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The Weekly News Source for Wyoming's Ranchers, Farmers and AgriBusiness Community

Opinion by Jim Magagna

by Wyoming Livestock Roundup

WSGALT: Easements are a Tool to Protect the Future of Agricultural Lands
By Jim Magagna, WSGALT board member and secretary  

    At last December’s “Making a Plan” Workshop, the Wyoming Stock Growers Association had a “Tools for Transition Room,” where information was made available on several tools that are available to agricultural producers who are faced with ranch transition decisions.
    One of those tools, among many, is the use of a conservation easement (CE). The decision to employ this tool, or any other tool, is strictly voluntary and should be made by a landowner only when: 1) it is consistent with a clear family and business goal; 2) there is a clear understanding of how CEs will affect the future of the operation; 3) a trusting relationship exists with the entity that will hold the easement; and 4) the landowner has retained qualified professional legal and financial assistance.
    A presentation on CEs delivered at the 2011 Wyoming Farm Bureau Convention by Cheyenne attorney Harriet Hageman entitled “The Good, the Bad and the Ugly” has received a lot of attention. Unfortunately this presentation and the reports that have followed it have focused on the bad and the ugly. A headline in one Wyoming agricultural publication, “Conservation easements take away important property rights,” is typical.  
    Horror stories on conservation easements abound, and a number of them that relate to CEs acquired by national non-governmental organizations (NGOs) outside of Wyoming may be valid. A bit of research will similarly uncover horror stories involving each of the many other transition tools, including life insurance, trusts and wills. If we are to reject each of these, and other tools, based on their occasional abuse, landowners are left without viable approaches to transferring the family farm or ranch without unsustainable estate tax liabilities.
    As a founding member of the Board of Directors of the Wyoming Stock Growers Agricultural Land Trust (WSGALT), I feel compelled to address some of the inaccurate portrayals of the work that we and other Wyoming land trusts undertake with willing, informed sellers and donors.
    The broad statement that today’s conservation easements are “federalizing our private property rights” cannot be substantiated. In fact, it is untrue! The vast majority of easements today are held by private not-for-profit land trusts. These trusts range from huge national NGOs to local community land trusts. The guiding philosophies of these trusts vary from wildlife habitat to community parks to preserving ranching.
    Yes, there are examples of national land trusts acquiring feel title ownership of properties, then turning these properties to the federal government, likely at a profit. I join Harriet and others in strong condemnation of these arrangements. However, it is inappropriate and confusing to include these transactions in a discussion of conservation easements. These are land purchases. Every easement acquired by WSGALT will be held by WSGALT.  Our principles do not allow a transfer to any governmental agency.
    It is similarly incorrect to state that “easements are purchased by a land trust at below market value.” A qualified appraiser determines the value of an easement, and it represents the difference in the total market value of the land prior to the easement and the remaining value after the easement. The sale of a conservation easement is the one-time sale of an interest in real property. To contend that the seller should be entitled to receive this value again in 20 or 30 years would be akin to selling a piece of property with the expectation that the buyer will pay the full value multiple times.  
    While it is true that some land trusts, including WSGALT, request that the seller donate a small portion of the easement value, for which they may receive a significant tax benefit, this donation is clearly identified and mutually agreed to prior to the signing of the easement.
    Private funding for the purchase of easements is very limited. Therefore, WSGALT and other private Wyoming land trusts rely heavily on dollars made available through federal Farm Bill programs and the Wyoming Wildlife and Natural Resource Trust. This investment of federal and state dollars just makes sense because of the broad public benefits that are incidental to an easement. Importantly, the easement agreement is solely between the landowner and the private land trust. The responsibility for compliance monitoring rests with the private land trust.
    Yes, conservation easements limit some of the choices available to the next generation – the choice to subdivide or develop the property. Similarly, your decision to develop your land effectively limits the choice of the next generation to farm or graze the land. These considerations should be an important part of any landowner’s decision. What future options do you want your successors to have? There is another choice that some agricultural landowners face. Do I want my heirs to inherit the land with insurmountable debt? If not, do I retire debt by selling a portion of the ranch, or by placing a conservation easement on the ranch and keeping it intact? There is no generic “right answer” to these difficult questions.
    The Federal Tax Code and most funding sources today dictate that conservation easements be held in perpetuity. This is not a comfortable concept for many landowners.  There is a need for an option based on a term easement – perhaps 25 to 50 years. I believe this would significantly broaden the value of easements as a transition tool.
    It is important to recognize that not all easements are the same. The terms of an easement should reflect the needs and desires of the landowner, together with the philosophy of the land trust. At WSGALT we begin with our own prototype easement that is designed to assure the continued viability of the agricultural operation.
    At WSGALT, we view easements as a tool to protect the future of agricultural lands. The membership of the Wyoming Stock Growers Association supported the establishment of this land trust as a service to Wyoming agricultural producers. We do not market conservation easements – we market our service. A bond and a trust exist between our land trust and our easement sellers or donors. I am confident that the work we do in partnership with Wyoming landowners represents only the “good” referenced in the title of Hageman’s presentation.

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