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Conservation easements

Lander – During the Aug. 23-24 meeting of the Select Committee on Natural Resource Funding held in Lander, committee members looked at oil and gas development on lands protected by conservation easements.
    “The statutes provide that everyone having an interest in the mineral estate, including the carbon sequestration rights, has to consent in order for the conservation easement to impact the development of those mineral interests,” explained John McKinley, attorney at Davis and Cannon, LLP in Cheyenne. “Unless everyone gives consent to the conservation easement, it cannot impair the ability to develop oil and gas interests.”
    However, McKinley also noted that some differences exist between split and unified estates, and donated easements also have additional stipulations.
Split or unified estates
    “You have to distinguish not only between split and unified estates, but also whether the easement is going to be purchased, donated or a combination,” McKinley continued.
    Split estate regulations require that a conservation easement does not impact the mineral estate.
    “Wyoming statute provides that the mineral estate remains dominant, and the conservation easement cannot impair the third party’s rights to develop those minerals,” he clarified. “From a practical standpoint, certain companies may be more reluctant to lease those minerals, but they are still available for leasing and development.”
    However, if landowners own the entirety of the surface and mineral estates, it is their prerogative whether to allow or disallow oil and gas development on the property in the future.
Localized and limited development
    “The only guidance in the regulation and the code is that oil and gas development is limited and localized,” he said, adding, however, that the terms limited or localized have not been defined by the court system. “There is a little bit of guidance in the regulations, and there are a couple of letter rulings that help define it.”
    Additionally, conservation easements are often drafted to include language that negotiates surface use agreements regarding the property.
    “The grantee – the land trust – has an obligation to monitor and make sure the terms of the conservation easement are upheld,” McKinley explained. “We put the initial burden on the grantor – the rancher who has been out there for years.”
    “The grantor negotiates in a fashion to minimize the surface impacts for the conservation values, but both the grantor and grantee have to approve the surface use agreements,” he added.
    Enforcement of surface use agreements also depends on the terms of the agreements.
    Language inserted in conservation easements stipulating surface use can be agreed to by all parties – the grantor, grantee and funding sources – without the separate consent of the federal government.
IRS implications
    McKinley added that there are special provisions that need to be considered in the event that IRS deductions are taken when a conservation easement is donated.
    “When you take the deduction, look at the present time – what is going on right now,” he explained.
    “If it is a purely donated easement and the landowner intends to take certain IRS deductions and benefits, the landowner has to comply with the IRS code and regulations to limit oil and gas development in a manner that is limited, localized and can be remedied,” McKinley said. “That is a condensed summary.”
    He added, however, that there are instances where a private letter ruling has allowed landowners to benefit from a tax deduction on donating an easement and oil and gas development in the future has occurred, providing that certain parameters are satisfied.
Strip mining
    “Strip mining deals get a little dicey,” McKinley noted, especially if the easement is donated and the landowner intends to utilize IRS deductions. “If you put a conservation easement on donated land, it has to have a prohibition as to strip mining.”
    In many conservation easements, a remoteness letter is required. The letter details the likeliness that land will be developed
    “The grantee is going to require a geologic review of the property before they enter into a conservation easement,” he added. “That review, or the remoteness letter, should identify whether mineral development will occur on the property. I’m aware of at least one conservation easement property that got nixed because of the results of the remoteness letter.”
    In other words, if land is highly likely to be developed, a conservation easement on the property does not make sense, said McKinley.
Prohibiting development
    While McKinley said that he is unsure of exactly how a conservation easement would be structured to effectively prohibit oil and gas development on lands protected by a conservation easement, there are most likely ways to do it.
    “If the landowner wants to prevent development and he owns the minerals, it is a private property right,” said McKinley, noting that parts of a property can be carved out of a conservation easement, leaving them available for development.
    “The landowner really has to spend a lot of time when they are sitting down to figure out the structure of the conservation easement that makes the most sense to accomplish their goals and at the same time continue ranching,” McKinley commented.
    Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Washington, D.C. – On May 3, the U.S. Fish and Wildlife Service (FWS) proposed changes to the Candidate Conservation Agreements with Assurances (CCAAs) policy under the Endangered Species Act (ESA).

With changes imminent, FWS Biologist Pauline Hope comments, “The proposed policy is not retroactive and will not affect previously completed CCAAs. Participants of completed CCAAs may continue to implement their CCAAs as they previously agreed.”

At the same time, Hope also notes that future participants will also not have different requirements. Rather, the process of developing and approving CCAAs was clarified in the policy with the goal of simplifying the process by clarifying intent and terminology.

