Seeing the Forests

Something about a miserably hot, humid day here in Memphis that makes me think of the cool shade of a quiet forest. So, some forestry news to mull on while dreaming of cooler days.... Two Southern environmental groups and one of the South's largest timber companies have announced a deal to protect the forests of the Cumberland Plateau of central Tennessee. The accord is between the Dogwood Alliance,the Natural Resources Defense Council and Bowater. According to the press release...
The agreement with Bowater - the largest newsprint manufacturer in the U.S. - will change the way the company does business and serve as a model for all other paper companies operating in the South.
"This is a major win for hundreds of communities throughout Tennessee and the South that have been living with the impacts of paper production for generations and have been calling for change," said Danna Smith, Policy Director for Dogwood Alliance. "We believe that other paper companies can and must follow Bowater's lead."
Highlights of the accord include:
• Bowater will end conversion of natural hardwood forests to pine plantations on all the land it owns in the United States within three years. Such conversions recently have totaled approximately 500 acres per year.
• Bowater will stop buying from third-party land owners pine fiber converted from natural forestland to pine plantations after 2007. The phase out will take place over the next three years.
• Bowater will expand its buffer zones during aerial applications of herbicides and fertilizers to a uniform 300 feet. The company will also formalize a public communication program of these activities.
• Bowater is in the process of studying approximately 7,000 acres of particularly sensitive areas (known as ‘gulfs and coves’) areas on its Tennessee lands to identify those of exceptional ecological, geological or historical significance. The company has committed to take appropriate measures to protect these areas as they are identified. While that study is underway, Bowater has agreed not to sell or harvest those areas.
Northwest News
Other innovative timber harvesting techniques are underway in the Pacific Northwest as well.
Ecotrust is using the power of private markets and federal incentives to try to change harvesting methods there. The group is using $50 million in Federal Tax credits to work with timber companies that have big tax burdens.
The tax credits will allow Ecotrust -- via its recently formed Ecotrust Forests LLC -- to provide investors a better return. Investors will be eligible to claim 39 percent of the amount placed with Ecotrust Forests in federal income tax credits over a seven-year period.
"An investment that doesn't at first offer market returns suddenly becomes viable" because tax credits provide gains for investors, said Stuart Cowan, an expert hired by Ecotrust to navigate the New Markets Tax Credit application process.
Ecotrust is a 14-year-old organization that seeks environmental conservation by employing a strategy called a "triple-bottom-line-oriented system" along the temperate rain forest of the West Coast. The system weights environmental stewardship and social equity with the economic bottom line.
Through the new organization, Ecotrust plans to purchase significant forest parcels along the western edges of California, Oregon and Washington in a range of sizes between 1,000 and 20,000 acres. Ecotrust will hire firms to manage the forests in each of the communities nearest its lands. .........."It is pretty tough to do this sort of thing for the kinds of money available through charitable grants and government funding. So we are going to capital markets," said Ecotrust President Spencer Beebe.Von Hagen said current trends in forest ownership emphasize economics to the detriment of the long-term health of timber towns and the environment. "The forest products industry is facing intense global competition in terms of new products from plantations in fast-growing, low-cost regions. As a result, there is a huge transition of forests from corporate ownership," she said.........imber investment organizations, known as "Timos," are purchasing a growing number of those lands to provide investors strong, relatively short-term returns. Forest land holdings in the United States owned by Timos are valued at roughly $15 billion. They typically work by logging and reselling property within about a decade. "Timos certainly aren't thinking very long term," said Grant Munro, president of Port Angeles, Wash.-based Munro LLC. "Ecotrust is taking a very novel approach. It is much like the industry used to do. And it is a way to get investors to put money into commercial timberland, operate with a lower project return and yet get investors the same return they might have been hoping for," he said.Ecotrust wants to whittle the amount of lands left vulnerable to investors seeking short-term returns. When forests are managed in a time-frame of at least several decades, von Hagen said, a variety of revenue streams can be established. When a forest is selectively logged and clear cuts are avoided, larger, high-value trees can be steadily harvested for years.
"By engaging in long-term management for optimum forest health productivity, we think we can allow timberlands to generate a whole suite of products and services that will provide economic and social benefits to the local communities," von Hagen said.In addition, sources of revenue not typically cultivated by traditional forest owners also can boost returns. For instance, a growing number of corporations that emit carbon dioxide are looking to purchase carbon credits to offset pollution. "The long-standing controversy around forest management is that it does not create the most wealth, innovation or happiness," von Hagen said. "We could be creating a prosperous and wealth-building forest products industry and regaining the market position that Pacific Northwest forests should have in the world."

Ready for your briefing?

If you're looking for deeper background on some of the most important issues facing the country, there's a new resource on line. Not only will you be more informed, you'll also know what your Congressman(woman) knows. Check out Open CRS, a new project that makes the reports produced by the Congressional Research Service available to the public. The site notes that taxpayers spend over $100 million a year to support Congress's own think tank, but until now, the general public hasn't had access to the fruits of their taxes. Among the recent reports are studies of Renewable Energy, Gasoline Prices and Energy Policy. Also available are some more esoteric topics, like the pro's and con's of building a nuclear bunker buster bomb. Over 8,000 reports and counting.

