Permit Value: A Hidden Key to the Public Land Grazing Dispute

• Chapter Overview
• THE ISSUES IN REFORMING PUBLIC LANDS GRAZING
  • Ranch Viability and Local Community Economic Health
  • Habitat, Ecological Health, and Recreation Values
  • Permit Value, Loans and Finance
  • Government Finances
  • Leasing Requirements
  • Should Grazing Be Required?
  • Management Responsibility and Input
  • Monitoring/Sidebars
  • The Potential for Floral Decadence
• POSSIBLE PUBLIC LAND GRAZING REFORMS
  • Fee Level Changes
  • The Domenici and Smith Bills
  • Selling Allotments To Ranchers
  • Open Market Bidding For Grazing Permits
  • Free Market Bidding For Variable Use Allotments
  • Grassbanking
  • Compensation For Forced AUM Reduction
  • Voluntary Allotment Retirement

This chapter briefly explains some of the current reform proposals relating to permit value. It analyzes each proposal, in part by considering the conversations with the interviewees that occurred in addition to their answers on the survey questions, Then it considers whether each proposal could be implemented in a form that is acceptable to both the public land ranching and environmental communities. Before discussing the reform proposals, a number of other public land grazing issues are examined in brief, so that they can also be discussed, along with permit value, in relation to each reform proposal. This reflects a concern that grazing reform primarily directed at permit value does not ignore other issues that could make it either unacceptable or unworkable.

For most ranchers, ensuring the continued viability of their operations is of primary importance. Most do not want to see any reduction in the number of livestock they run, and many do not want to see reductions in the acreage grazed on public lands, as they think that grazing is good for the land. Many ranchers also want their leases to last longer than ten years, to insure the stability of their operations.

If one goal of reform is the cooperation of the public lands ranchers, the AUM reductions that are required should be done in a manner that is as least threatening as possible. Reductions should be made as much as possible through voluntary measures. Larger operators should be encouraged to sacrifice AUMs to provide forage for smaller operators facing reductions. If possible, cuts should be made to larger operators and foreign interests before smaller operators are cut. Where possible, efforts should be made to find replacement forage, whether it comes from public or private land.

Ranchers also think that ranching is socially and economically important to their local communities, and point out how some economists argue that these allotments ultimately benefit rural economies, bring in tax money, and prevent the unemployment of up to 28,000 ranchers. These beliefs continue, despite the studies that show the West's economy changing rapidly, with many western communities becoming less and less dependent on the ranching industry. Still, in designing politically viable reforms, it is important to consider that the ties ranchers have to their communities are important to the them, that these ties have existed historically, and that to varying degrees, they remain important to the communities.

It is not the point of this work to debate whether or how destructive livestock grazing is, but it is important to consider how this issue effects possible reform. Environmentalists point to a growing body of evidence suggesting that the effects of grazing are serious, especially if overgrazing is allowed. In considering grazing reform, it must be taken into account that for most environmentalists, their primary concerns are wildlife habitat and the long-term ecological health of public land. Many also highly value the recreation potential of public lands. Environmentalists vary in the degree that they see livestock grazing as harmful to these values. Most of them want public land grazing to be reduced in many areas to protect these values. Some even maintain that all livestock should be removed from public lands.

Clearly, most ranchers are also concerned about wildlife habitat and ecological health, but compared to environmentalists, they generally do not believe that livestock grazing is nearly as destructive to these values. Many ranchers believed themselves to be "environmentalists," but those who do would generally be considered conservationists rather than preservationists. In general, however, ranchers focus their ecological concerns on the deer, elk and fish populations—species that are hunted and fished.

Ranchers generally would allow an area to be grazed longer than environmentalists would before considering it overgrazed. Environmentalists are more cautious about grazing levels and their effects on riparian areas. For reform measures to satisfy environmentalists, ranchers will have to be more respectful of that tendency toward caution.

