When the state board of land commissioners shall ascertain that sections 16 and 36 or any part thereof granted to the state have been actually settled upon prior to the survey thereof by the general government, and are occupied by bona fide settlers, claiming title thereto under the homestead laws of the United States, then the said board shall be and is hereby authorized and empowered, in its discretion, by and with the approval of the secretary of the interior, or the secretary of agriculture when necessary, to select from the surveyed, unreserved and unappropriated public lands of the United States within the state of Idaho, other lands equivalent in area and value, in legal subdivisions, and as contiguous as may be to the section in lieu of which the same is taken.