Abstract—Compliance provisions
require Federal farm program participants to conserve soil (on highly erodible
cropland) and wetlands. Conservation compliance, which requires application of
a soil conservation system on highly erodible cropland, may have reduced annual
soil erosion by as much as 295 million tons, accounting for 25 percent of all
erosion reduction between 1982 and 1997.
Introduction
To
improve consistency between commodity and conservation programs, compliance provisions
require farmers to meet some minimum standard of environmental protection on environmentally
sensitive land as a condition of eligibility for many Federal farm program benefits—including
farm commodity program payments. Under current compliance requirements, farm program
eligibility could be denied to producers who:
Fail to implement and
maintain a Natural Resources Conservation Service (NRCS) -approved soil conservation
system on highly erodible land (HEL) that is currently in crop production and
was cropped before 1985—a provision known as conservation
compliance;
Convert HEL to crop production without applying
an approved soil conservation system—referred to as sodbuster;
or,
Produce an agricultural commodity on a wetland converted after
December 23, 1985, or convert a wetland after November 28, 1990, in a way that
makes the production of an agricultural commodity possible—referred to as
swampbuster.
Producers who violate compliance requirements risk losing all Federal
farm programs payments—not just those payments that were (or might have been)
made on the HEL or wetland in question.
Sodbuster and swampbuster provisions
became effective on December 23, 1985, when the Food Security Act became law.
Conservation compliance was implemented over a period of years. By 1990, producers
growing crops on HEL were required to have an approved conservation plan. Plans
were developed site by site to account for the broad diversity of resource conditions,
cropping patterns, and producer preferences. By 1995, producers were required
to be actively applying the conservation systems specified in their conservation
plan. All three types of compliance have been continued in subsequent farm bills
(1990, 1996, and 2002).
Compliance was originally designed to prevent farm
support and conservation programs from working at cross-purposes. In the 1970s,
evidence suggested that farm commodity programs encouraged crop production on
relatively erosive land, even as conservation programs attempted to mitigate erosion
(Watts et al., 1983; Reichelderfer, 1985; Heimlich, 1986). Compliance eliminated
the farm program incentive to expand production onto HEL.
Compliance mechanisms
can also leverage farm program payments for environmental gain—without additional
payments—to the extent that producers adopt conservation practices to retain
farm program eligibility. Compliance mechanisms are a unique policy tool, distinct
from—and in some ways more effective than—conservation payment incentives
(e.g., cost sharing). In particular, compliance may be more effective than payments
in deterring environmentally harmful actions. For example, a hypothetical subsidy
program designed to prevent wetland drainage would require policymakers to pay
for protection of all wetlands on agricultural land—a potentially expensive
proposition—or decide which wetlands are sufficiently vulnerable to agricultural
conversion as to warrant protection—a potentially difficult task (Heimlich
and Claassen, 1998b). In contrast, swampbuster penalties are assessed only when
a violation occurs, eliminating the need for broad-based subsidies or the need
to anticipate the potential for a violation to occur on any given wetland. No
direct costs are imposed on producers who comply, although there may be an opportunity
cost associated with production forgone on wetlands.
The Compliance
Incentive: Producers Weigh Benefits Against Costs
In making decisions
about land use and production practices, agricultural producers respond to a range
of market signals in the context of available technology, the resources they control
(e.g., land), and their own skills and preferences. Any change in land use, investment
(e.g., new machinery), or production practices (e.g., reduced tillage) involves
both benefits and costs. Likewise, producers who decide to meet compliance requirements
are likely to do so because the benefits of compliance outweigh the costs.
Farm
program benefits and compliance
Farm program benefits subject
to compliance—including farm commodity, disaster, and conservation programs—ranged
from $8 billion to $27 billion between 1997 and 2004 (fig. 5.3.1). Farmers may
also become ineligible for loan and loan guarantee programs that offer reduced
interest rates or improved access to credit. Whether these benefits are large
enough to leverage conservation depends on whether they exceed the cost of required
conservation actions. Because farm program payment levels are set independent
of the compliance requirement, there is no guarantee that they will exceed compliance
costs. Correlation between payments and conservation needs is critical to the
(environmental) success of any compliance requirement, as on highly erodible cropland
(fig. 5.3.2).
Compliance costs
Producers may incur direct costs and/or
opportunity costs in meeting compliance requirements. Direct costs include the
cost of applying and maintaining a conservation system, which depends on the erosion
standard to be met and the characteristics of the land (e.g., inherent erodibility).
