Business as Usual?
With the right conservation easement, ranchers still free to manage cattle and oil interests as they see fit
By Katrina Huffstutler
“But I don’t want someone else telling me what I can do with my land.”
It’s an often-heard concern among those considering conservation easements. They still want to run cattle in the way that works for them. Or maybe they’re apprehensive about what an easement would do to their mineral rights.
But not all conservation easements are created equal, and placing one on your land doesn’t have to impede operations.
Take Jim Bill Anderson, for example. The rancher runs a commercial cow-calf operation in Hemphill County on land that has been in his family since the 1940s. He was also Texas Agricultural Land Trust’s (TALT) second conservation easement donor in January of 2008.
He says one of the most important decisions a potential donor can make is which organization will hold the conservation easement.
“It’s important who you do it with,” Anderson says. “And I’m prejudiced towards TALT because they really are extremely ag-friendly.”
Of course that’s no surprise, he says, considering that the organization was formed to meet ranchers’ needs.
“While many groups can hold a conservation easement, I really wanted to be able to deal with people who understand agriculture. Because even though these are highly negotiated agreements, it may not be as enjoyable or as good of an experience if you’re dealing with someone who has no concept of agriculture,” he says.
Anderson also chose TALT because of their hands-off approach to day-to-day management.
“How you run cattle, if you choose to farm some of the land, how you do things in general — they don’t get into the management of the land at all,” he says.
Texas Agricultural Land Trust CEO Blair Fitzsimons says it’s right there in the governing principles: Trust the landowner to manage. TALT believes that the landowner knows best how to manage his or her property. We are interested in conserving open space, thereby preventing the loss of rural land to development or the fragmentation of properties into smaller and smaller parcels.
She says TALT seeks to work with conservation-minded landowners and believes they know best how to manage their own properties, “so we write easement agreements that don’t interfere with day-to-day management. We don’t require a grazing plan, for example.”
Anderson says this is in stark contrast to how some easement holders operate.
“Now, some organizations will tell that you can’t move a fence, you can’t build a corral or you can’t get off of this road or that kind of thing. And while any conservation easement will protect your land, the administration of the monitoring of some of them could be quite irritating,” he says.
Oil, Gas & the IRS
Since a conservation easement is a negotiated document, what it does and does not allow is entirely dependent on the negotiated terms of that particular conservation easement and the purposes of the easement. However, if the landowner is going to seek tax treatment and deductions for the value of that donated easement, there are certain IRS rules that have to be followed.
Joseph B.C. Fitzsimons, a natural resources, oil and gas, and water law attorney and third-generation rancher in South Texas, says it is possible to make your conservation values and the restrictions in your conservation easement compatible with oil and gas development.
He says that while surface mining on the property is prohibited by Internal Revenue Service Code Section 170(h), oil and gas exploration is allowed by the Code so long as the impact is restricted to limited, temporary and localized impacts that are not irremediably destructive of significant conservation interests.
“This means oil and gas development on the property puts the IRS tax benefits of the conservation easement at risk, but the two can potentially coexist,” Joseph says.