Grazing Fees: An Overview

Betsy A. Cody, Specialist
Environment and Natural Resources Policy Division

May 21, 1996

96-450 ENR

SUMMARY

Charging fees for grazing private livestock on federal lands is a long-standing but contentious practice. Generally, livestock producers who use federal lands want to keep fees low, while conservation groups and others believe fees should be raised to approximate "fair market value." The Clinton Administration pursued an increase in fees for nearly two years; however, congressional objections forestalled an administrative increase. Legislative interest in grazing fees and rangeland management continues in the 104th Congress, primarily in response to the Administration's issuance of new rangeland rules in August 1995. The Senate passed S. 1459 in March 1996, which would replace the new rules and establish a new grazing fee formula that would apparently increase fees by approximately 25-35%. The House Resources Committee marked up S. 1459 on April 25.

INTRODUCTION

Charging fees for grazing private livestock on federal lands has been the policy of the Forest Service (in the Department of Agriculture) since 1906, and of the Bureau of Land Management (BLM, in the Department of the Interior) since 1936. Today, fees are charged for grazing on approximately 167 million acres of BLM land and 95 million acres of Forest Service land.(1) Forage grazed on these lands represents approximately 2% of the total feed consumed by beef cattle in the 48 contiguous States and supports 10%, of the livestock producers in the 16 Western States where grazing fees are charged under a fee formula established in the Public Rangelands Improvement Act of 1978 (PRIA).(2)

Grazing fees have been contentious since their introduction in 1906. Generally, livestock producers who use federal lands want to keep fees low. They argue that federal fees are not comparable to fees for leasing private rangelands, because public lands are less productive and require added operating costs. Additionally, they argue that fee increases may force many small and medium-sized ranchers out of business.

Conservation groups generally assert that low fees contribute to overgrazing and deteriorated range conditions. In addition, because these fees are lower than private grazing land lease rates and do not cover the costs of Forest Service and BLM range management, critics believe low fees subsidize ranchers and contribute to the Federal budget deficit. Conservation groups note that part of the fee is returned to the agencies for range improvement and contend higher fees could enhance the productive potential and environmental quality of federal rangelands.

BACKGROUND

The grazing fee is paid by animal unit month (AUM), the amount of monthly forage needed to sustain one animal unit (one cow and calf, one horse, or five sheep or goats). Fifty percent of the fees collected are returned to the agencies and deposited into a range betterment fund and used for range improvement. Portions of the remaining 50% are allocated to the states and the U.S. Treasury, depending upon what type of lands generated the receipts.(3) (See figure 1.) The state share is then allocated to "benefit" the counties from which the receipts were generated.

Figure 1.

The fee formula enacted in PRIA begins with a base value of $1.23/AUM, adjusted by indices of livestock market prices and rancher operating costs (sometimes called "ability to pay" factors). PRIA required a 7-year trial of the formula while the Forest Service and BLM undertook a grazing fee study to help Congress determine a permanent fee or fee formula. The trial period for the PRIA fee formula expired in 1985. Congress did not legislate a new fee authority, and President Reagan issued Executive Order #12548 on February 14, 1986, to continue indefinitely the PRIA fee formula for both agencies, adding a provision that established a minimum fee of $1.35 per AUM (which was the grazing fee for 1985, and again for 1996). Consequently, under the current executive order, the fee cannot fall below $1.35/AUM; however, it can be greater if application of the formula results in an increase. The annual grazing fees since 1985 are shown in Table 1.

Table 1. Grazing fees under the PRIA formula, 1986- 1994.
(dollars per AUM)

PRIA also directed the Secretaries of the Interior and Agriculture to evaluate the fee formula and other grazing fee options. In response to this directive, the Secretaries issued a report in 1986 that included: 1) a discussion of livestock production in the western United States; 2) an estimate of each agency's cost for implementing its grazing programs; 3) estimates of the market value for public rangeland grazing; 4) potential modifications to the PRIA formula; 5) alternative fee systems; and 6) estimated effects of the fee system options on permittees.

