PUBLICATION NUMBER: 107-10 pt 1

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00–000 DTP
2001
2001
FORMULATION OF THE 2002 FARM BILL
(CONSERVATION PROGRAMS, CREDIT, RURAL DEVELOPMENT, AND RESEARCH)

HEARINGS

BEFORE THE

SUBCOMMITTEE ON CONSERVATION, CREDIT,
RURAL DEVELOPMENT, AND RESEARCH

OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

MAY 23, JUNE 6, 9, WEATHERFORD, OK; 20, 26, 27, 2001

Serial No. 107–10
Part 1
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Printed for the use of the Committee on Agriculture
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COMMITTEE ON AGRICULTURE
LARRY COMBEST, Texas, Chairman
JOHN A. BOEHNER, Ohio
    Vice Chairman
BOB GOODLATTE, Virginia
RICHARD W. POMBO, California
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
SAXBY CHAMBLISS, Georgia
JERRY MORAN, Kansas
BOB SCHAFFER, Colorado
JOHN R. THUNE, South Dakota
WILLIAM L. JENKINS, Tennessee
JOHN COOKSEY, Louisiana
GIL GUTKNECHT, Minnesota
BOB RILEY, Alabama
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MICHAEL K. SIMPSON, Idaho
DOUG OSE, California
ROBIN HAYES, North Carolina
ERNIE FLETCHER, Kentucky
CHARLES W. ''CHIP'' PICKERING, Mississippi
TIMOTHY V. JOHNSON, Illinois
TOM OSBORNE, Nebraska
MIKE PENCE, Indiana
DENNIS R. REHBERG, Montana
SAM GRAVES, Missouri
ADAM H. PUTNAM, Florida
MARK R. KENNEDY, Minnesota

CHARLES W. STENHOLM, Texas,
    Ranking Minority Member
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
EARL F. HILLIARD, Alabama
TIM HOLDEN, Pennsylvania
SANFORD D. BISHOP, Jr., Georgia
BENNIE G. THOMPSON, Mississippi
JOHN ELIAS BALDACCI, Maine
MARION BERRY, Arkansas
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MIKE McINTYRE, North Carolina
BOB ETHERIDGE, North Carolina
LEONARD L. BOSWELL, Iowa
DAVID D. PHELPS, Illinois
KEN LUCAS, Kentucky
MIKE THOMPSON, California
BARON P. HILL, Indiana
JOE BACA, California
RICK LARSEN, Washington
MIKE ROSS, Arkansas
ANÍBAL ACEVEDO-VILÁ, Puerto Rico
RON KIND, Wisconsin
RONNIE SHOWS, Mississippi

Professional Staff

WILLIAM E. O'CONNER, JR., Staff Director
LANCE KOTSCHWAR, Chief Counsel
STEPHEN HATERIUS, Minority Staff Director
KEITH WILLIAMS, Communications Director

Subcommittee on Conservation, Credit, Rural Development, and Research

FRANK D. LUCAS, Oklahoma, Chairman
JERRY MORAN, Kansas
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    Vice Chairman
JOHN R. THUNE, South Dakota
DOUG OSE, California
TOM OSBORNE, Nebraska
SAM GRAVES, Missouri
ADAM K. PUTNAM, Florida
MARK R. KENNEDY, Minnesota

EARL F. HILLIARD
    Ranking Minority Member
JOHN ELIAS BALDACCI, Maine
DAVID PHELPS, Illinois
MIKE THOMPSON, California
JOE BACA, California
COLLIN C. PETERSON, Minnesota
EVA M. CLAYTON, North Carolina
(ii)
RYAN E. WESTON, Subcommittee Staff Director
  

C O N T E N T S

MAY 23, 2001
    Hilliard, Hon. Earl F., a Representative in Congress from the State of Alabama, opening statement
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    Kind, Hon. Ron, a Representative in Congress from the State of Wisconsin, prepared statement
    Lucas, Hon. Frank D., a Representative in Congress from the State of Oklahoma, opening statement
    Moran, Hon. Jerry, a Representative in Congress from the State of Kansas, prepared statement
    Putnam, Hon. Adam H., a Representative in Congress from the State of Florida, prepared statement
    Stenholm, Hon. Charles W., a Representative in Congress from the State of Texas, prepared statement
Witnesses
    Horan, Bill, president, Iowa Corn Growers Association
Prepared statement
    Lincoln, John, president, New York Farm Bureau
Prepared statement
    Stephenson, Robert, Director, Conservation and Environmental Programs, Farm Service Agency, U.S. Department of Agriculture
    Weber, Thomas, Deputy Chief, Programs, Natural Resources Conservation Service, U.S. Department of Agriculture
Prepared statement
Answers to submitted questions
    Willey, Wythe, president-elect, National Cattlemen's Beef Association
Submitted Material
    National Pork Producers, statement
    Tallman, Dusty, president, National Association of Wheat Growers, statement
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JUNE 6, 2001
    Boehlert, Hon. Sherwood L., a Representative in Congress from the State of New York, submitted statement
    Hilliard, Hon. Earl F., a Representative in Congress from the State of Alabama, prepared statement
    Lucas, Hon. Frank D., a Representative in Congress from the State of Oklahoma, opening statement
Witnesses
    Adams, Jamie Clover, secretary, Kansas Department of Agriculture, Topeka, KS; on behalf of the National Association of State Departments of Agriculture
Prepared statement
    Cantu, Joe, president, National Association of Resource Conservation & Development Councils, Pipe Creek, TX
Prepared statement
    Cox, Craig, executive vice-president, Soil and Water Conservation Society, Ankeny, IA
Prepared statement
    Grossi, Ralph, president, American Farmland Trust, Washington, DC, on behalf of the Coalition of Conservation and Environmental Organizations
Prepared statement
    Hampton, Joe, president, Oklahoma Grain and Feed Association, Enid, OK, on behalf of the National Grain and Feed Association
Prepared statement
    Nelson, Jeff, director of operations, Great Plains Regional Office, Ducks Unlimited Inc., Bismarck, ND, on behalf of the Sportsman Coalition
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Prepared statement
    Peterson, R. Max, executive vice-president, International Association of Fish and Wildlife Agencies, Washington, DC
Prepared statement
    Smith, J. Read, president, National Association of Conservation Districts, St. John, WA
Prepared statement
Submitted Material
    Defenders of Wildlife, statement
    Environmental Working Group, statement
    Native Seed Trade Association, statement
    Stawick, David, Alliance for Agricultural Conservation, statement
    Wildlife Management Institute, statement
JUNE 9, 2001, Weatherford, OK
    Lucas, Hon. Frank D., a Representative in Congress from the State of Oklahoma, opening statement
    Moran, Hon. Jerry, a Representative in Congress from the State of Kansas, opening statement
    Osborne, Hon. Tom, a Representative in Congress from the State of Nebraska, opening statement
Witnesses
    Bowman, Eddie, president, Oklahoma Wheat Growers
Prepared statement
    Conner, Richard, professor, range economics, Texas A&M University, on behalf of the Nature Conservancy
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Prepared statement
    Dewald, Scott, Oklahoma Cattlemens Association
Prepared statement
    Drake, Bob, Grazing Lands Conservation Initiative
Prepared statement
    Kouplen, Steve, president, Oklahoma Farm Bureau
Prepared statement
    Limmer, Dan, director, South Dakota Audobon Society
Prepared statement
    Lowrance, Dan, vice-president, Oklahoma Association of Conservation Districts
Prepared statement
    Miller, Alfred, president, Oklahoma, Association of Resource Conservation and Development Councils
    Wilson, Billy, past chairman, National Watershed Coalition
Prepared statement
    Wulf, Ray, president, Oklahoma Farmers Union
Prepared statement
Submitted Material
    National Governors Association, statement
JUNE 20, 2001
    Lucas, Hon. Frank D., a Representative in Congress from the State of Oklahoma, opening statement
Witnesses
    Cooksie, Carolyn B., Deputy Administrator, Farm Loan Programs, Farm Service Agency, U.S. Department of Agriculture
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Prepared statement
    Edelman, Henry D., president and chief executive officer, Federal Agricultural Mortgage Corporation
Prepared statement
    Hague, Terry, chief executive officer, Farmers Exchange Bank, representing the American Bankers Association
    Leighty, Dale, president, First National Bank of Las Animas, representing the Independent Community Bankers of America
Prepared statement
Answers to submitted questions
    Lowrey, F.A., president and chief executive officer, AgFirst Farm Credit Bank, representing the Farm Credit Council
Prepared statement
    Robinson, Miles, college of agricultural, environmental and natural sciences, Tuskegee University
Prepared statement

JUNE 26, 2001
    Hilliard, Hon. Earl F., a Representative in Congress from the State of Alabama, opening statement
    Lucas, Hon. Frank D., a Representative in Congress from the State of Oklahoma, opening statement

Witnesses
    Dudick, Joe, executive director, Partners for Rural America
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Prepared statement
    English, Hon. Glenn, chief executive officer, National Rural Electric Cooperative Association
Prepared statement
    Fluharty, Charles W., director, Rural Policy Research Institute, Columbia, MO
Prepared statement
    Gorshing, Gary, executive director, South Western Oklahoma Development Authority, on behalf of the National Association of Development Organizations and National Association of Counties
Prepared statement
    Graves, David, president and chief executive officer, National Council of Farmer Cooperatives
Prepared statement
    Hoeven, Hon. John, Governor, State of North Dakota, on behalf of the National Governors Association
Prepared statement
    Stockton, Blaine, Acting Administrator, Rural Utilities Service, U.S. Department of Agriculture
Prepared statement
    Zippert, John, director, program operations, Federation of Southern Cooperatives
Prepared statement
Submitted Material
    Herrera, Hank, Community Food Service Coalition, statement
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    Leval, Kim Center for Rural Affairs, statement
    Regional Rural Development Center, statement
    Swenson, Leland, president, National Farmers Union, statement

JUNE 27, 2001
    Combest, Hon. Larry, a Representative in Congress from the State of Texas, opening statement
    Lucas, Hon. Frank D., a Representative in Congress from the State of Oklahoma, opening statement
    Putnam, Hon. Adam H., a Representative in Congress from the State of Florida, prepared statement
Witnesses
     Abernathy, John R., dean, College of Agricultural Sciences and Natural Resources, Texas Tech University, Lubbock, TX
Prepared statement
    Curl, Sam, dean and director, Division of Agricultural Sciences and Natural Resources, Oklahoma State University, Stillwater, OK
Prepared statement
     Hefferan, Colien, Administrator, Cooperative State Research, Extension, Education Service, U.S. Department of Agriculture,
Prepared statement
     Floyd Horn, Floyd, Administrator, Agricultural Research Service, U.S. Department of Agriculture
Prepared statement
     Lechtenberg, Victor, L., chair, National Agricultural Research, Extension, Education and Economics Advisory Board, West Lafayette, IN
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Prepared statement
    Phills, Bobby, dean, School of Agriculture, Florida A&M University, Tallahassee, FL
Prepared statement
    Wolf, Terry, president, National Coalition for Food and Agricultural Research, Homer, IL
Prepared statement
Submitted Material
    American Dietetic Association, statement
    American Indian Higher Education Consortium, statement
    Barcinas, Jeff D.T., statement
    Cosgrove, Daniel, American Society of Plant Physiologists, statement

FORMULATION OF THE 2002 FARM BILL
(CONSERVATION PROGRAMS)

WEDNESDAY, MAY 23, 2001
House of Representatives,    
Subcommittee on Conservation, Credit,
Rural Development and Research,
Committee on Agriculture,
Washington, DC.

    The subcommittee met, pursuant to call, at 3:42 p.m., in room 1300 of the Longworth House Office Building, Hon. Frank D. Lucas (chairman of the subcommittee) presiding.
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    Present: Representatives: Moran, Thune, Osborne, Putnam, Kennedy, Hilliard, Phelps, Peterson, and Stenholm [ex officio].
    Also present: Representative Kind.
    Staff present: Ryan Weston, subcommittee staff director; Dave Ebersole, Anne Simmons, John Riley, and Susanna Love, assistant clerk.
OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OKLAHOMA
    Mr. LUCAS of Oklahoma. This hearing of the Subcommittee on Conservation, Credit, Rural Development and Research to review conversation issues will come to order.
     I want to welcome the subcommittee's first of these three hearings to discuss conservation issues that must be addressed in next year's farm bill.
    In the previous hearings, we have heard and learned how efficient conservation minded agricultural producers have become regarding energy. Agricultural producers are amazing caretakers of the land, as they are the original conservationists. Since the land provides them with a living year after year, who has more vested interest in taking care of it? I would dare say none.
    This subcommittee has been tasked with determining what conservation measures are needed in the next farm bill. We do not intend to take the responsibility lightly. We have heard groups testify that between $6 billion and $12 billion per year may be required for commodity programs to provide an adequate safety net to producers. We are also going to hear organizations request between $3 to $8 billion per year for conservation programs. It does not take an economics degree to see that the requests for these two farm bill titles alone add up to large, and I mean large, amounts of money. Before we decide the money will solve our conservation concerns, we must diligently examine what we are doing now.
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    First, we must review the current programs. Are they meeting the goals they were intended to reach?
    Second, we must review the persons and organizations that are responsible for these programs. Are they administering the programs in an efficient and effective fashion?
    Third, producers are faced with an array of regulation and conservation priorities. Do the current programs help producers comply with current regulations and will they help producers meet their future regulatory burdens in order to allow U.S. producers to remain among the most environmentally friendly in the world?
    Our subcommittee members will decide how dollars can best be spent on conservation, whether it is cost-share programs, technical assistance, watershed programs or rental and easement programs or a combination of some or all of these to be determined. We will work with agricultural producer groups, sporting groups, conservation groups, agribusinesses and other interested parties to find a consensus that is feasible and responsible.
    I thank you for being here. I look forward to your testimony. I apologize for the delay. But our first responsibility, as some of you have heard me say before as Members of Congress, is to cast those votes on the floor of the United States House, and that is where we have been for an hour and a half. With that apology, hopefully duly noted, I turn to my ranking member, Mr. Hilliard, for his opening comments.

OPENING STATEMENT OF HON. EARL F. HILLIARD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ALABAMA
    Mr. HILLIARD. Thank you very much, Mr. Chairman.
    Mr. Chairman, members and distinguished guests, I am delighted that Mr. Combest and Mr. Stenholm have decided to write a farm bill this year. There's no question it is needed. We need to get on with the task of helping our farmers and American people.
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    Conditions have changed since the last farm bill has been written. And many contradictions have developed, as things will over a period of time. Changes take place and we need to help direct those changes to constructive ends.
    I strongly support public-private corporation that is the very basis of our farm policy. Before World War II, our government was supporting several times more strongly farmers than it is now. Further, the interplay of productive farming and environmental protection and management make for an intelligent, long lasting agriculture section in our Nation. Managing this interplay is the purpose of the farm bill. We must deal with urgent matters now. We cannot wait any longer.
     I want to mention one serious problem that I find to exist in our conservation program. Our small, some underprivileged and some disadvantaged farmers, seldom participate in those type programs. And they are the ones who need them the most. I do not know all of the reasons for this, but I hope that the witnesses today will respond to that problem and suggest ways to remedy it. We have lost a great deal of the diversity in farming over the years. We have lost a large number of small farmers. This has been damaging to our society in a number of ways. We cannot afford to continue to lose small farmers on the rate that we have in the past. We displace and impoverish families that destroy the rural infrastructure of our Nation. We cannot afford to let this happen any longer. Again, let me say I support constructive conservation programs, but I think that they need to be made to work for rural people and to farmers. Thank you and thank you, Mr. Chairman, for this meeting.
    Mr. LUCAS of Oklahoma. Thank you Mr. Hilliard for your comments. Does the ranking member of the full committee, Mr. Stenholm, have any comments he wishes to make?
    Mr. STENHOLM. I just have a statement to be inserted into the record, Mr. Chairman. Thank you.
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    [The prepared statement of Mr. Stenholm follows:]
PREPARED STATEMENT OF HON. CHARLES W. STENHOLM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
    I appreciate Chairman Lucas and Ranking Member Hilliard holding today's hearing, and those that will follow, to review the conservation programs that fall under the jurisdiction of the House Committee on Agriculture.
    I have repeatedly said that we are falling behind in our commitment to helping landowners and operators protect, preserve and enhance their farms and ranches. If we compare the spending on technical and financial assistance on working lands to what we did in 1937, we'd be spending over $5 billion a year, instead of the $1 billion that we're spending today.
    This subcommittee has a very difficult task before it, and I hope that the Members will consider several questions as they hear from witnesses and discuss possible actions:
     How do we balance the financial assistance that is provided to working lands versus acreage that has been retired from production?
     Are priority areas accomplishing their objective of concentrating financial and technical efforts and making a difference in environmental quality, or is there a need to spread our financial resources throughout the countryside, which can also provide needed conservation benefits?
     Can the objectives presented by the various groups and constituencies be achieved through our current programs, or do we need to take a different path?
    As I indicated earlier, this subcommittee will have some very difficult choices to make. I wish them well in this endeavor, and I look forward to working with them as they strive to complete their task.
    Mr. LUCAS of Oklahoma. Thank you, Mr. Stenholm.
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     The Chair would request that other members submit their opening statements for the record so that the witnesses may begin their testimony and to ensure that we have ample time for questions.
    [The prepared statements of Members follows:]
PREPARED STATEMENT OF HON. JERRY MORAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS
    Mr. Chairman, I appreciate the subcommittee scheduling a hearing on this issue that is so important to landowners and conservationists, but particularly to our agricultural producers. Conservation and protecting the environment will be major goals of the next farm bill.
    Farmers and ranchers are the greatest stewards of our natural resources. Through their daily efforts to supply American consumers with food and fiber, they directly and indirectly take steps to protect the quality of our water and air, maintain wildlife habitat, and preserve the land for future generations.
    This year's farm bill has been predicted to be the ''greenest'' farm bill ever, strongly emphasizing conservation incentives. The task at hand is to help producers meet today's current environmental regulations, as well as to help them satisfy the environmental criteria of the future. We must address the existing conservation needs of agricultural producers, while also keeping in mind the future challenges that these operations could face. New Confined Animal Feeding Operation regulations from the Environmental Protection Agency, compliance with Total Maximum Daily Loads, and preserving critical habitat for wildlife are just a few of the problems producers see on the horizon.
    I believe that existing conservation programs can be used as a basis to effectively address today's problems. The Conservation Reserve Program, Wetlands Reserve Program), Environmental Quality Incentives Program, and Wildlife Habitat Improvement Program offer producers a variety of conservation tools and resource management options. With some changes in the current administration of these programs and targeted expansion to address pending concerns, we can continue to support producers in meeting environmental goals.
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    Perhaps one of the greatest needs for conservation assistance occurs on lands used in production for both crops and livestock. In the past, we have addressed resource conservation by simply setting land aside. However, conservation practices can be effective without taking ground out of production. Best Management Practices for row crops are just one example of a mutually beneficial land use that is good for the environment and good for farm income. These types of management practices should be eligible for incentives to encourage widespread use of conservation initiatives.
    To address the increased public demand for and producer interest in conservation, the conservation budget for agriculture has been increased by at least $3.5 billion, with the possibility of additional spending to be considered by the agriculture committee. This increase is much-needed and welcomed by agriculture producers. However, as Chairman Combest pointed out last week, we are constrained by the total $79 billion budget increase. From this total increase must come not only conservation programs, but also programs for rural development, food and nutrition, commodity support, food safety, research, and other important Department of Agriculture functions. Therefore, it is important that conservation considerations fit within the budget realities.
    The chairman has outlined the committee's intention to report a comprehensive farm bill before the August recess. This timeline sharpens our focus on the specifics of conservation options. As we begin the discussion of different approaches to conservation programs, I believe it is important to note that all the recommendations share the same end goal of providing conservation programs that work for producers and landowners and benefit the environment.
    Yesterday I introduced the Conservation Enhancement Act to reauthorize four existing conservation programs, CRP, WRP, EQIP, and WHIP, for 10 years, through 2012. In addition to reauthorization, this bill provides greater flexibility to help producers address the environmental challenges confronting today's agriculture. The CEA builds on the positive results of current programs, while making the programs more useful for those who seek to participate and a better value for the taxpayer. The legislation fits budget goals for conservation spending.
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    As the summer schedule progresses, I am optimistic that the conservation discussion can create a win-win situation for protecting the environment and helping the survival of family farms. I look forward to working together on behalf of our agriculture producers to address environmental issues through enhanced stewardship incentives like those outline in the CEA.
    Again, Mr. Chairman, I thank you for the opportunity to have this hearing. Today's input is a good start to including conservation issues in farm bill debate.
PREPARED STATEMENT OF HON. ADAM H. PUTNAM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA
    Federal conservation programs play a critical role in sustaining a viable agricultural industry and the protection of valuable natural resources. Through voluntary participation of landowners in conservation initiatives, the task of managing natural resources and farm production becomes more attainable.
    U.S. Department of Agriculture conservation programs are vital to the environmental restoration and protection of Florida's resources and agricultural lands. Implementation of conservation programs have brought improvements throughout Florida to the production of cow-calf operations, water quality and wildlife habitat demonstrating the healthy partnership between environmental preservation and agricultural production.
    While Florida consistently ranks fifth in the Nation in net farm income with sales currently exceeding $8 billion for agriculture and its farmers and ranchers face some of the most extensive environmental challenges—Florida only received 2 percent of the Federal agricultural budget distributed through the Natural Resources Conservation Service (NRCS). It is critical that conservation programs are broadened and enhanced to allow greater access to farmers and ranchers representing a wide range of agricultural production across the Nation.
    Specific improvements to current conservation programs include increasing enrollment in the Wetlands Reserve Program by an additional 250,000 acres; allowing the use of cattle grazing to control invasive plant species and expanding conservation practices for marginal pastureland to include isolated wetlands restoration in the Conservation Reserve Enhancement Program; expansion of the Environmental Quality Incentives Program (EQIP) to allow funding of Best Management Practices to address Total Daily Maximum Load (TMDL) requirements and Concentrated Animal Feeding Operations (CAFO). Development of flexible program guidelines that encourage landowner participation and allow funds to be used to address water quality issues is also critical.
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    State NRCS funding levels should also more accurately reflect the proportional value of statewide agricultural production to the Nation and water quality needs. Flexibility must be woven into the program to allow maximum conservation results by allowing the blending of programs on a tract of land. Providing for up-front funding for smaller and limited resources farmers should encourage participation by smaller landowners. NRCS staffing demands could be relieved by the outsourcing of technical assistance and providing block grants to States and localities. Many of these tenants aimed at greater access and flexibility for American producers to conservation programs will be included in the Resource Conservation Agreement Act that I will be introducing soon.
    Building improved conservation partnerships is critical to meeting resources management challenges. Expansion and enhancement of voluntary, incentive based conservation programs are to key to reaching these goals. I look forward to working with my Colleagues toward new and creative conservation incentive programs to protect natural resources and sustain a viable agricultural industry.
    Additional Florida Conservation facts:
    Florida ranks seventh in the Nation in total Wetlands Reserve Program acres. Nearly 10,765 acres of wetlands have been restored and protected under the program. The loss of 465,000 agricultural acres of urban expansion is major concern to Florida.
    Recent conservation highlights in the State include a dramatic decrease in nitrate levels from animal wastes, protection of 10,764 acres of wetlands, an EQIP commitment of $3 million and technical assistance provided to 5,581 producers.
    Mr. LUCAS of Oklahoma. I would like to invite our first panel to the table. Mr. Thomas Weber, Deputy Chief for Programs, Natural Resources Conservation Service, U.S. Department of Agriculture, and Mr. Robert Stephenson, Director of Conservation and Environmental Programs, Farm Service Agency, USDA.
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    Mr. Weber, please begin when ready.