As the previous chapters suggest, permit value is a significant issue that needs to be addressed in effective grazing reform. Clearly ranchers have a considerable financial investment in permit value. Ranchers who have outstanding loans or who have little ready cash and think they might need loans, are even more attached to keeping their AUM levels and associated permit values stable.

Due to these outstanding loans, and the official agreements that encourage such loans to continue, many banks are very concerned about permit values. Some banks have even appealed AUM reductions from allotments, and there is little question that some banks encourage policy makers to maintain the security of their loans, and the allotment system in general.

Grazing reforms should consider the question, "Does public land grazing make economic sense?" Recognizing that this question is multidimensional and has no simple answers does not make it irrelevant. In fact, it becomes even more important as its complexities are examined. The question has to be put in different contexts. What area of the public lands is going to be considered? The economic issues can be looked at nationally, regionally, for small groups of allotments, or for individual allotments. To focus the issue, what really needs to be asked is, "From whose perspective does grazing make economic sense? From the ranchers'? The communities'? The governments'? The taxpayers'? The anglers'? The botanists'?" The answer is as varied as the perspective. To get a sense of these complexities, the following discussion looks briefly at the economics of the allotment system for the ranching industry and for the taxpayer.

For the ranchers, there is little question that most of the allotments in the current system benefit them economically. They also point to their allotments' benefits to their local community from the revenue sharing system of grazing fee receipts, and remind us that the money their businesses bring into their communities needs to be considered in the economic equation. The ranching industry claims that ranchers need the benefits from their allotments, as they are faced with a variety of hardships that hit the small operators hardest, including the low price of beef, competition for land and forage from other users, and higher overhead. Many ranchers also think that the government is paying too much for administrating the allotment system.

Despite the overall benefits of federal allotments for the ranching industry, some allotments are being abandoned either because of lack of interest or high operating costs. Even considering that during the last few years, grazing fees have been some of the lowest in many years, some allotments are expensive to maintain and of marginal economic value to ranchers.

Viewed from the taxpayers' perspective, there is no question that the federal government spends more money on managing the allotment system than it brings in to the treasury. After compiling the 1993 figures from the BLM and Forest Service, the RR '94 DEIS found that grazing fee receipts brought in $28,112,000, of which $14,044,000 went into the Range Betterment Fund for range improvements, $5,869,000 went towards payments to states and counties, and only $8,172,000 went back to the US treasury (USDI, BLM 3-73). The report also states, "Average administration costs for the 1993 programs were $3.21/AUM for the BLM and $3.24 for the Forest Service" (USDI, BLM G-4). This puts the total administration costs for the BLM at $42,702,848 and $28,401,286 for the Forest Service. The total administrative costs of $71,104,134 means a loss to the treasury of $62,932,134, and the report makes it clear that there are potentially other social and environmental costs that should be assessed to the grazing program, along with the costs of other lost uses.

Other sources have radically different estimates. Charles Wilkinson estimates that the total grazing subsidy on all federal lands is about $37 million annually (112). Hess, Knowles, and Knowles estimate that the total costs to the BLM and Forest Service are closer to $150 million/year, when overhead and other miscellaneous agency costs are considered (39). Jacobs tallies the total tax expenditures to maintain public land grazing at over $1 billion/year, but he includes the cost of fire protection, roads, animal and insect control, flood protection and vegetation management.

It is unlikely that the disparity between these economic viewpoints will be settled anytime soon. Nevertheless, it is important to consider that one of the original reasons for charging fees was to insure that the administrative costs of the grazing program were covered. Clearly, any grazing reform would do well to insure that in the long-term, the costs and benefits to the taxpayers achieve some sort or parity. On the other hand, the reforms should consider how the allotment system assists the public lands ranchers, and focus any reductions to allotment AUMs so that they have as little economic impact as possible to those ranchers.

