Conservation Easements in Agriculture w/ Chris Eddy

Interview with Chris Eddy, Realtor at Community Insurance Agency

Show Notes

Conservation easements is the topic of discussion in this episode of Organics Unpacked. A conservation easement is a tool that landowners can use to ensure their property is farmed using organic standards now and into the future. To help us understand this topic, we welcome Chris Eddy, a realtor for Community Insurance Agency in Coon Rapids, Iowa. Chris recently drafted and completed a conservation easement for the Garst family’s 2000-acre farm in Iowa.

Learn more about Avé Organics: www.aveorganics.com 

Learn more about Chris Eddy at Community Insurance Agency: www.commins.net

Connect with our guest on LinkedIn

#agriculture #conservation #easement #farming #organicagriculture #organicfarming

Podcast Transcription

TOM: Hello, everyone. Conservation easements is the topic for today’s episode on Organics Unpacked. A conservation easement is a tool that can be used by a landowner to ensure their property is farmed using organic standards for both now and into the future. These conservation easements are voluntary, legal agreements that permanently limit the use of land in order to protect its conservation values for future generations. To clarify the topic of conservation easements, I have with me today Chris Eddy. Chris is a realtor for Community Insurance Agency in Coon Rapids, Iowa. Chris recently drafted and completed a conservation easement on a 2000-acre farm in Iowa. 

INTRO: Welcome to Organics Unpacked, a podcast for the business-minded organic grower — an interview podcast where we hear from the top experts in the commercial organic industry — with a focus on the business elements of organic growing both in and out of the field. You will gain insight and grow your operation. This show is brought to you ad-free by Avé Organics, a Wilbur-Ellis company. To learn more about Avé Organics, visit our program notes. In the meantime, enjoy the show.

Implementing a Conservation Easement

TOM: Chris, recently, I understand that you just drafted and implemented a conservation easement on a 2000-acre farm. Tell us about that.

CHRIS: Yeah, we work with the Garst family quite a bit. Back in May of 2021, they came to me and proposed the idea of selling off the last productive acres that they held but wanted to do so with a conservation easement in place. Specifically, the Garsts wanted to target soil health, increasing organic matter, no-till, cover crops, the things that they’ve been doing for years. And they felt that this was an important aspect to emphasize going forward and wanted to protect the land with a permanent easement before it was transferred to the new owners.

TOM: So, Chris, this term conservation easements’ that we’re using, do you know how long conservation easements have been around? Do you know the background of them?

CHRIS: I learned quite a bit through this process, to be honest with you. I understand that easements have existed in history for all kinds of purposes and for a long time. It’s not a new concept, Tom, as you well know. The fact that you can protect land with a conservation easement has been going on for quite some time, but maybe it’s just not as well known to the public as what it should be.

How Conservation Easements Work

TOM: So how does a conservation easement work? So I assume you always, in any agreement, have two parties. You have a landowner that wants to make an agreement for some purpose. Then you have another party that holds the agreement and enforces it. Is that right? Is that how it works?

CHRIS: That’s exactly right. So what happened with the instance in the Garsts was that they owned the land, drafted an easement specifically targeted towards the purpose they wanted to emphasize and then granted that easement to a land trust that’s in charge of monitoring the easement forever. In this case, it was the Whiterock Conservancy of Coon Rapids. So, along with that, the owners, who were the Garsts, provide a donation to offset the cost of enforcement and monitoring of that easement for the life of the easement.

TOM: Okay, so they wanted to make sure that their farm was farmed now and into the future and protecting soil health. So they set up certain criteria in this conservation easement that they said needed to be followed. Is that right?

CHRIS: That’s exactly right, specifically prohibiting tillage. Traditional farming — what we were used to 30 years ago, where you plow and disc and harrow and plant — those concepts, we’re realizing, resulted in quite a bit of soil loss and are a detriment to the productivity of our land. And with no-till concepts and cover crops, the main focus of the Garst easement was continuous living roots to establish a glue for the soil to hold it in place so that it doesn’t go anywhere. 

