By Larry Kolvoord
As printed in The Austin American-Statesman, September 21, 2008.

OZONA – Buck Owens is like a lot of West Texas ranchers in some ways. His face is tanned from long hours in the sun. He wears a rodeo buckle on his belt. He complains about the price of fuel and feed even as he extols the way of life.

In another way, Owens is a rare breed of rancher: His family has been running livestock on land leased from the University of Texas System for more than a century.

"My dad instilled something in me," said Owens, who leases 18,589 acres about 25 miles north of Ozona in Crockett County. "He told me, 'It's university land, but they don't really own it. We own it. You take care of it, and it takes care of you.'"

That bit of homespun wisdom speaks volumes about the relationship between the UT System and the ranchers who graze cattle, sheep and goats on its 2.1 million acres. Of 116 parcels, a few dozen have been leased by the same families for decades, and a handful have been held by the same families since leasing began in the late 1800s. Exact counts are not available because old records are incomplete, officials said.

To those in for the long haul, leasing can indeed feel a lot like owning. Ranchers are permitted to renew the 10-year leases routinely and to pass the leases down through the generations. Hunting rights are included in every lease at about 60 percent of market rates and can be subleased.

And, in a tradition built largely on trust rather than on written guarantees, a rancher who decides to hang up his or her spurs can invite bids for the right to take over the lease and split the highest offer with the UT System. One such rancher got half of a $1.2 million bid, also known as a bonus payment, two years ago.

Such terms are unheard-of in private-land leasing. On the other hand, the UT System's ranchers, unlike their counterparts leasing private land, must put their own money into maintaining and replacing fences, windmills, water troughs and other improvements.

Owens estimates that his family has spent several hundred thousand dollars on improvements since his grandfather, Clint, began leasing from the university system in 1896. Those improvements, including a 10-room brick house with wood-beam ceilings, 10 windmills, miles of barbed-wire fencing and a set of immaculate white outbuildings, cannot be removed and will always remain the system's property.

"Why not keep things up if you're going to live here the rest of your life?" said Owens, 76, who runs 320 head of Angus cattle. He has lived on UT System property since he was born, as did his late father, Bode, until he had to move into a nursing home.

Neill Woodward, who grazes sheep, goats and cattle on UT System land, echoed that view. He's lived for 50 years in a house on 44,709 leased acres in Pecos County, and he also leases 11,863 acres in neighboring Terrell County that his grandfather secured in about 1933.

"We're not one of the old families; we're newcomers," Woodward said. "Unless I go broke or they run me off, I'll probably die here."

Endowing education
The UT System's holdings, scattered across 19 counties, were set aside as an educational endowment through a series of legislative and constitutional decrees in the 1800s, beginning when Texas was a republic. Land, not cash, was the primary currency possessed by the government during those early years.

No local, state or federal agency and no individual or private entity owns more land in Texas. Nor does any university or university system in the nation have larger holdings.

The Permanent University Fund lands, as they are called, are perhaps best known for their rich deposits of oil and natural gas, which have produced $4.8 billion in royalty payments and other mineral income for institutions in the UT System and the Texas A&M University System since oil was struck in 1923. The UT System leases mineral interests on much of the same land used for grazing to various oil and gas producers.

Grazing leases brought in $4.4 million during the fiscal year that ended Aug. 31, part of an $18.3 million stream of what is known as surface revenue that also includes lease payments for pipeline easements, power lines, motels, welding shops, service stations, wind turbines and even a winery. The surface revenue amounted to just 4 percent of the oil and gas income during the same period, but the oil and gas will eventually peter out while the land will last forever. The Texas Constitution authorizes the UT System Board of Regents to sell land, but the regents have done so rarely.

The land isn't exactly lush. Only one parcel, in Culberson County, has a continuously flowing spring. Mesquite trees, rocks and cacti often seem more abundant than grass. Rainfall is sparse – as little as 9 inches a year in the westernmost reaches – and drought persistent.

It can take as much as 100 acres to sustain one cow.

Yet there is a stark beauty to the land, with sweeping vistas unbroken by anything made by humans.

Every aspect of the UT System's grazing leases is designed to produce reliable revenue while ensuring good stewardship of the land, said Steve Hartmann, the system's executive director of university lands.

Ranchers pay grazing rent according to the same formula, which factors in the size of their herds and the average market prices for the various types of livestock they own. For example, cattle ranchers paid rent of $128 this year for each animal unit, which consists of a cow and an unweaned calf, said Richard Brantley, assistant director for surface interests. In contrast, many owners of private land charge by the acre.

The UT System's approach is intended to create an incentive for ranchers to trim their herds – because that reduces their rental payments – when buffalo grass, sideoats grama, hooded windmill and other grasses wither during drought. Renewing leases time and again also encourages ranchers to go easy on the land, Hartmann said. Six of the 116 leases have changed hands in the past five years or so.

"You don't have a problem with people overgrazing, because they don't want to hurt themselves," he said. The land "is a resource that will hopefully be there in perpetuity. If you abuse it, especially in this part of the world, it can be many, many years before it recovers."

Ranchers are charged below-market hunting rates – essentially a wholesale price – because they are responsible for lining up hunters, supplying services to them and making sure they abide by harvest limitations set by the system for deer and other game. If the UT System charged more for hunting, it would have to take over those duties, which would require additional employees.

