Legal Framework for Watershed Land Conservation

by Louis Smith and Chuck Holtman

The following presentation was given at the Minnesota Association of Watershed Districts, December 1, 2005.

  1. Introduction and Overview
    . . . the riparian zone, [is] a ‘thin green line’ of wetter, greener, and richer belt of unique vegetation along almost all streams. . . . Buffering the stream against degrading influences from upland activities … the riparian zone –if left undisturbed—filters out sediment, … and nonpoint pollutants of many kinds. It is here in this dynamic, energizing, and productive corridor so vibrant and biologically diverse, that the microorganisms, unique animals, and highly active photosynthesizing plants can change destructive chemicals and degrading substances into benign or useful organic matter. --Thomas F. Waters, Wildstream 89-90 (2000). Can water resources be protected without considering upland? Can a watershed be managed without considering all of the elements of its natural systems? Land conservation to preserve natural areas can be an important tool for watershed management. The legal framework for watershed districts to undertake land conservation is grounded on the fundamental premise that the preservation of natural upland areas can be beneficial, even critical, to the protection of water resources.

  2. Land Conservation and Watershed District Powers
    Watershed districts have broad authority to acquire real property for conservation purposes:
    1. A watershed district has the power, to the extent necessary for lawful conservation purposes, . . . to exercise the power of eminent domain; Minn. Stat. 103D.335, subd. 1;
    2. The managers may acquire by gift, purchase, taking under the procedures of this chapter, or by the right of eminent domain, necessary real and personal property. Minn. State. 103D.335, subd. 11.

  3. Land Conservation and Watershed District Purposes
    Watershed districts are special purpose local units of government, created for special statutory purposes:
    1. General purposes. To conserve the natural resources of the state by land use planning, flood control, and other conservation projects by using sound scientific principles for the protection of the public health and welfare and the provident use of the natural resources, the establishment of watershed districts is authorized under this chapter. Minn. Stat. 103D.201, subd. 1.
    2. Specific purposes. A watershed district may be established for any of the following purposes:
      1. to control or alleviate damage from flood waters;
      2. to improve stream channels for drainage, navigation, and any other public purpose;
      3. to reclaim or fill wet and overflowed land;
      4. to provide a water supply for irrigation;
      5. to regulate the flow of streams and conserve the streams' water;
      6. to divert or change all or part of watercourses;
      7. to provide or conserve water supply for domestic, industrial, recreational, agricultural, or other public use;
      8. to provide for sanitation and public health, and regulate the use of streams, ditches, or watercourses to dispose of waste;
      9. to repair, improve, relocate, modify, consolidate, and abandon all or part of drainage systems within a watershed district;
      10. to control or alleviate soil erosion and siltation of watercourses or water basins;
      11. to regulate improvements by riparian property owners of the beds, banks, and shores of lakes, streams, and wetlands for preservation and beneficial public use;
      12. to provide for hydroelectric power generation;
      13. to protect or enhance the water quality in watercourses or water basins; and
      14. to provide for the protection of groundwater and regulate its use to preserve it for beneficial purposes.

      Minn. Stat.103D.201, subd. 2.

  4. Land Conservation and Watershed Planning
    1. Metropolitan Water Management Program
      1. Purposes
        1. protect, preserve, and use natural surface and groundwater storage and retention systems;
        2. minimize public capital expenditures needed to correct flooding and water quality problems;
        3. identify and plan for means to effectively protect and improve surface and groundwater quality;
        4. establish more uniform local policies and official controls for surface and groundwater management;
        5. prevent erosion of soil into surface water systems;
        6. promote groundwater recharge;
        7. protect and enhance fish and wildlife habitat and water recreational facilities; and
        8. secure the other benefits associated with the proper management of surface and ground water.

        Minn. Stat. 103B.201.
      2. Land and Water Resources Inventory (8410.0060)
        • Surface water resource data;
        • Groundwater resource data;
        • Land use (existing and anticipated);
        • Water-based recreation areas and land ownership;
        • Fish and wildlife habitat;
        • Unique features and scenic areas.
      3. Goals and Policies (8410.0080)
        “The goals and policies should recognize the fundamental relationship between land use and water quality.”
      4. Assessment of Problems (8410.0090)
        Must consider the general impact of land use practices and in particular land development and wetland alteration on water quality and water quantity; Must consider the adequacy of programs to maintain the tangible and intrinsic values of natural storage and retention systems.
      5. Implementation Program (8410.0100)
        Implementation program includes nonstructural solutions.