STATEMENT OF THOMAS WEBER, DEPUTY CHIEF, PROGRAMS, NATURAL RESORCES CONSERVATION SERVICE, U.S. DEPARTMENT OF AGRICULTURE
    Mr. WEBER. Mr. Chairman and members of the committee, thank you for the opportunity to appear here today and provide an update on the conservation programs implemented by the Natural Resource Conservation Service.
    Farmers want to be good stewards of the land. And our mission is to help them meet their conservation challenges, while maintaining productivity. The backlog of program requests is a testament to their interest.
    Today, I want to highlight the many ways our conservation programs are making a difference. Our programs are voluntary and help farmers and ranchers deal with regulatory pressures. And the public benefits from these programs in terms of improved and protected natural resources.
    In short, I believe the conservation programs are a win win for farmers and the Nation. But before I outline the programs, I want to say a word about the cornerstone of our work. The conservation technical assistance provided by the Natural Resources Conservation Service.
    Everything we accomplish is contingent upon the talents and technical skills of our field staff around this country. They are trained professionals with technical tools, standards and specifications to get the job done on the land. And the partnership we have with the State and local people, including conservation districts, State conservation agencies and Resource Conservation and Development councils is important today, as it has ever been.
    I want to also take a moment to emphasize that outside of the farm bill programs, the NRCS Small Watershed Program continues to serve America with flood prevention, water quality and water supply improvements and many other conservation benefits. The program remains very popular and continues to grow and produce excellent results around the country.
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    Mr. Chairman, I want to commend you and other members of this subcommittee for your leadership on NRCS Water Resource Programs. Having said that, I will begin a review of the 1996 farm bill programs by highlighting another of our important water resource activities. The Wetland Reserve Program. WRP preserves, protects and restores wetlands. WRP is making a substantial contribution to the restoration of Nation's migratory bird habitat. A 1996 act authorized a total enrollment of 975,000 acres in the program. At the completion of fiscal year 2000, the program had almost reached maximum enrollment. However, the fiscal 2001 appropriations provided an additional 100,000 acres. We have several times as many acres offered than the program can enroll. It is clear WRP continues to be very popular with farmers and has strong support around the countryside.
    Second, the Wildlife Habitat Incentive Program, which provides 75 percent of the cost-share for implementing wildlife habitat practices. The program had an initial funding cap of $50 million, which was exhausted at the end of fiscal year 1999, with 1.4 million acres enrolled. For fiscal year 2000, WHIP will be funded with an additional $12.5 million from funding in the Agricultural Risk Protection Act of 2000. We expect land owner interest in this program to greatly exceed funding.
    Next, the Farmland Protection Program, which protects farmland from conversion to nonagricultural uses. It provides matching funds to acquire conservation easements. The program was initially funded at $35 million. These funds were exhausted in fiscal year 1998. For 2001, $17.5 million of additional funding was provided. Again, through the Agriculture Risk Protection Act of 2000. We have received $116 million in requests for this funding.
    The Environmental Quality Incentives Program or EQIP, provides technical, financial and educational assistance to farmers and ranchers who face serious threats to soil, water and related natural resources. The 1996 act authorized funding at $200 million, however, funding has varied from $174 million to $200 million, annually. The program has been extremely successful. We continue to receive three to six times the number of applications that could be approved with funding. Demand for this program remains high around the country.
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    Mr. Chairman, in closing, I would note that conservation does not just happen. It happens because all of us, including the Congress, the conservation partners and most importantly, the people living on the land work together to make it happen. As exemplified through the many programs and activities that are underway, a great deal is happening on the ground. As a result, we are all enjoying the public benefits of an improved quality of life, affordable and safe food supply, clean air and water, reduced damage from floods and other natural disasters, abundant fish and wildlife, scenic landscapes and a sustainable resource base. These benefits are critical to sustain agricultural production, economic prosperity and the very social fabric of our communities now and in the future. We are proud of our accomplishments and we look forward to working with you to build on all that has been done so far. This concludes my statement, Mr. Chairman, and thank you again for the opportunity to appear. I would be happy to answer any questions the committee might have.
    Mr. LUCAS of Oklahoma. Thank you. Mr. Stephenson.
STATEMENT OF ROBERT STEPHENSON, DIRECTOR, CONSERVATION AND ENVIRONMENTAL PROGRAMS, FARM SERVICE AGENCY, U.S. DEPARTMENT OF AGRICULTURE
    Mr. STEPHENSON. Mr. Chairman and members of the subcommittee, I'm pleased to appear before you to discuss FSA's conservation programs.
     The Conservation Reserve Program implemented by the Farm Service Agency is the Federal Government's single largest environmental improvement program on private lands. Today, the CRP is safeguarding millions of acres of American top soil from erosion, improving our quality, increasing wildlife habitat and protecting ground and surface water by reducing water runoff and sedimentation. Countless lakes, rivers, ponds and streams are cleaner, healthier and more useful because of the CRP.
    CRP's success is accomplished through local voluntary partnerships between individuals and the Government. Instead of compelling participation, the program uses financial incentives to encourage farmers and ranchers to voluntarily establish viable conservation practices, such as permanent covers of grass and trees on land subject to erosion, where vegetation can improve water quality or to provide food and habitat to wildlife. Initially, the CRP emphasized reducing soil erosion. However, the public was becoming more sensitive to other environmental issues, such as the condition of streams, lakes and rivers and the need to preserve threatened wildlife species.
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    In the 1990 farm bill, Congress broadened the program's focus and today, CRP's objectives include improving water quality, turning marginal pasture land into repairing areas, increasing wildlife habitat and other environmental goals. In 1993, total enrollment stood at 36.4 million acres, which is the maximum enrollment level. Today, enrollment stands at 33.6 million acres or about 10 percent of the crop land they reach planted in 2000, and CRP is providing rental payments to farmers and ranchers of over $1.5 billion per year.
    Generally, farmers bid competitively for CRP contracts, maximizing the power of each dollar spent. Only the most environmentally sensitive cropland is accepted, while less vulnerable farmland remains in production. The result is an effort that targets the most sensitive land and helps farmers, while it keeps productive farmland growing food and fiber at a competitive cost. Environmental benefits measured in improved water, air quality and wildlife habitat have been estimated to total between $2 and $2.5 billion dollars annually. The CRP's benefits go far beyond environmental improvement. By idling highly erodible and environmentally sensitive cropland, the program also stabilizes crop prices, increases farm income, improves soil quality and helps maintain long-term productivity to the Nation's cropland.
    In October 1997, FSA implemented a Conservation Reserve Enhancement Program. The partnership between the Federal Government and the State's, CREP addresses nationally significant environmental problems by targeting CRP Program resources. CREP is working to address water quality problems in the Chesapeake Bay, restore salmon habitat in the Northwest, protect New York City's water supply, enhance water quality in Illinois and Minnesota, restore the Great Lakes, improve wildlife habitat in California and North Dakota, protect water supplies for 54 communities in Missouri and restore vital estuaries in North Carolina.
    For certain high priority conservation practices yielding highly desirable environmental benefits, farmers and ranchers throughout the United States may sign up at any time without waiting for an announced signup period, provided certain eligibility requirements are met. Continuous signup allows management flexibility in implementing special conservation practices on cropland. These are designed to achieve significant environmental benefits giving participants a chance to help protect and enhance wildlife habitat, improve air quality and improve the condition of America's waterways. Through mid-April 2001, 1 1/2 million acres have been enrolled under continuous sign-up practices such as filter strips, riparian buffers, contoured grass strips and grass waterways. The continuous signup effort has significantly increased the enrollment of these environmentally important practices. For example, enrollment of filter strips and riparian buffers has increased 10 fold compared with levels enrolled in the CRP prior to enactment of the 1996 farm bill.
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    On April 13, 2000, USDA announced new financial incentives totaling up to $350 million over 3 years for producers participating in the CRP continuous signup.
    These new incentives included a signing bonus of $100 to $150 per acre. A payment equal to 40 percent of the practice installation cost, increases in maintenance rate incentives for certain practices involving tree planting, fencing or water developments and updated marginal pastureland rental rates to better reflect the market value of these lands.
    FSA also implements the Emergency Conservation Program, which provides emergency cost-share funding to agricultural producers to rehabilitate farmland damaged by natural disaster and for carrying out emergency water conservation measures during periods of severe drought.
    The Pasture Recovery Program, which provides payments to reestablish permanent vegetative cover to owners and operators who have suffered pasture losses and the Debt for Nature Program for persons with FSA loans secured by real estate, who may quality for cancellation of a portion of their FSA indebtedness in exchange for a conservation contract with a term of 10, 30 or 50 years. I appreciate the opportunity to testify today and I'll be happy to respond to your questions.
    Mr. LUCAS of Oklahoma. Thank you. Gentlemen, one of the comments that frequently come up in my town meetings in the sixth district of Oklahoma, and I suspect, occur across the country, are the comments about the backlogs in many of the conservation programs and the requests that you receive. From your perspectives, how much would it take in dollars and/or people to address the requests that both of your agencies have out there nationwide at the present time? Standing requests.
    Mr. WEBER. Mr. Chairman, I can give you some figures in terms of backlog. And I want to be clear, these do not include 2001 applications. In WRP, Wetland Reserve Program, our backlog is approximately $560 million. In EQIP, our backlog is approximately $1.4 billion. In Farmland Protection, our existing backlog is about $160 million. And we expect another $90 million because this year's difference between how many dollars requested and how many dollars available. It is about that number. The Wildlife Habitat Incentive is approximately $20 million. For Forestry Incentives, it's approximately $10 million. And for our Emergency Watershed Flood Plain Program, which, in essence, is for restoration of flood plains, wetlands, we have a backlog currently of about $178 million. And in the Watershed Program, Small Watershed Public Law 566 and 534, our existing backlog is approximately $1.4 billion.
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    Mr. LUCAS of Oklahoma. Speaking of the watersheds, in particular, having worked on the rehabilitation bill last year for the small watershed rehabilitation amendments, in particular, of course, having worked on that bill with a number of my colleagues on this committee, I have seen many requests come from out in the field. Could you focus on that, in particular, for a moment or is that information available? I realize some of the things I ask may require a response later, which is fine.
    Mr. WEBER. Mr. Chairman, I do have that information. Currently, based on specific requests by sponsors, we have requests to do rehabilitation on 1,434 dams. The cost is estimated at $518 million. Those are current requests we have.
    Mr. LUCAS of Oklahoma. And would it be possible to secure from you a copy of those requests?
    Mr. WEBER. We'd be glad to provide them for the record.
    Mr. LUCAS of Oklahoma. Please. Thank you. What percentage of the WPR is enrolled in permanent easements or 30 year easements or cost-share agreements?
    Mr. WEBER. Mr. Chairman, I can give you the acreages. I don't have the percentages. But of the 1.05 million acres currently enrolled in WRP, 817,000 of those are under permanent easements. So roughly 80 plus percent. 165,000 acres are under 30 year easements. Something less than probably 7 percent. And the balance that are cost-share agreements amounts to 66,000 acres.
    Mr. LUCAS of Oklahoma. How much of the cost-share are the producers responsible on the cost-share agreements?
    Mr. WEBER. The cost-share agreements are 100 percent-excuse me. I don't have that on the top of my head. It is a sliding scale where permanent easements are 100 percent cost-share. 30 year easements—and I would need to get you the specific figure, but it is around 75, 80 percent. And I believe the cost-share agreements are in the 50 to 60 percent. But we can provide that for the record, specifically.
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    Mr. LUCAS of Oklahoma. Good. Step back for a moment to the original question about the resources that are necessary. If you had those dollar amounts to work with, tell me about the personnel resources, the technical people you have. Could you fulfill the requirements that that would place upon your people in the field?
    Mr. WEBER. No, Mr. Chairman. We could not. That would outstrip our ability to deliver that level of increase above the current level with the current workforce.
    Mr. LUCAS of Oklahoma. What would you describe is your level of utilization now? Are your folks pretty much being fully utilized to address the needs that the resources are available for?
    Mr. WEBER. My view is that our people are moving out at 110 percent. They are extremely committed, dedicated people. They work extra hours. They do what needs to be done to get the job done.
    Mr. LUCAS of Oklahoma. Thank you, Mr. Hilliard.
    Mr. HILLIARD. Thank you very much. Mr. Weber, let me follow-up on a couple of questions that the chairman asked. Could you share with us the dollar amounts that would be needed to help clear up the backlog for the various programs?
    Mr. WEBER. Yes. I quoted those a minute ago. I haven't added them up in my head. But that would be the wetland reserve figure of $569——
    Mr. HILLIARD. Well, let me ask it in another manner. Are they increasing?
    Mr. WEBER. They will increase, sir.
    Mr. HILLIARD. The need is increasing?
    Mr. WEBER. Yes. They will increase each year because the number of applications continues to exceed the available dollars. So those numbers will continue to grow.
    Mr. HILLIARD. So what can be done to meet the demand?
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    Mr. WEBER. Well, obviously, one thing is increased funding to try to address the demand. Priority setting becomes very important in this process. To have a good, rigorous priority setting process that is fair and equitable, given limited resources.
    Mr. HILLIARD. In your Forest Incentive Program, how much did the administration include in this year fiscal budget?
    Mr. WEBER. I believe the administration did not include funding in that proposal for 2002 budget.
    Mr. HILLIARD. And do you know why?
    Mr. WEBER. I assume the decision was made that it was not a high priority with the administration.
    Mr. HILLIARD. And what is your feeling, as one of the administrators?
    Mr. WEBER. I think there's value added in the Forestry Incentives Program for conservation purposes, as in all of our other programs. But it is a matter of choices and setting priorities.
    Mr. HILLIARD. Did you or did your office recommend that the program be continued?
    Mr. WEBER. I believe so.
    Mr. HILLIARD. Did you recommend an amount?
    Mr. WEBER. I am drawing from memory, but I believe we recommended $6 million area, 6.2.
    Mr. HILLIARD. Why was the recommendation for that amount?
    Mr. WEBER. I believe that's the historical level that has been funded in the past.
    Mr. HILLIARD. Do you think that there will be irreparable harm in the Forestry Program now that this money was cut out from the budget?
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    Mr. WEBER. I wouldn't say irreparable on a 1 year basis. Long-term, there may be. Since this money is used for forest production purposes.
    Mr. HILLIARD. Will you recommend it for the next year funding?
    Mr. WEBER. I would, of course, our Chief would make those recommendations from the Agency perspective. But I believe we will be looking at making some recommendations to help fund it.
    Mr. HILLIARD. Thank you very much. I have just a few more questions. I have a great deal of problems in Alabama, in my district, dealing with the wetlands and Endangered Species Act. Let me ask this. How does the Wildlife Habitat Incentive Program interact with the Endangered Species Act?
    Mr. WEBER. Thank you. Mr. Hilliard, I want to make clear that there is no direct connection between the Wildlife Habitat Incentives Program and the Endangered Species Act. Wildlife Habitat Incentives Program is the voluntary conservation of wildlife habitat management plans and the actual practices, whereas the Endangered Species Act is more of a regulatory process. However, the Wildlife Habitat Incentives Program is a conservation tool that a land owner can use to put in place on their land, those conservation practices that will take care of their requirements under the Endangered Species Act.
    Mr. HILLIARD. Thank you very much. Mr. Stephenson, I have heard reports that minorities and small farmers seldom utilize Government programs, which are available. Is this true? Can you tell me why?
    Mr. STEPHENSON. I know that FSA's laws, the Department, generally, we are mindful of and maintain a number of outreach programs to ensure that the entire farming community participates in the programs. We have also been criticized in the past, both FSA and the Department, generally, that we have not been as effective as we should have been. I know that we are willing, I believe, to entertain the comments and make corrective actions where we need to.
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    Mr. HILLIARD. From your perspective, what can be done to make the program available more to those group of farmers that do not use it now? Or what can be done to increase the incentive to use the program?
    Mr. STEPHENSON. I think the first step involves getting the word out as to what it is we do. I think we are pretty good about getting information out in some of the agriculture press about what it is we offer. But I know some experience in dealing with some of the tribes, for example, is, that is not as effective in getting to the tribe as some one on one contact, meeting with the tribal leadership. Same things would apply, also, with some of the minority farmers where maybe the local churches might be the best place to go. I don't think we've done maybe as good a job with that as needs be.
    Mr. HILLIARD. Mr. Stephenson, now, you do realize that some of these programs we set up specifically for minority and underprivileged farmers and small farmers. Tell me, what percentage of resources do these three groups receive of the budget?
    Mr. STEPHENSON. I don't have those numbers with me. I assume that we could provide them. If we have programs that are authorized for particular groups or particular areas, then we will have data to show where those funds have gone.
    Mr. HILLIARD. Is that information readily attainable?
    Mr. STEPHENSON. That is a good question. I don't know.
    Mr. HILLIARD. Would you check and see and let me know?
    Mr. STEPHENSON. Yes, sir.
    Mr. HILLIARD. Thank you very much.
    Mr. LUCAS of Oklahoma. Mr. Moran.
    Mr. MORAN. Mr. Chairman, thank you. Mr. Stephenson, last year, USDA changed its policy in regard to continuous signup on grass strips on terraces. We have worked through Congress, as well as with the Department to return to the days in which continuous signup was a possibility. What is the status of that issue and——
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    Mr. STEPHENSON. Sometime last year, I forget the exact month, we issued a directive to our field offices to comply with the 2000 appropriations bill. So that language is out there now.
    Mr. MORAN. You believe that it is now possible for continuous signup of grass strips on terraces. Is that accurate?
    Mr. STEPHENSON. Well, let me put it this way. I haven't heard that no one has been denied.
    Mr. MORAN. I appreciate the Department, perhaps reluctantly, reaching that conclusion. It is an important one certainly at home, in my State, particularly among the wildlife interested parties. And I think it makes a lot of sense in preserving our terraces, structurally. Mr. Weber, I heard you in response to the chairman's question talk about the split in WRP between cost-share, the 30 year easement and the permanent easement. Where is the demand? If we were going to prioritize where to put additional dollars or resources between those three opportunities, what is the demand situation?
    Mr. WEBER. The demand, in terms of permanent, 30 year or cost-share, by far, the demand is in the permanent easement category.
    Mr. MORAN. And why is that? What is the distinction? What causes someone to prefer the permanent or what is the circumstances that create that circumstance?
    Mr. WEBER. I suspect it is those areas that folks have tried to farm, but have not had great success on any kind of a continual basis, obviously, because of dealing with climate and those issues. And really haven't recouped the financial returns from farming on those areas, so they see a benefit to themselves, both from an income perspective. Because in many cases, you get the real land value for the easement, 100 percent of it, essentially.
    Mr. MORAN. What is the typical situation where the 30 year easement is used?
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    Mr. WEBER. Thirty-year—of course, these would be dependent on the land owner's interest and goals. You may have a family where, say, the lead producer in the family is getting near retirement. They may choose to put that parcel into WRP with the idea that they want to have flexibility later on maybe for their children or a future generation to go back and have the option to farm that area or not farm it.
    Mr. MORAN. Let me switch to EQIP. Is it true that there are greater demands being placed upon confined feeding operations from environmental rules and regulations?
    Mr. WEBER. Absolutely.
    Mr. MORAN. And do you see a role that EQIP can play or a greater role that EQIP can play in assisting those producers and the operators of those confined feeding operations in compliance through EQIP?
    Mr. WEBER. Mr. Moran, I think that is an outstanding opportunity that EQIP can address. Right now, EQIP, we must provide 50 percent of the dollars to livestock operations not specifically to AFOS. But all of the tools are there, in terms of the [unintelligible] technical tools and practices, to handle the livestock waste from the rainfall onto the field and distribution systems and everything in between. So it is a tremendous tool in terms of having all of the components. And obviously, there is a limit, however, on the size of the facility in terms of waste storage facility cost-sharing, but that is one limit that does get imposed through statute.
    Mr. MORAN. With the exception of the size restriction, what are the other restrictions in EQIP's ability to address the problems associated with CAPOS?
    Mr. WEBER. There are no restrictions, really.
     Funding and technical support are the key limits.
    Mr. MORAN. I hope to talk throughout this hearing and later through the remainder of our committee's work on legislation that I have now introduced, H.R. 1938, that deals with a number of these programs. In fact, all of them. In what we think is a very common sense approach to trying to not only reauthorize the programs, increase the funding and the authorized levels, but to allow these programs, CRP, EQIP, WRP, WHIP, all to play a greater role in meeting the environmental needs of farmers and ranchers and other land owners. And a number of the items that you have mentioned are ones that we think we are utilizing this legislation to address.
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    I would want to highlight the importance of what you said about the capacity of technical assistance. That as we, if we, in this farm bill expand authorized levels, increase programs and the nature of the programs, that your ability to deliver the service—I guess your testimony is you are at capacity. And so make sure we don't forget about the importance. And I noticed in your statement, you did not give us the opportunity to look the other direction. Thank you, Mr. Chairman.
    Mr. LUCAS of Oklahoma. Mr. Phelps.
    Mr. PHELPS. Thank you, Mr. Chairman and for having this hearing of valuable input for me. Mr. Stephenson, how many counties are above 25 percent?
    Mr. STEPHENSON. The number of counties that are at 25 percent and the numbers that have exceeded it?
    Mr. PHELPS. Yes.
    Mr. STEPHENSON. We can provide those to you.
    Mr. PHELPS. OK.
    Mr. STEPHENSON. It is probably in the low hundreds is just a guess, nationwide.
    Mr. PHELPS. Is the acreage that will be eligible to go into CRP Wetlands Program also eligible for WRP?
    Mr. WEBER. Probably.
    Mr. STEPHENSON. I am told probably.
    Mr. PHELPS. Probably means you have to look at it to see or——
    Mr. WEBER As I understand the Federal Register Notice and statute, converted wetlands, prior converted wetlands and farm wetlands would be eligible. Both of those would be eligible, generally speaking, under WRP, as well.
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    Mr. PHELPS. Gentlemen, maybe both of you, maybe it's Mr. Weber's domain. One of the common frustrations of expressed when I am back in the district, talking to farmers is how complicated EQIP is. How do you think we can simplify that and why do they feel that way?
    Mr. WEBER. I think we have got a handle on some of the issues that we are trying to resolve. Some of them are policy issues. Some of them are going to be statutory issues that we are going to need to have some assistance on. We have identified through a number of different outreach meetings of various groups and studies, really, the statutory issue has come down to a technical issue on carrying over dollars from one year to the next so they are not lost for conservation purposes.
    The first year payment issue, where, in fact, a landowner is restricted from getting payment the first year of their contract, Mr. Hilliard, does impact negatively limited resource folks, as come out of our studies. The length of contract also affects limited resource and other communities. Currently, it is at 5 to 10 years, the statutory 5 to 10 years. And we are being told with folks needing to turn over dollars and receive their benefits that we should be looking at something less than that. We are looking at a 3 to 10 year contract term so that we can meet those concerns.
    Mr. PHELPS. So the ability of the small landowners to qualify for assistance, you think, can be adjusted? Bonus points or something——
    Mr. WEBER. Yes. One thing that is very unique, but very important to know about EQIP is that the priority setting process does take place—the evaluation process does take place at the local and State level. Folks can factor in and those communities can factor into those kinds of things in their evaluation process.
    Mr. PHELPS. Thank you very much.
    Mr. CHAIRMAN. Mr. Thune.
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    Mr. THUNE. Thank you, Mr. Chairman, and I appreciate the panel. These are issues that are important in South Dakota and, of course, as we look at writing a new farm bill, conservation is going to be a very important component part of that. And we have had a number of raging debates in South Dakota over issues like wetlands, which I know you are quite aware of. And in some cases, have been able to work together to find what I think are win win solutions. One of which was this last year when we were able to create a pilot program that would allow acreage within filter strips and buffer zones to be eligible for the continuous signup program. And I think that is what we ought to be doing, is looking for ways in which we can get the wildlife community and the producer groups and everybody working together to find those win win solutions.
    One of the things I would be interesting to get your reaction to what I think is a proposal that is in that vein. And that is the Conservation Security Act, which I know my staff has been working, I think, with NRCS staff and you have been working, as well, with the Senate sponsors of that legislation to try and determine what is what the estimates are as to how many producers would participate in that program and the first 5 years, the first 7 years, the first 10 years, coming up with cost estimates of the proposed program. That is something that seems to be a matter of discussion and debate and, frankly, dispute, as well, about what the program might cost.
    But in my mind, it seems, at least, if we can find something—conservation programs that are voluntary, that are incentive based for our producers, that provide flexibility to local level, that aren't dictated from Washington. And also, the thing that I think is really sort of unique about the Conservation Security Act is it allows producers to continue to farm the land and they don't have to sacrifice or give up the income that they otherwise might if they had to set aside in some other conservation program. So, anyway, having said all that, I guess I am just curious to know if the Agency has run any cost estimates of that proposal.
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    Mr. WEBER. I am not personally aware of any specific figures. I do understand that a request came to the Office of the Chief Economist in USDA and they have run various scenarios and provided those, I believe, to the Hill. But I don't have those figures, specifically, myself.
    Mr. THUNE. OK.
    Mr. WEBER. And I wouldn't want to preempt the Department's work in that arena.
    Mr. THUNE. Do you have any estimate about what likely participation rates might be in that sort of a program, just based on past experience?
    Mr. WEBER. It's a unique stand alone identity. It is a little hard to guess. It depends on, of course, the level of incentive, is going to drive up the participation rate, depending on the levels of incentives. So it is a matter of what assumptions you put into it, frankly.
    Mr. THUNE. OK. And I think that the level of incentive is connected, obviously, to the degree of detail that an individual producer would put into this plan. It is a tiered program, which if you become more comprehensive in your conservation practices, that you would benefit in a higher level, in terms of the compensation you will receive. Which, again, I think is part of the uniqueness of the concept. And that is that there is flexibility there. And I know, going into this, that it is a different of enough of approach, there are, again, some people who are going to be resistive to change and reluctant to go down that road for that reason and will probably look at more of the traditional programs and say, well, let us figure out what we can do to expand those. But I really see this as a reform oriented program and one, again, which I think draws on the best of all the various communities who would benefit, not only the producers who would benefit from additional income, but also from the environmental community, the wildlife community. Something that is very important in my State is wildlife habitat. We have a very significant recreational economic development initiative going in our State. It is called pheasant hunting. And we want to continue to see that prosper, as well. So let me just, if I might, ask one question, wrapping up. And that is, has the Agency determined what some of the cost estimates are to producers for environmental regulations like TMDLs and CAFOs and coming back to Mr. Moran's line of questioning earlier, a little bit about what some of those regulations actually cost producers?
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    Mr. WEBER. Mr. Thune, I am happy that you asked that question because it has been a concern of NRCS's over the last couple of years as EPA has been developing the rules on both CAFO and TMDL. Currently, on the cost side, USDA is working jointly with EPA to do a cost and capability analysis. It is expected that that will be completed before December 15 of this year. In terms of the technical assistance costs, those kinds of things, we can only estimate, of course, how many folks are going to come through the door. And that will be dependent, obviously, on the regulation and the stringency of the regulation. We are estimating about 272,000 AFOs will come through the door requesting assistance. And by assistance, I am saying they will expect a plan for their operation and they will expect technical help to implement that operation or plan. We are estimating that is going to run us about two-tenths of a staff year, per. So the mathematics gets to be rather large. And the cost gets into several billion in technical assistance alone for that.
    Mr. THUNE. OK. I appreciate that answer. And thank you for your testimony. I see the heavy hand of the chairman here, as getting ready to gavel me down. So I yield back. Thank you, Mr. Chairman.
    Mr. LUCAS of Oklahoma. Thank you. Mr. Kind.
    Mr. KIND. Thank you, Mr. Chairman. I just want to thank you for your permission to participate in this subcommittee hearing. I am not a member of the subcommittee, but rather a member of the whole committee. I do believe this is going to be a very important part of the farm bill that we are trying to put together and reauthorize this year. I do have a written statement that I would ask unanimous consent to have submitted for the record. And Mr. Weber, let me start with you. I have got a few important issues in the upper Midwest, especially in light of the recent flooding along the Mississippi River. My congressional district in Westchen, Wisconsin has more miles that border the Mississippi than any other congressional district. So we certainly appreciate the value and the importance of wetlands reserve and what that means to a nonstructural flood mitigation approach to rising waters and that. We also see the back load that we have now in applicants trying to get enrolled into WRP. There is going to be a supplemental coming up shortly. And I was wondering if your Agency is willing to submit a request for an expansion of WRP enrollees in light of the positive flood mitigation effects that that also has.
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    Mr. WEBER. Thank you, Mr. Kind. It is good to see you again. We will be working with the USDA leadership, in terms of deciding what will go forward relative to WRP. But we will need to consult with them.
    Mr. KIND. We will be happy to work with you on that because I think this is an opportunity of emphasizing a very important program, a program that has been under funded. But also brings tremendous amount of a benefit, not only to wetlands protection and wildlife protection, but also the obvious effects that high water and floods have on communities. Farm communities and smaller communities that border the river. I am hoping that we are able to do something significant in the conservation portion of the farm bill. I think this is a wonderful opportunity for us to be able to provide not only technical assistance, but some cash assistance to farmers that want to be good land stewards. Many of them are being turned away right now because of the inadequacy of funding. This is a way of not getting into trouble with trade agreements and WTO rules. And as Mr. Thune indicated, it is an opportunity of creating some win win situations when you consider the fact that over 30 percent of our rivers and streams and lakes are not fit for swimming or fishing or drinking purposes. There is certainly a demand, and we see that from the land owners, themselves, the producers who are trying to get into the programs. Obviously, there has been a lot of discussion in regard to technical assistance. And I believe your Agency is calculated in order to meet the demand of just technical assistance. We are going to have to have a three-fold increase in field staff over the next 5 years, which is a tall order, obviously, to fill. My question to you, Mr. Weber, is would the Agency be willing to consider the certification of third parties in order to help with the technical assistance demand that exists throughout the country?
    Mr. WEBER. We currently have a policy which does allow us work with third party vendors and also organizations that certify third party vendors in terms of accepting their credentials and their technical work.
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    Mr. KIND. On your opinion, and how effective has that been? Is that in an area that we may consider expanding into?
    Mr. WEBER. It is a bit in its infancy, frankly. It came out of the 1996 farm bill. And we have had several agreements with various professional certification groups that have developed over the last few years. But I would say the critical mass of activity working with third parties is really not matured at this point. So it is a little early to tell.
    Mr. KIND. OK. And finally, before we run out of time, I know there is going to be a lot of talk, a lot of concentration and reauthorizing these programs, perhaps plussing up funding for them and that. But are your two agencies conducting or receiving some good research based scientific studies on the overall effectiveness of these programs so that we know we are getting a decent bang for the buck that we are investing in land conservation, whether it is CRP or the host of other land conservation programs out of USDA? Is this being driven by some research, at least? Some scientific study showing the overall effectiveness of these programs?
    Mr. STEPHENSON. I know that there has been a number of ad hocs that he has done on CRP. Whether it is this university, that university, some of the outside groups. Interior, actually, some years ago, did some research on the effectiveness of CRP, only with respect to the threatened and endangered species. We have considered trying to come up with some type of long term substantive study on CRP. There is a fair amount of cost associated with that and a fair amount of time to come up with an objective study. But we have talked about it, generally, down at FSA and some of us would like to do that very quickly.
    Mr. KIND. Mr. Weber.
    Mr. WEBER. A couple things. One, we have a fairly current report from our Wildlife Management Habitat Institute that has taken a look at least at the wildlife impacts of various programs since the 1996 farm bill. I guess the biggest data source that we would look at would be the status and trends that come out of our National Resource Inventory. It is a 5-year frequency. We have tracked trends of soil erosion, agricultural land conversion, wetland conversion, et cetera, for decades. And, of course, 1997 was the last year where we generated the results, which were very revealing, in terms of the progress we are making and the challenges ahead. I think that probably forms intellectually, from a science based resource standpoint and inventory point, a good point of debate on using that information. It does come down to the State and lower levels, so you can start to analyze impacts both of programs, as well as resource impacts. For example, the 38 percent reduction in soil erosion that we have accomplished since 1985 is pretty impressive. The conversion of agricultural lands—well, conversion of all wetlands to nonagricultural purposes has dropped to less than 30,000 acres a year and even less than that, if you are talking just for agricultural purposes, conversion of agricultural land for agricultural purposes. So we have got some real trend data there. It is statistically valid. We have 800,000 sample sites around the country, so I think that would form a major piece of information.
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    Mr. KIND. Well, I think that is another area we would be happy to work with your respective agencies to see if we can develop some good science based studies, so we know we are getting a decent investment. Thank you, Mr. Chairman.
    Mr. LUCAS of Oklahoma. The gentleman's time has expired. Mr. Osborne.
    Mr. OSBORNE. Just a cursory look at your data here would indicate that roughly one-third of your applicants to the various programs are served and maybe two-thirds are not. And indicates, as I add them up here, a backlog of about $3.5 billion or something like this, to fully service everyone that wants to be involved. And we are going to have to write a bill here fairly soon. And what is your estimate as to what funding we should have for the conservation title in order to adequately take care of these programs? On an annual basis. Do you have any thought? Because we are going to, at some point, have to address that issue.
    Mr. WEBER. It would be a best estimate only and it would not represent the administration.
    Mr. OSBORNE. Yes.
    Mr. WEBER. But I believe we have roughly—Bob mentioned $2 billion a year, alone, for CRP. So that is a current level figure. The rest of these programs come to, I think, and I am including the technical assistance in all the conservation programs here, not just the cost-share. But I believe that figure is around $1.3 billion when you add it all together. So there is $3.3 billion package right there. And then on top of that, I think you can look at the backlog. So perhaps a $5 billion figure could be a figure to talk about. Somewhere in that vicinity. Recognizing you probably won't address the whole backlog in 1 year. It is going to be a multi year kind of thing.
    Mr. OSBORNE. So what you are estimating there would be $5 billion would take care of everything, plus the backlog?
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    Mr. WEBER. No. No.
    Mr. OSBORNE. You are not. OK.
    Mr. WEBER. It would be $5 billion a year.
    Mr. OSBORNE. OK.
    Mr. WEBER. And you would take care of the backlog over a period of probably 3 to 5 years in that process.
    Mr. OSBORNE. But the backlog is included in the $5 billion?
    Mr. WEBER. I think the mathematics, it would work out roughly at that. Yes.
    Mr. OSBORNE. OK. Good. Well, I appreciate that because it gives me a little bit of a frame of reference as to where we are talking about here. The other thing I would like to ask you about is on the EQIP Program. I noticed that it is authorized at $200 million per year. And it kind of jumps around a little bit. We had $174 million, 1999, $174 million in 2000 and it jumps up to $220 million in 2001 and goes back to $174 million. And one of the main complaints we hear is inadequate funding. Just a lot of people wanting EQIP help don't get it. Why do we see the variation in this? Also, the WHIP Program. Looks like some years, there is no funding at all and some years, there is. So is there any reason for the variability?
    Mr. WEBER. It depends on the annual appropriations, of course, that come from the farm bills. But EQIP, for example, it started out its first year, which was 1997, at a figure of—I think the figure was around $175 million, as it is shown here. There was a transition involved there. The next 2 years, 1998, 1999 and 2000, I believe were at the $174 million level total. That is everything in EQIP. Technical assistance, financial assistance, everything. And then this last year, it was appropriated at $174 million and then there was an additional $26 million added later on in the appropriations process. So this year, it is at $200 million. So that number varies depending on the appropriations annually. The same would be true of WHIP, except WHIP had the cap of a total of $50 million. The whole cap, total. So as soon as you hit $50 million, whether it is the first year or multiple years, unless Congress then increases that cap through appropriations process, then that is the limit you hit.
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    Mr. OSBORNE. OK.
    Mr. WEBER. The same thing is true on the WRP acreage, except it is acreage versus dollars. Caps.
    Mr. OSBORNE. OK. Thank you and thank you for coming. Thank you for your testimony and I yield back the balance of my time, Mr. Chairman.
    Mr. LUCAS of Oklahoma. Thank you, Mr. Osborne. I think it is worth noting the line of questioning you pursue is very good. While we authorize for 3 years or 5 years or 7 years at a time, the appropriators tend to re-write us every year, so to speak, as they pass their bills, which is another one of the many reasons that we need to be so thorough and methodical in our hearings, is to make the case for our friends in other parts of this building that only establish priorities. They need to be implemented. With that, we turn to Mr. Kennedy.
    Mr. KENNEDY. Thank you and thank you for your testimony. One of the questions I have is I have worked with the people at the local level on soil and water conservation districts or State level organizations, as well as your offices there. What would be your response to saying are we adding something at the Federal level that we couldn't achieve by just having a block grant down to the State level or down to the soil and water conservation districts, for them to work in their own areas on the conservation priorities that are deemed highest at the local area? What would your thoughts be on that type of a program?
    Mr. WEBER. Thank you, Mr. Kennedy. What you are buying for—the Federal delivery system and, of course, that is the technical people. What you are buying is you are buying a consistent set of standards. You are buying a consistent set of administrative processes. You are buying an oversight, an assessment process that looks at these programs and the implementation of these programs and the development of these programs in a consistent manner. You are buying quality control. You are buying liability insurance, so to speak. And at the same time, probably most importantly, is you are buying the partnership that works together at the local level to actually accomplish this work. The equivalent technical work force to the NRCS work force. Which is out there now in many States. The training that is provided. The technology development and dissemination that is provided through the national systems. And most of our programs are reflective of the local needs and priorities. We have tried to design them to do that. We don't try to make the decisions in Washington, by all means. We try our best, within the confines that we have to work, statutorily and otherwise, to make sure that the local folks have a say in making the decisions that they think are their priorities.
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    Mr. KENNEDY. And they speak quite highly of the partnership role that you play in the technical assistance and training that should get but I am struck by being in several meetings, for example, the Soil and Water Conservation Society held a series of hearings around the country. And as I read each region's response, you thought they were on different planets as to which of these programs they thought made the most sense. And so for us to decide up here which makes the most sense, I am not sure. And I am just struck with maybe better off, in addition to the programs we have is whether we are better off supplementing that with some block grants that maybe they could also contract back with you to the extent they needed additional services to do. But to try to, instead of us having to make the decision and guess what is best for the country as a whole, get more local flexibility and local involvement in those decisions. Not replacing NRCS, but, like, empowering them. What other ideas would you have as to how we can make sure the local people are empowered in this decision process?
    Mr. WEBER. Mr. Kennedy, I would say, from my view, that we just need to do a better job of institutionalizing the local power in the decision making process. We call that locally lead in the partnership. And we have tremendous examples around the country. I think Mr. Osborne in Nebraska, you have a tremendous relationship between the natural resource districts out there and the NRCS and others in making sure that those decisions do reflect the local priorities out there. And I think we probably need to do a better job of that all over the country. I think there is flexibility to do that. We just need to make sure that that flexibility is utilized.
    Mr. KENNEDY. And if we were to look at the continuous signup program, I mean, I am struck as I go around my district, that I see lots of places where that is able to be used and it is not being used. How much of that backlog would you say would be in some of the continuous signup programs portion of the backlog in CRP?
    Mr. STEPHENSON. Are you referring to the technical assistance portion of——
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    Mr. KENNEDY. I am talking about the riparian strips and all the other types of buffer strips that qualify under the continuous signup program today. If we were to say of the backlog in CRP, how much of it is the types of programs that are eligible under continuous signup versus those that would not be?
    Mr. WEBER. It is a little difficult for me to answer. Continuous signup was designed to avoid long lines during signup and things like that. Because you can come in at any time and a farmer can use it as a management tool. When they need it, they can sign up. We do know that in some parts of the country, there are a backlog of farmers getting the technical assistance that is needed. There is also a backlog in some cases of the FSA employees of not being able to service them timely because they are providing loan deficiency payment service. As far as the numbers of, I don't have those with me.
    Mr. KENNEDY. Thank you.
    Mr. LUCAS of Oklahoma. Mr. Putnam.
    Mr. PUTNAM. Thank you, Mr. Chairman. How evenly distributed is your backlog? Does every State have a backlog? Does every region have a backlog? Does every soil and water conservation district have a backlog?
    Mr. WEBER. Mr. Putnam, let me give you some examples. Wetland Reserve Program, it varies by State. The large numbers for Wetland Reserve Program are in Arkansas, Iowa, Louisiana, Missouri. And the vast majority of the other States have some, certainly smaller than that. But you do have States, like Georgia, that is zero. Hawaii is zero. Maine is zero. New Hampshire, New Jersey, New Mexico are zero. So it does vary, geographically, based on the resource, based on the interest of the communities and the people out on the landscape and what fits their needs.
    Mr. PUTNAM. Is there enough flexibility in the program for you to redistribute personnel and resources to meet the backlogs from the States that have no backlog?
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    Mr. WEBER. It depends on the other priorities that they are working on. For example, they could be doing AFO in those other States. It's not an easy question to ask or answer. We would need to look at all of the workload, how it is distributed and the priorities of the Agency to look at any redistribution of personnel.
    Mr. PUTNAM. You said that you would require a tripling of personnel to implement AFO and TMDL restrictions, I believe.
    Mr. WEBER. I didn't say that, but our estimate is it would be about 52,000 staff years over the life of doing the work.
    Mr. PUTNAM. And how many staff do you have currently.
    Mr. WEBER. We have a total staff right now, nationwide, of 11,500 staff years.
    Mr. PUTNAM. Staff years?
    Mr. WEBER. Staff years. Yes.
    Mr. PUTNAM. How many people is that?
    Mr. WEBER. I would say that is roughly 12,500. when you throw in people that are intermittent employment, temporary employment, et cetera.
    Mr. PUTNAM. In the States that have the larger backlog, are those the States where you have chosen to pilot the private sector or other agencies for technical assistance?
    Mr. WEBER. We leave that flexibility to the individual State conservationists.
    Mr. PUTNAM. And in how many instances have they taken advantage of that opportunity?
    Mr. WEBER. I believe, the one I am aware of that they have done some work through consultant third parties, I believe, is New York State. Now, I can't give you the specific assessment of how well that has been going. But I do know they have had a relationship for a couple of years.
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    Mr. PUTNAM. You have had authority to enter into agreements with the private sector for technical assistance since the 1997 bill?
    Mr. WEBER. We have had authority to work with third party vendors. Yes.
    Mr. PUTNAM. And you testified that it hasn't had an opportunity to reach critical mass.
    Mr. WEBER. Right.
    Mr. PUTNAM. But it has been in place since 1997 and there is only one State doing it. So nobody is taking advantage of the opportunity.
    Mr. WEBER. I am aware of one State that has had a good, strong relationship. I can't say for sure that there aren't other States that may be utilizing third party vendor relationships. We are not paying the third party people. They are being paid by the landowners. They are certified sources of technical assistance that we work with.
    Mr. PUTNAM. Let me change gears real quick. How do you define success in any of these environmental programs? How do you quantify pounds of nitrates reduced, pounds of phosphorous reduced, number of nesting pairs of endangered or threatened species increased, reductions in pollutant loads or whatever pounds of carbon sequestered. How do you define success?
    Mr. WEBER. That is one of our chief problems on the CRP side because we don't know, for example, how many nesting pairs you can attribute directly to CRP versus normal fluctuations. We don't know, for example, how many tons of soil—collectively, we have numbers, but we don't know for a particular site, how much is related to CRP, how much is related to other land use practices on the farm.
    Mr. PUTNAM. But you testified that you have a report that says that these programs generate $2 billion to $2 1/2 billion in benefits.
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    Mr. WEBER. Yes. And it is a range of numbers. And the reason it is a range because we don't have databases to go out and define every benefit we get and that is attributable to each program.
    Mr. PUTNAM. So if we were to waive our wand and fully fund the number that you gave plus the backlog, you couldn't quantify the net environmental improvement to air, water or land that would be derived from that investment. Can you?
    Mr. WEBER. Are you talking to me?
    Mr. PUTNAM. Yes.
    Mr. WEBER. Oh. We could quantify it in terms of the resource improvements that we would get on the ground.
    Mr. PUTNAM. How would you be able to do that if you can't quantify what you are doing now?
    Mr. WEBER. Let us say if you put in 100,000 animal waste systems. How much waste has been properly managed. What the nutrient benefits from handling it properly are to keep it out of the water. From going into the air. You can quantify those benefits. The amount of soil erosion saved, the amount of soil that doesn't get into the water or the lakes. Now, to make the next step in terms of the outcome, the outcome, is a more complex process. It is a modeling process. And the state of the state is not, at this point, a precise science. That is where we depend on NRI and other tools to help us plot the trends.
    Mr. LUCAS of Oklahoma. The gentleman's time has expired. And due to the lateness of the hour, the ranking member and I would request that the panel answer two questions in writing. Number one, we would like to know how you allocate your technical resources and people among the States and within the county offices within the States. Surely there is a policy somewhere that you can draw upon for that. And question No. 2, we have discussed, in round about ways here at this hearing about potentially increasing the resources for conservation $2 1/2, $5 billion. There has been talk as much as $6 billion or $8 billion a year. I would like for you to explain, since we are fully utilizing our personnel, just how many more people we would have to have and what it would take to make that possible to be able to achieve these goals, if the money were available. And with that, gentlemen, thank you for coming and testifying today and providing your insights.
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    Mr. WEBER. Thank you.
    Mr. LUCAS of Oklahoma. I would like to invite the second panel to the table. Mr. Wythe Willey, president-elect of the National Cattlemens Beef Association from Cedar Rapids, Iowa on behalf of the Livestock Coalition. Bill Horan, president of the Iowa Corn Growers Association from Rockwell City, Iowa, on behalf of the Crop Coalition. Mr. John Lincoln, president of the New York Farm Bureau, Bloomfield, New York, on behalf of the American Farm Bureau Federation. Mr. Willey, may begin when you are ready.

STATEMENT OF WYTHE WILLEY, PRESIDENT-ELECT, NATIONAL CATTLEMEN'S BEEF ASSOCIATION
    Mr. WILLEY. Thank you, Mr. Chairman, Mr. Hilliard. As the chairman said, I am Wythe Willey. I am a farmer from eastern Iowa and I am with the National Cattleman's Beef Association, but here this afternoon to provide testimony on behalf of the National Associations representing cattle, dairy, pork, sheep, poultry, broilers, layers and turkeys, collectively referred to as the livestock sector. And also, the Alabama Farmers Federation joins with us in this prepared testimony. I would ask those folks that are in that group to stand up and to let you know they are behind me. And just quickly, without introducing them, I will proceed.
     We know that the members of this committee understand better than anyone the significant economic contributions that livestock producers make to U.S. agriculture. Livestock receipts, projected to reach $100 billion annual this year, consistently average over half of total ag receipts. We are the single biggest customers for U.S. feed crop producers and the single largest expense, by far, for livestock producers is feed we purchase for our animals. Without a doubt, livestock agriculture is the engine behind value added agriculture.
    In addition, we also manage more than 600 million acres of land in this country, which is another indicator of just how important this sector is in meeting the country's economic and natural resource objectives. It is our contention that the 2002 farm bill must make a major investment in helping livestock producers with conservation cost-share and incentive pay programs through voluntary, incentive-based programs. This assistance is needed to help us design, install and help manage livestock waste management systems. The financial assistance should be matched by an ample supply of public and private technical assistance. One reason for this request is simple. Livestock producers in many States face or will soon face costly environmental regulations as a result of Federal or State law designed to protect water and air quality. These regulations will come from the Clean Water Act, TMDL Program, the proposed CAFO permit requirements and the Clean Air Act.
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    We have several specific suggestions and provisions—and requests for provisions to be included in that 2002 conservation title. Our written testimony goes into those items in some great detail. The major highlights of what we suggest are as follows.
    As noted in table 1, in our written testimony before you, more than $12.2 billion is needed to address the projected 10-year costs of Federal, State and local mandatory manure management, water and air quality protection requirements. You will notice we have those broken down by species. Producers must be eligible for this assistance, regardless of the size of their operation.
    A Payment Limitation Program comparable to that used in row crop Operations should be adopted. Funding for livestock waste management systems should be a national priority and addressed irrespective of other priorities that might exist for the program that is used to deliver those funds. We are going to need the joint effort of Federal and NonFederal technical assistance providers to implement these livestock provisions.
    A voucher system could be developed to support the NonFederal technical assistant provider's role. These needs could be met through substantial amendments to the Environmental Quality Incentives Program, EQIP, or in an entirely new program. If carried out, through EQIP, EQIP should be amended to focus exclusively on soil, water and air quality issues. The current wildlife objectives supported by EQIP would be moved to an existing Wildlife Habitat Incentives Program, called WHIP, making WHIP the wildlife program for working agricultural lands.
    Once livestock waste management systems are installed, producers will need help with the ongoing maintenance of the systems. This could be done through EQIP or another incentive payment program. Those provisions could also work for and support the needs of row crop producers. Such an incentive program will work only if the payments are tied to real costs, according to conservation plans that are clear and accountable, while producers will have ownership of the practice and by also incurring cash or in-kind costs to implement them. The program must ensure that producers be compensated fairly relative to producers anywhere in the country.
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    In our opinion, the Conservation Reserve Program should place less emphasis on enrolling whole field, more emphasis on enrolling buffers and portions of fields. The number of whole fields enrolled should be substantially limited and there should be some flexibility in management of those CRP Programs.
    Mr. Chairman, thank you for holding this hearing and giving us a chance to present our testimony. This statement today reflects livestock producers deeply held committment to protecting environment, protecting water quality and managing our operations and the resources in our care responsibly. Livestock operations need help if they are to be maintained economic viability, be able to conserve natural resources for future generations and provide the environmental benefits being demanded and mandated from American agriculture. We pledge to work with you toward those goals and I will be glad to be here and answer any questions you might have.
    Mr. LUCAS of Oklahoma. Mr. Horan.

STATEMENT OF BILL HORAN, PRESIDENT, IOWA CORN GROWERS ASSOCIATION
    Mr. HORAN. Good afternoon, Mr. Chairman. My name is Bill Horan. I raise corn and soybeans in a partnership with my brother, Joe, in Rockwell City, Iowa. I am a member of the National Corn Grower's Association Board of Directors and I am testifying today on behalf of the NCGA, the American Soybean Association, the National Association of Wheat Growers, the National Cotton Council and the National Barley Growers Association. I appreciate the opportunity to offer this testimony.
    The members of our organizations are committed to begin good stewards of the land and leaving the environment in better shape than we found it. We take responsibility for our farming activities and must do so with a keen eye towards conservation, productivity and marketing.
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    We support the voluntary, incentive-based conservation programs the past farm bills have created. We believe that the flexibility in the programs is essential for their widespread adoption, given local variances and conservation and water quality priorities, production, practices, climate, soil type and many other factors. These programs have demonstrated agriculture's commitment to working collaboratively with the U.S. Department of Agriculture to reach our environmental goals and we believe that these voluntary programs have been successful in producing environmental benefits. Any new programs should contemplate financial assistance for conservation practices on resources and management that support production and generate environmental benefits.
    As we look at broad Clean Air Act issues and regulations, we know that agriculture plays an important role in maintaining a healthy environment. All agriculture producers face the increasing regulatory burdens, whether it is local, State or Federal requirements on the management of their land. We support programs that will work with our members in utilizing conservation practices and work to maintain a healthy environment. A Conservation Environmental Incentive Payment Program could assist growers in meeting those increasing requirements. This approach recognizes an important part in adoption of conservation practices across the farming community, which is the growers need financial and technical assistance in management of their operations based on conservation principles.
    Intensive resource management practices can become important as a filter strip or a buffer strip in achieving conservation goals. But these management practices or choices frequently add to the cost and risk of farming operation. These are the areas that should be included in the development of the Conservation Title of the next farm bill. Policymakers can work with growers to identify conservation practices that fit in with their management stewardship of working land. Any program modifications or enhancements must maintain flexibility for local implementation to maximize both participation and effectiveness.
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    Regarding existing programs, we support continuation of the existing cost-share programs, including the Conservation Reserve Program, CRP, including continuous signup, Wetlands Reserve Program, WRP, Wildlife Habitat Incentives Program and others. These programs have been an excellent investment in the public and have generated significant environmental benefits, as documented by USDA. Programs that take land out of production should be managed so as not to take all farms out of production. The focus of the continuous signup should be on small areas of specific environmental value and there should be local flexibility to meet the environmental concerns facing a specific area of the country. We believe that the CRP should be fully utilized to 36.4 million acre cap and that any additional land enrolled should be the most environmentally beneficial land, utilizing the continuous signup. While the Wetland Reserve Program has generated enrollment that is expected to reach the 1,075,000 acre cap this year, as with CRP, we do not support increasing the acreage cap at this time.
    Regarding the provisions of the 1996 farm bill, concerning wetlands and highly erodible land, we support maintaining the flexibility the farmers were given in the bill. NRCS has been unable to implement some of the flexibility that was granted in 1996, due to a lack of cooperation of other Federal agencies. However, we would urge that the committee to see that that that flexibility is maintained and that growers are able to utilize these provisions. Also, the implementation of wetland regulations has not been consistent across the country. And we ask the committee to encourage NRCS to implement wetland rules fairly and consistently.
    In my part of the world, where I farm, Mr. Chairman, we have many wetlands due to the size of this room with very little utility. Two inches of water in them, maybe 10 days out of the year. And it brings into effect the respectable duck rule, which is no respectable duck would land in that place and build a nest and try to raise ducklings. So the idea of mitigation banking, which was brought up in the last farm bill, we thought was very useful. It was something that we could have done to take those low utility wetland spots, like I have the size of this room, mitigate those into a large, high utility wetland that actually has some benefit to wildlife. We are hoping that that can be part of the next farm bill.
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    The Environmental Quality Incentives Program, while designed to target scarce financial resources, has become a very complicated program for commodity producers to utilize. Many were understanding of the desire to consolidate programs and prioritize project areas, but of the ensuing challenge and dissatisfaction centers around who gets access to limited funds. Improvements should be made to the program to expand the flexibility and allow more producers to participate and increase the total funds available.
    Each of these programs mentioned provide an integral part of the overall conservation and environmental water quality objectives. Federal farm programs provide financial resources and technical assistance to facilitate the adoption and management of conservation practices. Federal, State and local cost-share programs are essential for the greater benefit provided to these practices. Our members are engaged in farming as a livelihood and must maintain the ability to raise productive crops on their land and market crops to maximize profitability.
    I will conclude, Mr. Chairman, by saying that each of our organizations are facing their own production and marketing challenges. Low commodity prices, coupled with increasing input costs, new regulatory burdens and the need to continually increase productivity have resulted in serious cost/price squeeze and low farm income.
    We appreciate the opportunity the committee provided for each of us, our organizations to present specific commodity program proposals. We also appreciate the efforts of the committee to secure additional funding for agriculture in the new budget resolution. As we have each presented the committee with commodity specific proposals, we share the conservation goals outlined in this statement and the belief that the conservation title should work in conjunction with a fully funded commodity title. It is essential to use the provisions of the conservation title provide voluntary, incentive-based options for producers, but not replace or serve as a substitute for the commodity programs proposed by our organizations in earlier hearings. Producers need to be given flexibility in meeting increasing regulatory challenges, whether they are local, State or Federal requirements placed on their operations or the management of their land. The USDA technical assistance local watershed activities and cost-share programs are a proven approach to addressing environmental challenges. We support continuing this conservation commitment to help undertake conservation practices on productive farmland throughout the reorganization of the conservation title of the next farm bill. Thank you, Mr. Chairman.
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    Mr. LUCAS of Oklahoma. Thank you. Mr. Lincoln.

