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In north central Wyoming, seven miles east of the Big Horn National Forest, Catherine Kusel and her brother Fred, two siblings well into retirement age, still run cattle on land purchased by their father in 1920. Their land has an undisturbed beauty typical of Wyoming. It is the dry, high desert steppe of open sage and grass juxtaposed with the rising forms of the Big Horn Mountains at its edge. The Kusel Ranch is an ideal place to raise a small herd of cattle, ideal, too, for people craving the aesthetic of the open west or for the second-home buyer wanting a private getaway. That's why, since last summer, Catherine and Fred Kusel’s newest neighbor is not another rancher, but a new subdivision. Statistics presented by the Wyoming Stock Growers Association indicate that by the middle of this century, an additional 48 million people are expected to live in the West. This population boom will put 26 million acres of open space at risk of residential and commercial development. Expected to have the third-highest growth rate, Wyoming will feel much of this coming change.

The Land Trust Alternative: For Wyoming’s Endangered Ranchers, It’s a Future

In north central Wyoming, seven miles east of the Big Horn National Forest, Catherine Kusel and her brother Fred, two siblings well into retirement age, still run cattle on land purchased by their father in 1920. Their land has an undisturbed beauty typical of Wyoming. It is the dry, high desert steppe of open sage and grass juxtaposed with the rising forms of the Big Horn Mountains at its edge.

The Kusel Ranch is an ideal place to raise a small herd of cattle, ideal, too, for people craving the aesthetic of the open west or for the second-home buyer wanting a private getaway.

That’s why, since last summer, Catherine and Fred Kusel’s newest neighbor is not another rancher, but a new subdivision.

Statistics presented by the Wyoming Stock Growers Association indicate that by the middle of this century, an additional 48 million people are expected to live in the West. This population boom will put 26 million acres of open space at risk of residential and commercial development. Expected to have the third-highest growth rate, Wyoming will feel much of this coming change.

Such statistics sound like a death knell for people like the Kusels, who could be considered among the West’s endangered ranchers. To help them out, the Wyoming Stock Growers Agricultural Land Trust, Wyoming’s politicians and Wyoming’s industries are stepping up. After all, in a state where agriculture remains the third top-grossing industry after mining and tourism, losing ranches would hurt the economy as much as it would Wyoming’s identity.

Land trusts aren’t a new concept. They’re often the first line of defense for ranchers feeling threatened by high land prices, housing developments and the everyday costs of maintaining a farm. The Wyoming Stock Growers Association, founded in 1872 to advocate for the state’s cattlemen, is well aware of this and established its land trust 11 years ago. The goal in 2000 and today, said the trust’s executive director, Pamela Dewell, was to create an organization “with agriculture as the primary focus, that would provide working ranches with an alternative.”

This alternative starts with a conservation easement, a binding contract between a land trust and a landowner. To create an easement, the landowner sells or donates to the land trust the total potential value of development on a piece of land – everything from housing and energy exploration, to water and mineral development. If the land is ever sold, the property rights remain with the land trust ensuring that, even with a change of hands, it will remain undeveloped.

Relinquishing these property rights can lift a huge financial burden off the shoulders of landowners. If the conservation easement is sold, owners make a hefty one-time chunk of money. If the easement is donated, a number of federal and state tax incentives benefit the landowner.

***

Last December, President Obama signed HR 4853, which continues federal tax incentives for landowners who donate conservation easements between January 2010 and December 2011. Under the version signed by the president, landowners may deduct up to 50 percent of their adjusted gross income; farmers and ranchers who earn a majority of their income from agriculture may take a 100-percent deduction. The bill allows these deductions to be taken for up to 16 years after the easement is donated.

This law, however, must be renewed each year, potentially allowing the bill to lapse, as it did in 2010. In 2009, Wyoming’s U.S. Rep. Cynthia Lummis (R) and Senators John Barasso (R) and Mike Enzi (R) supported passage of HR 1831, a bill that would have made easement incentives permanent. The bill never moved passed referral to the House Committee on Ways and Means. But many hope a similar bill will be introduced again in the 112th congress, which would surely receive support from Wyoming’s representatives.

Thanks in large part to interest generated by incentives like those in HR 4853, last year was one of Stock Growers Land Trust’s busiest yet. In 2010, the trust worked on 11 new easements and purchased seven. Diverse support for conservation easements in Wyoming keeps the trust from feeling the financial burden of those purchases. Last year, for example, financial donations from Jonah Interagency Office, the Wyoming Wildlife and Natural Resources Trust and the Wyoming Governor’s Big Game License Coalition helped purchase an easement for 1,800 acres of the Cottonwood Ranches near Pinedale.

