Landowners seek security
Agreements usually ban surface mining, subdivisions
By LORNA THACKERAY Of The Billings Gazette Staff
Published on Sunday, February 26, 2006
Conservation easements aren't for everyone, Big Timber real estate agent and land manager Mark Norem advises.
There are a lot of things to consider when placing restrictions on a piece of property that will forever prevent subdivision, surface mining or other commercial development.
"You have to measure the benefits and weigh the risks," he said.
When it came to his own small farm, preservation trumped potential profits. He placed it under a conservation easement.
"It gives direction to my family that I don't want to see our little place subdivided, even though the county planner thought it would be a good place for a subdivision," Norem said.
Preservation of much-loved landscapes ranks high among the motivating factors for increasingly popular conservation easements.
Since 1975, when Montana legislators approved the Open Space Land and Voluntary Conservation Easement Act, conservation easements have been placed on more than 1.3 million of Montana's 93 million acres. Easements on more than 870,000 of those acres are held by private land trusts. Montana Fish, Wildlife and Parks holds easements on 257,000 acres, and the U.S. Fish and Wildlife Service has easements on 143,000 acres.
Although conservation easements have been around for 30 years, Montanans don't know a lot about them. Just the word "conservation" is enough to antagonize many a landowner east of the Rockies.
So how do conservation easements work?
Basically, they are voluntary agreements by landowners to perpetually preserve existing landscapes. Easement agreements vary, but in general they prohibit surface mining, subdivisions for residential or commercial purposes, construction of nonagricultural buildings and dumping of toxic wastes.
The easement follows the land title and binds future generations or new owners to its terms. Under Montana law, easements can be granted to governmental entities or to qualified private organizations. At least a dozen land trust organizations in Montana are authorized to hold conservation easements, according to the Montana Conservation Voters Education Fund.
Existing law obligates the agency or organization holding the easements to monitor them for compliance. One of the key criticisms nationally, especially by the IRS, is that not all land trusts have been diligent in keeping an eye on easements landowners claim as tax deductions.
The Montana Land Reliance, the largest nonprofit land trust operating in Montana, monitors its easements once a year, said Mary Page, who runs the organization's Eastern Montana office in Billings. It's not generally an intrusive process, she said. It's just a basic review to make sure there are no breaches of the agreement.
"We don't want to count cows," she said. "We're not the cow police. We're not the weed police."
Most conservation easements are donated to private land trusts, but federal and state agencies purchase easements on land considered important wildlife habitat.
Montana Fish, Wildlife and Parks requires that easements it purchases be accessible for hunting and fishing, said Steve Knapp, chief of FWP's Habitat Bureau. But landowners with easements held by the U.S. Fish and Wildlife Service or by private land trusts keep the right to decide whether sportsmen are welcome on their property.
Individual easements can spell out access rights, said Billings attorney David Dietrich. They can provide for specific numbers of new dwellings to accommodate future family needs. Terms of the agreement can also provide for division of the land among heirs. Dietrich cautions, however, that as the number of splits increases, the conservation value diminishes, and so does the size of the charitable contribution for tax deduction purposes.
Land owners can tailor easements to meet their individual visions as long as the result is protection of a valuable resource in compliance with IRS codes, Dietrich said.
To be considered a deductible charitable contribution, the IRS demands that easements be made in perpetuity, that the easement prohibits toxic waste dumps, and that commercial development be restricted. Although subsurface drilling for natural resources is allowed, surface mining is banned. The easement must also serve at least one of three conservation goals -- preserving natural habitat for fish, wildlife and plants; preserving open space; or preserving areas for the education or outdoor recreation of the public.
For the past several years, the IRS and Congress have increased scrutiny on conservation easements and nonprofit land trusts, especially the Nature Conser-vancy. The Nature Conservancy was put under the microscope after Washington Post stories in May 2003 detailed questionable practices, including insider land deals with board members and lax monitoring of conservation easements. None of the scandals involved Montana, and the Nature Conservancy since has instituted corrective actions.
But the IRS remains concerned that easements are being abused to evade taxes and that many easements have little public benefit. In June, the IRS announced that it had created a team to search for abuses of conservation easement deductions and to go after offenders with civil and criminal actions.
Land trusts have to be scrupulous in determining whether to accept a donated easement and the terms the landowner wants included in the agreements.
"Our board has the responsibility to decide whether they are protecting anything or not," Page said. "There has to be a conservation value. It has to fit our mission."
The mission, according to Montana Land Reliance publications, is to "provide permanent protection for private lands that are ecologically significant for agricultural production, fish and wildlife habitat and scenic open space. Our goal is to affirm the positive relationship between well-managed, productive lands and the integrity of wildlife habitat, watersheds and open space in a way that benefits both the landowner and the community."
"It used to be a narrow set of clients who were interested in conservation easements," Dietrich said. "Now a lot of ranchers realize they don't have to give away the farm."
Dietrich's first exposure to conservation easements came 10 years ago, when he was approached by landowners considering donating an easement to the Montana Land Reliance. He became so intrigued that he eventually found himself on the Montana Land Reliance board of directors.
The Montana Land Reliance is trustee for more than 600,000 acres of conservation easements. Most of it is in Western Montana, but the idea is gaining ground in Eastern Montana, too, he said.
Montana Land Reliance has recently become trustee for a conservation easement on an 11,000-acre property south of Miles City, Page said.
"Most of what we see is traditional families who want to keep their ranches in the family," Dietrich said. "They are asking, 'What can we do to protect this?' "
