Money Hanging from Trees

Psst. Want a hot tip. Buy trees... it's the next hot thing..... Or so says The Sophisticated Investor in Marketwatch.
How so? The evolving market of "carbon trading"
Carbon trading is going to be a $23 billion marketplace in just five years, according to some estimates. That's up from a mere $450 million today.
Trees store carbon dioxide, which offsets the carbon emissions that lead to global warming. The international treaty on climate change, the Kyoto Protocol, invented a system that provides economic incentives for business and countries to reduce their carbon emissions by buying carbon credits as an offset. Those credits are quickly becoming akin to futures contracts......
....CarbonCredEx.com, a "venue for the exchange of carbon credits between emitters, investors and growers" offers land and forests for sale as credit agents on its site. Carbon credit funds are being set up around the globe to amass forests as carbon emission offsets. The World Bank even established its own fund with public and private participants. It was just closed to new investors after being oversubscribed.
There are other ways, such as investments in renewable energy projects in developing nations, to gain carbon credits under the Kyoto Protocol. But carbon storage is the current focus of credit transfer. This is because demand for logging remains strong and carbon emissions remain rampant.
Critics of the carbon-credit transfer system say it's too bureaucratic and complicated. They also complain it allows rich nations to effectively buy their way out of reducing harmful emissions.
The first part is true, hence the investment opportunity to capitalize on the market newness and inefficiency. The second part is nonsense. Emissions aren't geocentric; saving a tree in Patagonia offsets greenhouse gas in Pomona; we have a common roof. The rich paying their way out still reduces carbon effects.
That's why rewarding land conservation may sound like a radical approach to garnering a foothold in the burgeoning carbon-credit trading market. But it isn't. It's a trading incentive.
That said, go buy a tree. You'll be getting in on the ground floor of the world's next big investment opportunity
Is this an income source for land trusts? If it's not now, it appears that it could soon be. For more info, check out the glossary at CarbonCredEx. I have no idea how much money we're talking here, but I assume the more trees and wetlands you have, the more it could be worth.

Passing of a Land Preserver

Richard Brewer (on the Landtrust Listserv) points out the passing of a Land Trust Pioneer. In the New York Times obituary the headline reads "Kingsbury Browne, Land Preserver, Dies at 82. Nice way to be remembered, isn't it?
Browne's biggest legacy may be the Land Trust Alliance, says the obituary...
Land trusts generally buy land or work out voluntary agreements with private owners that limit future development; typically they focus on farmland, forests, stretches of coastline and scenic vistas.
Mr. Browne's dedication to them underpinned the Land Trust Alliance, a national umbrella group for what had been a scattershot land-use movement. Since he helped form it in 1982, the alliance has given legal and institutional support, practical know-how and a collective voice to more than 1,500 land trusts around the country.
Mr. Browne joined the issue while counseling environmental groups and public agencies on tax matters. Then, on a sabbatical from his firm, Hill & Barlow, in 1980, he visited land trusts scattered around the country under the aegis of the Lincoln Institute of Land Policy in Cambridge, Mass., and Harvard Law School.
The experience showed him that those isolated efforts - unlike the big established ones, like the Nature Conservancy - needed a national association and clearinghouse. He called a meeting in Cambridge to organize a Land Trust Exchange, soon renamed the Land Trust Alliance.
One of Mr. Browne's noted contributions was to adapt and apply to conservation the common-law concept of easement, in which a property owner may cede the right of way on the land for a road or transmission line. As developed by Mr. Browne, easements also permitted nonprofit preservation trusts to gain the owner's consent to keep a property undeveloped or maintain it as a forest or farmland, with the owner gaining a tax advantage in return.
Mr. Browne served as general counsel to the alliance for years. He was editor and chairman of its Conservation Tax Program and sat on the advisory council of the Trust for Public Land, a national conservation group. He retired as a partner in Hill & Barlow in 1992, when he became of counsel to the firm.
Preserver of Land, Father of the Conservation Easement... those are legacies to make anyone proud.

