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Trust Lands in the American West Page Ii TABLE of CONTENTS Particular thanks is owed to Jon Souder, who engaged in a comprehensive review of the final draft of the report; his comments were essential to finalizing the report, completing the legal analysis, and helping to restore the vision of the overall project. We are also indebted to Dr. Jay O’Laughlin of the University of Idaho, who provided invaluable and detailed comments to complete the legal analysis; thanks also to Professor Mary Wood of the University of Oregon School of Law in this regard. Andy Laurenzi, Director of the State Trust Lands Program for the Sonoran Institute, also provided invaluable review and guidance from the preparation and throughout the various drafts of the report. Finally, a deep debt of gratitude is owed to Jennifer A. Barefoot of the Sonoran Institute’s Phoenix office, who spent countless hours reviewing and editing this report to bring it into its final form. About the Authors Peter W. Culp is the Project Manager for the State Trust Lands Program and Attorney for Programs for the Sonoran Institute, where he works on a variety of issues related to land and water policy. He is the author of four published articles and several unpublished reports on environmental policy in the Colorado and Columbia River basins. He holds a J.D. from the University of Arizona (summa cum laude, 2001) and a B.A. in politics from the University of California, Santa Cruz (with honors, 1994). He is a member of the State Bar of Arizona and the American Bar Association. Diane B. Conradi is the Montana Project Manager for the Sonoran Institute’s State Trust Lands Program, where she manages a variety of policy efforts related to the administration and management of state trust lands in Montana. She holds a J.D. from the University of Oregon (1991) and a B.A. in English from University of South Carolina Honors College (with honors, 1986). She is a member of the Oregon State Bar and the State Bar of Montana. Cynthia C. Tuell is a second year law student at the James E. Rogers College of Law, University of Arizona, and is Senior Intern for the Sonoran Institute, where she conducts research on a variety of issues related to the administration and management of state trust lands. She holds a B.S. in Ecology and Evolutionary Biology from the University of Arizona (cum laude, 2002). Lincoln Institute of Land Policy/ Sonoran Institute Trust Lands in the American West Page ii TABLE OF CONTENTS Acknowledgements …..……………………………………………………………………………………………….. i Table of Contents …..………………………………………………………………………………………………….. iii I. Introduction ………..………………………………………………………………………………………………….. 2 II. History of the Trust Land Grants ……………………………………………………………………………… 4 A. Education, Cession, and Expansion ………………………………………………………………….. 4 B. The General Land Ordinance and Northwest Ordinance …………………………………….. 6 C. Emergence of the School Land Grants ………………………………………………………………. 7 1. Consolidation of State Authority over School Grants ……………………………………. 8 2. Expanding Trust Grants ……………………………………………………………………………… 8 Table II(C): History of State Land Grants in the United States……………….. 10 3. Changing Rules for the Administration and Disposition of Trust Lands………….. 12 4. Lessons from the History of State Land Grants ……………………………………………. 15 III. Trusts and Trust Responsibilities …………………………………………………………………………….. 16 A. What is a Trust? ………………………………………………………………………………………………… 16 B. Fiduciary Duties of the Trustee …………………………………………………………………………… 16 1. The Duty to Follow the Settlor’s Instructions …………………………………………………. 17 2. The Duty of Good Faith ………………………………………………………………………………… 17 3. The Duty of Prudence …………………………………………….…………………………………….. 17 4. The Duty to Preserve the Trust ……………………………………………………………………… 19 C. Private Trusts, Charitable Trusts, and the Public Trust Doctrine …………………………….. 19 1. Private Trusts ……………………………………………………………………………………………….. 20 2. Charitable Trusts ……………………………………………….………………………………………….. 20 3. The Public Trust Doctrine ………………………………………..……………………………………… 24 IV. The State Trust Doctrine …………………………………………….……………………………………………… 26 A. Evolution of the State Trust Doctrine ………………………………........................................... 27 1. The Ervien and Lassen Decisions …………………………………………………………………… 27 2. State Adoption and Adherence to the Trust Doctrine ………………………………………. 29 3. Revisiting the Trust Doctrine …………………………...……………………………………………. 34 B. Distinguishing State Trusts from Common Law Trusts …………………………………………….. 37 1. State Trusts as a Form of Charitable Trust? …….………………………………………………. 37 2. Fiduciary Duties of the State Trustee …………..…………………………………………………… 39 3. The Trustee’s Additional Obligations as a Public Entity ……………………………………… 40 4. Enforcing the Trust Against the Public Trustee ………….……………………………………… 42 5. Beyond Revenue Maximization: the Implications of Perpetual Trusts………..