Grazing Fees and Rangeland Management II

CONTENTS FOR THIS SECTION

Current Issues

Range Condition, or "Rangeland Health"
Public Participation
Grazing Fees
Pricing Mechanisms
Cost Recovery
Regional Socio-Economic Concerns
Permit Value: The Heart of Financial Concerns
Other Socio-Economic Concerns

Current Issues

Range Condition, or "Rangeland Health"

Rangeland condition has been one of the primary concerns cited by proponents of changes in rangeland management since the outset of the 20th century. However, interest has shifted from focusing on the condition of the range for grazing use -- the capacity of the land to produce forage for livestock -- to an increased emphasis on the full range of benefits and services healthy rangelands can provide, including biological diversity, soil and water retention, fish and wildlife habitat, recreational opportunities, open space, and other aesthetic values. Early range management efforts of the Forest Service, and later the BLM, focused on restoring and stabilizing the capacity of rangelands to produce forage for livestock. According to a 1994 study by the National Research Council (NRC), early surveys used by the agencies for monitoring range conditions relied heavily on "palatability factors and other subjective criteria for estimating forage production or carrying capacity."

Opinions on how best to manage a particular piece of land depend largely on one's objectives. As noted above, the primary objective for federal rangeland management in the past was to maximize forage value for livestock. More recently, federal agency objectives have been to manage lands for multiple purposes, and current survey, or assessment, methods reflect this change. By the 1950s, improved understanding of the ecological functions and workings of rangeland plant communities led to new federal assessment methods. The Natural Resources Conservation Service (previously the Soil Conservation Service) and the Forest Service (both in the Department of Agriculture) adopted assessment methods that were based on a succession-retrogression model of plant community behavior; however, BLM continued to use the older interagency range survey method until 1983.

Much of the controversy surrounding the status of range conditions today stems from the use of different and sometimes subjective assessment terminology (such as excellent, good, fair, and poor) to describe rangeland conditions. Environmentalists have criticized agency methods and argue that the loss of native grasses has had disastrous effects on associated species, and that damage from grazing in some areas, particularly riparian (streamside) areas, is threatening the ecological functions of rangelands. Ranchers counter that the rangelands are in their best shape in a century. Both views are technically correct. The problem is that these two general groups measure, or value, different things -- their expectations of the benefits that rangelands should provide are fundamentally different.

Some advocate return to pre-western expansion range conditions, such as those described of the tall grass prairies, or removal of domestic livestock in order to get as close as possible to "natural" rangeland conditions. Others note that pre-settlement or natural range conditions also included semi-desert shrubland and that management changes have favored big game species, such as deer and elk, that forage and use upland brush for cover, thereby benefitting such wildlife as well as hunters and other outdoor recreationists. Still others are most interested in the early emphasis of federal range management on producing forage for livestock.

While it is true that, on the whole, rangeland conditions have improved since the 1930s, or even the turn of the century, these earlier conditions were so severe in many areas that range specialists feared the depleted rangeland condition might be irreversible. Intensive federal management efforts in upland areas have contributed to improved conditions; however, the Administration contends that riparian areas are in their "worst condition in history." (See Rangeland Reform '94, Draft Environmental Impact Statement (DEIS) on proposed range rules.)

Not only is there extensive debate over the status of rangeland conditions, or "health," but according to the NRC, the scientific validity of the rangeland assessment methods used by the federal agencies is also in question. In an attempt to resolve differences in opinions about assessment methods, and how they should relate to management practices, and also to separate the ecological assessment process from decisions about what rangelands should produce, the NRC report suggests that instead of focusing on range condition, resource managers should focus their attention on "rangeland health." It argues that rangeland condition implies a particular mix of species, or successional condition, at specific points in time. Instead, an emphasis on the primary elements necessary to build and maintain or sustain the capacity of rangelands to produce a range of plant species, thereby providing a safety net of sorts for rangeland productivity, is arguably more flexible and responsive to changing management objectives. The NRC report notes that once the basic ecologic functions of rangelands have been secured, it then becomes a management decision as to what mix of species is desired, depending upon the social values or public objectives to be achieved.

