into the proper zone value in the rent schedule. The majority of the commenters stated that the average per acre land and building value should be reduced to remove land with buildings or other improvements, but offered no recommendations on how this should be accomplished. Some of the commenters stated that irrigated cropland should also be removed from the average per acre land and building value, pointing out that in most cases the average per acre value of irrigated land is significantly higher than non-irrigated land. These commenters recommended reducing the average per acre land and building value in the NASS Census by 50 percent, but offered no data to support a 50 percent reduction, except to state that lands administered by the BLM and FS are not used for irrigated cropland production, nor do they contain rural farm buildings, and therefore, the average per acre land and building value should be reduced by at least 50 percent.
We agree that the average per acre land and building value for each county should be reduced by an amount that
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reflects the value of irrigated cropland and land encumbered by buildings because BLM- and FS-administered lands do not include these land categories. The BLM consulted with officials from the NASS on an appropriate methodology to arrive at this figure. The NASS advised us that this calculation can be accomplished by comparing the total value of irrigated acres and acres in the "other" category, to the total value of all farmland acres. In 2002, there were a total of 938,300,000 acres of rural farmland, composed of 434,200,000 acres of cropland (50,300 acres irrigated); 395,300,000 acres of pasture/rangeland (5,000,000 acres irrigated); 75,900,000 acres of woodland; and 32,900,000 acres in an "other" category (roads, ponds, wasteland, and land encumbered by non-commercial/non-residential buildings). In 2007, the average per acre value of all land in all categories equaled $2,160 for a total farm real estate value of $2,026,728,000,000. This compares to an average per acre land value of $4,736 for all irrigated cropland (a total value of $261,900,000,000 for the 55.3 million acres of irrigated cropland) or approximately 12.9 percent of the total value of all farmland. Thus, to eliminate the irrigated cropland value from the average per acre land and building value of each county, a 13 percent reduction is necessary.
To determine a similar value for the "building" component of the average per acre land and building value is more difficult, since only the total number of acres in the "other" category is known (32.9 million acres, which includes acres encumbered by roads, ponds, non-commercial/non-residential buildings, and wastelands). In addition, unlike the average per acre values that have been determined by NASS for pastureland/rangeland ( $1,160), all cropland ( $2,700), irrigated cropland ( $4,736) and all farm real estate ( $2,160), the average per acre value for the "other" category is not available. However, since the lands in this category are basically non-productive, their average per acre value is likely less than the average per acre value for pastureland/rangeland ( $1,160). Even so, if all 32.9 million acres were valued at $1,160 per acre, the total value of all lands in the "other" category would equal $38,164,000,000, or less than 2 percent of the total value of all farm real estate. If all lands in the "other" category are valued the same as irrigated cropland ( $4,736), their total value would still only be 7.7 percent of all farm real estate. Therefore, in the final rule we reduced the average per acre land and building value by 20 percent (a 13 percent reduction for all irrigated acres and a 7 percent reduction for all lands in the "other" category which includes all improved land or land encumbered by buildings) to eliminate the value of all land that could possibly be encumbered by buildings or which could possibly have been developed, improved, or irrigated.
One commenter suggested that the value for non-irrigated cropland should also be deleted from the average per acre land and building value because of its commercial nature and its dissimilarity to public and NFS lands. The BLM disagrees with this comment. In the 2007 Annual Report, the NASS provided the average value per acre of non-irrigated land in 20 states, including most of the states in the west with large acreages of public and NFS lands, except for the states of Arizona and Nevada where there is very little cropland that is not irrigated. The average value per acre of non-irrigated land is $1,963, and the average value per acre of pasture land in these same 20 states (excluding Arizona and Nevada) is $1,976. If the average per acre pastureland values were included for Arizona and Nevada, the average value per acre of pasture land for all 22 states is $1,926. Thus, there is little difference in the mid- western and western states between the average per acre values of non- irrigated cropland and pastureland/rangeland. In the eastern United States, Federal land holdings, including NFS lands, have largely been acquired from the private sector (primarily farm real estate) and would likely fall into the same land categories covered by the NASS Census. As a result, no further reductions to the average per acre land and building value (other than the 20 percent reduction discussed above for irrigated lands and buildings) are made in the final rule.
