Conservation Policy: Land Retirement Programs

Conservation Policy Briefing Room Background Working-Land Conservation Programs Land Retirement Programs Farmland and Grazing Land Protection Programs Compliance Provisions for Soil and Wetland Conservation

In 2004, USDA's land retirement programs accounted for over half of all the Department's conservation expenditures (see the Background chapter). Under these programs, the Government offers rental payments and other incentives to farm owners and operators, who convert land from agricultural production to land covers deemed more environmentally beneficial. In 2005, USDA spent over $1.7 billion on the Conservation Reserve Program (CRP) to retire over 36 million acres of cropland. In addition, the $240 million spent on the Wetlands Reserve Program (WRP) increased protected wetland acreage to over 1.75 million acres. Although the Farm Security and Rural Investment Act of 2002 signaled a shift toward working lands programs, land retirement will continue to be 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 later 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 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.

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The Food, Agriculture, Conservation, and Trade Act of 1990 expanded eligibility for CRP beyond highly erodible land. The 240 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:

• To account for multiple environmental concerns, an environmental benefits index (EBI) 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. 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. Since the bid process meant that already enrolled lands were not automatically re-enrolled, the distribution of CRP enrollment shifted somewhat during the 1990s. Of the nearly 34 million acres enrolled in 2002, 17 percent represented net additions to county CRP acreage (over the county's 1990 enrollment). And of the nearly 33 million acres enrolled in 1990, 14 percent was dropped from the program by 2002.

Although a roughly equal number of counties gained and lost CRP acreage between 1990 and 2002, there was little redistribution of acreage at the regional level. 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).

Overall, the CRP started as a program with a soil conservation agenda, in a time when the farm sector was weathering a severe economic downturn. As other stakeholders recognized the potential of this dedicated stream of conservation expenditures, 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. WRP goals are the restoration of high-risk agricultural land located in, or adjacent to, floodprone areas. 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 due to 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.

WRP enrollment began in 1992, with steady increases in subsequent years. When the initial enrollment cap of 1 million acres was met in 2001, the Farm Security and Rural Investment Act of 2002 reauthorized the WRP, increasing the cap to 2.275 million acres. The WRP uses three enrollment schemes: permanent easements, 30-year easements, and 10-year costshare agreements.

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The initial 2 years of enrollment consisted of pilot programs in a limited number of States. WRP has since 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.

Current Status of Land Retirement

As of January 2006, the CRP enrolled 36.1 million acres of land at a cost of $1.76 billion per year (average cost of about $49/acre). The bulk of this land was enrolled via "general" signup—about 31.7 million acres. The remaining acres are in "continuous" signup, which includes 117,000 acres of farmable wetlands (small non-floodplain wetlands). Most CRP land is in the Northern Great Plains, Prairie Gateway, and Heartland.

Under the terms of the original contracts, between 2007 and 2008, over 60 percent (21 million acres) of current CRP contracts were scheduled to expire. For several reasons, including easing administrative burdens, FSA offered holders of CRP contracts, that would expire between 2007 and 2010, a chance to re-enroll or extend their contracts. Preliminary (June 2005) estimates indicate that about 85% of these acres were re-enrolled or extended. Hence, expiring acres will vary between 3.0 and 5.6 million acres over the next decade

As of December 2005, the WRP enrolled 1.74 million acres of land, mostly in permanent easements. Expenditures in 2004 and 2005 were about $275 million and $240 million (at an average cost of $1,400 and $1,688 per acre) respectively. Average contract size is 194 acres. Much of WRP land is in Missouri, Arkansas, Louisiana, Mississippi, Florida, and California.

Challenges

Over their 20-year-plus lifespans, both the CRP and WRP have provided an array of environmental benefits. While this suggests that both programs are successful, each faces challenges.

Selecting acres when managing for multiple objectives. The CRP seeks to improve more than one environmental resource. Given that more acres are offered to each program than can be accepted, 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. 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, increases 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 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. 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 variety of environmentally valuable lands, it also dilutes the soil conservation emphasis. When many environmental policies and programs exist, this dilution may be positive or negative.

National wetlands goals. A current environmental goal is to increase wetland acres nationwide. However, the reduction in Clean Water Act jurisdiction of 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 may acquire additional importance as a means of achieving this national goal.

Alternative bid mechanisms. Currently, to account for land retirement costs, the CRP uses a cost component in the EBI, while the WRP bases easement payments on assessed value. To more effectively use program dollars, other mechanisms may be possible. For example, the NRCS announced a $10 million pilot program that uses a reverse auction bid mechanism. Landowners will be allowed to resubmit bids if they judge (based on their bid's cost-benefit ratio, relative to other bids) that NRCS would not accept their offer at the initial bid value.