STATEMENT OF JOHN LINCOLN, PRESIDENT, NEW YORK FARM BUREAU
    Mr. LINCOLN. Thank you and good afternoon. Mr. Chairman, I am John Lincoln, president of the New York Farm Bureau, and a dairy farmer from Ontario County, New York.
     Increased regulatory costs at all levels, Federal, State and local, are placing a heavy burden on individual farmers and ranchers, as well as distorting the traditional structure of the industry. The unintended consequence is the inability of small and medium-sized family farms to complete in a highly charged regulatory environment.
    Farm Bureau believes there is a need for a new environmental policy framework. We need to move beyond the current debate over whether the public has the right to mandate features and/or farming practices and rural landscape. If a voluntary incentive is offered for a desirable environmental outcome, farmers will overwhelm America with improved soil conservation, water quality, air quality, wildlife habitants.
    In order for a Conservation Incentive Program to work well, public policy must recognize the inherent limitations that command and control regulations have in attaining desired public benefits of an environmental nature. Efficient public policy is one where the thing demanded by society is the thing that is being produced.
    Farmers and ranchers can produce and market more than traditional agricultural commodities. We can also produce and market environmental benefits. Under this concept, agriculture and the Government program must come together to create an alternative market for environmental improvements and amenities that the public desires.
    Farm Bureau policy supports expanded incentives to encourage voluntary improvements in the environment, expansion of the funding baseline in the commodity, specialty crops, livestock, conservation, research, trade and risk management titles. Voluntary participation and direct payment program that would comply with the green box World Trade Organization requirements and providing willing producers with additional voluntary incentives for adopting and continuing conservation practices.
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    Our vision is to capture the opportunities and the efficiencies of providing producers with additional conservation incentives. Specifically, I would like to highlight three programs for which we would like to see new funding.
    First, Farm Bureau supports a limited increase in the amount of acreage eligible to be enrolled in the CRP, with the new acreages targeted to buffer strips, filter strips, wetlands or grass waterways should be improved.
    Second, the current Environmental Quality Incentives Program does not provide livestock and crop producers with the assistance needed to meet current and emerging regulatory requirements. EQIP must be reformed and funding increased. We support the following reforms to EQIP. Elimination of the language that prevents large livestock operations from being eligible for cost-share, broader third party technical authority, which would allow farmers to hire consultants to provide technical assistance, elimination of priority areas in which would allow all producers, regardless of location, to participate in the program and simplify program participation requirements.
    Finally, I wish to express or support for a voluntary environmental program that provides producers with additional conservation options for adopting and continuing conservation. This approach would provide a guaranteed payment to participants who implement a voluntary management program to provide specific public benefits by creating and maintaining environmental practices. The management plan should be flexible contract designed and tailored by the participant to meet his or her goals and objectives, while also achieving the goals of the program.
    We support an increase in the budget baseline of $3 billion, annually, for three conservation initiatives I have outlined. Other conservation programs supported by Farm Bureau are the Grazing Lands Conservation Initiative. Grazing Land Conservation Initiative is a program providing additional technical assistance through NRCS for arranging pasture management. We support the continuation of this program.
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    Confidentiality of USDA information has become an increasing concern and priority for farmers and ranchers. We have seen attempts by other Government agencies to secure NRCS and NASS data for regulatory purposes. There have also been attempts by non-governmental organizations to secure farm and ranch data from FSA and APHIS. Farm Bureau strongly supports establishment of statutory authority that protects the confidentiality of all the data collected by USDA on individual farms and ranches. Thank you.
    Mr. LUCAS of Oklahoma. Thank you. And I would like to note that the Livestock and Crop Coalition witnesses have representatives present from each of their member organizations. Therefore, if subcommittee members have a question to direct towards a particular organization within one of the coalitions, someone may be able to answer that—for that particular organization and we would simply ask that they approach the witness table to answer the question and state their name and organization for the record so that we may all know who is speaking. Gentlemen, looking at a number of the things that have gone on in conservation in this farm bill and in previous farm bills, I would like to touch on a variety of areas. One of the comments that occasionally come up in my town meetings in my small towns and particular in the countryside is that CRP has had the effect of depopulating the countryside. And that there is some occasional concern among others that a Grazing Land Initiative along the same line might have unintended consequences on the way rural America is put together. To the whole panel, I ask you, do you think there is any validity in the comment that CRP has helped to depopulate the countryside or change the social fabric? And if so, for what reason or why not?
    Mr. WILLEY. Well, I think CRP has had an effect in reducing economic activity in an area that is somewhat mitigated by the fact that there is a 25 percent cap in every county. So that does much of the problem at that point. I would not think the Grazing Land Initiative would have that problem. In fact, I would think a Grazing Land Initiative would bring economic activity back to the community, put that land to a higher and better conservation use and keep economic community in the area.
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    Mr. LUCAS of Oklahoma. Some people offer the theory that CRP has been a challenge for beginning farmers and expanding farmers because it might have an effect on the price of land. And along that same argument, they pitch that a Grazing Land Initiative would have a direct impact on the price of range land out on the countryside, too. Any observations or thoughts about that from anybody on the panel?
    Mr. WILLEY. Yes. And that is probably a correct observation. CRP is another use for the land, so it will raise either the land value or the rents. On the other hand, the Grazing Initiative would give more opportunities to young people because you need labor to run a grazing operation. And they would have a better advantage in that respect.
    Mr. LUCAS of Oklahoma. But is it possible that we would see the first batches of land sales after the initiation of such a program increase to reflect whatever the payment would be?
    Mr. WILLEY. You might have some affect on that, but frankly, I think in many rural areas, one of the real problems is the lack of economic activity, the lack of the job market, people moving away. If you can increase that economic activity in that area through a grazing and a livestock value added, I think it would be very positive effect on the community.
    Mr. LUCAS of Oklahoma. There are others who say in my town meetings across the district that the way we have traditionally targeted cost-share towards conservation programs tends to encourage the producers either who in past times have not practiced good habits or discourages good producers who might be willing to do things, but because they have had a better system of practices down through the years, they don't score quite as high on these areas. I guess the question is, to the whole panel, is there any validity in that from your perspective and should, as some concepts have been bounced around in Congress in recent months, should all producers be accessible to conservation dollars without regard to prioritizing?
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    Mr. HORAN. The short answer, Mr. Chairman, is yes. There are some discouraged producers out there that have been doing conservation activities on their farms and now, almost feel penalized for it. Some of the first people that signed up for filter strips took a payment that is considerably lower than what is being paid today, not counting the bonus payments that are paid today for johnny-come-latelys, that maybe weren't quite as interested in protecting their land the way some of the first enrollees were. I would like to back up, though, your first question, Mr. Chairman, you talked about CRP depopulating, changing the social structure of the countryside. That was true a few years ago in the original whole farm CRPs. I think it is less true today. And that is why in my statement, we are more interested in targeting the more sensitive areas for CRP, not whole farm signups like we have had in the past. I have had the opportunity the last couple of years to go twice to what is called the New Frontier in Brazil and see how they are getting ready to cover us up with commodity grains down there. I think we are going to be paying for many years, it is sort of the penalty for the large set asides that we have had in the past. All that did was encourage our Brazilian farmers to expand and build infrastructure and get ready to produce more crops. So our organizations are not in favor of whole farm CRPs. If they are damaging, it does cause plywood to go up on Main Street of rural towns in this country. And we think the targeted CRP is the much wiser use of the taxpayers' dollars.
    Mr. LUCAS of Oklahoma. Clearly, in any bill that works its way through this Congress, CRP is one of the most popular sections with membership as a whole. And literally, the success in Western Oklahoma such that it is difficult to drive up and down the roads at night trying to avoid the deer and the turkey and all the other wildlife out on the move. With that, thank you, gentlemen. I turn to the ranking member.
    Mr. HILLIARD. Thank you very much. Gentlemen, I have four questions for you. One, to each one of you, individually. But the first one is to the entire panel. And if you would, we will start with Mr. Willey and answer as succinctly as possible. Do your organizations have an opinion on the use of priority areas in determining where financial and technical assistance is provided? And I would like for each one of you to answer that.
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    Mr. WILLEY. Our priority of the livestock people would be in the area where AFO, CAFO regulations, proposed regulations, current regulations require immediate expenditure, so we would prioritize in that respect.
    Mr. HORAN. Our position is that we have some difficulty in some areas with all of the money going to a particular targeted area, which leaves everyone else without funding to do projects. We need a system of prioritization for these projects. And some geographic distribution.
    Mr. LINCOLN. And in my testimony and the American Farm Bureau's written statement, I only speak to the need to having bill availability to all participants. Most of these issues are not, well, they are more geographically self-priority. In New York, for example, there has been a lot of prioritization into the watersheds. The AFO, CAFO issue is not a geographic issue. It is—and many times the best places for livestock sector may not be in that particular watershed. You need to be available to all participants.
    Mr. HILLIARD. And as each one of you know, under the Conservation Program, Erie County was assured of some level of funding. Each one of you seem to be against that. Am I right? If you prioritize them and if counties are left out, does that suit you?
    Mr. LINCOLN. I don't think that is what we are saying at all. I mean, no. I mean, what we are saying is that fielding assistance and the technical assistance needs to be available.If I am a dairy farmer, no matter where I am located in New York, whether I am out priority, watershed or whether I am not. And I think that is what I was referring to as priorities.
    Mr. HILLIARD. OK.
    Mr. LINCOLN. We need to have these available. So I would include all no matter what county I am in.
    Mr. HILLIARD. I understand.
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    Mr. HORAN. Part of the frustration is that in my case, in particular, we occasionally put terraces in. I can put terraces in whether I work through a cost-share program or do it on my own with the same contractor for the same dollars. And the reason I can is that if I just go to the contractor, tell him where I need a terrace, tell him to go build it, he will charge me the same amount. He will charge double if it goes through the cost-share program. FSA. And the reason that is, is that he has to spend too much time meeting with the technicians. He may be 20 or 30 miles across the county on another project. He has to drive back to meet with the technicians to finalize paperwork, to get approvals. Somebody is paying for that. In our particular area of the world, we could get twice as many terraces built for the same dollars if you had something like a Certified Technician that could just go out and do it and just be spot checked from time to time.
    Mr. HILLIARD. Well, let me ask Mr. Willey and Mr. Lincoln the same question. There is no doubt that we have to utilize third parties to assist land owners and operators. Do you have thought about where the priorities should be between assuring that the work force and the NRCS is adequate versus relying on these third parties?
    Mr. LINCOLN. If I can start out, New York was mentioned as one of the States where there has been some of that cooperation.
    Mr. HILLIARD. Are you seeing results? Quick results?
    Mr. LINCOLN. Yes. And favorable results. Because we were one of the first States to have to comply into the bill, the CAFO issue and we had set up a program with our Department of Environmental Conservation. So we have the certified crop advisors, certified planners. That is the only way that we could meet the needs of reaching the goals that was established in this case by our Department of Conservation. Because we just did not have enough technicians there through NRCS. But I think we need funding through NRCS and we also need the third party availability. We need both.
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    Mr. WILLEY. In a good part of the country, there just hasn't been enough use of independent contractors to have any idea whether they are successful or not. One problem you would have is that would have to have some time period for those people to get up to speed because in many parts of the country, I know in Iowa, we simply don't have a cauldrary of good, qualified people to just step in and start doing that work.
    Mr. HILLIARD. Let me ask Mr. Lincoln a question. Have you been in a position to see any differences in cost between the NRC workers and your workers, I'm sorry, and third party workers, the certified ones?
    Mr. LINCOLN. I really can't comment on that. But the additional information, I guess, on the bill, the certified, the point that was made that does take some time to develop those. The process we are using in New York is they have to actually go out to where the assistance from either NRCS or others to develop some plans and it is only after that they become certified. But it can be accomplished in a relatively short time, but no, I guess I wouldn't comment on the difference in cost.
    Mr. HILLIARD. Thank you very much. Let me just move to another subject for a minute. Mr. Horan, can you give us some explanation of why the Crop Coalition does not see a need to increase the acreage in WRP?
    Mr. HORAN. Well, we know that we are dealing with limited resources, limited funds. And we think that there is a better target for those if we use those kinds of funds to encourage no till incentive programs to encourage different types of practices that will impact clean air, clean water faster than some of the set aside programs.
    Mr. HILLIARD. Quickly, Mr. Lincoln, does the Farm Bureau have a position on the future of WRP?
    Mr. LINCOLN. On the future of WRP?
    Mr. HILLIARD. Yes.
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    Mr. LINCOLN. We have prioritized and with our list here of what we feel again we have been split—having conversation about the budget limitations, though our list prioritizes, that doesn't mean that we don't support the concepts on those other programs we haven't mentioned, like the——
    Mr. HILLIARD. Is that the end of the list? Is that what you are telling us?
    Mr. LINCOLN. Yes.
    Mr. HILLIARD. Thank you very much.
    Mr. LUCAS of Oklahoma. Mr. Thune.
    Mr. THUNE. Thank you, Mr. Chairman and thank you, panel. Just a question on if you look at the amount that has been put in the budget for addressing the farm bill needs and the next bill and there is the baseline number and then there is the additional dollars that are made available. And just for purposes of rounding, we will say it is about $70 billion. How much of that, in your mind, ought to be dedicated to conservation type initiatives, as opposed to my—most of you—some of you already testified in favor of changes in the farm bill that would require, obviously, additional funding for the commodity section of the program. How much would we be looking at in terms of what we ought to do for conservation?
    Mr. HORAN. Well, I am not sure I am prepared to put a price tag on it. But I will tell you, as a producer, my interest would be programs that allow me to become more efficient, more productive and be better able to compete in the global economy. And an example would be being able to mitigate a small wetland the size of this room with low utility to something with high utility, then I can go ahead and fix this small spot program that is only wet maybe 10 days out of the year. And that makes me more productive, more efficient in that field. I can go right through that spot and farm it and grow something on it. That makes me more competitive in the global markets. And I would hope that policymakers would focus on the types of programs for conservation that would also help productivity. Because it is very, very competitive, as you know, in that global market.
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    Mr. THUNE. Understood. Any of the others care to say something?
    Mr. HORAN. Well, we talked about $1.2 billion on a yearly basis. $12.2 billion over 10 years. Just off-hand, I would say about one-quarter to one-third ought to go to conservation programs.
    Mr. THUNE. Good. Mr. Lincoln?
    Mr. LINCOLN. Well, our number is still the $3 billion to and I, just to further expand a bit on and agree with what has been said. But I think it is an opportunity to reach out to the environmental payments, or green payments for assistance and to some of the nontraditional grow crop payments to specialty crops and then they also contribute to the environment and things like that. So I think there is an opportunity to use it and as that mechanism.
    Mr. THUNE. Three billion dollars annually?
    Mr. LINCOLN. Annual.
    Mr. THUNE. As a follow-up to that, what do you all see as the next step in terms of conservation of the farm bill? I mean, I am looking at your testimony and, for example, the Crop Coalition made reference to contemplating financial assistance for conservation practices on resources and management that support production and generate environmental benefits. And that ties in with what you answered. You just answered your last question, Mr. Horan. And that is that you want to see things that enhance production. I think that makes a lot of sense and there are similar statement in Farm Bureau about voluntary public benefits, creating and maintain environmental practices, flexible contracts, those sorts of things. What is the next iteration of conservation of the farm bill?
    Mr. HORAN. Well, I think continuation upon some of the things that we have seen successful in the past. And specifically, incentive based payments to help a producer convert and cover the risk of changing a farming practice like minimum till to no till. There is educational component. There is a financial component. There is a risk component. It would be great if the next farm bill could address some of those components and help transform our grandfathers' agriculture into a 21st century conservation agriculture.
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    Mr. THUNE. Anybody else care to comment or two?
    Mr. LINCOLN. Two things I will comment on. The EQIP Program that we had mentioned, I think you need to make some changes there so it does better accommodate today's agriculture and the future of agriculture. On the regulatory costs is something that American agriculture, whether you are a livestock producer or a crop producer or specialty crops, it has a tremendous impact, as I mentioned in our statement on the industry. One of the one of the effects of regulations—and I operate a dairy farm. We have the next generation coming in. As it forces the industry the family farm to be larger to comply with the regulations cost per cow and things like that go down somewhat. The larger the operation there is. So I think you need to have the adequate cost-sharing programs, the technical assistance under programs like EQIP. I know in our discussion on our American Farm Bureau Board of Directors and back home in New York, I think moving towards the so-called environmental, the green payments, is another way to better serve American agriculture, the changing needs, the flexibility and also compliance as far as the WTO agreements.
    Mr. THUNE. Thank you. I yield back, Mr. Chairman.
    Mr. LUCAS of Oklahoma. Mr. Putnam.
    Mr. PUTNAM. Thank you, Mr. Chairman. Mr. Lincoln, you have had a couple of long days of testimony. I will be you are ready to get back to the farm.
    Mr. LINCOLN. Yes.
    Mr. PUTNAM. In the discussions that American Farm Bureau went through, what is your organization's consensus on the flexibility that should be given to States, in terms of implementation of these programs, even flexibility right down to the county level? And what are some recommendations to improve that, if that is a priority of yours?
    Mr. LINCOLN. I think, in fairness we have had some discussion, but we haven't had a lot. Certainly, we support the local initiative and things. But we can get back to you with a better answer to your question. And we had some discussion, but I don't want to——
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    Mr. PUTNAM. Was there any discussion about whether or not funding should be based on the value of farm production, rather than the number of farms in the State?
    Mr. LINCOLN. Yes. We haven't had that particular discussion, at least, at a board level. And some individuals may have had that. But not officially as an organization.
    Mr. PUTNAM. As we move into the discussion about modernizing these programs and bringing agriculture into the 21st century and we talk about the social benefits that are derived from environmental stewardship, the water recharge areas and the carbon sequestration and things of that sort. How are we going to quantify those so that we can go to some of our colleagues who aren't necessarily from rural areas and aren't from agricultural areas and give them the science-based number of the social benefit that is derived from producers engaging in these techniques? Anyone.
    Mr. HORAN. Well, one of the things that got us pretty excited a couple of years ago was we had a local insurance company in Iowa that had contracted with two power generating companies in Canada to sequester their carbon in Iowa cornfields. And as the discussions moved along, we were talking about a number something like $7 an acre that farmers would be paid for sequestrating that carbon. Suddenly, there were all sorts of numbers about tons of carbon that were actually being sequestered. Exactly what you are getting at. And so the last information that I read about that was the National Academy of Sciences was trying to figure out, on a cornfield that was yielding a certain number of bushels, how much carbon that actually sequestered. I think that research is being done. I think we are going to come up with some hard numbers at some point. We don't have them today. 2 years later, we are still not being paid for sequestering that carbon because we don't have those hard numbers. That would be very useful if we could get those numbers.
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    Mr. LINCOLN. From a Farm Bureau standpoint, I think that is very much the case. We need some research that needs to be quantified. Some better research. However, some factors may be very hard to quantify like the value of the landscape to the public and some of those more tangible things. But I think there are things we can and there is research being done. We just need to pull some of that together, quantify some of it and have, maybe, perhaps, more research in other places. Better information.
    Mr. PUTNAM. Yes, sir.
    Mr. WILLEY. Well, the good extent, good conservation is in the eye of the beholder. And agriculture, for one, is going to have to do a better job of educating the general public as to the progress that they have made and that they intend to make. But in particular, where we are dealing with the EQIP Program, we could point to greater compliance with current environmental regulations laws and say we have this percentage of additional compliance with the law, therefore, less pollution and more valuable use and more positive use of nutrients.
    Mr. PUTNAM. What are your thoughts on leveraging Federal dollars to match programs that are already going on in the States, and I know some States are way up front on this. Florida has a pretty innovative TMDL Program that we are working on and around Lake Okeechobee. Do you think that preference should be given to States which have developed their own programs and incentives?
    Mr. WILLEY. Well, our whole approach is a voluntary, incentive-based program. Where the farm owner, the land owner and/or operator have a commitment of financial commitment and stake in that particular practice. Certainly, anything that the State would do or any other local Government, would be a positive factor there. And I think that contribution ought to be encouraged and recognized.
    Mr. HORAN. If there were Federal dollars available for a cost-share situation like that, I think that would be a huge driver for States to go ahead and develop a program there very quickly and take advantage of those dollars.
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    Mr. LINCOLN. And, again, I think, you have to look at it proposal by proposal and certainly the concept probably is something that could be taken a look at.
    Mr. PUTNAM. Thank you, Mr. Chairman.
    Mr. LUCAS of Oklahoma. Thank you, Mr. Putnam. One last question, Mr. Willey. In your testimony, you mentioned the potential cost of upwards of $12 billion over the next 10 years to meet the mandatory standards. Food chain tends to be a situation where costs rarely go down because of World competition. Costs tend to revert back to the source. If these needs aren't addressed, what would be the impact do you think on the livestock industry in this country?
    Mr. WILLEY. Well, I think that money would have to come out of the farmer's pocket.
    Mr. PUTNAM. Mr. Chairman?
    Mr. LUCAS of Oklahoma. Mr. Putnam.
    Mr. PUTNAM. Based on the testimony, it sounds like it would be a whole lot cheaper just to repeal the TMDO rule than to fund all the requirements to abide by it.
    Mr. LUCAS of Oklahoma. You are an exceedingly practical freshman, but sometimes, challenges are a bit great. And with that note, let me note that when you consider the money that has to be set aside to address commodity titles, when you consider the existing needs in conservation and you consider all of the other issues that we have talked about today, perhaps, perhaps, we should be lobbying more extensively on both the Budget Committee and the Appropriations Committee. After all, we are your friends here and we understand the challenges we all face together. But to accomplish what we need to accomplish, we have to pull everyone along with us. And with that, I thank the witnesses for being very tolerant of today's schedule on the floor of the House. And I thank my colleagues, also, and wish to observe that without objection, the record of today's hearing will remain open for 10 days to receive additional information and supplemental written responses from witnesses to any questions posed by a member of the panel. This hearing of the Conservation, Credit, Rural Development and Research subcommittee is adjourned.
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    [Whereupon, at 5:39 p.m., the subcommittee was adjourned, subject to the call of the Chair.]
    [Material submitted for inclusion in the record follows:]
Statement of John Lincoln
    Mr. Chairman, I am John Lincoln, President of the New York Farm Bureau, and a dairy farmer from Ontario County, New York. AFBF represents more than 5 million member families in all 50 states and Puerto Rico. Farm Bureau is looking for, and will be supportive of, the right mix of public policy tools that will enable farmers and ranchers to improve net farm income, enhance their economic opportunity, preserve their property rights and enhance the Nation's environment.
    America depends on a strong and sound agricultural policy. American agriculture provides food security for this nation and much of the rest of the world. We contribute to our national economic security by running a positive balance of trade and generating off-farm employment. We also contribute to the world's environmental security. In this specific area we can, with the proper incentives, do much more.
    Increased regulatory costs on all levels—Federal, State and local—are placing a heavy burden on individual farmers and ranchers as well as distorting the traditional structure of our industry. Farmers and ranchers understand the importance of protecting the environment. Their livelihood depends on it. However, the expenses that are incurred to meet compliance are taking a heavy toll on farm incomes and forcing farmers and ranchers to spread the cost of increased regulation over more units of production. The unintended consequence is the inability of small- and medium-sized family farms to compete in a highly charged regulatory environment.
    Farm Bureau believes there is a need for a new environmental policy framework. We need to move beyond the current debate over whether the public has the right to mandate features and/or farming practices in the rural landscape. We are at that proverbial fork in the road and have concluded that mandates are not only counter-productive but more important, inefficient. Our members understand that there is need for a different set of tools and farm policy options. We believe market forces and government programs can work together to enhance the Nation's productivity and environmental objectives.
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    U.S. farmers and ranchers have historically shown that if either market forces or government support prices provide sufficient incentives, such as $3.00 per bushel corn or $4.00 per bushel wheat, we can produce an abundant supply of these commodities. Similarly, if a voluntary incentive is offered for a desirable environmental outcome, farmers will overwhelm America with improved soil conservation, water quality, air quality and wildlife habitats.
    In order for a conservation incentive payment program to work well, public policy must recognize the inherent limitations that command and control regulations have in attaining desired public benefits of an environmental nature. Efficient public policy is one where the thing demanded by society is the thing that is being produced.
    There is little doubt that we have made strides in improving our environment over the last three decades. By nearly every measure our environment and natural resources are in much better shape than at any time in our lifetimes. As the demand for environmental enhancements increase it is important that we examine the public policy tools that we have at our disposal and determine whether they are appropriate or not. The command and control nature of many of the first generation environmental statutes were enacted for the problems of the 1960's and 1970's. The programs were, and continue to be very controversial and adversarial in nature. Compliance was expensive and inefficient but comparatively easy to measure.
    In addition to building on the gains of the last three decades, the public now desires open space, wildlife habitat, scenic vistas, diverse landscapes and recreational activities. These are clearly more ephemeral policy goals that require a more delicate and site-specific policy approach that necessitates the cooperation of the landowner more than ever before. The existing environmental policy framework is not equipped to function in a way that is most efficient in achieving the policy objectives we are faced with in the future. Public policy, and in this case, the conservation title should move beyond preventing bad things to policies of promoting good things. Command and control mechanisms do not provide an attractive incentive for farmers and ranchers to produce the things that the public wants. A new, more efficient and effective approach should be developed to assist farmers and ranchers in providing the public with what it wants. It should be voluntary, provide sufficient economic incentive and clearly define the benefits that society at large derives from agriculture.
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    Farmers and ranchers can produce and market more than traditional agricultural commodities. We can also produce and market environmental benefits. Under this concept, agriculture and the government program must come together to create an alternative market for environmental improvements or amenities that the public desires. Such environmental features would likely include erosion control and improved water quality, ecological services such as nutrient filters and carbon sinks, habitat, bio-diverse landscapes, recreational opportunities, and rural amenities, such as visual aesthetics and scenic vistas, to name a few.
    Farm Bureau policy states that the next farm bill should:
     Continue to improve the environment through expanded incentives to encourage voluntary soil conservation, water and air quality programs, and advance technological and biotechnological procedures that are based on sound science and are economically feasible;
     Improve the quality of rural life and increase rural economic development;
     Provide for an expansion of the funding baseline in the commodity, specialty crops, livestock, conservation, research, trade and risk management titles;
     Continue voluntary participation in a direct payment program that would comply with the green box World Trade Organization requirements; and
     Provide willing producers with additional voluntary incentives for adopting and continuing conservation practices to address air and water quality, soil erosion and wildlife habitat.
    Bridging the gap between where we are now and where we want to be in the future requires an expanded public investment in agriculture. Part of this public investment directly positions agriculture for renewed growth. Increases in conservation incentives are needed to lay the base today for responsible growth in our industry. We encourage this Committee to consider the following principles as we work together to find the right mix of policy options that will enable farmers and ranchers the opportunity to step up to this new challenge:
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     Allow the market to determine the value for these new commodities;
     Provide voluntary participants with an annual guaranteed incentive payment, not simply a cost-share or ad hoc payment;
     Provide incentives for both implementation and maintenance of conservation and environmental practices - something that has been lacking in the past;
     Make incentives available to ALL producers, livestock, poultry, aquaculture, timber, fruit and vegetable producers;
     Provide incentives that conform to WTO green box requirements;
     Do not replace or disturb any existing or future payment program unless participants choose to opt out of traditional farm programs in return for a higher level of incentives;
     Provide program participants the opportunity to improve the quality of rural life and increase rural economic development by providing a stable and diverse presence for agriculture; and
     Allow confidential conservation plans to provide an improved level of assurance and accountability of the conservation efforts undertaken by the program participants.
    Our vision is to capture the opportunity and efficiencies of providing producers with additional conservation incentives for adopting and continuing conservation practices to address air and water quality, soil erosion and wildlife habitat.
    CONSERVATION AND ENVIRONMENTAL PROGRAMS
     Conservation Reserve Program (CRP)
    Under the CRP producers bid to enroll environmentally sensitive lands into the reserve during signup periods, retiring it from production for 10 years. Successful bidders receive cost-sharing and technical assistance to plant conserving vegetation and annual rental payments.
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    Twenty-one signups have been held between 1986 and 2000. There are currently 33.4 million acres enrolled out of the maximum 36.4 million acres provided for in legislation. USDA estimates that average erosion rates on enrolled acres are reduced from 21 tons per acre to less than 2 tons per acre per year.
    CRP: (a) provides incentives for reduction in soil erosion, enhancement of water and soil quality, and additional wildlife habitat; and (b) provides a steady income to participants who enroll in the program. In order to ensure that rural and agricultural infrastructure is not hurt by even a slight increase in CRP acreage, we continue to oppose more than 25 percent of the county acreage being included in a CRP contract, Conservation Reserve Enhancement Programs and all experimental pilot projects.
    Farm Bureau supports a limited increase in the amount of acreage eligible to be enrolled in the CRP with new acreage targeted toward buffer strips, filter strips, wetlands, or grass waterways should be approved.
     Reform Environmental Quality Incentives Program
    EQIP does not provide livestock and crop producers the assistance needed to meet current and emerging regulatory requirements. EQIP must be reformed and funding increased in order to assist producers with the cost of meeting Federal, state and local environmental regulations. We support EQIP authority with the following improvements.
     We believe that EQIP payments should be available to all livestock producers, no matter their size, and total payments should be limited in a manner comparable to that for row crop producers. The current program does not make EQIP assistance available for the structural components of livestock waste management systems for large livestock operations, defined in most states to be those with more than 1,000 animal units. Excluding large livestock operations from structural assistance ensures that EQIP will never be able to attain its water quality and environmental objectives. This exclusion is entirely inconsistent with a program designed to improve agriculture's environmental performance.
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     EQIP should be explicitly amended to direct the Secretary to allocate EQIP dollars to producers for the purpose of helping them meet Federal, state and local mandatory manure management and water and air quality protection requirements. The program should provide the proper assurances that EQIP will result in the highest value possible for the tax dollars spent. But the priority setting approaches must be flexible and allow the Secretary to address all of agricultures' top conservation needs. Some priorities will be best addressed through the adoption of certain conservation practices over a large area of a state or the country. Many of these needs most certainly will not be defined by a geographic scope like a 14 digit watershed. In other situations, producers in a defined geographic area like a watershed will be in need of priority attention. EQIP must be amended to ensure that it can address all of these situations. Certain practices or needs could be of such national or statewide priority that they would be eligible for funding without going through a local bidding process. For example, these practices could include such things as:
     Helping producers build, plan and operate nutrient and manure management measures and systems.
     Implementing pesticide best management practices (BMPs) known to improve water quality.
     EQIP should provide for contracts involving single practices or multiple practices, and contracts that range in length from one to 10 years as appropriate to the conservation issue that needs to be addressed. Existing law provides for 5–10 year contacts.
     Avoid any unnecessary duplication in the EQIP application process and conservation planning process so as to minimize the administrative burden and duplication, and diversion of funds from producers to administrative activities.
     Appropriate emphasis must be given in EQIP to air quality goals and practices.
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     CCC statutory authority currently requires that EQIP payments to a producer cannot begin until the year after a contract is signed. This provision needs to be changed to permit payments to producers in the year a contract is signed.
     Program must be amended to ensure that funds can be provided for:
     Helping producers improve and computerize their farm decision support environmental data and record-keeping systems;
     Helping producers plan and implement agricultural BMPs designed to improve air quality.

     Amendments are needed to ensure that producers will be able to get the technical assistance they need to successfully participate in the program.
     In addition to ensuring that there USDA-based technical assistance is funded, producers must be able to access and use private sector or non-Federal conservation technical assistance from ''certified'' providers like Certified Crop Advisors, Independent Crop Consultants, conservation district professionals, other qualified persons).
     A voucher system or some similar system needs to be established for producers to use to secure non-Federal EQIP planning assistance.
     The program should in no way impede producers that want to use their own funds to purchase ''certified'' planning assistance, and the funds producers use for that purpose should apply to their cost share contribution.
     These non-Federal technical assistance provisions must be addressed in detail as part of the formal EQIP rulemaking.
     Establish a USDA-based program to pay producers or give them vouchers to purchase, from private sector organizations that know and understand agriculture, a certified third party assessment of environmental performance. Again, this must be part of the EQIP formal rulemaking.
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EQIP should maintain current authority to provide funding to all producers including crops, livestock, fruits and vegetables. It would provide 50 percent of funding to livestock and 50 percent to crops.
    Livestock producers in several states face, or will soon face, costly environmental regulations as a result of state or Federal law designed to protect water quality. Crop producers in many states are preparing to deal with similar environmental requirements. The Federal regulations under the Clean Water Act include the Total Maximum Daily Load Program (TMDLs) and the new Confined Animal Feeding Operations (CAFOs) permit requirements. Federal regulators are also exploring the possibility of expanding Federal regulation of agriculture under the Clean Air Act. Producers need now, more than ever, Federal financial and technical assistance to help them meet these challenges. In many instances, the new Federal or state requirements will be very costly for producers.
    Implementation costs for these types of regulations are significant. NRCS estimates that preparation of a comprehensive nutrient management plan could cost $5,000. Installation of a new pork manure management system would run $50,000 to $100,000 and a nutrient management plan and implementation incentives for a 500-acre corn and soybean operation would require $1,500 to $3,000 per year.
    Implementation of a program to provide financial assistance to farmers and ranchers to help them execute unfunded state and Federal regulatory mandates must be approved.
    EQIP (a) should be readily accepted since producers are familiar with the EQIP program; (b) would be available to all crop and livestock producers; and (c) would provide compliance assistance to farmers and ranchers with implementation of Federal, state and local environmental laws.
    (C) Environmental Incentive Payments
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    We support a voluntary environmental program that provides producers with additional conservation options for adopting and continuing conservation practices to address air and water quality, soil erosion and wildlife habitat. This would be a guaranteed payment to participants who implement a voluntary management plan to provide specific public benefits by creating and maintaining environmental practices. The management plan would be a flexible contract, designed and tailored by the participant to meet his or her goals and objectives while also achieving the goals of the program.
    We support allowing farmers and ranchers the opportunity to voluntarily participate in a program that provides the public with the environmental features they actually want in agricultural areas. It would also provide participants with an alternative source of income that would, in some cases, provide an additional safety net. The proposal is based on the concept that farmers and ranchers can produce and market more than traditional agricultural commodities. They can also produce and market what might be called public environmental benefits. Not only would agriculture be able to produce and market food and fiber, it would also be able to produce and market environmental amenities that the public desires.
    Examples include erosion control and improved water quality, ecological services such as nutrient filters and carbon sinks, habitat, bio-diverse landscapes and recreational opportunities, and rural amenities such as visual aesthetics and scenic vistas.
    We believe participants should be given the opportunity and flexibility to develop a management plan that provides environmental benefits but, without land retirements or easements, to provide environmental benefits in return for a payment. The length of the contract period would be flexible and tailored to meet the participant's situation. Practices covered under such a proposal could range from accepted good farming practices already implemented on the farm to establishment of a comprehensive environmental management plan.
    A management plan and any information resulting from it would be confidential, and the property of the producer. If any incidental or minor regulatory noncompliance within the scope of the management plan is discovered in the course of plan development, the producer should have a grace period of one year to get in compliance without being liable for penalties. Producers who are in good faith compliance with their management plans, but through no fault of their own become non-compliant with environmental regulations, would have one year to correct the noncompliance without being liable for civil or criminal penalties.
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    This concept would provide (a) incentives to all agricultural producers; (b) participants with an annual guaranteed per acre incentive payment; (c) incentives for not only implementation, but maintenance of conservation and environmental practices; and (d) an opportunity to provide family farms additional financial assistance beyond current programs.
    Implementation of an environmental incentives program should be adopted.
FUNDING FOR CONSERVATION INCENTIVE PROGRAMS
    All three of the conservation initiatives would be classified as green box and increase government expenditures $3 billion annually.
    Other Conservation Programs
    Other conservation programs supported by Farm Bureau are the Farmland Protection Program (FPP) and the Grazing Lands Conservation Initiative (GLCI). These programs were authorized in the 1996 farm bill and are funded through an annual appropriation.
     FPP—Farm Bureau supports funding for FPP. This program has been popular in many states. Farm Bureau does not support non-profit organization eligibility for Federal funding to carry out the acquisition of development right easements under this program. Additionally, we oppose the imposition of any farm management plan on the property. The intent of the FPP is to avoid development pressures, not dictate farming practices.
     GLCI—The GLCI is a program providing additional technical assistance through NRCS for range and pasture management. We support the continuation of this program.
    Confidentiality
    Confidentiality of USDA information has become an increasing concern and priority for farmers and ranchers. We have seen attempts by other government agencies to secure NRCS and NASS data for regulatory purposes. There have also been attempts by non-governmental organizations to secure farm and ranch data from FSA and APHIS. Farm Bureau strongly supports establishment of statutory authority that protects the confidentiality of all data collected by USDA on individual farms and ranches.
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    Swampbuster. Related to wetland, our challenge has been and continues to be the construction of a coherent national policy that protects both the rights of property owners and our Nation's wetland resources. We believe such a policy exists within the amendments made to the Swampbuster Title of the 1996 farm bill. The key to success is flexibility for farmers and ranchers to modify their operations to gain needed economic efficiencies while also encouraging wetland enhancement and protection. By providing agriculture with the opportunity and flexibility to enhance both wetland resources and agricultural production we can truly have a win/win wetlands policy.
    Mr. Chairman, we sincerely appreciate the opportunities to share our views on changes necessary in the next few years to inspire a healthy agricultural sector. We have attached to our testimony the Farm Bureau response to the chairman's earlier questions relating to the conservation title of the farm bill.

    STATEMENT OF THE AMERICAN FARM BUREAU FEDERATION TO THE HOUSE AGRICULTURE COMMITTEE REGARDING THE CONSERVATION TITLE
OF THE
NEXT FARM BILL
    April 25, 2001
    The American Farm Bureau Federation appreciates the opportunity to respond to the committee and believes our response to the following questions will help assure the committee of the need for a strong conservation title. Agriculture is looking for, and will be supportive of, the right mix of public policy tools that will enable farmers and ranchers to improve net farm income, enhance their economic opportunity, preserve their property rights and enhance the nation's environment. American agriculture not only provides food security for this nation and much of the rest of the world, but we also contribute to the world's environmental security. In this specific area we can, with the proper incentives, do much more.
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    Question 1(a). Is the NRCS operating the Conservation programs for which it is primarily responsible (EQIP, WRP, WHIP, FPP, Conservation of Private Grazing Land etc.) in an effective and efficient manner?
    Programs, whether voluntary and incentive-based or regulatory in nature, are not self-implementing, therefore we believe there is a need for a significant increase in technical resources for timely implementation of the nation's conservation priorities. Each farm and ranch in this country needs access to information and technical assistance. Although there are NRCS resources to assist farmers both technically and monetarily, these resources are inadequate to meet agriculture's most basic needs.
    Recommendation: Farm Bureau supports increased funding for voluntary incentive-based programs and NRCS technical assistance.
    Question 1(b). What changes should NRCS make to its program and operating procedures?
    The role of NRCS should be that of providing technical assistance and education. NRCS should not become a regulatory agency, serve in a policing capacity or be combined through any reorganization with an agency that has regulatory functions. NRCS should not negotiate or become party to any Memorandums of Agreements or Memorandums of Understanding with Federal regulatory agencies that would give NRCS the power to develop, implement, or police those agencies' regulation on agricultural lands.
    Recommendation: Farm Bureau believes NRCS should not become a regulatory agency but should function as a non-regulatory mediator of environmental compliance issues with regulatory agencies, on behalf of producers.
    Question 2(a). Is the FSA operating the Conservation programs for which it is primarily responsible (FSA, etc.) in an effective and efficient manner?
    Recommendation: We support the current system by which FSA carries out programs in conjunction with NRCS.
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    Question 2(b). What changes should FSA make to its program and operating procedures?
    Recommendation: We continue to support funding for conservation programs being administered by FSA.
    Question 3. Please list in order of priority (highest to lowest) each Conservation Program your organization supports. Please include the amount of authorized and appropriated monies your organization supports along with the amount of acres that should be allowed into each program. (All current programs and those being considered) Please include any recommended changes to these programs that could be helpful through both statutory changes and regulatory changes.
    The AFBF testified before the committee on February 28, 2001, on the need for at least $12 billion of new budget baseline to adequately provide for a rewrite of the farm bill, including the conservation title. If at least $12 billion is available, then the following programs should be funded. While we have, as requested, ranked our requests, the AFBF Board has not officially taken action as to their priority. The board will consider this issue at their June meeting and will base their decision on the budget resolution conference report passed by Congress.
    Overall Conservation Funding Recommendation: We support increasing conservation expenditures above current baseline levels by $3 billion annually for the above programs.
    Priority #1 - Reform Environmental Quality Incentives Program
    EQIP does not provide livestock and crop producers the assistance needed to meet current and emerging regulatory requirements. EQIP must be reformed and funding increased in order to assist producers with the cost of meeting Federal, state and local environmental regulations. We support EQIP authority with improvements in the program to:
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     Eliminate statutory language that prevents operators of larger farms from being eligible for cost-share;
     Provide broader third-party technical assistance authority, which would allow farmers to hire consultants to provide technical assistance;
     Eliminate priority areas which would allow all producers regardless of location to participate in program; and
     Simplify program participation requirements.
    EQIP should maintain current authority to provide funding to all producers including crops, livestock, fruits and vegetables. It should continue to provide 50 percent of funding to livestock.
    Livestock producers in several states face, or will soon face, costly environmental regulations as a result of state or Federal law designed to protect water quality. Crop producers in many states are preparing to deal with similar environmental requirements. The Federal regulations under the Clean Water Act include the Total Maximum Daily Load Program (TMDLs) and the new Confined Animal Feeding Operations (CAFOs) permit requirements. Federal regulators are also exploring the possibility of expanding Federal regulation of agriculture under the Clean Air Act. Producers need now, more than ever, Federal financial and technical assistance to help them meet these challenges. In many instances, the new Federal or state requirements will be very costly for producers.
    We support an EQIP proposal that would authorize payments to:
     Help producers build, plan and operate nutrient and manure management measures and systems;
     Implement pesticide best management practices (BMPs) known to improve water quality;
     Help producers improve and computerize their farm decision support data and record-keeping systems;
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     Help producers plan and implement agricultural BMPs designed to improve air quality; and
     Ensure that producers could get private sector conservation technical assistance that meets NRCS standards and guidance with nutrient, pest and information management.
    Recommendation: We support implementation of a program to provide financial assistance to farmers and ranchers to help them execute unfunded state and Federal regulatory mandates. Implementation of EQIP should be authorized at $1.25 billion annually.
    Priority #2 - Conservation Reserve Program (CRP)
    Under the CRP producers bid to enroll environmentally sensitive lands into the reserve during signup periods, retiring it from production for 10 years. Successful bidders receive cost-sharing and technical assistance to plant conserving vegetation and annual rental payments.
    Twenty-one signups have been held between 1986 and 2000. There are currently 33.4 million acres enrolled out of the maximum 36.4 million acres provided for in legislation. USDA estimates that average erosion rates on enrolled acres are reduced from 21 tons per acre to less than 2 tons per acre per year.
    CRP: (a) provides incentives for reduction in soil erosion, enhancement of water and soil quality, and additional wildlife habitat; and (b) provides a steady income to participants who enroll in the program. In order to ensure that rural and agricultural infrastructure is not hurt by even a slight increase in CRP acreage, we continue to oppose more than 25 percent of the county acreage being included in a CRP contract, Conservation Reserve Enhancement Programs and all experimental pilot projects.
    Recommendation: Farm Bureau supports a limited increase in the amount of acreage eligible to be enrolled in the CRP (38 million acres) with new acreage targeted toward buffer strips, filter strips, wetlands, or grass waterways. CRP funding should be authorized at 38 million acres ($500 million).
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    Priority #3 - Environmental Incentive Payments
    We support a voluntary environmental program that provides producers with additional conservation options for adopting and continuing conservation practices to address air and water quality, soil erosion and wildlife habitat. This would be a guaranteed payment to participants that implement a voluntary management plan to provide specific public benefits by creating and maintaining environmental practices. The management plan would be a flexible contract, designed and tailored by the participant to meet his or her goals and objectives while also achieving the goals of the program.
    We support allowing farmers and ranchers the opportunity to voluntarily participate in a program that provides the public with the environmental features they actually want in agricultural areas. It would also provide participants with an alternative source of income that would, in some cases, provide an additional safety net. The proposal is based on the concept that farmers and ranchers can produce and market more than traditional agricultural commodities. They can also produce and market what might be called public environmental benefits. Not only would agriculture be able to produce and market food and fiber, it would also be able to produce and market environmental amenities that the public desires.
    Examples include erosion control and improved water quality, ecological services such as nutrient filters and carbon sinks, habitat, bio-diverse landscapes and recreational opportunities, and rural amenities—visual aesthetics and scenic vistas.
    We believe participants should be given the opportunity and flexibility to develop a management plan that provides environmental benefits but, without land retirements or easements, to provide environmental benefits in return for a payment. The length of the contract period would be flexible and tailored to meet the participant's situation. Practices covered under such a proposal could range from accepted good farming practices already implemented on the farm to establishment of a comprehensive environmental management plan.
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    A management plan and any information resulting from it would be confidential, and the property of the producer. If any incidental or minor regulatory noncompliance within the scope of the management plan is discovered in the course of plan development, the producer should have a grace period of one year to get in compliance without being liable for penalties. Producers who are in good faith compliance with their management plans, but through no fault of their own become non-compliant with environmental regulations, would have one year to correct the noncompliance without being liable for civil or criminal penalties.
    This concept would provide (a) incentives to all agricultural producers; (b) participants with an annual guaranteed incentive payment; (c) incentives not only for implementation, but maintenance of conservation and environmental practices; and (d) an opportunity to provide family farms additional financial support beyond current programs.
    Recommendation: Implementation of an environmental incentives program should be authorized at $1.25 billion annually.
    Priority #4 Confidentiality
    Confidentiality of USDA information has become an increasing concern and priority for farmers and ranchers. We have seen attempts by other government agencies to secure NRCS and NASS data for regulatory purposes. There have also been attempts by non-governmental organizations to secure farm and ranch data from FSA and APHIS.
    Recommendation: Farm Bureau supports establishment of statutory authority that protects the confidentiality of all data collected by USDA on individual farms and ranches.
    Priority #5 Grazing Lands Conservation Initiative (GLCI)
    GLCI—The GLCI is a program providing additional technical assistance through NRCS for range and pasture management. This has been a very popular program and has accomplished a great deal in resource conservation with relatively little funding.
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    Recommendation: We support the continuation of this program.
    Priority #6 Air Quality Task Force
    Due to lawsuits, new interpretations of existing law and new regulations under the Clean Air Act and other statues, agriculture is increasingly being targeted for air quality regulation. Emissions of particulate matter (dust) from field operations and livestock, ammonia and hydrogen sulfide from livestock, and smoke from agricultural burning, have all been identified by either the EPA or in lawsuits, as agricultural sources of air pollution, though these emissions have not been previously addressed under the CAA. Farm groups are pursuing the need for sound science to identify agriculture's true emission of these pollutants prior to any regulation.
    Recommendation: We support the inclusion of the Sec. 391 of the current FAIR Act. This language should remain in the new farm bill. One addition should be made. Under Sec. 391, part (d)(2) the following sentence should be added: ''Task Force members shall serve on the committee according to Federal Advisory Committee Act (FACA) rules, with no limits on the number of terms they serve, as long they are approved by the Secretary.''
    Priority #7 Farm Protection Program (FPP)
    FPP—This program has been popular in many states. The intent of the FPP is to avoid development pressures, not dictate farming practices
    Recommendation: Farm Bureau supports funding for FPP but opposes non-profit organization eligibility for Federal funding for the acquisition of development right easements under this program. Additionally, we oppose the imposition of any farm management plan on the property.
    Priority #8 Environmental Conservation Acreage Reserve Program (ECARP)
    ECARP is the umbrella program for CRP, WRP and EQIP. ECARP lays out general guidelines for these programs. ECARP changes are necessary to accommodate EQIP recommendations.
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    Recommendation: Air quality should be added to the goals and practices encompassed in ECARP. Priority area designation language should be rewritten in such a way as to not favor or discriminate against farmers and ranchers due to their proximity to a geographic area. Priorities should be set based on critical issues, needs and practices.
    Priority #9 Forestry Incentive Program (FIP)
    Recommendation: Support continuation of the FIP providing cost-share for tree planting.
    Question # 4. Do any of the current conservation programs adversely affect your commodity or livestock operations?
    Recommendation: As stated above, we believe the following changes are needed in EQIP authority to improve overall program operation:
     Eliminate statutory language that prevents operators of larger farms from being eligible for cost-share;
     Provide broader third-party technical assistance authority, which would allow farmers to hire consultants to provide technical assistance;
     Eliminate priority areas which would allow all producers regardless of location to participate in program; and
     Simplify program participation requirements.
    Swampbuster. It was the intent of Congress to exclude farmland converted for the production of an agricultural commodity as well as the land where conversion was commenced prior to 1985 from Swampbuster regulation. There have been attempts to erode this exemption over the last several years. Certification language was added to the 1996 farm bill during final conference that weakens the exemption. This language has created considerable confusion regarding the status of prior converted land.
    Recommendation: All certification language should be deleted (Sec. 1222, a, reference to certification in (1), all of 3,4,5,6,)
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    Swampbuster—Wetlands MOA
Since its inception, the wetlands MOA has been very controversial and ultimately non-operational since 1996. Recent court cases have created further conflicts between CWA 404 and Swampbuster. The delineation process under the MOA never functioned well for farmers and created a significant workload for NRCS. AFBF has requested that NRCS withdraw from the MOA.
    Recommendation: The wetland MOA language in Section 325 should be deleted.
    Question #5. Why hasn't Section 335, Conservation Farm Option, been used to consolidate program payments from CRP, WRP, and EQIP into one payment?
    Section 726 of Public law 106–387, passed by the 106th Congress prohibited funds being made available to pay the salaries and expenses of personnel to carry out a conservation farm option program.
    Question #6. Have Sections 351 through Sections 360 establishing the National Natural Resources Conservation Foundation been useful and effective?
    No. Report language contained in Public law 104–613 prohibited any use of Federal funds to establish or operate the National Natural Resources Conservation Foundation.
    Question #7. Please identify and breakdown costs to producers that are going to be incurred in order to comply with current environmental concerns caused by statute and through regulation. (e.g. CAFO/AFO regulations)
    In most cases a professional planner will be needed to develop the type of Comprehensive Nutrient Management Plan (CNMP) envisioned by EPA. These changes will require that farms pay for practices on their own and in most cases hire a professional planner. The cost of these plans varies considerably depending on the existing practices and enterprises, present management, and size of the farm. Developing the plan can take the services of a crop management specialist, an animal nutritionist, an agricultural engineer, a veterinarian, and a financial planner. Information on the soils, watershed concerns, crop yields, animal production, bio-security methods, future goals of the farm, and the financial resources will need to be gathered. These plans, without adequate NRCS resources, will cost from $2,000 to $60,000 for typical farms to develop. NRCS has been and should continue providing these services, however they cannot be expected to provide much help to the large numbers of farms needing this service. NRCS can provide information but will be overwhelmed with the volume of information needed for all livestock farms.
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    In the past NRCS was the main source of the designs and construction specifications of these practices (e.g., technical guidelines, best management practices and engineering specifications). Design work for some practices can be quite involved. Protecting a barnyard from off site water sources, and controlling the runoff through sediment basins and filter areas can involve many separate hydrological and hydraulic calculations. Working within the constraints of existing facilities can add considerably to the cost of the design. This design work often exceeds the traditional engineering design fee of 6–10 percent of the total cost of the project. Inspection costs to ensure compliance with standards and specifications can also add greatly to the costs. The typical engineering costs to implement the plans may range from $2,000 to $50,000 per farm.
    The best information developed to date on the importance of technical assistance and implementation costs were compiled by the Cornell Cooperative Extension Service. They found the following:
     New York City Watershed Agricultural Council has been working since 1995 to develop and implement pollution control plans that will reduce the potential for farms in the watershed to contaminate the surface water sources of New York City's drinking water supply. So far they have completed over 235 plans at an average cost of $10,000 each. This figure is derived from the four-person planning team's goal of two plans per month with a total cost per employee of $60,000 per year. Most farms in the New York City Watershed are smaller than 300 animal units. Most of the farms are challenged with barns and barnyards close to streams. The construction costs of the plans average $75,000 for the NYC watershed farms. Larger farms have construction costs above $1,000,000. Without the full costs of the plan development and construction costs, additional environmental results are questionable. The bottom line: average cost per dairy cow ranges from $1,000 to $2,000 for an average 80-cow dairy.
     Skaneateles Lake provides drinking water for the city of Syracuse in upstate New York. The city has also agreed to pay for the plan development and implementation of practices that will protect the lake from agricultural pollution. The Skaneateles Lake Watershed Agricultural Program was developed cooperating with Cornell Cooperative Extension, Natural Resources Conservation Service, and Soil and Water Conservation Districts from the counties involved. So far the average cost of planning and designing the needed practices have been about $30,000 for each farm. The range has been $3,500 for a small one-enterprise farm to $196,000 for a large dairy. Again, the bottom line: average cost per dairy cow ranges from $1,000 to $2,000 for an average 80-cow dairy
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     Nationally, farmers need NRCS help in developing these plans and in providing cost-share assistance. EPA has estimated that there are 450,000 Animal Feeding Operations (AFOs) in the U.S. If the average CNMP takes a professional 320 hours to complete, (the time used in the NYC Watershed) and the average professional has 2,000 hours available to develop CNMPs, it will take 7,200 people 10 years to provide this effort. This would not include the time spent in design and construction inspection or the time spent in changing and updating CNMPs.
     If the average cost is $50,000 per farm, it will take the current EQIP budget of $200 million at a 50 percent cost share rate 56 years to finance this effort. In this scenario farmers would be providing half the cost of implementation, $11.25 billion. This does not include the cost of maintenance or additional operating costs. Farms will also be impacted by the activities in the Mississippi River Basin to address the seasonal hypoxic zone in the Gulf of Mexico and by activities in the Everglades.
    Recommendation: Farm Bureau supports a significant increase in funding for voluntary incentive-based programs and NRCS technical assistance to assist producers with the cost of Federal, state and local regulatory requirements.
    Question #8. Is the Conservation Security Act intended to replace existing Conservation and Commodity programs or to coexist with those currently being administered?
    We believe the ''Conservation Security Act-type program'' should coexist with and complement current conservation and commodity programs. The conservation title should:
     Continue to improve the environment through expanded incentives to encourage voluntary soil conservation, water and air quality programs, and advance technological and biotechnological procedures that are based on sound science and are economically feasible;
     Provide willing producers with additional voluntary incentives for adopting and continuing conservation practices to address air and water quality, soil erosion and wildlife habitat.
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    Increased regulatory costs on all levels—Federal, state and local—are placing a heavy burden on individual farmers and ranchers as well as distorting the traditional structure of our industry. Farmers and ranchers understand the importance of protecting the environment. Their livelihood depends on it. However, the expenses that are incurred to meet compliance are taking a heavy toll on farm incomes and forcing farmers and ranchers to spread the cost of increased regulation over more units of production. The unintended consequence is the inability of small and medium sized family farms to compete in a highly charged regulatory environment.
    We believe there is a need for a new environmental policy framework. A policy that provides an opportunity for farmers and ranchers and the public to move beyond the current debate over whether the public has the right to mandate features and/or farming practices in the rural landscape.
    U.S. farmers and ranchers have historically shown that if either market forces or government support prices provide sufficient incentives, such as $3.00 per bushel corn or $4.00 per bushel wheat, we can produce an abundant supply of these commodities. Similarly, if a voluntary incentive is offered for a desirable environmental outcome, farmers will overwhelm America with improved soil conservation, water quality, air quality and wildlife habitats.
    In order for a conservation incentive payment program to work well, public policy must recognize the inherent limitations ''command and control'' regulations have in acquiring desired public benefits of an environmental nature. Efficient public policy is one where the thing demanded by society is the thing that is being produced. ''Command and control'' forms of environmental laws have run their course.
    There is little doubt that we have made strides in improving our environment over the last three decades. By nearly every measure our environment and natural resources are in much better shape than at any time in our lifetimes. As the demand for environmental enhancements increase it is important that we examine the public policy tools that we have at our disposal and determine whether they are appropriate or not. The command and control nature of many of the first-generation environmental statutes were for the problems of the 1960's and 1970's. The programs were, and continue to be very controversial and adversarial in nature. Compliance was expensive and inefficient but comparatively easy to measure.
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    In addition to building on the gains of the last three decades, the public now desires open space, wildlife habitat, scenic vistas, diverse landscapes and recreational activities. These are clearly more ephemeral policy goals that require a more delicate and site-specific policy approach. The existing environmental policy framework is not equipped to function in a way that is most efficient in achieving the policy objectives we are faced with in the future. Public policy, and in this case, the conservation title should move beyond preventing bad things to policies of promoting good things. ''Command and control'' mechanisms do not provide an attractive incentive for farmers and ranchers to produce the things that the public wants. A new, more efficient and effective approach should be developed to assist farmers and ranchers in providing the public with what it wants. It should be voluntary, provide sufficient economic incentive and clearly define the benefits that society at large derives from agriculture.
    Farmers and ranchers can produce and market more than traditional agricultural commodities. We can also produce and market environmental benefits. Agriculture and the government can work together to create an alternative market for environmental improvements or amenities that the public desires. Such environmental features may include erosion control and improved water quality, ecological services such as nutrient filters and carbon sinks, habitat, bio-diverse landscapes and recreational opportunities; and rural amenities—visual aesthetics and scenic vistas to name a few.
    Recommendation: We encourage the Committee to work with us to find the right mix of policy options that will:
     Allow the market to determine the value for these new ''environmental commodities;
     Provide voluntary participants with an annual guaranteed incentive payment and/or additional cost share;
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     Make incentives available to ALL producers;
     Does not replace or disturb any existing or future payment program unless participants choose to opt out of traditional farm programs; and
     Allows confidential conservation plans to provide an improved level of assurance and accountability of the conservation efforts undertaken by the program participants.
    We believe such a program would provide incentives for both implementation and maintenance of conservation and environmental practices and give the public an easy to understand argument for expanding the agricultural entitlement baseline. It would also provide incentives to producers that conform to WTO green box requirements and provide program participants the opportunity to improve the quality of rural life and increase rural economic development by providing a stable and diverse presence for agriculture. The bottom line is we believe this committee has an opportunity to capture the win/win efficiencies of providing producers with additional conservation incentives for adopting and continuing conservation practices to address air and water quality, soil erosion and wildlife habitat.
     

