The other land transfer effort

After more than a century, some Western states receive school trust lands.


In an era when many schools are underfunded, Margaret Bird has long known where some money might be found: in forgotten school trust lands.

More than 40 years have passed since Bird, then a budding economist, discovered that Utah was not only mismanaging its school trust lands, it also lacked some of the acreage it was owed under the state’s enabling act. As a result, the schools were missing out on millions of dollars that the nation’s Founding Fathers had intended for education.

“I was asked by Gov. (Calvin) Rampton to do a projection for royalty income from oil and gas wells during the oil embargo,” Bird said, referring to the 1973 Arab oil embargo that left Americans waiting for hours at the gas pumps. “I noticed that the schools were making only $15 million a year, and I thought, ‘Gosh, with all these oil wells, why aren’t they making more money?’

A pump jack on school trust lands in Grand County, Utah.
Courtesy Utah Trust Lands Administration

Turns out, the situation wasn’t limited to Utah. As U.S. territories gained statehood in the 19th century, they were granted federal land to raise funds to build and manage schools. States are divided into townships of 36 square miles, and every square-mile parcel is a section. The federal government granted states the 16th section in the middle of every township. Back then, states leased the land to livestock producers or timber companies; later, they expanded the leases to include oil, gas and mineral extraction. Starting with California in 1850, states were also granted the 36th section for the school trust.

For states that were created later, however, some designated sections had already been claimed by homesteaders, Indian reservations or national forests. The government said that those states could choose other sections instead — so-called “indemnity” selections — but the resulting bureaucracy, both federal and state, has led to a century of delays.

Eleven Western states, plus North and South Dakota, have slogged through the indemnity process with the Bureau of Land Management, and now only five remain unfinished: California, Colorado, Montana, Oregon and Utah. With the end in sight, an organization of state land boards signed an agreement with the BLM in 2012 to make indemnity resolution a priority. Like the other remaining states, Montana started its final steps last year.

Because some lands are more valuable than others, in 1980, the BLM made property value the basis for indemnity, instead of allowing the states to just choose an acre for every one that was owed to them. Montana started requesting land in 1963, but because land values began climbing in the 1980s, the Montana Department of Natural Resources and Conservation kept its indemnity requests small in the ’80s and ’90s, choosing only lands that filled an obvious need.

“The state made a conscious decision to say, ‘Let’s not complete this right now, because we want to keep a little bit of balance in reserve,’” BLM realty specialist Jim Ledger explains. “But that was 30 years ago. So maybe a need never arose, and it just drifted along until there was a little more of a push.”

Today, Montana owed about 1,200 acres. Some of the promised but unavailable sections are worth a lot more now, says Ledger, giving the state a chance to get more acreage or more valuable property in the final transaction. Last year, Department of Natural Resources and Conservation land specialist Chris Pileski traveled around the state to assess the value of the remaining 16th and 36th sections. The two most valuable parcels are in the middle of Glacier National Park and in Gardiner, just outside Yellowstone National Park. All together, the sections were valued at more than $4 million.

With that price in mind, Pileski and Lands Section Supervisor Emily Cooper chiseled their wish list of desired BLM parcels down to about 1,600 acres. “Blocking up state land is always something we want to do,” Cooper says. “We over-picked, knowing full well we wouldn’t get them all. Then we gave them a priority list so we could work down from the top.”

The two agencies don’t anticipate much public opposition to the trades. They’ve already eliminated sections that the BLM would be unwilling to part with due to wilderness or wildlife values — places like core sage grouse habitat, for example, where many activities are restricted to protect the bird.

Pileski is fairly confident the BLM will approve a handful of parcels in north-central Montana that have been farmed, something not normally allowed on BLM land. “How that happened, I don’t know. It doesn’t fit within their management regime. But it fits within ours very well,” Pileski says.

The only hitch might come with several parcels that have BLM grazing allotments, because the BLM charges ranchers a rock-bottom rate — $2.11 per animal unit. If those parcels become school trust lands, the ranchers will see their rents rise: The state currently charges almost 10 times as much as the federal government.

However, ranchers probably won’t have to pay the full state rate. Under a preference-right leasing system — a practice allowed in many Western states — ranchers who renew their leases can appeal and usually receive discounted rates.

Roy Andes, attorney for Montanans for The Responsible Use of the School Trust, believes the appeal practice is unfair. “This diminishes the ability of the state to maximize revenue. It’s not a free market,” Andes says. “It’s something we’ve been fighting about for decades now.”

Watchdog groups have also complained about Montana and other states giving companies breaks on oil and gas leases. The whole point of acquiring more school trust lands, they argue, should be to get the best return for the state.

Andes doesn’t know if the preference system will apply to land that rolls over from the BLM to the state. But there’s still time to figure it out: After the open house meetings scheduled for this November, the public process of selecting the indemnity lands is expected to take two years. That’s typically needed to meet the requirements of the National Environmental Policy Act, which includes research followed by initial and final drafts of studies, incorporating months of public comment.

Fortunately, no schools will close down because of the delay. The states manage their school trusts differently, but none of them make trust funds the major part of their school budgets. Over the past decade, the Montana trust fund paid between 9 and 23 percent of the school budget, according to the state’s Office of Public Instruction.

Still, the West’s growing population needs more schools, improved infrastructure and good teachers. People in some states are trying to rewrite the law to include other programs, such as early education, that aren’t covered by the original school trust. The extra money from the acres still in limbo could help.  “This was the most incredible endowment, given five years before we had a U.S. Constitution,” says Bird, “and it’s supposed to be a forever endowment for schools.”

Laura Lundquist became a Montana freelance journalist in 2015 after a five-year career as a newspaper environmental reporter and six year as an environmental consultant. Follow her @llundquist.

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