The Great Goose Easement

There's a big swath of undeveloped land in southern Oregon that is being considered for a National Refuge status. The area is usually home to cattle and sheep, but a few times a year, it becomes a rest stop for Aleutian Geese. The problem? According to an article in the Ashland Mail Tribune "The New River Bottoms area is considered a critical layover location, possibly the last place the geese stop before returning to the Aleutians in the spring. The geese enjoy grazing among sheep, but they can cause damage to ranchlands and gobble huge swaths of grass meant for sheep and cattle. Ranchers can haze them out, but currently they just run the geese from one property to another. The easements essentially would pay landowners for temporarily housing these geese."This would provide habitat where they’re welcomed," Lowe says.
Rancher Rick McKenzie says he encourages such discussions.
"We have 50,000 geese during the spring these past few years, and they’ve cost us hundreds of thousands of dollars," McKenzie says. "It would be good to come up with some agreement where the geese can live with us, and we can live with the geese.
"I’m all ears," he says."
What's good for the Goose.....etc, etc.
The area sounds beautiful, and it's nice to hear the government wants to work with the landowners to create an area where nature and ranching can co-exist.
National refuge officials are taking comment on the proposed study through July 8. The agency plans to issue documents in October for public review and comment. A decision is expected in January. If created, the refuge boundaries would identify private lands on which the refuge service can negotiate either land sales or conservation easements. In these easements, landowners would get a one-time payment to keep their land available to wildlife. They are the most common agreement for private lands within the coastal refuge system, Lowe says. Each easement is settled individually with willing landowners only, and they remain forever tied to the property. Easements would be purchased as money becomes available, Lowe says. The proposal has generated concern among residents who believe there’s more to this than meets the eye. Lowe says he expects landowners to become more comfortable with the proposal when they look closer into it. "It can be kind of scary to some of them to see the federal government put a line around their property and say, ‘Don’t worry,’ " Lowe says.A national refuge in the New River area would guarantee usable habitat for dozens of species, including federally protected birds such as threatened snowy plovers and endangered California brown pelicans.
Here's a a link to Google's Satellite Map of the area

Panel on Nonprofits Releases Report

The "Panel on the Nonprofit Sector" has released its report on ways to toughen regulations on charitable organizations. The entire PDF can be downloaded here.
The Senate Finance Committee has been waiting for this report before pressing forward with new legislation.
When it comes to regulating conservation easement donations, the panel is recommending:
-Strengthen the definition of a qualified appraisal and a qualified appraiser.
-Expand penalties on taxpayers who claim inflated donations
-Impose penalties on appraisers if the appraisal exceeds the correct value of the property by 50% or more
-Mandate electronic filing, and require the donor to complete information on the appraised value before the charity can say that it has received the property.
-Enact laws allowing that deductions for easements can be reduced if the value of surrounding properties owned by the donor or his/her relatives increases because of the donation.
-Allow donations only to qualified charities with a primary purpose of environmental protection that "has a commitment and the resources to manage and enforce the easement restrictions with appropriate procedures for certifying that a charity meets this definition".
- Impose penalties on charities that fail to enforce easements, with a waiver available when a change in conditions on surrounding property makes it impossible.
- The IRS should require charities to certify annually on its Form 990 that it has established written procedures for monitoring easements and has adequate resources to enforce them.
- File a list of all donations of easements it holds, listing location, acreage, purpose of easement, year it was donated and whether it has been modified.

All in all, pretty sensible recommendations. It will require a professionalization of easement appraisals, and gives some teeth to rules against cheating. It will mean more paperwork for trusts, but it seems as though not any more than would be expected. A good organization should already have a database of existing easements, and be performing at least annual monitoring, so it should be able to keep up. And by giving the appraiser a 50% cushion, there's enough leeway so that appraisers won't be scared off from even attempting to handle easement business. It all seems like good advice.

Easements, The Next Step

The posting from this past weekend about Land Choices made me wonder about the natural evolution of putting a conservation easement on a piece of land. Once you donate or sell the easement, and the time comes to sell the property, what happens next? Is it sold through a regular real estate agent? It certainly can be sold that way, but a number of organizations are popping up that specialize in selling easement protected property. Land Choices links to one of them, American Conservation Real Estate. It specializes in selling ranches in Montana and Wyoming with easements. The idea behind it is to link up conservation minded buyers (with some pretty deep pockets, judging by the prices) with sellers. That way you avoid the confusion of a buyer who thinks he's getting a great deal, only to discover that he can't subdivide that property to pay off some debts a few years down the road.
In Massachusetts, Land Base bills itself as a non-profit organization that has been formed by a consortium of land trusts to market easement property in that state. The Trustees of Reservations also advertises property with easements in Massachusetts.
Finally, the self-described mission of Defense of Place is to help local communities make sure that easements that are supposed to be held in perpetuity are actually held forever. It is focused mainly on parks. Here's part of the self-description on the website.
The question is one of permanence. What is our obligation to continue to preserve parks created by past generations? When we promise to preserve such spaces in perpetuity, how long is forever? How do we respond when the value of land has risen exponentially and the pressure for development increases? Will Americans be strong enough to stand up for our parks and open spaces, for wild rivers and wilderness? Is their value beyond and above money?
As long as "conservation minded" buyers can be matched with sellers, there shouldn't be a need for a Defenders program for private easement property, but I suspect that someday, probably sooner than later, the need will arrive.

