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Project Kerr-01 (response)


How Free Markets Threaten Public Lands
prepared by: Gila Watch

A proposal to open federal lands grazing permits to the free market - allowing individuals and corporations other than ranchers to buy grazing permits - is being touted by several conservation groups as the solution to grazing abuses on public lands. The Larch Company (Andy Kerr) produced the proposal, which would transform grazing permits into "public land leases" open to "diverse uses" by anyone who cares to buy them. Oregon Natural Desert Association, (ONDA) and WAFC are backing the plan. Their rationale is that in an open market, conservation groups and individuals could buy federal grazing permits, then kick the cows off, saving the land. At first glance, this plan may look at first like a painless "fix" for conservation groups tired of fighting and losing battles against grazing damage. Unfortunately, the free market "fix" would create far more problems than it solves and in the end, it would deliver America's National Forests and wilderness areas into the hands of private profiteers.

Banking on cattle - The truth is, the free market is already the driving force on public lands - and the free market is the problem, not the solution, to environmental destruction. The federal grazing permit system parcels federal lands into grazing allotments, attached to adjacent private lands called "base properties" or "base ranches". Traditionally, livestock were grazed on the higher elevation public forests during the summer and sheltered on the base ranches during the winter. However, in milder Southwestern climates where cattle can graze in the mountains even during the winter, base ranches have been slowly whittled away by rancher-speculators, and today many base ranches are as small as forty acres. Public lands ranchers currently use their federal grazing permits as collateral for bank loans along with their private land, as though their public land allotments were also private property. Where base ranches are small, almost the entire value of ranching loans is based on federal grazing allotments. Loan values of grazing allotments are calculated not only on the value of the livestock that graze the allotments, but on the "sex appeal" of the National Forest, the proximity to roads, the value of "improvements" such as stock tanks and fences, and the potential for mineral rights. Since ranching loans tend to be very generous, the number of livestock ranchers need to sell to make their loan payments is almost always more than the land can support without severe overgrazing.

In a system set up fifty years ago by the U.S. Department of Agriculture and the quasi-federal Farm Credit Banks, the Forest Service and BLM act as brokers for these loans, and therefore feel a responsibility to keep ranchers in business. Because of their sweetheart deal with the ranchers and the banks, federal land management agencies have largely lost their objectivity and work to serve the ranchers instead of the public. Even their Environmental Analyses of grazing allotments often accommodate ranchers by specifying the selection of an alternative "economically acceptable to the permittee" as a "goal" of the process. Rather than reduce livestock numbers to protect streams and watersheds, agencies attempt to mitigate damage by fencing and by constructing stock tanks in the uplands at taxpayers' expense, short term fixes that move the grazing damage uphill and ignore long term effects on the ecosystem.

When agencies do try to lower livestock numbers (usually under intense pressure from environmentalists), its not only the ranchers who object. The banks holding the mortgages complain that livestock reductions will reduce the collateral of their loans, sometimes appealing agency decisions on those grounds. Because these loans are no longer held exclusively by Farm Credit Banks, but also by regional and national banks, mortgage companies and even insurance companies such as Metropolitan Life and Prudential - and because the total value of these loans is estimated at approximately two billion dollars westwide - Western senators also get involved when livestock numbers are threatened. Livestock numbers stay high, taxpayers foot the bill, biodiversity suffers and future generations lose. This is why regional lawsuits which would drastically reduce cattle numbers have proven un-winnable and/or un-enforceable.

The free market - The only hope of breaking the money cycle is to devalue ranching loans, discouraging lending institutions from loaning on public lands. The Larch/ONDA proposal, which would separate grazing permits from base properties, does exactly the opposite. By opening the grazing permit market to additional "players", it would stabilize or increase the monetary value of permits. Higher permit value means bigger loans and more banking industry influence in public lands management, more speculation by investors, and more pressure on Congress to open federal lands to other "profitable" uses. The threat of establishing a private property right in grazing permits would also increase with increased trading of permits like private assets on the open market.

It is important to note that the Larch/ONDA proposal is nearly identical to a joint Libertarian/livestock industry proposal floated last year by Karl Hess, formerly of the Right Wing CATO Institute and now with the Oregon-based Libertarian think tank, the Thoreau Institute, and aggie-college range scientist Jerry Holechek. Hess and Holechek both want to see ranchers' "security" in public lands locked in and the now-shaky livestock industry stabilized. Hess' goal is the establishment of private property rights in public lands. It is not in the best interest of conservationists to allow ranchers to dig themselves any deeper into public lands.

In the hope of owning a piece of the action, Larch, ONDA, WAFC and other supporters of the free market proposal have unwittingly become pawns of the livestock industry. Even if the ranching industry went along with separating permits from base ranches, conservation groups couldn't possibly buy more than a tiny fraction of the permits. (Currently only about 40% of grazing permits are used as collateral for loans, and it is reasonable to assume that the total value of grazing permits westwide is around five billion dollars.) The vast majority of grazing permits would continue to be controlled by the cattle industry and by the large corporations already buying into the system as speculators - and these aren't just American "eco-friendly" corporations. They're also foreign corporations such as the Japanese Zenchiku Corporation, the largest grazing permit holder in Montana and Gila National Forest permittee Eloy Vallina, the Mexican multi-millionaire who's fortune lies in mining and chemical plants, banking companies and a Mexican paper mill.

The solution - Free marketeering on public lands would be a corporate investors' dream - and a step towards the privatization of our National Forests and other federal lands. Ecological destruction will continue as long as the management of public lands is profit-driven. Gila Watch, PLAN and the Center for Environmental Equity (CEE) are developing a proposal to buy out grazing loans and permanently retire allotments. Its the only real solution.