"Could I make more gross revenue? Yes," Hartmann said. "Could I make more net revenue? No. You don't just turn a bunch of people loose out on the land with guns and not pay attention to them."

Long-term approach
Jimmy Sterling likes the system's conservation ethic and long-term approach to leasing. That's why he was willing to bid $1.2 million to take over an 80,243-acre lease in Andrews County, north of Odessa, that had been held by the Scharbauer Cattle Co. for 110 years.

It was the largest bonus payment for a grazing lease in the system's history.

The bidding process is unusual. The UT System does no advertising, instead requiring the leaseholder – in this case, Scharbauer Cattle – to round up bidders. The system reserves the right to refuse bids if it deems them inadequate. Sterling's offer exceeded eight others, and he wrote two checks moments after the sealed bids were opened in August 2006, one for $603,831.95 to Scharbauer Cattle and one for the same amount to the UT System.

Leaseholders aren't guaranteed a penny of the winning bid. "They just trust that that's what I'm going to do," Hartmann said. "It's just the culture. It's always been that way."

That's good enough for Sterling. "If UT didn't share that bonus payment with the previous rancher, people would tend to let the ranches run down when they decide they're going to get out in four or five years," he said. "They wouldn't keep the fences up and the windmills up.

"I look at this as a lifetime investment for my family's future," said Sterling, who also owns and leases other ranchland. "I want to leave a place better than it was when I took it over. UT seems to have that same philosophy."

The UT System could require more frequent turnover of leases and thereby generate more frequent bonus payments. But such an approach could also reduce demand for the leases, lower the size of bonus payments and take away some of the incentive for careful stewardship of the land, said Scott Kelley, the system's executive vice chancellor for business affairs.

The UT System's leases are designed to maintain and improve the land and are "pretty dadgum fair," judging by the low turnover rate, said Hugh Aljoe, a consultant with the Samuel Roberts Noble Foundation, a nonprofit organization in Ardmore, Okla., that advises farmers, ranchers and land managers.

"If we had more people that would structure a lease this way, there'd be a lot less land degradation," Aljoe said.

Aljoe, who reviewed the system's "flexible grazing lease" at the request of the American-Statesman, said he likes a provision that requires ranchers to consult with federal agriculture officials and state wildlife authorities on measures intended to conserve soil and water and to improve wildlife habitat.

He noted that ranchers must underwrite fences and other capital costs and that the rental payment structure – like most in the industry – does not take into account the rising prices for feed, fuel, fertilizer and labor.

"On the other hand, there are few leases that have terms of 10 years with the provisions of almost automatically rolling over into another 10-year lease, indefinitely," Aljoe said. "It's priced about as aggressively as it needs to be, as aggressively as a lessee could afford it to be."

The discounted price for hunting rights allows ranchers to defray some of the grazing charges in exchange for essentially serving as the university system's agent for managing hunter access, harvest limitations and so forth, Aljoe said.

Owens, like many of the system's ranchers, is quick to say that leasing from the UT System isn't a path to riches.

He doesn't get a discount by virtue of his family's 112 years on the land. His rent this year totaled about $60,000, according to system records. Except for a few details such as dates, acreage and minimum fees, all of the leases are essentially identical.

And like many of his fellow ranchers, Owens said he would prefer to pay rent by the acre, to avoid the fluctuating charges that result from the system's approach and to cut down on paperwork. Still, he's not complaining.

"I've been snake-bit, and a bull's run over me, and we've had a lot of fights in this house, but I wouldn't trade it for anything," Owens said. "The university has done me so well. They don't tell me how to ranch it. I ranch it."

Problems quickly addressed
Hartmann, who has worked for the UT System for more than 31 years and overseen its West Texas operations for half that time, said he and his Midland-based staff of about 40 range conservationists, wildlife biologists, accountants and other employees generally enjoy good cooperation from leaseholders.

Nearly all are quick to address problems noted during inspections, he said. There have been exceptions, though.

One rancher in Crockett County got so far behind on a long-term agreement to repair fences, clean up trash and control brush that Hartmann fired off a letter in February giving him 30 days to complete all of the work or lose the lease. The rancher finished the work.

A stern letter persuaded another rancher to eliminate a pile of hot water heaters, sofas and other junk she had dumped in a pasture.

Hartmann said he has terminated just one lease over the years; in that case, a Pecos County rancher refused to pay rent.

Hartmann and his staff sometimes have to run interference between ranchers and oil and gas producers operating on the same property. From the ranchers' point of view, drilling can be a nuisance because of the access roads that must be carved into the land, damage to fences and general disruption.

A larger question for ranchers concerns the prospects for a way of life that has survived for more than a century: Will wealthy city dwellers start outbidding ranchers for leases?

"Sometime, not in my lifetime, I'm afraid it'll be recreation and hunting and no ranching," Owens said. "I hope I'm wrong. It'd break my heart to see a bunch of Houston and Austin lawyers take it and let it fall down."

City dwellers haven't started snapping up leases, but Hartmann wouldn't be surprised to see such a trend. Any leaseholder would still have to maintain fences, windmills and other improvements even if the person didn't plan on ranching, he said.

"These folks are getting older," Hartmann said of the current lessees. "I would predict, in the next 10 years, you'll see 40 or more leases change hands. I can't discriminate. I can't say we don't want your money because you're a lawyer."

This article appeared in The Austin American-Statesman, www.statesman.com, on September 21, 2008.