Thanksgiving, 2005

Happy Thanksgiving to everyone. This has been one of those trying years, but despite the bad there has been so much more to be thankful for. Happy wishes to you and yours.
-Pat, Robin and Abigail

Family addendum--
To get an idea of the trying time, check out MSNBC.Com. That's my Aunt Betty and Uncle Pete Benevenutti, as the work crews tear down half of their house. That house has many of my fondest holiday memories. As kids we always ended up in "the Bay" for either Thanksgiving or Christmas or both. I still remember one Thanksgiving in the early '70's. There are 8 Benvenuttis and assorted Benvenutti friends, most of them older (I was still sitting at the little kids table). Everyone is in full late '60's hair... long and shaggy. One of the cousins came upon this guy from South America who was bicycling through the U.S. and invites him to dinner. If you read the MSNBC story, you'll see the back room that's still standing. That's where we had the dinner. Room filled with loud talking people. It was a riot (a very fun one.) I still remember the family portrait from that year. A bunch of wild haired, hippie looking people all having a great time. And one wild haired, hippie looking guy from South America, wondering if this was what all of America looked like on Thanksgiving. What a great house.

The (Re)Wild Mississippi

Remember the Mississippi River Flood around St. Louis in 1993? The middle Mississippi kept rising and rising, right through towns that never thought it could get that high. I helped fill sandbags that were supposed to help protect downtown Alton, Illinois for two days (it was something of a TV news stunt... the old "we care so much we're sending volunteers to sandbag"), and all I remember is that despite millions of sandbags, the river still rose over the top and flooded the town.
I bring up this flashback because other people also remember the flood of '93, but they're still doing something about it. The St. Louis Post-Dispatch reports that.....
Since the flood of 1993, a nonprofit group has quietly assembled 25,000 acres of land around the Mississippi in an attempt to return some of the wild functions to the river. The object isn't the fickle waterway that Twain observed but one repopulated with wetlands, advocates say.
"It's called 'wilding' the river," said Tim Richardson, Washington liaison for the American Land Conservancy, which is the nonprofit organization that has established the Mississippi River Conservation Partnership. Most of the land, including a 3,200-acre chunk dedicated last month, has been assembled in the last five years by the California-based group.
The American Land Conservancy has figured out how to pull off a big project like this without making many waves.....
The project's biggest advantage politically, according to backers, is that it cuts down on flood insurance cashed in by farmers growing crops in flood-prone regions.
"What we do makes very good economic sense," said Jenny Frazier, vice president of the American Land Conservancy. The cost savings over the long term may be why the endeavor has avoided controversy associated with some other conservation efforts. About 95 percent of the property is considered public land, and much of that can be hunted or fished with the proper approvals.
"This project should serve as a model for the rest of the nation," said Rep. Jerry Costello, a Democrat from Belleville who represents Southern Illinois and is one of the project's strongest backers. "Flood plain wetlands restoration is good for the environment while providing more land for public use."
In the Mississippi region, an added ecological benefit to reducing farming near the river is the diminishing of fertilizer runoff into the Mississippi.
"The efforts are averting an endangered species crisis along the river," Richardson said. Species at risk include pallid sturgeon and birds such as the piping plover and the least tern..........
One of the criticisms I get is that I'm putting farmers out of business," said Frazier, who said she hunted and fished on her property in Bollinger County, Mo. "That's completely inaccurate. We find landowners who want to quit farming in the flood plain.
It's a lot better than filling sandbags, I can attest.

1491

I have once again been remiss in my blogging. Partially to blame is the November ratings book (going pretty well, thank you for asking) and a general lack of things grabbing my attention. But I have also been engrossed in "1491" by Charles C. Mann. It is a fascinating look at the latest scholarship on what the Americas looked like in the time before Columbus arrived. I highly recommend it. The gist is that we're realizing that the picture of what North and South America looked liked before Columbus that we learned in high school is completely wrong. These were not mostly empty continents asserts Mann, they were actually more populous than Europe and Asia. It was only the introduction of "Western Germs" that rapidly made them empty. Mann writes a paragraph that struck me, and I think should cause everyone interested in the envrionment to think about, too.
In talking about the disputes over painting the historical picture, Mann writes...
"Disputes also arise because the new theories have implications for today's ecological battles. Much of the environmental movement is animated, consciously or not, by what geographer William Denevan calls "the pristine myth" - the belief that the Americas in 1491 were an almost untouched, even Edenic land, "untrammeled by man," in the words of the Wilderness Act of 1964, a U.S. law that is one of the founding documents of the global environmental movement. To green activists, as the University of Wisconsin historian William Cronon has written, restoring this long-ago, putatively natural state is a task that society is morally bound to undertake. Yet if the new view is correct and the work of humakind was pervasive, where does that leave efforts to restore nature?"
Where indeed?
I thought about this when Jon Christensen linked to an article in Orion magazine about the push by some of the big environmental organizations to force native people off threatened land. The sense that land untouched by man is pure and natural becomes more historically untrue the more we learn. People are part of the landscape. We are part of the ecosystem. The trick is preserving the balance between our needs and lives and the needs and life of the world around us. The edenic myth is just that, a myth. The job of environmentalists is to keep people alive and well in the healthy environment.