The Administration's new rangeland regulations incorporate measures of ecosystem or rangeland health and direct the BLM to establish standards and guidelines to ensure continued rangeland health. S. 1459 (104^th Congress) would have made development of standards and guidelines at the regional level optional and tied any changes in use levels to prior monitoring of range conditions. Many in the ranching community have objected to standards and guidelines, feeling that reductions in use levels or increased regulation of allotment activities is implicit in this approach. H.R. 2493 (105^th Congress), as passed the House, did not address standards and guidelines.

Public Participation

Early implementation of the 1934 Taylor Grazing Act and 1939 amendments focused on input from local stockmen. According to one historian, "stress was laid on the part advisory boards, elected by the users of the range, were to have in drafting the rules and regulations, and every effort was made [by the federal grazing service] to cooperate with the stockmen, win their confidence and support, and convince them that the controls were theirs and solely for their benefit, without minimizing conservation." (See Paul Gates, History of Public Land Law Development, written for the Public Land Law Review Commission, November, 1968.) Rangeland management broadened in perspective with enactment of FLPMA in 1976, which directs the Secretary of the Interior to manage for multiple use (including recreation and wildlife) through land use plans and range allotment management plans, and with enactment of other laws such as the National Environmental Policy Act of 1969 (NEPA) and the Endangered Species Act (ESA).

In recent years, environmental groups and others have pushed for a more open process for federal rangeland management decisions, more commensurate with the broadened use of the lands. At the same time, ranchers have generally objected to increased involvement of other parties in rangeland management or allotment decisions. The new Administration rangeland regulations broaden public input. The regulations replace Grazing Advisory Boards (made up of livestock representatives elected locally) with Resource Advisory Councils (RACs), which are appointed by the Secretary to represent the various groups interested in rangelands, including permittees, local officials, environmentalists, recreationists, tribes, and the public at large. Further, the new regulations replace the term "affected interest" with an alternative term, "interested public," which is defined more broadly and used throughout the regulations.

The make up of the RACs, their function, and decision making processes were all vigorously debated in both the 104^th and 105^th Congress; however, new language on RACs was not included in the House-passed version of H.R. 2493.

Grazing Fees

Despite the long history of charging fees for private livestock grazing on federal lands, debate over how much to charge has been, and remains, contentious. Several factors contribute to this controversy. First, because federal and private land lease rates are not always directly comparable, parties disagree over the accuracy and validity of fair market value estimates for federal grazing. Secon d, there is disagreement on whether other criteria, such as sustaining ranching or maintaining resource-based rural economies, should prevail over fair market value or cost recovery in setting grazing fees. Third, experts do not agree on whether fee increases will reduce the number of cattle grazing on environmentally sensitive lands, such as riparian areas. Fourth, range scientists do not fully concur on the environmental benefits and costs of federal lands grazing and of changes in grazing levels. Finally, some believe that the fee is irrelevant, that all livestock grazing should be prohibited from federal lands. (See: CRS Report 96-450 ENR, Grazing Fees: An Overview.)

Pricing Mechanisms. Fees for grazing private livestock on federal lands are currently set under a formula in the Public Rangelands Improvement Act of 1978 (PRIA). Although the PRIA formula expired in 1985, President Reagan extended it indefinitely (Executive Order 12548) and instituted a minimum fee of $1.35 per Animal Unit Month (AUM) -- the amount of forage needed to sustain one animal unit (one cow and calf, one horse, or five sheep or goats) for one month. Adjustments are made under the PRIA formula to establish the annual fee, reflecting changes in private grazing land lease rates, the price of beef cattle, and costs of livestock production -- sometimes called "ability to pay" factors. The 1998, 1997 and 1996 grazing fees were the minimum $1.35 per AUM. The 1995 fee was $1.61 per AUM, and the 1994 fee was $1.98 per AUM. The declining fee reflects both falling beef prices and rising production costs.