In the ANPR the BLM requested comments regarding whether the proposed Per Acre Rent Schedule should split some states and counties into more than one zone. The BLM received three ANPR comments addressing whether some counties should be split into more than one zone. One commenter said that any consideration of splitting states or counties into more than one zone should involve discussions with stakeholders. One commenter said that zones smaller than a single county may lead to undue administrative burden for the BLM (establishing boundaries and collecting data). For very high-valued lands, rent could be based on 25 percent of the assessed value, according to one commenter. Alternatively, high-valued BLM lands could be sold or exchanged. One commenter said that wide variations in land values within a state or county may require applying the zone methodology at the sub-state or sub- county level. In the proposed rule, the BLM did not split any county into more than one zone because there was no published data, easily obtainable, that would support making such a split. We received one comment on the proposed rule suggesting that multiple zones be established where land values vary greatly within a single county. However, the commenter did not indicate how such variations in land values could be easily obtained or identified within each county entity. The BLM believes that it is not possible to make easy or accurate determinations of variations in land values within each county, and therefore the final rule does not split any county into more than one zone.
The BLM also requested in the ANPR comments regarding whether the proposed Per Acre Rent Schedule should apply to Alaska. One commenter stated that the new linear right-of-way rent schedule should apply to public and NFS lands in Alaska if similar published data for land values is available for Alaska as for the lower 48 states and the data produces a reasonable per acre rental value. As a result, we proposed that the schedule apply to Alaska since the NASS Census does include average per acre land and building values for 5 Alaska areas: Fairbanks; Anchorage; Kenai Peninsula; Aleutian Islands; and Juneau. These NASS data produce a reasonable per acre rental value and are comparable to the per acre rental values from contracted appraisals and/or local rent schedules now in effect in some BLM and FS offices. The NASS Census data does not define the actual boundaries for the 5 areas, and therefore we specifically asked for comments to assist the BLM and the FS in determining and identifying the on-the-ground area to be included in each of the 5 Alaska areas in the NASS Census. For example, the NASS Census average per acre land and building value for the Fairbanks "area" could be used for all public lands administered by the BLM Fairbanks District Office and the NASS Census average per acre land and building value for the Anchorage "area" could apply to all public lands administered by the BLM Anchorage District Office, and so forth. Another approach, which both the BLM and the FS prefer, would be to identify specific geographic or management areas and apply the most appropriate per acre land and building value from the 5 Alaska NASS Census areas to the BLM/FS identified
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geographic or management areas based on similar landscapes and/or similar average per acre land values. The proposed rule stated that the FS planned to use the NASS census data for the Kenai Peninsula for all NFS lands in Alaska, except for NFS lands located in the Anchorage and Juneau areas. For NFS lands located in the Municipality of Anchorage, the NASS Census data for the Anchorage area would apply. For NFS lands in the downtown Juneau area (Juneau voting precincts 1, 2, and 3), the NASS Census data for the Juneau area would apply.