In total, the Stock Growers Land Trust has conserved 148,703 acres of land through 57 easements in 15 Wyoming counties. The Kusels are one of the 44 families in Wyoming who’ve turned to the trust for help. The Sigel family is another.

***

Almost 350 miles directly south of the Kusels’ pastureland, Art Sigel along with his wife, two sons and their families, run Hecht Creek Ranch in Wyoming’s Centennial Valley. Another gorgeous landscape tucked into a nook of the Medicine Bow National Forest, and only a short drive from Laramie, Cheyenne and Denver, the once traditionally agricultural valley is also attracting the attention of homebuyers and developers. Like other Wyoming ranchers worried about the future of his land, Art Sigel looked at his options.

“I always wanted to go into business with my two sons,” says Sigel, who’s a relative newcomer to Wyoming and to ranching. Though farming on the Hecht property goes back to 1887, the Sigels’ story with the land begins in 2005. Recently retired after 40 years of work in the chemical industry, Sigel joined his sons out West, bought the property and created a conservation easement with the land trust.

These days, the family’s cow and calf operation is small, but strong. With excellent access to irrigation and land thick with high mountain native grasses, the family is positioning themselves as summer grazers. And, for the most part, Sigel has found the ranching life to work for him, but he has also learned of the profession’s challenges. Though admittedly well-off, Sigel says that money is always an issue. Each mistake the new ranchers make hurts. “After all the money spent to purchase land, animals, equipment, sometimes you make a wrong decision and….” Art doesn’t finish his statement, but you can imagine winged dollar bills flying away over his head.

The enormity of this financial obstacle is one that a young aspiring rancher must realistically consider. While most college graduates enter the workforce full of dreams and high hopes, agriculture students grasp diplomas and head for the door already supplied with a stiff sense of worldly realism.

***

“Running a small 6,000-cow operation is not enough money to ever afford to buy land,” says Luke James Lenski, a 22-year-old senior at the University of Wyoming’s College of Agriculture and Resource Management. Lenski grew up 50 miles southeast of Denver. His first impression of the future of ranching formed early on as he watched the alfalfa fields around his childhood home turn into subdivisions.

Summers spent working on a family friend’s ranch convinced Lenski to study agriculture and make it his life’s work. Now nearly graduated with degrees in animal science and agriculture business, Lenski sees his only possible future in the business as a manager for a large corporate ranch like Silver Spur – a TIC Communications owned business with ranch operations in three states.

Yet, interest in ranching is still quite strong among young people, according to Jim Wangberg, associate dean of the university’s College of Agriculture. Enrollment in that department has broken records for two years running. And, while students like Luke Lenski are in abundance, the job market is not as dire as one would expect.

According to Wangberg, roughly a quarter of his students come from ranching families and will go back home better equipped to run the family business. Another quarter will continue their education and remain in academia. The remaining 50 percent is all over the board. They will work for government agencies, becoming game wardens and range management professionals. They will join the private sector and, as Lenski hopes to, manage large cattle outfits across the West.

Wangberg doesn’t bother mentioning those students who may try, against odds, to successfully buy and operate their own ranch. Those numbers, it seems, are too small to really count.

***

The truth is, for ranching to survive past older ranchers’ retirement, people like Lenski need to acquire land and ranch it. Based on current trends, between 50 and 75 percent of ranches in the West will change hands in the next 10 to 15 years. That’s because, as Pamela Dewell of the Wyoming Stock Growers Land Trust says, we are hitting a demographic bubble.

Agricultural producers over the age of 65 more than doubled between 1964 and 1997. The number of producers 35 and younger declined to just 5 percent of all producers in 2002, says Dewell. On top of that, in Wyoming, 42 percent of land is privately owned and 90 percent of those lands are in agriculture.

Add together a quickly aging population of agricultural producers with the amount of land in Wyoming that is private agricultural land and you get an idea of just how much is at stake.

The challenge for the land trust is to keep those ranches from becoming subdivided or, just as bad, unproductive hobby and trophy ranches and to put them, instead, into the care of enthusiastic young ranchers. Their first test has already been set. Last year Catherine and Fred Kusel, with no heirs of their own, willed the Kusel Ranch to the trust.

Currently, the trust is preparing to make the property part of its fledgling ranchland succession program.

Other succession programs do exist. Iowa State University has the Farm On program, Nebraska’s Center for Rural Affairs has Land Link Service and, in Montana, there is Land Link Montana. Described sometimes as an online dating service for ranchers and landowners, these programs match beginning farmers with landowners, both for employment and for purchase opportunities. Following a feasibility study, the Wyoming trust hopes to have its program up and running as early as this summer.