H.R. 2493 (105^th Congress), as passed by the House, would have codified a new fee formula based primarily on historical (12-year) gross beef cattle production values (including production costs and revenues) and tied to short-term treasury bill rates for the past 12 years, making it more stable and less dependent on yearly fluctuations in beef prices than the PRIA formula. No minimum fee is established. Had the fee formula under H.R. 2493 been used for the 1997 grazing year, it is estimated it would have resulted in a fee of approximately $1.84 per AUM. H.R. 2493 would have also counted seven sheep or goats as one AUM rather than the current five, thereby allowing more sheep and goats to graze for the same fee. Amendments to make federal fees comparable to those on state-owned grazing lands, or to charge higher fees for large producers, or to strike the provision on counting 7 rather than 5 sheep or goats for billing purposes were defeated. However, an amendment to charge higher fees for permits or leases held or otherwise controlled in whole or in part by a foreign individual or corporation was adopted. This fee would be the higher of the average grazing fees charged by the state during the previous grazing year for grazing on state lands in the state in which the grazing lands are or the average grazing fee charged for grazing on private lands in the relevant state.

Supporters of the current, or a modified, PRIA fee system argue that the system was designed to keep fees within ranchers' ability to pay and to reflect differences in costs of using private and federal lands. Critics believe it keeps fees artificially low. The General Accounting Office (GAO) found in 1991 that the PRIA formula "double counts" ability to pay factors, and thus that federal grazing fees have "not kept pace with increases in the private land lease rate[s] over time." (See Range Management: Current Formula Keeps Grazing Fees Low, GAO/RCED 91-185BR.)

Due in part to concerns over the grazing fee formula, Congress in 1991 directed the BLM and the Forest Service to evaluate the PRIA formula and other fee options. The agencies' April 1992 response estimated that fair market values for public rangelands varied regionally from $4.68 to $10.26 per head per month (HD-MO) for cattle and horses and were $0.95 HD-MO for sheep throughout the West. (The agencies consider a HD-MO to be comparable to an AUM for horses and cattle, and one-fifth AUM for sheep.) While the report was accepted by many, it was criticized by some as using unsound evaluation methods.

The 1992 report also included a tabulation of fees charged on state-owned lands. An update of that information by CRS in 1996 showed that grazing fees for state educational and trust lands vary widely, ranging from $2.18 per AUM in Arizona to $22 per AUM in parts of Nebraska. The wide range in fees is due to several factors, including highly variable forage values and other amenities affecting the value of the rangeland (such as soils, availability of water, access roads, etc.), as well as differing fee systems. Many states base their fees on formulas similar to the PRIA formula, some solicit bids at public auction, and others combine a bidding system for allocating leases yet also charge rental or AUM fees. Nonetheless, state fees are consistently higher than federal fees. In some areas state and federal rangelands are comparable; in other areas they are not. (See CRS Report 96-97 A, Survey of Grazing Programs in Western States.) The U.S. Department of Agriculture's 1992 survey of private land lease rates shows fees ranging from $7.5 per AUM in Arizona, to $21 per AUM in Nebraska, with an average of $12.40 for the 17 Western states.

In summary, it is difficult to estimate fair market value, because public and private land lease rates are not directly comparable. Private range leasing and feedlots are generally competitive, with relatively easy access, and prices set by supply and demand. In contrast, access to federal rangeland allotments is limited to those who own nearby property (known as base property) and can show a need for additional land. Also, private lands or feedlots often provide water, fencing, and other amenities. Public allotments often do not, although half of federal grazing revenues are used for improvements, such as water developments, that benefit ranchers as well as other public values, such as wildlife. While most fair market value estimates of federal grazing permits or leases attempt to account for these differences, such estimates are problematic without some type of competitive market mechanism. Consequently, disputes about the accuracy and validity of such estimates persist.

The new fee proposals generally would not apply directly to the National Grasslands. Fees for grazing on the National Grasslands differ from those for other National Forest System lands. Under 36 C.F. R. § 222.52, grazing fees for the National Grasslands are to be established under concepts and principles "similar" to those for the national forests and "Land Utilization Projects" (which are the rest of the lands managed by the FS under the Bankhead Jones Act). The National Grasslands were not subject to PRIA, and E.O. 12548 applied to the same lands as did PRIA. By administrative action, the fees that were applied to the national forests were also applied to National Grasslands in California, Idaho, and Oregon. A modified PRIA is currently used for the rest of the National Grasslands and certain credits are allowed. The effects of new fee proposals on fees charged for grazing on the National Grasslands are uncertain.

Cost Recovery. The current grazing fee system is often criticized for not recovering costs. Some contend that fees should at least cover the government's cost of administering grazing programs. Critics note that the fees are substantially less than agency estimates of program costs -- $2.40 to $3.24 per AUM for the Forest Service, and $2.18 to $3.21 per AUM for the BLM.