  5. Assuring Public Purpose
    1. The Public Purpose Doctrine
      1. Article Four of the Minnesota Constitution provides that: “the legislature shall pass no . . . law . . . authorizing public taxation for a private purpose.” Minn. Const. art. 4, sec. 33.
      2. In interpreting this provision, courts consider several factors, including whether the activity: (a) serves as a benefit to the community as a body; (b) is at the same time directly related to the functions of government; and (c) has as its primary objective the accomplishment of [the stated public purpose] and not the promotion of the private interests of the [purchaser]. Port Authority of St. Paul v. Fisher, 145 N.W.2d 560, 568 (Minn. 1966).
    2. Procedures
    3. Two procedures are well-established in local government to assure that in the disposition of real estate, the public purpose, rather than private benefit, is served:
      1. Obtaining an independent appraisal to support the purchase price;
      2. Using some means to obtain a competitive transaction.
    4. Several opinions of the Attorney General have interpreted statutes authorizing municipalities to acquire or dispose of property to require a competitive process for disposition of real estate:
      1. Village council, in selling land, was bound to get the best price that it could for the village, and the council could not give the land away or take a lower price where to council’s knowledge a higher price could be obtained. Attorney General’s Opinion, 90-E-6, July 16, 1947.
      2. Village council cannot purchase realty for resale or for purpose of making a gift of all or part thereof to private interest. Attorney General’s Opinion, 469-A-12, Oct. 8, 1958.
      3. Village could not have conveyed realty to school district unless village received as consideration the highest obtainable price. Attorney General’s Opinion, 469-A-15, March 1, 1950.

  6. Valuation of Conservation Easements
    1. “Market value”: the difference in the value of the underlying fee interest with and without the easement restrictions.
      1. The purpose of this criterion is to ensure the watershed district is not paying more than it should on the open market, without a strong reason to do so.
      2. This “market value” is determined by a “before and after” appraisal.
      3. The valuation should be sensitive to factors that limit the effect of the easement on market value, for example:
        1. Wetlands and lowlands typically not developable due to physical and regulatory constraints.
        2. Area subject to conservation easement may be used in density calculation
        3. The easement may create significant tax benefits for the fee owner.
    2. “Water resource value”: the difference in the amount of water resource protection with and without the easement restrictions.
      1. The purpose of this criterion is so that the watershed district is spending its money cost-effectively.
      2. An easement may have a high “market value” but a low water resource value. Conversely, the best situation is an easement with a low “market value” but a high water resource value.
      3. Elements of water resource value may include:
        1. Flood protection
        2. Water quality protection/treatment
        3. Soil preservation
        4. Shoreline/streambank preservation
        5. Habitat preservation
        6. Passive recreation and scenic benefits
      4. It may be, in a given case, that an area with high water resource value is not a sound easement purchase because its values are likely to be preserved without an easement:
        1. Physical constraints
        2. Regulatory constraints
        3. Infrastructure constraints
        4. No foreseeable market
      5. Water resource value cannot be fully quantified. Appraisal techniques may help on some elements of resource value, as may scientific evaluation. A land conservation program plan identifying priority areas may help ensure cost-effectiveness on a program basis where a parcel-by-parcel value estimate is more difficult. The watershed board will need to compare a proposed transaction with other potential uses of its funds and use judgment.

  7. Policy Considerations
    1. Should the easement be perpetual, or just for a term of years?
      1. Landowner may not want to “commit” to a permanent easement, though most are quite willing.
      2. Watershed district always should prefer a perpetual easement: “market value” of perpetual easement is essentially the same as a term easement and a permanent easement is necessary if district intends to put efforts into enhancing the resource.
      3. IRS requires permanent easement for landowner tax benefits.
      4. Term easement may be justified to allow time for planned approach.
    2. Should the watershed district acquire the right to actively manage the land and water within the easement area?
      1. Area may be degraded or threatened, and need active hydrologic or vegetation management to gain water resource value from easement.
      2. Will require careful design and modeling of system response to precipitation events to define easement boundaries by flowage.
      3. Terms of easement will be more complicated (insurance, environmental warranties, indemnifications, notice).
      4. Greater ongoing monitoring costs.
    3. Will public access be permitted?
      1. Resource protection vs. recreation.
      2. Typically conservation easement DOES NOT mean public access.
      3. Privacy issues for landowner.
      4. Liability, management issues for landowner and watershed district.
      5. Partner with local government for day-to-day management.
    4. What uses are reserved to the landowner?
      1. Carefully delineating rights to preserve water resources values while causing the least impact on landowner uses creates the most "value" from transaction. Ability to preserve certain uses may be essential to landowner willingness to convey an easement.
      2. Typically development is prohibited within easement area. Possible compatible uses include:
        1. Cultivation
        2. Grazing
        3. Timbering
        4. Mining
        5. Use by motorized vehicles (summer, winter)
        6. Recreation
      3. Use may imperil tax benefits. IRS prohibits surface mining and any use that may injure a “significant conservation value.”
      4. Watershed district must determine that any reserved use will not injure water resource benefits that are key to the easement.
      5. May allow certain uses based on management plan approved by watershed district. This allows for more careful tailoring of complementary uses.
      6. Higher administrative/monitoring costs for watershed district.