Forbes Land Plans

For years I've seen ads in magazines (usually Forbes publications) offering to sell a chunk of the Forbes Family ranch near Ft. Garland, Colorado. Parts of the ranch are still for sale, but now the properities come complete with a conservation easement. Malcom Forbe's children are selling access to an undeveloped portion of the Trinchera Ranch and agreed to put a conservation easement on the property.
His children plan to raise US$70 million ($101.8 million) by selling access to the ranch so capitalists can commune with black bears, coyotes and mountain lions.
The Forbes siblings have given up their right to develop about half the ranch's 69,363 hectares near Fort Garland, Colorado, qualifying for conservation-land tax breaks.
Documents filed with the US Securities and Exchange Commission show they have also created a company, Forbes Trinchera Ranch, to sell stakes granting ranch access.
The easement lets multi-millionaires build 930 square-metre mansions that can serve as base camps for hunting elk and bighorn sheep. The family, while managing an estimated US$1 billion inheritance, join western landowners in using conservation easements to cut taxes as land values soar.
"They are using the tax code and the land for all the benefit they can get," says local real estate agent Bruce Steffens, of Monte Vista, Colorado. "That is just smart."
Wonder if the price of those mansions drops along with the value of the easements?

Land Rush in the Woods

A change in corporate fortunes is creating some real fortunes from an unlikely place.... the deep, dark woods. In the last year some of the big land trusts, like the The Nature Conservancy have been striking deals with state governments and timber companies to buy up easements on property held by Big Timber. But despite the size of the deals, they're pretty small compared to the vast areas the companies own. As corporate profits get squeezed, either by a drop in demand for paper products, or by cheaper timber from outside the country, the timber companies are finding the real estate business can be much more lucrative than harvesting the timber. An article orginally published in the Wall Street Journal details how money managers are rushing into the woods in search of profits.
"The result is an enormous land transfer now under way. The paper companies long were the nation's largest private owners of large tracts of standing timber. "For 100 years, the industrial users owned this land. A 1980 map of landowners in Maine would be almost the same as the 1900 map," says William Ginn, an official of the Nature Conservancy, a nonprofit environmental group.
Now the national map changes almost monthly. It's a phenomenon that has financial ramifications as well as environmental ones, such as the possibility that financial investors who get in a bind might over-log or overdevelop the land.
Today, nearly $30 billion of American forest land is in the hands of financial investors, according to Hancock Timber Resource Group, a large timberland investment manager. That's six times what such investors' timberland holdings were in 1994, Hancock Timber estimates. And these investors have poured billions of dollars more into forests abroad.
In one notable sale, an investment partnership run by Grantham, Mayo, Van Otterloo & Co., a Boston money-management firm, last year bought more than 5 percent of the land in the state of Maine. Grantham Mayo oversees 2.6 million acres of timber investments world-wide.
Harvard University, meanwhile, earmarks 10 percent of its nearly $26 billion endowment for timber, a remarkable proportion for such a small and unconventional asset class as this. Although Harvard recently sold most of its U.S. forest holdings -- to another financial investor -- the university is looking for new land to buy. Yale also invests in forests, as do various pension funds, insurance companies and charitable trusts. John Malone, chief executive of Liberty Media Corp., owns 75,000 woodland acres with his wife.
The money pouring into timber reflects a global hunt for higher returns as investment cash floods the world from many sources: pension funds, central banks, hedge funds, oil-rich nations and corporations with surplus cash on their balance sheets. This has created a surge in demand for "hard assets" like real estate, timber and commodities -- in part because cash flooding into bonds has driven down returns on them.
Industry insiders say $10 billion more U.S. timberland will come to market over the next year or two, and that investors are lined up to buy it. The result of this fervor is that prices have climbed, in some cases doubling in five years, despite weakness in prices of the lumber the forests produce.
