The Future of Perpetuity: Conservation Easement Concerns in the 21st Century

By James L. Olmsted

Background

In the United States, one of the most popular legal tools for the protection of private land is the perpetual conservation easement. While exact figures are difficult to come by, it is likely that at least 12 million acres of private land are currently protected by conservation easements held by nonprofit land trusts and that many more millions of acres of private land are protected by conservation easements held by governmental entities. The popularity of conservation easements should not be surprising, given their relative ease of creation and the often substantial financial incentives they provide to landowners.

Conservation easements are unique among other forms of easements in that they can be held by a third party (i.e., they are technically easements “in gross”) and typically impose a multitude of restrictions on the property they burden, the most important of which are restrictions on development. Moreover, conservation easements run with the land they burden in perpetuity. Because of these and other unique features of conservation easements, they were not favored at common law. Thus, virtually all conservation easements in the United States are authorized by state statutes, many of which are modeled on the Uniform Conservation Easement Act.1

Many conservation easements are purchased by the holder, allowing the holder to protect land without having to pay for the full market value of the land in fee and allowing the landowner to continue to occupy the land while potentially pocketing a substantial profit. An even more widely used financial incentive is the federal income tax deduction provided under Section 170(h) of the Internal Revenue Code (IRC) for the donation of a qualified conservation easement to a qualified holder. The IRC §170(h) tax deduction thus provides landowners with desirable income tax advantages while allowing holders to acquire conservation easements with minimal financial expenditures.

In the course of deploying so many perpetual conservation easements, the land trust community has developed an impressive body of knowledge regarding their nature and use. Nevertheless, and to its credit, the land trust community is also increasingly aware of its lack of a full understanding of the future consequences of deploying current versions of conservation easements in a world that is rapidly changing in every imaginable aspect, including its climate. The following sections describe some of the concerns that this gap in understanding has engendered and suggest areas in which perpetual conservation easements might need retooling to better serve the needs of future generations.

Amendment

One of the greatest concerns of the land trust community is improper use of the amendment process. While there is arguably an implied ability to amend any conservation easement, most conservation easements contain language expressly permitting amendment upon agreement of the landowner and the holder. On a practical level, current landowners and holders are often concerned that future landowners and holders—remember that conservation easements last forever—may lack the motivation or resources to protect the land and thus may collude to amend the conservation easement to relax or even remove certain restrictions. It is also easy to envision any number of scenarios in which less-than-scrupulous landowners or holders may be tempted to amend away easement restrictions for economic gain. Another concern is that amendments may so greatly reduce or eliminate the protection of the conservation values of a donated conservation easement that the eased land may be deemed by the IRS to no longer be “protected in perpetuity,” an express requirement under the Treasury regulations, resulting in the disallowance of the tax deduction taken by the landowner. While there is a continuum of conservation easement provisions to remove these concerns, a conservative and often-used approach is to expressly require that all amendments be “neutral to or enhance the conservation values.”2 Even greater protection from inappropriate amendment can be had by adding further provisions requiring judicial oversight when substantive amendments are not neutral or enhancing to the conservation values.

Termination

Concerns regarding improper conservation easement termination mirror those regarding improper amendment. Like the ability to amend a conservation easement, the ability to terminate a conservation easement usually derives from provisions in the easement itself. While the Treasury regulations are silent regarding amendment of donated easements, they allow termination of donated easements when the stated conservation purposes become impossible or impractical to implement. As with amendments, one commonly used drafting strategy to avoid improper termination is to include preventive language within the easement document itself. For example, the termination provision might require that any proposed termination requires judicial approval. Further protection may be provided by expressly characterizing the conservation easement as a charitable trust, thus requiring that a state’s attorney general’s office participate in the termination proceeding on behalf of the public interest in continuing the easement’s existence. Additional protections would involve granting standing to contest termination proceedings to such parties as former landowners, heirs of the current or former landowners, or former holders.3