  8. Liability Risks
    1. Liability for prior site contamination
      1. Under federal and state law, a landowner may be liable for environmental contamination caused by prior owner. Chance that the holder of a conservation easement will be held liable may be low, but prudence should be exercised.
      2. "Due diligence” should be exercised before accepting an easement, in the form of a Phase I and possibly Phase II environmental assessment. This will both (a) steer the watershed district away from a problematic property and (b) establish the basis for “innocent landowner” defense if later contamination issue arises.
      3. “Voluntary Investigation and Cleanup” program of Minnesota Pollution Control Agency can limit liability risk if potential contamination exists.
      4. Easement should require grantor to warrant no knowledge of contamination and indemnify watershed district for contamination liability.
      5. Easement should make clear that watershed district has no authority to control use of property.
      6. If possible contamination issue, review coverage with insurer before accepting easement.

    2. Landowner liability

      1. A landowner may be liable for obvious or hidden hazards on the land.
      2. If watershed district is passive easement holder, easement should assign all landowner liability to the fee owner.
      3. If watershed district retains right to manage site hydrology or vegetation and to install structures, it assumes liability to the fee owner and the public (including trespassers) for any hazards it creates or maintains.
      4. Sound design and modeling are first precaution against liability to fee owner for flooding or property damage.
      5. Immunities, defenses and liability limits protect public bodies.
      6. Review liability coverage with insurer before accepting easement.
      7. Landowner liability generally can be readily managed.

  9. Alternatives to Conservation Easements
    1. Reasonable regulation often can protect water resources without cost to watershed taxpayers.
      1. Land use regulation by the city, county or township offers many options to protect sensitive waters, wetlands and riparian lands:
        1. Subdivision dedication
        2. Density credits/TDR
        3. Shoreland and floodplain
        4. Zoning setbacks
        5. Steep slopes
        6. Tree preservation
      2. A watershed district can protect sensitive lands through floodplain, wetland protection, buffer, stormwater management and other rules.
      3. Under the Wetland Conservation Act, a comprehensive wetland management plan or creative use of replacement credits can foster protection of wetlands and lands riparian to them.

    2. Other programs offer resources for easement acquisition.

      1. Reinvest in Minnesota
      2. Permanent Wetland Preserves Program
      3. DNR Natural and scenic areas grants
      4. Metro Greenways
      5. Conservation Reserve Program/Conservation Reserve Enhancement Program (15-year contracts)
      6. Agricultural preserve designation

    3. Many programs offer resources to encourage landowner resource enhancement efforts.

      1. Landowner Incentive Program

      2. Flood Hazard Mitigation

      3. Streambank Maintenance Grants

      4. Wetland Reserve Enhancement Program

      5. Other federal/state programs

      6. Watershed district cost-share program

  10. Conclusions

    1. As with any watershed initiative, effectively implementing a land conservation program requires careful planning, thoughtful policy development, and thorough documentation. Understand the powers of watershed districts and potential partners and the programs and strategies that exist to use them.

    2. Land conservation should be considered not as an isolated program, but rather as one element in a comprehensive approach to watershed management. Understanding and acting towards community, land use and water resource needs on a watershed or subwatershed basis maximizes options and allows resources to be directed most cost-effectively.

    3. Close engagement with local units of government, state and regional resource agencies and the affected public makes all of the tools in the box available for use and helps ensure that all interests are accounted for. Putting the puzzle pieces together creatively can create more value for all interests and expand the range of “win-win” approaches.