Further, if any grazing reform calls for significant grazing reductions, the money that goes to the states and counties in the form of grazing receipts needs to be addressed. Any reform that calls for AUM reductions is likely to be more acceptable to ranching communities if it includes a mechanism to replace grazing receipts with money from another source.

The Forest Service and BLM both have specific requirements that dictate who can hold an allotment permit or lease and under what conditions. The Forest Service requires that their permittees have the forage and water to maintain their livestock during the time that their animals are not grazing on the allotments. They also have an upper limit to the number of AUMs that a permittee can hold. The BLM gives a preference for their allotments leases to the ranches closest to the allotment. There are some ranchers and economists who argue the agencies should get rid of these requirements and allow allotments to be exchanged more easily, so they end up attached to the ranches where they will be of most economic benefit. Environmentalists tend to believe that there should be AUM limits, but usually do not have strong opinions on these other issues.

The Forest Service and BLM both require that allotments be grazed. There are exceptions granted for drought or lack of forage. These exceptions are generally allowed for only two or three years, but occasionally can be longer if circumstances warrant. There is a growing agency practice of giving allotments an extended rest, usually after negotiating with the ranchers, in order to restore floral and riparian health.

Currently, however, it is still illegal for an allotment holder simply to decide for themselves not to graze an allotment. Most environmentalists want to change this requirement, so that individuals or groups could lease allotments that they believed are important for habitat or recreation, and rest them from grazing. Babbitt's RR '94 would have allowed allotment holders to rest their allotments, but that issue was opposed by the ranching industry and is on appeal in the courts, having recently been ruled against in Wyoming. Clearly, this is an important issue to address in grazing reforms.

Judging from the conversations with the interviewees and others, both ranchers and environmentalists want more input into managing grazing on public lands. On one hand, the ranchers often feel misjudged by the agencies' range specialists, believing that the officials make many of their recommendations after only looking at the worst conditions on their allotments. On the other hand, grazing activists often claimed that their comments are not listened to, and that their appeals of AMPs and EAs fall on deaf ears, thus leading to lawsuits. Although this issue is generally unrelated to permit value, it may be important to address in grazing reforms.

The other major debate that comes up over allotment management is the question of who can comment on and appeal AMPs. There is a movement in the ranching industry to get the law changed so that appeals would be limited to parties who are "affected interests," with the definition of "interest" focused on economic impacts. Environmentalists believe that since the grazing is on public land, any citizen should be able to comment on or appeal these plans.

Much like the issue of management responsibility, the reform of monitoring is not directly related to permit value. The level of monitoring of different allotments varies between the agencies and can vary extensively from region to region. Monitoring is an important issue to both ranchers and activists. Activists generally want more and better monitoring of allotments. Ranchers generally think that the standards that are being monitored for need to be much clearer and enforced more uniformly. Many want to get rid of the AUM number limits for allotments and base the use of allotments on these new monitoring standards, often termed "sidebars," that are based only on environmental considerations.

Many ranchers fear that if allotments are not grazed, the grasses will dry up and brown out over the season. They claim that deer and elk do not like the brown grasses, preferring grasses that have been grazed early in the season and are sprouting new green shoots. They believe that after a few years without grazing, the grasses will stagnate and fail to re-seed. They also believe that the allotments that are not grazed will become fire hazards.

Environmentalists usually dismiss these concerns as not backed by historical or ecological facts. They note the historical records from the travelers throughout the Great Plains and Rockies, before the influx of sheep and cattle, that found tall and lush grasses. Still, if grazing reform does remove grazing from some allotments, then the reforms should insure that these areas are monitored and that management options are provided that will prevent them from going decadent and becoming hazardous.