Statement of Thomas A. Weber
    Mr. Chairman and members of the committee. Thank you for the opportunity to appear today and provide an update on the Conservation Programs implemented by the USDA Natural Resources Conservation Service (NRCS).
    Mr. Chairman, as you know, farmers across America are faced with ever increasing pressures to maintain productive and profitable businesses. Prices for many farm commodities have been the lowest in years and poor weather and growing conditions have been issues in many areas. Production costs have increased due to many factors including rising prices of nitrogen fertilizer and natural gas. In addition to these concerns, farmers face increasing pressures associated with natural resources. In recent years, concern regarding the health of our soils, water supply, and air has made farming and ranching increasingly difficult.
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    We know that farmers want to be good stewards of the land. They know that stewardship is in the best interests of long-term productivity of their farming operations. And by and large, it is also important to farmers and ranchers who want to leave improved natural resources and a better environment for future generations. Our mission is to help farmers and ranchers meet the challenge of sustaining their natural resources while maintaining a productive and profitable business.
    Today, I would like to highlight the many ways our conservation programs are making a difference around the countryside. Since the enactment of the Federal Agriculture Improvement and Reform Act of 1996 (1996 Act), NRCS has experienced an increased national demand for participation in conservation programs. Farmers are utilizing these programs for a variety of benefits, including managing nutrients to save on input costs and protect water quality, restoring and protecting wetlands to create wildlife habitat, installing grassed waterways to control erosion, and implementing systems to increase forage production and manage invasive species.
    Farmers and ranchers are using conservation to improve the productivity and sustainability of their operation, while also improving the asset value of their operation. Our programs are voluntary. In response to new environmental regulations at many levels, we are helping farmers and ranchers meet some of the regulatory pressures they face. In turn conservation programs provide public benefits that go well beyond the edge of the ranch or farm field. Mr. Chairman, I believe that conservation programs the Congress included in the 1996 Act, when coupled with our historic conservation programs, and the state and local delivery system are proven winners for the farmer, and the country as a whole.
CONSERVATION TECHNICAL ASSISTANCE
    The cornerstones of our conservation activities are the NRCS workforce and our partnerships. Everything we accomplish is contingent upon the talents and technical skills of our field staff around the country. They are trained professionals with the technical tools, standards and specifications to get the job done. NRCS has operated since its creation through voluntary cooperative partnerships with individuals, conservation districts, state and local governments, and other Federal agencies and officials. That partnership may be even more important today if we are to meet the challenging conservation problems facing our Nation's farmers and ranchers.
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    While we are accomplishing much through the 1996 Act programs, it is important not to lose sight of the importance of our ongoing Conservation Technical Assistance program. For more than 60 years, the NRCS has used conservation technical assistance to build a foundation of trust with people who voluntarily conserve their natural resources. Each year, the NRCS provides information, education, planning, and/or implementation assistance to more than 1 million land users. On average, the Agency's conservation assistance leverages more than $1 in contributions for every Federal dollar invested. And through the National Cooperative Soil Survey, approximately, 22,000,000 acres have been mapped each year, so that natural resource decisions are based upon the best information available.
    NRCS accomplishes its goals by working with 3,000 local Conservation Districts that have been established by state law and with American Indian Tribes and Alaska Native Governments. We also leverage our resources with the help of more than 348 Resource Conservation and Development (RC&D) Councils. State and local governments contribute substantially, with both people and funding to complement NRCS technical and financial assistance. Approximately 7,750 full time equivalent staff years are provided annually by NRCS partners and volunteers.
WETLANDS RESERVE PROGRAM (WRP)
    Next, I would like to highlight the accomplishments of the Wetlands Reserve Program (WRP). WRP preserves, protects, and restores valuable wetlands mainly on marginal agricultural lands where historic wetland functions and values have been either depleted or substantially diminished. Program delivery emphasizes maximizing wetland wildlife benefits, providing for water quality and flood storage benefits, and providing for general aesthetic and open space needs. Approximately 70 percent the WRP project sites are within areas that are frequently subjected to flooding, reducing the severity of future flood events. WRP is also making a substantial contribution to the restoration of the Nation's migratory bird habitats, especially for waterfowl.
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    As directed in the 1996 Act, the enrollment is separated into three components (permanent easements, 30-year easements, and cost-share agreements). Pursuant to appropriations act directives, enrollment is being balanced to respond to the level of landowner interest in each of these three components.
    The 1996 Act authorized a total cumulative enrollment of 975,000 acres in the program. At the conclusion of fiscal year 2000, the program had nearly reached maximum enrollment. The Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Bill for fiscal year 2001 provided an additional 100,000 acres, raising the cumulative enrollment cap to 1,075,000 acres and allowing 140,000 acres to enroll in fiscal year 2001.
    From inception of the program in 1992 through 2000, interest in WRP has been exceptional. Historically, there have been many more acres offered than the program could enroll. One benefit of WRP is the amount of resources we have been able to leverage with other Federal programs as well as non-governmental organizations. It is clear from our experience to date, Mr. Chairman, that the WRP continues to be very popular with farmers and ranchers and is a program that has strong support around the countryside.
WILDLIFE HABITAT INCENTIVES PROGRAM (WHIP)
    The Wildlife Habitat Incentives Program (WHIP) provides up to 75 percent cost-share for implementing wildlife habitat practices to develop upland wildlife habitat, wetland wildlife habitat, threatened and endangered species habitat as well as aquatic habitat. WHIP also helps landowners meet their own needs while supporting wildlife habitat development, and to develop new partnerships with State wildlife agencies, nongovernmental agencies and others.
    The program was initially funded at a total of $50 million in the 1996 Act. As a result of strong interest in the program, those funds were exhausted at the end of fiscal year 1999, at which time 1.4 million acres were enrolled in 8600 long-term wildlife habitat development agreements. For fiscal year 2001, $12.5 million will be provided for WHIP from funding in section 211(b) of the Agricultural Risk Protection Act of 2000, as authorized in the fiscal year 2001 Consolidated Appropriations Act. NRCS has made an enormous effort to develop partnerships and outreach methods with government and private organizations to develop a program that targets specific state concerns.
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FARMLAND PROTECTION PROGRAM (FPP)
    The FPP protects prime or unique farmland, lands of State or local importance, and other productive soils from conversion to nonagricultural uses. It provides matching funds to leverage funds from States, Tribes, or local government entities that have farmland protection programs. The FPP establishes partnerships with State, Tribes, and local government entities to acquire conservation easements or other interests in land. It ensures that valuable farmland is preserved for future generations and also helps maintain a healthy environment and sustainable rural economy. The program was initially funded in the 1996 Act at a level of $35 million. To date, all funds have been expended, and local interest in the program continues to be strong. For fiscal year 2001, additional funding provided in the Agricultural Risk Protection Act of 2000 will fund the FPP at $17.5 million. On January 22, 2001, a request for proposals was published in the Federal Register. Eligible entities had until March 8, 2001 to submit their proposals. After the evaluation process is concluded, successful applicants will be notified in June, 2001.
FORESTRY INCENTIVES PROGRAM (FIP)
    To increase timber production, FIP was authorized by Congress in 1978 to share the costs of tree planting, timber stand improvement, and other related practices on nonindustrialized private forest lands. The Federal share of these costs ranges up to 65 percent.
    Mr. Chairman, the demand for sawtimber, plywood logs, and quality hardwood logs continues to be strong. To meet the demand for these products, more trees must be planted and more forestland placed under good forest management. FIP is designed to share the expense with eligible, private landowners to produce timber. For the life of the practices, additional environmental benefits accrue including wildlife habitat and carbon sequestration.
    Funding for FIP for fiscal year 2001 is $6,325,000. With these funds 4,049 participants were enrolled with forest management plans on 151,015 acres of private forestland. Of this total, 117,026 acres of trees were planted, 23,709 acres of timber stand improvements were accomplished, and 10,230 acres of site preparation for natural regeneration was implemented. We would estimate that since 1975, landowners have established nearly 4 million acres of tree planting and 1.5 million acres of timber stand improvement.
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ENVIRONMENTAL QUALITY INCENTIVES PROGRAM (EQIP)
    EQIP provides technical, financial, and educational assistance to farmers and ranchers who face serious threats to soil, water, and related natural resources on agricultural land and other land. The 1996 Act authorized $200 million, annually for EQIP, utilizing funds of the Commodity Credit Corporation (CCC). For fiscal year 2001, the final appropriation was $200 million. In fiscal years 1999 and 2000, $174 million was available. Consistent with the authorizing legislation, the program is primarily available in priority conservation areas in order to maximize the benefits of each Federal conservation dollar. The priority areas consist of watersheds, regions, or areas of special environmental sensitivity or having significant soil, water, or related natural resource concerns that have been recommended through a locally-led conservation process. For fiscal year 2000, nearly 85 percent of the EQIP financial assistance funding was provided within priority areas. I would also note that an additional $20 million will be provided for soil and water conservation assistance outside of conservation priority areas in fiscal year 2001. This funding was initiated through the Agricultural Risk Management Protection Act of 2000.
    The EQIP program has been extremely successful. We received 76,168 applications in fiscal year 2000. After NRCS ranked the applications based on criteria developed at the local and state level, 16,443 long-term contracts with farmers and ranchers were approved. Since inception of the program, EQIP has averaged about 3 to 6 times the number of applications than could be approved with available annual funding.

    Mr. Chairman, in closing, I would note that conservation doesn't just happen. It happens because all of us, including the Congress, the conservation partners, and most importantly, the people living on the land working together to make it happen. As exemplified through the many programs and activities we have underway, there is a great deal happening on the ground. The public benefits are an improved quality of life, affordable and safe food supply, clean air and water, reduced damages from floods and other natural disasters, abundant fish and wildlife, scenic landscapes, and a sustainable resource base. These benefits are critical to sustain agricultural production, economic prosperity and the social fabric of our communities now and in the future. We are proud of our accomplishments and look forward to working with you to build on all that we have done thus far. This concludes my statement, Mr. Chairman, and thank you again for the opportunity to appear. I would be happy to answer any questions the Committee might have.
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Statement of Bill Horan
    Good afternoon. My name is Bill Horan. I raise corn, soybeans, oats and alfalfa in partnership with my brother Joe in Rockwell City, Iowa. I am a member of the National Corn Growers Association's Board of Directors. The National Corn Growers Association (NCGA) represents more than 31,000 direct members and the 300,000 corn farmers throughout the Nation who make check-off payments each year. I am testifying today on behalf of the NCGA, the American Soybean Association, the National Association of Wheat Growers, the National Cotton Council, and the National Barley Growers Association. I appreciate the opportunity to offer this testimony.
    The members of our organizations are committed to being good stewards of the land and leaving the environment in better shape than we found it. We have a commitment to our community to ensure that we have clean water and healthy, viable soil to ensure the land is productive for many years to come. We take responsibility for our farming activities and must do so with a keen eye towards conservation, productivity and marketing.
    We support the voluntary, incentive-based conservation programs that the past farm bills have created. We believe that flexibility in programs is essential for their widespread adoption, given local variances in conservation and water quality priorities, production practices, climate, soil type and many other factors. These programs have demonstrated agriculture's commitment to working collaboratively with United States Department of Agriculture and other organizations and a commitment to water quality, air quality, habitat protection, and a healthy environment. We believe that these voluntary programs have been successful in producing environmental benefits. As we look toward the next farm bill, we are interested in conservation programs that assist growers in maintaining and/or undertaking new conservation practices in their farming operations. Any new program should contemplate financial assistance for conservation practices on resources and management that support production and generate environmental benefits.
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    As we look at broader Clean Water Act issues and regulations, we know that agriculture plays an important role in maintaining a healthy environment. All agricultural producers face increasing regulatory burdens whether it is local, State or Federal requirements on the management of their land. We support programs that will work with our members in utilizing conservation practices and work to maintain a healthy environment. A conservation/environmental incentive payment program could assist growers in meeting these increasing requirements. This approach recognizes an important part of adoption of conservation practice across the farming community - which is, that growers need financial and technical assistance in management of their operations based on conservation principles.
    Intensive resource management practices can become as important as a filter strip or buffer strip in achieving conservation goals, but these management practices or choices frequently add to the costs and risks of the farming operation. These are the areas that should be included in the development of the Conservation Title of the next farm bill. Policymakers can work with growers to identify conservation practices that fit in with their management and stewardship of working land. Any program modifications or enhancements must maintain flexibility for local implementation to maximize both participation and effectiveness.
    Regarding existing programs, we support continuation of the existing cost-share programs including the Conservation Reserve Program (CRP)—including continuous sign-up, Wetlands Reserve Program (WRP), the Wildlife Habitat Incentives Program and others. These programs have been an excellent investment for the public and have generated significant environmental benefits as documented by USDA. Programs that take land out of production should be managed so as not to take whole farms out of production. The focus of the continuous signup should be on small areas of specific environmental value and there should be local flexibility to meet the environmental concerns facing a specific area of the country. We believe that the CRP should be fully utilized to the 36.4 million acre cap and that any additional land enrolled should be the most environmentally beneficial land utilizing the continuous signup. While the Wetland Reserve Program has generated enrollment that is expected to reach the 1,075,000-acre cap this year, as with CRP, we do not support increasing the acreage cap at this time.
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    Regarding the provisions of the 1996 farm bill concerning wetlands and highly erodible land, we support maintaining the flexibility that farmers were given in the bill. Our organizations worked during the last farm bill to provide flexibility for growers with wet areas on their farms. Concepts such as minimal effects and mitigation banking would have provided some flexibility for growers with specific areas of concern on their farm. NRCS has been unable to implement some of the flexibility due to the lack of cooperation of other Federal Agencies, however we would urge the Committee to see that flexibility is maintained and that growers are able to utilize these provisions. Also the implementation of wetland regulations has not been consistent across the country and we ask the Committee to encourage NRCS to implement wetland rules fairly and consistently.
    The recent Supreme Court ruling has intensified the inequity of wetland regulations. Since the 1985 farm bill, farmers participating in the farm program have been held to the highest standard of wetland protection in the land. This inequity was supposed to be addressed in the 1996 farm bill with some of the regulatory relief measures that were included in the bill. Recently, significant wetlands regulatory relief was granted by the courts due to the Supreme Court ruling on Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers regarding isolated wetlands. While this is welcome relief to developers and our State and county highway departments it is of little help to most farmers since swampbuster is still the highest, regulatory hurdle. In fact, we will now face the irony of court ordered regulatory relief for all except the American farmer.
    The Wildlife Habitat Incentives Program offers farmers a unique opportunity to receive NRCS technical assistance and cost share monies to install conservation practices improving wildlife habitat on private lands. We support the program's state and locally-driven habitat priority setting process, and also NRCS's coordination role with private partners like Ducks Unlimited and the National Association of Conservation Districts in implementing the program at the ground level. The commodity organizations support the continuation of this voluntary program. Further, since this program's objectives are to enhance wildlife, we would encourage a balanced approach to the addition of overly costly wildlife objectives to other program rules and regulations.
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    The Environmental Quality Incentives Program, while designed to better target scarce financial resources, has become a very complicated program for commodity producers to utilize. Many were understanding of the desire to consolidate programs and prioritize project areas, but the ensuing challenge and dissatisfaction centers around who gets access to limited fund. Improvements should be made to the program to expand the flexibility and allow more producers to participate and increase the total funds available.
    While each area of agriculture is facing commodity specific production concerns, many of us also watch with keen interest the status of the U.S. Livestock industry. The interdependence of commodity and livestock production is very evident in U.S. agriculture and we strive to maintain the productivity and profitability of each. Increasing regulations, Federal, state and local are placing a heavy burden upon agriculture and we must be given the tools and resources to comply with new regulations if we are to remain competitive in a global market place.
    Each of these programs mentioned provide an integral part of the overall conservation and environmental/water quality objectives. Federal programs provide financial resources and technical assistance to facilitate the adoption and management of conservation practices. Federal, state and local cost-share programs are essential for the greater benefit provided by these practices. Our members are engaged in farming as a livelihood and must maintain the ability to raise productive crops on their land and market their crops to maximize profitability.
    We support locally led, voluntary, incentive-based programs, specifically those that work on a watershed basis. In order for these programs to work, there must be local people to work with our farmers and others in agriculture in improving conservation practices. USDA's Natural Resources Conservation Service (NRCS) has a good track record on voluntary incentive-based programs, as well as an extensive field staff network. Therefore, we in agriculture will be looking to NRCS as an important delivery mechanism of technical assistance to landowners. We support Federal funding for NRCS conservation operations; to maintain and expand that structure as needed to help protect our natural resource needs.
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    Recognizing that there are still gains to be made in water quality, we believe that our goals of clean water, productive land and a viable domestic market are attainable. We believe that USDA is the primary Federal Government resource to assist growers across the country in attaining these goals. Whether it is through the technical assistance provided to growers for compliance with a myriad of government programs or for voluntarily adopting a conservation practice, USDA has the structure with local delivery units, to provide the support necessary for growers to continue their commitment to the land.
    Each of our organizations are facing their own production and marketing challenges. Low commodity prices, coupled with increasing input costs, new regulatory burdens and the need to continually increase productivity have resulted in a serious cost/price squeeze and low farm income. We appreciate the opportunity the Committee provided for each of our organizations to present specific commodity program proposals. We also appreciate the efforts of the committee to secure additional funding for agriculture in the new budget resolution. As we have each presented the committee with commodity specific proposals, we share the conservation goals outlined in this statement and the belief that the conservation title should work in conjunction with a fully funded commodity title. It is essential to us that the provisions of the conservation title provide voluntary, incentive-based options for producers, but not replace or serve as a substitute for the commodity programs proposed by our organizations in earlier hearings. Producers need to be given flexibility in meeting increasing regulatory challenges whether they are local, state or Federal requirements placed on their operations or the management of their land. USDA technical assistance, local watershed activities and cost-share programs are a proven approach to addressing environmental challenges. We support continuing this conservation commitment to help undertake conservation practices on productive farmland through the reauthorization of the conservation title of the next farm bill.
     
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Statement of Dusty Tallman
    Mr. Chairman, as president of the National Association of Wheat Growers (NAWG), and on behalf of wheat producing farmers across the nation, I thank you for the opportunity to submit our testimony regarding the Conservation Title of the farm bill.
    NAWG represents the 238,000 U.S. farmers that plant approximately 63 million acres of wheat annually. Besides providing the world with a safe, abundant, and affordable supply of food, our members are tremendous stewards of the Nation's land, environment, and wildlife resources. We are committed to our families, our communities, and our country to ensure that we maintain and improve the productivity of the land, the health of the environment, and the quality of our food supply.
    The farming and ranching community has made tremendous strides, often at personal cost, to improve the environment. With rebounding waterfowl and wildlife populations, better soil conditions and decreased erosion rates, and improved wetland protection and restoration efforts, agriculture continues to make positive environmental contributions through efforts on private lands.
    As you know, however, America's farmers continue to face pressures to further protect the environment while simultaneously confronting the reality of low commodity prices, increased input costs, and at best marginal profitability. Farming is becoming an increasingly difficult business as the struggle to maintain profitability collides with tougher air, water, and land use regulations.
    Mr. Chairman, NAWG supports the voluntary, incentive-based, and flexible conservation programs that have allowed the agriculture community to make these impressive environmental gains. As we confront the new environmental challenges of the twenty-first century, we would urge that we learn from the lessons of the past. Mandates and heavy-handed regulations are inefficient, ineffective, and very inequitable, and often fail to deliver the promise of a better working environment.
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    Environmental problems increasingly require site-specific policies that can be adapted to local climates, resource conditions, and specific operator needs. In addition, the future of on-farm conservation practices will be proactive in nature as producers are now demonstrating through the adoption of practices such as conservation tillage that seek to prevent future problems. Finally, the future of conservation will require reasonable incentives to encourage and assist operators in the adoption of sound, proactive conservation practices. As such, NAWG offers the following comments on current and proposed conservation programs and environmental issues.
    Conservation Reserve Program. While we fully support the Conservation Reserve Program (CRP), NAWG believes the current cap of 36.4 million acres is adequate and should not be raised. The regular CRP, and the continuous sign-up and conservation reserve enhancement program components, have proven a valuable investment for the public and the environment. However, we believe that increasing the investment in CRP is not productive or cost-efficient.
    In some locations, CRP whole-farm acreage and high rental rates are beginning to out-compete producers who seek to rent land for production. Contract rentals should be limited to the average county rental rate, and care should be taken before enrolling whole farms in the program. In addition, the Environmental Benefits Index should be revised to return the focus of CRP to marginal soils and fragile lands. Any additional acreage remaining under the existing cap should be enrolled in the continuous sign-up to help producers address site-specific and sometimes cost-prohibitive environmental problems.
    1Wetlands Reserve Program. Like the CRP, the WRP has been a very successful program. However, NAWG does not support raising the acreage cap from the current 1,050,000 level. Acreage set-aside programs such as the WRP and CRP are excellent programs, but they do not represent the future of on-farm conservation.
    Environmental Quality Incentives Program. The EQIP program should be made more equitable, and it should be amended to allow commodity producers to better utilize the program. Currently 75 percent of all funding goes to priority areas, leaving many producers ineligible for EQIP cost-share dollars. Either the priority-area process should be revised, or some of the focus should shift from places to practices, allowing the flexibility to address specific concerns such as TMDLs or encourage practices such as BMPs. This shift would allow many more producers to participate in the program.
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    The funding structure should also be changed: cost-share and incentive payments under EQIP should be made as soon as possible following a contract, and program funding should be allowed to be carried over between fiscal years. Funding should also be available for land enrolled in the CRP or WRP. Shorter-term contracts should also be made available to interested producers.
    Finally, the whole farm planning emphasis of EQIP makes it difficult for many producers to benefit from the program. Whole farm planning is expensive, time consuming, and often the local NRCS staff does not have the resources to meet demand. The Committee should provide greater authority to use certified third party vendors for technical assistance and planning.
    Wetlands. We believe it is a responsibility of the Committee to provide a rational and coherent national policy guiding the utilization, protection, and enhancement of wetlands on our agricultural lands. Operators should have clear and unambiguous direction from the government regarding their responsibilities under wetland regulations. Currently, such direction is lacking, leaving many producers in a quagmire of conflicting agency jurisdictions and missions.
    NAWG supports wetland regulations that provide full flexibility to producers. Minimal effects regulations and wetland mitigation banking should be aggressively utilized to minimize problems associated with wetland regulations and swampbuster. Part of the reason the NRCS has been unable to implement the flexibility on wetland issues provided under the 1996 farm bill is due to a lack of cooperation from other Federal agencies. We would ask the Committee to see that wetland regulations are implemented on a more equitable and consistent basis, and that growers are allowed to utilize the wetland mitigation and minimal effect provisions of the 1996 act.
    Conservation Incentive Payments. We are aware that members of the Committee and many others have expressed an interest in creating a new program to provide incentive payments for working lands conservation. NAWG believes the future of on-farm conservation policy should focus on productive agriculture lands rather than set-asides and reserves. However, we do have some concerns regarding these conservation incentive payment programs.
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    While we appreciate and support the concept of focusing conservation efforts on working lands, we remain wary that a new program may create new problems. First, we are concerned that local NRCS staffs and budgets will be over-burdened; currently, there is a greater need for technical assistance and staff field time than the NRCS can possibly provide. Any new major conservation program would likely intensify these problems.
    Another significant concern is the possible association between future environmental regulations and the proposed incentive payments. Farmers now engage in many of the conservation practices on working lands in a voluntary manner, free from the encumbrances of cost-share programs or government regulations. While we encourage a continued focus on the adoption of sound production practices, such as conservation tillage, we remain justifiably concerned that today's incentive payments may become tomorrow's production regulation.
    Finally, while we understand and appreciate the importance of the farm bill's conservation title, we do not want to see commodity program payments replaced by any form of conservation incentive payments. The first responsibility of our nation's agriculture producers is to provide the world with a safe, abundant, and affordable supply of food, feed, and fiber. The government should continue to provide assistance to this end, and should not seek to replace food production as the primary objective of our nation's agricultural lands.
    Mr. Chairman, in conclusion I would like to thank you and the Committee for the opportunity to submit testimony and share our thoughts and concerns regarding the conservation title of the farm bill. While we recognize that new environmental challenges await agriculture, and that the public is placing new values, such as recreation and amenity values, on farmland, we would ask that we first recognize the gains agriculture has made. As we have increased productivity, cost-effectiveness, and profitability, we have also improved the condition of our land, air, water, and wildlife resources.
    These achievements should not be overlooked; nor should the manner of our successes be ignored. Farmers continue to lead by example, protecting the environment and wildlife through voluntary measures on their private property. Where assistance is needed, incentive and cost-share programs that are flexible, voluntary, and farmer-friendly have provided the encouragement to address the more difficult and costly problems. The future of on-farm conservation lies down this path.
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FORMULATION OF THE 2002 FARM BILL
(CONSERVATION PROGRAMS)

WEDNESDAY, JUNE 6, 2001
House of Representatives,    
Subcommittee on Conservation, Credit,
Rural Development and Research,
Committee on Agriculture,
Washington, DC.

    The subcommittee met, pursuant to call, at 1:03 p.m., in room 1300, Longworth House Office Building, Hon. Frank D. Lucas (chairman of the subcommittee) presiding.
    Present: Representatives Moran, Thune, Osborne, Graves, Putnam, Kennedy, Baldacci, Phelps, Thompson of California, Baca, Peterson of Minnesota, Clayton and Stenholm [ex officio].
    Also present: Representative Chambliss.
    Staff present: Ryan Weston, subcommittee staff director; Dave Ebersole, Callista Gingrich, chief clerk; Susanna Love, Elizabeth Meyer, Anne Simmons, and John Riley.

OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OKLAHOMA

    Mr. LUCAS. This hearing of the Subcommittee on Conservation, Credit, Rural Development and Research to review the conservation issues will come to order.
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    I would like to welcome you to the subcommittee's second of three hearings to discuss conservation issues. Two weeks ago, I stated that this subcommittee had been tasked with determining what conservation measures are needed in the next farm bill and that we would not take that responsibility lightly.
    The invitation letter sent out to last week and today's witnesses asked for specific information and, just to note for the record, the letters clearly stated that the purpose of this hearing was to receive testimony from you regarding conservation programs in the context of a comprehensive farm bill. The subcommittee is interested in how the current programs are operating, what changes need to be made to the programs and their funding levels and whether current programs or new programs are needed to help producers comply with the regulatory standards.
    Some of the organizations have done an excellent job of giving recommendations, while others have a little work yet to do. The reason I have asked for witnesses to give testimony in the context of a comprehensive farm bill is so that they are aware of all of the spending needs that we must consider.
    In addition to the commodity and conservation titles of the farm bill, we are going to have requests for changes in the credit and rural development and research titles that will also require expenditure of mandatory funds.
    The interesting fact is that if we add up what the majority of groups are asking for in the commodity titles plus what most groups are asking for or are going to ask for in a conservation title, we have already spent more money than has been budgeted for the entire farm bill, and that's why I want to focus this hearing on what is working and what is not working and what can be done in a more efficient fashion and how that can be accomplished.
    Last week, this subcommittee was asked to spend over $1 billion more per year on EQIP alone. The request was to ensure that there would be available to agriculture producers cost share and incentive funds. This week, we will be asked to expand CRP, WRP, as well as WHIP, the Farmland Protection Programs and others. This is all before we are asked to look at an incentive payment program that could run into the billions of dollars per year.
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    Can we expect USDA to effectively administer a new program when they have a backlog in current programs, or should we be focusing on ensuring that the current programs are adequately funded?
    CRP alone is authorized to set aside $36 million acres, and that is over 10 percent of the cropland of the entire United States. If it goes up to 45 million acres and we add in other permanent easement programs, we will be setting aside somewhere between 15 and 20 percent of the cropland in the United States. Now, some economic studies have led us to believe that as we set aside land our competitors overseas simply have made up the difference.
    We all know that numbers can be manipulated to show various results, and I am a supporter of CRP. However, I simply want all of you to consider the pros and cons of our actions. Is taking more land out of production good for the U.S. farm sector and rural economies? I believe we will see a good debate on this issue today and in the coming days.
    With that, do any of my colleagues have any opening statements?
    [The prepared statement of Mr. Hilliard follows:]
PREPARED STATEMENT OF HON. EARL F. HILLIARD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ALABAMA
    Mr. Chairman, members and distinguished guests, conservation programs on private land are some of the most important available to America's fanners. In my district in the Black Belt of Alabama, more money comes to fanners from conservation spending alone than from commodity payments.
    This means that conservation provides more Federal money to Alabama fanners than commodity payments for cotton, our largest crop. These programs, especially the Conservation Reserve Program, provide the difference between success and failure for many fanners in this Nation, as well as in my own district and State.
    I support all American fanners, but I am especially concerned for our small, poor, and minority fanners who continue to have difficulty accessing Government programs. I hope in your testimony that you will address this problem of access and use of the programs. It is my belief that conservation programs, while protecting and restoring the health of our lands, can also bolster these small fanners. Their lives, families, their communities and their values are important to our great nation and I think that all our programs should consider and support the least among us.
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    Mr. LUCAS. We will now turn to our first panel; and they are right there at the table. Ms. Jamie Clover Adams, Secretary of the Kansas Department of Agriculture from Topeka, Kansas, and on behalf of the National Association of the State Departments of Agriculture; Mr. Joe Cantu, president of the National Association of Resource Conservation and Development Councils, Incorporated, Pipe Creek, Texas; Mr. J. Read Smith, president of the National Association of Conservation Districts, Resource Conservation Development Councils, St. John, Washington; Joe Neal Hampton, president of the Oklahoma Grain and Feed Association, Enid, Oklahoma, on behalf of the National Grain and Feed Association.
     Ms. Adams, when you are ready.

STATEMENT OF JAMIE CLOVER ADAMS, SECRETARY, KANSAS DEPARTMENT OF AGRICULTURE, TOPEKA, KS, ON BEHALF OF THE NATIONAL ASSOCIATION OF STATE DEPARTMENTS OF AGRICULTURE

    Ms. ADAMS. Thank you, Mr. Chairman. We do appreciate the opportunity to be here today and offer testimony on the conservation provisions of the farm bill.
    For the record, my name is Jamie Clover Adams, and I am here today to represent the National Association of State Departments of Agriculture.
    Today I will present a broad outline of a new environmental stewardship program for America's open spaces, the 900 million acres under the care of American farmers, ranchers and their families.
    I need to stress that this is a work in process. It is a product of extensive discussions over many months with my colleagues from every region of the country. Our dialog continues. We do support the continuation of existing programs with increased funding, and we recommend certain changes in WHIP, EQIP and CRP. For example, with EQIP, we recommend that USDA allow flexibility and discretion in administering the program, allow 1-year contracts, remove the $50,000 payment cap and remove the national size restriction for livestock projects.
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    These and other proposed changes are described in my written testimony.
    Despite the overall viability of existing programs, we see gaps in coverage that are probably inevitable, given the focus of these programs on national issues.
    Because meeting environmental demands is a make-or-break challenge for many agricultural producers, many of our State Departments of Agriculture have taken the initiative to design programs tailored to address resource needs in our States that cannot be met with existing conservation programs.
    For example, in Kansas, the Kansas Department of Agriculture established a pesticide management area. The object was to limit the amount of atrazine and other soil-applied herbicides that were going into our surface waters.
    First, we worked with our Kansas State University to develop voluntary best management practices, and we published those, dependent on the farmers tillage practice. Then our State Conservation Commission offered a pilot program of $5 per acre to farmers in one critical watershed to encourage the adoption of these BMPs. Further, these farmers were contacted on various occasions, both by the Conservation Commission and by a KSU extension employee dedicated to the project.
    Participation was nearly 100 percent. But, more importantly, all waters have been removed from the atrazine-impaired waters list, except for Tuttle Creek, which receives 80 percent of its pesticide load from Nebraska. And I am happy to report that Kansas and Nebraska are working together to solve that issue as well.
    The PMA and similar programs in other States supplement existing Federal conservation programs while helping farmers bear the cost of what we see as substantial public benefit. And I would emphasize that they are providing a public benefit that the public wants.
    We know that expectations, as the chairman said, in growing, increasing regulation are putting burdens on our farmers and ranchers. The short-term and long-term economic payback just isn't there, and you all know that agriculture is not like other businesses where they can pass those costs of production on to consumers. It competes with servicing farm debt and other family financial needs.
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    I would also point out to the committee that the Federal Government has spent a lot of money cost sharing with local governments to upgrade wastewater treatment plants across our country to meet the requirements of Clean Water Act without bankrupting small communities across our Nation, and we only ask for that consideration as well for America's farmers and ranchers.
    Now, to the block grant program that NASDA proposes, it is a new program, kind of if you think of it as a working fund to get at these gaps, to get at the needs that we see on the ground every day in our States.
    First, the funding would be provided through cooperative agreements between USDA and State departments of agriculture. The State Departments would serve as the lead agency in designing and carrying out the program.
    Second, the program parameters would recognize activities that enhance protection of the land, water, air and wildlife, defined in the broadest terms possible to permit local flexibility and avoid duplication of existing planning systems and infrastructure.
    Third, the States would have the flexibility to allocate dollars between both payments to producers and technical assistance based on local needs and priorities.
    Fourth, participation would be voluntary, incentive-based and targeted to environmental enhancements that are supported by science and, most importantly, produce results.
    Contract payments could be made on an annual basis, and all data would be private and confidential.
    We expected, Mr. Chairman, that this proposal would fit within the green box of WTO and our commitments there.
    We appreciate the opportunity to be here today, and I would be glad to stand for questions at the appropriate time.
    [The prepared statement of Ms. Adams appears at the conclusion of the hearing.]
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    Mr. LUCAS. Thank you. Mr. Cantu.

STATEMENT OF JOE CANTU, PRESIDENT, NATIONAL ASSOCIATION OF RESOURCE CONSERVATION AND DEVELOPMENT COUNCILS, PIPE CREEK, TX

    Mr. CANTU. Good afternoon, Mr. Chairman and members of the committee. My name is Joe Cantu. I am president of the National Association of the Resource Conservation and Development Councils. I am one of thousands of volunteers who serve on RC&D councils across the country. I am here to discuss the farm bill recommendations for the RC&D Program. I would like to submit my full written statement for the record.
    The RC&D Program began as a pilot USDA effort to address conservation and economic development in rural areas.
    The Resource Conservation and Development Program is based on a number of concepts that make it a truly unique Government program. These concepts include: community sustainability with a balance between rural economic development and natural resource protection; grassroots involvement; leveraging limited Federal dollars; public/private partnerships; and bringing USDA agencies together to focus on the same problems and opportunities.
    RC&D Council members are volunteers that include local, civic, appointed and elected officials. RC&D councils are nonprofit organizations that work in partnership with USDA's Natural Resources Conservation Service.
    The program has grown significantly over the years as a result of its ability to provide local solutions to local challenges. We are the catalyst for bringing people together to identify their needs, and then we search out funds to solve the problems.
    Here are a few examples: The Cherokee Hills RC&D Council in Oklahoma was instrumental in the formation of and continues to provide technical assistance to the TenKiller Utilities Authority. As a result of RC&D assistance, the community is now seeing improved health standards for an underserved population. Over 60,000 customers are provided with safe drinking water.
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    The ALA-Tom RC&D Council in Alabama is very active in small farm revitalization efforts. The council has facilitated four cooperatives and developed basic infrastructure to provide markets for their products. Last year, in spite of a serious drought, one of the cooperatives made a profit and prevented local crop failures because of RC&D Councils assisted them with a mulch/irrigation project. The council has assisted the cooperatives in developing a system so that they can sell their products to the school lunch programs both in Alabama and in Florida. This effort has improved the quality of life for many minority farm families and stimulated the economy in those areas.
    RC&D councils are making a difference in America's communities and represent the entrepreneurial spirit of rural America. RC&D councils have played a strong role in increasing new businesses, education, conserving our natural resources, bioenergy development and outreach.
    To assist in increasing conservation and economic development in communities that are hard hit by low farm income, the National Association of RC&D councils requests the following changes to the farm bill:
    Permanent authorization of the RC&D Program. This is our highest priority. We believe that the recent growth in the RC&D Program from 277 councils in 1996 to 348 councils in 2001, covering 80 percent of the Nation and 180 million people, is a testament to our success. Congress has recognized the valuable services RC&D councils provide to local communities and has helped to grow this program.
    In addition, we have successfully leveraged a $42 million Federal investment into more than $1 billion annually to directly support conservation and economic development, making a continued investment in RC&D a cost-effective investment of taxpayers' funds.
    Update our statement of purpose and write the role of the RC&D councils into the law and define RC&D councils' affiliations. The recommendation is a technical change to the law. The structure of the RC&D councils evolved and USDA recognizes RC&D councils as the entity that carried out the mission of resource conservation development. As a result, we believe that RC&D councils need to be recognized in the law.
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    Encourage USDA agencies to provide technical assistance. The administrative responsibility for the RC&D Program is delegated to NRCS with the expectation that full array of USDA programs and services are available to assist RC&D councils to achieve their goals.
    Mr. Chairman, and members of the committee, we request that the farm bill include legislative language that encourages USDA agencies, consistent with their mission and authority, to bolster these relationships. RC&D councils are an effective delivery system for rural America, and we see no need to duplicate the RC&D concept to create new programs or entities to deliver services to rural America.
    Mr. Chairman and members of the committee, I thank you for the opportunity to testify here today, and I welcome the opportunity to respond to any questions.
    [The prepared statement of Mr. Cantu appears at the conclusion of the hearing.]

    Mr. LUCAS. Thank you. Mr. Smith.