As originally envisioned, conservation systems would be designed to reduce soil
erosion to the soil loss tolerance ("T") level—the level that
a soil can sustain without long-term productivity damage. Before conservation
compliance was implemented, however, USDA determined that reducing erosion to
T would be very costly on some land—so costly that a considerable amount
of HEL cropland would be unprofitable to farm (Canning, 1994). In the meantime,
doubts about the scientific validity of T were being voiced (Cook, 1982) and research
showed, increasingly, that water quality damage from sedimentation (which is unrelated
to T) exceeded the value of productivity loss (see Ribaudo, 1986; Ribaudo et al.,
1990).
As eventually implemented, producers could meet compliance requirements
by designing conservation systems to obtain "significant" erosion reduction
using "technically and economically feasible" practices, rather than
reducing erosion to T. In most cases, conservation systems could be based on inexpensive
management practices such as conservation cropping, crop residue management, and
conservation tillage. More than half of the HEL cropland acres that meet the Conservation
Compliance requirement have approved conservation systems made up of these three
practices alone or in combination (USDA, 1999).
Producers may also incur
opportunity costs when they refrain from converting additional HEL or wetland
that could have been profitably cropped. With wetlands, the opportunity cost equals
the value of the land for crop production, less the cost of drainage and land
use conversion (e.g., removing trees). HEL not previously cropped can be converted
to crop production if an approved conservation system is applied. Compliance cost
equals the lower of (1) the opportunity cost of forgoing agricultural production,
or (2) the cost of applying a conservation system. On land not cropped before
1985, however, conservation systems must reduce erosion to the T level—a
potentially expensive task.
Enforcement
USDA's major
enforcement tool is the annual Compliance Status Review (CSR). Each year, through
the CSR, USDA field staff assess HEL and wetland compliance on a sample of "tracts"
that are identified as part of farms receiving Federal farm program payments subject
to compliance provisions. Some tracts are selected at random from the national
Farm Service Agency (FSA) database, while others are added by State FSA offices
because of potential for noncompliance. For example, tracts on which temporary
variances or waivers were previously granted must be checked to establish a return
to full compliance.
According to the CSR, overall compliance is high. Based
on 1997 CSR data, 95.9 percent of producers subject to compliance were actively
applying approved conservation systems. In more recent years, the CSR has shown
compliance rates of roughly 98 percent. However, a recent GAO
report (2003) identified a variety of deficiencies in the CSR, among them
the methods used to select the sample for review, consistency, and clarity of
guidance provided to local offices, data handling and analysis, failure to cite
producers for significant deficiencies, and inadequate justification for waiver
of penalties. This suggests that the actual level of compliance—and whether
environmental gains have been realized—cannot be clearly understood using
CSR data alone.
What have compliance mechanisms accomplished?
The rate of soil erosion on U.S. cropland and the rate of wetland
drainage for agricultural production have dropped significantly
in recent decades. Cropland erosion fell from 3.1 billion tons in
1982 to about 1.9 billion tons in 1997, a reduction of 1.2 billion
tons or just under 40 percent. Wind erosion declined by 542 million
tons per year (40 percent), while water erosion declined by 633
million tons per year (38 percent). The rate of wetland conversion
for agriculture has also declined from 235,000 acres per year during
1974-84 (Dahl and Johnson, 1991) to 26,000 acres per year for 1992-97
(USDA-NRCS, 2002) (see AREI
Chapter 2.3).
Although these trends
coincide with implementation of compliance mechanisms, the trends alone are insufficient
to show compliance's efficacy. Environmental gain can be attributed to compliance
mechanisms (or any agri-environmental program) only to the extent that the incentive
prompted a change in producer behavior. In other words, we can attribute wetland
conservation or erosion reduction to compliance only if the producer or landowner
would have done otherwise in the absence of compliance. Because producers respond
to a wide range of market and policy incentives, isolating the effect of compliance
mechanisms can be difficult. To disentangle these effects, a careful analysis
is required, (Classan et al., 2004).
Has conservation compliance reduced soil erosion?
Between 1982
and 1997, annual soil erosion from cropland dropped by 1.2 billion tons. (Erosion
reduction data are from the National
Resources Inventory (NRI)). Of this total, 442 million tons occurred on non-HEL
land—where conservation compliance did not apply—leaving 732 million
tons (fig. 5.3.3). Because compliance was formulated to avoid forcing land out
of production, erosion reduction due to land use change (365 million tons, including
CRP enrollment) was probably not caused by compliance, leaving 367 million tons.
Erosion reduction to levels below the soil loss tolerance (T)
level (36 million tons) also cannot be attributed to conservation compliance because
conservation compliance required—at most—that erosion be reduced to
T. Finally, erosion reduction on farms that do not receive government payments
(36 million tons) cannot be attributed to compliance, leaving 295 million tons,
or 25 percent of the 1.2-billion-ton reduction in cropland soil erosion between
1982 and 1997.
