INTRODUCTION: Why the controversy?

Often overshadowed by the more intense debates and struggles involving logging on National Forests or mining in the public domain, the debate over grazing on public land seems to phase in and out of the media's eye. But gradually, grazing has become more and more of an issue for both environmentalists and the public. What is at stake is the health and use of over 285 million acres of public land. These lands are loosely controlled by the Bureau of Land Management (BLM) and the Forest Service, but used, often intensely, by ranchers for their cows, sheep and horses.

The problems surrounding that use are rooted in the economic and political structures that often allow overgrazing to continue, and surface as ecological bruises and scars. Overgrazing can lead to the loss of native grasses, the invasion of exotic plant species including noxious weeds, wildlife decline through loss of floral cover and habitat, erosion of topsoil, problems with forest regeneration or increased fuel load, streambank shearing, stream widening and loss of function, desertification through water table decline, stream sedimentation and the loss of fish spawning areas and the subsequent decline of fish populations.

Economically, low grazing fees for the use of these lands are called government subsidies by some, and necessity by others, who see many ranches barely surviving and worry about the effects of their loss to western communities and landscapes. Politically, despite some common ground in the desire to care for the land and keep open spaces, the lack of communication and varying definitions of "caring for the land" tend to divide people on the issue into a spectrum between the pro-extraction extremes of the Wise Use movement, and the "No Compromise" extremes of the environmental movement.

Currently, this split comes to light in the controversy taking place in many western states over the use of school lands for grazing. Environmentalists are arguing, with increasing success, that nonranchers should be able to bid on state grazing permits. The intent of the environmentalists, if successful, is to pay the state for the privilege of not grazing these lands. They would rest the land from livestock grazing, maintaining its flora for wildlife habitat and forage. Environmentalists argue that the states are legally bound to consider their bids because of constitutional requirements to maximize the long-term profits from the school land. Although the court battles continue, after years of agency petitioning and legal battles, the Forest Guardians were awarded the right to rest one state-controlled allotment that was abandoned by the rancher in 1996, and a second after outbidding a rancher by 5¢ an acre in 1997.

Not surprisingly, ranchers are threatened by these bids on state lands, and not simply because of the impact of the loss of a few state grazing leases to a few ranchers. Undoubtedly they are even more worried about the public's perception of grazing if the state determines that grazing leases are not the best long-term use of public land. Ranchers are also worried, with good reason, about how these rulings and their ramifications will affect the use of federal lands. Although the federal government is not required to maximize profit from the land it leases, one of the reforms proposed by Secretary of Interior Bruce Babbitt's proposed "Rangeland Reform '94" (henceforth abbreviated "RR '94") would allowed ranchers (or other who came to control federal allotments) to rest their allotments. This facet of the proposed reforms, along with a few others, has been taken to court and a final ruling is still pending.

The public land ranching community's resistance to reforms is based on several concerns: that the total land base available for ranching will diminish; that reforms will economically impact both individual ranchers and ranching communities; that ranches will fail and get sold to developers, resulting in a loss of open spaces; that grazing fees will climb, impacting yearly operations; and that the flora on allotments that are not grazed will become decadent, and prone to fire. These concerns are compounded by a fear that the price for ranches will continue to climb in many areas due to development trends that are pushing up land values. This could eliminate some old ranches, and decrease the likelihood of any new ranches.

For ranchers, the July, 1997 decision by the US Fish & Wildlife Service that declared 599 miles of Arizona's, New Mexico's and California's stream banks as critical habitat for the southwestern willow flycatcher, along with the expected restrictions resulting from that declaration, are even more scary. Once again, as was not uncommon in the last 20 years, ranchers and environmentalists will end up in court, with federal agencies in the middle. With this most recent round, contesting habitat needs for a growing number of endangered species, the stakes are getting higher, as the grazing management provisions in the Forest Plans from eleven separate National Forests are under dispute.

Ranchers have felt the pinching and pruning of these court cases for years, never knowing whose allotment will be cut back next, usually with no compensation. Many fear an eventual end to public land grazing. Although that is unlikely to happen any time soon, the cry, "Cattle Free in '93" from many environmentalists still echoes in many a rancher's ear, perhaps also rekindling a more distant remembrance of the early moves to completely end grazing on the original forest reserves.

Despite these continued clashes, a counter development has attempted to bring ranchers and environmentalists to the same table. In some cases, such as the BLM's Resource Advisory Councils (RACs), they come to discuss each others concerns and to try to find some common ground that will allow the agencies to work with both more easily. In other areas, such as the Gray Ranch in New Mexico, or the Tipton Ranch in Nevada, ranchers are working with environmental groups on plans that emphasize ecologically based range management. Many more ranchers are attempting to do their best to show the public that ranching does not always destroy the land, and can at times help rehabilitate it. Although many environmentalists are truly pleased by these efforts, others cannot help but point out negative statistics. For example, they often note that 66% of the riparian habitat in BLM allotments is not in Proper Functioning Condition (USDI, BLM). Thus, the political and legal battles continue.