The BLM received 2 comments on how the NASS Census data should be applied to public and NFS lands in Alaska. Both commenters generally supported the methodology of the proposed per acre rent schedule (with minor exceptions), but varied slightly in the geographical application of the five NASS Census areas for Alaska. One commenter agreed with the proposal of using the NASS Census data for the Kenai Peninsula for all NFS lands in Alaska, except for NFS lands located in the Anchorage and Juneau area. The commenter stated that for NFS lands located in the Municipality of Anchorage, the NASS Census data for the Anchorage area should apply, and for NFS lands in the downtown Juneau area, the NASS Census data for the Juneau area should apply. For the BLM, the commenter proposed that the NASS Census data for the Kenai Peninsula (Zone 4) apply to all public lands within the BLM Anchorage District boundaries, except for public lands in the Anchorage (Zone 6 in the proposed rule; Zone 5 in the final rule due to the 20 percent reduction in the average per acre land and building value--see discussion above), Juneau (Zone 11), and the Aleutian Island Chain (Zone 1) areas. The commenter said that for public lands located in the Municipality of Anchorage, the NASS Census data for the Anchorage area (Zone 5 in the final rule) should apply and for public lands in the downtown Juneau area (Juneau voting precincts 1,2, and 3), the NASS Census data for the Juneau area (Zone 11) should apply. For public lands in the Aleutian Island Chain, the NASS Census data for the Aleutian Islands Area (Zone 1) should apply. In addition, the NASS Census data for the Fairbanks Area (Zone 3) should apply to all public lands within the BLM Fairbanks District boundaries. The commenter stated that these zone definitions and values would be consistent with both the suggestion in the proposed rule and the general fee schedule previously developed by the Appraisal Services Directorate (ASD), Alaska, for the BLM and the United States Fish and Wildlife Service. The BLM agrees with the commenter's suggestions because these zone definitions and values closely match previous rent schedules/values developed by the ASD for these same geographical areas. Therefore, in the final rule the BLM will apply the NASS Census data for Alaska to the geographical and administrative areas as follows:
Aleutian Islands Area--all lands within the Aleutian Islands Chain--Zone 1;
Fairbanks Area--all lands within the BLM Fairbanks District boundaries--Zone 3;
Kenai Peninsula Area--all lands within the BLM Anchorage District boundaries excluding the Aleutian Islands Chain, the Anchorage Area, and the Juneau Area--Zone 4;
Anchorage Area--all lands within the Municipality of Anchorage--Zone 5; and
Juneau Area--all lands within downtown Juneau (Juneau voting precincts 1, 2 and 3)--Zone 11. The second commenter, while disagreeing with some of the individual elements in the formula, stated that the rent formula, when taken as a whole, is well structured and should be extended, as described, to Alaska. This commenter did note, however, that the 2002 appraisal completed for the Trans-Alaska Pipeline System (TAPS) right-of-way set a $391 per acre land value for Federal lands north of the Yukon River and suggested that the BLM use this as justification to place these lands into Zone 2 instead of Zone 3, as proposed. We do not dispute the per acre value of Federal lands north of the Yukon River as determined by the 2002 TAPS appraisal. We do, however, note that in arriving at an annual per acre rental value for these lands, the 2002 TAPS appraisal utilized an encumbrance factor of 100 percent (later reduced to approximately 86.49 percent) and an 8 percent rate of return. When taken together, these components of the TAPS appraisal produced an annual per acre rental value of approximately $31 (later reduced to $27) for Federal lands north of the Yukon River and an average per acre rental value of approximately $35 (later reduced to $30) for all Federal lands along the TAPS corridor. In comparison, the proposed rent schedule would have generated an annual per acre rental value of $32.35 in 2002, while the final rule would have generated $26.35. Therefore, the BLM agrees with the commenter, that while issue can be taken with individual elements of the final per acre rent schedule, when taken as a whole, the schedule is well constructed and produces a reasonable per acre rent for all zones. In the final rule, the TAPS will be assessed Zone 3 rates for all public land acres within the BLM Fairbanks District boundaries, and Zone 4 rates for all public land and NFS land acres within the BLM Anchorage District boundaries and the Chugach National Forest.
Puerto Rico, which has no public lands administered by the BLM, is not divided into counties. However, the NASS publishes average farmland values for the entire Commonwealth of Puerto Rico. The proposed rule stated that the FS planned to use the NASS average farmland values ( $5,866 per acre in 2002) for linear right-of-way authorizations located on NFS lands in Puerto Rico. The BLM included this same amount ( $5,866 per acre in 2002) for Puerto Rico in the proposed rule for use by the BLM in the event that the BLM were to issue and administer future linear authorizations in Puerto Rico (for example, a MLA grant which involved lands administered by two or more Federal agencies could be issued/administered by the BLM). We received no comments on this issue and made no changes to the final rule.
Per Acre Zone Values
The 1987 linear rent schedule contained eight separate zones representing average per acre land value from $50 per acre to a $1,000 per acre. The schedule contained two zones with a $50 range, five zones with a $100 range, and one zone with a $400 range. All the counties in the 48 contiguous states, except one, and Puerto Rico were in one of the eight zones based on their estimated average per acre land value. The lone exception was Coconino County, Arizona, where the area north of the Colorado River was in one zone, and the area south of the river was in a different zone.
