There's just one place where Washington's Cascade Mountains reach the sea. Rising steeply from Puget Sound, the Chuckanut Range commands sweeping views of the San Juan Islands. Hikers and bikers wander Blanchard Mountain -- the range's high point -- while hang gliders launch from its cliffs. Century-old forests host abundant wildlife, including the marbled murrelet, a threatened seabird.

But Blanchard Mountain isn't a protected park; its 4,800 acres are state trust land. Managed by the Washington Department of Natural Resources (WDNR), Blanchard's forests are cut to fund schools and other services in rural Skagit County, where communities rely on the timber industry for jobs.

Blanchard Mountain exemplifies a clash common to Western state trust lands. Most such lands were granted at statehood by the federal government to generate revenue for schools through logging, mining and other industries -- a mandate that often precludes other values like recreation and habitat protection. It's a management pickle that one former Arizona land-department staffer characterized as "cactus versus kids."

But as state economies expand beyond resource extraction and taxpayers seek more from public lands than just pay dirt, the trust-land mandate is being challenged in new ways. Both state governments and grassroots groups have pushed trust-land managers to make conservation a higher priority. Among Western state land departments, Washington's has a unique ability to get creative with trust-land management by using Legislature-approved funds to compensate schools, so that some trust lands can be set aside for conservation.

When a timber sale was planned near popular trails on Blanchard Mountain in 2006, citizen opposition mounted. Mitch Friedman, founding director of the environmental group Conservation Northwest, doubted the logging could be stopped completely, though. "We were basically in deadlock, and that stalemate could have lasted forever," says Friedman. "It would have been too messy for (WDNR) to log it and too impossible for us to protect it."

So WDNR assembled 10 representatives from timber, recreation, state parks, county government and environmental camps to carve out a compromise. In exchange for WDNR setting aside 1,600 acres for habitat and recreation, the state would recompense Skagit County for lost timber revenue by purchasing $12 million in private timberlands at risk of development. By shielding more forest from subdivisions, WDNR staked the common ground where loggers and environmentalists could find consensus.

Similar efforts to protect Washington's working forests from urban sprawl have recently inspired an entirely new brand of trust land. In April, Gov. Christine Gregoire, D, signed the Community Forest Trust bill, which takes advantage of a trust-land transfer fund allowing WDNR to use state dollars to compensate schools and transfer sensitive trust lands into preserves, conservation areas and now community forests. Some $96 million was slated for 2009-2011 to add to the 144,000 protected acres held by WDNR and to transfer land to other agencies. Under the new trust, the state and local governments split the cost of reimbursing schools for lost timber revenue. As in the Blanchard agreement, other lands more suitable for harvest or development are purchased to keep money flowing to schools.  Local governments will co-manage community forests with the state to make just enough revenue to pay management costs. But whether community forests can earn that cash remains to be seen. "I'm skeptical that these lands can be managed in such a way that they will produce their own revenue," says State Rep. Brian Blake, D, who co-sponsored the forest trust bill. "But I think it's worth giving folks a chance."

Back in the Chuckanuts, roadblocks have slowed implementation of the Blanchard Mountain agreement. The Chuckanut Conservancy -- a conservation group left out of early negotiations -- sued the state in 2007, saying the agreement required environmental review. Late last year, WDNR won the appeal. But the lagging economy means that funding to purchase the replacement timberlands has dried up; $1 million in unspent funds was seized early this year to plug a state budget gap.

Meanwhile, the addition of a controversial parcel of 100-year-old forest to the protected area recently split the Blanchard group in a 6-5 vote; there will be a public hearing this summer. "Those are the devils in the details coming out of this process," says Kendra Smith, natural resource lands policy coordinator for Skagit County, who represents the trust-land beneficiary. Smith voted against protecting the parcel, hoping that logging it would provide needed jobs and revenue. The first timber sale approved by the Blanchard group will soon face the saw.

Despite the difficulties, Smith remains confident that Skagit County will get the state revenue it needs. "We should be made whole," she says, satisfied with the results of the hard-earned Blanchard agreement. "I think it could be a really good model to take to other (state trust lands)."