Increasing grazing fees is undoubtedly the most debated grazing reform, and usually leads to disputes between the ranching and environmental communities. With grazing fees currently at $1.36/AUM, except for some of those who think that ranchers should be rewarded for good stewardship, there are only a few people asking for a reduction in grazing fees. There are, however, a number of voices calling for a fee increase as a solution to some of the problems with public land grazing. The possibility of a fee increase raises a number of questions, some hotly debated: What would a fee increase do to ranches? How do fee level changes affect permit value? What might a fee increase do for the taxpayer, or the health of the land? There is no question that an increase in grazing fees would cost ranchers more and reduce their profits. Almost everyone agrees that increasing fees would decrease both the desirability and permit value of allotments.

The real debate over increasing grazing fees involves whether it would ultimately benefit the land. Ranchers argue that as fees increase, more ranches will go out of business, leading to decadent grasses, and either more subdivisions in areas of increasing populations, or job loss and community disruption in areas with stable or decreasing populations. Many also believe that a fee increase will lead to more overgrazing, as ranchers add more livestock to the land in an attempt to make up for lost profits.

Environmentalists argue that increasing fees will cover more of the agencies' costs of managing the grazing programs, and give them more money for monitoring. Many also believe that fees should be raised gradually until permit values reach zero. Some would do this simply because they believe that permit value should never have existed in the first place, others because they think allotments benefit only a very narrow class, not even including all ranchers. Others think that without the additional motive of retaining permit values, ranchers will be less protective of their AUM levels and more willing to accept AUM reductions that might prevent overgrazing. They also believe that increasing fees would end up removing grazing from the more economically marginal allotments, which they believe are often the allotments that have already been damaged from overgrazing.

The recent reform efforts introduced first by Senator Domenici and then by Representative Smith (R-OR) have also generally led to controversy, as they focus on insuring the security of ranches by lengthening leases to fifteen years, limiting public input in allotment management, and making grazing the priority use of these public lands. Environmentalists are nearly unanimous in opposition to these reforms, with many angered by what they see as an attempt to limit the public's rights. Despite their controversial nature, it is important to question what these reforms would really do to the public land grazing system. Would they really improve the ranchers' security? Would they improve habitat or the productivity of the land? How would longer leases affect permit values and property values?

If these reforms came about, it is likely that both the ranchers and the banks would feel more secure about the stability of the allotment system and their local communities. If the reforms generally stabilize AUM levels, then permit and property values are likely to remain stable or even increase. With grazing levels stable, these reforms would also reduce concerns about potential floral decadence, but would not do anything to change leasing or monitoring requirements. Additionally, since fewer people could appeal, the taxpayers might also save money because officials would spend less time on appeals.

Supporters of the bills argue that if ranchers could count on the continued use of their allotments at present levels, than that enhanced security would encourage them to take better care of the land. Many also argue that since the ranchers would be more protective of their forage, their efforts would work to prevent overgrazing, thus also helping habitat. It makes sense that if these reforms were enacted, ranchers who already have made sacrifices and investments to take better care of the land would then make further investments and continue to protect their previous investments.

Environmentalists have a different argument. They believe that although some cases of overgrazing take place through ignorance of good management practices, more often it occurs because a rancher is financially troubled. At times, these indebted ranchers attempt (illegally) to run even more cattle on allotments simply to try to pay their bills or pay off their loans. Although this would not happen in every case, there is nothing in these reforms to prevent ranchers who abused their allotments from continuing that destructive practice. They believe that these bills really do not protect the leaseholders who need it the most, and only provide them a false sense of security. In fact, they think these bills trap the poorer ranchers in a loose net of governmental subsides, and bind their livelihood to marginal allotments. This leaves the less fortunate ranchers trying to eke out a living from those marginal allotments, with one of their biggest expenses being the loans that they took out to pay for both their ranches' property value and the permit value of their allotments.

One potential reform that has been suggested since the beginning of the allotment system is the possibility of selling off these lands. Those who suggest this usually would give the ranchers first preference in purchasing them. Some have even suggested that the allotments should be given to the ranchers, following the spirit and custom of the Homestead Act. Along with the previous set of questions raised about each reform, this possibility raises some unique issues: How would the price of the allotments be determined? Would the ranchers actually be given first preference, and if not, could corporate or foreign interests buy these lands? Would there be limits on development? Would the ranchers even buy them?

