Conservation Easements: Striking a Balance between Public and Private Wishes

By: Jessica Drake, Staff Member

In 2010, the Bluegrass Conservancy reached its goal of protecting 10,000 acres of farmlands in the Bluegrass Region. Andy Mead, Saving the Bluegrass Farm by Farm, Lexington Herald Leader, Jan. 9, 2010, available at http://www.kentucky.com/home_garden/story/1088648.html (last visited Jan. 20, 2010). The conservancy, like many in the United States, is a private, non-profit organization that encourages the protection of farms like those in Kentucky through innovative, legal means such as conservation easements. Bluegrass Conservancy, http://www.bluegrassconservancy.org/index.html (last visited Jan. 20, 2010). These easements require the voluntary relinquishment of "sticks" of private landowners' "bundle of rights" that accompanies landownership. These "sticks" inevitably restrict the ability for land to be developed and require the preservation of the property in its current state and for its current uses. In Kentucky, specifically, many horse and agricultural farm owners find the prospect increasingly appealing in order to protect their land from being sold to build strip malls and subdivisions, with the added benefit of tax breaks. Id. While the documents establishing these easement protections are usually flexible and tailored to the land at issue, they are, by definition, perpetual in duration and not generally susceptible to alteration or termination. Kentucky Revised Statutes § 382.810-382.860 (2010).

As lawyers and critical thinkers, we must always question our policies and decisions. Are conservation easements the way to go?

Conservation Easements are not created without opportunity costs. These lands will be labored with dead hand control – limiting the ability of future generations to change/sell the land according to their own needs and desires. Is it possible for conservation easements written today to allow enough room for future developments and changed circumstances? Many are concerned with the possibility that the present uses may become obsolete or even detrimental to the collective generations of the future, but find refuge in the ability of the law to cope. Nancy A. McLaughlin, Conservation Easements – A Troubled Adolescence, 26 J. Land Resources & Envtl. L. 47 (2005); Barton H. Thompson, Jr., The Trouble with Time: Influencing the Conservation Choices of Future Generations, 44 Nat. Resources J. 601 (2004). The Trouble with Time, in fact,
asserts that while these are valid concerns, the law has built in mechanisms to deal with unanticipated changed circumstances, and the benefits of perpetual conservation, such as lower transactional costs and hard barriers for future development, far outweigh the problems. Id. at 608-613. Kentucky courts also have this same ability to terminate or modify a conservation easement in certain situations. Kentucky Revised Statutes § 382.810-382.860 (2010). Still, is this enough of a safety valve?

On the other hand, some landowners feel that placing negative covenants upon their property is not enough. While it currently appears that these negative covenants will be enforceable in state courts by the private or public entities that "own" the "development stick," many feel that things could change. National Public Radio recently reported about one Michigan woman who desired to never to leave her "easement protected" land. David Baron, Landowner Calls on Death to Save Her Farm (NPR broadcast Dec. 30, 2009), available at http://www.npr.org/templates/story/story.php?storyId=121752798. In order to carry out this wish, she intended to require, at her death, to be buried on her precious property according to the ideas of the "green burial movement". Green Burials, http://www.greenburials.org/ (last visited January 23, 2010) (this movement is one that encourages people to be buried in either bio-degradable casket, shroud, or favorite blanket to ensure the most natural burial possible). She discussed her desire to assure the preservation of her land as well as giving back to it even after her death. Id. In fact, she has invited others to join her in this mission – an invitation that several of her friends have accepted. Id. The idea of her burial will just make it that much harder for someone to build something like "a bookstore" on her property. Id.

Ultimately, the law rarely makes everyone happy, as lines must be drawn at some point. However, conservation easements have, over time, become not only an innovative way but also a reliable way to strike the balance between public interests and private landownership. The world only has so much land and if it continues to be developed each time huge sums of money are at stake, our environment will be increasingly harmed. Regions like the Bluegrass may look to the option of conservative easements to ensure the continuation of not only their environment but also historic industries like raising horses. While some, like Joan Graham, would argue that these easements are not enough – that the land must become something more sacred than legally prohibited – it must be recognized that the future is unpredictable. The law then must allow for unknown possibilities that could change the current outlook of such land. In any event, our future generations, while maybe having to change the legal restrictions upon the land, will at least have it to fight over.

Drinkable Water is a Pollutant?: Northern Plains Resource Council v. Fidelity Exploration

By: Laura L. Mays, Former Staff Member; This Comment was originally published in JNREL Vol. 20 No. 1.

Abstract by: Andrew Leung, Staff Member

In deciding Northern Plains Resource Council v. Fidelity Exploration, 325 F.3d 1155 (9th Cir. 2003), the Ninth Circuit held that naturally occurring groundwater in an unaltered state is a pollutant under the Clean Water Act (CWA) and should be treated accordingly. "Drinkable Water is a Pollutant?: Northern Plains Resource Council v. Fidelity Exploration" examines the court's analysis and explains the probably harmful effects that this holding will have on the coal industry in the Commonwealth of Kentucky and the country at large.