A Defense from the West

One of the things I like most about writing this blog is coming in contact with folks all over the country. Rob Bleiberg of the Mesa Land Trust wrote to say hi after I mentioned the 25th anniversary of the trust in an earlier post. Rob notes that anniversary celebrations will be going on through the summer and fall, but mainly wanted to point out a terrific editorial in the Grand Junction Daily Sentinel defending conservation easement articles. The editorial notes the important work the Mesa Land Trust is doing there and how it has effectively used easements in Mesa county. The paper then lays out a concise and fair summation of the problems found nationally with easements so far, and urges Congress to make reforms but .......
"Per usual, Congress is considering both good ideas and bad ideas in its desire to curb the abuse of conservation easements. Among the bad ideas being bandied about Congress these days is a proposal to limit the tax deduction that a landowner can take for donating a conservation easement to just one-third of the full development rights of the property.
That’s precisely the wrong approach because imposing an artificially low limit on tax deductions would mitigate most strongly against the most valuable conservation easements, such as those used by ranchers to keep cattle growing on their property rather than condominiums.
What’s needed are clear-cut appraisal standards that are universally accepted by land trusts nationwide. Additionally, there is certainly a need for more transparency and public record-keeping and, if need be, more rigorous enforcement from the tax gendarmes at the Internal Revenue Service to lower the boom on anyone out to clearly scam the system.
Since their introduction a quarter century or so ago, conservation easements have helped protect critical wildlife habitat, open space and vital farm and ranch lands on more than 17,000 properties totaling more than 5 million acres nationwide.
Conservation easements serve an overwhelmingly vital public interest. Congress should be mindful of that as it goes about the necessary task of crafting circumspect ways to end abuses in the application of this vital conservation tool".
Absolutely right. I urge any trust to include this editorial in their arsenal of arguments when trying to make their elected officials and the general public aware of the importance of the easement deduction. Thanks, Rob, and enjoy the anniversary!

Land Choices Launches

Here's an interesting new concept. The announcement of a new non-profit dedicated to increasing awareness of conservation issues nationwide, and of serving as a sort of MLS for properties being sold with conservation easements. The organization is called Land Choices. According to the website, the group's founder is Kirt Manecke. It says he was previously Executive Director for a Northern Michigan Land Trust. He's asking conservation groups to add a link to his site on their websites to help drive traffic.
The site has a page listing conservation land for sale. It's in the early stages, but it makes sense to promote these properties nationwide. It hadn't even dawned on me that there would be a need for a marketplace like this. But one key to marketing is knowing your market. What better way to sell conservation land, than to people with an interest in conservation. But just because the value has dropped because of the easements, it doesn't mean the property is cheap. Check out some of the listings. And if you're interested, make sure you've been saving up in the piggy bank for a while. It's a really interesting idea, I'll be intrigued to see how it goes. And in the spirit of helping spread the word, I've added the link on the blogroll.

Hitting the Lottery

Different states with lotteries use their money in various ways. Here in Tennessee lottery proceeds go to fund college scholarships and soon, a pre-kindergarten program. In Colorado, the money goes for conservation. Among the latest to hit the lottery is Mesa County, in the western part of the state. The Daily Sentinel of Grand Junction details the latest award.
Mesa County received $422,000 from Great Outdoors Colorado for the county’s community-separator program.
The money will be used for conservation easements on 65 acres of working agricultural land in close proximity to other lands already under conservation easements prohibiting their development. Three parcels will be covered under the grant.
The award brings to $3.1 million the amount of Colorado Lottery funds contributed to the community-separator project and was among $3.5 million awarded to projects in western Colorado on Wednesday. Great Outdoors Colorado awarded $8.2 million around the state, bringing the total contributions for fiscal year 2005 to $97 million.
Mesa county isn't the only entity conserving land there. In fact, one of the older trusts in the country is already operating there. The Mesa Land Trust is celebrating its 25th anniversary this year. Happy birthday.

Oregon update

Interesting story from High Country News that indicates the big change in land use laws in Oregon doesn't seem to be having too much of an effect.
Measure 37 says that if land-use regulations diminish the value of property by limiting development, the regulating agency must either pay the owner for the lost value, or waive the rules and allow new development. Its passage has led to about 1,000 claims from landowners who say county and state governments need to pay up or butt out. The most notable claims come from around the Willamette Valley, in the high desert around Bend, and near the fast-growing town of Hood River in the Columbia Gorge.
But there apparently hasn't been the land rush some feared.

Enlightening Enlibra

Not having spent too much time around western Governors, I hadn't heard of the word "enlibra" before. Turns out I'm 7 years behind the curve (ain't that the truth). According to this citation in Wordspy, enlibra has been kicking around for a while.
Enlibra. That word isn't in the dictionary, at least not yet. After all, it was just introduced to the world on Monday.
Conservative Republican Utah Gov. Mike Leavitt and liberal Democratic Oregon Gov. John Kitzhaber coined it together hoping it will eventually revolutionize environmental debates.
"Enlibra is a word we made up," Leavitt explained to a gathering of reporters at the National Press Club — after a full day of talking to reporters for magazines and national newspapers in New York City and Washington about it.
"It is from two Latin phrases: 'en,' to direct toward; and 'libra,' to find balance. Our purpose then in putting forward enlibra is to find a symbol for the middle" and balance in environmental debates, Leavitt said.
—Lee Davidson, "Coined word aims to bring balance to wilds issue," Deseret News (Salt Lake City, Utah), July 14, 1998
Don't you love being dragged along on my education process?
But as in most words coined by politicians, it has become political.
The most important question to be considered in Senate hearings, however, is the intent and potential impact of what Leavitt calls his "enlibra" principles, which call on the federal government to give more leeway to states and industries on environmental issues.
Are those principles intended to allow locally designed solutions, or to weaken federal laws that defend against pollution that knows no state boundaries? Is "enlibra" just a fancy name for coming down on the side of industry, or is it truly a collaboration that lends equal weight to the views of environmentalists and the public —- the folks who can't buy their way into Beltway circles?
—"Judge EPA nominee on his record," The Atlanta Journal and Constitution, August 21, 2003
I like the latter definition. We certainly need more of that.

Enlibra in the West

Supporters of "free market environmentalism" might want to take note of the resolutions unanimously adopted by the Western Governor's Association. One of the resolutions is summarized by the press release from the conference as supporting -- Conservation easements and other voluntary, incentive-based methods for preserving open space and maintaining land and water for agricultural and timber production, wildlife and other values. Sponsors: Govs. Bill Owens (Colo.), Napolitano, Richardson, Jon Huntsman (Utah) and Christine Gregoire (Wash.)
Check out the full text of the resolution titled Principles for Environmental Management in the West.
The resolution includes this passage The Western Governors renew their commitment to the Enlibra principles to guide natural resource and environmental policy development and decision-making in the West. Enlibra is a newly created word meaning balance and stewardship.. Enlibra sounds more like an on-line bookseller to me, but I like the meaning taken here.