Setting Up a Conservation Easement

TOM: So, again, they wanted to make sure that there were certain practices that were followed, and they were able to write this into the easement. So are these easements, are they generally set up when somebody wants to sell their farm? Or are they set up prior to that, where somebody just says, If I die and my heirs inherit this, I want to make sure it’s farmed in a certain way?’ Or how do they typically get set up?

CHRIS: That’s a really good question, Tom. In this case, the Garst easement was set up to where it was enforced the same day that we transferred to the new owners. So the Garsts granted the easement to Whiterock and then deeded the land to the new owners. However, in a perfect world, they would’ve done this several years prior to selling. They would’ve had this easement in place operationally and then set up well before they transferred the land. So, to answer your question, no, it can be done at any time. And in fact, it’s probably best to do it when the owner that created the easement and had the idea to put it on the land is still operating the land.

TOM: Okay, so, in this respect, the Garsts were farming certain practices. They were doing it. They didn’t necessarily need an agreement because it was under their control. But when they went to sell the land, they wanted to ensure the land would be continued to farm in the same aspect and protected. So they stepped in and put in a conservation easement.

CHRIS: Well, they did. They had large tracks that had been. Well, all of these tracks had significant conservation structures already on them: wide waterways, terracing, tiling. The structures that were put in place have been designed over 40-plus years. So another emphasis of this was that those structures would remain. At first glance, a new farmer would look at those waterways and say, I want to take em out because I can add more acres.’ For instance, one of the tracks was a section and a half, so over 900 acres. And of that, there were 120 acres of just waterway. So pretty easy for the new owner to come in there and say, I’m going to skinny those terraces up from 100 feet to 60 or 80 feet and add quite a few acres.’ However, that’s prohibited by the easement. The waterways are there for a reason.

Conservation Easements for Organic Farming

TOM: So I think the reason that you’re on as a guest today is that conservation easements can be used for a lot of different things, not just soil help. But for instance, if you have a landowner who has a farm, and they want to ensure that it’s farmed under organic standards into the future, can you write a conservation easement to do that?

CHRIS: I believe so. You have to establish legal purpose, which is the basis for the easement. If the easement is ever challenged in court, if the new owner says that the provisions in this easement are ridiculous and I’m not following them, what’s your basis for enforcement? If you can’t go to court and have a judge rule in your favor, then your easement is worthless. So you have to make sure that it’s written based on the legal principle that would be enforceable in a court of law.

TOM: Right. So, if somebody has an easement written and says, We’re going to follow USDA organic standards because I believe it’s good. It’s healthy. It’s the right way to farm.’ That would likely be an enforceable easement.

CHRIS: Right. Certainly, the state has emphasized water quality initiatives, certainly soil conservation. There are several conservation principles now that are recognized, enforced and could certainly be the basis for an easement going forward.

Land Value With a Conservation Easement

TOM: Okay. So, if I’m a landowner and I put an easement on my farm — whether that’s for soil health, organic farming, whatever it is — and I go to sell my land, the next person that buys my land, this easement, of course, is a permanent easement. They’re impacted by it. Do I generally think that as a landowner selling land, maybe there will be a reduction in value on my land if I sell it with an easement on it?

CHRIS: That’s another really good question because, in the Garst sale, I think that we decided there was a reduction in the value. However, the land values were very, very good. We’re also selling into one of the hottest markets that has ever existed. But I think, just because the idea of a concept of an easement on row-crop ground is probably relatively new, that the owner could expect a discount anywhere from 10 to 15%, I would guess.

TOM: Right, and I would assume that it depends on what the easement is and where you are. For instance, if it is organic farming and you’re in an area where there are few organic farmers, you would probably expect there would be less interest in buying the land because you have to farm it organically. But if you’re in an area, maybe, where there’s a lot of organic farmers, and that’s what would be expected out of the land, maybe there would be less of a hit on the land. Does that make sense?

CHRIS: Yeah, absolutely. And too, as the concept becomes more familiar, as a realtor, I would think that we have opportunities for buyers. Whether it be carbon credits, that’s an evolving market. There could be benefits on your crop insurance to continuing some of these practices. We’re already seeing cover crop subsidies be applied at the state and federal level on crop insurance. So I guess my hope is that in the future, there’s a pool of buyers that look for properties with easements on them because they know that they’ve been well cared for, and that provides added value to them.