The "pollutant" in question is groundwater removed from natural aquifers through the harvesting of Coal-Bed Methane (CBM). CBM is a naturally occurring deposit of methane that exists in situations where coal is saturated with groundwater, thus trapping methane inside the coal. When CBM deposits are tapped, the miners must also remove the groundwater deposits in order to achieve the ideal pressurization at the mining site.

In Fidelity Exploration, Fidelity Exploration and Development Company extracted CBM from the Powder River Basin in Montana for commercial sale. The groundwater that was brought to the surface was transported to and deposited in the nearby Tongue River. It should be noted that the dissolved solids level in the groundwater was nearly triple that of the river. When this fact was publicized, The Northern Plain Resource Council (NPRC) filed citizen suit in the District Court for the District of Montana. The district court granted summary judgment for Fidelity, but NPRC timely appealed to the Ninth Circuit.

The Clean Water Act proscribes that transport and discharge of a pollutant from a "point source" into "navigable waters" is unlawful. In the case at hand, the "point source" is the underground aquifer from which the CBM was harvested, and the "navigable wate[r]" is the Tongue River. Although defendant Fidelity noted that the water was disposed of in its natural state, the Ninth Circuit found that CBM water was "industrial water" because it was produced as a byproduct of an industrial activity. Ironically, the court conceded that the same water was generally potable, and could be used for agricultural means.

This holding effectively dissuades coal companies from exploiting the CBM deposits that often accompany the coal deposits that they already mine. By imposing this obstacle, coal companies are not likely to change their practice of allowing CBM to escape into the atmosphere, where it contributes to global warming. Fidelity Exploration serves as one of those rare instances where a strict protectionist approach to the environment via literal interpretation of statutes may actually serve to cause greater harm than good.

Study to be Conducted on the Impact of Horses on the Environment

By: Katherine Huddleston, Staff Member

The United States Department of Agriculture ("USDA") has begun a five-year educational project entitled, "Environmental Impact of Equine Operations." Natalie Voss, Environmental Impact Study to Include UK Faculty Member, THEHORSE.COM, Jan. 13, 2010, http://www.thehorse.com/ViewArticle.aspx?ID=15628. While the equine industry has a long and rich history, very little is known about the potential its environmental impact. Id. This project was initiated by Michael Westendorf, PhD, of Rutgers University and proposes to combine the efforts of "Cooperative Extension agents and university faculty" from 12 states. Currently the states being studied include: Connecticut, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Alabama, New Jersey, North Carolina, Pennsylvania, South Dakota, and Vermont. Id. Kentucky joined this list just last week when the Department of Agricultural Economics at the University of Kentucky announced that assistant director, Jill Stowe, PhD, would take part in the project. Id.

Participants will soon begin research; the results of which they hope to circulate widely at the close of the five-year term. Id. Potential research topics include "the effects of manure and fertilizer runoff on soil and groundwater," which has been shown to affect water environments, as well as how horses' diets and medications can affect "life in the soil and water." Id. With the "Go Green" movement taking hold across the country, these researchers are hoping to find the best balance between "the safety of the horse and … the well-being of the environment," says Stowe. Id.

The results of the studies will likely affect the industry both here in Kentucky and nationwide. While the overall impact of the equine industry on the environment is likely very slight in comparison to the cattle and other large livestock industries, the project will hopefully find concrete and manageable ways in which the industry can join in the fight for a more environmentally friendly society. Id.

CRUDE EVALUATIONS: DO COURTS PROPERLY CONSIDER THE COSTS OF FOREIGN ENERGY RELIANCE?

By: LeeAnne Edmonds Applegate, Former Staff Member. This Comment was originally published in JNREL Vol. 20 No. 1.

Abstract by: Ramsey Groves, Staff Member

Montana Wilderness Ass'n. v. Fry, 310 F. Supp. 2d 1127 (D. Mont. 2004) was decided by the United States District Court for the District of Montana. In this crucial case, the court enjoined the continued use of a natural gas pipeline based on violations of the National Environmental Policy Act of 1969 (NEPA). In issuing the injunction, the court weighed the public interest in protecting the environment against the potential economic harm to the energy company. However, the court failed to consider the economic harm to the public. Arguably, the court erred because the policies and goals of NEPA indicate the relevance of economic harm to the public. On multiple occasions, the courts of the Ninth Circuit have exhibited faulty analysis of energy issues by refusing to consider the economic harm to the public despite the requirements of the NEPA.