In the ANPR, the BLM requested comments regarding the appropriate number of rental zones for the revised rent schedule, and received three comments. One commenter said that the number of zones (8) in the current schedule is sufficient. Two commenters said that the number of zones should not be changed, unless the NASS Census data indicates the need for a change.
In the proposed rule, the number of zones was increased from the previous 8 to 12 in order to accommodate the range of 3,080 county land values contained in the NASS Census. For the same reason, it was necessary to increase the dollar value per zone. In
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the 2002 NASS Census, the county land and building value per acre ranged from a low of $75 to a high of $98,954. To accommodate such a wide range in average per acre land values, the BLM proposed 2 zones with $250 increments, 3 zones with $500 increments, 1 zone with a $1,000 increment, 1 zone with a $2,000 increment, 1 zone with a $5,000 increment, 2 zones with $10,000 increments, 1 zone with a $20,000 increment, and 1 zone with a $50,000 increment (see Table 2--Zone Thresholds).
TABLE GOES
Table 2--Zone Thresholds Zone 2002 county land and building value Zone 1 $1 to $250. Zone 2 $251 to $500. Zone 3 $501 to $1,000. Zone 4 $1,001 to $1,500. Zone 5 $1,501 to $2,000. Zone 6 $2,001 to $3,000. Zone 7 $3,001 to $5,000. Zone 8 $5,001 to $10,000. Zone 9 $10,001 to $20,000. Zone 10 $20,001 to $30,000. Zone 11 $30,001 to $50,000. Zone 12 $50,001 to $100,000.
The proposed rule's zones accommodate the per acre land and building values of 100 percent of the total number of counties in the 2002 NASS Census (see Table 3). As land values increase or decrease, it may be necessary to adjust the number of zones and/or the dollar value per zone. The proposed rule allowed adjustments to the number of zones and/or the dollar value per zone after the publication of every other NASS Census (once each ten-year period). The adjustments must accommodate 100 percent of the county per acre land and building values reflected in the 5-Year Census. In the proposed rule, the BLM specifically asked for comments on whether 100 percent of the counties should be covered by the per acre rent schedule.
See Table 3 in Original Document.
The BLM received several comments that supported the number of zones, the zone values, and the placement of all NASS counties within the appropriate zone value. One commenter encouraged the BLM and the FS to verify that the zone values reflect actual undeveloped, non-irrigated land values in rural areas of the country adjacent to the public and NFS lands, to ensure that the land values within each zone are appropriate, and the zones assigned to different counties are accurate. We believe that we have addressed this concern by removing all irrigated land and land encumbered by buildings from the calculation of land value and reducing the average per acre land and building values by 20 percent from those shown in the proposed rule. Even with this reduction, we do not believe that the number of zones or the zone values require adjustment. There are still several counties that would fall into Zone 12, even with the 20 percent reduction.
Another commenter suggested that the BLM should discard the zone brackets entirely and use the actual NASS Census land and building value for each county. The BLM considered this option in the development of the proposed rule, but did not believe it conformed to the Congressional mandate provided in Section 367 of the Act to revise the existing schedule by state, county, and type of uses to reflect current land values in each zone. The commenter also suggested that in lieu of using the actual NASS Census value for each county, the BLM should utilize the midpoint of the zone value to base its calculations instead of the upper limit value of each zone. Again, the BLM considered this option in the development of the proposed rule, but did not adopt it because this calculation change would have been significantly different from the methodology used in the previous schedule (which utilized the upper zone amount and not the midpoint in making the per acre rental calculations) and its use would have generated significantly lower per acre rent amounts, while land values have generally increased. As a result, we made no adjustments to the number of zones in the final rent schedule, the zone amounts, or the methodology used
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in the calculation of the per acre rent for each zone.
