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

As the evidence from the previous chapters indicates, there is really no debate over the existence of permit value. It can be documented historically, starting soon after the creation of the allotment system and continuing into the present. It is recognized by the Internal Revenue Service and the Farm Credit Administration. It has been documented by economists, both in theory and practice, through surveys and modeling of ranch real estate values. It is also almost universally recognized by anyone familiar with the allotment system.

There is still debate, however, over the importance and influence of permit value. It clearly has practical significance, as most ranchers expect to recoup their investment in permit value if they decide to sell their ranch. Since it is taxed as an inheritance, it can also play a part in whether a rancher's heirs will continue ranching or sell the ranch. For individual ranchers, permit value is widely variable in its direct impacts. For ranchers who do not intend to sell their ranches and are not threatened by AUM cuts, it is effectively nonexistent. For others, that is far from the truth. As one historian points out:

Many ranchers take almost continuous non-use for a significant part of their permitted numbers, but fiercely resist all suggestions that these excessive numbers (which they know to be excessive) be cut, because of their desire to retain the potential sale value of the larger permits. (Calif 274)

For ranchers who are faced with AUM reductions and recognize that they may sell their ranches at some point or if their allotments are used as collateral, permit value can be extremely significant in their decision-making.

The level of direct impacts of permit value on a specific rancher does not necessarily directly translate into the level of political significance it has for that rancher. A rancher may not even have an allotment, but might still support maintaining grazing levels and permit values at their current levels. Alternately, a few ranchers dependent on allotments threatened by reductions may still support reforms that reduce the importance of permit value. Non-ranchers, including bankers, environmentalists, and taxpayers in general, also have a wide range of opinions about permit value that affect their political stance on managing public lands.

The results of the survey undertaken for this thesis indicate that the political importance of permit value varies. Its political influence is reflected in the extent it increases the resistance of ranchers to reductions in their AUM levels. By extension, the extent that ranchers and their supporters attempt to use their political influence to maintain their AUM levels and permit value also varies. The extent that permit value affects ranchers politics is not something that can be determined in any absolute or completely objective manner, but clearly it has some influence, and that influence is potentially of great importance.

It can also be argued that in politics, an issue that is extremely important to a small sector often becomes an important influence to policy makers. If that is the case, considering that permit value is a major motivating factor for some ranchers (and bankers) then that influence is at least significant, and potentially a major factor in the politics of the management of public land grazing.

Permit value is clearly an important enough issue that it should be considered, and hopefully dealt with, in any attempts to reform the public land grazing allotment system. In general, reforms that would reduce the total permit value without compensation should expect opposition from the ranching community. Reforms that reduce permit value through compensation can expect favorable but mixed reviews and some reluctant support from both environmentalists and from the public lands ranchers. Reforms (or the current status quo) that leave the total level of permit values generally unchanged can expect support from the public land ranchers, but opposition from environmentalists. All of these options are likely to receive mixed reviews from other sectors

A politically acceptable reform is likely to have several of the following characteristics. The reform should be as simple and clear as possible, so it is understood by all the parties affected and leaves little room for misinterpretation. It should strike a good balance between the goals of ranchers and environmentalists; although it might not be the favorite of everyone, it should have little outright opposition. It should foster continued and broader communication between the different groups concerned with the grazing system. It should increase management options. Finally, it should work as a gradual social evolution with slow but consistent changes, and not force the issues quickly.

Another critical factor to consider in a grazing reform proposal is how those proposing and supporting it would be perceived by their peers. The issue of grazing on public lands has been in dispute for over one hundred years, with the driving forces in the dispute often led by those with the most extreme views. A few have become completely hardened in their views and will always refuse to compromise. For many others, although not complete absolutists, any compromise would be difficult at best. For some individuals, supporting any compromise could mean losing the support of their friends and neighbors—losing face. For some organizations, it could mean losing members or financial support.