The NEPA states that its goals include "identify[ing] and developing methods and procedures . . . which will insure that presently unquantified environmental amenities and values may be given appropriate consideration in decision-making along with economic and technical considerations." Thus, the NEPA states in no uncertain terms that economic impact should be considered. However, in Montana Wilderness Ass'n v. Fry, the Ninth Circuit recognized that the remedy for a NEPA violation is ordinarily an injunction, and the court stated that the factors to be considered include harm to the public and harm to the parties. The court further stated, "A third party's financial damages from an injunction generally do not outweigh potential harm to the environment." Based on this statement, the Ninth Circuit clearly places more weight on the environmental impact factor.

When balancing factors that include harm to the public, it is reasonable to expect a court to give appropriate consideration to economic harm to the public. This is certainly true when one considers the rising price of oil. This is of great importance because of the widespread use of petroleum products in our culture and the profound effect of these products on our national economy. Rising oil prices not only increase transportation and heating costs, but they also impact the costs of household items made from petroleum derivatives, such as diapers, deodorant, aspirin, dentures, golf balls, and compact discs.

Fortunately, not all circuits have the same view as the Ninth Circuit. The D.C. Circuit recognizes the value in reducing U.S. dependency on foreign oil. As such, the D.C. Circuit takes a more expansive approach by considering all of the factors articulated by Congress, including the economic harm to the public.

The Ninth Circuit clearly fails to comply with the NEPA policy of weighing economic harms. This circuit is the largest in the country geographically and includes within its jurisdiction the oil-producing states of California and Alaska. The Ninth Circuit's view is particularly troubling because, by failing to consider the impact of increased energy costs on the public, there is certainly a potential for great damage to the economy. Absent a Supreme Court decision mandating that the standards of NEPA are to be considered in their entirety, the Ninth Circuit is likely to maintain its problematic position.

Horse sales tax exemption: Good for the industry, bad for the state?

By: Adrianne Crow, Staff Member

According to a recent article in the Lexington Herald-Leader, some Kentucky citizens have begun to question tax exemptions provided to horse sales and the impact of this exemption on the state's economy. Janet Patton, Horseman say exemption crucial for Ky., Lexington Herald-Leader, Jan. 17, 2010, available athttp://www.kentucky.com/horse_racing/story/1099255.html (last visited Jan. 20, 2010). Kentucky Revised Statute § 139.531 provides exemptions for sales tax and use tax for the sale or use of horses made for breeding purposes only as well as for the sale of horses less than two years of age bought by out-of-state residents who take the horses out of Kentucky. Ky. Rev. Stat. Ann. § 139.531(2) (2009).

Based on estimates supplied by the state, this practice has cost the Kentucky almost $220 million in lost revenue from 2004 to 2010. See Patton. For example, SheikhMohammed bin RashidalMaktoum of Dubai, Kentucky's top buyer of thoroughbreds, has purchased more than $60 million in broodmares at Keeneland's fall sales since 2002. Id. Had these purchases been taxed at Kentucky's rate of six percent, they would have generated more than $3.6 million by themselves. Id. During this time of budget short-falls and overall cut-backs in our state, some suggest that it is time to reevaluate Kentucky's tax code.

However, others worry that that taxing more sales would cost Kentucky a competitive edge in the horse industry, which is already hurting. Those in the horse industry are afraid that if Kentucky imposes a sales tax, buyers will simply go to other states that offer exemptions, including Maryland, New York, California, Florida, Pennsylvania and Texas. Id. Additionally, those who support keeping the tax exemptions point out that the horse industry is taxed in ways that other agriculture sectors are not. Jay Blanton, spokesman for Keeneland, explained "that sales of many horses, including those of racehorses, are taxed, and that horse farms pay sales taxes that other agricultural enterprises don't. Feed and hay for cattle, for instance, are exempt while the same products for horses are taxed." Id.

During these continued tough economic times for people in Kentucky and across the country, these issues regarding tax reform are surely to be debated by our legislators in the near future.

Senator Thayer Pulls in the Reins on his Gambling Amendment

By: Natasha Farmer, Staff Member

Republican Senator Damon Thayer called off a committee vote on his proposed constitutional amendment on January 13. Janet Patton, Senator Calls Off Committee Vote on Gambling Amendment, Lexington Herald-Leaser, Jan. 14, 2010, available at http://www.kentucky.com/news/state/story/1094981.html (last visited Jan. 17, 2010). His proposed amendment, if passed by the full Senate, would allow video lottery terminals in up to seven counties that have racetracks, but the racetracks would have to compete for this license.

Id.

This bill was expected to pass the Senate State and Local Government Committee; however, it was unlikely to pass a floor vote by the full Senate.

Id.

Thayer

believed that delaying the bill would give him more time to gain additional support for his bill. Ron Mitchell,

Thayer

Delays Committee Vote on Gaming Bill

, January 14, 2010,

available at

http://www.bloodhorse.com/horse-racing/articles/54796/thayer-delays-committee-vote-on-gaming-bill (last visited Jan. 17, 2010.)

