Conservation Compliance for Agriculture:
Status and Policy Issues

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

Updated April 10, 1998

96-648 ENR

Summary

Provisions enacted in the 1985 Food Security Act require farmers producing agricultural commodities on highly erodible land to fully implement an approved conservation plan to remain eligible for certain firm program benefits. About 140 million acres, more than a third of the country's cropland, is classified as highly erodible. This program, known as "conservation compliance," was amended in 1990 and 1996. This paper reviews the compliance concept, the program requirements, and the implementation record. It also introduces three policy topics: the effect of compliance on erosion rates and patterns; the effectiveness and flexibility of implementation; and the possible impact of changes to commodity policies enacted in the 1996 farm bill.

Background

The Concept. From their inception in the 1930s, and until compliance requirements for farm programs were 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) and cost-sharing payments through the Natural Resources Conservation Service (NRC S), land rental and emergency payments through the Farm Service Agency (FSA), and education through the Extension Service (ES). Employees of each agency are located in most counties, providing easy access to programs for most farmers.

However, in the late 1970s and early 1980s, as commodity program costs soared and substantial erosion problems were widely reported, opinion surveys showed a growing portion of the general public, and even some in 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 and should be exempted from regulatory requirements that apply to other industries.

Compliance sets an environmental standard for agricultural activities. When conservation compliance for erosion and two other compliance proposals surfaced in the 1985 farm bill debate, they were quickly identified as a major shift in policy. (The two other proposals, also enacted in 1985, 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 debate about compliance proposals would be contentious. The sodbuster proposal had been considered for several years. It had passed both Chambers in 1984, but was not enacted. Many veterans of farm policy debates did not expect compliance proposals beyond sodbuster to survive the omnibus farm legislation deliberations. However, these compliance provisions were enacted after surprisingly little discussion. Policy analysts suggest that earlier debate over sodbuster, and discussion of the closely-related concept of "cross compliance9' in the 1982 National Conservation Program, had probably helped prepare the way for congressional acceptance of these proposals.

Some opponents of compliance maintain that it has changed NRCS from a farm-conservation support agency into a regulatory agency. Supporters of compliance counter that there have always been requirements on farm program participants, and that compliance for soil and water conservation creates additional requirements, not new regulations. Further, each producer can still decide whether to comply or not, and those who choose to be out of compliance still have frill market access. This debate--which has both philosophic and practical dimensions--continues, especially in areas where meeting compliance standards has been especially difficult or costly and producers rely on federal farm program payments.

If compliance is viewed as a "stick" approach, Congress also included 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. Producers have enrolled 36.4 million acres. Compliance and CRP are connected; when contracts end, the 75% of the 36.4 million acres enrolled in the CRP before 1995 that are defined as highly erodible will be subject to compliance requirements. Producers returning crop production on these acres will have 2 years after their CRP contracts expire to be frilly in compliance or lose program eligibility.

Conservation Compliance, as Amended. Compliance was enacted in the Food Security Act of 1985 and amended in 1990 and 1996. Under the 1985 Act, farmers who cultivate highly erodible lands must have frilly implemented an approved conservation plan by 1995. Under this law, producers who are out of compliance risked losing eligibility for the following farm support programs on all the land the producer cultivates:

· price and income supports and related programs;

· farm storage facility loans;

· crop insurance;

· disaster payments;

· storage payments; and

· any farm loans that will contribute to erosion on highly erodible lands.

Amendments in the Food, Agriculture, Conservation, and Trade Act of 1990 expanded compliance to include highly erodible land set aside as a requirement for participating in commodity programs. They also added six more federal farm programs to the list of benefits that could be lost for non-compliance. A graduated penalty, available once every 5 years, was added so that under some circumstances, called "good faith" exemptions, producers could be subject to only $500 to $5000 loss in benefits. The revisions protect tenant farmers from violations caused by landlords or other tenants.

Amendments in the Federal Agricultural Improvement and Reform Act of 1996 expanded producer flexibility. Among the enacted changes were provisions that:

· require conservation compliance as a prerequisite for receiving market transition payments;

· provide violators up to one year to meet compliance requirements:

· develop expedited variances (less than 30 days) for weather, pest, or disease problems;

· allow third parties to measure residue, and require that residue measurements take into account the top two inches of soil;

· allow producers to self-certify compliance when applying for benefits;

· allow producers to modify plans if they maintain at least the same level of treatment;

· allow local county committees to permit relief if a conservation system causes a producer undue economic hardship;

· direct USDA employees who observe violations while performing other duties to inform producers of necessary corrective actions within 45 days;

· delete crop insurance from the list of program benefits that can be denied; and

· authorize a pilot project to review the use of wind erosion factors.

Implementation. NRCS is the lead agency administering conservation compliance. It coordinates the drafting of regulations, works with producers to develop and implement conservation plans, and visits a sample of the 1.6 million plan sites each year to verify implementation. It can grant variances to producers based on uncontrollable physical conditions, such as disease or drought, or extreme hardships. NRCS passes along the names of those found not to be "actively applying" their plans or not using an approved conservation system to the agencies who administer the specified programs; these agencies determine whether benefits will be denied. Producers can appeal a non-compliance determination.

Compliance requirements have placed substantial pressures on the NRCS staff During the first decade of this program, a large source of these pressures was the increased workload. Compliance required that the new plans be completed on the approximately 140 million acres classified as highly erodible by 1990. (In contrast, in 1984, the year before compliance was enacted, NRCS assisted with plans on about 2.5 million acres.) Between 1990 and 1995, implementation continued to place large demands on staff, especially leading up to the 1995 deadline for frill implementation. Almost half the plans were revised at least once before the 1995 deadline because of changes in farming techniques and crops, new conservation technology, and changes in ownership and tenancy. NRCS estimated that expenditures to implement compliance have totaled $1.77 billion, or about $1,000 per plan. NRCS had forecast that its workload on this program will decrease substantially after 1995, pending implementation of amendments to the 1996 farm bill.

