Conservation Compliance:
Policy Issues for the 1995 Farm Bill

Jeffrey Zinn
Senior Analyst in Natural Resources Policy
Environment and Natural Resources Policy Division

December 19, 1994

95-6 ENR

SUMMARY

Under provisions enacted in the 1985 Food Security Act, all farmers producing agricultural commodities on highly erodible land must fully implement an approved conservation plan by January 1, 1995 to remain eligible for certain farm program benefits. Conservation compliance to control erosion affects about 140 million acres, more than a third of the country's cropland. As the deadline approaches and the 1995 farm bill debate begins, three questions will likely be raised. First, how much erosion control is enough? Second, is USDA's enforcement adequate? Third, will this approach become increasingly ineffective if farm programs continue to be scaled back? This paper reviews the compliance concept, the conservation compliance requirements, the implementation record, and these three questions.

BACKGROUND

The Concept

From their inception in the 1930s, and until compliance was enacted in the 1985 farm bill, all soil and water conservation programs offered through the agencies of the U.S. Department of Agriculture (USDA) had been based on two principles: voluntary participation and incentives. These incentives included technical assistance (conservation planning and engineering) through the Natural Resources Conservation Service (NRCS, formerly the Soil Conservation Service), cost-sharing payments through the Agricultural Stabilization and Conservation Service (ASCS), education through the Extension Service (ES), and loans through the Farmers Home Administration (FmHA). (Under the recently-enacted USDA reorganization legislation, P.L. 103-354, many of the cost-sharing programs are being moved to the NRCS, and the ASCS and FmHA will be incorporated into the newly created Consolidated Farm Services Agency). Employees of each agency are located in most counties, providing easy access for most farmers.

However, in the late 1970s and early 1980s, as farm program costs soared and substantial erosion problems were widely reported, opinion surveys showed a growing portion of the general public, and even the farm community, supported the idea that farmers who receive Federal assistance should be required to meet societal standards for environmental quality. This was a significant change from the earlier prevailing view that agriculture was an unique industry. Agriculture generally had been exempted from requirements that applied to other business and industrial sectors, such as many of the programs enacted in the 1972 Clean Water Act.

Conservation compliance for erosion sets an environmental standard for agricultural activities. When this and two other compliance proposals surfaced in the 1985 farm bill debate, they were quickly identified as a major shift in policy. (The others set standards for highly erodible land that had not been cultivated between 1981 and 1985 (sodbuster), and for wetlands converted to agricultural uses (swampbuster).)

Supporters and opponents alike thought that compliance proposals would be contentious. Many veterans of farm policy debates did not expect compliance proposals to survive the omnibus farm legislation deliberations. Supporters of compliance reportedly were concerned that verbal support for the concept of compliance would not translate to votes to enact legislation that would significantly redirect conservation policy.

However, these compliance provisions were enacted after surprisingly little discussion or debate. Policy analysts suggest that earlier debate over sodbuster and discussion of "cross compliance" in the 1982 National Conservation Program had exposed this concept to congressional consideration, and probably helped prepare the way for acceptance of conservation compliance (and swampbuster).

Some opponents of compliance maintain that it has changed NRCS from a farm-conservation support agency into a regulatory agency. Compliance-program supporters counter that there have always been requirements on program participants; compliance creates additional requirements, not new regulations. Further, each producer can still decide whether to be in or out of compliance, and those who choose to be out of compliance still have full market access. This debate--which has both philosophic and practical dimensions--continues, and is concentrated in areas where meeting the standards of compliance are especially difficult or costly.

If compliance is viewed as a "stick" approach, Congress also enacted a counterbalancing "carrot" program in the same 1985 law, the Conservation Reserve Program (CRP). CRP allows producers to retire highly erodible or environmentally sensitive land under 10-year contracts. These contracts start to expire in 1995. Compliance and CRP are connected; at the end of the contract, the 75 percent of the 36.5 million acres in the CRP that meets the eligibility requirements will be subject to compliance. These producers will have 2 years after their CRP contracts expire to be fully in compliance if crop production is resumed. (For more information on CRP, see CRS Report 94-413, Conservation Reserve Program: Status and Issues.)

Conservation Compliance, as Amended

Compliance was enacted in 1985 and amended in 1990. Under the 1985 Food Security Act, farmers who cultivate highly erodible lands must have an approved conservation plan by 1990 and have it fully implemented by 1995. Producers who are out of compliance lose eligibility for several farm support programs on all the land the producer cultivates:

• price supports and related programs;

• farm storage facility loans;

• crop insurance;

• disaster payments;

• storage payments; and

• any FmHA loans that will contribute to erosion on highly erodible lands.