Looking at Land Link Montana as a model, the organization facilitates matches first by gathering extensive information. Landowners must disclose agricultural assets, type, scale and history of agriculture carried out on the land. Queries cover soil type, irrigating systems and water availability, as well as the rancher’s transition expectations. A landowner may indicate interest in deals ranging from short-term one-year leases, leasing with option to buy or outright sales.

Ranchers seeking land, on the other hand, disclose work history – schooling, degrees, previous employment and current occupation. They indicate the desired size for a farm and agricultural interests: beef, dairy, hogs and sheep, or even berries, vineyards and Christmas trees.

The process is complicated. The steps are intricate and a lot is on the line – land, money and trust in each other and the organization. Though Dewell has received calls from around the country from people interested in the ranchland succession program, there is one big hurdle. Again, it comes down to money.

“Agricultural land values are hugely inflated above the value they hold for production. Second-home buyers drive up real estate values,” Dewell says matter-of-factly. “Jackson Hole is a perfect example. When agricultural lands have water, mountain views, good soil and the best wildlife, then everyone wants the same pieces of land.”

To make it work, Dewell and the Wyoming Stock Growers Agricultural Land Trust will have to look at every option available. It will have to be a group effort with participation from retiring ranchers and financial help from private donors, state and federal government grants and trusting brokers and banks willing to go out on a limb for these young entrepreneurs.

About Katherine Pioli

Comments

  1. Benjamin R. Bombard says:

    Great story, Katherine!

  2. jake says:

    Wow. Very well thought out and presented. Seasoned writing style. Count me impressed.

  3. Dave Skinner says:

    Less impressive is the nasty reality that conservation easements don’t deal with the real problem, which is the impact of inheritance taxes on intergenerational transfer.
    Nor do CE’s resolve the reason why inheritance taxes are unaffordable…because an ongoing operation simply won’t rake in enough dough over time to pay off the tax man.
    Further, a CE doesn’t do dooooooodly cow squat about 30 or 40 years down the road when our enthusiastic young rancher is a broke down ol’ cowboy looking to get out — the tax break has been consumed.
    Or worse yet, a broke down ol cowboy on an easemented property in an area where agricultural operations are inherently no longer viable because the support infrastructure has gone away — implement dealers, processing facilities, all of which need a certain level of business in order to operate. Might be the greatest ground on the planet, but if you can’t get your product to market in marketable form, or get your supplies within reasonable cost and time constraints, guess what. CE or no CE, that operator is kaput.
    I must ask, what happens to the land then?

  4. dave smith says:

    Land trusts don’t deal with the real issue, which is getting cattle off 10,000 acres of public land grazing allotments that go with every 1,000 acres of deeded land the ranchers actually own.

    Land trusts and other agreements that keep cattle on public lands are a defeat for the public, not a victory.

    That 10/1 ratio is a generalization, but it’s reasonably accurate on western ranches.

    If we could wrest contol of public land from cattle and ranchers, we’d be better off nuking or subdividing the private land ranchers actually “own” to give back public lands to the public.

    I’ll take 1,000 acres of McMansions and 10,000 acres of public land set aside for people anyday rather than 1,000 acres of private ranch land and 10,000 acres of denuded public land set aside for cattle.

    The deeded private land is irrelevant since the public has no access rights whether it’s an old fashioned ranch or a McMansion. It’s what happens on the public land that counts.

  5. Dave Skinner says:

    Logger, you missed the point. When Rich Old Broke Down Cowboy kicks the bucket, 45 percent of their equity over 2 million per heir needs to be converted into cold hard cash for Uncle Sam. Right Now.
    Unless there’s a huge pile of cash under the mattress, that means breaking up the base property, or the ranch itself.
    I suppose there are many corporate, privately held, but that’s a less-than-optimum idea when the family has vision issues.

  6. Jeremy Gingerich says:

    Katherine,

    Couple significant typos in the section on Luke Jenski:
    1. A 6,000-cow operation is not small, and, if well-managed, should be able to buy land. Maybe you meant 600 cows or 6,000 acres, each of which would be on the smaller end of a medium-sized ranch.
    2. Silver Spur is part of TCI, not TIC.

  7. SMc says:

    Dave,
    Conservation easements are relatively new and offer a limited time tax benefit, so I’ll agree with you that it’s uncertain as to what happens 40-50 years down the road (other than the fact that the kaput rancher may find someone who wants to buy the property with the easement on it for a recreational property and can reoup his losses through sale).

    Easements do however, address estate tax issues, especially for ag producers. First of all, because the easement reduces the value of the property (bringing it down from its speculative development value to its ag value), there is less estate value to tax. Secondly, ag producers can qualify to reduce their estate tax an additional 40% up to a cap. I’ve seen this make a real difference for farmers and ranchers in Colorado.