This plan clearly takes care of the issues of monitoring, management responsibility, and leasing requirements, because without allotments, these issues would disappear. With continued grazing, there would also be little potential for decadent grasses. If ecological costs are not considered, then this option would almost surely save the taxpayers some money by reducing the costs to the agencies, and it would provide a short term income to the treasury from the sales. It is also a potential boon to some communities, due to an influx of property taxes.

Many advocates of this option have a libertarian philosophy that objects to having any public land. Some also believe that the ranchers would take better care of the land they owned, and that overall the plan would lead to significant improvements in ranch viability and local community economic health, along with better habitat and ecological health. Others, including a few environmentalists, simply believe it would save the taxpayers money.

Without the rules, regulations, and uncertainty of the allotment leasing systems, at first glance it would seem that the stability of ranches would increase. On further analysis, however, that may not be the case. There are many who believe that this plan would not work, because the ranchers either would not be able to afford the allotments to begin with, or if they did purchase them, they would be strapped with both additional loans and additional property taxes that would add up to be significantly more than grazing fees. Thus the plan would actually lead to widespread ranch instability, or the disappearance of the small family ranch. On the other hand, if the privatization of allotments was set up to minimize these costs to the ranchers, than the benefits to the treasury and local communities would also be minimized.

In the conversations with interviewees, it became clear that all the environmentalists and many of the ranchers opposed the privatization of public land, especially if there was any chance that it would lead to developing these lands. Many also agreed with the results of the Reagan initiated study, President's Private Sector Survey on Cost Control, which questions whether there would be interest in buying these public lands. Since that study, some of the land has increased in value, but generally for its development potential and not for its forage.

Environmentalists completely disagree with the analysis of this plan done by its supporters. They do not believe that the ranchers would take better care of land they owned if there was no monitoring program or means to limit grazing levels. They think that in many cases overgrazing would increase with the increased financial pressure on the ranchers. Privatization would also limit public access to these lands, reducing recreation options and their economic benefits to the communities. Left without the laws and regulations of the current leasing systems, some environmentalists also envision that they would end up relying increasingly on the Clean Water Act and the Endangered Species Act to protect habitat and water quality, which would create even more controversy as these laws would have to be applied to more private land.

Opening up grazing permits to the highest bidder is one of the most often suggested grazing reforms, in part because it has been or is currently being used in various formulations by some states, tribes, and federal agencies. These bidding systems vary in duration, as to whether the bids are open or closed, and as to what additional services are provided, but most will only allow ranchers’ bids to be accepted. In almost all instances, open market bidding brings in higher fees than the current fees of the BLM and Forest Service. Exceptions exist in areas where there is little competition for the allotment or if the allotment is in poor condition.

If a bidding system was implemented, a number of issues would have to be settled: Who could bid? Would subleasing be allowed? What type of monitoring system would be put in place? Who would pay for the improvements that ranchers previously invested in for their allotments? Would the ranchers who currently have their allotments get some sort of preference in the bidding process? Would permit value be compensated for in any way? For both ranchers or environmentalists, how the bidding system was set up would make a big difference in their evaluations as to whether to support or oppose it.

The public land ranchers are unlikely to support instituting a bidding system unless the leases were for multiple years, and the ranchers who previously leased the allotment were compensated for both their improvements and their investment in its permit value. Even then, many would likely believe that a bidding system would detract from their industry's and communities' security. They might be more likely to support bidding for allotments currently are not being leased, or if bidding was instituted for a ranch's allotments only after the ranch was sold. Generally ranchers are also opposed to having allotments bid on if the bidder does not intend to graze them, especially if the allotments are currently being grazed.