So, in the midst of this controversy over public land grazing, is there any way to make significant political progress on these issues? It is unrealistic to suggest that the groups involved will ever reach consensus, but it may be that one important element of that debate remains largely overlooked by environmentalists and lawmakers, and even in part by the public lands ranchers that it most effects. That missing element may be fundamental to understanding the ranchers' resistance to changes in the management of public land grazing. It may be that a clear understanding and fair consideration of the importance of that element may ease the conflict and allow politicians and land managers to develop new options that allow for progress in this hundred year debate. These new options could both ease the ecological concerns of environmentalists and the economic concerns of ranchers. This important hidden element, permit value, is the focus of this thesis.

In a quick perusal of works on the history, politics or economics of public land grazing, the overwhelming impression would be that the dominant theme is the debate over grazing fees. Clearly there is much truth to that impression. That impression would surely be tempered by the growing importance of environmental issues, but often even environmentalists get caught up in the grazing fee debate. To some, the phrase, "low grazing fees are subsidies" becomes a mantra, for it works to bring the public's attention to an environmental issue by having them look at where their tax dollars are going.

At least part of the academic interest in the debate over fees is because of its complexity. They raise many questions: Should fees be charged at all? How should fee levels be determined? Are ranchers being subsided through low grazing fees? Are low grazing fees costing taxpayer money? How do grazing fees relate to ranch prices? Do low grazing fees stabilize rural communities? The academic debate then filters out to the public, who usually look to the bottom line.

Throughout this varied debate, however, it is usually assumed that the fee itself is of paramount importance. The fee level does affect both the profitability of the ranch, and how much of the government's expenses for monitoring and maintaining the grazing program are recovered. Part of that fee-level debate centers on whether the fee represents the fair market value of the forage the lease provides. Also, it is often argued that increased fees will put small ranches out of business. What is not often asked, however, is if there are any equally important and possibly more fundamental issues that contribute to making the fee debate so central.

To clearly understand permit value, it is necessary to have a clear understanding of the benefits that leasing a public land grazing allotment have to a ranching operation. The fundamental benefit is that such a lease provides a source of relatively secure forage that allows the operation to run more cattle. Although allotment AUMs do occasionally get cut, only in rare instances do whole allotments get canceled. Generally a ranch can count on this increase in forage to remain secure for at least ten years. In most cases, as long as they follow the legal requirements of their leases, they can keep their leases for decades. In some areas, forage from allotments is also difficult to replace, simply because the surrounding pastures are in use. This makes ranchers feel dependent on their allotments. Further, even if it is available, replacement forage is usually more expensive than running stock on an allotment. This is especially true in cases where the allotment abuts or is close to the ranch.

The question then becomes, "How real is that feeling of dependency?" Everyone admits that the fee for using federal allotments is clearly less than the fees charged to lease private allotments. Many thus argue that the ranchers should not be subsidized and the fee should be increased. Others argue that although the fees are lower on public lands, the total costs to the rancher for public and private forage are actually on par, if such factors as the required transportation, labor and equipment are considered. This controversy is important to recognize, but will not be resolved in this work.

If the total costs to a ranching operation are less per animal for a ranch with a federal allotment, then there is clearly a benefit of having an allotment. Even if the average total costs of public and private forage are nearly equal, there are other benefits that are less obvious. Looking at the microeconomics of ranching operations, a larger operation will usually have a greater total income and a greater total profit. Often, through economies of scale, larger operations also have more profit per unit of livestock, since some costs remain nearly constant despite changes in the size of the ranch. Although the degree of their influence is debated, in almost all cases allotments clearly provide some increase to the yearly profit of a ranching operation.

Permits become valuable through the combination of all these benefits, and that value becomes marketable because permits are consistently transferred with the sale of a ranch. Although definitions of permit value vary slightly, for this thesis permit value is defined as the difference between the real estate value of a ranch without its attached allotment(s) and the real estate value of a ranch with its allotment(s). The actual calculation of permit value for an allotment is complicated, since permit value fluctuates with many factors, including changes in grazing fee levels, possible changes to the AUM level of the allotment, the season of use for the allotment, the degree of security that the allotment will remain with the ranch, the ranch's geography and ecology, the general productivity of the ranch and allotment, and local trends in ranch real estate values.

Many environmentalists and lawmakers are not even aware that permit value exists. Others are aware of it but focus on the grazing fee controversy or ecological concerns. Some environmentalists that I talked to, influenced by their belief that permit value has no legal basis, blind themselves to the significance that permit value has for ranchers. They do this despite the fact that in some cases it more than doubles the base (deeded) value of a ranch. In either case, those who are aware of it have failed to educate the public on its significance. Most ranchers with allotments are undoubtedly aware of the economic importance of permit value, but for good reasons, few seem to make an issue of it. They choose instead to fight for the notion that grazing allotments are a property right, or emphasize the controversy over fee levels, imploring politicians to keep them low in order to maintain the stability of the public lands ranchers. This tactic, however, gets little sympathy from those who see low fees as a subsidy. Those who believe in these subsidies often do not really care about the debate over total costs, or how it affect ranchers, for as taxpayers what they care about is that the costs of managing the federal allotment system is considerably more than the sum that grazing fees bring in.