Taking Notice

Two western newspapers have taken notice of the conservation easement debate and the impact it would have on their respective states. The Rocky Mountain News notes In Colorado, 915,000 acres are covered by conservation easements, according to a survey just completed by the Colorado Conservation Trust, a Boulder-based nonprofit focused on preserving open lands.
The easements have helped to preserve some of the sweeping views that drew people to Colorado in the first place. In the Roaring Fork Valley, where development pressures have intensified with skyrocketing land values, Mike and Kit Strang donated conservation easements on much of their 450-acre horse ranch near Carbondale.
"It's 100 percent visible from a public road and has big vistas," said Martha Cochran, executive director of the Aspen Valley Land Trust, the state's oldest such group.
The Strang Ranch is among the remaining working ranches in a valley that has increasingly succumbed to subdivisions.
"It's one of the main productive, prosperous ranches," said Cochran, whose group managed the deal. "You can't just have one left."
Colorado alone has 42 land trusts, many of which report that the trend toward conservation easements has grown rapidly since the state began offering donors tax credits, which can be sold to raise cash.
That has proved a boon to land-rich but cash-strapped ranchers who want to stay on their land but wouldn't benefit much from taking an income tax deduction when they donate an easement.
It's a similar situation in Wyoming, so says the Casper Star Tribune. The article quotes land trust leaders as saying the easements are vital to preserve land there... and includes this..
U.S. Sen. Craig Thomas, R-Wyo., a member of the Finance Committee, said after the hearing he was inclined to agree.
"Obviously there have been some actions taken by groups and individuals that have raised concerns and called conservation easement usage into question," Thomas said in a written statement. "As with any charity, receiving special tax considerations requires a group to withstand public scrutiny and be held to the letter of the law. What we learned today is that curbing abuse may be more of a question of enforcing existing law than imposing new requirements."
Wednesday's hearing focused on a range of concerns. Many involved The Nature Conservancy, the world's largest environmental group and the subject of a two-year investigation by the committee's staff. Others centered on individuals and smaller charities that allegedly manipulate conservation laws to generate large tax deductions.
In Wyoming, conservation easements arranged by The Nature Conservancy protect 239,956 acres. The Jackson Hole Land Trust, meanwhile, has used the tool to protect more than 20 percent of the private land in Teton County -- property that today has a combined market value of nearly $700 million, Lindstrom said.
Thomas said any reform efforts should consider the purpose of conservation easements, improve the appraisal process, and promote greater accountability among land trusts.
"I will continue to talk with Wyoming groups and my colleagues in the Finance Committee to find a reform plan for these kinds of tax treatments," the senator said. "Conservation easements are not a tool favored by all landowners, but we ought not take this instrument away from folks who may want to use them to keep their lands involved in agriculture."
Thomas is noteworthy because he is not only a western Republican Senator on the Finance committee, but because he is not one of the senators who signed the letter supporting easements before the hearings. That's one more indication the easements will stay, with modifications.

Other Land Trust Voices

It's been fun to watch the hits on the site in recent days, as lots of people who are interested in the Senate hearings have checked in, directed by the nice folks at sites that are used to having actual readers, like Grist Mill, The Commons and The Uneasy Chair. Another fun aspect is that people who are doing similar things have reached out. For instance, did you know there is an online radio station dedicated to all things environmental? It's called Radio Ecoshock. It's run out of Canada by Alex Smith, who was nice enough to include a synopsis of my Grist Mill essay. (One small quibble Alex, it's Nature Noted, not Nature's Notepad.... although that's probably a better name). Radio Ecoshock has podcasts and a looping netcast that includes music and environmental news.
Also Oliver Bass with the Natural Lands Trust in Pennsylvania wrote to let me know his organization has started three regular blogs to update news from three of their protected areas. The blogs cover the Crow's Nest Preserve, Mariton Wildlife Sanctuary, and the Southern New Jersey preserves. It's a great idea that every trust should consider.

Another view

Gary Jones, the contrarian that he is, takes some thoughtful exceptions to a few of my conclusions on the effectiveness of trusts. Check it out over at Muck & Mystery

The Grist Mill Essay

For those of you who missed it at Grist Mill, here's the entire post on why I think the recent hearing on easements deserves more coverage.