The Forest Service and BLM estimated that it cost $52.0 million to administer their programs related to livestock grazing in 1990 ($22.4 million for the Forest Service and $29.6 million for the BLM). Total program costs (including planning, rangeland ecology, and range improvements) were $73.8 million, while total receipts from grazing fees were $27.5 million (including $5.5 million returned to Western states and counties). Thus, the federal grazing program is estimated to have cost the U.S. Treasury $52.3 million in 1990. Others estimate the total "subsidy" to be as high as $200 million annually for the BLM when taking into account the range of federal activities that indirectly support livestock grazing.

Regional Socio-Economic Concerns. Local and regional economic concerns have been at the heart of federal grazing policy since its inception. Even while the Forest Service limited allotment sizes and instituted fees (beginning in 1906) for public lands grazing, its primary goals in managing the Forest Reserves were to conserve the resources to ensure continued prosperity, to ensure wise use of the range by the "small local owners (near the range)," and to protect watersheds that growing western communities relied upon for a variety of economic purposes (USDA, The Use of the National Forests, a report of the Chief Forester, 1907). In trying to convince Congress in 1936 that it should manage all the remaining public domain rangelands, the Forest Service warned that if these lands were not managed properly, overstocking practices would lead "to overgrazing, depletion, and social and economic instability of the dependent population" (The Western Range, a letter from the Secretary of Agriculture to the U.S. Senate, printed as S. Doc. 199, 1936).

Current local economic concerns over changes in the grazing fee or changes in grazing policy fall generally into two categories: 1) impacts on ranching operations; and 2) impacts on resource-dependent communities and the "quality of life" in those communities. Many western Members of Congress express concern about the effects of any change in the grazing fee on small- to mid-size ranching operations. Concerns include ranchers who are highly dependent on federal rangeland as well as those who may be highly leveraged and may not be able to secure financial credit for continuing operations, or those who feel they may be forced to sell their base ranch property. Studies abound on the impacts of a grazing fee increase on ranch operations; however, many of these studies are directed at local or regional economic effects and differ in what they are trying to measure or address, making them difficult to use to assess the economic impacts westwide.

Permit Value: The Heart of Financial Concerns. Permits and leases for federal lands grazing have taken on an assumed value of their own. The federal government has explicitly stated that private livestock grazing on federal lands is a privilege and not a right nor an interest in property. (See TGA, 43 USC §315b, and Supreme Court decisions Light v. United States (220 U.S. 523 (1911)), and Osborne v. United States (145 F.2d 892 (9^th Cir. 1944). See also, Swim v. Bergland (696 F.2d 712 (9^th Cir. 1983)). Nonetheless, ranches with access to federal forage often sell for a higher price than they would without access to federal rangelands. The result is that the value of the grazing preference is capitalized into the net worth of the ranch base property and is considered as an asset by the rancher. For decades ranches have been purchased and loans have been made against them with the expectation that permits will be renewed and apparently that grazing fees would remain relatively stable. Whether or not the expectations are justified, many ranches have depended upon permit or lease renewals and made financial decisions as if they were a right. Consequently, increased grazing fees or other changes that might increase operational costs or might financially harm livestock owners who bought base property and perhaps paid a premium for such expectations, are thus generally opposed by livestock owners who use federal lands.

Other Socio-Economic Concerns. Added to the basic concern over the rancher's financial interests is concern over the changing landscape of many western communities: the increase in tourism in some areas, as well as increased subdivisions of land to accommodate new residents and second homes. Some local officials and entrepreneurs want to diversify local economies and take advantage of economic opportunities associated with growth in the "New West"; others oppose such change. Paradoxically, increasing tourism and attracting new businesses based on "quality of life" attractions may depend on maintaining the open vistas of traditional ranching. Depending on one's perspective and preferences, the growth in recreational use, passive tourism, or influx of new full- or part-time residents may be viewed as a great success or impending disaster. The fast-paced growth problems facing the cities of Moab (UT), Aspen (CO), and to some degree Bozeman (MT), all illustrate this point. In many ways, questions addressing these concerns boil down to one question: what do people want the western landscape to look like in 20, 40, or even 100 years, and who should decide?

.........