The ranching and environmental communities both have distinct, core, but related positions that need to remain uncompromised to allow any negotiations to proceed, and for the participants to save face. Though hard-core environmentalists will resist any reform that further subsidizes or compensates the ranchers, for those willing to compromise, the line is drawn at reform that makes grazing into a right, or that sets up allotments so that they are subject to takings claims. The hard-core ranchers will resist any reform that removes any land from the allotment system, but for those willing to compromise, the line is drawn at any reform that removes land from the system without some form of compensation.

It often appears that these positions are irreconcilable, and in practice, it might be impossible to find an acceptable compromise. The two reforms systems discussed previously that set up compensation systems without setting up any new rights to grazing or allotments are clearly on the fence between the two extremes. For some environmentalists, it really would not make much difference that the compensation money for forced reductions is for "transitional forage" or "transitional income." They will still consider it too much like a taking. If is it stated properly, the courts, on the other hand, are unlikely to consider a transitional allocation much of a precedent to bolster other takings claims. It would be more like food stamps or unemployment insurance. Although such a system might seem to play into the hands of the ranchers, and satisfy all but the hard-core, the ranchers are still making a "hidden" concession, since compensation systems would almost certainly make it much more difficult to fight AUM reductions with economic arguments, either in the courts or with the agencies.

A politically negotiated agreement between the ranching and environmental communities would clearly take some compromise. Having considered the "bottom line" positions, the other important element to consider in bargaining is the real goals of each group. Although more than a few environmentalists want to get rid of ranching on public lands, the more common goal is to reduce ranching's impacts to order to improve the health of the land. Similarly, although more than a few ranchers want to make public land grazing a permanent right, the more common goals is to insure their economic viability and their way of life. Can both of these goals be reached in some agreement, even if it does not satisfy the absolutists?

Perhaps they can, as talk of different proposals for new types of grazing reforms appears to be increasing, and many proposals include some type of compensation scheme. (See Appendixes C and D.) If this talk was coming only from environmentalists, it probably would not be very significant, but it is also being heard from some ranchers, and also from some politicians whose main focus is cutting the budget. Despite these rumblings, it would still be a surprise if the issue gets much attention by the general public, but these ideas are gaining the attention of environmentalists and land-use groups. It is between these groups that the real debate is beginning to take shape, and where it needs to take place, if these new options that prioritize the consideration of permit value are to change the ongoing political debate over grazing on public lands.

A Hybrid Solution

In the light of the influence of permit value and the often conflicting interests of the environmental and ranching communities, what recommendations can be given to the policy makers that might conceivably be politically acceptable? The option favored by the author incorporates a number of tradeoffs and includes some of the options discussed earlier. It focuses on gradually reducing the influence of permit value without undue economic impacts on the part of the ranchers. It also recognizes the importance of the current national trend towards lowering the total AUMs in the allotment system, and that this trend is expected to continue. It is fundamentally based on a combination of the two plans that compensate ranchers for forced AUM reductions and for the voluntary retirement of allotments.

The compensation for forced AUM reductions (that are not due to overgrazing) appears to be grudgingly favored by both ranchers and environmentalists, although to some degree more by the ranchers. In the hybrid plan the rancher would be compensated unless there was evidence to show that the rancher had violated the agency proscribed AUM level or season of use on their allotment more than once in the previous five years. Compensation would also not be given to foreign-owned ranches or ranchers who refused to sign their AMPs or any other required contract with the agencies. The amount of compensation should be such that a prudent investor could replace the lost income from the sale of their livestock, based on the average sale price of livestock in their state for the previous five years. The money to finance this should come in part from the government's expected savings, in part from the Land and Water Conservation Fund and in part from the 50¢ surcharge on allotments discussed previously.