Databases

In view of the enormous popularity of conservation easements as a land protection tool, to date there has been remarkably little progress in gathering, organizing, and disseminating to the public information about individual conservation easements. There are a number of reasons for this, including the collective ambivalence of the land trust community regarding whether conservation easement information should be made public in the first instance. Of the arguments against making conservation easement information public, the most prominent include protecting land not open to the public from public use and protecting the privacy of landowners granting conservation easements. Compelling as such arguments may be, on balance this author finds arguments in favor of compiling and making public conservation easement data far more persuasive. For example, making conservation easement data public greatly enhances collaborative efforts to protect not only land but also species and their habitat. Publicly available conservation easement data also enhances the ability of scientists to evaluate various land-protection methodologies, gather information critical to species and habitat protection, and track on the ground effects of climate change. Finally, and perhaps most importantly, conservation easement registries may provide the only reliable means for tracking conservation easements that might otherwise be lost because of the dissolution or other failure of the easement holder in the distant future. Despite the many obstacles to making conservation easement data public, one critical milestone was recently achieved after years of collaborative effort with the online publication of the National Conservation Easement Database.4

Land Use and Zoning

Conservation easements prohibiting development in perpetuity inevitably interact, for better or worse, with land use and zoning processes. For example, placing a large conservation easement on land in the path of development not only will be unlikely to stop such development permanently, but may even make matters worse by altering its trajectory, perhaps even causing it to leapfrog to other locations, including locations poorly suited for development. For reasons explained in the previous section, land use planners may not even be aware of the existence and locations of conservation easements in their jurisdictions, thus leading them to act on incomplete information and thereby decreasing the effectiveness of their planning efforts. Despite the negative social and economic consequences that might occur when conservation easement creation and land use and zoning processes are allowed to operate independently, only one state, Massachusetts, requires the integration of conservation easement creation and land use and zoning hearing and approval processes. Significantly, the lack of governmental oversight of conservation easement creation by local governments may be a contributor to the popularity of conservation easements. In particular, those who mistrust the motivation of local governments and planning departments when it comes to protecting natural lands find this lack of governmental oversight helpful in staving off unwanted development.5

Climate Change

Of all the challenges facing the land trust community, anthropogenic climate change tops the list in complexity and severity of threat. Climate change forces the land trust community to confront the incongruity between its use of a legal tool created and designed to maintain the status quo in a static world and the scientific perspective that the world exists in a constant state of almost infinitely complex change. Climate change has simultaneously multiplied the speed and complexity of all forms of biotic and abiotic change thereby increasing the severity of the potential harms that the land trust community hoped conservation easements would prevent. Important issues to be considered include how to address climate-change-caused migrations of species that become invasive in their new domains, whether to attempt restoration of ecosystems transformed by climate change, and whether to dispense with or reduce the use of perpetual conservation easements in the first instance. After what may be described as a long denial phase, the land trust community has begun to more fully acknowledge the immensity of the challenges posed by climate change. Nevertheless, actual solutions in terms of how conservation easements should be drafted and deployed in a climate-changed world are often little more than cosmetic.

Management Plans

Thus far, the primary means by which the land trust community has attempted to inject flexibility into conservation easement practice is by use of management plans. This relatively recent trend has typically been limited to management plans for so-called working forests, but grazing-management plans for rangelands are becoming more common and the use of management plans for other types of working lands is to be expected. Another, more generalized, form of management plan is the increasingly common “adaptive management plan.” Designed to allow flexibility in management of eased lands under a variety of change scenarios (e.g., climate change), adaptive management plans take advantage of multiple information inputs, including monitoring reports based on site visits and scientific data gathered over varying scales.

While much hope has been pinned on management plans, a number of pessimistic observations may be made. First, in terms of conservation easement drafting, provisions for management plans remain skeletal and aspirational. For example, the typical management-plan provision simply provides that at some future time the landowner and the easement holder will select an expert to create a management plan for some feature of the eased land, with such plans sometimes being subject to the approval of the landowner and sometimes not.

