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Environmental enhancement in agriculture: the case for a national trust.

Efficiency in Government! The catchphrase for the late 1990s is finally reaching the agricultural sector, particularly in respect to conservation programs. Over the past several years, Congress and the USDA have developed numerous conservation programs and have induced significant changes in agricultural production for the primary purpose of protecting environmental quality. These programs have invested billions upon billions of dollars. However, I am convinced that we have wasted billions of dollars also. As an environmentalist, I want the most environmental quality that my tax dollars will buy. As an agriculturist, I am concerned that by supporting such wasteful programs, the 85% of Americans who consider themselves environmentalists will force regulations upon agriculture that will also be counterproductive.

One of the most costly types of agricultural environmental programs has been land retirement programs. These programs, which include a number we have had for many, many years, help the environment in various ways. One is by increasing the habitat for wildlife by taking that land out of agricultural production; increasing water quality, especially surfacewater quality; and by generally making for a more aesthetic landscape that many Americans say that they want. Presently we have several land-retirement programs. One of the most familiar is the Acreage Reduction Program (ARP), which is a temporary set-aside; over the years the ARP has retired millions of acres for a year or so. In 1985, Congress and USDA instituted the Conservation Reserve Program (CRP), designed to take 40 to 45 million acres out of production for a 10-year period; now we are up to nearly 38 million acres out of production under CRP rental agreements.

We also have several wetlands programs. We have Section 404 of the Clean Water Act, which prohibits draining of wetlands. We have Swampbuster, part of the 1985 and 1990 Farm Bills. We also have the Wetland Reserve Program. We have deliberately spent billions and billions of dollars on these programs; CRP alone will cost the American taxpayer well over 20 billion dollars.

Unfortunately, many of these dollars have been wasted because we've conserved resources which are in abundance, and we have not been efficient in conserving or protecting the environmental amenities that we really want. What is needed are more innovative solutions to these problems, not just continuing on with the same wasteful programs. Why have these programs been so wasteful? One of the reasons is that there is no structure in them for forcing people to make tradeoffs between regions or between properties based upon environmental benefits versus the cost of the program. That's why lands are taken out of production and put into a retirement program that yields few environmental benefits. In the CRP program, many of the acres in the western regions yield limited environmental benefits but yet are relatively costly.

Another reason why these programs have been ineffective or wasteful is that there is no method in these programs for eliciting the quantity of environmental quality that we, as individual citizens, want and are willing to pay for. It's a political process. We allocate 20 billion dollars and, of course, USDA spends 20 billion dollars. What is needed is a system where we are forced to choose where to protect habitat, whether that habitat be in the Northern Great Plains or a wetland in the Delta region; where we are forced to make choices between groundwater quality in Nebraska and surfacewater quality in Tennessee.

This paper suggests two innovations for correcting problems with land-retirement programs. One innovation is called the Agriculture Environmental Enhancement Trust. Congress should provide this Trust with dollars from the Conservation and the Wetland Reserve programs, which at present levels would be approximately $1.8 billion a year. (Obviously, in the present budgetary realm, this future allocation may be less than that, but whatever Congress is willing to spend on CRP and WRP, it should put into this Trust.) This Trust would have a Board of Directors, half from land-user interests and half from environmental organizations. Each expenditure from this Trust would have to have a two-thirds vote of that Board. Therefore, projects funded would have more than parochial interests; each project would have to convince at least two-thirds of the entire Board - not just the land-user interests, not just the environmental interests.

The system would work so that local and state groups - and those could be all the way from a local chapter of the Audubon Society to a local soil and water conservation district to a state farm bureau - would propose land-retirement projects to the Trust. Obviously there would be hundreds, if not thousands, of these projects proposed to the Trust. The Trust would then have to decide which ones are most important, which ones would do the best job of protecting the environment at the lowest cost. Included in that cost should be disruptions in agricultural production. This would force explicit choices to be made, priorities to be set, and would lead to greater effectiveness for tax dollars. And as an added benefit, it would be much less intrusive upon agricultural producers and other land users.

Another idea that would even provide some revenue for the Trust would be to hold a wetland auction. In 1991 I wrote an article for the Journal of Soil and Water Conservation outlining this idea of a wetland auction. The basic idea rests upon the present Section 404 of the Clean Water Act and Swampbuster. Under the regulations, the U.S. government owns the drainage rights to millions and millions of acres. It doesn't own other rights associated with that land, but it will not allow landowners to drain those acres. The government should sell those drainage rights in an open auction; sell those rights that it confiscated under Section 404 and Swampbuster. Half of the bid price for a particular wetland acreage would go back to the present fee-simple owner as a compensation; the other half would go to the Agriculture Environmental Enhancement Trust. Many people are now concerned about compensating these landowners, and this provides at least partial compensation.

Under this program, drainage rights to the most environmentally valuable wetlands would be purchased by local and national environmental groups. They obviously will have the incentive to make sure they raise the money to purchase those prairie potholes and those Delta estuarian wetlands. These environmental groups will likely look at a farmed wetland in the middle of an Indiana or Illinois cornfield and say: "The environmental benefits from that are so low, we're not going to waste our money."

Now, a few wetland acres close to urban areas will be purchased by developers, and we would lose those wetland acres. But remember, developers are going to bid relatively high, and half of that money is going to go back into the Trust. The Trust could, in essence, fund projects to construct wetlands in other areas or similar areas in the country. Many of these acres or drainage rights would be purchased by the present fee-simple owner because no one else would have any use for them at that price. And so for $1.00 an acre, the present fee-simple owner could bid and get the drainage rights. Then, those farmers have a choice: they can drain those acres, they can continue to get stuck in them as they are doing fieldwork, or they can decide to reestablish a full-functioning wetland.

This would encourage us to make choices about how valuable a piece of property is for providing wetland values versus commodity production versus development. In addition, it would establish a market for wetlands that can adjust the changing preferences and changing knowledge. Our preferences for things like wetlands and other environmental amenities have changed over the years. There's no reason to expect they won't change over the next decade or two. Also, every year we get more knowledge about wetlands and how we can, in fact, generate those wetland benefits that people say they want. We may find in the future that we want more wetlands. We have a market. We will have established the market for responding to our increased demand. Under this proposed system, we may find that we can generate the same wetlands values and the same amenities with fewer acres, and therefore those acres will come back into production, development, or some other use.

Most important, this proposed system allows us individually or collectively, to determine the importance of wetland functions and what we are willing to pay for them. Unlike our present system where we're allowing government bureaucrats or university scientists to decide which wetland values are important, which amenities people are willing to pay for, and which we are going to preserve.

Stephen B. Lovejoy is with the Department of Agricultural Economics, Purdue University, West Lafayette, Indiana.
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Author:Lovejoy, Stephen B.
Publication:Journal of Soil and Water Conservation
Date:May 1, 1996
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