One of the most successful environmental movements of the last fifty years is about to change the way it does business. And if it doesn’t do it on its own, the government will step in and force it to change.
That’s the headline on the recent investigation of the nation’s land trusts by the Senate Finance Committee.
Wednesday, the Finance Committee held hearings ostensibly aimed at tightening the tax code on the use of conservation easements, which has become a prime tool in conserving land from development. It’s also become a prime tool for evading taxes. The Finance Committee began its investigation three years ago after a series of embarrassing articles in the Washington Post about the practices of the country’s biggest trust, The Nature Conservancy.
The staff released the results of its investigation Tuesday, outlining a series of abuses by TNC, including:
*A pattern of dealings with insiders that gave preferential treatment on land deals.
*A pattern of dealings with the companies of board members
*Selling emissions credits, including a $10 million deal with General Motors while GM’s chairman John Smith served on TNC’s board.
*Selling emissions credits that it may or may not have even owned, essentially furthering its own environmental goals (buying land) at the expense of another environmental goal (reducing greenhouse gases)
*Allowing oil and gas drilling on one of three known habitats of the Attwater Prairie chicken, bumbling its way through the deal so that it ended up in court, accused of cheating one of its partners, all while pocketing over $8 million in royalties.
The report paints a picture of an organization that had gotten so big, and so successful, that it lost sight of why it was formed in the first place. To its credit, TNC leaders know they needed to make some big changes and appear to have done so, although there are still questions about whether the new safeguards are as effective as they can be. Also the report breaks out just how wealthy TNC has become. At the end of fiscal year 2004, it had gross receipts of $2.5 billion with revenues of $732 million.
But TNC isn’t the only reason the Senate began investigating. It has become clear that some people have been abusing the law that allows tax deductions for conservation easements. The easement deduction allows me to sell the development rights to my property to a land trust. I keep the property the way it is, and everyone who buys it from me agrees to keep it that way too. If it’s wilderness, it stays wilderness. If it’s a ranch, it stays a ranch. In areas with lots of development, that can be worth a ton of money. The big question, how much? It’s a subjective appraisal, and if both parties want to unfairly jack up the value, the hearings have shown the IRS doesn’t have the manpower to catch it. And it’s led to a cottage industry in easement tax shelters, including millions of exemptions for golf courses, driving ranges and backyards. Phony trusts were set up not to protect land, but to act as tax shelters for the wealthy. As the facts come out, it’s outraging critics, and depressing supporters.
There’s also the unfairness of the tax code. I can only write off the amount of the deduction against what I earn. If I’m a small rancher just getting by, the deduction isn’t worth nearly as much as if I’m a millionaire who keeps the ranch for weekend getaways.
And the investigation highlighted the difficulty in monitoring the easements. They are donated in perpetuity. That’s a long time. Is the supervising trust making sure the land stays the same, and new owners haven’t bulldozed a big section for a new pool? Will they have the stomach for a legal fight if the contract is violated 10, 20 or 100 years from now?
So why not just kill the easement deduction? That’s what the Joint Senate Committee essentially proposed earlier this year sending land trusts into a panic. Trust leaders say that it would, instead, kill the movement. Easements are effective because they allow land to stay in private hands, and give the trusts more bang for their buck. Far fewer acres would be conserved, and smaller trusts simply wouldn’t have the money to even exist. Fewer landowners would be willing to donate their property. More land would go to development.
Land trusts that have played by the rules have been unfairly tarred by the abuses. But the damage is done. The consensus is that in order to keep the easement deduction, and to stay in business, trusts will have to agree to reforms. The Land Trust Alliance has proposed an accreditation system that is going to mean tougher standards, more paperwork and stronger monitoring. It’s institutionalize or die. And many trust members have debated whether it’s not better to just pack it in. They argue the reforms are going to rip the soul out of their organizations. Most are small, predominately volunteer groups, staffed by people who love their local land. They got into this to save a particular patch of ground that means something to them. They didn’t get into it to become a bureaucrat. There’s also an outrage that they’ve done nothing wrong, but now they are being viewed as tax cheats, out to help the rich and big corporations. But it’s clear to most that the freewheeling days of a bunch of like-minded individuals getting together to save some land is over. The days of the IRS forms, staff accountants and lawyers are here.
So why should anyone else in the environmental community care? First, land trusts work, they’ve conserved over 9 million acres of privately held land, 5 million of those acres were preserved through easements. Most importantly, they enjoy broad political support. You won’t find many organizations that do as much environmental good that are supported by conservatives and liberals alike. Bottom line, trusts work. And if it hadn’t been for an intensive lobbying campaign by the LTA and other conservation leaders, and a deep reservoir of goodwill, trusts faced at the very least, the loss of their most effective tool. At the worst, it would have meant the end of many trusts. And that would have been the real crime.

Woodpecker update

So, I just watched the story, and I think the verdict on the Ivory Billed Woodpecker sighting in downtown Memphis is, maybe. The man we talked to saw a large black bird, with a distinctive "kreee kreee" sound. The picture he took was of a black bird sitting on a power line. But it was so fuzzy, there was no way to tell what it really was. But it was something. The question is, just what was it?

The Woodpecker Moves to Memphis

Ok, I'm not making this one up. Today we had several viewers call the assignment desk at my station, swearing they had seen an Ivory Billed Woodpecker in downtown Memphis. We had one group of tourists call, and one local man took pictures. I talked with our reporter on the story, and he says the picture is pretty fuzzy, but there's definitely a big bird in the picture. The man who took the picture described the unusual cry of the bird. Downtown Memphis is not far from the wetlands where the bird was spotted, but considering how shy the bird is, I was pretty skeptical. But to get several calls from different people at the same time means there was something unusual downtown. We're running a story on it tonight at nine.

The Story So Far

So after all the drama of the past few days, I became puzzled by why no one else seemed to be covering the Senate Finance Hearings. Jon Christensen has been doing an excellent job for a long time, not only on at The Uneasy Chair but also in a series of MSM publications. The Washington Post is covering it, because it was their investigation that uncovered the entire can of worms. But it seems like that's about it. In recent weeks, I had seen posts over at Grist Mill wondering why the big political blogs never covered "green" issues". So I wrote to Dave Roberts at Grist Mill, wondering why the big environmental blogs weren't covering the land trust hearings. Dave wrote back with an offer; how about you do it for us? So, for those of you who want to know the story so far, check out my rambling guest essay at Grist Mill. I thought it was way too long for a blog, but Dave and his fellow Grist Millers are generous people, and posted it anyway. Thanks so much for letting me do that. See that's one way to stop people from sending you nasty comments....put 'em to work!