STATEMENT OF J. READ SMITH, PRESIDENT, NATIONAL ASSOCIATION OF CONSERVATION DISTRICTS, ST. JOHN, WA

    Mr. SMITH. Good afternoon, Mr. Chairman and members of the committee. I am very pleased and honored to have travelled across our country to be with you here today.
    I am currently president of the National Association of Conservation Districts, but, more importantly today, I am here as a farmer and a rancher and a conservation district official. I was elected 28 years ago to serve in my conservation district in eastern Washington, and I have proudly worked for that period of time implementing the programs that your committee authorizes. I am very proud of that.
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    I would refer you to my written testimony and ask that that be included in the record, and for specific comments and recommendations on existing programs, I would refer you to that written testimony.
    I want to visit with you today about a new vision, a new approach that the Nation's conservation districts have for the conservation title of the farm bill.
    We have attempted, since 1985, to solve our problems by creating programs. We have developed programs after programs that, wonderful as they are, they tended to make smaller pieces out of an ever-shrinking pie. I am here today to suggest that what we need to perhaps do, look at a new vision. We need to change the process from finding programs that will solve our conservation problems to developing conservation plans and then seeking the programs that will solve those problems, a complete reversal of what we are doing now.
    Unfortunately, many of the plans that we are currently operating with down on the farm where I live are generic, computer-generated, impersonal, with no buy-in by the farmers and ranchers that implement them. We need to get back to the self-directed hometown plans that are written site-specific and then find the resources in order to solve the problems that we have.
    We have developed over the last 2 years a conservation incentives program that would do just that. They are based on the strong philosophies conservation districts across the country have of voluntary, incentive-based and locally led. We need to include the local conservation districts and State agencies and the States in the decision-making process in implementing these programs at the local level.
    We have spent nearly 2 years developing our recommendations for this committee. During that time, we have reached out to the 3,000 districts across the Nation and got input from nearly 1,700 of those districts. Included in our reach-out was over 90 different groups that are interested and have weighed in in the past on the conservation title of the farm bill. We had nearly 50 of these organizations respond to us, and we were very amazed to find out that most all of these groups had very similar concerns to some of ours. We have responded to those folks by including some of their thoughts along with ours, and hopefully we have developed a comprehensive package that is very favorable to a wide audience here in town.
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    Clearly, this will take a significant increase in both financial assistance and the technical assistance, and that is the scientists, the economists, the engineers and so on, conservationists, to carry out this new vision.
    The recent workload analysis indicated that there is a need out there for $2.4 billion worth of technical assistance that is being unmet. So we recognize the huge investment that the country must make in this, but certainly we would like to see the committee prioritize that investment and at least get initially started along the way.
    Our program and our vision will reach out to far more producers than existing legislation. We need to cover more acres, more people and reach out to the entire country, not just selected commodities or groups, and our vision will go a long ways towards doing that. It will provide flexibility and local control.
    Certainly we need to have Federal guidelines for implementing these types of programs, but we have a huge pool of over 7,500 State and local employees that work day-to-day with our Federal partners, and we need to utilize this wonderful resource, and together we can build a program that will solve the natural resource problems on private land.
    There is huge public benefit in what we do. We need to learn to tell the public what is in it for them—and certainly the public is very understanding about the investments that's necessary in order to achieve these goals—better soil, cleaner water, greater profits and a brighter future for agriculture, in addition to abundant wildlife, higher quality wetlands and really an enhanced quality of life for all Americans. And the investment and prevention is far cheaper than the cost for solving the problems later.
    I would welcome your questions.
    [The prepared statement of Mr. Smith appears at the conclusion of the hearing.]
    Mr. LUCAS. Thank you. Mr. Hampton.
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STATEMENT OF JOE HAMPTON, PRESIDENT, OKLAHOMA GRAIN AND FEED ASSOCIATION, ENID, OK, ON BEHALF OF THE NATIONAL GRAIN AND FEED ASSOCIATION

    Mr. HAMPTON. Mr. Chairman, distinguished members of the subcommittee, I am Joe Neal Hampton; and I am president of the Oklahoma Grain and Feed Association. I appear today on behalf of our association, 14 other State and regional grain and feed associations and the National Grain and Feed Association. We represent over 4,000 grain and feed-related firms who are the farmers' first customer beyond the farm gate. I ask that our testimony be referred to, entered into the record.
    My oral testimony today will ask this subcommittee to ensure that the new conservation title to the new farm bill will be targeted towards the conservation needs of all sectors of agriculture.
    We all want a rural America and an agriculture industry that has as little environmental impact as possible on our land and water resources but also want an economically strong rural America. Current and new conservation programs must be tailored to help producers meet their environmental responsibilities, while ensuring that producers and the rest of rural America remain economically viable.
    In keeping with this view, we would like to recommend four things: First, that the CRP's current acreage of 36.4 million acres be retained and not increased; second, that any new acreage enrolled to CRP be focused on filter strips and partial field enrollment.
    I would like to cite a USDA Agricultural Research Service study that was done in Oklahoma a few years ago that indicated that a mere 66-foot-wide vegetation filter strip can capture 60 to 90 percent of the nutrient runoff from the field. The larger the filter strip, the more nutrient runoff it captures; and in my mind that is a great value for the taxpayer, to protect our water with a simple vegetative filter strip.
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    Anyway, we believe that these resources are much better focused on CRP rather than whole farm enrollments which have a detrimental effect on the rural economy. We support earlier testimony by livestock groups that recommend working lands be kept working.
    Thirdly, that Congress and the administration minimize the number of counties that reach the maximum limit of 25 percent of tillable acreage, again to preserve the viability of rural economy.
    And, fourth, more emphasis to be given to conservation programs such as the EQIP program for all types of agriculture production, including animal feeding operations, and that the EQIP funding process be streamlined and somehow made more directly accessible to producers.
    As a side note, I and several other of my producer friends have been trying for 5 years to figure out a way to get terrace and waterway funds to build and reconstruct, and it is a very difficult process, and we like the old program where you knew you had some money to be able to go and get that cost share.
    One thing the conservation programs were never meant to do, and they cannot do, and that is to impact commodity prices over the long term. For many years, the United States attempted to do this through high loan rates and idling acres programs, but the result was this lost market share, decreased exports without any long-term price benefit, simply because foreign acreage replaced ours. From 1980 to 1995, while we were idling 33 million acres, our foreign competitors brought on line 49 million acres and in the top 19 wheat-producing States in the United States account for over half of the current CRP acres.
    We have witnessed a substantial increase in the amount of imported wheat and a loss of global market share during the same time, and our wheat export market share has dropped from 40 to 25 percent. Now, while CRP is not the sole factor for this cause, it is certainly a contributing factor.
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    Rural economies are hard hit by land idling, including places where CRP is high. Congressman Lucas, in Shattuck, Oklahoma, in your district, since the CRP was implemented, 23 businesses have closed, which represents 25 percent of the local economy. And the population has decreased by half during the same time period.
    Acreage idling also erects barriers to young farmers. When the Government is essentially competing to be a tenant, young producers cannot have access to enough acres to spread their fixed costs over enough acres. Also, the average age of producers in Oklahoma is 60 years of age; and what America needs is more young farmers and not programs that serve as retirement benefits for absentee landlords.
    I will be free to answer any questions you might have. Thank you.
    Mr. LUCAS. Thank you.
    [The prepared statement of Mr. Hampton appears at the conclusion of the hearing.]
    Mr. LUCAS. That might be a good point to begin with a question or two on, since you bring up CRP and the effect in rural western areas like northwest Oklahoma, Joe Neal. This is not the first time that we have had programs with a major land idling provision in them. Forty some years ago, the old soil bank of the 1950's and 1960's had some similar provisions, perhaps not quite as much of a focus on soil and water and wildlife, but nonetheless idling of the land. Your institutional memory being what it is, how did that affect, if it did affect, rural America in comparison to what CRP has done now?
    Mr. HAMPTON. I think it had the same effect, in that when you idle the acres, especially when you are talking about wheat and it is such a global commodity, that if we are not going to do it, somebody else can be able to pick up those acres and provide the wheat for the people that want to buy it.
    Mr. LUCAS. And it is fair to say, isn't it, Joe Neal, that you are not advocating not idling environmentally sensitive acres? You are talking about the effect of wholesale programs.
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    Mr. HAMPTON. Yes, sir.
    Mr. LUCAS. Let me address this question to the whole panel. As you heard me comment upon in my opening remarks, customarily the Agriculture Committee for the last 50 years has struggled with trying to come up with enough resources to do all of the things that we have a responsibility for; and this year this farm bill will be no exception to the needs of commodity producers and the needs of conservation efforts, also.
     Should all conservation programs be required to be leveraged or matched by State resources? And the concept behind that is to make the dollars stretch farther. Are there any feelings out there among the panel? Anyone?
    Mr. CANTU. Mr. Chairman, this is Joe Cantu. I would definitely say that I think that that would be an approach that we should go after, sought after. I believe that the responsibility of this whole conservation effort should be shared by all Federal and also State levels.
    Mr. LUCAS. Anyone else?
    Ms. ADAMS. Mr. Chairman, if I might, my colleagues have discussed this issue as well, and we are still discussing it. I didn't sense any opposition to that.
    I would point out, in our State, we have done a needs assessment of three river basins that need TMDLs for high-priority areas. That total is over $200 million. We have some money in our State, but we don't have $200 million.
    So I think folks are willing to step up to the plate, but it is going to take larger resources. And I would point out, as I did in my oral statement, that the Congress has provided money for small communities to put in wastewater treatment facilities to meet public goals, and I don't see this as any different. And perhaps we can get folks outside of agriculture to see it that way. They might be more willing to fund those programs.
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    Mr. LUCAS. Mr. Smith.
    Mr. SMITH. Mr. Chairman, there are many States today that are making very sizable investments in conservation. I am sure you are very well aware of the programs that States are sharing with the Federal Government, and there is no question in my mind if a requirement was to be developed for cost sharing and sharing, leveraging dollars, that you would see an increase in the investment that States are giving conservation. So I would certainly encourage that as an option, and I think that States will recognize and step up right away.
    Mr. LUCAS. Changing subjects for just a moment, Mr. Cantu, the committee, of course, has an appreciation for the RC&D's efforts around the country, but could you expand for a moment on how your concept works, the councils work, in regard to their relationships with State government and the NRCS?
    Mr. CANTU. Mr. Chairman, we partner with many different organizations to be able to achieve the goals of our efforts. We partner strongly with the saltwater conservation districts such as in Texas with Texas Rural Development councils and with anyone else, Forest Service, whoever we can, to make sure that we deliver our set goals.
    One of our concepts is the uniqueness of RC&D carries across the board into many different areas other than just conservation of resources, and so we take advantage of whatever partnerships we can to make sure that we can deliver.
    Mr. LUCAS. With that, I turn to Mrs. Clayton for any questions she might have.
    Mrs. CLAYTON. Thank you, Mr. Chairman.
    Ms. Adams, in your testimony you make reference to increasing and giving some flexibility to the agricultural stewardship program, increasing probably the limitations. I was just wondering how you would fashion that so that either we wouldn't have too many eligible people?
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    Ms. ADAMS. You are speaking of EQIP, ma'am?
    Mrs. CLAYTON. Right.
    Ms. ADAMS. In our State we set up priority areas by the State Technical Committee. I can say personally the desire to raise the national cap comes from the fact that perhaps a thousand head feedyard in Michigan is large, but in Kansas it is not the size of feedyard that a family would have. And we see in our State, and my colleague from South Dakota calls them betweeners, and those are the folks that are really in the business as a family and can't get cost share, because they have to be fairly large to support that family. So we would target based on priority watersheds within a State. So it would vary depending on the State that you are in and the priorities that they have set.
    Mrs. CLAYTON. So Kansas would be different from Michigan, and Michigan would be different from North Carolina.
    Ms. ADAMS. Yes, ma'am.
    Mrs. CLAYTON. And the States themselves would make that decision.
    Ms. ADAMS. I would see it as we have discussed within NASDA. It would take many different forms, but I think we would definitely agree with the conservation districts that it would have a local component with stakeholders at the table designing the program, because that is how you make changes. You are changing people's habits and you have to change their heart and their mind in order to make a difference, and you can't do that by shoving it down their throat. You have to have them at the table to help make the decisions.
    Mrs. CLAYTON. I agree with you that we do have to have the consultation and everybody around the table, but the allocation based on the size seems to put a little bit in contradiction of making those resources available for smaller farmers. If you want to raise the cap, if you have a limited pot of money and—we don't have an unlimited pot of money. So raising the cap, you are either going to give more to fewer if you have relatively the same pot of money. I am just trying to find how would you fashion an equitable proposal, even if you did it in the individual States, that would allow for us to be responsive to smaller farmers with smaller plots of land.
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    Ms. ADAMS. I think my testimony outlines the problem we face in our State. Many of our small producers don't take advantage of it because they can't make the capital investment. EQIP only covers the waste treatment system. It doesn't cover the bunks, the pens and everything else that goes along with that.
    And we have a little saying on the northeast part of our State. They are called second-year good-year workers. They are part-time farmers, and they need to make changes, but they can't take advantage of the program as it currently exists, because they want to engineer a Cadillac, when maybe a Chevy would do.
    So I don't think raising the cap necessarily takes money away from small producers. I think the program has problems as it is when it comes to allowing small producers to participate.
    In our State specifically our greatest need is where our smallest producers are, but we feel that there are those in the West who do deserve to have an opportunity for those funds who may exceed the thousand animal unit limitation.
    Mrs. CLAYTON. So for raising the cap without damaging the opportunity for the small farmers.
    Now, what would you recommend that we could suggest to make this rule amenable to smaller farmers, since they are pushing down a Cadillac and they need a Chevrolet or a Ford or whatever? So what would you recommend that we should consider to make it more assessable and usable to smaller farmers?
    Ms. ADAMS. I think the block grant proposal that NASDA has brought forward would take care of a lot of those problems. But I think the fact that the guidelines are set in Washington, that the State conservationists feels like they have to follow the guidelines of Washington, doesn't allow them to consider simple things like shelter belts and alternative water supplies to get cattle off of cricks. So I think there are easy ways to solve the problem, but it is just that the guidelines of the problem don't allow the money to be present on those less-engineered activities.
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    Mrs. CLAYTON. Well, let me move to the Resource Conservation and Development Council.
     How are you currently funded now? Are you in the Conservation Program, sir?
    Mr. CANTU. We are funded through USDA, administered through NRCS.
    Mrs. CLAYTON. Right. I am working with some of our council and we are trying to expand our councils to our State because we think you provide a terrific service, and similar to Mr. Smith said, that it involves volunteers, and so you can amass the technical assistance, working with the county commissioners and the natural resources. But there was a question raised to me about funding, and I thought there might have been a question not to the amount, but where it was placed. Is there any concern about that?
    Mr. CANTU. Not to my knowledge. When you are talking about funding with RC&D, our Federal funding is discretionary funding through USDA, but what we have a strong reputation for is being able to leverage funding, which we normally do once a county committee comes up with a project, then we look for sources of funding.
    Mrs. CLAYTON. Right.
    Mr. CANTU. And those sources of funding are normally——
    Mrs. CLAYTON. I think what it was, it was that when you begin to look at—how many are there now?
    Mr. CANTU. There are 348 councils across America.
    Mrs. CLAYTON. Right. That they were fearful that the cap was going to prevent any expansion of those. And we looked at North Carolina. We are looking at our State, and we find that we are not equally served by the council. So I think the fear was that, as we were looking at the farm bill, we wouldn't prevent the opportunity for those parts of the country that were not served by this. Because we had some gaps in our area.
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    I just wanted to speak to that and maybe have another round, Mr. Chairman.
    Mr. LUCAS. Mr. Osborne.
    Mr. OSBORNE. Thank you, Mr. Chairman.
    This would be a question addressed to any or all of you. I am very interested in EQIP, because the livestock industry, as far as conservation is concerned, I think what I have heard would focus more on EQIP more than any other single entity that the Federal Government is involved with. And I know some of you have mentioned some changes you would like to see, and I would like to have you review specifically what changes in EQIP you would advocate and what level of funding. I think some of you talked to a higher dollar amount, so if we could be little bit more specific, I would appreciate that. Again, anyone who wants to answer.
    Mr. SMITH. Well, I will go first.
    We have communicators from very specific recommendations on EQIP within the past year, and I am very happy to share at least the highlight of our recommendations with you today.
    I think there is unanimous agreement that we need to increase the funding substantially. It has been woefully inadequate. In fact, I have unfortunately some personal experience in being turned down on a number of occasions with EQIP contracts, and it has seen a tremendous amount of our field staff time being taken up developing contracts that are never funded. We are recommending that we increase EQIP funding to $1 billion annually. The need is far greater than that, and that certainly would go a long ways towards helping.
    We would like to see a removal of the prohibition of expenditures being made in the same fiscal year as a contract's execution. The start-up costs and so on are hampering, particularly, small, limited-resource producers. It would be very helpful if there was an annual practices component within the EQIP program. Certainly not all producers and ranchers need elaborate 19-year contracts, and that would be very beneficial to the overall program.
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    I think the last strong recommendation we would have is to remove the requirement of 19-year contract and look at something less than 10 when that is appropriate.
    So those are our major recommendations.
    Mr. OSBORNE. Thank you, Mr. Smith.
    Any others have any comments on EQIP?
    Ms. ADAMS. Congressman, we would also advocate removing the national size limit for those producers that can participate and also allowing for activities other than engineered activities that get the job done to be allowed for cost sharing.
    Mr. OSBORNE. Do you see technical assistance being a problem in EQIP as well as other conservation programs?
    Mr. SMITH. Technical assistance has been a problem in conservation in every program. We are all very concerned about programs like EQIP and having the adequate technical assistance. Many times that is actually preventing contracts from being implemented. So I would certainly urge the committee to make certain that the technical assistance for all of these programs, particular programs like EQIP, have the necessary technical assistance to make sure that they get implemented.
    Mr. HAMPTON. Congressman Osborne, I serve on our State Technical Committee, and the regulation, which is very complex, needs to be streamlined more and gotten back to the local level. It is just very difficult for the farmers, especially the small ones, to be able to access funds to build waterways, to clean out their waterways, to prepare their terraces and build new terraces because of a complexity of the regulations of the program.
    As I said, I have visited with many, many farmers, and I have yet to find anybody who has been able to access simply fixing their terraces and getting their waterways cleaned out. There has been some larger, complex issue that needs to be streamlined. Thank you.
    Mr. OSBORNE. Thank you.
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    I might just comment that when you are talking about one bill, Henry, you are talking annually for EQIP? One of the problems we will be faced with is I believe that the amount of money that is currently in the budget for agriculture over the next 10 years is something in the range of $170 billion, which is $17 billion annually, is what it averages out to. Coming up with $1 billion for EQIP alone may be difficult, but I certainly agree with you that it is a very critical program, and we need to do a better job with it.
    Thank you. My time has expired, Mr. Chairman.
    Mr. LUCAS. Thank you.
    Mr. Baldacci.
    Mr. BALDACCI. Thank you very much, Mr. Chairman, for having the hearing and to the panel for giving their testimony.
    Just a couple of questions. I will start with Mr. Smith.
    Mr. Smith, it looks like your request for increases in the conservation programs funded with mandatory spending out of the Commodity Credit Corporation adds up to about $1.7 billion per year. I was wondering if you assumed that various forestry programs would remain as discretionary programs that require annual appropriations, or would they be funded with mandatory funding?
    Mr. SMITH. It is my understanding that those programs are not funded currently within the USDA budgets within the Appropriation's Subcommittee on Agriculture, and we work with VA-HUD on the Forest Service appropriations, and certainly I we think that that's where those expenditures should remain, and maybe I didn't understand your question.
    Mr. BALDACCI. Well, it is just whether they remain as discretionary or mandatory funding.
    Mr. SMITH. Well, I think it is totally separate from the mandatory CCC funding that we are talking about for these USDA programs.
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    Mr. BALDACCI. Well, I think it is very important that forestry be part of the element when we talk about conservation programs and that the same level of assistance and commitment is provided to both when we are going ahead with the development of this particular title under the farm bill.
    I would like to, first of all, thank the State of Kansas and their agriculture secretary for their testimony, because I really appreciate and like the idea of trying to develop a flexible block grant to the States. I know from your testimony it was kind of a work in progress, and there is not a final document yet, but what are some of the guidelines that you think ought to be part of that proposal?
    Ms. ADAMS. It is fairly well along, and I have it from staff that it will be released in the next 2 or 3 weeks.
    But the basic tenets of our program are that, first, it would be a block grant, as you have said, with the Department of Agriculture in each State being the lead agency in designing the program. It would also be based on local input in the local buy-in that the NACDs have talked about.
    Second, we want to recognize all enhancements that protect land, water, air and wildlife in a very broad kind of way, so that if taking care of critical habitat is important in Wyoming but water quality is important in northeast Kansas we can take care of those issues in our States and spend that money on the issues that we see are needed in our States.
    Third, as Congressman Osborne pointed out, there is a need for technical assistance, and we would ask that there be some flexibility there to allow the locals to decide how much goes to payments and how much goes to technical assistance. I do know as an administrator of an agency it is always often hard for legislators to accept that there is some administrative overhead and there are people. I mean, all the money in the world for programs doesn't do you any good if you don't have people to help farmers put it on the ground.
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    Finally, we would agree with everyone on the panel that we need voluntary incentive-based programs, and they should have measurable results. And I think you can see measurable results as long as you understand that it won't happen overnight.
    It is kind of like losing weight. You don't gain it overnight, and you don't lose it overnight, that you will see progress. We have seen progress in our State, but we started a decade ago. So as long as we remember that, I think that you can put performance measures on these activities, as long as you allow the process to play it out.
    Then, finally, we are concerned and would suggest that individual producer privacy and data confidentiality be a part of that program as well.
    Mr. BALDACCI. I have seen some of those commercials on weight, though, that it makes it look a lot easier than it really is, and I am sure that we are not advocating those kinds of efforts.
    Then, looking at the Federal budget and recognizing the limitations that we have on the Federal budget, I think that it is going to be imperative that we have much more efficient Federal, State, local conservation district relationships in order to maximize those resources; and I would like to work with you and your association as you develop further on that.
     Mr. Chairman, just in closing my questioning, I think that you all recognize on the financial front that we have got a backlog on EQIP. We have got a backlog on CRP programs. I think we have got a commitment to fill that backlog.
    At the same time, I think it is going to be imperative to address these conservation issues, because we know that we need the assistance and the development in these particular areas. And I have always felt that in agriculture that we have always been asked to do an awful lot more in agriculture in terms of the environmental and conservation ethics. And I think those are important. And I want to continue those efforts, but I don't think that we have got a fair apportionment of the resources in some of the other environmental agencies for the Department of Agriculture. So I really would like to see if we couldn't be able to, within the budget constraints, be able to allocate more by developing a much more efficient, seamless relationship. All the way from Federal to local, and at the same time being able to put some additional resources.
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    Thank you.
    Mr. LUCAS. Good point, Mr. Baldacci.
    Mr. Moran.
    Mr. MORAN. Mr. Chairman, thank you.
    Let me take this opportunity to thank Jamie Clover Adams, our Secretary of Agriculture, for being here and for her testimony and to commend Kansas during your tenure and during our governor's time in office of I think focusing lots of resources on environmental and conservation issues, particularly water quality.
    I also would thank you personally. I think you have been a great advocate for Kansas farmers and ranchers, and I have not had that opportunity to say that either personally or publicly. So I appreciate your presence here, but I appreciate what you do in our State on behalf of farmers and ranchers and especially on behalf of the conservation and environmental kinds of issues that we face in our State.
    It does appear to me that your testimony suggests that you prefer expansion and improvement of our current Federal programs as compared to a wholesale, radical change in the way that we deliver conservation services in Washington with, perhaps, the exception of adding the block grant program. Is that an accurate summary of your sentiments?
    Ms. ADAMS. That is accurate, sir.
    Mr. MORAN. I used the last hearing we had to talk about legislation that I have introduced that I think you have seen. As I read your testimony, the legislation that a number of us have introduced seems to me to be very compatible with your testimony, perhaps with the exception of we put a pilot program in for CRP, and it seems to me that it in some ways is the same kind of thing you are suggesting, only at a State level, to allow greater flexibility decisions being made at home. And I think I agree with Mr. Baldacci that that is an interesting concept that we ought to look at. So I thank you for you and your Association's point of view.
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    What Federal programs in this area are most important to Kansas producers and most important to our environment at home?
    Ms. ADAMS. Existing programs?
    Mr. MORAN. Yes, ma'am.
    Ms. ADAMS. I think both the continuous CRP for buffer strips, as well as EQIP.
    As you are aware, there are a lot of small producers who are still running cattle on the streams, and that is causing some problem. If we were able to work with those folks and give them some assistance, perhaps provide a higher match, they would be able to move their animals off the streams.
    I was out in Phillips County last summer, and there was a gentleman who had moved about 800 head off the crick, and that that EQIP, as you are aware, only paid for the waste treatment system but had nice new bunks and pens. We were chatting, and he took me out on the weeds to look at the lagoon. He said, I didn't do this for me. I did this for my grandson. And I think that is what we need to remember. As Joe Neal talked about, we need to get young people in agriculture, and the way to do that is to help their families stay in the business so they can pass it on.
    Mr. MORAN. In deference to the chairman from Oklahoma and my friend, Mr. Osborne, from Nebraska, there is no State that has more cattle than Kansas, and I assume that changes in EQIP would be maybe our top priority, and I would ask you, where should we focus? And this was somewhat Mrs. Clayton's focus, is where should we focus? The smaller operators? The larger operators? It seems to me there are lots of challenges out there. Is there a size relationship between where those challenges are?
    Ms. ADAMS. I think, Congressman, when you look at the data from our State, I think we need to look at where the environmental problems are. The fact that in the northeast corner of the State, lives 60 or 70 percent of the population and they get their drinking water from surface water, that is the place to start. If there are issues with other contaminations and other——
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    Mr. MORAN. Regardless of whether they are small operators or large operators, it is where the consequences are the greatest.
    Ms. ADAMS. Exactly and where you can show improvement.
    I think the way we sell these programs to urban folks is to show them that there is progress being made; and, well, you do that by not putting it in because the rules say you put it in but because it is going to make a difference in the environment. And I think that is how you prioritize where are your problems and what is the best way to take care of them.
    Mr. MORAN. Mr. Hampton, you mentioned the grass strips on terraces, as did Ms. Clover Adams. We have struggled with this issue for a long time. Continuous sign-up was available. The Department of Agriculture took that opportunity away. Through efforts, we added language into an appropriation bill in which we reinstated continuous CRP sign-up. The Department of Agriculture was not very happy in that regard. I mean, it has been a struggle to make continuous CRP sign-up on those terraces happen. Are things OK now? Is the Department of Agriculture performing to the degree that we think they should in this regard?
    Mr. HAMPTON. I cannot address that particular point. I have no knowledge of that. But you are correct about the past. It just seems that the benefit of a grass strip for removing so much nutrients before it goes into our rivers and streams, it is just a great program; and we need to be able to utilize that as much as we can.
    Mr. MORAN. The past Department of Agriculture has, I don't know whether to call it philosophical difficulties with this issue, because they believed that they were paying for the terrace, and it is a double payment if they then allowed landowners to receive the benefit for paying for the grass. It seems to me that the benefit are exceptional, both from a water quality but from a wildlife habitat. It is just an important program, but if anybody has any thoughts about whether or not USDA is complying with the congressional directives to make continuous CRP sign-up work, I would like to know, particularly if they are not.
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    Thank you, Mr. Chairman.
    Mr. LUCAS. Thank you.
    Mr. Thompson?
    Mr. THOMPSON. No questions.
    Mr. LUCAS. Mr. Putnam?
    Mr. PUTNAM. Thank you, Mr. Chairman.
    I am also going to pursue a couple of questions about the flexible block grant. Do you think that there ought to be some special consideration for States that are on the cutting edge of developing their own conservation programs? Do you think that there should be a matching program for States to encourage more partnerships, and what are your thoughts on developing those?
    Ms. ADAMS. I don't know that I would give special consideration for cutting-edge programs. I think that we should allocate the dollars. We are looking at working with some models on some various ways to distribute funds under the program as we have talked about it. But I think that we need to provide resources not only to States that are moving ahead like our State, like New York and New Jersey and many other States, but we also need to help those who maybe haven't had the resources to make things happen the way they need to.
    As far as the match would go, we have discussed that amongst the members of NASDA. I didn't sense any opposition to that, but we are still in discussion on that concept.
    Mr. PUTNAM. Well, that's essentially the same thing. I mean, if you are recognizing States who contribute matching dollars, then you are giving them special consideration over a State who does not make it as much of a priority.
    Ms. ADAMS. I didn't think about it that way, but you are correct.
    Mr. PUTNAM. Are you aware of, through your communication with your other State secretaries and commissioners of agriculture, of other success stories, that maybe their State has punished or penalized in the Federal dollars because of rules that the States have, or is there a need for us to be able to recognize the State programs that are out there and prevent those types of problems from happening?
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    Ms. ADAMS. I think performance is the issue. If it is a program that is working and the environment is getting cleaner, we have better habitat, that should be the measure, not whether or not it meets guidelines A, B, C and D. So I don't know that there needs to be any special treatment given, as long as there is no hindrance to moving forward with programs that really make a difference.
    Mr. PUTNAM. Does your State have a resource conservation agreement-type scenario, a less than perpetual conservation easement purchase or development rights purchase program?
    Ms. ADAMS. That has not been used in our State. If you know the geography, we just don't really have the urban centers that would make that a priority in our State.
    Mr. PUTNAM. For some of the other members of the panel, USDA testified in a previous hearing that their use of outside vendors was virtually nil. What are your thoughts on the use of outside vendors, and to what degree do you think that the farm bill will need to reflect an emphasis on using outside vendors to take the load off some of the technical assistance aspects?
    Mr. SMITH. I think, as time goes on, we are going to see a much greater use of—we will call it third-party vendors—in applying conservation or in developing conservation. What we need to do is develop a mechanism for compensating them. Right now, if there is any compensation for these folks, it comes out of the pocket of a landowner or an operator, in lieu of perhaps some technical assistance from the Federal Government or from the State or local governments that might be pro bono.
    So as the demand for technical assistance increases, as the supply of qualified folks from the Government to provide that assistance goes down, the gap continues to widen. And I think that we need to prepare ourselves for how to handle this growing group of third-party vendors that will provide those types of services.
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    Mr. PUTNAM. So do you think that a scenario where the NRCS would certify a private land manager who could then draw up the technical assistance plans and that would be sort of a de facto approval by that outside vendor, would that not have the effect of reducing the backlog and saving the Government money on personnel?
    Mr. SMITH. I know for a fact that is actually happening in some States right now. I know my own State of Washington currently has some outside engineers that are working within State and local areas but are being certified through the Federal engineers. So I think we are going to see that type of—and I would say that that is probably a very appropriate role for the Federal component to take, would be to provide the standards and the guidance and the certification required for perhaps third-party vendors to proceed.
    Mr. PUTNAM. Thank you.
    Thank you, Mr. Chairman.
    Mr. LUCAS. Thank you.
    Mr. Peterson.
    Mr. PETERSON of Minnesota. Thank you, Mr. Chairman.
    Ms. Clover, in your testimony—I am sorry. I wasn't here. I was tied up. But in the WHIP program, you recommended that we apparently rejigger the formula so that it carries out voluntary critical habitat enhancement. What is critical habitat?
    Ms. ADAMS. As I understand it, under the Endangered Species Act, critical habitat is designated by the U.S. Fish and Wildlife when a species is listed as threatened or endangered, and then it is up to the landowner to provide that habitat, and we would just ask that that activity perhaps be a focus of the WHIP program. I know in our State we just had an endangered species listed, and a great number of acres along the Arkansas River that are designated as critical habitat for the Arkansas Shiner that our folks are going to have to deal with.
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    Mr. PETERSON of Minnesota. So they would take and reallocate a lot of this money into trying to deal with the Endangered Species Act? Is that what you are basically saying?
    Ms. ADAMS. That is as I understand——
    Mr. PETERSON of Minnesota. That would take a lot of money, unless we change the Endangered Species Act.
    Anyway, the testimony from Mr. Hampton on CRP—again, I am sorry I missed your testimony, but you don't look like you are a big fan of big track CRP, from what I can tell from your testimony.
    Mr. HAMPTON. No, I am not.
    Mr. PETERSON of Minnesota. Is that accurate? I just have to, I think, take issue with some of your conclusions that somehow or another that people are putting land into CRP is why there is less wheat production, which is what I surmise from glancing over your testimony. I don't know what it is in the rest of the country but in my part of the world the only reason those farmers are still in the area is because they had a chance to go into CRP because they cannot make money growing wheat, period. And that is the reality.
    Up north, we don't have an alternative for wheat. So CRP has been a savior for us. It has been a good thing for the environment, for wildlife. We up in our part of the world think we ought to have more of it, not less of it. So I just wanted to put that on the record.
     I also have to really take issue with the fact—it was kind of implied that somehow or another this had something to do with bringing in more imports. I would argue that it didn't take a rocket scientist to figure out what was going to happen when we signed the NAFTA agreement with Canada, and if they get rid of their Canadian Wheat Board, you ain't seen nothing yet for the kinds of wheat and barley that is going to come in from Canada, because we have opened up the border, basically.
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    So, I mean, I think I could see some of your argument, but I think a lot of what is happening in wheat and barley is, in my opinion, is more of what is going around in this world market and all of this free trade that we have gotten involved in. And I really hope that people will really take a look at this free trade with America situation. If any of you that haven't been to South America, we are asking for trouble, it seems to me, if we get into another kind of dole with them like we did with NAFTA.
    On the CRP, up in my part of the world and some other areas that I have been, we have been having problems with trying to deal with the kind of rigid regulations that have been put in place. I have been out hunting on CRP land where they are going to have to plow it up because in order for them to get enough points to get into the CRP again, they have got to plow it up and plant this seed mix that is required, and in a lot of these areas, it is not going to grow, and so we are going to take perfectly good CRP and destroy it, and we are going to replant it with something that is not going to work and have a mess, and there is no mechanism under the current situation for us to deal with that.
    Now, some of you have talked about having flexibility at the State level. I am not sure that is even far enough down the chain. I think maybe the county level. Do you support giving us some flexibility so we can make the CRP fit the local situation?
    Mr. SMITH. Well, I would very much support your suggestion, and we have commented and included in our testimony that that is a perfect example of a Federal program that needs to have flexibility at the local level. And it is the districts across America's suggestion that these are the kinds of decisions that would be better made at the local level.
    But keep in mind that in order to be accepted in the CRP program an operator had to agree to do those things. And the problem probably is not the selected varieties of grass required, although that is a problem. The problem is far greater than that in that we need to take a look at how that whole program was designed with the environmental benefits index and develop a program that truly reflects the benefit to the environment and start the redesign from the top down and then allow the flexibility at the local level.
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    Mr. PETERSON of Minnesota. Thank you.
    Mr. LUCAS. I believe that concludes the first round. Mrs. Clayton indicated that she might have some additional questions.
    Mrs. CLAYTON. My questions were answered. Thank you.
    Mr. LUCAS. Any other members have any additional questions?
    Mr. PHELPS. Thank you, Mr. Chairman.
    Mr. Smith, you know, the need for responding to regulatory requirements on agriculture producers, both by States and what has come down the pike from the Federal Government, we hear the need for work in areas that encourage conservation tillage and basic technical services. As we fashion funding and the tough decisions that we are going to be making, how do you propose we balance that sort of a consideration to provide the technical assistance that is needful and yet the regulation says imposed?
    Mr. SMITH. We have worked ourselves into a bit of a problem with the allocation of dollars for conservation, as I am sure the committee is probably more aware than any of us. An extraordinary amount of the percentage is going towards land retirement right now; and, unfortunately, a smaller percentage is going towards our working lands.
    I think we need to take a hard look at that mix, and certainly I am a strong supporter of all those programs included in the retirement category, but we are woefully underfunded on things like technical assistance on our working lands, and the best defense that those of us that are on the farm have against the environmental pressure that is increasing daily is to be accountable. We all want to be accountable. We want to do the things that are right.
    And I don't have to tell the committee the state of the economics in agriculture, but our folks out on the farms and ranches across the country desperately need help. We need the technical assistance, we need these incentives on our working lands, and I would hope that the committee could take a look at the balance and try to redirect some funds or find whatever way you can, additional dollars, to help those producers on the working lands and allow them to be accountable to the public, which is what we all want to do.
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    Mr. PHELPS. So essentially, if I hear you right, maybe look at some of the requirements, the environmental requirements and loosen up some of those that make it tough? We are trying to stretch the funding. How do we address both of those extremes?
    Mr. SMITH. I am not suggesting that we loosen up any regulations that are necessary. What I am saying is we need to provide the incentives so those of us out there can make the right decisions and do what is right.
    If we have got the input at the local level to make sure that what we are suggesting or requiring is economically feasible and locally accepted, those of us out there will gladly implement these things with some help. What happens is when you get Federal mandates which make no sense down at the county levels is where we run into some of our problems. And you need to safeguard against having regulations required that make no sense locally. But, I mean, we all want to do what is right.
    Mr. PHELPS. Can you give me an example of just one?
    Mr. SMITH. Well, I think you just heard the example on requiring a species of grass that doesn't fit the area. Those are the types of examples that we need to do, the conservation incentives program. We need to make certain that the funding levels, the requirements and those thresholds are set locally so that our folks down at the county levels can make certain that what they are doing is appropriate and the right thing to do.
    Mr. PHELPS. Thank you.
    Mr. LUCAS. Thank you.
    A couple of quick questions, and we will thank the panel for your efforts.
    Mr. Smith, in your comments, you mentioned in the proposal that an extra billion dollars for EQIP, and I think the way the written testimony was worded, with 20 percent of that being set aside for technical assistance, how would your proposal assure that the personnel would be available to write those EQIP plans? Would it specify that the NRCS chief assign so many people to do nothing but write EQIP plans during a fiscal year? How would you address that in the concept? Because we have talked about the shortages of personnel and resources and how we meet the needs that exist, let alone putting more resources in to meet those needs.
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    Mr. SMITH. Those are really difficult questions, and as we allocate EQIP dollars across the country, I think the problem is finding the proper allocation formula for making sure that the dollars are going where the problems are. And we heard it earlier that we don't want to attack our problems with programs. We need to find out where the problems are and develop plans that will solve those problems.
    EQIP is a perfect example. I know that the NRCS would be thrilled to adequately provide the technical assistance for EQIP if it was adequately funded. The problem is, I am not sure the 19 or 20 percent, the way the program is designed right now, is adequate. And I think with EQIP, for example, that is probably the problem, because there is no mechanism for the time a contract isn't accepted is paid for. It requires a tremendous amount of time from a conservationist to develop an unfunded contract, and who pays that bill when the contract isn't even signed?
    So I think these could all be fixed if we can make some changes within that program to streamline that so we minimize particularly the time that is required in an unsuccessful contract. And those things can all be fixed if we can all get together and do what is right.
    Mr. LUCAS. My next question I would, I suppose, primarily direct to Secretary Adams but to the whole panel. I spent 5 1/2 years in the State legislature before I came to Congress 7 years ago, so I have worked through the priority setting process in State government and have a huge fondness for both State government and local government.
    But let me ask this question of you all in the concept of either block grants or moving more of these resources and concept programs to the local level. How would we determine the local conservation priorities would be met within States, communities, whatever? Sometimes State legislatures have a unique concept about how things are to be done and should be done and do in their conference committees make decisions that are amazing even at home. How do we, if we go down this route, make sure those priorities are properly addressed with those Federal dollars we would be sending?
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    Ms. ADAMS. I think one thing is to hold folks accountable and have performance measures. At least in our State—and I get the sense from my colleagues in other parts of the country that the reason and the way that States are stepping in is because of mandates from other laws, like the Clean Water Act, like the Endangered Species Act and other acts such as that. And if the State legislatures somehow try to circumvent the use of that money, the landowner is the one who is going to pay the price in the end. So I think there is some incentive there to be accountable.
    I also think the contract I have with vendors with my agency is there is accountability, and if you are not accountable, you don't get the money. And I think that is very, very important when it comes to taxpayer dollars. We have to show results. As long as they understand that it is not going to be tomorrow, that it might be 5 or 10 years down the road, but everybody is better off.
    Mr. LUCAS. Every one of you sitting at table has had some involvement or dealings with the Federal Government or Federal programs. My follow-up question to that is how do we make sure that USDA doesn't shift staff away from current programs to oversee and implement these kind of concepts, reshuffling the eggs, yet fewer things are done with real producers out in the field?
    And, oh, by the way, I love those legislators who are drawing my congressional district lines right now in Oklahoma, for the record. Brilliant people.
    Mr. SMITH. Mr. Chairman, I think that the answer is as we develop these programs, which have far-reaching impacts from the Federal level clear down to the local level, we need to develop a procedure that will create some Federal guidelines and keep the States and the counties and the districts within certain parameters, and then at that level create a second set of parameters that will allow continued flexibility as you go down the chain, keeping the vision that you would have here within the committee and allowing for the flexibility at the State and the local level to carry out that vision.
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    Mrs. CLAYTON. I do have another question.
    Mr. LUCAS. Mrs. Clayton.
    Mrs. CLAYTON. I said I didn't have, but now I do have. A couple of comments that the Chair made made me think about the discussion.
    The accountability and the coordination and the oversight all are related, and we try to find out how we don't be constraining and allow for some flexibility. But I sit as the ranking democrat on the oversight committee, and the allocations of dollars to EQIP, who used it, how it was used, you cannot have that unless there is some understanding about that. Just as the State has oversight, if the Federal dollars going out has oversight—and I know when the State allocate their dollars, they have oversight to local governments. So it is with local governments to agencies. I don't think you are not suggesting that you don't have some oversight or accountability, but you want the maximum flexibility within that, and I understand that. And that to me almost is complete discretion. But we have to have guidelines for the utilization of those resources.
    The other point I wanted to make is that in our environmental laws as they are changing and become more demanding, as consumers become more discrete in and demanding in what they eat and how we grow and produce that, they are also doing that in other industries, not just food, but in agriculture. We find ourselves meeting it in several ways, not only in the end product of processing but in the production of it where Ms. Adams talked about the livestock being close to our body of waters. In my State, we have large hog farms which indeed impact on it.
    So you also begin to have environmental laws coming from other agencies that also impact the farmers or local units of government, and I know the natural resources staff has been working. I know in our State that is the case. If you add to that a calamity that may happen to happen, a storm or a drought, and now you are having to coordinate with different agencies and implement all these programs we have here, there is a point as how many programs can we efficiently and responsibly allocate and how should our coordination be.
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    So I just want to make the observation there is a staff resource and capacity resource in our ability to really implement what we put on books. So we just shouldn't check which can put the program dollars out there without some accountability. And we can't do those well unless we coordinate with other agencies that have some overlapping responsibility, rather, the State or the Federal agencies as well.
    Now, that wasn't a question. It was a comment.
    Mr. LUCAS. Thank you, Mrs. Clayton.
    You brought to mind one more question from me, and this will absolutely be the last question. We talked about incentive payments, and EQIP currently has an incentive payment option. Is it inadequate? Or what changes could be made? One last question to the whole panel. Looking at the incentive payment options within EQIP, is it inadequate, and what changes could be made to help producers?
    Ms. ADAMS. Mr. Chairman, while my agency is not responsible for implementing those programs, in my conversations with our State Conservation Commission, they are finding that there aren't a lot of takers with EQIP currently in our State, and much of that has to do with the size of the match and the current situation in the farm economy.
    Mr. SMITH. Apparently, this incentive component within EQIP, someone needs to take a hard look at it, because those of us that have applied for contracts and even have contracts aren't terribly aware of it or even utilize it. So I would suggest that there probably is something wrong, since it is being underutilized.
    Mr. HAMPTON. Congressman, we would like the EQIP program to be amended to allow payments to producers during the year the contract is signed. Current authority disallows that, and it impedes investment in necessary environmental technology and delays the benefits.
    Mr. LUCAS. Thank you.
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    Mrs. CLAYTON. Mr. Chairman, this is my last.
    I want to tell you that the last statement Mr. Hampton made, I have had minority farmers say to me why they don't participate, particularly socially disadvantaged farmers who are the minorities now, they can't afford to wait that long. They can't put $10,000 and get it 2 years later. They don't have that margin of operation. So I just wanted to acknowledge that that has been a concern raised by the farmers in my area.
    Mr. LUCAS. With that, the subcommittee appreciates the insights and the variety of responses from the questions the panel has answered and provided input on. Thank you for your attendance today, and we look forward to working with you to help make some positive things continue to happen in production, agriculture and in conservation in this next farm bill. Thank you.
    If the next panel will come forward. We have Mr. R. Max Peterson, executive vice-president of the International Association of Fish and Wildlife Agencies here in Washington, DC. We have Mr. Craig Cox, the executive vice-president, Soil and Water Conservation Society from Iowa; and Mr. Jeff Nelson, director of operations for Great Plains Regional Office, Ducks Unlimited, Inc., Bismarck, ND, on behalf of the Sportsman Coalition; and Mr. Ralph Grossi, president of the American Farmland Trust, Washington DC, on behalf of the Coalition of Conservation and Environmental Organizations.
    Mr. Peterson, whenever you are ready, you may begin, sir.

STATEMENT OF R. MAX PETERSON, EXECUTIVE VICE-PRESIDENT, INTERNATIONAL ASSOCIATION OF FISH AND WILDLIFE AGENCIES, WASHINGTON, DC

    Mr. PETERSON. Thank you, Mr. Chairman.
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    You have my testimony. If you will accept it in full, I will try to brief it for you and save you some time.
    Mr. Chairman, I do represent the 50 State fish and wildlife agencies that have been involved in these conservation programs since the beginning. I would also acknowledge that some of us here with more gray hair than others were part of the 1985 farm bill, but we have followed these through the years, and let me acknowledge that I think these conservation provisions of the farm bill, beginning in 1985, have done a tremendous amount of good not only for farmers and helping stabilize income but in terms of conservation. As you go about the country, there is wildlife abounding in places where it was not really present in very large numbers before. We see streams running clear that one time were running muddy.
    So much of my testimony deals with the fact that we think we have made a great many improvements over time in these conservation reserve programs, and I would be the first one to acknowledge that they are not perfect. The point that in some places we are still having problems with the right grass mixture is something that we dealt with I thought 15 years ago to empower State Technical Committees, working with local counties, to be sure they got it right, but we still find places apparently that we—the half life of knowledge I am absolutely convinced is about 6 or 7 years. You solve the problem once, and it comes back to bite you.
    So one of the suggestions that we make in our testimony, I think if we had some kind of a threshold level of qualifications for some of these programs and then allow flexibility to design within our threshold level. I have never been really comfortable with computer programs making the final selection, but it does seem to me that there does need to be some weighing of conservation benefits between different kinds of land. I am not sure how you do that without some kind of an attempt to do it through an index or some system of weighing one piece of land against the other, but I have always been concerned about the idea that you get the precise answer by using a computer program. I would much rather have State or local people out there with some kind of a threshold level look and say, yeah, here is land that qualifies, but this one is better than this one over here, or if we could do this to this land, it would be a substantial improvement.
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    One of the concerns over the years is how do you relate these different programs, like CRP, WHIP, Wetland Reserve Program and so on. There again, I would give States much more flexibility in tying these programs together at the local level, because a farmer may have both some wetlands, he may have some land that qualifies for CRP, he may have some land that would qualify for EQIP. There ought to be a way to package that that would make sense to the farmer. Because now it happens at different times and different standards, and you aren't really sure what kind of a program you are going to get till the dust all settles. So I think there is some opportunities to improve that.
    In my testimony, we have made recommendations for different levels of the different programs. We recommend that CRP be expanded from 36.4 to 45 million acres, that the wetland reserve program, we increase the authorization by 250,000 acres a year. As you know, that is completely used up now. We believe that WHIP, which has turned out to be a tremendously beneficial program, be authorized an expenditure of a hundred million acres, because one thing that WHIP does, it allows sort of a custom design of a program to fit a particular farmer's operation and fit the wildlife needed there as well as the other conservation programs.
    There is a proposal that we have been working on for several years for a grassland program. There is a lot of grassland out there that is in existing cover that is highly beneficial. As Congressman Peterson says, who has been in this about the same time I have, it never makes any sense to me to plow up one piece of land in order to put another piece in. And I am sure it doesn't make any sense to the farmer either. So it would be very helpful if we could have a grassland program that would specifically recognize the benefit of grasslands.
    Finally—and just suggestions of improvement—the continuous sign-up program, I have a brother in Missouri who is in the real estate business. He deals with this all the time. There is very small acres involved there. So you really can't use standard rental rates and so on. That has to be developed in more of a custom-made program.
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    Finally, we believe that both the Farmland Protection Program and Forest Stewardship and Forest Legacy should be part of this program and not separate, because sometimes farmers want one of these and not the other, and it would make sense to be able to get one as a mandatory but they have to wait and see if there is an appropriation for something else.
    That completes my brief on my testimony, Mr. Chairman.
    [The prepared statement of Mr. Peterson appears at the conclusion of the hearing.]
    Mr. LUCAS. Thank you. Mr. Cox.

STATEMENT OF CRAIG COX, EXECUTIVE VICE-PRESIDENT, SOIL AND WATER CONSERVATION SOCIETY, ANKENY, IA

    Mr. COX. Thank you, Mr. Chairman and members of the committee, for being allowed to speak to you today.
    We have submitted written testimony. We have also released a new report this morning that we have provided to the committee that presents detailed recommendations for what we would recommend for reform of both conservation and farm policy in the next farm bill.
    But in the few moments I have in front of you, I would like to try to rise up to the challenge you gave us, Mr. Chairman, to talk about conservation in the context of a comprehensive farm policy.
    What I am going to say is based on a series of five workshops we held around the country where we invited grassroots leaders from agriculture, water resource and fish and wildlife communities to share their ideas with us about how to fix what we have in conservation policy, and we also asked them to imagine they could wipe the slate clean and start from scratch. We have taken their ideas and attempted to shape them into specific recommendations that would be of use to you as you struggle with the decisions you need to make.
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    My basic message would be that we think we are missing a critical opportunity in agricultural policy to both help keep people on the land and care for that land at the same time, and we think the reason that we are missing that opportunity is because conservation policy is unbalanced and farm policy is unbalanced. Conservation policy is unbalanced because we have to rely too much on one tool, which is taking land out of production for conservation pumps.
    Farm policy is unbalanced because, again, we have to rely too much on one tool, which is trying to affect the price of a selective set of commodities or subsidize the income of those producers who produce a selected set of commodities. As a result of those two imbalances the reach of agricultural policy is seriously limited, and it simply cannot help keep people on the land and care for the land in the way that our workshop participants envisioned that agricultural policy ought to be designed to do.
    Now, we think we can correct this imbalance but that in order to correct that imbalance and really make conservation a force for helping keep people on the land we are going to have to look at fundamental reform of both conservation policy and agricultural and farm policy.
    On the conservation side, we need to double funding for existing conservation programs at about $2.5 billion more but spend most of that new money on technical services and on assistance to landowners that are trying to keep farming and not take land out of production. That doesn't mean we don't support the CRP and WRP. In fact, we make room in our $5 billion budget for a 30 percent increase, over $500 million increase, for those functions. But the major emphasis on new investment has to be technical services and financial assistance to help those farmers that want to keep farming but do so in a more environmentally sound way.
    Now, we detail a number of other specific recommendations for program reform in our testimony in the report that I refer you to, but let me now jump quickly to farm policy reform.
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    If we did what we just recommended in terms of conservation policy, we would make a huge step forward in ensuring that commercial viability of action and environmental quality are compatible goals, but that is not enough to achieve the vision that our workshop participants gave to us.
    To do that, we think we really need to make room in farm policy this time for a program that is based on stewardship rather than based on the collection of commodities that a producer happens to produce. We see stewardship contracts as being worked into farm policy in a way similar, perhaps, to production flexibility contracts. But instead of that production flexibility contract being—the payment being calculated based on the historic mix of a selected set of commodities produced, the stewardship payment would be based on the level of conservation benefit a producer is willing to do and to produce environmental benefits for taxpayers.
    About 8 percent of farmers currently receive over half of all the farm subsidy payments, while operating about 32 percent of the farm acres in this country. We think a stewardship contract, as part of farm policy itself, would be a way to balance farm policy and reach out to all of those agricultural producers who do not receive lots of subsidies from current programs but who do manage most of the landscape in this country.
    Thank you, sir, and members of the committee.
    [The prepared statement of Mr. Cox appears at the conclusion of the hearing.]
    Mr. LUCAS. Mr. Nelson.

STATEMENT OF JEFF NELSON, DIRECTOR OF OPERATIONS, GREAT PLAINS REGIONAL OFFICE, DUCKS UNLIMITED INC., BISMARCK, ND, ON BEHALF OF THE SPORTSMAN COALITION
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    Mr. NELSON. Mr. Chairman, members, I appreciate the opportunity to address the committee. We have submitted written testimony, and so I am just going to quickly summarize what we had to say.
    I am a professional biologist by training, and I work for Ducks Unlimited, but this testimony comes from just more than Ducks Unlimited. I grew up on a dairy farm in Minnesota, and so I have a farming background myself, and I have also worked in both the United States and Canada, mostly in the prairies.
    Ducks Unlimited, as you may know, has grown from a handful of people in 1937 when it was founded to an organization over a million supporters that have helped conserve nearly 10 million acres of habitat across the continent. We take great pride in our work with private landowners, in our ability to assist and advise farmers, ranchers and foresters on how they can meet their economic goals while providing habitat for wildlife.
    Importantly though, today I am representing the views of a broad coalition of about 40 conservation organizations with their interests being represented by nearly 10 million members. These organizations represent a spectrum of interests that have come together to support continuing a strong conservation tradition in U.S. agriculture policy. The groups I represent today include the Nature Conservancy, the Congressional Sportsman Foundation, Pheasants Forever, NRA, The Wildlife Management Institute and others. Collectively, our members and supporters represent a sizable cross-section of our Nation's citizenry. You will find a list of the organizations on the title page of our written testimony.
    The future of wildlife in this country is inseparably tied to actions undertaken on private lands. Agriculture is by far the dominant use on these lands, with about 50 percent of the United States, or 900 million acres, managed as cropland, pasture or rangeland. Thus, Federal agricultural programs and policies have an enormous influence on the condition of our Nation's air, soil, water, plant, wildlife and other natural resources. In recognition of this fact, Congress incorporated strong conservation titles in the 1985 farm bill and has continued this approach in each of the last two farm bills.
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    Over the past two decades, conservation programs have played an integral role in the economic vitality and general well-being of our Nation. In addition, they have improved conservation of private lands by enhancing and protecting wildlife and their habitat. The increased role and importance of conservation in agriculture and its role in private land stewardship has given way to a dialog that, while contentious at times, has led to consensus and partnerships among Government and private interests, including commodity groups, individual producers, livestock organizations and the conservation community as a whole.
    Voluntary, incentive-based conservation provisions included in national agriculture policy have provided the framework for win/win solutions on the farm and across the rural and urban landscape. Our organizations are united in their belief that this Congress should strongly support continued commitment of our Federal resources to farm bill conservation provisions.
    I will present four areas of focus, followed by brief descriptions of the specific farm bill conservation programs and the rationale for including them as we go forward. The Coalition is united behind these four areas of focus, and they lie in no particular order.
    We would like to see expansion of the Wetlands Reserve Program to accommodate enrollment of 250,000 acres per year through the duration of the next farm bill.
    Second, we would like to see the restoration of the enrollment caps for the Conservation Reserve Program to its original 1985 level of 45 million acres.
    Third, we would like to see expansion of the WHIP Program to authorize expenditures of $100 million annually.
    And, fourth, we would like to see the development of a new Grasslands Reserve Program, which would authorize up to a million acres for enrollment and that would be targeted to some of the native grassland areas that we still have out there.
    We urge you to continue and expand these agriculture programs with the addition of the Grasslands Reserve Program, because they have been proven to be successful in achieving recent conservation gains and provide critical options for family farmers. Farm policy that includes wetland and grassland protection features, like swamp buster and sod buster, in combination with other voluntary incentive programs like I discussed, comprise a package of conservation provisions that, taken together, promise future success based on a strong tradition of natural resource stewardship.
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    Farm policy must address both the immediate and long-term needs of our Nation's producers. Producers must be able to survive and hopefully prosper while they work to provide food, fiber and shelter so important to our qualify of life. The conservation of soil, water, wildlife, and other natural resources requires a long-term strategic view, and this subcommittee has a special challenge to try to incorporate these sorts of things into farm policy.
    I would like to thank you with that for the opportunity to provide comments as you continue to deliberate on conservation in the next farm bill.
    [The prepared statement of Mr. Nelson appears at the conclusion of the hearing.]
    Mr. LUCAS. Thank you. Mr. Grossi.

STATEMENT OF RALPH GROSSI, PRESIDENT, AMERICAN FARMLAND TRUST, WASHINGTON, DC, ON BEHALF OF THE COALITION OF CONSERVATION AND ENVIRONMENTAL ORGANIZATIONS

    Mr. GROSSI. Thank you, Mr. Chairman.
    I am a dairy farmer and cattle rancher from northern California, and for the past 16 years, I have also served as president of the American Farmland Trust. Today I am here to testify on behalf of 16 national and regional conservation and farm organizations representing more than 10 million Americans.
    Our fundamental message to this committee today is that conservation should be the focal point of the next farm bill. Rewarding farmers for environmental stewardship can promote rapid progress on a wide range of critical national environmental objectives. Private crop, pasture and range lands account for more than 50 percent of the lands in the contiguous United States; and private forests account for another 20 percent.
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    Farmers and private forest owners can provide not only food and fiber but also clean water, habitat for native wildlife and a barrier against sprawling development, as well as other public benefits.
    Mr. Chairman, I want you to grasp the gravity of this moment that you have, this moment in time, to recraft farm policy in this country. The American consumer is not demanding more wheat, corn and soybeans. The American consumer is demanding clean air and water, wildlife habitat and open space around their communities. The next farm bill can provide the funds to help farmers achieve those needs of all Americans. The Agriculture Committee has a historic opportunity to craft the next farm bill in a manner that properly recognizes the importance of the private landowner.
    Because in its budget resolution Congress has made an average of $21 billion per year available for a 5-year farm bill, this committee does have the resources necessary to craft a bill to address private stewardship challenges in a way that is appropriate to the scale of the need.
    And the desire among landowners is great. More than half of all farmers seeking technical assistance to enhance stewardship are turned away. So, too, are three out of every four farmers seeking help from the EQIP program to improve water quality. There is a backlog of 560,000 acres of wetlands to be submitted for restoration for the Wetland Reserve Program, and approximately 4,000 farmers and ranchers in the path of sprawl are willing to sell their development rights. The oversubscription to the Farmland Protection Program this year was 6 to 1. There clearly is a need and a desire by landowners to do something. The response has to start in committee. They are turned away because conservation spending since the last farm bill as a percentage of direct aid to farmers has greatly declined, from about 30 percent in 1996 and 1997 to 6 percent in the last fiscal year.
    A new farm bill should focus $11.8 billion per year on conservation programs and stewardship incentives, as well as programs for research, marketing, and rural economic development that support independent and resource-conserving farmers.
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    A reoriented farm bill can help meet a broad array of challenges and help farmers, ranchers and foresters attain the environmental quality that the public is demanding. There are numerous areas and specific recommendations that we can make to you, but in the interest of time I will skip through those and just mention that the highest priorities I think clearly are in the areas of water quality, in sprawling development and preserving prime and unique farmland, safer food and confidence in that food supply, native wildlife and endangered species, enhancing pasture and rangeland in this country, as well as our private forest lands, and in the area of climate change, where many of the practices that reduce polluted runoff or enhance wildlife habitat also help sequester carbon, turn methane into energy, reduce nitrous oxide and otherwise reduce gases that contribute to global warming.
    Federal programs can help farmers develop markets as well to solve verifiable true reductions in greenhouse gases to industry.
    Current farm programs are lacking in many ways, and you have heard this from other members on this panel. And I think it is important to note that nearly two-thirds of all producers currently don't receive any direct support. A broad conservation title can do much to help farmers and communities address their needs. But, again, it has to start at this committee. Of the $21 billion available, roughly half should be made available for these programs to provide stewardship payments, to buy easements on threatened lands, to create incentives for farmers to enhance and preserve grasslands and, importantly, to increase the technical assistance needed to deliver those programs to respond to those needs.
    If you don't respond to this need to help individual landowners, the public will force more rules and regulations on those private landowners. We know they are demanding these services, and they will get them one way or the other. This leads to more conflict over the use of lands and how lands are used and, to resolve that, we have to find ways to make private landowners partners with the public in achieving them.
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    Thank you.
    [The prepared statement of Mr. Grossi appears at the conclusion of the hearing.]
    Mr. LUCAS. My first question would be—perhaps those organizations, Mr. Peterson and Mr. Nelson, who have advocated going back to the original CRP target number, 45 million acres. Have your organizations taken into consideration when preparing your positions on these concepts not only the potential impact on soil and water conservation and wildlife but also the economic and cultural impact on the areas in rural America where the majority of these acreages are or would be?
    Mr. PETERSON. Yes, we have. We believe that the economic impact would be positive.
    If you look at where CRP has been used now, it provides a supplemental source of income for people. It provides some assurance that there be money there to pay debts to banks and so on. So I think you will find in the communities where CRP is important, by and large, it has been positive in that community. It has always brought people into the community to hunt and fish and otherwise recreate, which is one of the fastest-growing types of recreation in the United States today is related to wildlife. That is, in fact, the fastest growing. So, yes, we have looked at that, and we think it would be positive.
    Mr. NELSON. We would agree with that. In fact, we looked into the idea that CRP has somehow contributed to the decline of small-town America in the rural landscape, and in fact we looked in North Dakota and found that a number of acres of cropland has not gone down since CRP was initiated. It has actually gone up. And what CRP really replaced was foul grounds. So that land now, instead of eroding in sort of a foul kind of a system, has been taken under production and put under grass and created all the benefits CRP creates. Whereas, it has an impact, either the bush was harvested or the acres and cropland.
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    The other thing I might mention is we work with our Canadian counterparts where they don't have CRP, and the same trends are occurring across the prairies of Canada as you see in the great heartland of the United States in terms of agriculture and the towns that rely on agriculture. So I agree with Congressman Peterson that I think there is a lot of information that we have indicated is a positive benefit and not nearly negative as some would have you believe.
    Mr. LUCAS. Mr. Cox, your organization stewardship-based option for agriculture, you mentioned that it would involve the say of local producers and citizens with guidance from USDA's State Technical Committees in establishing what the minimum bar would be for producers to pass to be eligible for the payments. Would you expand for me just a moment how the concept envisions those agricultural producers playing a role in this process of determining what environmental issues would qualify to receive assistance?
    Mr. COX. Well, I think we are attempting to bill on the model that has been used for the past 60 years, frankly, in working with agricultural producers and community at the local level to help direct how USDA conservation programs are spent.
    The State Technical Committees, in our view, would be the go-between, frankly, between the local communities and the Federal Government. It would be their responsibility to help mesh the priorities that are established at the local level with the priorities that are established at the Federal level to assure Federal taxpayers that the dollars they are investing in these conservation programs actually meet significant State environmental or national environmental goals. So that is how we see the State Technical Committee playing.
    At the local level, conservation districts, watershed councils, FSA committees, these local folks have been involved for decades, often involving producers themselves in helping to set priorities for what conservation spending ought to be.
    Now, there are two recommendations I think you may be talking about at the same time. The second recommendation, we feel that issue of what taxpayers ought to be expected to pay for versus what farmers or ranchers ought to be expected to do as a responsibility of land ownership is going to arise as a significant issue in the implementation of this program, especially if billions of dollars are put through this pipeline as we recommend, the $3 billion program. This kind of issue has already been raised in programs like EQIP, where operators above the thousand animal units have been excluded from assistance for some portions of EQIP.
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    We think the way around that or the most creative way around that would be to have agricultural producers and local citizens decide in their local community what ought to be expected as a minimum land stewardship from farmers and ranchers and pay for efforts in addition to that.
    Mr. LUCAS. So you envision the local entities being on par with the State Technical Committees or being recipients of their decisions?
    Mr. COX. Well, I actually think that is sort of a false dichotomy. I don't think we send to set these things up as local versus Federal or top down versus bottoms up. The fact is, we need both. That is the only way you can achieve accountability to taxpayers and flexibility to local citizens simultaneously.
    There is this tension between local control and accountability is a necessary and desirable part of a system that relies on local, State and Federal partners. I don't think there is any way to—I don't think you can choose the grassroots versus the top down. You have to make that process transparent and as participatory as possible.
    Mr. LUCAS. But as in the nature of any governmental process from which the majority of the money flows, generally flows the majority of the control, too.
    But we will have time to visit with this in another round. I now turn to Mrs. Clayton.
    Mrs. CLAYTON. Well, I, too, want to focus on this. I was struck by your first—what was it we needed? A new vision? What was that? We had an opportunity for a new vision?
    Mr. COX. Yes, ma'am.
    Mrs. CLAYTON. And that the dichotomy of where we are now is how we are approaching our farm program is we have taken land out of production, that that's how we take care of some conservation and how we take care of fluctuation in the market, we support local commodities. That is where you have summed up what we are now doing. Right?
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    Mr. COX. That is correct.
    Mrs. CLAYTON. Now as we move to get the balance, we would use those tools. We would talk about the current tools you see us using. If those tools—the status quo, and we want to move to a more envisioned and enlightened farm bill.
    Mr. COX. Right.
    Mrs. CLAYTON. Help me understand how we move from the price quota for certain commodities and how we achieve a sustainable, safe environmental land and not use our current tools.
    Mr. COX. I will try, ma'am.
    Mrs. CLAYTON. I just want to understand where you are.
    Mr. COX. I understand, and I will try to address your question.
    On the conservation side, let me address that first, and then I will talk about the farm policy side. On the conservation side, the CRP and the WRP are very excellent, effective tools. In fact, they demonstrate what enough money can do.
    Mrs. CLAYTON. So those two you see as being adequate?
    Mr. COX. So those should be retained, and in fact we would propose increasing their reach. But we would see the major expansion on the conservation side being in programs like EQIP that are helped to design people that are producing food and fiber do so in a more environmentally sound way and with a primary emphasis on technical services. By that I mean research, education, technical assistance. We actually see that as the fundamental conservation program.
    Mrs. CLAYTON. So you would substitute technical assistance from what we are now doing in the EQIP program?
    Mr. COX. Well, I think we need to change the way we think about technical assistance. Too often we see it as a cost of delivering financial assistance. That is not how we see it. We see technical assistance as the basis of conservation, with financial assistance being something that makes it easier for farmers to do conservation.
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    So we would change the emphasis to put technical assistance at the core and then use these financial assistance tools to help farmers do what they now know how to do in terms of changing their operations on the farm policy.
    Mrs. CLAYTON. So you would put in more incentives to encourage good environmental behavior that farmers are now doing? Is that what you are saying?
    Mr. COX. I would focus EQIP on helping farmers adopt production systems that produce crops or livestock that integrate conservation practices directly into those production systems so that the process used to produce food and fiber produces environmental goods and services at the same time. That is what those sorts of programs ought to be directed to doing, and technical help is absolutely critical to making that happen, in fact, more important in many cases than financial help.
    Mrs. CLAYTON. So would you, therefore, give more resources to capacity building for technical assistance within natural resources?
    Mr. COX. If you start from the 2000 year funding, our $5 billion proposal for conservation programs—as opposed to $3 billion for farm programs would be—we would double funding for technical services to about $1.75 billion a year. We triple fund for what we call assistance to working land, programs like EQIP, to about a billion a year. And we would increase the land retirement programs by about 30 percent to $2.25 billion. That is the sort of balance we think would actually create a fully functioning conservation program enterprise effort within the Department of Agriculture.
    On the farm policy side, what we have seen in terms of our looking at the data is that there have been fundamental changes in the structure of agriculture. And because our basic commodity subsidy programs follow production, as production of those subsidized commodities has focused on fewer farms and fewer acres, so have the subsidies. And what has happened is because of that there is a large portion of agriculture, most producers frankly operating most acres, that do not benefit that greatly from our current commodity subsidy programs.
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    That came through loud and clear in our workshops. And what we see is our stewardship contracts being a viable way for the Federal taxpayer to engage with those agricultural producers, provide them help to keep them on the land by paying for what they are already doing, and also paying for them to do more than they are doing now. So that is how we see the stewardship component being fit into farm policy.
    Mrs. CLAYTON. Thank you, Mr. Chairman.
    Mr. LUCAS. Thank you. Mr. Kennedy.
    Mr. KENNEDY. Thank you very much. And I appreciate your good testimony and I was happy to be part of one of your forums, Mr. Cox.
    And part of what I have been hearing through a number of panelists, both this panel and the last panel, is the need for more flexibility at the State level. And I found that whenever we have glitches in the States' flexibilities to deal with these they can be more creative and innovative than we can be sitting here in Washington.
    What ideas do you guys have, and I will open it up to comments, on how we can encourage innovation at the State level that will maybe help guide the way for how we should be going nationally?
    Mr. PETERSON. I will give you a couple of ideas. I think that what Mr. Cox is talking about, one thing we have always advocated, I think there are people who will do things just from technical assistance. So wherever you can provide technical assistance a large number of landowners will do that. That should be one option that is open probably more broadly, and it does not have to be tied to signing up for CRP or WRP or something, technical assistance to help people assess their operation. And some if they do that will do good things for conservation.
    But I would say to the Congresswoman over here that not always are people able to afford to do it if they have technical assistance, because you have a lot of small landowners that may need some level of financial assistance. And that is where it would be extremely important to have some flexibility at the local level to give technical assistance to those who only need that and be able to go a step further to landowners who need more than that. That is one kind of flexibility.
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    Another kind of flexibility, as I mentioned earlier, is to try to package these programs so that you do not at one point put in a CRP and 3 months later do WRP and some time later do something else so that the farmer will know the outcome at one point in time. Those are just a couple of ideas. And I think if you gave the State and local people more flexibility, they would come up with more ideas of how you might do this.
    Mr. GROSSI. Congressman, I could add a few points. I think one of the problems with our current programs is that the priorities are set here instead of in the States and localities. If we had a system in the best of all worlds where the State knew how much money they were going to have in the form of Federal matching funds for a particular year, and had fairly broad guidelines as to how to apply those funds based on the priorities in that State; that is, water quality versus climate or some other issue, habitat, and allow them to make those decisions and draw those guidelines, if you will, to allocate the funds and to decide how much matching funds they could apply to the programs, we would have a much more effective system.
    We would generate a lot more interest and probably a lot more matching funds at the State level and we would build a constituency for these Federal programs that currently does not exist among American consumers and taxpayers.
    I would point to one program with which I am very familiar, of course, as an example: The Farmland Protection Program allows States, local communities, and nonprofit organizations to match Federal dollars, and it matches them rather dramatically. Unfortunately, it has been a small program but we are getting a 6-, 7- and 8-to–1 match from non-Federal sources. That is the kind of efficiency and leverage I think we could get in other programs if they were designed properly.
    Mr. COX. Congressman, we explored the idea of block grants, which was brought up in the previous panel, in our workshops. We ran into a buzz saw of opposition to the notion of block granting programs for a number of reasons, including accountability issues and concern that those programs would be redirected away from the purposes for which they are authorized by Congress.
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    We think there is a couple of opportunities to pursue that are perhaps less dramatic than block grants. One would build on the experience with the Conservation Reserve Enhancement Program that I think you are familiar with in Minnesota. This notion of operating Federal programs through State agreements that provide States much more flexibility in how those programs operate I think is a good example. And I think we should explore how to expand that notion to all of our USDA conservation programs, building on the success of CREP, and of the Wildlife Habitat Incentives Program.
    We also think there is an opportunity to provide States more money as well as more flexibility to implement their State agreements or State plans, by thinking about creating a fund by which a portion of all of the dollars made available every year for individual conservation assistance funds is pooled and made available to States who have signed these agreements. And somewhat like a grant program, I mean, we think this kind of idea would get around a lot of the objections that we heard to block grants and yet provide a significant amount of flexibility and authority at State and local levels to deal with Federal program guidelines.
    Mr. KENNEDY. Good.
    Mr. NELSON. I will just make a quick comment. ''One size fits all'' never works as good as many sizes tailored to each individual area would work. The example of the CRP cover EBI is a great example of what happens when you try to apply one formula to everywhere in the country. I would strongly advocate being mindful of flexibility at the State level, but maintaining important sideboards to maintain quality control in the program and some consistency across the country.
    Mr. KENNEDY. We appreciate your comments and look forward to working with you on adding more flexibility in whatever we do here in conservation. So thank you.
    Mr. THUNE [presiding]. Mr. Thompson.
    Mr. THOMPSON. Thank you, Mr. Chairman. I have a question of questions, one I think I am particularly interested in. I am from California and our property values in California are, sometimes to the point where it is detrimental, are pretty high. And it seems to me that we need to figure out some way to craft the conservation programs so they will be able to respond to the sprawl matters and such in California that will allow us to participate in the programs. We have lost, I think, 97 percent of our historic wetlands, for instance. So I would think it would be an idea that is critical that we are able to respond. But given the high property values, it is tough for us to participate in these programs.
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    I was wondering if any of you had any ideas as to how we could address that issue?
    Mr. GROSSI. Well, as the Californian sitting at the table I will take the first shot at it, Congressman. While I am at it, I want to welcome a fellow Californian sitting behind me, former Deputy Secretary Rominger, who has joined us today, who might know a lot more about this than any of us.
    As you know, the current method of distributing dollars across the American landscape, Federal dollars for farm programs, is not based on any real evaluation of the resource base. It is historic based on primarily commodity production, and that in itself ought to raise a big red flag for all of us. California is by far the number one agricultural State. It has tremendous natural resources that are at great risk, and there is very little money going into that State to address the problems.
    So redefining the parameters, the different distribution system, maybe allocating new dollars; you heard me suggest that we ought to raise the total to somewhere around $11 billion. Maybe it is not the current level dollars that you reorient, but put the new dollars into those places where the most important resources is at the greatest risk and allocate it by some criteria that defines that other than what kind of commodity you produce.
    I think it is very clear that in California a little money will go a long way, even though the property values are high, because the public has put protection of the land as a very high priority. And so the State and private interests and foundations are contributing a great deal of money. And, frankly, the Federal Government is not living up to its share of the costs of protecting the environment out there. I am suggesting a different kind of criteria that would make sure the money goes into the place where the best, most important asset is at the greatest risk.
    Mr. PETERSON. Congressman Thompson, having lived in California for 15 years, but I sold my property before all the values went up. I have good timing. But realistically, I think as Ralph Grossi has indicated, there are some important partnership programs that have worked pretty well in California. The State of California Fish and Game Agency, for example, has put quite a bit of money into protection of wetlands. Ducks Unlimited put quite a bit of money into it. So I think if we look at partnership programs in places like that where values are high, the benefits are also high. So we ought to figure out ways to leverage those partnership programs as one idea.
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    Plus, maybe that Environmental Benefits Index that we all cuss and discuss, maybe we could recognize the size of the benefits from some of these programs other than just the benefit index.
    Mr. THOMPSON. Thank you. I look forward to working with any of you and the subcommittee to make sure that we can address this issue.
    Another matter that concerns me—and it came to my attention because of a California project, but I am assuming it has happened in other places—we have a highway in my State that they want to realign, and they want to realign it, the Department of Transportation, right through the middle of permanent easements for wetland protection. And they are going to take it through both State level easements as well as CRP and WRP easements.
    I think this greatly undermines the integrity of the program. If someone puts their property into permanent easement and taxpayers pay for that, it seems deleterious to me to then run a highway through that. And I would like to figure out some way that we can provide a higher protection for these properties that we are trying to protect. And if you have any suggestions on that, I would like to hear from you. You can let me know separately because my time is running out.
    I would like to get a sense from the four panelists as to your ideas as to permanent easements vis-a-vis temporary easements. It seems to me the permanent easements provides a good planning tool for both resource allotment as well as for farmers who participate in these programs.
    Mr. PETERSON. Let me talk about the highway thing there for a minute. There is a provision in the Federal law that says if you are building a highway, you can't use either recreation land and so on unless there is no feasible alternative. That is maybe a little too strong for the case that you are using, but there is a precedent in the law that says you can't just disregard the fact that there is an easement.
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    I would also point out that groups that oppose permanent easements also say that sometimes a little thin easement might hold up something that is badly needed. So somebody ought to be able to weigh those equities. And we believe that the fact that there is a permanent easement ought to be an important thing when you locate that highway, to not just ignore that is there. And there is precedent in the Federal Highway Act now for outdoor recreation and park land, but does not address permanent easements.
    Mr. NELSON. I will just say one quick thing about permanent easements. I think permanent easements are a critical part of the mix. I think there are critical parts of the landscape that ought to be put under easement to protect the resource values that are there. On the other hand, there is always the need for shorter term conservation programs that maybe transition landowners to different kinds of working agricultural properties.
    Mr. GROSSI. Congressman, let me just add two quick comments to that. The reference to the highway, there is a Farmland Protection Policy Act passed in 1981, rules are out and the Governor of the State has considerable power if the highway is going to go through productive prime farmland. So that is one avenue in that case.
    On the issue of permanent versus term easements, I think the reality is that you will find that you will pay almost as much for a 30-year easement or 25-year easement as you would for a permanent easement. In that case what are we really getting for the taxpayer in return? Are we getting permanent protection for the money put out or only buying time?
    Mr. THUNE. Mr. Putnam.
    Mr. PUTNAM. Thank you, Mr. Chairman. I wanted to speak with you about some of the ideas that the Farmland Trust and Mr. Cox had raised. Mr. Cox, if I read your booklet correctly, your organization recommends essentially a fundamental shift from a production or income support-driven farm policy to a stewardship or conservation-based farm policy, where you would—if I understand it correctly—form the basis of all payments on the social benefits derived from that farmland, the water recharge, wildlife habitat, et cetera. Is that essentially correct?
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    Mr. COX. Actually, that fundamental reform was suggested by a number of our workshop participants, but we came out nowhere near down as fundamental reform of that.
    What we are actually recommending is the creation of an option based on stewardship. We see some elements of especially risk management components of current farm policy continuing, because conservation simply cannot address some of those risks. Crop insurance, for example, if reformed and made to function as a true insurance program, should continue because conservation is not going to deal with the risks of hail or bad weather or disasters. Similarly, perhaps something that looks like a safety net, a minimum countercyclical sort of program that deals with legitimate risks faced by producers in world markets with swings in prices may have a function long term within agricultural policy to deal with those real risks that agricultural producers face.
    So we are not arguing that conservation can replace all elements, all of the traditional tools of farm policy. But we do think there is a crying need to balance our over-reliance on those traditional tools now with new tools that provides new options for farmers and new options for policymakers.
    Mr. PUTNAM. The State of Florida has just passed a Rural Lands Protection Act which outlines just those stewardship payments, and I have legislation being prepared to be filed that would do that as well, and that is why I am very interested in the idea of stewardship payments.
    Does the Farmland Trust have——
    Mr. GROSSI. If I could just add a comment to Craig's comments. I think we need to back up and think about what the underlying principles are here. What is the policy or the principle that guides the policies that you are developing? And we think that ultimately we should get to a point where the payments to the landowners are consistent with the goods that landowner produces for society. Those goods in some cases might be environmental, social goods, if you will. In other cases they might be the protection of highly productive farmland or the production of certain commodities, food and fiber.
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    But right now they are all skewed. All the payments are skewed toward those producers who produce food and fiber. And there are these other values that flow from private lands that are produced. They are products of farms. Wildlife habitat, clean water, open space are farm products and we ought to begin to shift to align what the American taxpayer is paying with what the American taxpayer is getting in return. And that would lead us to a system that was not only fairer, but had much broader public support across the country, I think.
    Mr. PUTNAM. What type of a time limit would you put on such a commitment? Would it be a 5-year stewardship agreement with the landowner? 30-year? An annual? Was any thought given to that by any of your organizations or discussion?
    Mr. GROSSI. I don't think there has been a lot of detailed discussion, but there are plenty of models to draw from. One of them is in my home State, the Williamson Act program in California, where a rancher can sign up a 20-year agreement with their county to get the maximum use value tax benefits. And you are in the program for 20 years all the time until you opt out, and then you have 19 years left of benefit until you no longer get the benefit.
    So that is the kind of model one could look at. There are other models and we would be happy to work with your staff on exploring some of those models.
    Mr. PUTNAM. I look forward to that. Thank you. Thank you, Mr. Chairman.
    Mr. LUCAS [presiding]. Mr. Peterson.
    Mr. PETERSON of Minnesota. Thank you, Mr. Cox. In your testimony, in your explanation I guess, you were explaining the Conservation Security Act, something along that concept where you talked about the stewardship contracts.
    Mr. COX. Yes.
    Mr. PETERSON of Minnesota. Who decides what the appropriate stewardship is and how these payments are going to be made? That is what concerns me. In Minnesota we have got the technical committee that was set up that is primarily dominated by Twin City people, which is something we run into all the time. And we have problems because they do not understand what is going on up in northwestern Minnesota. That is part of the problem.
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    So some of the concern I have about this is who it is that is going to decide what is the appropriate thing to do and are they going to come up with some cockamamie idea of about what it ought to be that is going to drive us crazy again, to be blunt about it.
    Mr. COX. Congressman, we would certainly not recommend that we use a cockamamie scheme that would drive you crazy. We have been asked this question a lot in the course of our workshops and our deliberations since then. I must say I find it a bit puzzling in the sense that this issue has had to be dealt with in every financial assistance program for land management since the 1930's. And it was dealt with under the Agriculture and Conservation Program. It has been dealt with under EQIP. Can every financial assistance program——
    Mr. PETERSON of Minnesota. Let me stop you there. That is one of the problems that I have with it. We have created all of these things. Now if we set up a new program, we are going to go back and create a whole other process and have everybody come in and have to redo this all again.
    Mr. COX. I think there are two things there, if I could finish my first thought. There is a lot of experience with very credible ways of applying local priorities and professional judgment to come up with a rational way to set payments for conservation performance. I think what would be different is the scale. It is not a difference in kind, it is a difference in scale. And that difference in scale troubles us, because if we really went down this stewardship option route we would be looking at providing technical assistance on an ongoing basis in the countryside at a scale we have not done since the 1930's. So that is an issue.
    On the other issue, sir, we say in our report that unless this stewardship option is very big, $3 billion at a minimum, if we are not willing to make that kind of commitment within farm policy to stewardship, then we shouldn't do it. It would be much better to invest smaller sums of money if that is all this committee can address to this priority, to invest that in existing conservation programs. In fact we would recommend consolidating conservation programs to address that issue.
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    Mr. PETERSON of Minnesota. Thank you. If I could, I would just like to make a little bit of a comment here about CRP. It gets to kind of what I am talking about here and it is some of what has been discussed in the committee all day. I represent this area of the Red River Valley where the river flows north and it floods all the time. And we have got the DNR and the technical committee, again these people in the Twin City, and the solution that they give us is that we should have more wetlands. And I am all for wetlands, but they do not understand what is going on up there. We had bigger floods in the 1890's and 1880's than we have now and we had all the wetlands still in place. There wasn't one wetland drained at that point. These last three floods the wetlands have been completely full. They do no good. The water comes across land and we are paying millions of dollars to replace land.
    Now, so the CRP does not qualify in the Red River Valley because it is not marginal land, it does not fit the EBI index, and we cannot get any CRP. I grew up in this area. I used to hunt there. There is not one bit of wildlife habitat left in that area. So we have been trying to get CRP put back in there, because that would actually stop the water and stop a lot of this overland flooding and it would work. We can't get it done.
    The people in the Twin Cities, they are against it because they want us to put in wetlands. And this is the kind of frustration that we run into. And I think it happens in other parts of the country as well where we can see if we could just make a sensible use of these programs, that we could take that area alongside the river that floods and put into CRP, if we could put in strips to stop the water from coming across, we could stop a lot of this problem. But we can't do it.
    And not only will they not look at it, they are opposed to it on ideological grounds because they have some idea of about what is politically correct or whatever.
    So, I don't know what my point is other than to say that we have got some problems in trying to figure out how to make all of this stuff work and I hope during this process we can sit down and work on sensible solutions to make these programs which have been good programs work better and accomplish things for the people.
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    So thank you, Mr. Chairman.
    Mr. LUCAS. Thank you, Mr. Peterson. Mr. Osborne.
    Mr. OSBORNE. Thank you, Mr. Chairman. Thank you, panelists, for being here today.
    I certainly agree with a lot of your arguments. We currently have an increase in TMDLs and the requirements of the Clean Air Clean Water Act and Endangered Species, and of course this is adding cost to the landowners. And my contention is that we are not adequately compensating them for what we are expecting them to do.
    So I am interested in some of your ideas. Seems like Mr. Cox has kind of been the whipping boy today. I will start in with you on the stewardship contracts. You were talking $3 billion, or exactly what percentage of the total agriculture budget are you talking about for these contracts?
    Mr. COX. The way we finished our deliberations was to settle on a $3 billion level as the minimum level that would really make such a stewardship option a truly viable option for agricultural producers. And it was very important to us that this option be a real option for producers that provides assurances comparable to other aspects of farm policy. And we thought $3 billion was about the minimum that could be invested in such a program and accomplish that objective. That would be, depending on which figure you want to use—if $28 billion in fiscal year 2000 was spending on farm subsidies, that would be a relatively small percentage of that total.
    Mr. OSBORNE. I believe, Mr. Grossi, you were talking about one-half of $22 billion, and actually probably have something like $17 billion on the average over the next 10 years in the budget right now, so it is not going to be that much. But I guess, particularly to you and maybe to Mr. Cox, I would ask this question: There is considerable difference in land types. You may get some land in Iowa that is very uniform, maybe no rivers, no bodies of water, which would not require any buffer strips. And then you may go to some other areas such as South Dakota where you will have a variety of landscapes, and Nebraska. So you will have some landowners qualifying for a relatively large percentage of these types of payments as opposed to others. And have you thought at all about any inequities or do you feel that my assumption is incorrect that there will be considerable differences?
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    Mr. GROSSI. Of course, Congressman, there would be differences in how the money would flow. In the situation where you quadruple the amount of money for conservation as we are suggesting—and incidentally in my testimony when I referred to $22 billion, I was referring to the 5-year period of the farm bill. So it is supposed to phase down as was the case in the last farm bill.
    I want to come back to the principle that I talked about earlier, and that is are we asking the tough questions? What is the taxpayer getting in return for their dollars and how do we justify these kinds of payments out into the future when we can't rely on emergency status to shovel money out the door at USDA?
    And if we ask these tough questions and if we apply the programs so that farmers can make a decision about what they want to produce, how much land they want to set aside, how much land needs to go into buffer strips and that payment to them is competitive to producing a commodity so that the taxpayer is paying for something they are really getting in return, that virtually all farm areas have something to offer the public in the way of social benefits. In the way of soil conservation, wildlife habitat, clean water, carbon sequestration—one of the promising areas—virtually every farm area has some of those benefits, and what we need to do is create the options for farmers and local communities and State agencies to select from and then get the money flowing to those farmers who can best produce those benefits.
    Mr. OSBORNE. You mentioned the words ''carbon sequestration.'' one of the questions I have been asked, if somebody is a rancher, they have had the same land for 100 years and they have taken good care of their land. And then you have someone who is farming marginal land and they take that land and put it back into grass. There is a temptation to say that we are going to reward that guy who takes the marginal land out of production and puts it back into grass and we are not going to do anything for the guy who has done something for 100 years. Have you thought about how you are going to allocate, or what carbon sequestration really means and who is going to dispense the funds?
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    Mr. COX. Congressman, there is both a moral and a technical issue embedded in that question. I will take up the moral issue first, that since existing conservation programs often reward those folks that have either done the wrong thing or delayed in doing the right thing was one of the fundamental reasons why our workshop participants wanted to see a stewardship option built into farm policy itself.
    We heard a number of examples from farmers who told us that they had kept their fragile land in grass and pasture and rangeland for generations and are therefore ineligible for assistance under the Conservation Reserve Program, whereas their neighbor who broke out their land was now getting $40 an acre a year to put that land back into grass. Those sorts of inequities were very strongly felt, particularly among the producers in our workshops.
    This has been an issue with conservation programs for decades. I think we desperately need to find a way to deal with that. There are ways to deal with it in both existing conservation programs and in the Stewardship Program. We tended to think of things as maintenance fees versus installation fees where there is a cost to maintenance of practices and of good conservation systems. In many cases we know what those costs are today. And I think if we thought about stewardship both in existing programs and in this new stewardship option as maintenance versus installation, we could come up with a payment scheme that would not just reward those people who are doing the right thing now, but also pay less money perhaps, and almost certainly less money for maintenance, but still provide a reward to those folks who have been doing the right thing sometimes for generations.
    So I think there are ways to address that. The carbon sequestration front, that is a technical issue as well as a moral issue in terms of accounting for the effective practices over decades, which is a daunting technical task. Most people that have confronted us with that technical problem have tried to look at what is going to happen from this date forward. That is an easier technical question than to ask us to quantify what happened in the past 30 years. That may be a way to look at the sequestration issue.
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    Mr. LUCAS. Mr. Thune.
    Mr. THUNE. Thank you, Mr. Chairman. Thank you, panel. Let me just begin by saying that I am very supportive of many of the programs that are already in existence. In fact, I am a cosponsor of Congressman Peterson's bill to expand the CRP program. That is a program that has been enormously beneficial to my State of South Dakota. I think he wants to expand it so they can get acreage in Minnesota so they will have a pheasant population over there, so he doesn't have to come to South Dakota to hunt pheasants. I am not sure we want to accommodate that request.
    As you know, I am sponsoring the Conservation Security Act, which you talked about the stewardship contracts, very similar to what we are talking about doing, and I think it is a very sound concept for a lot of reasons obviously. And the Chairman obviously accuses me of promoting my bill in these hearings. But I do have a question that I would like to get your answer to. One of the things that concerns me about some of the existing programs that we have is obviously the small businesses in South Dakota are very dependent on—the seed dealers, the fertilizer, all the folks on Main Street who serve the production agricultural population in our State suffer when we take a lot of land out of production.
    I think we also know that we are going to spend a substantial amount of money in this new farm bill supporting agriculture. It seems to me it makes a lot of sense, and there are public benefits that are derived when we compensate landowners for practices that they are employing that are leading to conservation and wildlife habitat and all those things. Do you think that it is necessary to idle land in order to get a conservation benefit? If we allow producers to continue to farm, which is something they say, too, we sacrifice income sometimes if we pull land out of production, there are a lot of benefits in my mind that if we continue to allow them to farm the ground and implement conservation practices that are in the form of these contracts that they would agree to and then be compensated for those practices.
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    And then a follow-up question to that, perhaps Mr. Nelson, about the wildlife benefits of one program relative to the other, because I know that is a concern that you have. It is a concern that I have. I would like to think that we could figure out a way to accomplish all of these objectives and provide broad public benefits at the same time that we are supporting our producers.
    Mr. NELSON. Let me just quickly address the issue of working lands. One of the reasons we are strongly supportive of the Grassland Reserve Program is because there are ranchers that have incredibly important native grasslands and they use and will continue to work and it offers them an option to get involved and get paid for the conservation that they have been providing all of these years. It has been a very popular program as delivered through the Fish and Wildlife Service in South Dakota, as you probably know.
    We are finding at least as much interest in North Dakota, where the laws are different, but we are working with the Fish and Wildlife Service to help make that option available to producers. We think it would be very popular if it was delivered through USDA in some kind of a parallel program and that would entail working lands, the implication being, yes, working lands do provide many values for wildlife. There is nothing wrong with grazing grasslands. I think grasslands, if they are going to stay grasslands, need to be grazed.
    We obviously try to work with producers and make sure that they are not overgrazed, but our focus is to get the marginal land that is out there that has been broken out back into grassland cover and then get the wetlands restored, because they are a value as well when they go to a grazing system.
    I also wanted to quickly touch on the idea that CRP is not really working land that has been idled. I think nowhere has the benefit of CRP been more evident than in South Dakota to the landowners. And most landowners who have CRP want to keep it idle because they get such tremendous wildlife production out of it, particularly pheasants. And we are seeing many operations really revolving around that idle cover that is part of the nesting cover and wildlife habitat that was missing in the system.
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    In fact, we have some small programs we have started in South Dakota where we seek to restore property that is on the market that is marginal land that has been broken out and we are having a hard time paying simply appraised value on an agricultural basis because so many farmers want to get back into—give that land because of the demand for pheasant hunting. I think there are ways of using working lands that produce both wildlife and agriculture products.
    Mr. THUNE. Anybody else care to comment if it is necessary to idle land to get the conservation benefit?
    Mr. PETERSON. I would agree with Mr. Nelson's comments. We worked very much with landowners where it is possible both to use the land for grazing and other purposes and still produce wildlife. But in an area where the native wildlife needed cover of the type that is provided on certain lands, and many of those were marginal lands originally that probably never should have been broken to begin with. If you went back and tried to break them out and work with the farmer, it simply wouldn't work in many of those areas.
    There are other areas where, as Mr. Nelson indicated, where you can allow some grazing and that is why we are interested in this grassland provision, where some grazing is very compatible depending on the time of year and so on, with the production of the land for water quality and wildlife. So you can get all the benefits plus some use, and we would be very interested in working with you on that.
    Mr. GROSSI. If I could add a comment, I am bothered by the implication that retiring land has a negative impact on the rural economy, if you will, the constant theme we hear criticism of CRP, because the flip side to that logic is that we support crop subsidies to enhance rural economies, crop subsidies that have clearly had a negative impact on the resource base in terms of soil erosion over the years.
    I would suggest that might be analogous to tearing down a building and rebuilding it in order to rebuild economic activity. We have to rethink the logic behind it. If the objective is to support family farms, a sustainable family farm system in our rural economies, then funneling money through commodity programs probably is not the best way to do that. But if there is a social benefit to preserving that family farm structure out there, then let's find another way to do it. If it is not through stewardship payments, then some other system. But funneling the money through commodity programs that leads to negative impacts on the resource base and having to retire to rebuild it is twisted logic, but that is the state we find ourselves in.
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    Mr. THUNE. And to respond to that, Mr. Chairman, I think the point that I was making in that is if there is a way to accomplish both, because your point earlier about what the taxpayers are getting for how we support agriculture, if we can get environmental benefit, conservation, wildlife habitat, all of those things, and at the same time the farmer continues to buy seed and fertilizer on those Main Streets, I think it is time for a new model, and that is why I hope this new bill provides the basis for doing that.
    Mr. LUCAS. Thank you, Mr. Thune. I think it is worth noting several times in the discussion today the discussion has come up: What does the American taxpayer get for his or her dollars in our present agriculture policy? We clearly need to remember that the first and foremost requirement of this coming farm bill and all previous farm bills is to provide the highest quality food and fiber to the American consumer, to make sure that we are all given the opportunity to eat and to be dressed.
    And the secondary role, for two centuries this country has acted as the world's granary. We have been the productive workhorse that has made sure that resources in times of drought and famine and war were available for a price for the entire planet. That has been the ultimate original goal, I think, of farm policy and responsibility of production agriculture.
    That said, times change and increases in productivity have changed rural America. When that first farm bill was passed in 1933, both of my grandfathers farmed behind two mules. My implement dealers now tell me if the tractor does not have 450 horsepower they cannot sell it. So things do change, but we have to reflect that.
    Now this panel and previous panels and many of my constituents back home have advocated substantial increases in conservation spending, most of it with a tremendous amount of merit. But as a subcommittee, and as a full committee, we have to work within the resources that are made available to us to achieve the greatest possible goal.
    Let me ask one last round of questions. If we are successful in coming up with substantial resources to invest, clearly NRCS has said before this subcommittee that they with their present personnel base are doing, I believe 110 percent was the comment made in the hearing, and I believe that. Much discussion has been made of third party sources for technical advice and implementation of these programs if the resources were available. Tell me from the perspective of your organization, would you be involved in that role if they were available? Would you be out there contracting with the Federal Government to provide this kind of assistance? Anyone or everyone.
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    Mr. NELSON. We already are in a big time way, particularly with WRP. That is the only way that I know it is getting delivered in the States of Arkansas, Louisiana and probably others. We could find out for you. We in the northern part of the Great Plains, where I work, we have staff in several NRCS offices helping to deliver CRP, wetlands restoration in CRP, helping deliver WRP in Minnesota. So it is going on because of that backlog of work and they found it cost-effective to involve partners like Ducks Unlimited and other partners, State associations and so on. So it is happening already.
    It seems to work fairly well. It is a good partnership. And it has been one that has been evolving over the last several years, getting comfortable with each other and what we each can bring to the party, but it is working well.
    Mr. LUCAS. Mr. Cox? Mr. Peterson? Mr. Grossi?
    Mr. COX. In that order, sir?
    Mr. LUCAS. Whatever order you choose to go in.
    Mr. COX. A small but I think growing number of our 9,000 members of our professional society are engaged in that kind of activity at the moment, mostly with landowners themselves, as private crop consultants or conservation consultants. But increasingly I am hearing from members that are involved in companies that are getting Federal grants of one shape, form or another to undertake conservation services for Federal programs. So it is happening, but it is certainly not the dominant employment scheme for our members.
    Mr. PETERSON. Let me emphasize again that we surveyed 14 States and found out in those 14 States that they are providing over $5.4 million in cost sharing and 300,000 hours, the equivalent of 145 full-time employees, to help deliver farm programs. That is about 10 people per State, so the States are involved now.
    But let me add real quickly that we have said for years, NRCS does not have enough technical people to fulfill the role that they need to fulfill, even if we assist and others assist. So I think that is a major problem to get enough people in NRCS to provide it because if they are not out there with the service available, particularly small operators will not take advantage of these programs unless there are people out there that are an outreach type of thing. So the needs are there, in addition to what we are already doing and we will continue to do.
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    Mr. GROSSI. Just very quickly, Mr. Chairman. I think first and foremost we need to repeat and echo what others have said about the need for technical assistance in NRCS. They are the trusted delivery service of technical assistance to the farm and ranch service. We need to enhance that capacity. Yes, my organization, the American Farmland Trust, is working with NRCS to help implement the Farmland Protection Program, both through training and education activities and actually helping with the land transactions in certain parts of the country. But we also have an extended family of land trusts and local agencies that are doing a great deal of work and would do a lot more if the funds were available to acquire easements or to cover some of the costs of doing so.
    Finally, I want to emphasize the potential to leverage existing resources out there. State agencies, local governments, conservation districts, many of these agencies have unlimited potential to work with the Federal Government if the programs are designed properly.
    Mr. LUCAS. Thank you. Any other questions from the committee?
    Mrs. CLAYTON. Yes, I do have.
    Mr. LUCAS. Mrs. Clayton.
    Mrs. CLAYTON. This subcommittee has as part of its title ''Rural Development.'' and just listening to the proposals and the opportunities that we have coming from several of you, Mr. Cox, Mr. Grossi, the American Trust, it sounds as if there is an opportunity to look at conservation in a broader sense. Not necessarily separating it, but to see its value beyond our traditional way of production of commodities or food fibers.
    I have been saying that as agriculture goes in most rural communities, so does the rural community, meaning they are intertwined and interrelated in terms of their survivability. The department store or the hardware store or the bank indeed suffers as the farm suffers, but we also lose an opportunity in our farm communities in terms of an economic growth component if it is shrinking in terms of that.
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    If you look at the economics, the demographics of the last census, you see people moving away from the land. There is not enough opportunity within rural communities to keep them there. So there is compelling reason for us to shore up the economic survivability and the productivity of our farmers; also with the livability and the economic opportunities in our community.
    This committee has the opportunity for rural development, and heretofore it has been two or three paragraphs in the farm bill. I would just ask any and all just to comment, do we have an opportunity to look at making a statement about rural development in its more holistic sense than we have in the past? And anyone can answer.
    Mr. GROSSI. I will jump in first and then pass this down the line, but I think the kinds of programs that are being suggested here are in effect a more sustainable potential rural development than are the current farm program payment system. Farmers would truly be paid for something of value they are producing.
    So the comment made about broadening the programs here is relevant. We are not suggesting you do away with entirely the current commodity programs. We are talking about adding another set of products that we can reward farmers for producing and that is social products, environmental products that they produce. And currently they have to give away instead of collect something for it. So the opportunity is great.
    Just in terms of opportunity, I think the chairman said it very well a few minutes ago, that times do change, and the reality is that the farmers who produce the food that America eats do not generally get any support from the Federal Government. It is only a few commodities that get that.
    I was before this committee 16 years ago and Chairman Jones chaired this committee, and that committee at that time took the bull by the horns and made a dramatic shift in conservation programs in 1985. I think you have the same opportunity today, Chairman Lucas.
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    Mr. COX. I would like to respond and take it from a little different angle than Ralph did. One of the implications of the productivity revolution that Chairman Lucas just mentioned—and that productivity revolution is really at the heart of all of the angst, I think, regarding farm policy that this committee and everyone that is desperately concerned about agriculture faces. But one of the other consequences of that is that in many areas agriculture no longer plays the role in rural economies that it once did, and in fact a significant number of farmers and farm families and farm operations rely on off-farm sources of income in order to make their households viable.
    So I think rural development is another potentially wonderful way to balance farm policy. I mean we started out talking about the imbalance in farm policy and talked about conservation as another leg to the stool, so to speak. But rural development, off-farm developing rural communities so that there are greater economic opportunities off the farm, is probably a critical way to also support a lot of those farm households that are increasingly dependent on a job in town to maintain their farm operation.
    So I think it goes both ways, Congresswoman. I think conservation can be a force for rural development, but I think rural development can be a real force for sustaining farm families as well.
    Mr. PETERSON. Let me just add I grew up in a real small town in Missouri. That town has changed quite dramatically since then. It is being undergirded by a much more diverse kind of economy than it was in my time. It was all production agriculture at that time. There is still some production agriculture, but now it is alongside of a river that has tremendous recreation opportunities. It is a famous hunting and fishing area and a place for people to visit. A lot of people are moving back to that area as they retire and people can live there and through the Internet can have jobs that they used to not have. .
    I think we need to look at rural development within a broader context, which is what is being said here. It is certainly going to involve conservation and production agriculture, but probably a different mix than it had once before, and that is one of your challenges, I think, to see what that mix might be.
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    Mr. NELSON. Just one quick example. Even in a State like North Dakota, tourism has almost caught agriculture in terms of the percent of gross domestic product in that State. And it floored me when I saw that statistic, but it is growing at 35 percent a year. Things like Lewis and Clark have helped. But certainly what we are looking at is finding ways of working with the State to diversify the source of income and the economy, because if we do not the State will go nowhere and we will continue our population drain.
    And I am afraid that is the same pattern we are seeing through the middle of the country, where commodities are typically produced. So we are trying our best to take a fresh look at the landscape not as simply a place to grow food and fiber, which it will always be about, but to see it as a place that has great natural amenities and can have a great attractiveness to people who come for other reasons, either tourists or hopefully to live there ultimately. And with the new economy coming on, finding those kind of places, a quality of place that that is where they want to live and work, not because they are farmers but because of the way the landscape is and looks.
    Mrs. CLAYTON. Thank you.
    Mr. LUCAS. The subcommittee thanks the panel for your insights and continued input as we work through this, and we have great expectation that whatever we come up with you will help us work with the appropriators on.
    Without objection, the record of today's hearing will remain open for 10 days to receive additional material and supplemental written responses from witnesses to any question posed by a member of the panel. This hearing of the Subcommittee on Conservation, Credit, Rural Development, and Research is adjourned.
    [Whereupon, at 3:55 p.m., the subcommittee was adjourned, subject to the call of the Chair.]
    [Material submitted for inclusion in the record follows:]
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Statement of Craig Cox
     Mr. Chairman, members of the committee, I want to thank you for the opportunity to appear before you today representing the Soil and Water Conservation Society (SWCS). My name is Craig Cox; I serve as Executive Vice President of the Soil and Water Conservation Society.
     SWCS is an international, not-for-profit professional society, founded in 1943. Its mission is to foster the science and art of natural resource conservation. Our 10,000 members include professionals ranging from technicians who work one-on-one with landowners to researchers who seek to improve our basic understanding of conservation problems and solutions. Our members provide the scientific and technical foundation for implementing the conservation programs that are the subject of today's hearing. Agricultural policy and the farm bill, therefore, are critically important to our members.
     Last spring, SWCS initiated a two-year project, Seeking Common Ground for Conservation, to help shape the conservation provisions of the 2002 farm bill. We invited state and local leaders with first-hand experience of the strengths and weaknesses of current agricultural conservation policy and programs to a series of five regional workshops. Participants representing the agricultural, water resources, and fish and wildlife communities mapped out a continuum of reforms to conservation and farm policy. SWCS took that map and developed specific recommendations that, in our best professional judgment, hold the most promise for addressing the hopes and concerns of the workshop participants.
     Those recommendations are detailed in our new report, just released this morning, entitled —Seeking Common Ground for Conservation—A Farm Bill Proposal: Responding to the Grassroots.— We are pleased to provide members and staff with copies of the report this afternoon. Additional copies can be obtained by contacting us at pubs@swcs.org or from our website at www.swcs.org/t—seeking—intro.htm.
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     In brief, workshop participants told us that the next farm bill must be about more than the price of corn—or wheat, or cotton, or rice, or any other agricultural commodity. It must be about caring for the land and keeping the people who work the land on the land. Participants were increasingly skeptical traditional commodity-based subsidies to achieve these goals.
     Policymakers face fundamental choices as they begin reauthorizing the farm bill. Those choices go to the heart of what should be expected from conservation and farm policy. They should force an answer to two questions: (1) What do we want from conservation, and (2) what do we want from agriculture?
     At a minimum, conservation policy and programs need to be strengthened so they can continue their traditional service to agriculture—but updated to address the environmental challenges that now confront farmers and ranchers. That will require a doubling of the current investment in U.S. Department of Agriculture (USDA) conservation technical services and financial assistance programs. New investment should ensure that all three compartments in the conservation tool box—technical services, financial assistance for conservation on working land, and financial assistance for land retirement and restoration—are well stocked with effective tools that work for agriculture and the environment. The first priority for new investment should be a doubling of funding for technical services and a tripling of funding for conservation on working land.
     New funding should be accompanied by a series of minor and major reforms of existing programs and policy. The most important of those reforms are reaffirming the central place of technical services in the conservation endeavor, providing real authority and flexibility to states to tailor Federal programs to their unique circumstances, and simplifying the process of participating in Federal conservation programs by basing that participation on producers' conservation plans rather than on the administrative requirements of individual conservation programs.
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     But settling for the minimum would be a mistake at this juncture. Instead, reforms to conservation policy and programs should be coupled with a new vision for farm policy itself. Traditional farm subsidies should be balanced with a new option based on land stewardship.
     Congress should authorize a minimum of $3 billion dollars annually—in addition to the $5 billion recommended to expand the reach of existing conservation programs—for a stewardship-based farm and ranch program that rewards producers for using their land, labor, and capital to enhance the environment. This new farm and ranch program should reward good actors through technical services and maintenance fees to keep existing conservation systems and habitat in place on their operations. It should also pay farmers and ranchers more who want to do more by installing new conservation systems. USDA state technical committees, local communities, and producers themselves should play a key role in seeing that the new vision stewardship program achieves key conservation objectives by determining which conservation systems and opportunities would make the greatest contribution to environmental enhancement at state and local levels.
     In combination, these two reform agendas would create an agricultural policy that is truly open to all of agriculture and built on a solid foundation—the unique status and responsibility of farmers and ranchers as the caretakers of this nation's land, water, and wildlife. Our new report makes a series of recommendations for action to implement both reform agendas. I would like to highlight a few of those recommendations and the reasoning that led to their formulation for your consideration.
REFORMING CONSERVATION POLICY AND PROGRAMS
     Conservation entered farm policy in the 1930's during a time of crisis—economic and ecologic. The role of conservation then was largely to serve agriculture by developing and managing soil and water resources as a means of enhancing agricultural production and rural development. Now, however, the challenge for agriculture and conservationists has changed. Environmental performance is becoming a key determinant of the commercial viability of agriculture. Producers operating animal feeding operations or irrigating cropland or pasture already are facing fundamental questions about the environmental sustainability of their operations.
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     Agriculture cannot escape the consequences of its environmental effects anymore than agriculture could escape the effects of land degradation in the 1930's. That is not because agriculture is bad, but because agriculture is big. More than half of the land area in the 48 contiguous states is agricultural land—cropland and grazing land. Almost 90 percent of all precipitation that falls in the continental United States falls on privately owned agricultural or forestland before it runs into streams, lakes, or underground water. About 70 percent of wildlife species depend upon private land for their habitat. The pressing question is whether we will organize ourselves to face this modern conservation challenge the same way we faced our historic challenge.
     Existing conservation programs and policy can meet this new challenge just, as the challenge of the 1930's was met. But they must be updated and dramatically strengthened. At a minimum, legislative action in the next farm bill must strengthen USDA conservation policy and programs enough to ensure that commercial viability and environmental quality become compatible goals.
    Funding. Funding for existing USDA conservation technical services and financial assistance programs should be doubled to about $5 billion annually—an increase, in percentage terms, comparable to what was accomplished in the 1985 farm bill. That investment produced dramatic reductions in soil erosion, protection of wetlands, and enhancement of fish and wildlife habitat. Since 1985, however, conservation funding has been flat in constant dollars. As a result, USDA conservation programs cannot meet producers' or the public's demands for conservation and environmental quality. USDA conservation programs remain dramatically oversubscribed. For example, the Wetlands Reserve Program (WRP) in 2000 recorded 3,171 offers on 567,000 acres that went unfunded. The unmet funding need, $524 million, was nearly four times the amount of money appropriated for the program that year. Likewise, only 30 percent of the 53,961 producers who applied for Environmental Quality Incentives Program (EQIP) funds in 2000 were awarded contracts. Funding needs were more than twice the $174 million available, and many producers reportedly did not apply for the program because of the limited number of contracts awarded in prior years.
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     The farm bill must make a major new investment in conservation to meet the needs of agriculture and taxpayers in 2002. Policy and program reform alone simply cannot close the conservation gap and serve the long-term interests of producers and taxpayers. Doing more with less is not a viable option.
Balance among tools
     There are three basic compartments in the conservation tool box: (1) technical services—research, education, and technical assistance; (2) financial assistance for conservation on working land—integrating conservation into the food and fiber production systems used by farmers and ranchers; and (3) financial assistance for land retirement and restoration—shifting the primary focus on working land from food and fiber production to habitat restoration or protection of critical natural resources. Today, the toolbox is unbalanced.
     In 1985, 97 cents of every financial assistance dollar from USDA supported conservation on working land; 3 cents were spent on land retirement. In 2000, land retirement accounted for 85 cents of every financial assistance dollar from USDA, while 15 cents went for conservation on working land. Over the same period, the Federal investment in research, scientific and technical support, and direct technical assistance remained essentially flat, increasing less than 1 percent annually.
     Most of the new investment in conservation should be used to strike a better balance among tools. Funding for technical services should be doubled to about $1.75 billion a year, and financial assistance for conservation on working land should be tripled to about $1 billion annually. The $5 billion conservation budget we recommend would thus strike a better balance and still leave room to increase funding for land retirement and restoration programs by about 30 percent.
    Technical services. Weakness in this nation's technical services infrastructure is the single greatest impediment to meeting the conservation needs of landowners and the public's desire for environmental quality. Ultimately, farmers and ranchers do conservation; public programs do not. Timely, accurate, and appropriate advice and information from technically trained advisors in the public and/or private sectors is the key to successful conservation. Without it, financial aid is likely to be wasted or, worse, misdirected. In many cases, good technical advice alone is all that is needed to help producers implement conservation systems that promise economic as well as environmental returns.
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     More money for technical services—as recommended above—is the first step toward solving this problem. But we also need to change the way we think about technical services. Since 1985 technical assistance has shrunk from 60 percent of the conservation budget to about 30 percent of the conservation budget. This growing emphasis on financial assistance reflects a conclusion among policymakers that the primary barrier to implementation of conservation systems on farms and ranches is cost. Many studies, however, show that lack of knowledge, rather than cost, is the primary barrier to adoption of conservation systems by farmers and ranchers. The next farm bill must recognize and affirm technical assistance as the most important conservation program in and of itself—not merely a cost of delivering conservation financial assistance to producers. Congress should ask the Secretary of Agriculture for an action plan and estimated funding needed to ensure that all producers have access to timely and effective technical assistance from the public and/or private sectors.
    Flexibility. Conservation is a national interest, but like health care and education, it depends on local leadership. State and local leaders, whether they work in the private sector or in Federal, state, or local government agencies, need greater authority over the way USDA programs operate in their states. Some workshop participants recommended block granting new and existing funds for USDA conservation programs to states as a means of achieving this objective. Block grant proposals, however, raised serious concerns among many participants about accountability and potential redirection of funds from objectives that are extremely important to those programs' constituents.
     Instead, we think the innovations in program implementation used in the Conservation Reserve Enhancement Program (CREP) and Wildlife Habitat Incentives Program (WHIP) should be expanded to touch all USDA conservation programs. States, at their choice, could develop a single, comprehensive state conservation plan that would propose changes in implementation of any or all Federal programs needed to meet state conservation objectives. Approved plans would provide much greater flexibility in program implementation and spark creative and innovative approaches to meshing local, state, Federal, and private programs and initiatives.
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     States should be rewarded for undertaking such an endeavor, however, with more than flexibility and authority. They should also gain access to additional dollars. We envision a USDA-administered Conservation Partner Fund, created by using a portion of the funds appropriated each year for all USDA conservation financial assistance programs. Funds annually made available for conservation financial assistance programs—above a designated funding threshold for each program—would be pooled and made available, much like a grant program, to states that develop a comprehensive state conservation plan as outlined above.
     Taken together, expanding the state plans and agreements pioneered in CREP and WHIP, with funding providing through a Conservation Partner Fund, could provide much of the flexibility proponents of block grants seek while maintaining the integrity and accountability of existing conservation programs.
    Fairness. Ensuring that all producers in all regions have access to the Conservation Reserve Program (CRP) would be a major step forward in achieving greater fairness in conservation programming. CRP accounts for more than 80 percent of the nation's current conservation financial aid spending. But one-third of that funding goes to five states, all in the Great Plains, and only land with a cropping history is eligible for enrollment. Substantial progress has been made in opening the CRP to additional states with implementation of the continuous sign-up and CREP initiatives. More could and should be done, however, particularly in regard to the limitations imposed by the cropping history requirement, to enroll land in the CRP. That cropping history requirement limits the application of CRP on rangeland, pasture, and other land that could provide substantial environmental benefits. That requirement also puts at a disadvantage those good actors who have already installed conservation practices otherwise eligible for the continuous CRP sign-up.
     Cropping history requirements for CRP should be modified to permit enrollment of environmentally sensitive acres of rangeland, pasture, or other land without a cropping history, at appropriate rental rates, and eliminated for all practices eligible for the continuous CRP sign-up. Congress should mandate at least a 5-million-acre goal for conservation buffers within the CRP and encourage participation through higher financial incentives and greater flexibility in practice requirements.
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    Simplification. The multiplication of stand-alone conservation programs—each with its own unique value, but also its own unique planning, application, and eligibility requirements has created a confusing situation for landowners and for field staff. The notion of program consolidation, however, met with overwhelming opposition from workshop participants. Instead, we are recommending other, less dramatic steps to simplify the process of implementing programs for producers and field staff.
     The first step we recommend is to make the producer developed conservation plan the basic entry point for multiple conservation financial assistance programs. Instead of producing multiple, often fragmentary plans to secure participation in a particular conservation financial assistance program, we would like to see producers work with technical advisors to develop a more comprehensive plan that integrates conservation into the farm and ranch operation in a way that meets a producer's economic and environmental objectives. That single producer driven plan should meet the planning requirements for all USDA conservation programs and open the door to eligibility under multiple financial assistance programs to implement the plan.
     Second, we think simplification of EQIP is a particularly important objective given its importance as the only major source of financial assistance for conservation on working land. We think EQIP could be much improved by taking steps to move toward a continuous sign-up process and by reducing the upfront planning burden placed on producers and field staff. The single most important reform should be to eliminate the statutory bidding requirement that, as implemented, requires substantial upfront planning to apply for assistance. Instead, we recommend that a ranking process be used to estimate the projected environmental benefits from participation. Those producers already approved for participation, then, would only need more in-depth conservation planning. Producers and staff would have more certainty, and the environment would be better served.
     Reforming Farm Policy and Programs. Expanding the reach of existing conservation programs—as recommended above—should be the minimum expected from legislative action in the next farm bill. But it will be a serious mistake, for agriculture and American taxpayers, to settle for the minimum at this juncture.
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     Participants told us it was time —for a new vision for agriculture— as one participant put it. They wanted a new farm policy that supported—through conservation—all agricultural producers, producing all kinds of crops and livestock, on all kinds of land, in all regions of the country. Their goal was to keep people on the land, and they were skeptical about the effectiveness of traditional approaches to supply control, price support, and income subsidies. They recognized that producers who relied on production of subsidized commodities for a large share of income from their operations had become very dependent on government payments. But they worried that such dependence was unsustainable and not in the best interests of agriculture, taxpayers, or the environment.
    Concerns about traditional farm programs. Abundant and cheap supplies of food and fiber, income support for struggling farmers, and economic support for rural communities are the three most often stated objectives of traditional farm policy. Those traditional policies are being challenged on their ability to address all three of these objectives.
     Underlying all of the questions being raised is the fact that major structural changes have taken place in agriculture. In 1999, according to USDA's Economic Research Service (ERS), almost 70 percent of the value of all crops and livestock was produced by 8 percent of producers operating just 32 percent of all farm acres. From the standpoint of crop sales only, 8 percent of farmers accounted for 68 percent of crop sales from just 32 percent of all farm acres. The productive capacity of American agriculture is a miracle. In fact, American agriculture is so productive that it is questionable whether subsides are needed anymore to ensure an abundant and cheap supply of food and fiber.
     The distribution of government subsidy payments has concentrated in fewer and fewer hands as production of subsidized commodities has concentrated on fewer and fewer farms. For example, about 47 percent of government payments in 1999 went to the 8 percent of farmers accounting for 68 percent of crop sales. Ninety-two percent of producers operating 68 percent of farm acres and producing 42 percent of crop sales shared the remaining 53 percent of government payments. As a result, the distribution of government payments diverges from what most taxpayers would recognize as equitable or efficient income support.
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     Fundamental changes in the nature of rural economies also have reduced the effectiveness of farm subsidies as economic development engines for rural communities. According to another ERS study, only about 37 percent of farm subsidies payments went to farmers in counties where those payments would be expected to play a significant role in the local economy.
     At the same time, recognition of the importance of farmers and ranchers as natural resource and environmental managers is growing. Working land—land used primarily to produce food and fiber—is, literally, the last frontier for environmental enhancement. Just as the land use and management decisions made by producers can impair the environment, those decisions also can create fish and wildlife habitat, contribute to clean and abundant supplies of water, protect against the risks of climate change, and create recreational opportunities.
    More balance in farm policy. Room should be made in farm policy itself for a program that supports farmers and ranchers based upon their unique role as caretakers of most of the land in this nation, rather than as producers of commodities that, more often than not, are in oversupply.
     The traditional tools of farm support clearly have their place in a new farm policy. Those tools will be particularly important for those producers who depend largely or exclusively on income from sales of undifferentiated commodities—the raw materials of the modern food and fiber production system. But we also think there is great advantage to agriculture and taxpayers by bringing on line new tools that hold greater promise for all of agriculture, rural communities, and taxpayers. Those new tools should include research, marketing assistance, rural economic development, and conservation, among others. Most of those tools really are not new. What would be new is a farm policy that seeks to create a better balance in policy attention and funding among the tools—a balance based on clear recognition of the realities of the current structure of agriculture, the food and fiber system, a global economy, and the environment.
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     Conservation has unique advantages as a component of a more balanced farm policy. For taxpayers, conservation at the center of farm policy would allows us to go beyond damage control, and even pollution prevention, to widespread environmental enhancement. To go beyond meeting minimum standards required by regulation to release creativity and entrepreneurial spirit in the service of conservation and environmental quality. Working cooperatively with the nation's farmers and ranchers as partners in environmental enhancement could become the third leg of this nation's conservation stool complementing land acquisition and regulation where needed—to create a balanced approach to environmental management.
     For agriculture, such a policy change would create the opportunity to use conservation to help keep people on the land and to escape some of the contradictions created by current farm policy. The land and its management would drive conservation rather than the amount or kind of commodities produced. That means all farmers and ranchers, producing all kinds of commodities, in all regions of the country could participate in environmental enhancement.
     Conservation could and should reach those 92 percent of farms operating 68 percent of the acres, but producing only 31 percent of the value of food and fiber products. Though many of these producers are not big players in the commodity market or international trade, those producers are, or could be, big players in the conservation market. Producers in Canada, Mexico, Argentina, Brazil, and France can compete in corn, soybean, wheat, and beef markets; they cannot compete with this nation's farmers in contributing to clean water or fish and wildlife habitat. The environment is a niche market, but one in which every farmer and rancher has a niche.
    Using conservation as a basis for support programs would provide more options for policymakers and producers, instead of attempting to fit an increasingly diverse and complex agricultural sector into a one-size-fits-all subsidy program. This nation could diversify agricultural policy to reflect the needs and unique circumstances of different farming and ranching operations. It could design a policy that works for those handful of producers who dominate commodity markets and trade, and it could design a policy that works for all those other producers in whose hands the country entrusts the management and care of most of its land, water, and wildlife.
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    Stewardship-based option for agriculture. Congress should authorize a minimum of $3 billion dollars within farm programs for a stewardship-based farm and ranch program that rewards producers for utilizing their land, labor, and capital to enhance the environment. This new program should be open to all agricultural producers of all agricultural commodities in all regions of the country.
     This new program should reward good actors through technical services and maintenance fees to keep existing conservation systems and habitat in place on their farms and ranches. It should also pay farmers and ranchers who want to do more by installing new conservation systems. Those payments should be determined by (1) relying on local input to identify the environmental goods and services of most value to the local community and relying on states to harmonize those values with state and national values, (2) calculating payments based on ''level of effort'' as estimated by cost, on a preliminary basis, of the practice and any economic value forgone until the technical capability to quantify benefits directly is strengthened, (3) distinguishing between ''maintenance costs'' and ''installation costs'' when valuing existing versus new investments in conservation, and (4) tithing the funds made available to the new vision program to invest in the research and testing needed to develop tools to estimate environmental benefits
     We think the issue of what taxpayers should be expected to pay for and, alternatively, what farmers and ranchers should be expected to pay for themselves will loom large, especially if billions of dollars of taxpayers' money are at stake, as we recommend. This issue has already been raised, for example, in implementation of EQIP. Large, confined animal feeding operations have been declared ineligible for financial assistance for the design and implementation of manure management structures. The determination of who gets paid and what they get paid for involves questions of justice, fairness, and social values, in addition to environmental goods and services. Failure to resolve such issues could and probably will create a serious stumbling block for implementation of a program that achieves the vision created by our workshop participants.
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     We think the best way to resolve these issues would be for local producers and citizens—with guidance from USDA state technical committees—to define a ''minimum bar'' over which producers must pass to become eligible for payments under the new vision program. This minimum bar would represent a general agreement between producers themselves and local citizens on those conservation practices that are considered a minimum obligation of land ownership and those practices that go beyond that minimum and deserve taxpayers'— support.
     The new stewardship-based farm and ranch program could and should be designed to complement existing conservation programs in five key ways—be available to all producers based on their willingness to make a commitment to conservation; prevent conservation problems before they require more expensive treatment; spur widespread enhancement of the environment rather than damage control; emphasize a transition to production systems that enhance, not just protect, the environment; and emphasize development, field-testing, and demonstration of innovative production systems that integrate conservation directly into food and fiber production.
    Reaffirm and strengthen conservation compliance. The role for compliance measures in a new farm bill was a contentious issue for workshop participants and during our deliberation leading to the recommendations in this report. A fully funded, effective conservation program of the magnitude envisioned in this report would be the preferred way to jumpstart conservation and environmental enhancement on farms and ranches across the country. However, the history of funding since 1985 clearly shows that actual appropriations often lag well behind authorized levels, and many new and promising conservation financial assistance programs have floundered because of lack of funding.
     We think it is appropriate to affirm and strengthen current conservation compliance measures to address the following key concerns. Workshop participants were nearly unanimous in their sense of injustice if producers were allowed to break out fragile land and subsequently be subsidized by taxpayers for enrolling those acres in CRP or another conservation program. Participants thought this was an affront to good stewards and a prime example of conservation programs rewarding the wrong behavior. The so-called ''super sodbuster'' provision had, in the past, addressed this issue by precluding the breaking out and cropping of highly erodible land if a producer had already enrolled in the CRP.
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     Crop insurance, revenue insurance, and other legitimate programs to help producers manage risk can create significant incentives to bring fragile and risky land into production. Crop insurance is currently exempted from compliance provisions—an exemption created to encourage participation and reduce reliance on annual disaster payments. Crop insurance reform with its increased subsidies, however, appears to have spurred participation in the program, and the potential for heavy reliance on revenue insurance as a mainstay of risk management and income support suggests to us that it is time to extend conservation compliance to crop insurance and any new insurance-based approaches to risk management and income support that may be authorized in the next farm bill.
     Finally, the highly erodible land provisions of the 1985 farm bill, though effective, appear to have left unaddressed an important segment of the nation'—s soil resources. About 50 million acres of nonhighly erodible land is, according to the 1997 National Resources Inventory, eroding at rates exceeding the soil loss tolerance. Asking producers who receive subsidies to take action to achieve a significant reduction in erosion on those acres—less than 15 percent of total cropland—would go a long way toward finishing the historic task started in the 1985 farm bill.
     Mr. Chairman, members of the Committee, I want to thank you again for the opportunity to share our thoughts with you today. A review of the testimony posted on the Committee's website makes it clear that shaping a comprehensive farm bill is a daunting task. The competing visions and priorities reflected by that testimony is evidence of the complexity and importance of agriculture to the economy, the environment, and taxpayers. SWCS would like to offer help whatever way we can as you undertake this task.
     