In 1991, Congress directed the Forest Service and the BLM to update the 1986 grazing fee study (P.L. 102-154). While the 1992 update did not make recommendations to Congress regarding changes to the fee or fee formula, it provided new information by updating the appraised fair market value of grazing on federal rangelands, presenting the current costs of range management programs, and calculating a way to update the PRIA base value through the application of economic indices:

• - The 1986 assessment of fair market value of grazing on federal land was updated for each of six western regions. Regional market values ranged from $4.68 to $10.26 per head per month(HD-MO) for mature cattle and horses, and from $4.68 to $7.74 HD-MO for yearling cattle. The appraised market value for grazing sheep was $0.95 HD-MO throughout the West. (Charging by HD-MO is considered by the agencies generally to be comparable to charging by AUM for horses and cattle, and one-fifth AUM for sheep.)
• - The cost to government of the Forest Service's livestock grazing program for FY1990 was determined to be $3.24 or $2.40 per AUM, depending on whether the calculation includes all range management funds or only those that are directly attributable to the livestock grazing program. Similar costs for the BLM's livestock grazing program were $3.21 or $2.18 per AUM, respectively.
• - The $1.23 per AUM base value used in the PRIA fee formula was updated by indexing the non-fee operating costs of leasing public land for grazing as compared with leasing private land for grazing. This indexing resulted in an increase to the base value. If applied in a new formula, the base value would equal $2.95 per AUM.

ADMINISTRATIVE ACTIVITY

New rules for rangeland management went into effect August 21, 1995; the final rules did not include an increase in the grazing fee. In August 1993, the Administration had proposed an administrative increase in the grazing fee, as well as a set of revisions to other federal grazing policies. The proposed rangeland rules for the BLM were revised and reissued in the Federal Register on March 25, 1994 (p. 14314-14353); proposed rules for the Forest Service were published in the Federal Register on April 28, 1994 (p. 22074 and p. 22094). The proposed grazing fee formula started with a base value of $3.96/AUM (up from the $1.23/AUM base value in PRIA). The new figure was based on previous government assessments of the value of public lands grazing, including the joint studies by the Forest Service and the BLM.

The proposed fee would have been adjusted to reflect annual changes in private land lease rates in the West by using one index, the Forage Value Index (FVI). The current PRIA formula is adjusted using several indices, a practice that some have criticized as double-counting ability-to-pay factors. The proposed new formula would have used 1996 as the base value for the FVI. The Administration had proposed phasing in the fee increase, which would have resulted in a grazing fee of $2.75/AUM for 1995 and $3.50/AUM for 1996. After 1996, the fee would have been calculated using the $3.96/AUM base value, multiplied by the revised FVI.

The Clinton Administration originally proposed raising grazing fees as part of its economic stimulus and deficit reduction proposal, "A Vision of Change for America," in February 1993. As outlined, the proposal would have authorized the Secretaries of Agriculture and the Interior to negotiate a graduated fee increase. Target net revenues for the increase were $76 million over five years, beginning with an increase of $6 million in 1994 up to $35 million in $1997.(4) (For comparison, net receipts for 1992 totaled approximately $10.7 million.) The Administration decided in March 1993 not to pursue grazing fee increases as part of its overall budget package, but to pursue an administrative increase instead.

Absent congressional action, it appears that the Administration has the authority to raise grazing fees if it continues to rely on a formula approach and considers ranchers' costs. Rules that do not address these two points may be on less secure ground.(5) Any attempt to increase the fee administratively, however, is likely to spur congressional action.

LEGISLATIVE ACTIVITY

Debate over grazing fees in the 103rd Congress revolved around opposing attempts to legislatively increase fees and to prohibit an administrative increase in fees. A Senate filibuster on FY1994 Interior Appropriations (H.R. 2520) ended when parties agreed to drop language that would have raised grazing fees and instituted widespread changes in rangeland policy. The Senate earlier had amended H.R. 2520 to prohibit funding of "any action involving the proposed rulemaking" on grazing fees and other program reforms initiated by the Administration. Conferees on the bill initially dropped the prohibition language and replaced it with an 85% fee increase over 3 years ($3.45 per AUM), and rangeland policy changes, similar to those proposed by the Administration. However, the FY1994 Interior and Related Agencies Appropriations was signed into law (P.L. 103-138) on November 11, 1993, with no grazing fee language.

Other grazing fee and range-related legislation in the 103rd Congress included H.R. 643, H.R. 1602, H.R. 1603, H.R. 1750, S. 781, S. 896 and S. 1326. (See: CRS Issue Brief IB 93110, Natural Resource "Subsidy" Issues in the 103rd Congress.) Several bills in the 102nd Congress had proposed a variety of responses to the grazing fee controversy, including two that would have raised grazing fees, both of which passed the House in the 102nd Congress.