The Day After

The Washington Post has a fairly low key story up about the hearings this morning. The story focuses on the news that the IRS is going to be starting a special team to examine conservation easement abuses. I think the story is fairly muted because most of the "news" came out the day before, in the release of the investigation of TNC. There is no coverage in the story to the testimony of Rand Wentworth of the LTA. That's a shame because he lays out a prescription for fixing the problems that seems to be the path that the Senators are likely to support. Anyone with an interest in land trusts should read the the entire testimony. But here are the highlights.
After careful consideration, the Land Trust Alliance has decided to support reform legislation provided that it:
*Targets the worst abuses
*Is cost-effective for small, all-volunteer charities
*Protects the incentives for legitimate gifts
*Clarifies rules, rather than complicates them: and
*Complements what the private sector and state govenments can do to prevent abuses
The steps he suggest are summed up by the following themes.
Strict rules that establish minimum qualifications for appraisers and appraisals.
Stricter penalties for inflated appraisals.
Prohibit deductions for donations most subject to abuses (i.e. golf courses, driving ranges, backyards)
Make the tax code fair for working farmers and ranchers (i.e. allow deductions to be a higher percentage of their gross income over a longer period, so they are not penalized by having modest incomes.)

Wentworth also went to bat for The Nature Conservancy, emphasizing that he believes it is committed to genuine reforms.
So my layman's take on all this, just from the opening statements and the outside coverage. Get ready to have easements scrutinized by the IRS, if you've been promoting easements on golf courses get ready to find another line of work, and I really hope The Nature Conservancy has taken a hard look at the cost of compromising its core values. It got so big and so good at what it was doing, it forgot why it was doing it. If that has truly changed, then this will have been worth all the trouble.

The Hearings

The prepared statements for today's Senate Finance Hearings are, for the most part, up on the committee's hearing website.
I wasn't able to listen to the actual testimony today, so I'll be interested to hear what was said during the question and answer period. From the tone of the opening statements, I'd say The Nature Conservancy was in for a pretty good whacking, but probably not a fatal one. TNC president's Steve McCormick's statement was appropriately contrite, but I imagine he still had to face some fairly sharp questioning.
Committee Chairman Charles Grassley acknowledges the new reality of non-profits.Charities have gone far beyond raising money by just having Santa ring a bell. Santa now is often engagin some of our nation’s top tax lawyers and accountants with the sharpest pencils.
There was also an examination of completely shady practices on land transactions by the Department of Interior that Chairman Grassley says go beyond anything he has seen at Interior. Referring to the Inspector General who investigated the deals, he says "To be candid, Mr. Devaney, I thought you had already found the bottom of the cesspool when it comes to land transactions at Interior, but this new report shows that it is even deeper than we first thought. It appears that since the mid-1990's, the Department of Interior has basically thrown out the rules book when it comes to this deal for Florida mineral rights."
There are details of the shady practices attached, including our first look at the controversial deal by The Nature Conservancy to allow oil and gas drilling on donated land meant to protect the Attwaters Prairie Chicken. It's an interesting read. You can see why TNC felt it was okay to get into the deal, how it got in over its head in the oil and gas business, and ended up getting badly burned, although it earned a handsome profit. If you don't have time to read anything else, read the internal memo on the deal
UPDATE
Jon at The Uneasy Chair found a good summary by the Journal of Philantrophy

The Post's story is up

The Washington Post's story on the TNC report is up this morning, with the headline Senators Question Conservancy's Practices:
End to 'Insider' and 'Side' Deals by Nonprofit Organizations Is Urged". The only thing I saw in there that I didn't find in my reading was that the big beneficiary of the Emissions Credit was General Motors, while GM's chairman sat on TNC's board. He didn't vote on the deal to avoid a "conflict of interest". I'm sure that made a big difference.
The committee hearing begins today. If you've got the time, you can listen to it here.

TNC's Response

The Nature Conservancy has posted its response to the report on its website The main points...

* On June 7, 2005 the Senate Finance Committee released a Staff report on The Nature Conservancy.
* Over the past two years, the Conservancy has made substantial and far-reaching changes so that we now meet higher standards of ethical, legal and professional conduct and organizational efficiency.
* The Conservancy remains confident that all of our work is in compliance with the law and in furtherance of our mission.
* We will examine the Committee’s Staff report to determine if there are further changes we should consider.
* Continual improvement is – and will remain – an organizational priority.

And the report does give TNC credit for cleaning up its act over the last two years (post the Washington Post). But it still has reservations.
TNC’s efforts and reforms should significantly improve the scrutiny of insider transactions, and prohibit certain types of transactions that came to light in May 2003. While the Staff commends TNC for its quick and comprehensive actions, the Staff remains concerned that TNC’s involvement in emissions credit arrangements, joint ventures, and similar arrangements may escape review under TNC’s revised policies.
There is also a sense from the report that TNC's rules on dealing with insiders is still not opaque nor is it tough enough. The ball is now in TNC's court.

For a round-up of other articles on the report, check out The Uneasy Chair. Thanks for the tip o' the eyeshade, Jon.