FWS adds, “The changes also can encourage additional non-federal landowners to participate in these agreements. FWS and the National Oceanic and Atmospheric Administration Fisheries are actively working to engage conservation partners and the public in the search for improved and innovative ways to conserve and protect imperiled species, even before they are listed under the ESA.”

Conservation action

Among the changes included, FWS notes that the revision removes all references to “other necessary properties,” instead using “net conservation benefit” to clarify the idea that, to preclude listing, conservation measures must be implemented across the landscape.

“Although a landowner is proposing clearly beneficial actions, for a CCAA to remove the need to list a species, it is dependent on other hypothetical landowners undertaking additional actions that are beyond that landowners’ control,” Hope says. “This created confusion with prospective CCAA enrollees and agreement administrators.”

In including the land into a CCAA, FWS adds that property only need to demonstrate that their proposed actions will result in net conservation benefit.

“The term ‘net conservation benefit’ has been used for other programs within FWS, as well,” Hope explains. “Most similarly, Safe Harbor Agreements, which are agreements non-federal landowners may enter into for ESA-listed species on their property, include a requirement of ‘net conservation benefit.’”

The use of the term strives to clarify the standard that landowners will be required to reach.

Implementing measures

Under a CCAA, conservation measures implemented on a property must be designed to reduce or eliminate current or future threats on a property that are within the control of the landowners, Hope summarizes, adding that the overall goal of a project is to increase the species’ populations or improve its habitat.

Recognizing that some areas are already managed to benefit species, Hope adds that, for those landowners, “a net conservation benefit will be achieved when the property owner commits to continue to manage the species for a specified period of time with the anticipation that the population will increase or the habitat quality will improve.”

The monitoring and reporting necessary for conservation measures is already an integral part of CCAA, and policy changes do not add any new monitoring or reporting requirements.

Unforeseen circumstances

New language was also added to Part Three of the CCAA regulations to explain assurances provided to property owners enrolled in a CCAA if circumstances change or unforeseen circumstances appear that would require additional conservation measures.

“This language is already included in FWS’ regulations and does not represent a change in current CCAA practice,” Hope says. “Adding this language to the policy will make the policy and regulations consistent.”

Further, Hope clarifies that additional conservation measures would not involve additional commitment of land, water or financial compensation or additional restrictions on use of land, water or other natural resources without consent of the property owner.

Federal lands

While CCAAs can only be implemented on private lands, permittees across Wyoming have also sought CCA – or Candidate Conservation Agreements – on the federal lands they utilize.

“Unlike CCAAs, which are only for non-federal entities, federal agencies can participate in CCAs,” Hope says.

With the changes for CCAA, however, she notes that the proposed policy changes would not be required for CCAs since there is no CCA policy in place.

“However, CCAs may be designed to be consistent with CCAAs to allow seamless conservation across land ownership boundaries,” she adds. “In that case, CCAs may be consistent with the CCAAs.”

FWS also mentions that the revisions to the CCAA policy are consistent with “success of the Obama Administration in improving regulations and implementing the ESA in new and innovative ways.”

The revisions are also consistent with Executive Order 13563, which asks for analysis of existing rules to decrease the regulatory burden and increase efficacy.

“The intent of the proposed policy is to clarify the CCAA policy and reduce confusion around the CCAA requirements,” Hope says. “Through the candidate conservation program, one of the goals has been, and remains to be, encouraging the public to implement specific conservation measures for declining species prior to them being listed under the ESA.”

Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Colorado will require land trust certification to end abuse
Casper – Wyoming land trust executives say there is a distinct difference between conservation easements written in the state and those now under scrutiny in Colorado.
    Coloradans who entered conservation easements in recent years did so for not only the federal tax benefits and, in most cases, the desire to preserve open space, but also state tax credits and the right to sell those tax credits to a third party or to the state itself.
    “Colorado has a state income tax,” says Wyoming Stock Growers Agricultural Land Trust (WSGALT) Executive Director Pam Dewell, “and passed a law in 2000 allowing landowners who couldn’t use the entire donation value of an easement on their state returns to sell the balance as a state tax credit.” Dewell says some people took advantage of the system and some used it to take advantage of landowners. “As with any profession there are some bad apples,” she says.
    According to an Oct. 28 news article appearing the Rocky Mountain News, beginning next year land trusts in Colorado will have to be state certified to continue accepting lands. “Beginning Jan. 1,” says the article, “the Colorado Conservation Easement Oversight Commission will begin reviewing dozens of nonprofit trusts to ensure they are qualified to monitor the lands and have the financial resources to defend the easements against development or misuse.” According to Rocky Mountain News, the coalition was formed after numerous abuses of the “landmark easement program were uncovered.”
    The newspaper says easements were being written on tiny parcels instead of the large-scale ranches where they were intended to prevent development. Dewell says there were also scenarios where easements were grossly overvalued. About 3,000 easements have been put in place since the program began in 2000. Rocky Mountain News says $274 million in state income tax credits have been claimed to date, far surpassing the anticipated level.
    “Land trusts were supposed to function as gatekeepers, ensuring appropriate lands were being protected and fairly valued,” says Rocky Mountain News. “But some were apparently formed fraudulently and others simply weren’t clear on their obligations under the law and the IRS code governing donations of scenic lands.”
    Dewell says 290 tax returns including conservation easements are amidst audits in Colorado, with the vast majority dating back to 2002 and 2003. “About 100 of those are held by bona fide land trusts and they’re sound easements,” says Dewell, noting that it’s too bad the IRS isn’t making the distinction. Of the remaining income tax audits where easements are involved, she adds, “Some are clearly not good easements. In Colorado there were a number of businesspeople who came out of the woodwork and used this system to their advantage and in doing so hurt some landowners.” The issue itself, she says, is not new. Colorado’s efforts to seek out a solution have, however, brought the situation to the public forefront.
    “About three years ago,” says Wyoming Chapter of The Nature Conservancy (TNC) State Director Andrea Erickson-Quiroz of conservation easement valuation, “TNC decided we were concerned about this issue.” She says there’s an “IRS 8283” form submitted upon an easement’s finalization. Carrying the appraised valuation, she says TNC won’t finalize an easement until they’ve seen the form and won’t sign off on the document if the appraisal is “out of line.” She says it’s important the appraisals meet TNC and IRS requirements.
    “Colorado’s tax credit for conservation had some unfortunate unintended consequences, creating an environment where dollars brought out the worst in people,” says Dewell. “There were some very extreme appraisals.” Dewell says it’s important to point out that appraisers are hired by the landowner. WSGALT stresses the importance of due diligence to landowners and urges ranchers considering the placement of an easement on their property to hire professional swho have experience and a sound track record. “If an appraisal looks too good to be true, it probably is,” says Dewell.
    “Conservation easements are a choice for landowners, who bear responsibility for meeting the legal and financial obligations of the decision,” says Jordan Vana, Land Program Director for the Pinedale-based Green River Valley Land Trust. “GRVLT has not, and will not, promote or make any assurances regarding financial benefits.”
    Vana continues, “GRVLT doesn’t get involved in appraisal matters. That’s between an easement donor and their appraiser. GRVLT does get its own appraisals to support easement purchases and only works with reputable firms.”
     Dewell also says it’s important to work with a land trust that is a known entity and belongs to a professional trade organization such as the national Land Trust Alliance or the western-based Partnership for Rangeland Trusts (PORT). Membership in PORT requires that a land trust be affiliated with an agricultural organization such as the Wyoming Stock Growers Association. “PORT members are land trusts sanctioned by agricultural entities within our respective states and are committed to working landscapes and the people who steward them. Our goal is to provide easement options with the landowner’s interests and values in mind.”
    “Easements are a valuable tool that should not be dismissed because some bad apples used the tool incorrectly,” says Dewell.
    “Our land trusts in this state have already taken important steps,” says Erickson-Quiroz, “and we don’t have a program like the tax credit that is complex and needed better oversight from the beginning.”
    “GRVLT, and other land trusts in Wyoming, follow the Land Trust Alliance’s Standards and Practices, which describe how an ethical and professional land trust should operate,” says Vana. “GRVLT recently became accredited through the independent Land Trust Accreditation Commission and stands as the only land trust in Wyoming to earn this distinction to date.”
    Jennifer Womack is managing editor of the Wyoming Livestock Roundup and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..
Cheyenne – When discussing the philosophy of conservation easements, Cheyenne attorney Harriet Hageman asks what they mean for Wyoming, livestock producers, landowners and the future.
    “Are they good, bad or ugly? They are some of all three,” she said in a discussion with Wyoming Farm Bureau members at their annual convention in Cheyenne in November.
