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Are You Asking the Right Questions about Conservation Easements or Purchased Development rights?


By Ric Frost

Policy Analyst

New Mexico State University

October 2, 2003


In recent decades, Conservation Easements (CEs) and Purchased

Development Rights (PDRs) have become a trendy way to acquire tax

write-offs on private lands. Reasons as to why varies with each owner, but

the common thread has been tax relief and to retain the land in agricultural

production. Many of these landowners have placed portions or all of their

private land holdings into a split estate situation without fully understanding

the impacts to themselves or their community. This is largely due to not

asking enough questions or the right questions.


To truly understand the problem, land trusts come on to land owners and

communities with the claim they are working to protect rural agriculture

from development pressures. Development is not the problem as rural

economic pressures come from:


·         Government Restrictions and Regulations,

·         Tax Exempt Non Government Organization Environmental Lawsuits,

·         Weather Fluctuations,

·         Market Fluctuations,

·         Operators Being Price Takers Without Control of the Market Pricing

Structure (or the ability to pass on increased business costs such as fuel expenses),

·         Subsidized Foreign Market Dumping Without Protection,

·         Influx of Wealthy Urbanites Competing for Control,

·         Estate Taxes and Compliance Costs.


These cumulative pressures force the economic demise of rural economies and

create compromised sellers ready for a quick economic fix, not willing sellers

desiring to leave their cultural practices or heritage. So the question simply put

is, do CEs protect agriculturalists from these real pressures as is claimed?

Simply put, NO THEY DO NOT! The secondary question to this is, if land trusts

are concerned with protecting agriculture, then what have they done to

alleviate these real pressures?


Splitting the title of private land has other consequences as well. Some comments

on CE & PDR impacts by financial officers:


·         Owners give up management and control of the land : Jimmy Hall, PCA, NM

·         Severely diminished loan value of land : John Johnson, First Western Bank, SD

·         CEs eliminate property loan value : Dee Gidney, Texas Bank Ag Loans, TX

·         Fragmentation of land title to deny future generations a full range of productive l

          and use options: David Guernsey, Alliance for America

·         Loan Value for Operational and Other Loans is Reduced up to 90%

          with an Easement



Interviews of land owners with CEs and PDRs have revealed some common

misunderstandings held when they got involved. Some misconceptions are:


·         “Perpetual means 99 years”. False: perpetual is forever.

·         “I retain full title to the land”. False: title becomes split with easement holder.

·         “A CE (PDR) is the only way the land is managed to my intent”. False: the

          easement holder and future easement holder can change management practices

          at any time including development! Easement management loopholes also allow

          easement holders to sue the landowner and impose habitat restrictions.

·         “A CE (PDR) allows me to use the property as I always have”. False: you

          give up management control of all easement property forever!

·         “Property with a CE (PDR) will sell easy”. False: a CE (PDR) may reduce

          the property value and affect the willingness of financial institutions to loan

          money on a split title.


Economic impacts may also be encountered as the result of CEs and PDRs.

Some of the impacts already experienced by landowners and communities have been:


·         Reduced management options on taxed lands of land owner and heirs

·         Restrictions on farm and ranch management practices

o        Restrictions on Chemicals Used

o        Restrictions on Seed and Plant Types

o        Restrictions on Farm and Ranch Management Practices

·         Reduction of income due to restrictions

·         Reduction in management options with land and business value decline

          forcing owner into a “willing seller” status (Actually a Compromised Seller)

·         Imposition of Environmental Assessment (EA) and Environmental Impact

          Study (EIS) expenses on land owner for restriction and management changes

          especially if a Federal Nexus exists

·         Legal and penalty expenses for CE and PDR violations (Its built into the fine print)

·         Vulnerability from non-trust third party lawsuit –Litigation Exposure

          is in the Easement Act

·         Decreased or eliminated production translating into negative economic

          impacts to Agriculture and related industries within community, county and state

·         Recent reports indicate a majority of lands with CEs (PDRs) have not remained

          in agriculture and are rendered to untaxed “open space” in the hands of the

          government or owned by wealthy non-agriculturalists comfortable with

          “open space” restricted lands without production

·         Reduced Management Options on Taxed Lands of Land Owner and Heirs

·         Reduction of Income due to Restrictions Reduction of Direct, Induced and

          Indirect Economic Benefits to all Related Industries within Community, County

          and State

·         Reduction of County Tax Base Forcing Tax Increases and Reduction of

          County Services on Other Property Owners in County to Make Up Loss

          (a disportionate burden)


Impacts resulting from violations were studied by the Land Trust Alliance and

published in the Winter 2000, Vol. 19 #1 issue of “Exchange”. It revealed that

the landowner always pays legal and penalty expenses for violations as this

condition is built into CE and PDR language. Average cost per case is $35,000

with range of $5,000 to $100,000. Of 498 violations reported, 22 were litigated,

only one landowner won in court but was still made to pay land trust

expenses (the $100,000 case).