Furthermore, some
erosion reduction may have occurred even in the absence of a compliance requirement.
For example, conservation tillage can preserve soil moisture where rainfall is
limited and can also reduce machinery, fuel, and labor costs, making it profitable
for some producers regardless of its effect on soil erosion. Tillage and planting
machinery needed to practice conservation tillage became widely available only
in the mid- to late 1970s. Because widespread adoption of new practices often
occurs over a long period of time, producers who included conservation tillage
in compliance plans may have eventually adopted the practice for economic reasons
even without the compliance requirement.
Still, evidence suggests that
compliance did have an effect. Reductions in excess erosion (i.e., erosion in
excess of T) were larger on farms that received farm program payments than on
farms that did not. Excess wind erosion declined by 31 percent on farms receiving
payments, but only 14 percent on farms not receiving payments (fig. 5.3.4). Excess
water erosion dropped by 47 percent on farms receiving payments and by 41 percent
on farms not receiving payments.
Has
swampbuster slowed agricultural wetland conversions?
Though wetland conversion for agricultural production has declined
over time (see AREI Chapter
2.3), the role of swampbuster is not entirely clear. Swampbuster
penalties constrain wetland conversion only when: (1) wetlands are
located on farms that participate in Federal programs subject to
swampbuster, (2) those wetlands could be profitably converted to
crop production in the absence of swampbuster, and (3) other policies
(e.g., Section 404 of the Clean Water Act) are not applicable or
not effective in deterring wetland conversion.
Many wetlands, ostensibly subject to swampbuster, are in remote areas unlikely
to be converted to cropland because they cannot be easily incorporated into an
existing farm. Of roughly 90 million acres subject to swampbuster, only 12.9 million
are adjacent to existing cropland. These wetlands appear to be located in areas
that receive large government payments (fig. 5.3.5).
Figure 5.3.5—Commodity
payments and wetlands adjacent to existing cropland
Even so, swampbuster deters conversion only if conversion would otherwise be profitable.
On this question, the evidence is mixed. Some researchers have questioned whether
wetland conversion for crop production is profitable even without swampbuster
(Tolman, 1997; Kramer and Shabman, 1993). Others, using more detailed data on
the potential productivity of wetland soils, suggest that there are wetlands that
could be profitably converted to crops in the absence of policy constraints. In
the absence of swampbuster sanctions, Claassen
et al. (2000) estimate that between 1.5 million and 3.3 million acres of wetlands
could be profitably converted to crop production under favorable market conditions.
Finally, swampbuster is just one of a number of policies designed
to deter or discourage wetland drainage (see AREI
Chapter 5.7,Non-USDA Programs). Section 404 of the Clean
Water Act (CWA) gives the Environmental Protection Agency and the
Army Corps of Engineers authority to regulate wetland drainage.
Since the January 2001 Supreme Court decision in Solid Waste
Agency of Northern Cook County (SWANCC) v. United States Army Corps
of Engineers, however, the extent of that authority with respect
to isolated wetlands (which are likely to occur in agricultural
areas) has been in doubt (Kusler, 2004). While many State and local
governments also have wetland laws and regulations on the books
and some have increased wetland regulation since the SWANCC decision,
many heavily agricultural States have little wetland regulation
(Petrie et al., 2001). In these States, swampbuster may be the only
remaining policy disincentive to wetland drainage.
Future of Compliance
Compliance mechanisms
have seemingly been effective in promoting soil and wetland conservation. While
USDA's Compliance Status Review appears to have flaws, these flaws do not mean
that compliance rates are low. Evidence from other sources, primarily the National
Resource Inventory (NRI), shows that soil erosion on HEL cropland and wetland
conversion for agriculture have been sharply reduced. Farms that receive government
payments appear to have reduced erosion more sharply than those that do not receive
payments, especially in the case of wind-erodible soils. Nonetheless, enforcement
of compliance requirements will continue to be a challenge.
Finally, other problems could also be addressed using compliance
mechanisms. Claassen et al.
(2004) show that a compliance mechanism could be used to address
nutrient runoff from land in crop production by encouraging the
use of nutrient management or buffer practices. More generally,
86 percent of U.S. cropland is on farms that receive Federal program
payments subject to compliance requirements. Thus, compliance could
provide leverage in addressing any agri-environmental issue that
occurs largely on land in crop production. However, adding multiple
or costly compliance requirements could threaten the goal of income
support by increasing the cost of farm program participation relative
to its benefits.
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