The rush is even more pronounced in certain "hot areas" that are in driving distance of major metropolitan areas. The Minneapolis Star-Tribune has just finished an excellent series on the rush in the North Woods of Minnesota around Lake Superior. In this case, the buyers aren't money managers, but people who want a second home in the woods.
On Lake Vermilion, for example, undeveloped lakeshore sells for $1,000 to $2,000 a foot. That means an average-sized lot could cost anywhere from $100,000 to $250,000. Away from the lake, 5 wooded acres go for $25,000 to $50,000.
Interestingly, one of the most important amenities is easy access to civilization. Though more and more buyers are willing to drive several hours to get to the wilderness, they still want access to some luxuries they left behind - restaurants and places to shop.
"Everyone likes to go up north and feel like they're up north, but they don't want to be too far up north," Peterson said. "They want to be able to go get a steak and a beer and all the nostalgia that goes with it."
Accessibility to roads and electricity can be even more important to an investor's bottom line. Charlie Chernak, an Ely real estate broker and a part-time land speculator, said that investors typically want to double their money after paying expenses related to platting the parcels and installing the infrastructure that's required to make it usable.
Property that was once considered too remote is now desirable (although I wonder how desirable if gasoline prices go back up). The big concern from environmentalists is that property that was mostly left intact (in between periods of ripping the heck out of it to harvest the trees) is going to be chopped up into smaller tracts that won't support the wildlife that depends upon it. Call it the suburbanization of the woods.
A number of the big land trusts in Minnesota have pooled resources to create a fund for conservation easements, recognizing that people are going to buy the land anyway.... so there might as well be an effort to keep it as intact as possible.
One such solution is the Minnesota Forest Legacy Partnership. The Partnership includes the Blandin Foundation, the Grand Rapids Chamber of Commerce, Minnesota Forest Industries Inc., the Minnesota Department of Natural Resources, the Minnesota Forest Resources Council, the Nature Conservancy, the Conservation Fund, and the Trust for Public Land.
The partnership has established a $6 million fund -- part of a planned three-year, $26 million public/private investment in these forests -- that will help ensure sustainable forestry, protect wildlife habitat and guarantee public access in the forests around Itasca County.
The fund will support the purchase of conservation easements on up to 75,000 acres of private industrial forestland in the Itasca County region. The conservation easements, once purchased from willing sellers, will be held by the state Department of Natural Resources..........
The economic vitality and quality of life of northern Minnesota communities depends on forest industries. The timber industry is the fourth-largest manufacturer in the state, creating employment in rural areas that produces more than $2 billion in wages. Moreover, the Northwoods of Itasca County is a prime destination for Upper Midwest tourism and outdoor recreation, pumping more than $100 million into the local economy and affecting some 2,700 jobs.
The continuing fragmentation of forests is one of the most pressing threats to wildlife and also greatly compromises timber management and harvesting. By protecting large blocks of forestland, we can preserve the vital connection between Minnesota's healthy forest-based industries, healthy forest ecosystems and healthy forest. By protecting our forests, we protect our way of life. Let's not miss this opportunity to pass on to our children the same Northwoods heritage we have grown to cherish.
I do find it a bit ironic that Big Timber ownership of woodlands is beginning to look more and more like "the good old days", but as Einstein pointed out, everything's relative. I applaud the effort by the trusts to use conservation easements to keep the properties intact. Because as we've seen too often, any kind of boom can too quickly turn into a bust. Saving as much as we can now, can limit the damage later.

Tennessee State Land Trust

Tennessee is getting into the land trust business. The Governor's office sent out this press release earlier today, marking the next big step in the state's plan to form a trust....