Environmentalists generally support instituting a bidding system over the current allotment system. They think that it would bring in more income, allowing the allotment system to pay for itself. They also believe that whether or not ranchers were initially compensated for it, a bidding system would get rid of permit value. Further, without permit value it is likely that a bidding system would lead to less opposition by ranchers if AUM reductions were called for, in part because reductions could be implemented between bidding cycles and because the ranchers would have less financial stake in maintaining allotment levels. Activists also support more frequent bidding cycles, because more cycles would allow the agencies to re-evaluate grazing levels more often.

There is a growing debate on few proposals that would not only open up allotments for competitive bidding, but would also open them up to different types of uses. One possible new use is simply resting the allotment, but various options include giving the leasee varying degrees of priority use of the allotment for camping, hiking, fishing, hunting, other recreation activities, plant gathering and even building and using a few (temporary?) structures.

These options drop specific leasing requirements for cattle grazing, but develop new requirements that limit the activities on the allotments, and in theory require responsible stewardship from the leasee. Most of the proposals give the primary management responsibility to the leasee. They base the agencies' monitoring system for the allotments on some type of sidebar requirements. This system would allow ranchers to run more cattle than their current permits allow, as long as the sidebar monitoring standards were met.

Options also vary as to the length of the leases, but most would increase it to fifteen or twenty years. Proposals also vary as to whether and how previous leasees might get compensation for their allotments' improvements and permit value. Most everyone agrees that free market variable use allotments would bring in considerably more income for the government. Its proponents usually project a somewhat reduced cost to the agencies, as they would not have to develop AMPs, but would have the costs from developing the initial sidebars. Skeptics of the new system believe that developing these sidebars would be complicated and costly, and that it would actually increase the management complexity and costs to the agencies.

As the specific proposals vary, so do the reactions to them, and the expectations as to their consequences for both ranch viability and ecologically related concerns. Reactions to these types of proposals also seem mixed among both the ranching and environmental communities. Concerns about what types of uses would be allowed, economic issues, sidebar development, and management implementation come from both sectors. Proponents with projections of positive financial benefits, less government intrusion, and healthier ecosystems come from within both communities and from others. It is my suspicion that government managers would not be happy about having to implement any of these proposals.

Grassbanking is a new management tool that the agencies have begun to test. It can be used in conjunction with various other reform measures. Grassbanking allows temporary grazing on unused allotments, to replace forage from allotments that are being rested to benefit ecological and riparian health. This allows the ranchers with allotments that are being rested to maintain their AUM levels at or near their previous levels. Sometimes the use of a grassbank allotment is given to the rancher after a rest is required, and sometimes it is used as a tool to negotiate a voluntary rest.

Since resting allotments comes through an agency decision, it does not actually change the legal requirement that allotments be grazed. Nor does it affect leasing or monitoring requirements. It is, however, a tool that allows flexibility in management. It can be suggested by environmentalists, ranchers, or the agencies, thus encouraging management responsibility by all parties. Also, as AUM levels remain generally stable, grassbanking has little effect on government finances.

Ranchers generally approve of grassbanking as a tool that maintains ranch viability and local economic health, while also improving habitat. Since it works to maintain stable AUM levels, they think that it helps maintain permit values. They also believe that it reduces the possibility of floral decadence, because it prevents allotments from going completely without grazing.

Environmentalists have mixed opinions about grassbanking. Although it encourages the resting of allotments that need restoration, many do not like the fact that previously abandoned allotments are returned to grazing, thus preventing what they predict would be the return to a totally natural state. On the other hand, they realize that some of these allotments could be legally returned to full grazing in any case, and tend to support grassbanking in those instances.

The acceptability of compensating ranchers for forced AUM reductions has already been discussed in the last chapter, but could it be successfully implemented and how does it relate to the other issues that come up in grazing reform? If such a compensation system were to be set up, two additional questions would have to be answered: "How would compensation levels be set?" and "Could the money be raised?"