Where to Start With a Conservation Easement

TOM: Chris, if I’m a landowner — and this seems like a bit of a complicated process — but if I’m a landowner, and I want to put a permanent easement on my land, how do I even start the process?

CHRIS: It starts with a good attorney. The firm that the Garsts used was out of Cedar Rapids, and they’ve done several of these in the past. But then, also, consultation with one of the land trusts that monitors easements, to ask maybe what the existing easement principles provide. Iowa Natural Heritage Foundation manages well over 200 easements and is very well-versed in the language of the easement, the monitoring program and what it takes to do this. Whiterock Conservancy is setting up that program. SILT is another land trust in the state of Iowa that monitors easements. There are not very many, but they would certainly be a good reference for how to get started and what to do.

TOM: So I assume that these organizations that hold and monitor the easements, there has to be something in it for them, right? They have to be motivated by conservation to kind of go through this process because it’s an ongoing kind of burden, if you will, for them.

CHRIS: Absolutely, and as you get bigger, it’s a staff position or two or more to be able to go through this process and accept the easements. There’s certainly documentation and a responsibility that goes along with accepting these, and there’s income from the landowner when you take these on. There’s a donation to these organizations to fund it, but then that’s the life of the easement, which is a long time. It’s going to outlive all of us, right?

Conservation Easement Compliance

TOM: Right. So, if I am selling a piece of land knowingly that I put a conservation easement on and what that is, and I sell it to another person, since it is a permanent easement, they’re obligated to follow the easement, right? 

CHRIS: Yes. 

TOM: Okay, and so I’ve heard people say, Well, I’ll just buy the land, and I’ll get a good attorney. And we’ll fight the easement, and we’ll get it dropped or negated or whatever.’ Is that the case? Or are these permanent easements really pretty tight?

CHRIS: I think, again, it goes back to when you draft the easement. When you hire someone to put this together for you, you need somebody that’s very knowledgeable in what they’re doing because you should go into it with the expectation that it will get challenged someday. In the instance of the Garst family, that was certainly a conversation topic: what if they don’t comply? So, per the terms of the easement, the first one is notification that you’re out of compliance. The second one would be arbitration, and then the third step would be court. And I don’t think anyone wants to go to court over this, but land trusts that monitor easements are also able to buy litigation insurance. Nationwide, there’s a group of land trusts that has helped create an insurance policy that helps provide defense costs or litigation costs for them to enforce easements. There is a nationwide network of groups that are doing this that believe in the purpose, that want to see that these things succeed. There’s definitely support from the conservation community to make sure that this is a successful program.

TOM: So, as a landowner, if I’m going to put a conservation easement on it, I better make sure I get it right, like don’t do it myself. I better make sure if I’m serious about putting a conservation easement on it, I better make sure I do it right because I don’t want it to go to court and end up being turned over and all the things. That if I sold my land for a discount or whatever, I don’t want that all to be turned over. But as a landowner, if I’m a future landowner, if I’m going to buy a piece, I better buy it with the understanding that whatever’s in the conservation easement is probably going to stick. And I’m not going to be able to say, Well, I’ll buy it today and beat the conservation easement tomorrow and just do whatever I want.’ Is that fair to say? Is that a good way of kind of looking at a conservation easement?

CHRIS: I think so. I believe that you could wrap up a lot of time and effort and certainly money in fighting an easement. If you were the landowner trying to break the easement, you could be on the hook for the defense costs of the organization that’s monitoring it too. It could be fairly substantial if you fight and lose. One thing that the easements are careful not to do is specify what the penalty is because you don’t know what the violation is going to be either. So, by and large, the penalty will be determined by the court or by the judge hearing the case and should be commensurate with the violation. In most cases, the solution is to put it back. The damage has already been done. In the case of the soil health easements, what if they go out and till? What if they go out and plow it? Well, the damage to the soil structure has already been done, and the solution, then, is for the landowner to stop doing it and put it back. Is there monetary, is there punitive damage? Who knows? It’ll depend on the length of the violation, I suppose.