The 2002 NASS Census per acre land and building value for each county (or similar area) and the corresponding zone number in the Per Acre Rent Schedule (based on 80 percent of the 2002 NASS Census per acre land and building value for each county) are listed for informational purposes at the end of this final rule. Most of the areas subject to the Per Acre Rent Schedule are called "counties." Exceptions include Alaska "areas," the "Commonwealth" of Puerto Rico, and Louisiana "parishes." To make the terminology uniform in this rule, all such areas are referred to as counties.
Encumbrance Factor
The BLM proposed an encumbrance factor (EF) of 50 percent for all types of linear right-of-way facilities. This is a change from the previous rule where the EF for roads and energy-related pipelines and other facilities was 80 percent and the EF for telephone and electrical transmission facilities was 70 percent. The proposed change is the result of public comments on the ANPR, a review of industry practices in the private sector, and a review of the Department of the Interior (DOI) appraisal methodology for right-of-way facilities located on Federal lands.
The EF is a measure of the degree that a particular type of facility encumbers the right-of-way area or excludes other types of land uses. If the EF is 100 percent, the right-of-way facility (and its operation) is encumbering the right-of-way area to the exclusion of all other uses. The land use rent for such a facility would be calculated on the full value of the subject land (annual rent = full value of land X rate of return). If the EF is 40 percent, the right-of-way facility (and its operation) is only partially encumbering the right-of-way area so that other uses could co-exist alongside the right-of-way facility. The land use rent for such a facility would be calculated on only 40 percent of the full value of the subject land (annual rent = full value of land x 40 percent x rate of return).
Two comments received on the ANPR on this topic suggested that an EF could be as low as 10-15 percent if the right-of-way facility is located on undevelopable terrain; a 25 percent EF be used for a transmission line that does not affect development of land ("set-back areas"); a 50 percent EF be used if development is restricted, but not prohibited, or if other land uses are still possible; and a 70 percent EF be used if development or other uses are severely restricted. Another ANPR commenter stated that the EF should be lowered to 25-50 percent for power lines, because in the private sector, an electrical utility typically makes a one-time payment of 50 percent fair market land value for a perpetual easement, allowing other use(s) within the corridor as long as the use(s) do not interfere with the power line. The commenter also stated that most of the uses that the BLM authorizes can also be conducted within a power line corridor without interfering with the power line and without restricting the additional use. One ANPR commenter encouraged the BLM to use a lower EF than 70 percent, based on common real estate practice relating to utility easements. The commenter stated that when utilities negotiate the purchase price for easements on private land, they typically apply a factor of 50 percent or less to the fee simple value of the land involved, to reflect that the utility easement is less than fee ownership and has a reduced impact. This commenter further stated that the BLM should use a 50 percent or lower encumbrance (impact adjustment) factor and should allow a right-of-way applicant to demonstrate that an even lower impact factor should apply.
In preparing the proposed rule, the BLM reviewed several appraisal reports (prepared by the DOI's Appraisal Services Directorate) for right-of-way facilities located on Federal lands. These appraisal reports showed an EF ranging from 25 percent (for buried telephone lines) to 100 percent (for major oil pipelines and electrical transmission lines). The BLM also reviewed one appraisal report that was prepared by a contractor for the BLM. The contractor did an independent solicitation of industry practices regarding this factor and again found anecdotal evidence that EFs vary from 25 percent to 100 percent, with 50 to 75 percent being the most common. One holder provided anecdotal evidence that its company typically used a 40 percent EF for buried facilities and a 60 percent EF for above ground facilities when negotiating land use rental terms for its facilities across private lands. One BLM grant- holder contracted with a private appraisal firm to determine an appropriate EF for a major pipeline and found that a 75 percent EF is fairly typical for major projects. Finally, our review showed that many state and Federal agencies have established an EF by statute or by policy, usually in the 70 percent to 100 percent range. In the proposed rule, the BLM specifically asked for comments regarding the proposed use of a 50 percent EF, especially since this was a reduction from the 80 percent and 70 percent EFs used in the previous per acre rent schedule.
