Conservation Policy: Land Retirement Programs

Overview Background Working-Land Conservation Programs Land Retirement Programs Farmland and Grazing Land Protection Programs Compliance Provisions for Soil and Wetland Conservation Recommended Readings Recommended Data Related Links

In 2007, USDA's land retirement programs accounted for almost half of all the Department's conservation expenditures (see the Background chapter). Under these programs, USDA offers rental payments and other incentives to farmland owners who convert land from agricultural production to land covers deemed more environmentally beneficial. In 2007, USDA spent over $1.82 billion in rental payments and other incentives on the Conservation Reserve Program (CRP) to retire over 36.8 million acres of cropland. In addition, $139 million spent on the Wetlands Reserve Program (WRP) increased protected wetland acreage to over 1.88 million acres. (See the Background chapter for total budget allocations for these programs). The Food, Conservation, and Energy Act of 2008 continued a trend started in 2002, of shifting conservation support towards working lands programs. However, land retirement is still economically and environmentally important. In this chapter, we review the trends, status, and challenges facing both the CRP and the WRP.

The Conservation Reserve Program

The Conservation Reserve Program (CRP) was established by the Food Security Act of 1985 and began enrolling farmland in 1986. The program uses contracts with agricultural producers and landowners to retire highly erodible and environmentally sensitive cropland and pasture from production for 10-15 years. Enrolled land is planted to grasses, trees, and other cover, thereby reducing erosion and water pollution and providing other environmental benefits (as well as reducing the supply of agricultural commodities).

Enrollment in CRP increased rapidly once the program got underway, with nearly all eligible applicants accepted. Approximately 34 million acres were enrolled during the first 9 signups (between 1986 and 1989). In the early years, CRP eligibility was limited to about 100 million acres of land with highly erodible soils, with per-acre payments based on a regional average of cropland rental rates (along with half the cost of establishing permanent cover).

The CRP was not the first farmland retirement program operated by the Federal Government, nor was it the only land diversion program operating at the time of its enactment. The Soil Bank Program, established in 1956, expired in the early 1970s. Furthermore, annual paid land diversion and Acreage Reduction Program (ARP) requirements continued through 1995. In fact, diverted acres outnumbered CRP enrollment until 1990. However, these earlier land diversion programs focused on supply control for crops and did not require environmental/habitat management. The primary goal of the CRP in the years immediately following its creation was to reduce soil erosion on highly erodible cropland.

d

The Food, Agriculture, Conservation, and Trade Act of 1990 expanded eligibility for CRP beyond highly erodible land. The 250 million acres of eligible land included several "Conservation Priority Areas" (the Chesapeake Bay, Long Island Sound, and Great Lakes watersheds), State water quality priority areas, and smaller plots of land adopting high-priority conservation practices.

USDA also made two significant changes to program enrollment criteria:

• An environmental benefits index (EBI) that accounts for multiple environmental concerns was used to rank offers. The EBI weights a number of different concerns, including water quality, air quality, and soil erodibility.

• Maximum allowable rental rates were based on a soil-specific estimate of the rent earned on comparable local cropland. Use of soil specific maximum rental rates enabled USDA to enroll environmentally sensitive, but highly productive, land into the program.

Following passage of the Federal Agriculture Improvement and Reform Act of 1996, wildlife habitat was added to the EBI. A continuous signup was initiated for acreage devoted to specific conservation practices, such as filter strips, riparian buffers, grassed waterways, field windbreaks, shelterbelts, living snow fences, salt-tolerant vegetation, shallow water areas for wildlife, and wellhead protection. Enrollment was capped at 36.4 million acres. In 1997, continuous signups were augmented by the Conservation Reserve Enhancement Program (CREP), a Federal-State partnership designed to encourage farm conservation practices that meet specific State and national conservation and environmental objectives. These include impacts to water supplies, loss of critical habitat for threatened and endangered wildlife, soil erosion, and reduced habitat for fish populations.

With early contracts expiring, signups conducted in 1997 and 1998 enrolled over 22 million acres. Unlike the early signups, competition was keen, with all bids ranked using the EBI. Because the bid process meant that already enrolled lands were not automatically re-enrolled, the distribution of CRP enrollment shifted somewhat during the 1990s.