Future of Conservation Easements

TOM: All right. So, typically, Chris, in these permanent easements, is there any kind of wiggle room to change? In your experience, like there’s an easement written up. It says what you can do and what you can’t do, what practice you have to keep in place, what practice you have to implement. Generally, is it like this is exactly how it is? Or is there like some negotiation between a future landowner and the conservation holder, kind of that non-government organization, in what can change on that land? Because we don’t know what’s going to happen in 10, 15, 20, 30, 50 years.

CHRIS: That’s exactly right. I think an easement has to be written with flexibility because we know what we know right now, which is more than we did 10 years ago. Presumably, 10 years from now, we’re going to be a lot better than we are today, and the equipment will be better. And we’ll understand more about soil structure and microbial activity and all the things that we don’t have a good understanding of now. So, if an easement is written without flexibility, I don’t think it’s a good easement.

TOM: So, if there is, for instance, let’s just say on the soil health one you’re working with. If there’s a way, as I buy the land, I have the easement on me. If there’s a way into the future that I can improve soil health in a different way, the governing body that’s overseeing the easement might say, Yeah, you can do this, and maybe you don’t have to do this anymore.’ There might be some give and take, but that would have to be a mutual agreement?

CHRIS: It would. We’ve already had requests for changes. I happen to be on the board of directors for Whiterock Conservancy too. I’m on the side that’s helping monitor this, and we’ve already had requests for changes from landowners. They come in written form. There are some low-level requests that can be approved in the field. But for major structural changes or maybe changes to terraces or practices or things that are already in place, that goes to a board of directors for a larger discussion.

Conservation Easements in Court

TOM: So, back to the legal aspects, Chris, if somebody challenges the status of the agreement, right? So I buy the land knowing there’s a permanent easement on it, but I challenge it. Do I challenge it in the state or in the federal courts? Where is the easement held, and where does the legislation originate from?

CHRIS: The easement, it’s my understanding, is written based on state law, state precedent. It would start in district court. I’m sure if it went through several appeals and challenges and things like that, it would graduate through the legal process, but it would start in our local court system.

TOM: Okay, so conservation easements are a state-regulated thing, not necessarily federal regulated.

CHRIS: That’s correct.

TOM: Okay. All right. That’s really helpful because I think it’s important for people to know, even when they’re getting legal help, what the status is and where they need to start. That’s helpful. So what other things can be put under a permanent easement? I know you worked with the soil health one, and it’s kind of soil conservation. We’ve talked about organic farming. I think there’s also some, like maybe I’m going to keep it in grass and vegetation and never row-crop it. What are some of the other parameters permanent easements could have?

CHRIS: Well, any land that’s fragile: highly erodible land, wetlands, certainly rare groves of trees or structures that used to be populated and are no longer here in Iowa. There could be several different purposes to protect what’s a valuable natural resource.

Conservation Easement Resources

TOM: All right. Well, Chris, your insight has been helpful, and I appreciate it. But if somebody is interested in doing a permanent easement, are you a resource? What are the resources where they could call and get a start and get some help?

CHRIS: I’d go back. I’d contact the Iowa Natural Heritage Foundation. They’re a very good resource. Whiterock Conservancy of Coon Rapids. The attorney that we used was Paul Morf from Simmons Perrine in Cedar Rapids. And certainly, Liz Garst is happy to talk about easements. She’s very well-versed in these things and has made it her mission to speak on behalf of conservation topics and protecting our most valuable resource, which is the land.

TOM: Okay, and so I would assume that depending on where people are, it’s state specific, so they would need to identify their resources in their state. It would be easy for the people you mentioned to talk about conservation easements in Iowa, but depending on where people are around the United States, they would have to identify resources in their area.

CHRIS: Yes, absolutely, and they would have to identify the principles that have been emphasized by their state and the productions provided by the laws of their state.

TOM: Yeah, and I do know that the Nature Conservancy is an organization who has done a lot of work on permanent easements, and they are a national organization. So that also might be, especially where there is conservation value, they might be a really good starting point for a conversation, too, as a national organization.

CHRIS: Absolutely. I think that landowners like the idea of this, and, to your point, they just don’t know who to contact. We’re in a stage in Iowa, for sure, that there are a lot of absentee landowners. They’ve owned this land in their family for years and years. They may have moved to the city or they no longer farm it, but they want to see it protected. They don’t want to see it damaged or destroyed in the future. I think it’s a concept that’s going to gain in popularity and momentum going forward.