Statement of David Stawick
    Chairman Lucas and Congressman Hilliard, thank you for the opportunity to submit this testimony.
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    The Alliance for Agricultural Conservation is a new project of the agribusiness firms that have sponsored the National Conservation Buffer Council for the past three years. These partners are: Cargill, Inc.; ConAgra, Inc.; Farmland Industries, Inc.; Monsanto Company; Pioneer Hi-Bred International, Inc.; and Syngenta Crop Protection, Inc. The Buffer Council is pleased to note that we have reached the one-million-mile mark on the way to the U.S. Department of Agriculture's goal of the establishment of two million miles of new conservation buffers on private agricultural lands by 2002.
    The mission of the Alliance for Agricultural Conservation is quite simple: to advocate additional financial incentives for farmers and ranchers to apply conservation measures on and in association with working agricultural lands.
    Our emphasis on conservation on working lands is not unique. For example, Congress realized the challenges of working lands conservation when it developed the Environmental Quality Incentives Program (EQIP) as part of the 1996 farm bill. We are pleased to see that a wide variety of agricultural commodity and conservation groups are also strongly advocating additional attention to working lands at this time.
    The farm bill debate provides all of us the opportunity to boldly increase our efforts to spur conservation on private lands with the same vigor President Theodore Roosevelt employed as he championed public land conservation a century ago. A Roosevelt biographer wrote that the President's conservation program was ''great forward-looking statesmanship.'' That same vision and leadership is needed today for private lands conservation.
    The environmental challenges that face America's farmers and ranchers are daunting. Foremost is water quality, from Total Maximum Daily Load regulations to hypoxia strategies at the national level, down through a matrix of steadily proliferating state and local initiatives. Confined livestock raise water quality and odor issues. Soil erosion continues to bedevil us. And agriculture is also looked to as an important source of wildlife habitat.
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    Society in general will benefit from the environmental improvements that will follow from increased adoption of the ''Core 4'' conservation practices—conservation tillage, integrated pest management, nutrient management and conservation buffers. In light of these benefits (including cleaner water and air, with attendant monetary savings) and because many farmers and ranchers are not in a position to pass along the net costs of their conservation activities, it is reasonable that society assist landowners in defraying these costs. In a nutshell, this is the justification for the additional incentives we seek for agricultural producers.
    The Alliance for Agricultural Conservation suggests four strategic issues that should be addressed in the conservation title of the next farm bill. These issues and related policy options follow.
    Address shortages in incentives for conservation practices on working agricultural lands. As mentioned earlier, EQIP was a tremendous step forward, owing to the mandatory nature of its funding, its targeting to environmental priority areas and, of course, its aim at working lands. Although EQIP's $200 million authorization was a sizable annual investment, it falls far short of demand, which has in recent years been more than $600 million.
    As you are aware, many colleagues in agricultural and conservation circles have developed estimates of what it will take to assist landowners in dealing with the widening circle of environmental challenges. A number of livestock organizations—reporting from agriculture's water quality ''front lines''—testified at an earlier hearing of the need for at least an extra $1.2 billion per year in incentives for nutrient management. Looking at the panoply of expectations society is placing on agriculture, I would say this is a conservative estimate.
    In addition to more incentive funding, we would suggest two improvements to EQIP or whatever program might succeed or accompany it in the future. First, the priority area concept should be strengthened by an ongoing enrollment process for practices returning particularly high environmental benefits. This would be similar to the Conservation Reserve Program (CRP) continuous signup option for buffer practices, which has been much more farmer-friendly than the regular CRP's periodic national enrollments. Second, while selective targeting has been positive, it may now be appropriate to place some of the new funding in regions other than priority areas. This would promote the ethic of conservation on all working lands and widen the base of support within agriculture for conservation funding.
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    Leverage Federal conservation funding through market-based initiatives. In many regions there may be strong but yet untapped economic justification for state or local governments, utilities or business entities to provide incentives to landowners who adopt conservation practices. For example, a drinking water supplier facing the necessity (and cost, which will be passed along to rate-paying customers) of building new treatment facilities might find it much less expensive to instead go up into its source watershed and pay farmers and ranchers who voluntarily make additional reductions in pollutant discharges, therefore obviating the need for increased treatment.
    This might be done by establishment of local ''best management practice (BMP) funds,'' from which EQIP-style payments could be channeled to participating landowners. The premiere example of this concept is located in the source basin for New York City's municipal water supply, which has extensive dairy operations. Another approach might be through a system of pollutant ''credit trading'' in which large industrial point sources contract with individual farmers to voluntarily reduce their pollutant output in the same watershed. By purchasing such a ''credit'' from an agricultural landowner, the point source would be relieved of some of its discharge reduction requirements.
    While the examples I have mentioned have focused on water quality, similar approaches could be used to promote carbon sequestration. Depending on the outcome of international negotiations on global climate change, carbon sequestration could be a nascent environmental opportunity for farmers and ranchers.
    What role might the Federal Government play in these otherwise market-based strategies? The most effective might be to assist in the capitalization of BMP funds or credit trading scenarios. For example, in qualifying projects, the Federal Government might put in $1 for every $2 or $3 that a nonFederal entity or business contributed to a BMP fund or dedicated for buying pollutant credits. The Federal money would have to be passed through to farmers.
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    BMP funds and credit trading are not a substitute for other incentive programs such as EQIP but they hold the potential for focusing intensely on problem areas. Intriguingly, they also change the reality of some conservation practices from net monetary expenses to new sources of value and income for rural landowners. Finally, considered from the perspective of the Congress, the ''leveraging'' effect of these market-based initiatives can dramatically multiply the benefits of Federal investments in conservation.
    Increase agricultural landowners' access to conservation technical assistance. In contrast to the burgeoning environmental challenges to farmers and ranchers, the ability of the Federal Government to provide necessary technical assistance to landowners has, in real terms, actually declined. Staffing levels for the U.S. Department of Agriculture's Natural Resources Conservation Service have fallen by about 2,100 positions in the past decade.
    Ponder this daunting statistic concerning the development of comprehensive nutrient management plans (CNMPs) as proposed under the Federal Government's animal feeding operation strategy. NRCS has estimated that at current staffing levels, it would require 30 years to provide the technical advice necessary for all the landowners who might be required to have the CNMPs.
    I want to be clear that AAC strongly supports the NRCS and the local conservation districts with which the agency partners to deliver technical aid. We also believe NRCS should receive more support from within USDA and we hope Secretary Veneman will make this a priority. But we also would suggest that current realities and likely future demands dictate a rethinking of NRCS's role in the delivery of conservation technical assistance.
    One option to consider would be to focus NRCS field staff on the needs of landowners with limited resources (in practice, this is already the case in many areas). Simultaneously, the needs of larger, better capitalized landowners could be met by private sector entities such as crop advisors, engineers, agronomists and farm managers whose qualifications to make conservation recommendations are certified by NRCS. Again, this is not a radical notion; NRCS already has a third-party certification process.
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    What I am suggesting is not a proposal to reduce NRCS's budget or human resource levels. In fact, it is conceivable that increases in either or both could be justified under the scenario I outlined. But recent history strongly suggests that NRCS, as currently focused, will not receive the increases in funding necessary to provide the technical assistance that is needed in the countryside.
    Examine a comprehensive national policy for working lands conservation. Our nation's natural resources are protected by a patchwork (some might say a ''crazy quilt'') of sometimes-overlapping laws and regulations authorized by several statutes under the jurisdiction of different congressional committees. While the environment is generally well served by this regime, it can produce exasperation for landowners and actually produce barriers to better environmental stewardship.
    A classic example involves wetlands. They are protected by the ''Swampbuster'' program laid out in the 1985 farm bill and administered by USDA, and by the multi-agency program authorized by Section 404 of the Clean Water Act. Not only do these initiatives overlap, they have different criteria. Then there are water quality programs. Federal-level legislation includes the Clean Water Act, the Safe Drinking Water Act and the Coastal Zone Management Act, which yield various Federal and state regulations.
    Meanwhile, our conservation incentive programs such as CRP and EQIP either implicitly or, in some cases, explicitly, are geared to help landowners meet the requirements of the laws and regulations I just mentioned. But there is no guarantee—no ''safe harbor,'' if you will—that participation in one of these incentive programs will result in compliance with pertinent environmental requirements.
    This is one of the situations we sometimes see in our society that we jokingly remark would prompt an intelligent life form from another planet so say, ''Who thought this up?'' The answer, of course, is well-meaning members of Congress who serve on different committees. And well-meaning executive branch officials who work for different agencies.
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    Because of this disparate authority, you in the Agriculture Committee cannot bring order to this situation alone and you probably cannot do it in the next farm bill cycle. But you may want to consider taking a near-term step that can start down the road to streamlining. While it might be argued that we have enough government commissions, you might want to consider in the next farm bill authorizing some sort of panel that could identify legislative and regulatory overlaps, point out the congressional jurisdiction barriers to what might be called traditional harmonization strategies (joint or sequential referral of bills, conference committees with members from multiple authorizing committees, etc.), and suggest strategies for moving legislation that could bring landowners more regulatory certainty.
    Another option might be to direct USDA and the agencies charged with carrying out the various environmental statutes to undertake a similar review and report to Congress. Such an approach might produce not only a legislative roadmap but also more immediate protocols between Federal agencies (and, where appropriate, state regulators) that would provide more encouragement for landowners to undertake conservation activities.
    I close with two final suggestions that impact on all the strategic issues I mentioned. First, delineate goals for what the conservation title of the next farm bill should accomplish through voluntary, incentive-based programs. Should we try and reduce agriculture nonpoint source pollution by 25 percent? Maybe 50 percent? What about soil erosion? What percentage of our lands should meet the soil loss tolerance? How should we harmonize confined livestock production with expanding urban boundaries? What support is appropriate for landowners currently implementing conservation measures? Answers to these questions will lead you to more rational decisions on how much should be spent on incentive programs—and increase the likelihood of receiving the political support necessary to secure new funding.
    Second, make environmental performance your guiding beacon in this process. As you debate conservation incentive programs and the next generation of commodity programs, there may be proposals from some circles to effectively combine the two into some sort of ''green payment'' scenario. The environmental hook could be to pay farmers for what they're already doing, which is not necessarily a bad idea. But the end result could be to get little new conservation on the ground. Such a gambit might be a clever way of justifying government payments to farmers but it would ultimately be cruel to landowners staring down the gunbarrel of environmental regulation and hollow for urban dwellers who also stand to benefit from conservation on working agricultural lands.
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    Thank you again for the opportunity to submit this testimony on behalf of the Alliance for Agricultural Conservation.
     