The program was amended in several significant ways in the Food, Agriculture, Conservation, and Trade Act of 1990. Compliance was expanded to include highly erodible land set aside, or taken out of production, under commodity programs. This Act added six more Federal farm programs to the list of benefits that could be lost for non-compliance. A graduated penalty was added so that under some circumstances, producers could be subject to only $500 to $5000 loss in benefits. This graduated sanction is available only once every 5 years. The revisions protect tenant farmers who may be ruled out of compliance because of the actions of other tenants or the landowner.

Implementation

Implementation is shared by several agencies. CFSA administers the conservation compliance provisions. NRCS is the lead technical agency; it works with producers to develop and implement conservation plans, and also field checks a sample of the 1.6 million plans each year. Based on these checks, NRCS passes along the names of those found not to be "actively applying" their plans or not using an approved conservation system to the appropriate administering agencies; these agencies determine whether benefits will be lost. Producers can appeal a non-compliance determination.

Compliance requirements have placed substantial pressures on the NRCS staff. One source of these pressures has been the increased workload. Compliance required that the new plans be completed on approximately 140 million acres by 1990. (In contrast, in 1984, the year before compliance was enacted, NRCS assisted with plans on about 2.5 million acres.) NRCS completed this task, using some new approaches. Since 1990, implementation continues to place demands on NRCS staff as producers work toward full implementation by 1995. Changes in farming techniques and crops, incorporating new technology, and changes in ownership and tenancy have contributed to revisions of almost half the plans at least once. NRCS expenditures to implement compliance have totaled $1.77 billion, or about $1,000 per plan.

A second source of pressure is the requirement to work with a large number of new, and sometimes, less cooperative clients. Many of the producers required to have compliance plans had never chosen to work with NRCS in the past and viewed the requirement as coercive. This view point has made farmer implementation more difficult, and caused many in the agriculture community to view NRCS as a regulatory agency.

In May 1992 and August 1994, the House Agriculture Committee's Subcommittee on Environment, Credit, and Rural Development held hearings to learn about the status of compliance. At the August 1994 hearing, USDA presented data based on a 1993 survey of 2.6 percent of all tracts subject to compliance. This data showed that almost 50 percent of all the plans had been fully implemented and another 42 percent were being actively applied. But most of the remaining ones were the more difficult or expensive plans. For example, in southwestern Iowa, where terracing is required in many of the conservation plans, it was not clear in 1993 that there was enough construction equipment available to complete all the remaining terraces by the 1995 deadline, even if funds were adequate and all producers intended to meet the deadline.

Current program criticisms center on adequate enforcement. According to CFSA statistics, 1,944 producers were found to be in violation of conservation compliance (and sodbuster) through 1992. The affected land area was just under 151,000 acres, and benefits lost totaled almost $7.3 million. Critics believe that this record shows lax enforcement, considering the billions of dollars spent in commodity and other programs during the same time period. Supporters of the current program point out that NRCS concentrated its efforts on assisting farmers achieve and retain compliance. Additionally, a very large majority of farmers continue to progress toward successful implementation. The data also show that the number of identified violators has increased each year.

Data from the 1993 USDA survey shows that 3.6 percent of the producers were out of compliance. Several States were in 100 percent compliance; States with less than 85 percent compliance included Iowa (77 percent, Delaware, 80 percent; Vermont, 82 percent; and North Carolina, 84 percent). The Environmental Working Group (EWG), an environmental think tank, analyzed USDA data and found that only about 75 percent were fully applying or actively applying their conservation plans. This battle over what is meant by being in compliance, and what portion of all producers are not in compliance is likely to continue.

POLICY ISSUES IN THE 1995 FARM BILLS

How Much Erosion Control is Enough?

Deciding how far erosion would have to be reduced to be in compliance has been controversial. Initially the Department stated that it would require producers to limit erosion to T, or 2T under some circumstances. (The T value is the theoretical rate at which soil can be lost while still maintaining long-term productivity. It varies with soil type from 5 to 2 tons per acre per year.)

