Thousands of acres of environmentally sensitive land in southwest Minnesota will be converted to native plants and grasses in an ambitious effort to protect local waters from polluted runoff, thanks to a major new infusion of cash for rural conservation.

A highly anticipated state-federal deal, announced Tuesday by Gov. Mark Dayton, will provide $350 million from the U.S. Department of Agriculture and $150 million in state funds to the Conservation Reserve Enhancement Program (CREP) which pays farmers to idle vulnerable land near lakes, streams and rivers.

"This is an outstanding day for conservation in Minnesota," Natural Resources Commissioner Tom Landwehr told a crowd at the Capitol signing ceremony.

The voluntary program targets up to 60,000 acres of farmland, including stretches along the Minnesota River, one of the country's most polluted rivers and a major contributor to the dead zone in the Gulf of Mexico. That's nearly 100 square miles that will be returned to native grasslands and wetlands.

Native plantings filter water, prevent erosion and provide critical habitat for a wide range of prairie species including pheasants, badgers, the meadowlark and bobolink, and pollinators such as the beloved monarch butterfly.

Farmers are expected to apply in large numbers, thanks to a recent drop in commodity prices and a tapering of the boom in land prices, which sweeten the appeal of a conservation alternative.

"We are thrilled for the state of Minnesota," Angie Becker Kudelka, assistant director at the Minnesota Board of Water and Soil Resources, which will administer the program. "This is a milestone … but it's just the beginning."

The money will also help some landowners affected by Minnesota's controversial new buffer law, which requires people with land along public waters and ditches to plant strips of perennial vegetation to prevent erosion and polluted runoff.

The $350 million in federal funds is significantly less than the $634 million the Dayton administration requested, but remains a landmark installment in the program's history. It's thought to be one of the largest CREP payments the Agriculture Department has ever made to a state. Minnesota's share will come from $55 million in appropriations lawmakers already made in recent sessions, $30 million in bonding, and sources such as the sales-tax supported Clean Water Fund.

Minnesota has used CREP in the past, but this version is expected to have a greater impact on water quality, said Bill Penning, a conservation easement manager at the soil and water board. Where wildlife habitat took top priority in earlier versions, this time water quality takes top billing, Penning said. And the state now has better data to target funds to the most environmentally sensitive areas.

The new program is part of the expansive federal Conservation Reserve Program (CRP), the country's largest set-aside program for private lands. But unlike the CRP, which idles land under 15-year contracts, the new program uses a perpetual easement, taking the land out of production permanently.

One landowner who's definitely interested is Paul Schwendemann.

A retired businessman in Madison, Minn., Schwendemann rents out 1,300 acres of farmland mostly in Swift and Lac qui Parle counties. He's used conservation programs before, and said he expects competition to enroll farm acres in this new version.

"I think there's going to be a pretty strong demand for this," Schwendemann.

Schwendemann said he hopes to enroll about 160 acres, half of which is currently farmed and half of which he retired under an expiring CRP contract.

One chunk is some marshy bottomland in Yellow Medicine County that's studded with cottonwood trees and bisected by Spring Creek. Another chunk, in Big Stone County, surrounds a wellhead for the city of Odessa, so protecting groundwater from chemical contamination is important.

Schwendemann said it's exciting to watch nature reclaim the piece of marginal farmland west of Madison that he placed in conservation years ago. It was seeded with 25 types of plants, and now local beekeepers erect their apiaries there, he said. It buzzes with honeybees.

"That one had tons of pheasants this year," Schwendemann said. "It's so beautiful with flowers out there. They pop up all over the place."

The new CREP program serves double-duty as the heart of a state plan to boost the pheasant population.

The program encourages three conservation practices: planting buffer strips of native plants between farmland and bodies of water, restoring wetlands and planting land above municipal drinking wells to keep groundwater clean.

Applications are expected to start in April.

Land will be selected based on an environmental benefit score, with landowners earning points based on the number of feet along a body of water, for instance, or the percent of land in a vulnerable wellhead protection zone.

"We definitely don't want to talk about this as prime ag lands," Becker Kudelka said. "It's the most critically sensitive ag land."