Although a roughly equal number of counties (about 23%) gained and lost CRP acreage between 1990 and 2002, there was little redistribution of acreage across ERS's Farm Resource Regions. The Northern Great Plains gained slightly, at the expense of the Heartland (probably due to the lower rental rates requested by Plains bidders) and the Southern Seaboard (where many CRP acres planted in trees were not offered for re-enrollment).

Under the terms of this wave of contracts, between 2007 and 2010 over 75 percent (28 million acres) of existing CRP contracts were scheduled to expire. For several reasons, including distributing the administrative burden over time, in 2006 FSA offered holders of expiring CRP contracts a chance to re-enroll or extend their contracts. Approximately 82 percent (22.9 million acres) of these acres were re-enrolled or extended. Hence, expiring acres will vary between 3.9 and 5.6 million acres per year over the next 5 years.

The Food, Conservation, and Energy Act of 2008 continued the CRP, but reduced the enrollment cap to 32 million acres. However, because of the number of contracts scheduled to expire, the cap leaves room for a steady stream of new enrollments.

Overall, the CRP started as a program with a soil conservation and commodity-reduction agenda, in a time when the farm sector was weathering a severe economic downturn. As conservation effects were identified and quantified, other stakeholders recognized CRP's potential for generating multiple environmental benefits, and CRP evolved beyond soil conservation, with greater weight given to wildlife habitat, air and water quality, and carbon sequestration.

The amount of land enrolled in CRP does not necessarily reflect the amount of land removed from production. First, "slippage," the reallocation of lands outside the program (such as pastureland) to cropland uses, may occur. Second, land enrolled in CRP might have left production even without the program.

The Wetlands Reserve Program

The Wetlands Reserve Program (WRP) was established by the Food, Agriculture, Conservation, and Trade Act of 1990. The stated emphasis of WRP is to protect, restore, and enhance the functions and values of wetland ecosystems to attain:

• Habitat for migratory birds and wetland-dependent wildlife, including threatened and endangered species,
• Protection and improvement of water quality,
• Attenuation of water flows to reduce flooding,
• Recharge of ground water,
• Protection and enhancement of open space and aesthetic quality,
• Protection of native flora and fauna contributing to the Nation's natural heritage, and
• Contribution to educational and scientific scholarship.

In 1991 and 1992, WRP enrollment consisted of pilot projects in a limited number of States. The program was fully operational in 1994, has continually increased wetland acreage to the present, and has been legislated to continue wetland restoration through 2012. The WRP has sought the greatest wetland functions and values, along with optimum wildlife habitat, on every acre enrolled. In pursuing these goals, WRP has undergone some changes. Most importantly, in the earlier years a "walk away" strategy was often used: parcels were allowed to return to their wetland condition with no other intervention. However, this strategy led to poor wetland function. So, a "full restoration" strategy was adopted in the late 1990s. Full restoration implies considerably more site preparation (for example, undoing land leveling). At least 70 percent of each project must be restored to the original natural condition (to the extent practicable). The remaining 30 percent can be restored to "other than natural" conditions.

d

d

With enrollment approaching 2 million acres, the Food, Conservation, and Energy Act of 2008 reauthorized the WRP, increasing the area cap to 3.041 million acres through 2012.

Current Status of Land Retirement

As of September 2008, the CRP enrolled 34.7 million acres of land at an annual rental cost of $1.76 billion per year (average cost of about $50.82/acre per year). The bulk of this land was enrolled via "general" signup—about 30.6 million acres. The remaining acres are in "continuous" signup, which includes 182,000 acres of farmable wetlands (small non-floodplain wetlands). Most CRP land is in the Northern Great Plains, Prairie Gateway, and Heartland.

The Food, Conservation, and Energy Act of 2008 contains several changes to the CRP. The most significant change is that, starting on October 1, 2009, the acreage cap is lowered to 32 million acres. Assuming all general signup contracts scheduled to expire by October 2009 are allowed to do so, and all continuous contracts are re-enrolled, about 30.6 million acres will be enrolled in the CRP. Thus, to reach the 32 million acre cap, FSA will either have to conduct a new general signup, or offer another round of extensions.

