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Montana Trust Land Revenue Dips From Pandemic, Weather

A bar graph with trend lines show total gross revenue generated by Montana trust lands against a line indicating total distributable revenue. Gross revenue hit a peak of nearly $100 million in fiscal year 2019 and dropped in fiscal year 2020.
Montana Department of Natural Resources and Conservation
Revenue from Montana trust lands dropped in fiscal year 2020 due to impacts of the coronavirus pandemic across industry and poor weather for agriculture in 2019.

Revenue from Montana’s trust lands, which support public K through 12 schools, public buildings and the Montana Veterans Home, is taking a hit from the COVID-19 pandemic.

Shawn Thomas with the Montana Department of Natural Resources and Conservation (DNRC) says agriculture and grazing leases accounted for nearly half of the revenue generated by state trust lands for the fiscal year that ended in June.

Revenue from grazing leases held steady but revenue from agriculture leases dropped by $2 million.

Thomas said during a land board meeting Monday that weather played a role.

“We had a really wet fall a year ago, really caused a lot of trouble. Early winter caused sugar beets, for example, to not even get harvested," Thomas said.

He said looking at the current fiscal year, wheat prices have been holding steady. Beef prices have started to recover from a pandemic shakeup in the spring, but malt barley is struggling as fewer people go out to restaurants and tap rooms.

“Primarily people aren’t drinking as much beer, apparently, and there’s literally no market for malt barley. So the malt barley we do have on trust land is mostly being sold as feed,” Thomas said. “That’s an almost 50 percent hit on those producers.”

Trust land revenue from coal, oil and gas collectively generated over $20 million dollars. Oil and gas revenue dropped by about one third from the year before but coal revenue increased.

“We’ve just had a coincidence for the last few years where we’ve had a fair amount of coal production occurring on state land and that’s likely to taper off in the current fiscal year. Those five active leases, three of them will be moved off before the end of the year. So we’ll see coal revenue substantially probably decrease in 2021,” Thomas said.

Forest management and real estate each contributed about five percent to the total trust land revenue pot.

“So 2020 was a bit of a down year for forest management. However, [fiscal year] 2021 saw a raging rebound. As the coronavirus hit, people were sitting around with not much to do. They decided to do a lot of remodeling, building onto their houses. We’ve seen real estate go kind of crazy during the summer,” Thomas said.

He said forest management revenue should be strong over the next several years.

The state generated more than $11 million by selling 53 parcels through the Land Banking Program. It allows the DNRC to sell land to the public and put the proceeds in a Land Banking Trust Fund. The combined funds from multiple sales can then be used to purchase lands that generate higher revenue than the lands sold.

Commercial leasing and licensing generated more than $2 million in fiscal year 2020.

Thomas says commercial leases are a small part of the overall land base with only 15,000 acres in the state.

“But they generate seven times more revenue per acre than any other programs. The bottom picture’s a brand new Mackenzie River down there at the Alaska Road interchange in Belgrade. So if you’re cruising through Belgrade and need a pizza, you can have one there and think about the school trust land that it’s sitting on and they’ll be generating revenue for us for a long time at that property,” Thomas said.

Renewable energy projects also fit into the commercial leasing portfolio. Thomas said wind projects have the potential to generate a lot of revenue for a long time. He said the DNRC hopes a wind project will get approval for a lease in December.

The state’s trust lands generated more than $41 million for public schools during the 2020 fiscal year. That’s $5 million less than last year.

Despite a revenue decline, the permanent trust fund continued to grow in fiscal year 2020, surpassing the $700 million mark, and Thomas predicts trust land revenue to bounce back in the next few years.