Conservation Easements for the Next Generation

TOM: Yeah, I do think that’s a really good point: that, for instance, my dad, as he thought about passing on land, he wanted to make sure it was farmed under conservation. And as you pass it to the future generation, especially if they’re not connected with the farm, they may not know right from wrong. And it’s easy to get a tenant or an operator that says, Oh yeah, go ahead and do this. It will be fine.’ And if you’re not embedded in that agricultural system, you don’t always know what’s good or bad, like maybe your parents did. So, by putting a conservation easement on, I think it might be a way of helping the next generation kind of navigate good conservation practices and make sure that land stays sustainable.

CHRIS: I think you’re exactly right. The concept before used to be that you lived on the farm, you retired and you either farmed 50/50 with your neighbor in a rental situation or you sold to somebody that was adjacent to you. But you had an idea of what farming was. Now that we’re two and three generations removed from that, you’re exactly right, Tom. There’s a huge group of landowners that don’t understand agriculture that aren’t connected to the land but have one of the most valuable resources in our state. And it does need to be protected. By and large, I think operators do a good job, but they also shouldn’t be afraid of putting some of these restrictions in writing and protecting exactly what they’re doing right now for years to come.

TOM: Right. Yeah, and I know the community of organic farmers believe very strongly in the value of organics. They’ve gone through the process of getting their land, that three-year process of getting it organically certified. And if they want to see that into the future, I think a conservation easement is really a good thing to look at. You need to go into it with open eyes. You need to understand what you’re signing up for. You need to understand. Are there people around that want to farm it after you’re gone, farm it an organic way? And if there are, then I think maybe looking at an easement is a really positive thing. 

CHRIS: Well, I think with organic farming too, this is a different topic, but we talk about: how does the next generation come into farming? Because right now, land values are at an all-time high. It takes a lot of money to get into farming. If you’re farming organically, your revenue per acre is higher. You get more out of your crop. You’re using smaller equipment. It’s kind of a throwback to the way we farmed 30 years ago. But I think it does provide opportunities for young farmers to be able to come in, make a living on a smaller amount of acres because revenues are higher. And it’s a good way for landowners to pass their land on to a generation that’s going to take care of it.

TOM: Yeah, I think that’s a really good thought: that if you, as a landowner, want to help a new farmer, probably looking at some organic farming and passing it on so that it has to be farmed under organic standards might be a really good way to think about that.

CHRIS: Absolutely because how else are we going to get the next generation involved?

Tax Benefits of a Conservation Easement

TOM: Yes, I agree, Chris. So, Chris, thanks again. Chris is a realtor for Community Insurance in Coon Rapids, Iowa. Chris, I appreciate you helping us out understanding conservation easements, and good luck with the one on the Garst farm. I know it’s made a lot of national attention. It was a really big one, and I think they really did the right thing. But I think it really has shown, I think, other landowners that there is an option out there for permanent easements. You can decide what you want in your permanent easement. It doesn’t have to be soil health. It could be organic. It could be maintaining, like you said, a certain ecosystem in an area, whether that’s wetlands or savannas or whatever, but permanent easements are out there. The last thing, though: there are some tax benefits too, right?

CHRIS: Yeah, I didn’t get as much involved in the tax side of things. But certainly, it’s my understanding that it’s possible the deduction that you take on the land, if you sell for a 10% discount, could possibly be tax deductible. Those are things that a good CPA would be able to advise you on. But definitely, there’s some potential there to save money on taxes.

TOM: Yeah, and I think of all tax issues, it’s state dependent and time dependent. When you put it in there, I know that tax laws change from time to time, and sometimes there’s more emphasis on encouraging permanent easements or less. So, like you said, I think it would be a really good thing, too, for people to contact their CPA, and that ought to be a part of their decision-making process.

CHRIS: Absolutely, but it’s exciting. I think it’s a new concept that’s gaining steam. And certainly, there’s a lot more conversation about it today than there was even two years ago, and I’m excited to see what the future holds.

TOM: All right. Thanks again, Chris. I appreciate your time.

CHRIS: Thanks for the conversation, Tom.

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