As of March 2007, WRP enrollment reached 1.88 million acres. The WRP uses three enrollment schemes: permanent easements, 30-year easements, and 10-year cost share agreements. Nearly 80 percent of WRP lands are enrolled in permanent easements. Expenditures in 2006 were about $137 million (at an average cost of $1,300 per acre for each contract). Average contract size is 179 acres. Much of WRP land is in the Mississippi Delta; the prairie pothole portion of the eastern Dakotas, Minnesota, and Iowa; and New York, Oregon, and California.

Impacts and Challenges

Over their lifespans, the CRP and WRP have provided an array of environmental benefits, including erosion reduction, wildlife enhancement, biodiversity, and flood control.

However, despite the successes of the programs, each faces challenges.

Selecting acres when managing for multiple objectives. The CRP and WRP seek to improve more than one environmental resource. Given that more acres are offered to each program than can be accepted, and that different parcels would provide different levels of environmental attributes, a mechanism that accounts for tradeoffs (between different environmental resources) is necessary. For example, the CRP uses the EBI to choose acres. The weights used in the EBI are based on the informed judgment of a number of scientists and land managers about their relative value. However, modifications in the EBI—and in what lands are enrolled—could increase the social benefits of the program. For example, ERS research found that using the 15th signup (1997) EBI for all CRP acres, rather than the simple erodibility criteria used at CRP's inception increased the value of several outdoor recreation activities by over $350 million per year.

Management modifications. As experience with the programs grows, opportunities for fine-tuning emerge. For example, land disturbances (such as grazing and controlled burns) every several years are often necessary to maintain vegetative diversity and good wildlife habitat. However, such actions are often costly to the landowner and require monitoring by USDA. While these concerns have limited the use of such fine-tuning, significant improvements in program performance may be possible with relatively minor changes, such as changes in rental schemes to encourage more active management, or the use of third-party monitoring.

Eligibility expansion. The success of voluntary programs such as the CRP and WRP depends on farm participation. The expansion of eligibility criteria greatly increases the pool of potential participants. For example, the CRP's refocus from erosion to a broader array of conservation priorities increased the pool of eligible acres from about 100 million to 250 million. While this brings in a greater variety of environmentally valuable lands, it may make it more difficult to address a single environmental issue.

National wetlands goals. In recent years, the United States has moved from a goal of no net loss to a goal of increasing wetland acres nationwide. However, the reduction in Clean Water Act jurisdiction over isolated wetlands underscores the need to use nonregulatory means. The WRP, with its proven record of protecting wetlands, and the CRP's Farmable Wetlands Initiative and continuous signup, may acquire additional importance as a means of achieving this national goal.

Alternative bid mechanisms. Currently, to account for land retirement costs, the WRP bases easement payments on assessed value. In contrast, the cost component of the CRP's EBI allows landowner's to reduce their bid in order to improve the odds of acceptance.  Although this feature of the EBI can reduce program costs, other enrollment mechanisms that utilize USDA information more effectively may yield even greater costs savings.  For example, in 2006, the WRP implemented an experimental reverse auction bid mechanism. The reverse auction allowed landowners to resubmit bids if they judged (based on their bid's cost-benefit ratio, relative to other bids) that NRCS would not accept their offer at the initial bid value. The reverse auction pilot program reduced easement acquisition costs by 14 percent—saving nearly $820,000 in Fiscal Year 2006.

Demand and price volatility for agricultural commodities. The swings in demand for and prices of agricultural commodities, such as those seen in 2007 and 2008, complicate the management of land retirement programs. Rental rates for new contracts may substantially increase during periods of high prices, and there may be calls for ramping up production by releasing current contracts, or by allowing limited uses (such as haying and grazing). When demand shrinks and prices fall, interest in land retirement programs may possibly increase, straining USDA resources, but also presenting an opportunity to enroll land with high environmental values. Managing these challenges requires careful allocation of program funds and acreage, and the ability to adjust to changing economic conditions while maintaining a long-term perspective.