The Sleazy Stuff

The staff findings on two areas, the Conservation Buyer Program and Emissions Credits seem likely to provide most of the negative headlines you will see coming out of this report. The Conservation Buyer Program (CBP) lets trusts sell interests in land rights that are subject to conservation easements. But the finding reinforce the notion that TNC cut sweetheart deals for insiders. The most outrageous claim is that TNC might have sold emissions credits that would allow polluters to actually INCREASE the amount of pollutants they spew into the air. Here again, are selected highlights... First about CBP
TNC structured many transactions with buyers to consist of two parts - the purchase of property at restricted value price, and a cash contribution for the additional consideration paid by the buyer to TNC.
CBP transactions also raise donative intent issues. They test the limits of present-law charitable contribution deduction rules because cash amounts paid by the buyers to TNC in the transactions appear to have been a condition of the completion transactions. In many, if not all, of these cases, it appears that TNC would not have conveyed the property to the buyer without the receipt of cash from that buyer.
Parties to CBP transactions often involved related parties or insiders and, as a result, these transactions might have excess benefit transactions tax consequences to the insiders and TNC’s organization managers.
At least until recently, TNC generally did not make the CBP properties avaiable for purchase by the general public. .... In many instances, TNC and the buyer specifically identified by TNC worked together to structure the papramenters of the acquisition and disposition of the property by TNC, taking into account the CBP buyer’s objectives and interests with respect to the to the property. .... The Committee questions whether this practice allowed TNC to receive the optimal sales price for easement-restricted properties (i.e. a member of the public might have paid more than an insider to acquire a property.) In addition, conservation restrictions in certain situations permitted CBP buyers to construct large new homes, swimming pools and tennis courts on the restricted property.
Programs such as the CBP that are regularly and systematically conducted by a conservation organization, and that affect significant assets of an organization, should be subject to a formal analysis and review that takes into account actual rather than hypothetical facts....
Great.... here come the swimming pool stories.
It gets worse, check out the Emissions Credits section..
TNC participated in eight emissions credit or allowance arrangements from 1995 through 2004, involving $34 million of cash payments made by financial participants to TNC under the various agreement.
TNC’s emissions credit arrangements provide financial participants with the right to receive potential emissions credits or allowances in exchange for cash provided to TNC for a conservation project..... the Staff questions:(a) whether the for profit participants obtained an impermissable private benefit as a result of the arrangements; (b) whether TNC owned the emissions credits or allowances and thus was required to receive fair market value for their current or future transfer to and use by the for-profit participants....
TNC “actively markets” these projects to potential participants.
While furthering one exempt purpose, i.e. the preservation of land, TNC’s assignment to the for-profit participant of potential credits (as opposed to TNC’s retaining and retiring them) would appear to frustrate an environmental purpose - the reduction of greenhouse gases. TNC’s transferring of potential credits to the for-profit participant presumably permits such participants to maintain their current emissions levels, or in the worst case, actually increase their emissions levels.
Lovely. An environmental organization participating in schemes to increase emission levels. All to make a buck.

TNC and easements

Reading throught the Staff investigation of the TNC, you get an idea of what might be in store for conservation easements. I've pulled a series of statements from the report to highlight.... you'll get the drift as you read through them.
“The staff notes that in at least one case involving a small easement, TNC was reluctant to bear the cost of litigation to enforce to resolve easment disputes. TNC and conservation organizations often must weigh the cost of litigation against the benefit achieved from enforcement. This makes easements, particularly those small in value, difficult to enforce in perpetuity because easement holders may not believe there is a credible threat of litigation.”

“TNC’s monitoring efforts did not reach the level that is now the standard requirement of TNC....”

“TNC’s conservation easement compliance efforts failed to meet the tests established in the Alliance Land Trust Standards and Practices set forth in the LTA Guidebook.”

“The Staff recommends that the IRS consider revoking the tax-emempt status of a conservation organization that regularly and continuously fails to monitor and enforce conservation easements. Alternatively, the IRS should suspend tax-deductible contributions to such an organization and require the organization to notify potential donors of such suspension. In addition the law should permit the IRS to impose excise taxes on officers and directors for failure to adopt and enforce policies to assure the organization satisfies its monitoring and enforcement obligations.”

The Staff recommends the implementation of an accreditation system for conservation organizations.

The Staff recommends that the Committee consider limiting charitable contribution deductions for certain small easement donations and consider providing the IRS with authority to require pre-approval of tax deductions for such donations.

The Staff recommends that the IRS issue guidance regarding what factors may be necessary to establish minimum levels of compliance regarding monitoring of easements.

So, TNC wasn't living up to the standards that even small land trusts are expected to abide by, wasn't too eager to enforce small fry easement violations and has set up a need for stricter standards that can be monitored.... along with some pretty stiff penalties for failure to monitor and to document the monitoring. Thanks TNC!

Breaking News - Nature Conservancy

The Senate Finance Committee has released the report of its investigation on The Nature Conservancy. You can find the report here. After digesting all 32 pages, I'll be back with highlights later.
UPDATE
First impression, cancel next year's donation. TNC has boatloads of money. For the fiscal year ending June 30, 2004, TNC reported gross receipts of $2.5 Billion and total revenue of $732 million. Cha-ching.

Noodling around

A few things hither and yon....
An interesting defense of conservation easements over at New West by John Wright, the head of the Department of Geography at New Mexico State University. The nut of his argument... Land trusts are not Enron. They are staffed by people of good ethics and strong commitment. The work is simply too hard and the financial rewards too modest to attract the Ken Lay’s of the world. Landowners who donate conservation easements are not shady dealers, they are your neighbors – farmers, ranchers, woodlot owners; families with deep roots in the landscapes they love. If problems exist with easement process, let’s calmly look at the facts and fix them. If the existing appraisal standards need tightening, let’s tighten them and stop any abuses. But if Congress and the press are looking for wholesale corruption, look elsewhere
While at New West, I came across The Westerner which is delving into the controversy over a New Mexico rancher named Kit Laney and his fight with the Forest Service over cattle grazing on public lands. The Denver Post has a good backgrounder on the case. It's a land use fight of a different type, but one that's reverberating through the West.