When determining the amount ranchers would get compensated for each lost AUM, in order to save on administrative costs, and to prevent disputes, it should be done in a manner that is as a simple and clear as possible. Individual assessments of allotment permit values would surely be expensive and inconsistent. Individual assessments also make allotments look more like property, and would thus reinforce the belief that the compensation is for some kind of taking (of the right to a grazing permit). Any compensation that could be viewed as a taking would almost universally be opposed by environmentalists.

To avoid these problems, the compensation would need to be written into law as a transitional fund, to provide either for alternative forage, or replacement income. Consider the simple method of setting compensation at a uniform level, say $75 for seasonal AUMs and $125 for year-long AUMs. These suggestions are at the higher end of studied permit values, but setting them high would make the program more acceptable to ranchers.

It could also make sense to set compensation levels through a clear formula. This might start at a lower level that was modified by a rancher's level of dependence on federal allotments. For example, $50 for seasonal AUMs plus $50 multiplied by the percent level of dependence would work out to $60 for 20% dependence and $90 for 80% dependence. A similar system could be set up that had one base level that was modified to take account for the exact length of the season of use for the allotment. A formula could even be developed that took into account both dependency levels and the season of use.

An acceptable compensation system also needs to set aside money to compensate the states or counties for lost grazing receipts. With the current fee level of $1.36/AUM, that would be 68¢/AUM for BLM allotments outside of grazing districts, 17¢/AUM for BLM allotments inside grazing districts, and 34¢/AUM for Forest Service allotments. To make up for this, $10 invested at an annual interest rate of 6.8% would earn 68¢/AUM per year, $5 would earn 34¢/AUM, and $2.50 would earn 17¢/AUM. Each of these figures is relatively insignificant compared to the money going to the rancher. It might also make sense to allow the state or county to take complete control of that fund after perhaps ten years.

How much money would it take to compensate for all forced AUM reductions? That of course depends on what reductions were required. Even under the Livestock Production Alternative in RR '94 DEIS, the agencies were expected to decrease total AUMs by approximately 2.4 million over the next 20 years. For quick figuring, assume the average compensation to be about $100/AUM, so those reductions would require $240 million or $12 million/year. The Environmental Enhancement Alternative in the RR '94 DEIS would have required a total decrease of approximately 6.7 million AUMs, so those reductions would require $670 million or $33.5 million/year. For this investigation, perhaps it would be best to use the figures for the Proposed Action of the RR '94 DEIS, with a 4.6 million AUM reduction over 20 years, requiring $23 million/year.

To put these figures for the program in perspective, one could look briefly at the costs of the Conservation Reserve Program. That program is designed to protect environmentally sensitive lands and erosive soils. This year the USDA accepted 5.9 million new acres into the Conservation Reserve Program at $45.15 per acre (Montana Grain Growers). Just this new acreage will cost the program $266 million per year. The current total in program is 29.9 million acres, and although the acreage for last year was enrolled at $39.39, the total cost of the program is still close to $1 billion per year.

Before finally looking at where this money would come from, it is important to look at what effects forced compensation has on other reform issues. Compared to current management, it would generally stabilize the ranching industry and communities, because it could be set up to maintain revenues from grazing receipts and gives some money to the ranchers for replacement forage. Many ranchers will still argue that replacement forage is not available, or that the compensation is not enough to pay for replacement forage in the long term. While that might be true in some cases, those ranchers might consider simply reducing their herds and putting that money in the bank or investing it. If they were compensated $1,200 for a 12 AUM reduction (enough to feed one cow and a calf for a year) at 6.8% annual interest, they would bring in $81.60, which is comparable to the average annual profits from one cow.

If there was compensation for forced AUMs, permit values would generally stabilize to a level close to the level of compensation, again stabilizing the ranching industry and increasing the security of the financial community that loans them money. If fee levels remain stable, forced compensation would initially cost the agencies more because fee receipts would go down and the compensation money would be added to the budget. However, some management costs, include money spent on appeals, lawsuits, improvements and monitoring, would go down, and in the long term, after grazing levels stabilized, the total costs to the agencies would go down.