The 104th Congress has addressed the grazing fee issue as part of an overall attempt to codify and modify previous rules on rangeland management. (See: S. 1459 (previously S. 852) and H.R. 1713.) In March 1996, the Senate passed S. 1459 to alter current rangeland regulations and establish a new grazing fee formula. The new formula would be derived from the 3-year average of the total gross value of production for beef (an annual survey of market prices per cow-calf) and would no longer be indexed to operating costs and private land lease rates, as with the PRIA formula. The Congressional Budget Office estimates the new fee would result in an increase of approximately $0.50 per AUM, or approximately 25%-35% above recent PRIA fees. S. 1459 was ordered to be reported from the House Resource Committee on April 25 and awaits floor action. (See: CRS Issue Brief 96006, Grazing Fees and Rangeland Management.)

FOR ADDITIONAL READING

U.S. Department of Agriculture, Forest Service, and Department of the Interior, Bureau of Land Management. Grazing Fee Review and Evaluation: Update of the 1986 Final Report. Report of the Secretaries of Agriculture and the Interior. April 30, 1992.

U.S. Department of the Interior. Rangeland Reform '94, Draft Environmental Impact Statement. Prepared by the Department of the Interior, Bureau of Land Management, in cooperation with the Department of Agriculture, Forest Service. (Washington, DC: 1994).

U.S. House of Representatives. Committee on Interior and Insular Affairs, Subcommittee on National Parks and Public Lands. Oversight hearing. Grazing and Public Rangelands. Serial No. 102-90. May 12, 1992.

---- Committee on Resources, Subcommittee on National Parks, Forests and Lands. Hearing on H.R. 1713, a bill to provide for uniform management of livestock grazing on federal land and for other purposes. Serial No. 104-38. July 11, 1995.

U.S. Library of Congress. Congressional Research Service. Natural Resource "Subsidy" Issues in the 103rd Congress. [by Marc Humphries, Betsy A. Cody, and Ross Gorte.] CRS IB-93110. Washington, DC: 1993.

---- Grazing Fees and Rangeland Management. [by Betsy A. Cody.] CRS IB 96006.

U.S. Senate. Committee on Energy and Natural Resources. Bureau of Land Management Authorization. S. Rpt. 102-460. Oct. 8, 1992.

--- Grazing. Hearings on the Department of the Interior's proposed rule to amend the Department's regulations concerning livestock grazing. (Washington DC: U.S. Govt. Printing Office, 1994.) S. Hrg. 103-655 (Pt. 1).

--- Livestock Grazing Act. Hearing June 22, 1995 before the Subcommittee on Forests and Public Land Management on S. 852, to provide for uniform management of livestock grazing on federal land, and for other purposes. (Washington DC: U.S. Govt. Printing Office, 1996) S. Hrg. 104-389.

--- Public Rangelands Management Act of 1995. Report accompanying S. 1459. S. Rpt. 104-181. Ordered to be printed December 7, 1995.

ENDNOTES

1. BLM figures are from: U.S. Dept. of the Interior. Public Land Statistics, 1993. (Washington DC: U.S. Govt. Printing Office, 1994.) Tables 14 and 15, pp. 26 and 27. Forest Service figures are from: U.S. Dept. of Agriculture, Forest Service, Range Management. Grazing Statistical Summary, 1994. (Washington DC: March 1995.) p. iii.

2. The sixteen States where PRIA grazing fees are assessed on Forest Service and BLM lands include: Arizona, California, Colorado, Idaho, Kansas, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Washington, and Wyoming. Grazing fees are different for eastern States and for national grasslands managed by the Forest Service.

3. Fifty percent of Forest Service receipts for western rangelands are split between the U.S. Treasury and the States. BLM's distribution of receipts is more complicated: States receive 12.5% of fees collected from lands defined in section 3 of the Taylor Grazing Act of 1934 (P.L. 482), and 50% of fees collected from section 15 lands. Section 3 lands are those within grazing districts for which BLM issues grazing permits (approximately 150 million acres); section 15 lands are those outside grazing districts, for which BLM leases grazing allotments (approximately 17 million acres).

4. The Congressional Budget Office (CBO) estimated the proposed increase would generate approximately $63 million over four years. The primary reason for the disparity between the Administration and CBO numbers is that CBO estimated that allotment permits and leases would decline by an approximate 2% for every 10% increase in the grazing fee.

5. See: CRS general distribution memo, Whether Legislation is Necessary to Change Grazing Fees, by Pamela Baldwin and Adela Backiel, April 8, 1993.