A second source of pressure has been 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. Some producers view compliance as coercive. This perspective has made farmer implementation more difficult, and caused many in the agriculture community to view NRCS as a regulatory agency. Constituent concerns caused Congress to convene several oversight hearings to explore implementation of compliance.

The annual status review report prepared by the NRCS is the most current summary of program accomplishments. The 1996 review was based on a survey of 40,000 highly erodible land tracts. This survey shows that almost 95 % of the sample tracts were using acceptable systems. Just under 3% had been granted a variance. Only .7% of the tracts were out of compliance; by contrast in 1994, 3% of the sites sampled had been out of compliance. In this report, NRCS also noted that the average review required 3.3 hours for field office staff and that performing all reviews (for compliance and swampbuster combined) consumed more than 163,000 hours.

Current Policy Topics

Compliance and Erosion Rates. The goal of the compliance program is to reduce erosion to target levels where long-term productivity would be maintained. Other benefits of reduced erosion include improvements to environmental conditions both on and off the farm. Deciding an appropriate erosion reduction level 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 would reduce erosion, but not to the T level, at a substantially lower cost to the producer. Subsequently, NRCS Chief Scaling mandated that alternative conservation systems be made available to all producers. This brought protest from environmental interests who felt that widespread use of these alternatives would compromise compliance. They believe that this option should be available only in very limited circumstances. Alternative conservation systems continue to be widely used.

The 1996 status review report summarizes the effectiveness of the program. NRCS found that average erosion on the sampled tracts had dropped from 16.8 tons per acre before the plans were implemented to 5.7 tons. These measured rates were less than the average of 5.9 tons that had been predicted. But the average measured rate still exceeded the average T value for these lands, which was 4.6 tons per acre per year. The higher measured rate can be attributed to the widespread use of alternative systems. The significance of the average of 1.1 tons per acre per year between the actual rate and the average T value is not clear. NRCS estimated in an earlier study that overall erosion on highly erodible land had been reduced from 1.37 billion tons before conservation plans were implemented to 0.48 billion tons at the time that the survey was taken.

The Flexibility and Effectiveness of Implementation. Disagreements over what is meant by being in compliance and what portion of all producers were not in compliance were especially strong as the 1995 deadline for frill implementation approached. Related questions about the level of enforcement were also raised. Those concerns, while less visible since the 1995 deadline passed, remain. Program statistics continue to fuel this debate. Supporters say they show that the overwhelming portion of producers are in compliance. A finding of the 1996 status review is that "farmers are complying with the law and that the law is achieving the goal Congress intended." Critics contend that the figures are more positive than observations in the field suggest and that anything less than frill compliance everywhere should not be acceptable.

What do these statistics show? According to the most recent FSA statistics, compiled in December 1996, 3,875 producers have been found to be in violation of conservation compliance (and sodbuster) since these programs were implemented. The affected land area was just over 461,000 acres, and benefits producers lost totaled $15.5 million. Critics believe that this record shows lax enforcement, considering the billions of dollars spent in commodity and other farm programs during the same time period. They also point out that appeals and exemptions greatly reduce the value of benefits denied. For example, in 1993, the value of the benefits denied was only $3.2 million after $9.2 million was restored through appeals and exemptions. Supporters of the current program point out that NRCS concentrated its efforts on assisting farmers achieve and retain compliance, not on identifying violators.

Producers were already given considerable flexibility in meeting compliance before the 1996 farm bill was enacted, according to environmental critics. They argue that use of alternative systems should be limited 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. Supporters point out that half the plans have already been revised at least once, and further change for a rather small marginal benefit would be at least disruptive, and probably costly as well. Future debate over the continued use of alternative conservation systems is likely to revolve around being able to define when 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.

Views continue to 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 that variances and exemptions are quickly granted when violations are discovered. Enforcement data in the early years showed that a high portion of those out of compliance were concentrated in a few areas, indicating potential inconsistencies. The most recent NRCS status review, by contrast, shows a dispersed pattern of violations. Agricultural interests would like to see both consistency and some flexibility, especially in areas where there have been practical problems, such as insufficient cost-sharing funds to support the necessary improvements.

About 83% of the plans reportedly rely on management of crop residues or residues and conservation tillage. The effects of variable growing conditions from year to year mean that producers either must 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?

Compliance and Commodity Programs. The future of compliance must also be viewed within the context of more general trends in commodity policy. The 1996 farm bill bases commodity policy for the next 7 years on "market transition payments," making producers rely more on the market place and on their own decision-making. Being in compliance is a requirement for participation. But if this is truly a transition program, when commodity programs are terminated, compliance will become irrelevant. Currently, this trend away from federal commodity programs is reinforced by budget constraints, by views about the government's role in the economy, and by changes in the makeup of Congress. During the transition period, if the 1996 farm bill is amended so that farm support programs are cut back further, some producers could decide to forego farm program participation and thereby avoid compliance.

Supporters of compliance's underlying goals may seek new approaches to supplement it and constrain the potential for "unacceptable" levels of soil erosion in the future. No new ideas are being widely discussed as yet, however. Many in the agriculture community say that they hope to avoid greater regulation and to rely on a program driven by the traditional approach combining voluntary participation, financial incentives, and technical assistance. They believe that most producers want agriculture to be not only profitable, but environmentally positive. This debate over future program options is likely to keep compliance issues before Congress, especially as new environmental concerns for agriculture become more prominent, including air pollution and animal waste management.