Under a forced compensation system, leasing requirements, management responsibility, monitoring requirements and the requirement to graze would not be greatly affected. Although reductions would be required, few allotments would end up without any grazing, so there would be little concern over the potential for floral decadence. Debate would continue as to what level of reductions were necessary to deal with the effects of overgrazing, protect habitat, and maintain recreation values, but it is likely that resistance to AUM reductions would go down.

So, where would the compensation money come from? Probably from a combination of sources. Money from private and nonprofit sources is one possibility. Some of the money could come from a surcharge on grazing fees. Fifty cents per AUM would initially raise over $10 million per year. Although a surcharge would encounter initial resistance, it is likely to lessen as the ranchers realize that such an increase is much like allotment insurance, and that all the money is returning to public lands ranchers. The money saved from appeals, lawsuits and eventual reductions in the agencies' personnel and monitoring budgets should also be filtered into the compensation program. Some of the compensation money should be tied to the reasons for the reductions. If reductions are required for deer or elk forage, or to protect fish habitat or an endangered species, they could be funded from the various Fish and Wildlife Agencies' budgets or other money designated for protecting endangered species. Finally, perhaps the most likely source would be from an amendment to the Land and Water Conservation Fund.

The acceptability of compensating ranchers for voluntarily retiring their allotments has been discussed in the previous chapter, but it also raises questions as to if and how it might be successfully implemented. The answers to the questions of compensation levels and sources are similar to those of forced reductions, but the voluntary compensation plan affects some of the other management issues very differently. This system also raises some different questions. How many ranchers would actually take advantage of it, and what would happen if more ranchers wanted to retire allotments than there was money available? Also, would the agencies have veto power over allotment retirement, and could an allotment ever be grazed again, even if it was not actually leased as part of the allotment system?

There is little doubt that the agencies would have to develop rules that prioritized which types of allotments they would fund first for retirement. These priorities might include allotments that are expensive to monitor and manage, or those in priority habitat or heavily used recreation areas, or those without AMPs. I suspect that the agencies would want to keep open the option of putting some of the allotments that got retired into a grassbanking system, in order to alleviate overgrazing on neighboring allotments. A voluntary retirement system would also more likely be acceptable if the owners of ranches who wanted to retire their allotments were required to make a commitment to limit the subdivision of their private land.

This system would not change leasing or monitoring requirements, but would obviously end the requirement that grazing continue for the retired allotments. It would also change the agencies' management responsibility, since the monitoring requirements for retired allotments would change to include preventing the potential for floral decadence.

Any voluntary reduction system should also include a fund to replace grazing receipts similar to the one discussed previously. The money for voluntary allotment retirement is much more likely to come from private and nonprofit sources. In many cases, states, counties and cities would benefit from the retirement of certain allotments and would conceivably help finance their retirement, as would some federal agencies besides the Forest Service and BLM, if it benefited their goals. If it were allowed, both the BLM and Forest Service would undoubtedly help finance the retirement of problem allotments, but certainly not to the extent that they would finance forced reductions, unless Congress voted additional money to the program.

Although it would probably benefit the agencies to have a clear and consistent compensation level along the lines of those discussed in the previous section, for other federal agencies, other governmental bodies, and for private interests, the compensation levels negotiated for allotment retirement would vary considerably, depending on the goals of the both the ranchers and those who fund the retirement. If retirement became widespread, than permit values are likely to at least stabilize at their current levels, if not increase, which would also please both ranching communities and their banks.

Overall, a voluntary retirement system should improve ranch viability and local community health, because the least economical ranches would most likely be retired first. Additionally, it could generally improve habitat, ecological health, and recreation opportunities, along with creating new economic opportunities.