The final installment of our series with Kendall Van Dyke on conservation easements. Catch Part 1 and Part 2 if you missed them.
You mentioned the NRCS-funded easements are a major tool right now. How do those actually work?
They’re a great tool, but you want to go into them eyes wide open. The NRCS, as a producer-oriented federal agency, has generally earned a higher degree of trust within the ag community than some other federal agencies I could name. Still, it’s taxpayer money purchasing a portion of these easements, so there are rules attached. MLR works within what’s called the Agricultural Land Easement program, which really breaks into two buckets — protecting intact native grassland, or protecting soils. There’s detailed criteria for each, and not every project qualifies. It’s gotten stricter over the years, but we’ve done a lot of meaningful grassland and farmland conservation through it.
The most common story I’ve seen, across a couple dozen or more of these projects, is a long-time farming or ranching family where a family member or shareholder has seen what land values have done and wants their share. The ALE program becomes the tool that lets the operation buy that person out, clean the deck, and keep farming or ranching intact. On a day-to-day basis, these easements are pretty solid at letting people who run a ranch keep running it. There are minimum deed term restrictions, too — if you’re dividing the property, the smallest parcel generally can’t go below the county’s median farm size, which keeps someone from carving off a 20-acre lot. That number varies a lot by county; it’s around 500 acres in Broadwater County, for instance, and considerably larger in Judith Basin.
What part of these federally funded easements tends to make landowners nervous?
The third-party right of enforcement. It means the federal government, as a funding partner, reserves the legal right to step in as the enforcement mechanism if a land trust like MLR were to cease operating or stop monitoring a property. That’s not something they can invoke on a whim, there’s a defined process but if it’s determined a land trust isn’t holding up its end, that right exists. Understandably, some landowners get hung up on that. There’s also a related piece worth knowing about: grassland easements carry restrictions against ever plowing under native grass for crops. From a forever-planning standpoint, that’s a real, permanent condition though I’ll say ranchers have taken to the idea of keeping grass right-side-up more than I expected going in.
Does MLR work with every conservation program out there, or are there ones you avoid?
We’re selective. Fish, Wildlife & Parks easements exist, but the politics right now mean FWP isn’t doing many of them — they’re sticky, come with strict management plans, and usually require perpetual public access, which is a hard thing for most landowners to swallow. MLR also doesn’t do U.S. Fish and Wildlife Service easements at all, and the reason comes down to our whole philosophy: when we sign an easement with a landowner, we’re making a promise that we’ll be there when there’s a problem or a question. Handing that easement off to a federal agency the moment it’s signed breaks that promise. Federal staff turn over. Our culture is built on being your actual long-term partner, not a broker for the government.
Is IRS scrutiny on the valuation side something sellers should genuinely worry about?
I understand why people assume that’s the biggest risk, but it hasn’t been my experience. In almost 14 years, I’ve been directly involved in exactly two audits. One involved a landowner who’d tried to write off a GoFundMe donation, which was never deductible in the first place — that’s what drew IRS attention, not the easement valuation. The other involved a ranch held in a C-corp, where the corporate complexities, not the appraisal, were what caused problems. In both cases, it wasn’t the underlying valuation that got flagged. That’s just been my experience with the appraisers we’ve worked with over the years, it’s not to say a bad valuation couldn’t cause trouble, it just hasn’t been the pattern I’ve seen.
One related question that comes up a lot: if it’s a bargain sale, meaning we pay a landowner for part of the easement value and they want to deduct the remainder as a charitable contribution — does that need a separate appraisal? Yes, and this is important to get right. Take the NRCS model: we pay a landowner up to 50 percent of the easement value for cultivated cropland, which is the cap on that program. Whatever the landowner can claim as a federal deduction on the remainder requires its own appraisal. A USPAP appraisal for the purchase itself, and a separate IRS appraisal for the deduction. Two different uses, two different documents. People need both to actually qualify for the benefit.
Landowners are trusting a land trust to hold up its end of the bargain forever. What actually backs that up?
An ironclad commitment, and — I’ll admit some bias here — I think what sets the Land Reliance apart is that our predecessors took fundraising seriously early on and built a real endowment, what we call our land protection fund. Our actuaries, for whatever their models are worth, show that fund keeping us solvent on easement stewardship for the next 600 years. A lot of land trusts lean on a basic insurance policy to cover litigation risk. MLR has built up close to $30 million specifically earmarked to protect both the organization and the landowners we’ve partnered with.
A few years back, we took in a very large, planned gift that turned out to be a real turning point. It pushed us to sit down with actuaries and really ask what an adequate stewardship account looks like given how much land ownership changes over time. We realized that even with a substantial amount already set aside, it wasn’t enough — so we made the call to put the bulk of that gift toward stewardship first, ahead of using it to fund new easements. That’s the kind of decision that, to me, is the actual proof of a long-term partner: choosing to protect the commitments you’ve already made to landowners before you go make new ones.
More interviews with Kendall Van Dyk: