Conservation

Conservation easements for mineral properties – What are they and how are they approved?

Posted November 13, 2017

A conservation easement is a legal designation of a privately-owned tract of land that carries restricted uses of the property in order to preserve its natural resources. The type and amount of natural resources varies with the land and may include wildlife habitats, scenic vistas or areas, and minerals. The basic principle of the conservation easement is that the potential development of the natural resource is forfeited by the landowner in exchange for federal or state tax deductions (available for some states). The intended purpose of the conservation easement is to preserve or maintain the land, water, forest, and or wildlife resources for the benefit of the general public, and for the heirs of the landowner.

The specific rights and restrictions of a conservation easement are dependent upon the agreement contract and consider the specific natural resources and character of the land. In general, the “conservation” aspect permits the landowner to use the land for most ongoing and non-invasive social practices which are compatible with long-term conservation and environmental values, maintaining wildlife habitats, open space, scenic, or ecological resources. The “easement” aspect allows the landowner to live on and use their land for farming, ranching, hunting, fishing, or other recreational activities generally associated with the land-use type for the region. Mineral extraction performed by commercial mining or from oil and gas production is considered an invasive use of the land and is not permitted. The landowner hence forfeits the right to sell, lease, or grant the right to develop or extract mineral deposits from the surface and subsurface, and prohibits the development of any related mine or oil and gas surface infrastructure.

The designation of a conservation easement and the monetary valuation that is listed by the owner for annual tax deductions is approved by the Internal Revenue Service (IRS). To qualify for a conservation easement where mineral deposits are present, the owner or his qualified representative must submit a written report to the IRS detailing two very different aspects of the minerals. One part of the report must include a mineral reserve tonnage estimate for each of the mineral types claimed, whether coal, limestone, oil, gas or other minerals, using industry and government approved standards of mineral reserve and resource classification. This estimate must be based upon available and verifiable geologic data derived from the subject property. The principal geologic data types used to determine the amount of reserve tonnage are core hole records in the form of “driller’s logs”, and the quality of the reserve tonnage is supported by analytical results of the chemical assays or concentrations of the core samples derived from the subject property.

The second part of the written report, which should be completed by a qualified mineral appraiser, must include a mineral valuation or appraisal of each of the mineral commodities claimed. The valuation must be based upon the mineral reserve tonnages estimated for the subject property (listed in the first part of the report), and an estimate of anticipated annual production for the subject. The estimate of annual production must consider the type and extent of mining that would logically be expected to be used for the nature, extent, and depth of the mineral on the subject property, a description of the current local and regional market for the minerals considering the anticipated competition with other active operations in the local area, and a hypothetical annual schedule or listing of the anticipated production tonnage and sales price per ton over the life of the mine or operation.

The IRS decision to approve the application for a conservation easement is based upon the merits of the reserve estimate and the associated valuation listed in the mineral reserve and appraisal report that is submitted for their review. The data and records supporting the mineral reserve estimate must be verifiable, meaning that it was produced by a reputable source which can be readily documented from specified, online information, or from data or information directly appended to the written report. Too often, the reserve estimate and valuation cannot be supported due to a lack or scarcity of data and information from the subject property, and or a lack of a market analysis of the anticipated sales and production of the minerals. In such cases, the application for a conservation easement is commonly rejected by the IRS.

SynTerra regularly conducts and produces mineral reserve estimates and valuations for individuals or parties considering tax deductions for conservation easements. Our clients include law firms, banks, and financial agencies, realty agencies, non-profit conservation agencies, and private individuals. SynTerra staff includes certified professional geologists, mining engineers, and mineral appraisers who have produced reports regarding the tonnage and valuation estimates of coal, limestone, sand and gravel, oil and gas, and various other minerals on single tracts less than 200 acres in size, and for multiple tracts comprising more than 36,000 acres located in a four-county area of two adjacent states. Please contact SynTerra to discuss your interest in a potential conservation easement for your property and how we can be of service to you.

Kathy Webb, P.G.

Senior Market Leader | Principal

Kathy Webb, who co-founded SynTerra (then known as The Fletcher Group) in 1992, has completed remedial investigations and regulatory compliance projects associated with Resource Conservation and Recovery Act (RCRA) facilities, state and federal Superfund sites, solid waste landfills, brownfield redevelopment, utility coal combustion residual (CCR) management units, and regulated industrial facilities. She has supported litigation as an expert witness related to chlorinated solvents, metals, and polychlorinated biphenyls (PCBs).

Kathy is known for her practical assessment strategy with the perspective of the client’s business objectives. She routinely evaluates groundwater corrective action systems for effectiveness and progress toward achieving compliance objectives. She has co-authored a trade journal paper with case studies of low-impact remedial strategies. Kathy is a licensed Professional Geologist in North Carolina and South Carolina.

Mark Taylor, P.G.

Principal

Mark has worked more than 40 years in natural-resource based industries. His expertise includes mine geology and mine engineering, hydrogeologic and geotechnical investigations, solid and hazardous waste management, and regulatory negotiations. He has published peer-reviewed papers about coal geology, ore geochemistry, mineralogy, and solid waste management. He is a leading expert in mining and environmental permitting for litigation support.

Mark is licensed as a Professional Geologist in South Carolina, Alabama, Arkansas, Georgia, Kentucky, Mississippi, North Carolina, and Washington. He serves on the boards of the Upstate Red Cross and Upstate Forever. He served on the South Carolina Board of Registration for Geologists for six years. Mark holds a Master’s degree in Geological Sciences from The University of Michigan and a Bachelor’s degree in Geological Science from Harvard University.

Andrea Kehn, P.E.

Vice President of Engineering | Principal

Andrea Kehn, leader of our Civil & Environmental Engineering Business Unit, has 28 years of experience in chemical manufacturing and environmental consulting. She leads and supervises staff professionals on multidisciplinary projects for a variety of industrial clients. Andrea’s vast experience and expertise includes: air quality construction and operating permitting; air quality modeling; air permit record-keeping and reporting; Oil Spill Prevention Control and Countermeasures (SPCC) and Storm Water Pollution Prevention Plans (SWPPP); NPDES permitting; water quality modeling; process safety management; risk management compliance and auditing; and RCRA compliance.

Andrea is registered as a Professional Engineer in South Carolina. She holds a Bachelor of Science degree in Chemical Engineering from Michigan Technological University.

Ruth Albright, P.E.

Vice President | Principal

Ruth has led projects for major industrial facilities throughout the Southeast and beyond. She built her knowledge of environmental regulations and their application to manufacturing operations while working for the second largest chemical manufacturing company in the United States. At SynTerra, she has expanded both her knowledge and reputation working for chemical manufacturing operations of all sizes. She has also worked extensively with other manufacturing operations, including pulp and paper, industrial equipment, pharmaceuticals, food, and automotive parts and assembly. Her experience includes air and wastewater permit compliance, solid and hazardous waste management, solid waste construction permitting, hazardous materials transportation, wastewater treatment systems, air pollution control equipment operations and maintenance, and ambient air monitoring systems.

Ruth is a professional engineer registered in South Carolina, North Carolina, Georgia, Florida, Virginia, Mississippi, Oklahoma, Michigan, Arkansas, and Kentucky. She is an active member of the South Carolina Chamber of Commerce Environmental Technical Committee and serves as the chair of the water subcommittee. She has previously served as the program and committee chair for the Greater Greenville Chamber of Commerce Environmental Affairs committee. She has a Bachelor’s degree in Chemical Engineering from Clemson University.