Governor Phil Bredesen today announced the appointment of the members of the Tennessee Heritage Conservation Trust Fund Board, a group of 11 Tennesseans who will help lead his land preservation and protection initiative.
Bredesen in September 2005 signed the Tennessee Heritage Conservation Trust Fund Act, which promotes public-private partnerships as a means for conserving the state’s natural spaces. The legislation establishes a board of trustees to raise funds and accept donations for land conservation through a 501(c)(3), as well as manage a $10 million budget approved earlier this spring by the Tennessee General Assembly.
“It’s personally important to me to preserve land for the future of our state and the people of Tennessee. Once it’s gone, we can never go back to the wild spaces that are so much a part of Tennessee’s landscape,” Bredesen said. “I am grateful to these Tennesseans for their willingness to serve our state. Their leadership will prove vital in our efforts to preserve and protect the natural spaces we cherish in Tennessee.”
The board’s members represent all regions of the state and will serve staggered four-year terms:
Jeannine Alday
Jeannine Alday has served Hamilton County for more than 20 years in her current position as chief of staff to county mayor Claude Ramsey and as the county’s former Human Services Administrator. Alday is a member of the Tennessee Riverpark Planning and Design Committee, the Tennessee Recreation and Parks Association, the Trust for Public Land Advisory Committee and the National Recreation and Parks Asspciation.
William “Buck” Clark
William Clark is a principal in the Clark and Clark real estate development firm of Shelby County. He is a board member emeritus of the Tennessee chapter of the Nature Conservancy and has worked extensively to help preserve the Wolf River natural area in West Tennessee.
Pete Claussen
Pete Claussen is the founder and chairman of Gulf & Ohio Railways, a shortline railroad operations company. Claussen also founded the Seven Islands Foundation, which helped develop a 410-acre wildlife refuge in south Knoxville. He chairs the Smithsonian National Museum of American History’s board of directors and is a member of the Smithsonian Institution National Board of Directors. He also serves on boards and committees with the Knoxville Public Building Authority, the National Transportation Research Center and the Knoxville Zoo.
Bruce Dobie
Bruce Dobie, former editor and publisher of the Nashville Scene newspaper, helped found the Land Trust for Tennessee and leads the group’s South Cumberland and Sequatchie Valley conservation initiative.
Darrell Freeman
Darrell Freeman is president and CEO of Zycron, Inc., a technology company. He is the incoming chairman of the Nashville Chamber of Commerce and chairs the boards of Stone Crest Medical Center and 100 Black Men of Middle Tennessee. His past service includes the Boy Scouts of America and the Federal Reserve Advisory Board.
J. Andrew Goddard
Drew Goddard leads the environmental practice of Nashville law firm Bass, Berry and Sims. Goddard has practiced environmental law for 20 years and has served as chair of the Tennessee Bar Association’s environmental section. In 2004 and 2005, Business Tennessee voted Goddard as one of the state’s best environmental lawyers.
Mary H. Johnson
Mary Johnson is vice president of Interstate Realty and Development in Bristol and serves as the vice chair of the Tennessee Conservation Commission. She also serves on the board of directors for Friends of the Smokies, the Tennessee chapter of the Nature Conservancy, the Natural Areas Advisory Board and the North Carolina Arboretum Board.
Cheryl W. Patterson
Cheryl Patterson is an attorney with the Memphis law firm of Wyatt, Tarrant and Combs. She serves on the board of directors for the Children’s Museum of Memphis, Bridges, Inc. and the Depot Redevelopment Corporation of Memphis and Shelby County. Patterson is a member of the Memphis, Tennessee, Philadelphia, Pennsylvania and American Bar Associations.
John W. Rose
John Rose owns a working family farm that has operated in Smith and DeKalb counties since 1874. He is president of Smith Fork Ventures, Inc., an investment firm, and served under the Sundquist Administration as Tennessee’s Commissioner of Agriculture. Rose is vice chair of the Tennessee Future Farmers of America Foundation, Inc., and vice chair-elect of the Tennessee Tech Foundation’s board of directors.
Becky Wilson
Becky Wilson is a former assistant U.S. Attorney for the state’s Western District and the founder of Bridge Builders, a youth leadership program. Wilson serves as a board of trust member for Vanderbilt University, a board of governors member for the Memphis Community Foundation and as director for the Memphis Zoological Society.
Earl Worsham
Earl Worsham is chairman of the Worsham Group and Worsham Watkins International, a hotel and real estate development company. He is the former chairman of International Trout Unlimited and a board member of the Atlantic Salmon Federation. Worsham owns more than 3,000 adjacent to the Great Smoky Mountain National Park, where he is active in conservation efforts.