Texas Land Conservation Assistance Network

The environmental benefits that healthy ecosystems provide -- such as clean water and air, flood prevention, healthy soils and wildlife habitat – are collectively known as ecosystem services. When ecosystem services can be measured and quantified -- for example, the amount of carbon stored in soil -- they can be sold and purchased through emerging markets. These markets are called ecosystem or environmental markets.

Farmers and ranchers frequently generate ecosystem services when they implement conservation practices on their lands. Producers who generate ecosystem services credit may be able to voluntarily participate in environmental markets, providing an additional source of income.

Conservation or Mitigation Banks are permanently protected lands that contain natural resource values. These lands are conserved and permanently managed for species that are endangered, threatened, candidates for listing, or are species-at-risk. Conservation banks function to offset adverse impacts to these species that occurred elsewhere, sometimes referred to as off-site mitigation. In exchange for permanently protecting the land and managing it for these species, the U.S. Fish and Wildlife Service (FWS) and/or the National Marine Fisheries Service (NMFS) approves a specified number of habitat or species credits that bank owners may sell. Developers or other project proponents who need to compensate for the adverse impacts projects have on species may purchase the credits from conservation bank owners to mitigate their impacts.

Wetland mitigation banks are permanently protected lands that contain natural resource values (wetlands and associated uplands). These lands have been restored and managed for wildlife habitat, water quality, flood amelioration, and ecological diversity. Stream banks are streams and/or stream riparian zones that are restored and enhanced to create stable stream corridors that result in improved, water quality, wildlife habitat, and watershed integrity.

Both wetland and stream mitigation banks are used to compensate for adverse impacts generally occurring within a specified service area, or designated watershed. The U.S. Army Corps of Engineers (USACE), along with other state and federal agencies, approves a specified number of wetland/stream credits available to be sold by the bank sponsor. Permittees needing to compensate for project-related unavoidable adverse impacts to streams may purchase credits from bank sponsors, upon approval by the USACE, to compensate for those impacts. Each state and USACE District, however, continues to quantify wetland and stream credits uniquely; therefore, understanding the credit generation and impact assessment process for each individual District is critical.

The most traditional tool for conserving private land, a conservation easement (also known as a conservation restriction) is a legal agreement between a landowner and a land trust or government agency that permanently limits uses of the land in order to protect its conservation values. It allows landowners to continue to own and use their land, and they can also sell it or pass it on to heirs.

A conservation easement is a voluntary restriction on the use of your real property by means of a recorded deed restriction. The easement will be executed along with an agreement with a qualified entity, often a tax-exempt charitable organization (such as a land trust) or a government agency, which will monitor and enforce the restrictions on your land.

Every landowner is unique and every piece of land is unique. Thus, a conservation easement is drafted specifically for your property and will vary depending on your current use of the property and your conservation vision for the future. Generally, conservation easements will prevent future real estate development, industrial use, and many potential commercial uses. However, you may choose to continue current uses, including, for example, residential and recreational use, agriculture, forestry, or ranching.

When you donate a conservation easement to a land trust, you give up some of the rights associated with the land. For example, you might give up the right to build additional structures, while retaining the right to grow crops. Future owners also will be bound by the easement’s terms. The land trust is responsible for making sure the easement’s terms are followed. This is managed through “stewardship” by the land trust.

Conservation easements offer great flexibility. An easement on property containing rare wildlife habitat might prohibit any development, for example, while an easement on a farm might allow continued farming and the addition of agricultural structures. An easement may apply to all or a portion of the property, and need not require public access.

According to the Texas Land Trust Council:

The donation of a conservation easement can have potentially significant tax benefits. Conservation easements are recognized for legal and tax purposes by the State of Texas (Chapter 183, Texas Natural Resources Code) and the Internal Revenue Service (Internal Revenue Code, Section 170(h)). These State and Federal laws allow for tax benefits to landowners who protect natural or historic land with qualifying conservation easements. Conservation easements are not suited for every situation; it is important that landowners consult tax and legal professionals for more specific information.

A conservation easement donation can qualify as a charitable contribution if:

1. It is granted in perpetuity;
2. It is granted to a qualified organization, either:
   • A nonprofit, 501(c)(3) charitable organization (i.e., a land trust) with a conservation purpose and the means to enforce the conservation easement, or
   • A local, state or federal governmental entity empowered to hold real property interests;
3. It achieves at least one of the following conservation purposes:
   • Preserves land for public outdoor recreation or education,
   • Protects relatively natural habitats of fish, wildlife or plants,
   • Preserves open space, either for scenic enjoyment or in keeping with a clearly delineated public policy (such as a local open space plan), or
   • Preserves historically important land or certified historic structures.
4. Following the gift, the land trust must provide the landowner a letter of substantiation documenting the charitable gift.

Conservation Easements in Texas

Conservation Easement Holders in Texas

Source: National Conservation Easement Database 2021

As defined by the U.S. Department of Agriculture:

Market-based conservation is an innovative way to stretch resources, to take conservation beyond the boundaries of the far, ranch and forest, while preserving productivity, maintaining and enhancing landowner livelihoods and producing environmental benefits.

Market-based solutions generally provide flexibility to undertake actions that have the lowest cost and result in more cost-effective achievement of natural resource conservation and environmental goals compared to traditional command and control approaches.

Examples of market-based conservation include:

• Green payments from public funds, including programs such as the Conservation Stewardship Program, which rewards producers for good conservation practices.
• Direct private sector payments for ecosystem services, in which the private sector defines and purchases benefits.
• Market-based environmental standards and certifications that add value to products and services, such as those that promote farming practices that reduce pesticide use and enhance biodiversity.
• Environmental credits for strategies that provide ecological services, such as carbon and water quality credits.