The Way The Wind Is Blowing

If you needed more proof that the political winds are blowing toward shooting down the proposals of the Senate Select Committee on Taxation, check out this letter posted on the website of the Planned Giving Design Center which bills itself as the world's largest community of planned giving professionals. Read the letter, then check out the names of the signatories. Based just on that, I'd say this ballgame is just about over.
May 25, 2005
Dear Chairman Grassley and Ranking Member Baucus:
We applaud your resolve to root out any wrongdoers in the charitable sector that are masquerading as philanthropists while abusing their positions for non-charitable purposes.
While we agree that any wrongdoers in this (or any other) sector should be punished, we are very concerned that some of these proposals would have the unintended consequence of overburdening small organizations and/or creating disincentives to contribute to legitimate charitable activity at a time when we are asking more of this community, not less.
As the Committee process unfolds, we hope you will take the following into consideration:
1. The Internal Revenue Service (IRS) should enforce existing laws against abuses. It is evident that the IRS has ample power and authority under current law to curb abuses in the charitable sector. Much of the testimony regarding 'charitable abuses' described actions that are already illegal and which were gleaned from reviewing filings by the charities with the IRS through existing Form 990s and other required IRS forms and filings. Before Congress considers sweeping new requirements, the IRS should be held accountable for enforcing the laws already on the books and simplifying filing and disclosures, not making them ever more complex. Indeed, at your April 5th hearing on charitable reform proposals, the IRS Commissioner testified that the IRS is very near eliminating the abuses by certain credit counseling agencies because of the focused and efficient use of IRS resources in this area. Clearly, no 'new laws' were needed for the IRS to resolve those problems; rather, all that was required was the will to act and to devote resources already available to the IRS.
2. The impact on small philanthropic organizations must be more fully considered. At the hearing, witnesses were repeatedly unable to articulate studies, analyses, or reports to quantify the costs and/or burdens on smaller organizations of the charitable reform proposals being put forth, or the possible impact of those additional costs and regulatory burdens on the charities. This analysis is critical given that most of our nation's charitable organizations are small. Of the nation's 65,000 private foundations, most have assets under $50 million. Of the nation's 1.8 million charities, 94% have annual revenue under $1 million. Clearly, more data and study are needed before going forward with any proposals that will impact these vulnerable organizations.
3. The impact on charitable contributions must be more fully vetted. Because of the heavy reliance we place on the charitable and philanthropic sector to meet the social and public needs of our country, we must proceed cautiously to insure that we do nothing to discourage legitimate charitable giving or to diminish the resources of charitable organizations. The IRS has recently begun to examine several of the areas that you have raised but we do not yet have sufficient information about their findings to warrant some of the pending proposals. For example, the proposed $500 cap for contributions of clothing and household items appears to be arbitrary and ignores "real world" consequences for legitimate charities with effective programs -- such as drug treatment and job training -- helping the poor partially or fully funded by in kind contributions. The proposed limitation to basis for contributions of land also would unnecessarily result in a significant undermining of the charitable incentive.
4. "One size fits all" is not a workable approach. Congress should not impose a 'one size fits all' regulatory regime on the charitable sector. One of the beauties of the uniquely American philanthropic community is the entrepreneurship, creativity, and ingenuity of our people to develop ideas, community solutions, and caring networks apart from government. Mandates from Washington, on everything from board size to specific governance procedures, are inconsistent with the entrepreneurial spirit that spawned and has been encouraging the charitable sector for generations.
5. Families should be encouraged to be philanthropic. Families can be critical to the creation of new engines of charitable giving; donors either trust members of their family to share their vision and implement it, or see their family foundation as a vehicle for inculcating in their heirs a binding charitable ethic. Reforms that have an anti-family bias are particularly troubling because they dilute the notion of original donor intent and move potential contributors away from philanthropy.
We look forward to working closely with you in the weeks and months ahead on this very important issue. We would ask you to be mindful of the important role that America's charitable community plays. But for the efforts of America's charities and private foundations, many of our most vulnerable citizens would suffer greatly. We hope you will take these concerns into consideration before taking further action on these proposals. The very last thing we want to do, as you no doubt agree, is to discourage the philanthropic spirit that is the heart and soul of America.
Sincerely,
Santorum, Sen. Rick;
Lieberman, Sen. Joseph;
Inhofe, Sen. James M.;
Domenici, Sen. Pete V.;
Vitter, Sen. David;
Brownback, Sen. Sam;
Cornyn, Sen. John;
Roberts, Sen. Pat;
DeWine, Sen. Mike;
Bond, Sen. Christopher S.;
Hutchison, Sen. Kay Bailey;
Allen, Sen. George;
Warner, Sen. John;
Chambliss, Sen. Saxby;
Coburn, Sen. Tom;
Allard, Sen. Wayne;
Bennett, Sen. Robert F.;
Voinovich, Sen. George V.;
Specter, Sen. Arlen;
Dole, Sen. Elizabeth

That's a pretty formidable block. All Republicans in a Republican Senate. (Ok, 19 out of 20. How'd Lieberman get into the Republican caucus?)

Time to make the sale

The Senate Finance Committee hearings on conservation easements will be held Wednesday, June 8. Jon's got the list of those invited to testify over at the Uneasy Chair. The LTA has also set up a page on the hearing on its website, which includes a link for those who want to listen to the hearings live.
Reading the tea leaves from a thousand miles away, I'd say the omens are pretty good for the survival of the easement deduction. First the list of those testifying includes the head of The Nature Conservancy, the president of the Land Trust Alliance, and others able to make the case for the easements. Also if you check out the LTA's page on Policy Makers, there are testimonials to the need for the easements from politicians from across the spectrum. Republicans like Rick Santorum, Democratic Governors, even the Secretary of Interior is saying nice things. It looks like the lobbying efforts by the LTA and local trusts has gained traction. It also looks likely that reforms of some kind will take place, the question becomes what form those reforms take. Should be an interesting hearing.

I'm Not Worthy...

Thanks to Chris at Organic Matter for including my post on the drilling along the Gulf Coast in the latest Tangled Bank compilation. It's a little humbling to be included along with people who actually know what they are talking about. If you haven't checked out Tangled Bank, well, check it out.