We received many comments on the proposed rule supporting the reduction of the EF to 50 percent from the 80 percent and 70 percent in the previous per acre rent schedule. A few commenters specifically stated that the EF should be limited in all cases to no higher than 50 percent. One commenter stated that the BLM has traditionally appraised the acquisition of non-exclusive road easements (the equivalent of a BLM right-of-way) using a 50 percent encumbrance factor and that a maximum 50 percent EF should be used whether or not the EF is applied to the upper limit of each zone value or the mid-point value of each zone. One commenter suggested that the EF should be reduced to as little as 10 percent, arguing that a transmission facility located on public lands devalues the land much less than would an easement on private land and that the rights obtained under a grant are also less than those obtained under an easement. Another commenter, while supporting an EF of 50 percent, believed that the final rule should provide holders the option to seek lower EFs via an appraisal. In addition, one commenter suggested that the EF be reduced below 50 percent in those cases where a new right-of-way is granted within an existing road right-of-way or patent reservation for roads or utility purposes.
The BLM agrees with the commenters that state that there are situations and circumstances where an EF of less than 50 percent may be appropriate, whether due to the type of facility, the rights obtained or granted, the impact of the facility on the land, or the co-location of multiple facilities within the same utility corridor. However, there is convincing evidence of situations where an EF greater than 50 percent is warranted. In fact, for large right-of- way facilities, such as interstate pipelines and electrical transmission lines greater than 138 kilovolts in size, the annual rent or one-time easement payment is typically determined using 100 percent of the land value (100 percent EF). These major right-of-way facilities not only encumber the greatest number of acres, but can have significant and continuing impacts on public land resources, including impacts to visual, open space, wildlife, vegetative, cultural, recreation, and other public land resources. In addition to the documented cases cited above supporting EFs greater than 50 percent, two articles published in a professional right-of-way journal also show that a 50
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percent EF is indicative of a balanced-use by both the land owner and right- of-way/easement holder (see Donald Sherwood, Easement Valuation, Right-of-Way Magazine, May/June 2006 at 33). More telling are several quotes from utility company officials stating that the typical amount of compensation for permanent easements is 50 percent of the underlying land value, but that this amount can increase up to 100 percent depending on the size of the transmission line or right-of-way facility being sited (see William R. Lang and Brett A. Smith, Valuing a Gas Pipeline Easement, Right-of-Way Magazine, September/October 1998 at 32). The BLM recognizes that the EF is closely related to the type of right-of-way facility authorized, as well as how it is operated and administered. However, to assign a specific EF for each type of facility, or type of terrain, or to allow the holder the option of completing an appraisal that may establish a lower EF would be counter-productive to the purpose of using a schedule in the first place, i.e., administrative simplicity and the cost savings that a schedule provides to both the BLM and the applicant/holder in determining rent for right-of-way facilities on public lands. (We note that under this final rule the holder has the option to complete an appraisal report to determine one-time rent for perpetual grants or easements under sections 2806.25, 2806.26, and 2885.22. In these cases, involving lands to be transferred out of Federal ownership, the appraisal report could establish an EF lower than 50 percent (see section 2806.25(d)). In determining an appropriate EF for the final rule, the BLM has also given consideration to the fact that the BLM grants rights-of-way for a specified term, usually 20 to 30 years and that the rights granted are subject to renewal, relinquishment, abandonment, termination, or modification during the term of the grant. We also recognize that the grants issued for right-of-way facilities are non-exclusive, i.e., the BLM reserves the right to authorize other uses within a right-of-way area, as long as the uses are compatible. Given these considerations, and the research and analysis cited above, along with consideration of public comments and published information, the BLM has determined that a 50 percent EF is a reasonable and appropriate component for use in the rent formula for linear right-of-way facilities located on public lands.
Rate of Return
The rate of return component used in the Per Acre Rent Schedule reflects the relationship of income to property value, as modified by any adjustments to property value, such as the EF discussed above. The BLM reviewed a number of appraisal reports that indicated that the rate of return for land can vary from 7 to 12 percent, and is typically around 10 percent. These rates take into account certain risk considerations, i.e., the possibility of not receiving or losing future income benefits, and do not normally include an allowance for inflation. However, a holder seeking a right-of-way from the BLM must show that it is financially able to construct and operate the facility. In addition, the BLM can require surety or performance bonds from the holder to ensure compliance with the terms and conditions of the