The other major element of this hybrid proposal is a voluntary retirement system that is not funded by either ranchers or (except in unusual circumstances) by the federal government. The retirement could be funded by state or local governments, nonprofit groups or private interests, when it is in there interest to do so. There would be no specific amount required per AUM for voluntary retirement, except the requirement that a fund be established to replace the amount of the fee that was going to the state or county. The system for voluntary retirement need not be rigid. Following are some suggestions that would allow more flexibility in retirement arraignments.

The voluntary allotment system could also be set up to allow for some allotment trading as part of the process. For instance, if a rancher was ready to retire, but had an allotment without prized habitat, and a nearby rancher still wanted to ranch, but his allotment was coveted by environmentalists for its fish habitat, trading would allow the first rancher to retire with compensation, the second to continue ranching, and the environmentalists to protect the habitat they consider most important.

A retirement contract might also incorporate a provision that stated to what degree the allotment could be used as part of a grassbanking system. A rancher might be more willing to put an allotment in semi-retirement, where it could be used every second or third year at half its previous level as part of a grassbanking system. The agencies could use that extra forage to rest other allotments, or put it up for bid. Such an agreement should designate the money from auctioned forage to the forced reduction compensation fund.

Part of a retirement agreement might also be combined with putting an easement on the private part of the land, or some limit on the extent that it could be subdivided. This could be used to prevent ranch owners who were about to "sell-out" to developers from making additional money. The agencies would have the decision-making power for allotments abandoned without such an agreement (by the developer or others). These allotments could be rested, retired, traded, put in a grassbanking system, or allotted through competitive bidding, thus preventing them from regaining permit value.

Another trade-off might ease the restrictions whereby small (perhaps 640 acres or less) and entirely enclosed allotments could be sold or traded to ranchers, after public comment and agreement by the agencies. This would give the ranchers some assurance that their investments and general ranch structure could be maintained and improved.

Considering the surprising range of viewpoints of both ranchers and environmental activists found in the interviews, it is likely that the debate over possible new reforms is unlikely to fall along the traditional lines. It is likely that those with the most extreme viewpoints will reject any new management option that smells of compromise. Since these elements are often the most vocal on both sides, any acceptable reform will have to have good support from those who are less extreme, and some of these "centrists" will have to take on vocal roles to educate others on the implications of these reforms.

Still, even some of the not-so-extreme environmentalists are likely to look at the "hybrid" proposal above and initially reject it as overly generous to the ranchers. Before doing so, however, they should seriously consider the "hidden" concession mentioned earlier. If this proposal or some other compensation plan is put into effect, without any other changes to environmental laws, then some of the main arguments that ranchers use to resist cuts in grazing levels would be undermined. That undercutting is likely to lead many ranchers to resist the proposal. One would no longer find sections of environmental impact statements that declared that management options that required AUM cuts would cause significant impacts to the ranchers and their local communities. Ranchers often argue that these changes will, "Put us out of business," or "Take away our way of life." With a voluntary retirement option that allowed for allotment trading, the ranchers going out of business would almost exclusively be those who are ready to retire anyway. Indeed, there would still be ranchers who have to reduce the numbers they run, but if there was compensation for forced reductions, most, if not all of their income would be replaced.

With compensation measures in place, undoubtedly the agencies, the courts, the public and the lawmakers would look at the ranching community with less sympathy when reacting to situations that apparently placed wildlife habitat or water quality ahead of a rancher's livelihood or the local community's economy. Compensation measures not only move public lands away from use for grazing and towards other uses, they also make environmental laws more effective by reducing their conflicts with economic considerations.

So why would any rancher buy into a system that one rancher describes as, "A sugar-coated cyanide pill?" Why would they accept a plan that might reduce their political influence and increase the effectiveness of environmental laws? For those who believe that grazing rarely or never causes environmental impacts or even improves the land, or who philosophically oppose seeing any land that is grazed go to other uses, then it is likely that there is no argument that will influence them. For some, however, the economic arguments that come with compensation make sense. Even if the compensation is not actually for a taking, they are still getting what many have been arguing in favor of for years: compensation for AUM reductions.