Another ill understood impact of CEs and PDRs is that if there are any Federal

permits or expenditures involved, this creates a Federal Nexus. The landowner must

now undergo a Section 7 consultation process for existing and new species,

restriction and proposed management changes. The owner with a CE or PDR

must also pay for all related expenses for studies.


One question that is typically missed is who is behind the push to get private property

into a CE or PDR. One effort where CEs and PDRs are the centerpiece, is known as

the Wildlands Project, a plan developed by Michael Soule, Dave Foreman (founder of

the Earth First! movement) and Dr. Reed Noss of Idaho. The base concept is that

wilderness areas need connecting corridors (without human activity) for the creatures

to roam freely and keep the gene pool healthy. The key to establishing these corridors

is CEs and PDRs.


Dave Foreman, as quoted in Listening to the Land by Derrick Jensen (Sierra Club Books),

considers conservation easements as the keys to the corridors. He had this to say

about conservation easements:


“If we identify a ranch … that’s between two wilderness reserves, and we feel it will

be necessary as a corridor, we can say to the rancher, ‘We don’t want you to give

up your ranch now, but let us put a conservation easement on it. Let’s work out the

tax details so you can donate it in your will to this reserve system’.”


It is highly recommended you research the design and implications of the Wildlands Project. It is a plan to render 50% of the United States land area as unoccupied or affected by human activity. Several trusts such as the Nature Conservancy, involved with developing CEs and PDRs support and promote the Wildlands Project. A description of this plan and partial list of supporting organizations can be accessed at http://www.wildlandsprojectrevealed.org

and http://www.epi.freedom.org.


Questions landowners approached for CEs or PDRs should be asking themselves are:


·         What are CE (PDR) impacts to private landowners and communities?

·         Do the “benefits” offset the impacts? (Lost tax revenue and future earnings opportunities)

·         What are the other impacts and implications from imposing a CE (PDR) on

      private land? (Federal Nexus and Section 7)

·         What is the long-range outcome from imposing a CE (PDR) on private landowners?

o        According to whom? (A tax-exempt organization?)

o        Would a limited liability company or incorporation better serve the landowner’s tax needs instead of a CE (PDR) that brings in tax-exempt third party and potential federal management?

·         Would it not be better to protect agriculture by:

o        Supporting reduced environmental restrictions on agricultural producers

o        Stopping the dumping of foreign commodities on our markets by foreign

      subsidized products at prices lower than what our producers cost of operation

o        Making agriculture attractive as a viable business career and encouraging

      our youth to remain in agriculture as a way of productive and a fulfilling life


Questions State and County officials should be considering for CE regulation are:


• License and Regulate Land Trust Agents

            - Regulation by State Real Estate Commission (they are acting as land brokers)

- Bonding Requirement on Each CE Transaction Equivalent to Value of Encumbered

            Property Before Transaction 

• Renegotiation Language Built into CE Contract that Allows Grantee to

            Renegotiate Every 5 Years (North Dakota has 10 year limits - no perpetuity


  - If Renegotiations Cannot be Accomplished to Satisfaction of Landowner,

      the CE Contract Becomes Null and Void

  - Land Trust pays back taxes on land if this occurs, not land owner (don't

      forget that if a CE is ended, under current law the land owner pays the IRS

      the back taxes back to the time of the origin of the CE, not the trust)


• Land Trust Pays Taxable Value of Severed Development Right to County to Prevent Erosion of Tax Base as Community Infrastructure Demands Increase (check with county appraiser for development right tax values)


• No CE Shall be Valid and Enforceable Unless the Limitations or Obligations Created by the Easement are Clearly Presented in Writing on the Face of Any Document Creating the

CE Including Information From the UCEA 1981 (Uniform Conservation Easement Act)


• Water, Grazing, Farming and Mineral Rights Shall Not be Encumbered by Conditions or

Restrictions Imposed or Agreed to in the CE Contract. Grantee (landowner) Retains

Rights of Transfer on All Rights Not Expressly Identified in CE.


• Local and State Legislation Expressly Prohibiting Transfer of CE to Other Parties Without Formal Written Consent of Landowner (a common practice of land trusts is to trade CEs

without knowledge or consent of land owner)


• Elimination of Third-party Enforcement Clause Language From CE Contracts - Must be State law! (Colorado apparently already has this law and has been upheld in one case)


Remember, restricting land through Conservation Easements in the name of “protecting agriculture” simply put does not protect agriculture!





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