The Challenges
Increasing Population: A variety of factors—natural beauty, comparatively inexpensive land, and amenities like hiking, horseback riding, fishing, hunting, snowmobiling, biking, and scenic views—have combined to attract new residents to Sublette County. Sublette County saw its population increase by more than 22 percent between 1990 and 2000 (2.5 times the state average). Eighty percent of the growth was from in-migration by individuals from outside Sublette County. From 2000 to 2004, the County saw its population grow by another 14%. Sublette County could see its population grow by 1,933 people (29%) in the next decade, which could result in an additional 1,174 new homes throughout the County.
Increasing Residential Development: Sublette County saw its acres of developed land increase by 2.6 times between 1982 and 1997. This represents an average of 18.6 acres of new development for each additional person residing in Sublette County between 1982 and 1997. Sublette County also saw a 36% increase in the number of new houses from 1990 to 2004. Of the 3,966 new homes in the County, an estimated 26% are second homes. There are over 30 properties covering more than 28,000 acres of working ranchland currently for sale in Sublette County (average listing = 826 acres). This means developers have over 30 opportunities to purchase and subdivide these properties. In 2002, the American Farmland Trust estimated that Sublette County risks losing 336,000 acres of strategic ranchland to residential development by 2020. This puts Sublette County first among Wyoming counties at risk of losing strategic ranch land to non-agricultural uses. The beauty of Sublette County and the recreational opportunities its lands offer increasingly attracts non-agricultural buyers who are eager and able to purchase ranch properties for luxury home sites and non-agricultural uses.
Oil and Gas Development: As many of you know, Sublette County is experiencing an unprecedented natural gas boom. Sublette County produces 38%—roughly one-third—of WY’s natural gas. Sublette County is home to 7 of WY’s largest 25 gas fields. While most of the oil and gas development in Sublette County occurs on public land, private landowners face challenges. Under Wyoming’s split estate system, private landowners own surface estates and others like the Federal government own the mineral estate. Because the mineral estate is dominant in Wyoming, companies that lease the mineral rights on private land from the Federal government generally can explore for and extract those minerals without interference from the surface owner. In February, Governor Freudenthal signed a new split estate bill into law. The bill requires oil and gas companies to notify the surface landowner of their intention to explore for and extract the minerals underlying the owner’s property, receive the owner’s consent for these activities, attempt good faith negotiations regarding the surface impacts of those activities and plans to reclaim the drilling sites, and obtain a surface use agreement that provides for compensation to the owner for damages to his or her land (or bond off on those damages). The law became effective on July 1, 2005.
Aging Operators and a Lack of Young People Entering the Industry: As above, the most recent Census of Agriculture found that the vast majority (79%) of ranchers in Sublette County are 45 or older, with average operator age of 54.6 years. Experts have noticed two obvious trends in agricultural operator demographics: (1) the age group “65 and over” has increased dramatically during the past 40 years and the age group “under 35” has significantly decreased during the same period. In general, the population is living longer, healthier lives as medical care improves. Technology has allowed operators to keep working well into their later years, being more productive longer. This means the next generation is coming into its inheritance later in life, which may help to account for the 54.1 percent decrease in the share of operators under 35 years. This trend suggests that as the population of operators ages, they are controlling farms and ranches longer. Their children will not become managers until later in life. As an intergenerational transfer approaches, the younger generation may have been away from agriculture long enough to make the transition harder and, in some cases, less likely and less successful. For agriculture to remain viable there must be a critical mass of farms to sustain the infrastructure (equipment, suppliers, veterinarians, machinery, etc.). Each time a ranch is sold for non-agricultural uses, the viability of every other agricultural operation in Sublette County is threatened.
Lack of Profitability of Agriculture: The limited profitability of Wyoming agriculture may also be a reason for the lack of young people entering the industry. After peaking in 1993 at almost $200 million, the net profit for agriculture in Wyoming has declined drastically during the last seven years and was in fact negative in 1996 (–$116,000) and 1998 (–$7.0 million) (U.S. Dept. of Commerce 2001). Despite some improvement in 1997 and again in 1999, low profitability makes it difficult to retain land in agricultural production, particularly when there is the potential for other more profitable land uses like subdivision and commercial development. Ranching on the edge – The uncertainty that accompanies farming on the edge of a growing and developing area can lead to declining agricultural investment, productivity, and income.