For others, who have been entrenched with environmentalists and the agencies for years, if not decades, it provides the light at the end of the tunnel. There is already a growing movement, including the BLM's Resource Advisory Councils and other private groups, towards negotiating these conflicts rather than continuing to battle in court. For the ranchers who prefer to spend their time ranching, rather than on law or politics, compensation plans are a path towards opening up communication and towards resolving these long-time conflicts.

Other ranchers see the changing social patterns that could ultimately erode their base of resistance to these changes. The ranching community is aging, and not as many in the next generations are willing to take over the ranch. Population is increasing, and ranchers are selling out, and with that increase comes more interest in using public land for recreation—and water. They see that if public land ranching is to continue, it will have to evolve. Some of these plans allow for that evolution, without bringing financial ruin to the ranching community.

The last reason that ranchers might be willing to accept these types of plans is that the public land ranchers have been gradually losing a war of attrition with environmentalists in the judicial system. There are good reasons that NEPA, the Endangered Species Act, and the Clean Water Act sound like dirty words to ranchers, as environmental groups are effectively using these laws in court to reduce grazing levels, especially in the Southwest.

Those victories bring on the question from some environmentalists, "We're winning. Why should we stop now?" They see that a solution that incorporates compensation, although possibly leading to significantly reduced grazing levels, would not lead to its abolition. After reductions are made on the most environmentally sensitive lands, it is likely to be harder to reduce grazing levels further, either politically or through the courts. Also, their focus would have to change towards raising money to lure more ranchers into potential voluntary retirement, and many have philosophical disagreements with primarily having to raise funds, as they believe that in doing so they will have to "buy into the system."

These environmentalists often do not step back to recognize how these victories in the courts, although significant, have come slowly, at great costs, and without real guarantees that the courts, the agencies, or the lawmakers might someday sweep them away. Victories of that nature actually work to increase the political resistance of the ranching community. They fail to see, or do not believe, that lasting change is more likely to come with a solution that is acceptable to all the parties concerned.

As with many of the reform measures discussed in this work, the implementation of the hybrid solution would take an act of Congress. Particularly given the current configuration of the Congress, that calls for a note of caution. In discussing two other possible reform measures, Larry Tuttle eloquently frames the problem:

If [Senator] Wyden were to introduce the Plan as has been suggested, what real control would he be able to exercise? Wyden has neither the disposition nor the power base to exercise control over amendments or mark-ups, unlike [Senator] Domenici, who has the disposition and power and a long involvement in grazing issues.

The Congress is made up of individuals with a wide variety of political beliefs and motivations, may of whom have little personal interest in public land grazing. The legislative process is also rife with tradeoffs and rarely passes legislation as introduced. With pro-grazing congressmen currently controlling the land use committees, there is little doubt that they would use their influence to make changes in any legislation that did not please them.

With these political realities in mind, it is recommended that no reform measure be introduced to Congress without general support from both the ranching and environmental communities. Also, it is recommended that the legislation introduced be as simple as possible, so that any changes made in the legislative process are easily noticed and thus easily debated by both sides.

This work looks at the permit value of public land grazing allotments historically, legally, economically, politically, and through a survey of interested parties. It finds that permit value clearly exists, has some political significance to most ranchers and great political important to a few, and that it should be an issue of concern in any attempt to reform public land grazing. It examines what elements might be important in order to find reforms that might be acceptable to both the ranching and environmental communities, reviews other issues that could be important for potential reforms and then analyzes a number of possible reforms for their potential political viability.

Finally, it offers a reform package that the author believes might be acceptable to both of those communities. That package, however, comes with a number of caveats: that there is no reform that is acceptable to all sides, that any reform should be carefully considered and introduced into Congress with extreme caution, and that prior to introduction the reform should have significant support of both contingencies, since Congress regularly makes significant changes to legislation that is introduced. Despite these caveats, grazing reform directed at reducing the influence of permit value should be undertaken.