Thayer

said that he "wanted to see if there is anyone else that is willing to come to the table."

Id.

Many leaders and racetracks of the horse industry have opposed Senate Bill 21 because "it does not guarantee that tracks get expanded gambling." Janet Patton, Senator Calls Off Committee Vote on Gambling Amendment, Lexington Herald-Leaser, Jan. 14, 2010, available at http://www.kentucky.com/news/state/story/1094981.html (last visited Jan. 17, 2010). But, Thayer said he has heard from a few "rank and file" horsemen that are disappointed with the horse industry opposing his bill. Id.Thayer explained that delaying the vote until later this month will hopefully translate into bipartisan support. Id. "Gambling Licenses are something of value to the people of Kentucky. A competitive bidding process is likely to result in higher fees to the state," Thayer explained. Id. Furthermore, he said that increased purses from the slots would bring more racehorses, which would generate revenue for the tracks. Id.

Senator Ed Worley has said no Democrat will vote for Thayer's bill. Id. If Worley's statement is true, Thayer's bill will not pass because a constitutional amendment needs at least 23 votes in the Senate to pass. Id. Only time will tell if Thayer's amendment can gain enough bipartisan support to pass through the Senate.

The Battle Between Coal and Gas Rights Continues: Hazard Coal Corp. v. Kentucky West Virginia Gas Co.

This comment was written by former staff member Elizabeth Clevinger and published in JNREL Vol. 20. No. 1. Staff member Tanner James wrote the following abstract.

Coal and natural gas, despite the ongoing debates about their conservation, are undeniably important to modern society's history and future. Landowners of resource-rich property often grant rights of access to those entities that facilitate the extraction and use of these natural fuels. But, on occasion, conflict arises; and, courts must effectively determine the importance of each resource involved.

In Hazard Coal Corp. v. Kentucky West Virginia Gas Co., 311 F.3d 733 (6th Cir. 2002), a property dispute between a coal company and natural gas company resulted in a victory for natural gas—potentially signifying the end of an era of coal dominance. Hazard Coal Corporation owned the mineral property rights of the tract of land in question. Kentucky West Virginia Gas Company held limited rights to run pipelines through the property that would allow access and transportation of their natural gas. After years of conflict-free operation, the plaintiff sought to extract coal from the property in a location that required the natural gas pipelines to be destroyed or relocated at the expense of Kentucky West. When Kentucky West declined, this case came to trial.

Despite finding that the property agreement was violated by Kentucky West, the Court considered equity and policy, finding for the defendant. The equitable notion of acquiescence (e.g., the plaintiff knew or should have known that the defendant was violating the agreement, yet allowed the violation to continue without complaint) prevented the plaintiff from succeeding on claim of breach. Perhaps more importantly, however, is that the Court considered social policy in determining that Kentucky West should not face liability for decisions made by Hazard Coal.

There once was a time when coal was king, and courts used policy considerations to protect the interests of coal companies. If Hazard Coal Corp. v. Kentucky West Virginia Gas Co. is any indication, the pendulum is now swinging away from coal, in favor of other viable fuel resources.

KJEANRL is now on the ABA blog database

After a winter break hiatus and below freezing temperatures in the Bluegrass, the blog will be up and running next week!

Over the break the blog was added to the ABA's blawg database. The database provides a search engine for legal blogs. To visit the ABA's description of the blog please visit: http://www.abajournal.com/blawg/kentucky_journal_of_equine_agriculture_and_natural_resources/


If the link does not work please go to http://www.abajournal.com/. Click on the Blawgs tab. In the Search area type in "KJEANRL."

This semester we also look forward to posting those comments by staff members not chosen for publication in our spring edition. Due to the limited space allotted for comments in our print edition we can only publish so many pieces but we wish to provide the world with the well-written and insightful comments written by our staff members.

For those readers awaiting the fall print edition of the journal we are hoping to have the journal in publication by late January or early February. For those interested in ordering a copy of the journal please visit the Contact Us tab for more instructions on subscriptions.

Blog to observe University of Kentucky Winter Break

Fellow readers,
The University of Kentucky College of Law is starting finals beginning next Tuesday! Considering that all our staff members are law students no one will be blogging until the beginning of spring semester. We hope to start posting by the second week of school, Monday January 18. Thank you all for your time and we look forward to discussing exciting issues in the fields of equine, agricultural and natural resources law in 2010! In addition, we are proud to announce that the next print issue of KJEANRL should be ready after the first week of January and if you are interested in ordering a copy you should do so now! To check which pieces will be published in our next issue please read our "Current Issue" page.

Thank you all and have a great winter!

Sincerely,
Mark Rouse, Production Editor and the KJEANRL staff