………… 48 C. Towards a More Flexible View of Trust Management ………………………………………………… 50 Lincoln Institute of Land Policy/ Sonoran Institute Trust Lands in the American West Page iii V. Trust Lands Management Across the West …………………………………………………………………… 53 Map of Trust Lands in the Western States ……………………..………………………. 53 A. State-by-State Comparisons …………………..………………………………………………………………. 54 Figure V(A)-1: State Trust Land Holdings ………………..……................................ 54 Figure V(A)-2: Gross Revenues from State Trust Lands …………………………….. 55 Figure V(A)-3: Estimated Revenue per Acre ……………………………………………... 56 Figure V(A)-4: Permanent Fund Balances ….…………………………………………….. 57 Figure V(A)-5: Annual Distributions to Beneficiaries ……...………………………….. 58 Table V(A): Distributions vs. Common School Budgets……………………………….. 59 B. Trust Land Management in Arizona ………………………………………………………………………….. 61 Map of Arizona Trust Lands …………………………...………………………………………. 61 1. Arizona’s Land Grant ……………………………………………………………………………………… 62 2. Enabling Act and Constitutional Requirements ………………………………………………… 62 3. Arizona’s Trust Responsibility …………………………………………………………………………… 63 4. Governance of Trust Lands in Arizona ……………………………………………………………….. 64 5. Trust Land Management in Arizona …………………………………………………………………... 64 a. Surface Uses ………..………………………………………............................................ 64 b. Subsurface Uses …………………………………………….......................................... 65 c. Land Sales and Other ………………………………………………………………………….. 66 Table V(B): FY 2004 Revenues – Arizona State Land Department…………….. 67 6. Trust Revenue Distribution in Arizona ……………………………………………………………….. 68 7. Recent Developments and Emerging Issues in Arizona ………………………………………. 69 a. The Arizona Preserve Initiative ……………………………………………………………… 69 b. Growing Smarter: 5-Year Disposition Planning ………………………………………. 70 c. Challenges to Grazing Lease Preferences …………………………………………….. 71 d. Exchange Authority ………………………………………………………………………………. 72 e. Trust Land Reform ………………………………………………………………………………. 72 C. Trust Land Management in Colorado ………………………………………………………………………. 75 Map of Colorado Trust Lands ………………………………………………………………….. 75 1. Colorado’s Land Grant …………………………………………………………………………………… 76 2. Enabling Act and Constitutional Requirements ………………………………………………… 76 3. Colorado’s Trust Responsibility ………………………………………………………………………. 77 4. Governance of Trust Lands in Colorado …………………………………………………………. 78 5. Trust Land Management in Colorado ……………………………………………………………… 78 a. Surface Uses …….………………………………………………………………………………… 79 b. Subsurface Uses ……….………………………………………………………………………… 80 c. Land Sales and Other ………………………………………………………………………….. 80 d. Conservation Reserve …………………………………………………………………………. 81 Table V(C): FY 2003 Revenues – Colorado State Land Board……………………. 83 6. Trust Revenue Distribution in Colorado …………………………………………………………….. 84 7. Recent Developments and Emerging Issues in Colorado ……………………………………. 85 a. Lowry Range ……………………………………………………………………………………….. 85 b. Multiple Use Management Policy …………………………………………………………. 85 c. Fiscal Impact Study Requirements ………………………………………………………... 86 D. Endowment Land Management in Idaho …………………………………………………………………. 87 Map of Idaho Trust Lands ……………………………………………………………………….. 87 1. Idaho’s Land Grant ………………………………………………………………………………………… 88 2. Enabling Act and Constitutional Requirements ………………………………………………… 88 3. Idaho’s Trust Responsibility ………………………………………………………………………….. 89 4. Governance of Endowment Lands in Idaho ………………………................................... 89 5. Endowment Land Management in Idaho ………………………………………………………… 90 a. Surface Uses ……………….……………………………………………………………………. 90 b. Subsurface Uses ………………………………………………………………………………... 92 Lincoln Institute of Land Policy/ Sonoran Institute Trust Lands in the American West Page iv c. Land Sales and Other ………………………………………………………………………….. 92 Table V(D): FY 2004 Revenues – Idaho Department of Lands ………………….. 93 6. Trust Revenue Distribution in Idaho ………………………………………………………………….. 93 7. Recent Developments and Emerging Issues in Idaho …………………………………………. 95 a. Western Watersheds Project ………………………………………………………………… 95 b. Educational Funding ……………………………………………………………………………. 95 c. Citizens Review Committee ………………………………………………………………… 95 d. Increased Timber Harvest …………………………………………………………………… 96 E. Trust Land Management in Montana ……………………………………………………………………….. 97 Map of Montana Trust Lands ………………………………………………………………….. 97 1. Montana’s Land Grant …………………………………………………………………………………… 98 2. Enabling Act and Constitutional Requirements ………………………………………………... 98 3. Montana’s Trust Responsibility ………………………………………………………………………. 99 4. Governance of Trust Lands in Montana ………………………………………………………….. 99 5. Trust Land Management in Montana ……………………………………………………………… 100 a. Surface Uses ………….………………………………………………………………………….
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