    “As landowners and producers, and with what you do for a living in producing the country’s food supply, we need to talk about all the aspects of conservation easements,” said Hageman. “There are some good things a land trust can do, but at the same time people need to understand all the sides, so they know whether a conservation easement, and what kind, is appropriate for them.”
    According to the Congressional Western Caucus, the federal government owns 29 percent, or 654,885,389 acres, of the land in the United States.
    “We claim to be a free country, but we have a federal government that dictates decisions from Washington, D.C. and owns a third of the land base,” she stated, adding that a risk with conservation easements is that they’re sometimes sold by the original purchaser – a land trust – to the federal government, which results in even more federal control of lands in the U.S.
    “I don’t believe conservation easements are always in the best interest of the citizens of Wyoming and the surrounding states,” said Hageman. “I’m afraid we’re federalizing our private property rights. Many of us are here today because of what we and our ancestors and family members have done in carving out a niche, a home, our society and a place to call home and raise our families. The concept of private property rights is very important in terms of who and what Wyoming will be in the long term.”
    “What we have is a situation that, as government acquisition and regulatory restrictions on land use have become prohibitively costly and ineffective, the government has looked to conservation easements as an effective and less expensive method for controlling lands without having outright government ownerships,” said Hageman. “What we have is a government using conservation easements to control private property rights without having to acquire those rights themselves.”
    Hageman said that, initially, conservation easements seemed to hold some promise as an unobtrusive means for preserving open space while upholding private property stewardship, private initiative and the rights of private landowners.
    “The land trusts that were first set up to manage the easements were typically small, non-political and independent of government involvement,” she said. “Land trusts have grown in size, and so has their association and influence with the government. This has been the case with large national organizations, and, for many land trusts, the close working relationships with private landowners have become a close relationship with government agencies.”
    “Their mission has evolved from protecting open land and private stewardship to aiding government agencies in acquiring private lands,” she continued. “Some land trusts now operate like government agents, acquiring easements from private landowners, only to turn around and quietly sell them, sometimes at an enormous profit, to state or federal governments. They don’t all act this way, but enough of them do that we should all be concerned about the unholy alliance they’ve created.”
    Because most easements are purchased at the low market value, Hageman said land trusts can sell the easement to the government at market value and pocket the difference.
    “Land trusts benefit because they can earn a profit from the taxpayer-funded arrangement, and government agencies like it because, unlike seizing private land through land use regulations, zoning laws or eminent domain, they can obtain private property without public scrutiny,” she stated.
    Also, Hageman asked why there is even a third party involved in the transaction.
    “If these conservation easements are worth that kind of money, and if our federal government is willing to give that kind of funding, why aren’t they working directly with you? If that kind of money is available, why is it going to TNC instead of directly to the landowner, who is burdened by the easement from the day it’s signed? Because it’s corrupt, and it’s a way that people have found to make more money off the government and federalize our private property rights,” she said.
    In addition to federal ownership of conservation easements, Hageman said she has a philosophical opposition to the concept of perpetual conservation easements.
    “Federal tax incentives for conservation easements require landowners to encumber their land in perpetuity,” she explained. “If you want children to stay in farming and ranch, you cannot put a perpetual conservation easement on your property, because if you do you will guarantee they will not be able to hold on to that land and make the decisions they need to in the long run.”
    “The entire purpose of a conservation easement is to bring somebody else in as your partner – not your son, daughter, nephew or cousin, but the federal government, TNC or the Fish and Wildlife Service. You’re bringing in an unaccountable, nameless person who will come onto your property and dictate what you can and cannot do,” noted Hageman.
    She added that another issue with conservation easements is their decrease in land value.
    “When a conservation easement is put on property, you are, by definition, decreasing the value of the most important asset you own – that’s the point of the tax write-off. Why, when the primary asset you own as farmers or ranchers is that real property, do you want to put something on it that will knock the legs out of the value? Why do you want to take the most important asset you have and undermine the value?” she asked. “That tax benefit is a one-time thing, but the easement will be on that property into perpetuity, and that is what we need to change.”
    She continued, “I’m not opposed to conservation easements – I believe it is wrong to have a perpetual conservation easement. If you want to enter into an arrangement for 10 years, do that, but don’t impose an easement on your property until the end of time.”
    “If conservation is a priority of our country, people ought to pay for it,” she said. “That’s your asset. If they want to pay for it in 2010, they ought to get a conservation easement, but they ought to pay for it again in 2030 at 2030 values. I’m not opposed to conservation easements, but this idea of perpetuity has got to be fixed.”
    Hageman said that, if land trusts continue to respond to the temptation of working with the federal government, land conservation will become even more political.
    “History teaches us that market incentives for conservation are strongest when individuals pay market prices and receive market values,” she said.
    Christy Martinez is managing editor of the Wyoming Livestock Roundup and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..