Increase in Agricultural Land Values: Due to not only its own appeal but because of the proximity of rapidly developing areas like Jackson Hole, land prices in Sublette County have escalated far above values based on ranch incomes. Ranching families often can't afford to transfer property to the next generation. Young ranchers find it nearly impossible to buy land to get started or to hold onto the highly taxed land that has been in their families for generations. Between 1990 and 2004, agricultural land values in Wyoming increased dramatically. Based on preliminary figures, the average value of an acre of irrigated meadow increased by nearly 204% (from $493 in 1990-92 to $1,497 in 2002-04). The average value of an acre of irrigated cropland increased by nearly 114% (from $661 in 1990-02 to $1,417 in 2002-04). Agricultural land values in Sublette and surrounding counties have followed suit: Again based on preliminary figures, the average value of an acre of irrigated meadow increased by nearly 80% (from $557 in 1990-02 to $1,005 in 2002-04). The average value of an acre of irrigated cropland increased by nearly 109% (from $623 in 1990-92 to $1,303 in 2002-04). Experts believe that these increases, coupled with low to negative profit levels, expand the potential for the conversion of agricultural land to other uses like subdivision and commercial development.
Effect of Estate Tax on Intergenerational Transfers of Agricultural Property: For agricultural operators, land often comprises their largest asset. This is often referred to as the “land rich, cash poor” phenomenon. Increasing agricultural land values, coupled with an unwillingness or inability to plan, often subject agricultural operators to estate taxes. Under the current federal estate tax system, individuals need only file an estate tax return if their gross estate exceeds the “applicable exclusion amount.” This amount is $1.5M in 2004 and 2005, $2M in 2006-08, and $3M in 2009. Absent Congressional action, the estate tax will expire in 2010 but return in 2011. Then, individuals will only be able to leave up to $1 million at death without estate tax exposure. Amounts in excess of $1 million will be subject to estate tax, with tax rates starting at 41% and rising to 55%. The average ranch size in Sublette County is 2,169 acres. Based on recent sales, the average price per acre for ranchland in Sublette County is $2,194. Without accounting for special use valuation and other “agriculture-friendly” estate tax provisions, this means that a family wishing to pass the average ranch in Sublette County to the next generation this year would be subject to the estate tax on roughly $3,258,786. At the 2005 top marginal estate tax rate of 47%, the family would pay $1,531,629 in estate taxes. Most families want to continue in agriculture and pass the land on to the next generation. High land prices eventually force every family to deal with the land not only as a natural resource, but also as a financial asset, whether to resolve inheritance issues or simply to deal with a buyout offer too good to refuse.
Additional Pressures on Federal Grazing Lands: Seventy six percent of ranches in Wyoming depend on Federal grazing to sustain their operations. These grazing permits are critically important to the profitability and financial stability of the operations that hold them. Notwithstanding this fact, grazing on public lands is unstable. According to the National Public Lands Grazing Campaign, a self-proclaimed “multi-year, multi-organization strategy to end abusive livestock grazing on the nation’s public lands,”
- Beef has been losing market share to chicken, pork, seafood, cheese and vegetables.
- Beef from foreign sources (Brazil, Mexico, Canada, and even Japan) is undercutting the profitability of the cattle industry as a whole, and public lands grazing permittees are generally the least profitable portions of the industry.
- The average age of public lands grazing permittees is rising.
- Conservation organizations, Native American tribes, hunting and fishing organizations and other citizen groups are focusing more attention on the environmental impacts of livestock grazing.
- Livestock-recreationist conflicts are more noticeable and frequent; irresponsible recreationists leave gates open, damage fences, and shoot at pipelines and water tanks, leaving ranchers with costly repairs.
- Enforcement of water quality standards is increasing.
- More endangered species listings are inevitable, followed by more litigation. In the interim, predators like wolves and grizzlies prey on grazing cattle and require monitoring from ranchers.
- New planning and management processes by federal land management agencies could reduce livestock numbers and place further restrictions on grazing season and location. In addition, more involved grazing schemes require greater federal funding, which is difficult to secure.
- Grazing fees could rise as bidding by conservation groups for state grazing leases will increase pressure to reform both federal and state grazing fees.
Opposition to Easements in the Agricultural Community: For a variety of reasons, many ranchers oppose conservation easements. As a recent Range magazine article put it, “Conservation easements can cause harm to the local community and economy, lock up the land forever, and will never again be under an individual’s control. The moral issues of destroying private property rights ‘in perpetuity’ should be considered. Future generations’ right to choose what they do with private property will not be returned.” Despite realities to the contrary, this perception poses a distinct challenge to private land conservation.