Market approaches to environmental conservation have gained traction globally in recent decades. Yet when it comes to management of many U.S. public natural resources, including water, public lands, wildlife, oil and gas, and minerals, historic U.S. laws present barriers to including conservation interests in traditional markets. In a recent article titled “Allow ‘Nonuse Rights’ to Conserve Natural Resources,” a team of economic and legal scholars note that historic public natural resource laws, which were developed when the policy focus was on maximizing extractive and consumptive use of public resources, often include use-it-or-lose-it requirements along with narrow definitions of valid uses and users. See Bryan Leonard et al., Allow “Nonuse Rights” to Conserve Natural Resources, 373 Science (2021). These restrictions limit conservation groups from participating in markets to conserve public natural resources for non-extractive uses such as habitat conservation and recreation. They argue that these restrictions bias resource management in favor of extractive uses, even when conservation interests are willing to pay more to protect resources from development.
State trust lands in the American West are among the public natural resources that have historically been managed with a focus on extractive and consumptive use. However, conservation groups and state trust land managers have begun recognizing the opportunity to generate revenue through market-based conservation of state trust land assets. This article discusses the growing trend of generating revenue through conservation of state trust lands.
Through the General Land Ordinance of 1785 and the Northwest Ordinance of 1787, Congress established a policy of granting lands to states upon statehood as a revenue-generating asset. See The General Land Ordinance of 1785, reprinted in 28 Journals of the Continental Congress 1774-1789, at 375 (John C. Fitzpatrick ed., 1933); Northwest Ordinance, ch. 8, 1 Stat. 51 (1787). Upon statehood, starting with Ohio in 1803 and ending with Arizona and New Mexico in 1910, Congress granted each new western state lands that under state constitutions are to be managed under a fiduciary duty to create long-term growth in value while producing optimum, sustainable revenue for designated public beneficiaries—primarily state K–12 education systems. Traditionally, managers of state trust lands have met that fiduciary duty through rent and royalties from extractive uses such as oil and gas development, hard rock mining, and timber harvesting. However, many parcels of state trust land have low extractive resource value and are not generating significant revenue for trust beneficiaries. At the same time, many state trust parcels have high ecological and conservation value including prime wildlife habitat. See Susah Culp & Joe Marlow, Conserving State Trust Lands: Strategies for the Intermountain West 15–21 (2015).
Conservation groups and state trust land managers are increasingly capitalizing on the opportunity to generate revenue from non-extractive use of state trust lands through conservation-oriented lease structures. Conservation leases are established to conserve ecological resources, wildlife, historic preservation, or cultural resources. They can be leased through a traditional competitive-lease bidding process, providing stakeholders such as local governments, state agencies, nonprofit organizations, or charitable trusts the opportunity to participate in the market by paying market value to conserve state trust land.
To purchase a conservation lease, stakeholders raise funds to conserve specific parcels through private donations or through targeted legislative appropriations. Federal and state programs (such as the federal Land and Water Conservation Fund and the Colorado lottery fund Great Outdoors Colorado) can help augment private funding programs and direct revenue to the designated public beneficiaries while helping conserve public resources such as wildlife and ecosystem services. Id. at 18–19.
Several states have developed conservation programs for state trust lands, including Arizona, Colorado, Idaho, Montana, New Mexico, Oregon, Utah, Washington, and Wyoming. Id. at 21. State land conservation programs in these states include the opportunity for conservation leases (Idaho, Montana, Arizona, Washington, and Oklahoma), stewardship designation (Colorado and New Mexico), ecosystem services leases (Utah, Colorado, and Montana), and recreational leases (Wyoming, Montana, Colorado, and Idaho). See, e.g., Idaho conservation leasing program and Colorado stewardship trust program.
From a fiduciary perspective, conservation leases monetize conservation interests on parcels generating income for beneficiaries while retaining and even improving the corpus. They also have the added value of attracting new investors and can help states capitalize on growing conservation and outdoor recreation and tourism economies.
As conservation leasing of state trust lands mature, there will likely be additional opportunities to add or “stack” conservation leases with other compatible uses of the same parcel. For example, a conservation lease could be stacked with a grazing or recreational lease that requires stipulated seasonal closures to protect ecological or wildlife resources. Emerging carbon credit markets (a financial market through which carbon credits—achieved by reducing, sequestering, or avoiding carbon or equivalent greenhouse gas pollution—are traded) are another opportunity for state trust managers to generate revenue through conservation use stacking.
Despite the benefits of conservation leasing, concerns remain, limiting their utilization. Concerns of directly pitting traditional extractive users against conservation users have left state trust land managers wary of open, competitive lease markets. Instead, some managers are choosing the path of least resistance by using conservation leases on parcels of low extractive use value or special use leases that avoid the competitive lease market. Further, like the federal public natural resource laws, many state laws focus on extractive and consumptive use and do not include mechanisms to incorporate conservation use of state trust land. Such mechanisms include “use it or lose it” requirements that preclude conservation interests from bidding on oil gas leases they intend to conserve instead of develop. Thus, legislative or regulatory revision may be necessary before conservation leasing can be fully utilized.
Conservation leasing holds great promise both as a revenue-generation strategy to fulfill the fiduciary duty to state trust landbeneficiaries and as an opportunity to expand conservation efforts to address biodiversity loss and mitigate the effects of climate change. Conservation leasing can also be a proving ground for conservation or nonuse rights recognition, one that could later be replicated to conserve additional types of public natural resources such as federal public land managed for multiple uses.