Ranchers might do better to be more open about the whole economic system of public land grazing. A clear explanation of permit value might gain or at least maintain public sympathy, especially if some ranchers have the courage to admit that they have become stuck with a large investment in an allotment that is not very profitable, or has become more valuable for other public uses. These ranchers must be more flexible, and at least willing to listen to new politically broad-based land management options. Ranchers must recognize that the West is changing and in the long run, they cannot realistically hold the acreage or AUMs that they currently do, in the face of the creeping forces of increasing population, growing demands for recreation on public lands, and increasing recognition of wildlife habitat needs.

In return, environmentalists must face up to the historical and political reality that it is unlikely that public lands ranching will end in the near future. They must work with the ranchers who are willing to change, and be willing to give some social and economic considerations to the long years of investment and sentimental use that ranchers have in public lands. They can continue in their attempt to chip away at the hardened allotment system through costly and time consuming appeals and legal battles, or they can try to work towards finding real, long-term solutions. If they attempt the latter, understanding permit value will surely help.

The reality is that without a significant political or judicial shift, the struggle over public land ranching in the West will continue. That struggle can be painful and protracted, or may be transformed into a rational debate that searches for equity and fairness. It is my hope that the exploration of permit value that follows, along with the concluding recommendations, will lead to some real attempts for more flexible and equitable grazing management systems, that both benefit the environment, and are fair to ranchers.

This thesis looks closely at permit value in an attempt to redefine the century-long debate over public land grazing. It postulates that there is a marketable real estate value to public land grazing allotments (hitherto referred to as permit value), that there is a fundamental tie between grazing fees and permit value, that permit value is one of the two biggest reasons why ranchers often resist cuts to their public land grazing allotments' AUM levels and other restrictive changes in allotment management. It then finds that ultimately, the issue of permit value must be addressed before any serious attempt to resolve the conflicts over public land grazing will bring even partial closure to the debate over public land grazing.

Chapter Two traces the historical background of the development of permit value: How did it come into being? This history is by no means comprehensive, and only touches briefly on the already well documented extensive debate over grazing allotment fee levels. Aside from fee levels, any law or event that changes AUM levels would directly influence permit values, as would any law or regulation that influences that existence or stability of permits. Thus, this history focuses on the debates, political trends, and legal issues that have influenced, or have the potential to influence, fee levels, AUM levels, or the stability of the allotment system. These include factors such as new environmental and land management laws along with related lawsuits, the "Sagebrush Rebellion" and its roots, the more recent grazing bills introduced by Senator Domenici and Representative Smith, fluctuations in the price of beef, and changes in land use patterns.

Chapter Three starts with a discussion of appraisal techniques and various theories proposed in the literature on the economic basis of permit value and the true costs of grazing on allotments. It then assembles the results of recent economic studies that assess the extent of permit value, i.e. how valuable is each additional AUM to the real estate value of a ranch. It also looks at the methods used in these studies to determine this value, including further discussion of the relationship between grazing fee levels and permit value. Finally, it attempts to explain some of the variations in those results.

Chapter Four reports the results of an informal survey the author conducted through interviews with forty-three people who are intimately concerned with the issue of public land grazing. These people include ranchers, both with and without federal allotments, federal land managers, professors, environmentalists, bankers, a Realtor and a reporter. The interviews were conducted in an attempt to assess the practical and political importance of permit value in the debate over public land grazing.

The focus of these interviews was on assessing the importance of permit value and on getting responses to new management options that would compensate ranchers for forces AUM reductions, or allow voluntary retirement of allotments for compensation. The discussion of the results of these interviews also attempts to fit the interviewees' perspectives on permit value into a larger picture of the practical and philosophical views on public land grazing. It does this by comparing their perspectives on permit value with other related issues of importance, including ranch viability, grazing fee levels, retaining open spaces, land prices, maintaining viable wildlife habitat, maintaining rural communities, and the role of the federal government.

Chapter Five discusses various issues affecting public land grazing that need to be considered when examining new management tools. Then some new allotment management options are discussed that could potentially mitigate the economic impacts to the ranchers from AUM reductions and the resulting loss of permit value. The goal of some of these options is to reduce the resistance of the ranching community to AUM reductions that aim to increase critical habitat for wildlife and improve stream and riparian function.

Many of these possibilities were discussed with the interviewees, to assess their political and practical viability. After a final assessment of the importance of permit value in the public land grazing debate, in Chapter Six a recommendation is made that includes an outline of the integral components of some new management options that might be successful if incorporated into new legislation.

Document Beginning          Page Top          Chapter 2