The final rule issued in 1988 added "economic and technical feasibility" to this requirement to give producers greater flexibility. It also allowed the use of "alternative conservation systems" which might not reduce erosion to the T level, but provide a great savings to the producer. Subsequently, SCS Chief Scaling mandated that alternative conservation systems be made available in all counties. This upset environmental interests who felt that these alternatives should be available only in very limited circumstances.

The continued use of alternative conservation systems may be debated in the 1995 farm bill. Environmentalists would argue that use of alternative systems is generally inappropriate, and that producers should be held to the higher standard that Congress intended in 1985. Strict adherence to those legislative instructions would require many plans to be amended. Moreover, a larger portion of the implementing activities would involve conservation measures that need to be designed, built, and maintained. Debate over the continued use of alternative conservation systems is likely to revolve around being able to clearly define whether and where they remain appropriate, and around an ability to compare the costs of meeting more stringent conservation requirements with benefits, both on the farm and off it.

Is Enforcement Adequate?

As the 1995 deadline for full implementation approaches, some producers continue to express concern about losing their benefits. In the early years of compliance, some producers thought that either Congress would extend the deadline, or that compliance for erosion would be repealed. In the largest study of producer views on compliance, the Soil and Water Conservation Society found that more than half those surveyed between 1989 and 1991 did not expect to lose benefits if they were not actively applying their conservation plans in 1995. These expectations have not been matched by actions at USDA or in Congress. For example, during the 1990 farm bill debate, Congress never seriously considered extending or repealing the program. Some producers will probably try to apply greater pressure for delay under some circumstances, basing their arguments on a need for being reasonable under difficult conditions.

Views vary on how the Department and its agencies are enforcing compliance. Many environmentalists believe that NRCS's field staff do not have the resolve to vigorously enforce compliance, and point to the data compiled by the Environmental Working Group (EWG). The Department has responded that enforcement will gradually increase as the 1995 deadline approaches. Enforcement data, especially in the early years, also show that a high portion of those out of compliance were concentrated in a few areas, indicating potential inconsistencies. NRCS states that it is taking action to improve consistency. EWG analysis indicates that the "not actively applying" situations are increasingly concentrated--in 1993, 82 percent of those producers were situated in only 11 percent of the counties. Viewed another way, only 19 counties had producers lose more than $10,000 in benefits in 1991 and 1992 because of compliance (and sodbuster) violations. Agricultural interests would like to see both consistency and some flexibility, especially in areas where there are practical problems, such as not enough cost-sharing funds to support the necessary improvements.

About 75 percent of the plans reportedly rely on residue management. The effects of variable growing conditions from year to year mean that producers have to build in a substantial margin for years when residue is limited, such as a year after drought conditions, or otherwise seek variances. This may be a significant problem at locations where moisture is highly variable from year to year. Basic questions that need to be addressed include: what are the options to residue management? where should they be used? and can they be adopted rapidly as amendments to plans that depend on residue management? Some producers may find that they must update their plans, requiring more work for them and for NRCS, and generating possibly greater producer dissatisfaction with the program.

NRCS has identified available agency resources as a potential problem as the deadline approaches. Demand for services will probably grow as producers increasingly believe that compliance will not be delayed and flexibility will be minimal. The anticipated increase in out-of-compliance determinations will place further demands on staff to deal with appeals. Further hampering implementation will be insufficient cost-sharing funds, and finding more funds will be difficult. Finally, NRCS downsizing will mean that less staff are available to administer this program.

Will Other Changes in Farm Policy Affect the Compliance Approach?

The future of compliance will also be viewed within the context of more general trends in farm policy. If farm policy continues to evolve away from large commodity programs and toward greater reliance on producer decisionmaking and the marketplace, then compliance may become increasingly irrelevant to a growing portion of producers. This general trend is likely to be reinforced by Federal budget constraints, by views about the Government's role in the economy, and by changes in the makeup of the 104th Congress. If farm support programs are cut back significantly, some producers could decide to avoid farm program participation and thereby avoid compliance. Thus, compliance could become a less effective policy tool for conservation.

Supporters of the program's underlying goals may seek new approaches to supplement compliance by limiting the potential for unacceptable levels of soil erosion in future years. No new ideas have been suggested as yet. Many in the agriculture community say that they hope to avoid greater regulation and to rely on a program driven by incentives. They believe that the overwhelming number of producers desire agriculture that is not only profitable, but environmentally positive. Other related environmental legislation such as water quality and other possible environmental benefits of compliance, which have not been part of the debate up to now, may also emerge in 1995 as Congress considers omnibus farm legislation.