April 01, 2016 Best of ABA Sections

A New Model for Acquiring Conservation Easements

The Avon Hills, an area of glacial hills and hardwood forests, is only a short, two-hour drive from the Twin Cities, Minnesota, metropolitan area. Despite its proximity to urban sprawl, about 70 percent of the Avon Hills remains undeveloped and contains about 11,000 acres of sites of biological significance, as determined by the Minnesota Department of Natural Resources. Saint John’s Abbey and University in Collegeville, Minnesota, also can be found in the heart of the Avon Hills, accounting for 2,500 acres of its lakes and forest. To protect this unique biodiversity and the university’s rural setting, the university and its chief forester pondered how best to preserve the Avon Hills, knowing that private parties own about 90 percent of the area and that 125,000 people live within ten miles of the area. Development seemed inevitable.

This article describes how parts of the Avon Hills have now been preserved forever. Perpetual conservation easements held by the Minnesota Land Trust now protect more than 1,000 acres of the Avon Hills and surrounding area thanks to a partnership between the Minnesota Land Trust and Saint John’s University that resulted in an innovative project selection and pricing method combining the best available scientific information to rank properties’ ecological merits with a “reverse bid” process to allow landowners to compete by bidding a price that is less than what they might otherwise have been willing to receive for the easement. The method is referred to as the Minnesota Multi-faceted Approach for Prioritizing Land Easements (MMAPLE).

Although the public owns vast stretches of lands in some parts of the country, private parties actually own much of the American landscape. For this reason, permanent conservation efforts must reckon with the rights of private landowners and the basics of real property law 101.

Conservation easements are frequently used to purchase landowners’ rights to develop their properties. A conservation easement contains a set of restrictions designed to preserve the land in its undeveloped condition, leaving the owner with very limited ways to use or develop the land in the future. Unlike other conservation programs in which a preservation group purchases fee title to property, a private landowner continues to own fee title to the land that is subject to the conservation easement held by a government agency or private nonprofit land trust (known as the “holder” in the parlance of conservation easements). Although conservation easements can be used to conserve historic buildings, farms, trails, or other features, this article focuses on using conservation easements to protect the natural environment.

The duration of most conservation easements is perpetual. These easements are designed to preserve the public values inherent in natural, undeveloped lands. In a typical scenario, the restrictions severely limit landowners’ ability to use or develop the protected lands by prohibiting subdivision, farming and grazing, logging, industrial or mining uses, and nearly all large construction projects. Many conservation easements will allow limited residential or recreational uses but seek assurances that these uses do not grow over time.

Whether the conservation easement is donated, purchased, or some combination of the two, an economic value must be ascribed to the rights the owner has surrendered. There is increasing pressure on easement holders to justify the amounts they spend to acquire conservation easements and to demonstrate that they are using their limited resources on projects that yield the greatest benefits to the public. Economic values are traditionally determined by appraisals, and MMAPLE does not eliminate the need to obtain appraisals.

The Land Trust Alliance, a national organization that promulgates standards and practices for land trusts to follow and operates the program that accredits land trust organizations, is clear that its members must ensure that their easement purchases are transparent and that the appraisals that value the easements are credible: “[a] fraudulent or non-credible appraisal damages the integrity of that conservation easement transaction regardless of the conservation values involved. It also damages the reputation of the land trust involved in the transaction and risks violating the public trust and reducing support for conservation in general” (Larry Kueter and Mark Weston, “Tax Benefits and Appraisals of Conservation Projects” 168, Land Trust Alliance, 2007).

The Minnesota Land Trust was organized in 1991 and now holds more than 500 conservation easements. In the past, the Land Trust received most of its easements as donated gifts. In recent years, however, the Land Trust has encountered more landowners who wish to receive at least partial payment for their conservation easements. Saint John’s University developed and partnered with Minnesota Land Trust to test a new way to rank, select, and pay for conservation easements by asking landowners to bid in a free market manner for the least amount they would be willing to be paid for a conservation easement. The model rewards the owners of lands with the most valued ecological conditions and who are willing to be paid the least amount of compensation. This “reverse bidding” process helps ensure that scarce resources are spent on the lands with the greatest conservation values, thereby providing the greatest public benefits at the lowest cost.

MMAPLE works in a step-by-step manner. The first step is to establish an overall protection goal. The second step is to secure a funding pool for the acquisition of easements within these program areas. The third step is to define the geography. The fourth step is to develop specific criteria to rank each potential easement project. In the fifth step, the ranking criteria must account for the rights that the landowner wants to retain. Depending on the program and local needs, there can be many or just a few differently weighted criteria that enter into the ranking and selection system. Up until this point in the process, the ranking system is not entirely unique. The Minnesota Land Trust adds a sixth step to its version of the MMAPLE method. Instead of paying landowners the full value for their easement, the Minnesota Land Trust asks landowners to “bid” what they are willing to be paid and how much they are willing to donate. Landowners are asked to indicate if they are willing to receive 25 percent, 50 percent, or some other discount against the full market value of their easements. In the end, the projects that rank the highest—and that will be selected first—are those projects that have the greatest ratio of environmental benefits to easement costs.

Once the overall project score is calculated, selecting final projects becomes simple. Projects are selected starting with those with the highest rating and then going down the list until all the available funding is gone.

While MMAPLE helps establish the price that the landowners are willing to be paid, the prices paid for the easements must still be established through the appraisal process. An appraisal sets the ceiling of what the Land Trust could ever pay for an easement, is requried for those landowners who wish to claim a tax deduction, and also helps demonstrate the amount of leverage provided by the landowners’ charitable donation.

The Land Trust now uses MMAPLE in six other areas in Minnesota, and the process is highly regarded by the state’s Outdoor Heritage Council, which makes spending recommendations on Minnesota’s annual $100 million Outdoor Heritage Fund.

MMAPLE, of course, isn’t the perfect solution for every conservation easement project. It is not suitable when a land trust targets a specific unique tract such as seeking to procure a conservation easement over an existing park. For situations in which MMAPLE is appropriate, though, the easements acquired under the process demonstrate to the easement funders and donors that they are getting the most conservation value for their contributions.

ABA Section of Environment, Energy & Resources

This article is an abridged and edited version of one that originally appeared on page 19 of Natural Resources & Environment, Fall 2015 (30:2).

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