Second, as the number of conservation easements created by each individual land trust increases, the amount of resources that each land trust can devote to monitoring its easement portfolio may tend to decrease. Such decreases are likely to be particularly problematic on lands subject to management plans because such lands would be expected to require even higher than normal levels of monitoring.

Indirect, but nonetheless compelling, evidence of the ineffectiveness of management plans in general comes from the dismal history of use of management plans by state and federal agencies.6 Among the causes cited for failed agency management plans are lack of mechanisms for gathering and preserving data from failed plans that would inform future plans, lack of resources for monitoring management-plan effectiveness, and lack of communication among various players and in particular among agencies themselves. Land trusts could easily be subject to the same deficits.

Finally, management plans are at odds with the predominant purpose of traditional conservation easements, which is to maintain the status quo at the time of easement creation. Consequently, unless conservation easements containing management plans are extraordinarily well crafted, the typical conservation easement restrictions on alterations to the land and modifications to the operation of the easement itself may cripple future attempts to implement management plans, particularly adaptive management plans intended to react to changing conditions.

Conclusion

Conservation easements hold great promise for protecting private lands, the treasures such lands contain, and the services they provide. Indeed, of all land-protection tools in use today, conservation easements are often the most effective and efficient in terms of providing the greatest social benefits for the least economic investment. Nevertheless, conservation easement practice faces great challenges, and such challenges can only be expected to grow and become more complex as population increases, development advances, and climate-change effects multiply exponentially. Accordingly, the land trust community must exist in a mode of constant learning and adaptation and must utilize scientific data from both the physical and social sciences. Through ongoing learning and multidisciplinary collaborations, and with more than a little luck, the land trust community will ideally be well positioned to protect our natural lands in an ever more populated, complex and rapidly changing world.

To download this and other articles by James L. Olmsted, please visit this author’s SSRN website at: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1488037 .

To download conservation-easement examples, conservation-easement laws, and influential conservation-easement law review articles, please visit the Conservation & Preservation Counsel website at: www.landprotect.com .

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James L. Olmsted is a conservation easement attorney representing clients nationwide. He is widely published and a frequent speaker on conservation easements and how they should be drafted and managed in the age of climate change. Mr. Olmsted also serves as an adjunct faculty member at the University of Oregon School of Law, where he is affiliated with the Environmental and Natural Resources Department. He is the founder of the law firm Conservation & Preservation Counsel, L.L.C.
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End Notes

1 The Uniform Conservation Easement Act was approved by the Uniform Law Commission in 1981 and has been adopted by 24 states and the District of Columbia. Oregon’s conservation easement enabling statute, ORS 271.715 et seq., is among those that have not formally adopted the Uniform Conservation Easement Act.
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2See generally Nancy A. McLaughlin & Benjamin Machlis, Amending and Terminating Perpetual Conservation Easements, July/August Prob. & Prop. 52 (2009), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1461159 .
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3 Id.
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4 See generally James L. Olmsted, The Invisible Forest: Conservation Easement Databases and the End of the Clandestine Conservation of Natural Lands, 74 Duke J.L. & Contemp. Probs. 51, (2011), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1690007 .
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5 See generally Jesse J. Richardson, Jr. & Amanda C. Bernard, Zoning for Conservation Easements, 74 Duke J.L. & Contemp. Probs. 83, (2011), http://www.law.duke.edu/journals/lcp . See also John D. Echeverria & Jeffrey Pidot, Drawing the Line: Striking a Principled Balance between Regulating and Paying to Protect the Land, 39 Envtl. L. Rep. 10868, (2009), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1925907.
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6 See generally Alejandro E. Camacho, Adapting Governance to Climate Change: Managing Uncertainty Through A Learning Infrastructure, 59 Emory L.J. 1, (2009).
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