Statement of the Native Seed Trade Association
    The Native Seed Trade Association (NSTA) proposes that the production of native seed be included among the permissible enterprises within the Conservation Reserve Program. Ideally, the efficacy of this proposal will be tested over several years in a pilot project that includes a number of different habitats around the country. We believe that native seed production dovetails perfectly with the interests of the CRP and that such a pilot project will be an inexpensive means of demonstrating its value. Below, we will briefly describe the native seed industry and underscore how it fits into the CRP. We will also summarize our research among prospective participants in such a pilot project in Southwestern Georgia. Finally, we will outline the details that we feel will give the pilot project the greatest opportunity for success.
THE NATIVE SEED INDUSTRY
    What are native seeds?. Native seeds are the seeds of plants that naturally occur in a particular region. Because these plants are naturally adapted to this region, they thrive without the sort of assistance that most agricultural crops require. For example, NSTA warns against irrigation or fertilizing, because these practices will eventually deplete many of the advantages that native plants offer. In part, because of these characteristics, native seed is in great demand.
    Who buys native seed? Native seed is essential in any attempt to restore native habitat. Many government agencies at all levels of government are large consumers of native seed. Since February 3, 1999 Executive Order 13112 [Invasive Species] et al. have formalized this governmental demand for native seed. And yet, the production of native seed is a mere fraction of the demand. In fact, there have been numerous interagency meetings to discuss the shortage of native seed. In addition to the governmental market there are hundreds of small businesses conducting restoration programs on public and private lands. Almost all of these require native seed. Almost all have difficulty obtaining the seed they require. A growing native seed industry will allow small farmers and private enterprise to solve one of government's more intractable problems.
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    How is native seed produced? In order to begin a native seed farm, the producer must first gather enough native seed to serve as founder stock. Out of this stock he rears his crop. Because even this initial seed is difficult to purchase, much of it is wild harvested. The producer finds large remnant stands (populations) of native plants, then he gets permits from the owners of that land to collect the seed, and then he uses this seed as founder stock for a crop of native plants on his own land. Many native plants take several years before they become financially productive. This process can be difficult and time consuming.
    How does native seed production fit into the CRP? he CRP seems designed with native seed production in mind. All of the goals of the CRP are robustly fulfilled by the production of native seed on CRP acreage. Here are some effects of native seed production and how they relate to the interests of the CRP:
    The Family Farmer acquires an alternative crop to protect his farm. The CRP, like all USDA programs aimed at the small family farmer, seeks to find ways of preserving this way of life. Native seed can be a lucrative crop—often selling for hundreds of dollars a pound. By permitting the production of native seed, the CRP will offer the farmer a long-term alternative to commodity crops without compromising any of the other goals of the CRP. However, developing a productive native seed crop can take several years; CRP rental payments will provide farmers the opportunity to enter this growing industry.
Native seed production is an ideal means to prevent soil erosion. The CRP began with the goal of abating the erosion caused by farming on marginal lands. The crop of native seed producers will be the native plants that pre-date agriculture in those locations. These plants are usually perennials and are never harvested completely. The soil is always under cover. Moreover, because the plants are native, they are highly adapted for success in that soil.
Native plant production will permanently remove land from the production of commodity crops. Another early factor in the CRP was the desire to support commodity prices by removing marginal land from production. In fact, one of the criticisms aimed at the program has been that its effects are too impermanent. For example, once acreage comes out of the program, the farmer has little incentive not to replant in commodity crops. If, on the other hand, the farmer is permitted an alternative crop, his impetus back toward the commodity crop is diminished.
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Native plants are exactly the right habitat for local wildlife. CRP has become one of the most successful methods for protecting critical habitat for wildlife and rare plant communities. The methods used to produce native seed not only protect habitat, they extend it.
THE SOUTHWEST GEORGIA EXAMPLE:
    The American Farmer does not want help. He wants the opportunity to help himself. This is why, all over the country, farmers are experimenting with alternative crops. The Native Seed Trade Association believes that converting marginal land to the production of lucrative native seed makes sense for many farmers. In particular, land under the CRP seems ideal for native seed farming.
    Of course, the question is whether the farmers themselves would be interested. In researching this issue, we visited with several farmers in the 2nd and 8th Districts of Georgia. Our visit was not intended to be a thorough survey; we only wanted to speak with one or two local farmers about their experience in the CRP. The response, however, has been overwhelming. Over 100 South Georgia farmers have called or e-mailed expressing an interest in participating in this project. In addition to the farmers themselves, several local organizations have indicated a desire to participate in developing this project. For example, The Jones Ecological Center has indicated a willingness to provide support to the Native Seed Trade Association and any group of local farmers willing to begin production of native seed.
    It is the farmers, though, who offer the most enthusiasm for the project. Farmers are normally conservative, skeptical people. They are realists. And, when they hear about the potential of native seed production, they ask hard questions. In the end, they believe they can make it work. Ultimately, they will be the ones who will have to.
THE PILOT PROJECT
    After listening to the farmers of Southwestern Georgia, the Native Seed Trade Association has formulated an outline of a program that will have the faith and backing of the farmers who would participate. This program involves the proposed changes to the CRP regulations, but it also requires commitments from the farmers, various local organizations, and the Native Seed Trade Association
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    The mission of the NSTA is to promote the production and availability of native seed. One of our principal objectives is to encourage traditional farmers to undertake the production of native seed. Even if farmers receive CRP rental payments, they will still need other forms of assistance. NSTA understands that its role will be to provide comprehensive training programs in all aspects of native seed production. Perhaps most importantly, farmers and their cooperatives will need ongoing technical advice and the support of other native seed producers from around the country.
    Our mission in Georgia is to organize cooperatives of farmers interested in alternative crop opportunities. The methods used in the development of this cooperative would serve as a model for creating other native seed cooperatives in areas of the country where demand for seed is the greatest [e.g. the Mid-Atlantic and Southeastern regions, and the great burn areas of the West.] The rental payments required to build incentive among traditional farmers must be at least $100/acre—we arrived at this number by talking to traditional crop farmers (e.g. soybeans, peanuts, corn, cotton) and all of them concurred that it would not be worth their effort if the rental payments were less than $100/acre. There was also a strong consensus among the farmers with whom we spoke that they would not participate if the permitted acreage were less than 25 acres. Because of the miniscule quantity of seed stock available to start the program, only a few acres can be planted in the first year. We recommend that there be incremental increases in acreage as seed becomes more available for planting. We are advising farmers to begin with a small parcel in the range of 25 acres to begin a founder population and that with each subsequent year they will be able to plant more acreage as more seed is accumulated with a maximum of 25 acres being the target for each of the 10 farmers in the duration of the Pilot Project.
    We will develop and implement a training program to teach farmers how to identify remnant populations of native plant communities, how to harvest a breeder or founder population of seeds from those remnant sites, how to plant those seeds in a particular species assemblage that matches the ecosystem they will be growing in, how to harvest the seeds from that planting and how to begin planning and planting for larger scale harvests. They will be trained in how to clean and process the seed and also how to market their product. This training program will be segmented and held over an 18 month period. As most of the native plant species of interest are perennial grasses, establishment of these grasses will take at least 3 years. Once the native plant species have become established and are growing in a healthy and stable system, seed harvest will then begin. The actual planting of natives will be in grassland/meadow/pasture type settings with high species diversity that will contain a 70:30 mix of grasses and forbs (flowering plants). This is the best system to restore ecosystem health by creating critical native habitat that fits into the surrounding environment.
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    In summary, NSTA recommends:
     To provide adequate incentive for farmers to invest in native seed production, rental payments should be at least $100 per acre.
     We [NSTA] would require that each farmer include a minimum of 25 acres in the native seed production program.
     We require source identified ecotype seed. The founding or breeder population of seed must match the ecotype in which it will be grown and NSTA will coordinate the source identification requirement.
     The planting will be done in meadow/prairie like situation with a composition of native cool and warm season grasses and native forbs. The ratio of at least 7 species of grasses and 3 species of forbs (flowering plants).
     The period of the pilot project should be a minimum of 10 years
     No harvest of grass seed can take place for the first 5 years as it will take that long to get the level of production economically and environmentally viable.
     Harvest of the seed will take place every other year after the initial 5 years and rental payments will be reduced by 50 percent in those years.
     For those farmers who want to participate but do not want to produce seed and have an interest in producing organic Hay - the same rules will apply.
     All seed from each ecotype area (conservation district) will be harvested and processed under the supervision and management of the local native seed producers cooperative. Each cooperative will be responsible for maintaining the integrity of the particular ecotype seed for their region. All seed will be processed in the cooperative and will be marketed and sold by the cooperative.
    The Native Seed Trade Association would like to thank the Subcommittee for this opportunity to express its views on the Conservation Reserve Program. If any members have further questions concerning native seed production or this pilot project, we are always available to offer our advice or hear your recommendations.
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Statement of Jamie Clover Adams
     Mr. Chairman and members of the subcommittee, thank you for the opportunity to present testimony on the conservation provisions of the next farm bill. My name is Jamie Clover Adams. I am the Secretary of the Kansas Department of Agriculture, and I appear today on behalf of the National Association of State Departments of Agriculture (NASDA) and my fellow Secretaries, Commissioners, and Directors from across thee Nation.
     What I will present today is the broad outline of a bold, new environmental program for the 900 million acres of America's open space resources that are under the care and stewardship of our agricultural producers. This new state ''Agricultural Stewardship Program'' would be a ''block grant'' type initiative designed to give state and local governments greater flexibility, innovative tools, and resources to implement agricultural conservation priorities. At the outset, I need to stress that the proposal we are offering for the Subcommittee's consideration is a work in progress. It is the result of extensive discussions over the past several months among the Secretaries, Commissioners, and Directors of Agriculture from throughout the country, formally adopted as a NASDA policy recommendation during our midyear meeting in February. Since then, we have refined and elaborated on our proposal after discussions with other stakeholders and stand ready to further refine it with input from this Subcommittee.
     Significant gains have been made in addressing traditional agricultural environmental concerns over the past decade. Soil erosion has decreased, as has the loss of wetlands, and wildlife habitat has been enhanced. We credit existing conservation programs for a good deal of this progress and recommend their continuation with increased funding, along with some modifications that I will mention near the end of my testimony.
     Although we have been making progress in several conservation areas, the scope and range of environmental challenges faced by our farmers and ranchers have expanded, while environmental regulations have increased and changed along with the public perceptions, priorities, and the science that underlie them. My colleagues and I strongly support and encourage the use of existing USDA-managed conservation programs. At the same time, many of us have recognized that successfully meeting the new environmental demands is a ''make or break'' challenge for the farmers and ranchers we serve. We have begun to move on our own to try and fill the gaps in existing programs.
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     These initiatives have taken different forms in each region of the country, reflecting state and regional differences both in what our farmers produce and in the most pressing agricultural challenges that they face. For example, the Kansas Department of Agriculture (KDA) created a Pesticide Management Area (PMA) in the Delaware River Basin of Northeast Kansas to limit the input of atrazine and other soil-applied herbicides into area surface water. Many agencies and entities assisted KDA to gather data and educate area residents, including the State Conservation Commission, U.S. Geological Survey, Kansas State University and Kansas Department of Health and Environment. The primary goal was to bring the amount of the chemical atrazine to below three parts per billion in area surface waters.
     Voluntary recommendations were developed for agricultural uses according to the tillage practices being used by the farmer. Further, after the PMA' inception, atrazine makers amended the Federal pesticide label to lower recommended application rates and adopted other water quality protection practices developed for the Delaware PMA program. The proposal also suggested application methods and encouraged using alternative weed control practices, stream buffer zones and vegetative buffer strips.

I11 Kansas State University published recommendations in an atrazine Best Management Practices (BMP) guide which had been developed through work at the Foster Farm research site. The Kansas State Conservation Commission (SCC) offered a pilot incentive program ($5/acre) to farmers in one critical watershed (Mission Lake) to encourage adoption of KSU-recommended BMPs. Further, farmers were contacted on more than one occasion by both the SCC and a KSU Extension employee dedicated to the project. Participation was nearly 100 percent. (Only one farmer did not participate because he grew soybeans only and did not use atrazine.) Outreach to farmers and property owners was the biggest challenge. Cooperating agencies worked hard to make cost-share incentives available to producers but, in point of fact, personal contact was equally, if not more, important to the success of the Delaware PMA. Finally, all waters in this area have been removed from the atrazine-impaired waters list except Tuttle Creek (which receives 80 percent of its pesticide load from Nebraska). Kansas and Nebraska are now working together to address this remaining issue.
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     Other states like New York have focused on nutrient management planning for dairy producers as a key environmental challenge, developing the Agricultural Environmental Management (AEM) program to provide direct technical assistance to dairymen and cost sharing for need improvements. The New Jersey Urban Conservation Action Partnership concerns itself with the issues that arise when farming coexists with urban and suburban development. Southwestern states are looking at programs that have a large water conservation component—an issue that is front and center in many parts of the country.
     Each of these new state programs is designed to supplement those that already exist to help farmers carry out their stewardship function and bear the cost of what we see as substantial public benefits: open space conservation, resource preservation for future generations, and clean air and water. Each is voluntary, incentive-based rather than sanction-based, designed to address local needs while complementing existing programs, and carried out in collaboration with all the Federal and State agencies already engaged in local environmental management activities.
     NASDA has testified before other congressional panels concerning environmental questions such as Total Maximum Daily Loads (TMDLs). Our goal will always be to assure that legislation that effectively mandates huge investments in new technology and new management practices does not put good farmers and ranchers out of business. We will continue to work on all fronts to preserve a sensible regulatory environment. At the same time, we understand that the rules of the game will keep changing.
     NASDA' proposal builds on existing planning systems and infrastructure—it does not duplicate existing programs. Our intent is to fill in the gaps, which will only increase in the future due to changing public expectations and regulatory requirements. This new approach will provide a better ''toolbox'' and tools to meet these needs. The potential benefits and rewards of our program are enormous because it would:
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     Reach all producers, thus provide greater environmental benefits overall;
     Give states flexibility to address their most critical problems;
     Target resources to where they are most needed on a site-specific basis;
     Increase local buy-in to find workable solutions;
     Emphasize preventive measures, which are more cost-effective and offer more economic returns;
     Simplify program delivery;
     Address the expanding list of new problems (i.e., carbon emissions, etc.)

     The state departments of agriculture also stand ready to work with the Subcommittee to examine resource and funding delivery and needs. This is a high priority and the key element for an effective Federal-state partnership in agricultural policy. We believe that there is a strong public policy argument for Federal cost sharing to help agricultural producers deal with changes in what the public expects in the way of environmental management. A good analogy would be the assistance provided by the Federal Government over the past three decades in upgrading municipal water treatment facilities to meet Clean Water Act requirements. Today our waters are cleaner than they have been in generations. Thanks to Federal support for necessary local investments, this enormous progress toward a national goal was accomplished without bankrupting small cities and towns.
     Today, public expectations, increased regulation and a growing list of environmental challenges are demanding on-farm environmental enhancements that are beyond the short-term and long-term economic payback for producers. For example, many conservation practices have high capital or management input costs, but do not generate additional revenues. Agriculture is not organized in a fashion that allows increased costs of production to be passed on to consumers. As such, on-farm expenditures for conservation compete directly with servicing farm debt and other family financial needs. In addition, implementing more stringent and complex standards usually increases the need for more costly approaches and technologies. Farmers are ready to do their part in accomplishing current and future national environmental goals. However, what will be expected of a cattle feeder in North Dakota will be quite different from the challenges faced by citrus grower in Florida.
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     Our Agricultural Stewardship Program asks the Federal Government to recognize two key facts:
     A one-size-fits-all approach toward helping agriculture meet the environmental challenges of the next decade will leave some regions and the producers of some crops or livestock products out in the cold.
     Local leadership is required for designing and implementing realistic programs, focused on what local stakeholders agree are the most pressing local agricultural environmental problems.

     Our State Departments of Agriculture stand ready to provide that leadership. As I have noted, many are already moving forward to design and implement effective producer-oriented environmental programs, utilizing local and state resources. Programs like Kansas' Pesticide Management Area (PMA) have the potential, given the resources, to assist even more producers for the benefit of the environment and our agricultural industry.
     NASDA believes that an effective state ''working fund'' for agricultural environmental stewardship will have these characteristics:
     Funding will come through cooperative agreements between USDA and State Departments of Agriculture, which will be the lead agencies in designing and carrying out programs; similar to the way State Revolving Fund grants are provided by the Environmental Protection Agency (EPA) to the states upon approval of an Integrated Use Plan;
     Program parameters will recognize activities designed to enhance protection of land, water, air and wildlife in the broadest terms possible, without duplicating existing planning systems and infrastructure;
     States will have the flexibility to allocate dollars between payments to producers and/or technical assistance, based on local needs and priorities;
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     Producer participation will be voluntary, incentive-based, and targeted toward those environmental enhancements that are supported by sound science and produce measurable results;
     Contract payments to participating producers will be made on an annual basis;
     All programs will have provisions to protect individual producer privacy and data confidentiality.
     Farmers and ranchers have provided tremendous environmental gains through participation in conservation programs established in the 1985, 1990, and 1996 farm bills. These programs are generally working well. However, limitations and inequities are preventing these programs from achieving their full potential. Let me now briefly outline our suggestions for changes in three existing environmental programs.
     Wildlife Habitat Incentives Program (WHIP) - NASDA recommends that WHIP be redirected with the addition of a Critical Habit Incentive Program (CHIP). This addition would dedicate a specific proportion of resources within an increased WHIP appropriation to carry out voluntary critical habitat enhancement, and would give a higher priority to enhancement of critical habitats within the program as a whole.
     Environmental Quality Incentives Program (EQIP) - NASDA has several recommendations, starting with our proposal that states be given more flexibility and discretion to decide eligible conservation practices. We further noted that:
     The national size restriction for EQIP livestock projects limits opportunities for producers. The 1,000 animal unit threshold may seem large in Michigan, but it is small by Kansas standards.
     Many practices outlined in the EQIP guidance for livestock practices do not work well for smaller producers and those who may work other jobs-a category of producers that is increasing in many states.
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     The program should allow for one-year contracts and should remove the $50,000 payment cap.
Conservation Reserve Program (CRP) - NASDA recommends that approved maintenance of land enrolled in the program should include grazing, under the following conditions:
     NRCS has determined that maintenance is required on the land to maintain plant heath, ground cover and/or improvement of wildlife habitat;
     Grazing must be high-intensity and short term, to provide benefits that may be more environmentally beneficial than burning, disking, clipping, or spraying;
     The CRP rental payment is reduced at a rate equal to the value of the forage or the maintenance fee; and
     The payment, time of year, and frequency of maintenance will be according to a determination by the local technical committee.

     In closing, I would like to note NASDA' strong view that, budget realities notwithstanding, investment in agricultural environmental stewardship should not be viewed as simply one more category of farm program spending. Should it be viewed in that way, a substantial additional investment in support for producer-level environmental enhancements will tend to trade off against unrelated programs designed to address consequences of low and unstable farm prices. An environmental stewardship ''working fund'' will not address the potentially disastrous implications of another year of low farm commodity prices, or point the way to stable long-term solutions to the underlying financial problems facing American agriculture. However, we know that our proposal will help us keep those farming and ranching operations that are most heavily burdened in helping achieve environmental goals from folding while we work to improve opportunities for growth and profitability in agriculture as a whole.
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     Speaking for all my state colleagues, I appreciate this opportunity to present views on how we can support good agricultural environmental stewardship in every region of the country. We look forward to working with the Subcommittee to develop a Federal agricultural policy that provides necessary tools for a healthy and profitable agricultural industry and to help farmers and ranchers continue to be good stewards of the land. Thank you.
     
Statement of R. Max Peterson
    Mr. Chairman, members of the Subcommittee, my name is R. Max Peterson. I am the Executive Vice-President of the International Association of Fish and Wildlife Agencies. The Association was founded in 1902 as a quasi-governmental organization of public agencies charged with the protection and management of North America's fish and wildlife resources. The Association's governmental members include the fish and wildlife agencies of the states, provinces, and Federal Governments of the U.S., Canada, and Mexico. All 50 states are members. The Association is a key organization in promoting sound resource management and strengthening Federal, state, and private cooperation in protecting and managing fish and wildlife and their habitats in the public interest.
    The Association appreciates this opportunity to present to the Subcommittee our perspectives on farm bill conservation programs. The Association believes that agricultural conservation programs established under the 1985, 1990 and 1996 farm bills, have been some of the most important, significant and successful fish and wildlife conservation endeavors in the last 30 years with significant, tangible on-the-ground benefits. The farm bill has proven to be an effective mechanism for delivering both financial benefits to landowners and public benefits in the form of affordable food, and conservation of fish, wildlife, and soil and water resources. As a result, conservation programs continue to enjoy broad bipartisan support.
    As you are aware, the State fish and wildlife agencies have broad statutory authority and responsibility for the conservation of fish and wildlife resources within their borders. The states are thus legal trustees of these public resources with a responsibility to ensure their vitality and sustainability for present and future citizens of their States. State authority for fish and resident wildlife remains the comprehensive backdrop applicable in the absence of specific, overriding Federal law. The State fish and wildlife agencies thus have concurrent jurisdiction with the Federal agencies for migratory birds, threatened and endangered species and anadromous fish. Because of our responsibility for and vital interest in the conservation of fish and wildlife resources, we have significant vested concerns in agricultural conservation programs.
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    The conservation and sustainability of fish and wildlife resources depends on the availability and quality of their habitat, much of which is found on agricultural lands. The State fish and wildlife agencies recognize, appreciate and respect the fact that about two thirds of the land (i.e., habitat) in the United States is owned by private landowners. We also know that most private landowners want to be good stewards of their property and many embrace conservation as a prominent goal for their land management objectives. We believe that the State fish and wildlife agencies have generally enjoyed very good relationships with agricultural landowners, and the majority of those landowners are willing to work with the agencies to include fish and wildlife with their other land management objectives.
    The Association believes that the key to unlocking the full potential of farm bill conservation programs is to focus on voluntary, incentive-based programs that provide:
     Funding sufficient to address landowner demand for program enrollment and technical assistance;
     Flexibility in program implementation to address regional and local differences in how program objectives can best be achieved; and
     Income support for conservation practices on a wider array of farms, ranches and forests in all parts of the country.
    Another important aspect to the success of current and future programs will be to insure that they are part of a comprehensive national agricultural policy to prevent different incentive-based programs from working at cross purposes and to address the public's expectations regarding the level of conservation benefits derived from tax dollars expended.
    Commitment of State Resources to farm bill Conservation Programs
Before presenting the Association's views on specific conservation programs, I believe it is important to recognize the commitment that many of our State fish and wildlife agencies have already devoted toward making these programs work for wildlife and for the landowner. One way of doing this is to provide technical expertise at all levels of program planning, implementation and evaluation so that fish and wildlife needs are considered throughout the process. Another way of doing this is to provide dollars for cost share, including equipment and materials. States are making substantial contributions in both manpower and money. Current contributions to farm bill conservation programs recently identified by just 14 states include over 5.4 million dollars for cost share and over 300,000 hours, or the equivalent of 145 full time employees, assisting NRCS with program implementation. Just three examples from around the country include:
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    Oklahoma Department of Wildlife Conservation—Spent 1,115 hours last year assisting NRCS with implementation of the Wildlife Habitat Incentives Program (WHIP), the Wetland Reserve Program (WRP), the Conservation Reserve Program (CRP) and the Environmental Quality Incentive Program (EQIP). The Department also provided $50,000 to private landowners for habitat improvements through the Department's own Wildlife Habitat Improvement Program, which is a landowner cost-share program that often supplements funding of USDA WHIP contracts.
    Missouri Department of Conservation—Providing 50 biologists and $900,000 in cost share this year to deliver fish, forest and wildlife technical assistance to private landowners in cooperation with NRCS.
    California Department of Fish and Game—Since 1996, the CDFG has made direct cash contributions of $3,677,521 to WRP restoration projects and easement acquisitions, expended $114,080 on wetland management agreements on WRP lands, and dedicated $90,000 toward two wetland biologist positions for technical assistance with WRP.
    These examples demonstrate the continuing commitment of the States to the successful implementation of farm bill conservation programs, and are just a sample of how these programs leverage nonFederal funds to multiply resource and landowner benefits. Additional and significant financial and technical resources come from various NGOs, such as Ducks Unlimited, and Pheasants Forever, who are also providing testimony today as part of a strong and growing coalition of wildlife conservation partners that support farm bill conservation programs. The Association applauds their efforts and looks forward to continuing the constructive partnerships between the NRCS, State fish and wildlife agencies and these organizations that will make every farm bill conservation dollar go even farther.
BUILDING PARTNERSHIPS TO ADDRESS DEMAND FOR TECHNICAL ASSISTANCE
     With the introduction of new conservation programs and the elevation of wildlife to co-equal status with soil erosion and water quality as a resource to be addressed in program implementation, the challenge has been to bring all the potential resource benefits to fruition on the ground. This requires adequate technical assistance by resource professionals. It is imprudent and unrealistic to expect FSA and NRCS to deliver existing, invigorated or enlarged programs under current staffing levels. Work analysis studies within USDA have substantiated what staffing levels would be needed to fulfill program objectives. These studies should be used as a road map on the way to staff recovery. To address staffing shortages, alternatives such as reimbursement to State fish and wildlife agencies and others who have the capability and expertise to deliver technical assistance, should be considered.
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    As was already mentioned, State fish and wildlife agencies are contributing staff time to help NRCS field offices service fish and wildlife aspects of USDA assistance to private landowners. Such partnerships can help NRCS deliver specialized technical expertise to private landowners at less cost than adding staff with this expertise. But, this will only work if state and local partner contributions result in additive staff. The Association strongly encourages the creation of a challenge grant program in USDA that would stimulate partnering arrangements between NRCS and State fish and wildlife agencies and others that result in cost efficiencies. Such partnerships will be able to more effectively and efficiently provide the specialized technical expertise necessary to deliver conservation programs to producers as originally intended by Congress. Funding for monitoring and assessment of conservation programs, which can also be conducted through partnerships, needs to be included in allocations for these programs.
    The Association believes the following existing and proposed conservation programs are complementary and can work together to address regional and local differences in conservation priorities, land values, regulatory requirements and public expectations. The Association respectfully offers the following farm bill conservation program recommendations:
    Conservation Reserve Program (CRP). The Association believes that no other conservation program has provided the quantity and quality of environmental benefits on agricultural lands as the popular CRP. In addition, this program has contributed to stability in the agricultural economy. We believe a CRP with an enhanced enrollment of 45 million acres can and will do more to achieve the objectives of long-term stability to the agricultural economy and long-term benefits for fish, wildlife, soil and water conservation. This program provides significant wildlife resource benefits. Bird species such as pheasants, ducks and grassland songbirds have been major beneficiaries. Pheasant populations have more than doubled in several states due to CRP. It is estimated that in one year alone (1994) three million additional ducks were produced in the Dakotas and Montana because of CRP. CRP helps address the decline in grassland bird species, which are 21 times more abundant on CRP fields and 32 times more likely to hatch than on adjacent farmland. CRP has been and can be a proactive conservation strategy for addressing the needs of declining species before they reach a point when listing under the Endangered Species Act is necessary.
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    The value added from CRP lands to local economies from hunting, fishing and wildlife viewing opportunities is also significant. The USDA's Economic Research Service estimates the value of CRP's improvements to wildlife viewing and pheasant hunting at $704 million per year. In addition, the nonmarket benefits of soil erosion reductions by CRP is estimated to be $694 million annually. Since the ERS believes these numbers understate the true value of CRP contributions to wildlife and to reductions in soil erosion, CRP alone represents a minimum of $1.4 billion in nonmarket benefits a year.
    The Association's members want to ensure that CRP lands deliver wildlife as well as soil and water benefits throughout the contract period. With this objective in mind, we believe it would be most productive for wildlife if cost-share was structured so that planting cover crops that are locally best suited for wildlife do not cost the landowner anymore than planting cover crops that are not as good for wildlife (often the lowest cost choice). Appropriate management and maintenance strategies on enrolled lands are also essential to the continuation of soil, water and wildlife benefits throughout the life of the CRP contract.
    The key to improving the CRP program is to avoid the one size fits all approach. By providing the flexibility to manage CRP lands according to specific regional needs identified by resource professionals working on the ground with landowners and coordinating their efforts through State Technical Committees, additional conservation benefits can be realized for all resources.
    Flexibility in CRP has been enhanced with the Conservation Reserve Enhancement Program (CREP). CREP is a state-Federal conservation partnership program that allows for the flexible design of conservation practices and financial incentives that address specific environmental issues. Currently 15 states have CREP agreements that provide $481 million in non-Federal funds to a $2.26 billion program. The opportunity for states to enter into CREP agreements should be reauthorized in the 2002 farm bill, and the process for a state to participate in a CREP should be streamlined.
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     The Association believes that the Continuous CRP Sign-up (Buffer Initiative) has the potential to provide significantly more water quality, erosion control and fish and wildlife benefits if some changes are made. In order to increase the interest and success of this program, action needs to be taken to: 1) increase agency promotion at the state and local level; 2) streamline, simplify and reduce program rules; 3) increase agency staff to address landowner interest and aid in program outreach and education and 4) provide an up-front rental payment structure. We believe these actions would increase participation, boost farm income/cash flow, and provide a concurrent environmental enhancement.
     Short-term Soil Restoration Program. A soil restoration program of short duration (3–5 years) can enhance soil and water quality, improve aquatic and terrestrial wildlife habitat, conserve energy and bolster commodity prices. The resource benefits generated by this program can also help producers comply with regulatory standards (i.e., TMDLs). It is imperative that this new program be constructed outside of CRP goals and dollar constraints so as not to imperil the CRP, the nation's greatest soil, water, and fish and wildlife enhancement program. Appropriate cover establishment goals should insure all of these benefits.
    Wetland Reserve Program (WRP). Never before have so many producers voluntarily stepped forward to protect, enhance and preserve the nations wetlands under appropriate public compensation for their efforts. According to the Economic Research Service, agriculture is the single largest source of U.S. wetland restoration. Popularity of the program remains very high with a 5:1 ratio of applications to approved projects. Hundreds of qualified applications submitted across the Nation cannot be accepted without expansion of WRP, which will reach the current authorized cap of 1,075,000 acres this year. We believe that it is simply good business to increase the enrollment cap annually by 250,000 acres and appropriate the necessary funds for enrollment. Producers could enroll and thus insure themselves against the increased risk of farming those economically marginal acres, add immediately to their cash flow, and improve fish and wildlife habitat, thereby helping to avert endangered species controversies.
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     Wildlife Habitat Incentive Program (WHIP). The originally authorized $50 million for WHIP was literally snatched up by anxious and willing farmers with little public announcement of the availability of funds. In many cases more than half of the offers were left on the table and thousands of farmers were turned away for a lack of funds. Implementation of WHIP provides enhanced fish and wildlife value, improved recreational opportunities and marketable outdoor experiences. This is a significant program on non-farmed lands and is of signal importance in the northeastern US because of demographics, cropping history, farm size and a host of other variables that render other authorized farm bill programs less applicable. This program has resulted in many partnerships between NRCS and non-Federal organizations, resulting in tremendous leveraging of non-Federal dollars. The Association recommends that $100 million annually be authorized for WHIP.
    Grasslands Reserve. Owners of grasslands are also at risk and deserve income enhancement considerations. Native grassland habitat continues to be in short supply and is likely to decrease if not buffered from competing uses. A substantial suite of grassland dependent birds have suffered precipitous declines but are capable of recovery with conservation and stewardship management of the remaining grasslands. A voluntary, incentive-based program needs to be made available to help small family grassland owners stay on the land, as opposed to their lands being sold for ranchette development or converted to row crop production. The opportunity exists to provide income enhancement and grassland conservation through an easement program similar to WRP that would be applicable to a wide variety of grasslands/rangelands around the country, but would be directed at the most vulnerable habitats based on state or regional priorities.
    Forest Legacy and Farmland Protection Programs
The Association's members continue to be concerned about the adverse impacts on fish and wildlife habitat resulting from conversion of farmland and forestland for development. Both the Farmland Protection Program and the Forest Legacy program can help prevent further habitat fragmentation, retain open space and maintain wildlife populations on the landscape close to rapidly expanding urban areas. Both of these programs should continue with adequate funding. The Association recommends at least $100 million annually for each program.
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    Forest Stewardship Programs. The Association recognizes the importance of forest stewardship programs and their potential for enhancing fish and wildlife habitat on the 350 million acres of non-industrial private forestlands in the United States. We recommend funding the Forest Stewardship Program and the Stewardship Incentive Program at $50 million per year for each program. All plans should be reviewed and approved by a wildlife biologist and a forester.
    Environmental Quality Incentives Program (EQIP)
EQIP is another very popular program that, according to testimony provided to this Committee by the NRCS two weeks ago, has averaged about 3 to 6 times the number of applications that could be approved with available annual funding. EQIP plays an important role in the conservation of lands in production and can be very useful in helping farmers and ranchers meet current environmental regulations and avoid potential future regulatory requirements (e.g., TMDLs and CAFOs). This program could logically be integrated into any new conservation program specifically designed for lands in production. The Association recommends funding this program at $300 million annually and allowing funds to roll over into subsequent fiscal years so that project planning and implementation is not interrupted simply because the Federal fiscal year has ended. We also recommend that fish and wildlife resources be recognized as co-equal with soil and water resources and fully integrated into program delivery.
     Comprehensive Approach to Agriculture Programs. The Association thanks the Subcommittee for considering conservation programs in the context of a comprehensive farm bill because we believe that conservation and commodity programs must be designed to work in concert. The soil, water and fish and wildlife benefits achieved through voluntary, incentive-based conservation programs targeted at the most environmentally sensitive lands should not be offset by other programs that provide incentives to put those same types of lands, such as wetlands and remnant native grasslands, into production. A national agriculture policy that provides assistance for producers in the form of crop insurance, loan deficiency payments and emergency payments should also include protection of sensitive lands through reauthorization of swampbuster and sodbuster along with adequate funding for the popular CRP, WRP and the proposed grasslands reserve program. Program coordination will be a key to achieving a comprehensive agricultural policy. This coordination requires the continuation of land retirement and withdrawals balanced with active conservation measures on lands still in commodity production. It must be remembered that all of these lands are ''working'' lands that generate different sets of products. The reality is that CRP and WRP are working lands for their production of renewable wildlife populations, development of natural vegetative communities, and for their conservation of soil and water resources.
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    Producers from all parts of the country should be able to use the soil, water and fish and wildlife benefits generated from the suite of voluntary, incentive-based conservation programs to help meet existing environmental regulations and to avoid or minimize the impacts of potential future regulatory requirements. As mentioned in recent testimony from both the Farm Bureau and the livestock industry, many farmers and livestock producers face, or will likely face, regulations concerning water quality. Many producers are also concerned about the regulatory impacts of the Endangered Species Act. With regard to the ESA, the Association recommends a proactive approach to examine how farm bill conservation programs can assist landowners in enhancing habitat for declining species that are not yet listed. Greater management flexibility exists prior to listing and if management actions are effective, listing can be precluded by the use of voluntary, non-regulatory incentives that insure sustainability of the species and their habitat.
    The key point is that assistance in addressing regulatory requirements can and does come from programs designed to remove sensitive lands from production as well as programs designed to conserve lands that remain in production. The approaches should be viewed as complementary. The existing programs need adequate funding and any new conservation programs need to be funded over and above base conservation funding.
    In conclusion, the Association appreciates your consideration of these recommendations and our member state fish and wildlife agencies stand ready to work with you to address conservation and farm income enhancement as mutually sustainable items on the nation's agriculture policy agenda.
     
Statement of J. Read Smith
    Mr. Chairman and members of the subcommittee, I am J. Read Smith, a farmer from St. John, Washington and a conservation district supervisor from the Palouse Rock Lake Conservation District Board. Along with my wife and son, we run a small-grain farm and ranching operation in the Palouse Region of eastern Washington. I am President of the National Association of Conservation Districts and I appreciate your invitation to be here today to share conservation districts' recommendations on conservation programs administered by the US Department of Agriculture.
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    The National Association of Conservation Districts is the nonprofit organization that represents the nation's 3,000 conservation districts and 17,000 men and women ''district officials'' who serve on their governing boards. Conservation districts are local units of government established under state law to carry out natural resource management programs at the local level. Currently, conservation districts work with NRCS and others to provide technical and other assistance to more than two-and-half million cooperating landowners and operators to help them manage and protect their land and water resources. Conservation districts encompass roughly 98 percent of the private lands in the United States.
    I am here today to represent the views of those 17,000 conservation district officials. But more than that, as locally elected or appointed public officials, collectively we represent the American public; all of the constituents in the districts we serve. As we talk today about USDA's conservation programs and the next farm bill, I urge you to keep in mind that we are the people who work at the very point where the programs you authorize are delivered to the customer.
    Mr. Chairman, I will focus my remarks today on a new vision conservation districts have for private lands conservation in America. We also have a number of recommendations for adjusting and maintaining the conservation programs currently authorized by statute, which I will discuss in Part II of my statement.
     A New Vision of Conservation
    The private working lands that comprise America's farms, forests and ranches represent 70 percent of our nation's land—nearly 1.5 billion acres. That working land provides us not only with food and fiber for our own use, but with an array of exportable goods as well. It provides an economic engine and a tax base for rural communities and nearby cities.
    But private lands also provide us with many intangible benefits. For example:
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     Nearly 90 percent of the rain and snow that recharges our water supply falls on private land.
     About half of the nation's endangered species rely on private land for at least 80 percent of their habitat.
     Private lands are the vital bridges among public refuges, the links that prevent wildlife communities from becoming isolated from each other, threatening biodiversity.
     Many of our open space and scenic vistas are on private lands.
     Private lands are important in sequestering carbon and producing bioenergy products.
    In setting the tone for the next farm bill, Congress has a new opportunity to elevate the importance of private lands conservation by creating incentives to better manage and protect those lands. We believe that expanded, voluntary, locally led and incentives-based initiatives will be the solution to helping America achieve its environmental goals.
    Two years ago, we at NACD established a task force to examine how the farm bill conservation programs are working so far and look at what is needed to elevate and expand conservation in this country beyond what we're now doing. This task force included a former chief of the Natural Resources Conservation Service, the president of a major land-grant university and farmers, ranchers, district officials and district employees, representatives from state conservation agencies and from private industry.
    Our task force began its work by developing a set of guiding principles, both simple and straightforward, to help crystallize our vision of what is needed to strengthen private lands conservation in America. We believe these principles should be the foundation upon which to refine and expand our Federal, state, local and private conservation efforts. These principles are:
     Maintain a voluntary, incentive-driven approach to help private landowners and managers protect their soil, water, wildlife and related resources.
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     Increase local leadership and involvement in carrying out programs, setting priorities, developing policies and advocating natural resource conservation and management.
     Utilize science-based technology in making conservation decisions, including those for accountability and baseline establishment.
     Provide land managers with the technical assistance they need to achieve conservation objectives.
     Emphasize the value of cost-effective conservation practices that, for all Americans, enhance quality of life, restore air and watershed health, and contribute to safe and affordable food and fiber.
    In formulating our recommendations, the task force reached out to every conservation district in the Nation for input on how our conservation programs are working now and what the workload needs are. We asked for suggestions for improving current programs and for new ideas to advance the nation's agenda for conservation. More than 1,700 conservation districts offered suggestions, ranging from modifications to the Environmental Quality Incentives Program (EQIP) to the need for our conservation agenda to reach all communities and watersheds, not just a few targeted areas or producers.
    We also contacted a wide cross-section of organizations with an interest in conservation to get their suggestions and comments. Fifty organizations responded, many with key suggestions and ideas on how we can work together to strengthen America's conservation agenda. Several of the organizations we have worked with have testified or will testify before this committee. We were encouraged to find that more than a few entertained thoughts similar to ours and we have incorporated many of their ideas into our recommendations. Our working paper, which is posted on NACD's web site, (www.nacdnet.org) invites input from anyone who is interested.
    The people we surveyed as well as those we talked to at conferences and meetings, in private conversations, through postal mail and email all shared a common commitment to the cause of natural resources conservation on private lands. They also shared a common message, and the more we listened, the more similar the message sounded.
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    The State of the Land
    Since the farm bill conservation title was enacted in 1985, we've made a lot of progress in reducing soil erosion and increasing productivity. Many of the gains we've made have been the result of conservation compliance, the adoption of conservation tillage, and farmer and rancher participation in the Conservation Reserve Program (CRP), Wetlands Reserve Program (WRP), Wildlife Habitat Incentives Program (WHIP) and EQIP. Since 1996, however, the gains have slowed.
    Data from the Conservation Technology Information Center (CTIC) show that in 2000, about 37 percent of the cropland in the U.S. used some form of conservation tillage. Although this is a substantial increase from the early 1980's when it first became popular, the rate of growth in this practice has slowed in recent years. To achieve CTIC's national goal of having 60 percent of all crop acres under some form of conservation tillage by 2005, we must increase its adoption substantially over the next four years.
    Reports such as NRCS's National Resources Inventory, EPA's latest 305(b) Report to Congress, the Fish and Wildlife Service's (FWS) Status and Trends of Wetlands in the Coterminous United States 1986 to 1997 also tell us that progress has leveled off and that we still have a long way to go in meeting the nation's conservation goals.
    A snapshot tells us that:
     According to EPA, more than 300,000 miles of rivers and streams and nearly 8 million acres of lakes are impaired with sediment, nutrients and microorganisms.
     America's private landowners have planted more than one million miles of buffer strips to protect the nation's rivers and streams. Meeting the ambitious goal of two million miles of buffers will hinge upon expanding voluntary conservation incentive programs.
    Wetlands losses have fallen by 80 percent since 1986, due largely to the farm bill's wetlands conservation provision and Wetlands Reserve Program. But, sometime this year, the program will reach its acreage limit.
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     Runoff from concentrated animal feeding operations is becoming an increasing concern. An estimated 272,000 animal feeding operations need technical assistance to develop sound environmental operating plans over the next 10 years.
     As much as 60 percent of the nation's rangeland and 46 percent of permanent pasture are deteriorating.
     Roughly 2,200 aging flood control dams around the Nation need to be rehabilitated or decommissioned at an estimated cost as high as $540 million.
     Every year since 1992, an average of 2.2 million acres of farmland have been lost to development.
     Although wind and water erosion was reduced by more than 30 percent on private rural lands, we are still losing an estimated 1.9 billion tons of topsoil to erosion on cropland every year.
    Using existing programs and their own resources, owners of America's working lands have made significant strides in safeguarding the quality of our water, soil and air. But there's still a long way to go.
    The State of Our Programs and Conservation Delivery System
    The number of programs addressing private lands conservation has grown considerably over the past 20 years. That may sound like good news, but the fact is, rather than devoting more resources to more programs, we have sliced a shrinking pie into smaller pieces. This proliferation of programs has resulted in efforts that are not well coordinated and sometimes even operating at cross-purposes. Further, each of these programs comes with its own set of priorities, rules and limitations. They are often administered independently—even within one agency.
    While the Federal funding devoted to private lands conservation has been going down—in real dollars, the amount is about half of what it was in the mid–1930's—state and local governments have dramatically increased their investments in conservation. Their contributions to private lands conservation have gone from virtually nothing 70 years ago to nearly a billion-and-a-half dollars today, with conservation districts fielding the same level of field staff as NRCS. But, the situation is mixed. In some regions of the country there is a true increase in funding and staffing; in others state and local level funding has leveled off or is in decline.
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    States have also created additional programs to address nonpoint source pollution, runoff from animal feeding operations, wildlife habitat and other resource issues. In fact, some 38 states have developed cost-share programs with about $500 million dollars, more than matching the Federal effort.
    While these state and local initiatives have helped, they have added to the already complex array of programs and are themselves not well coordinated with Federal conservation efforts. Many producers today find themselves struggling with multiple sets of rules and requirements, filling out application after application— sometimes for naught.
    A major shortcoming of all these programs is their limited reach and lack of adequate funding. Many producers who are targeted by these programs find themselves turned away because of lack of resources for NRCS to provide the assistance they need. This year, for example, of the more than 86,000 producers who applied for assistance through CRP, WRP, EQIP, WHIP and the Farmland Protection Program, nearly 62,000—72 percent—were turned away. There is a critical need to reach out to more producers and to get conservation on much more of the landscape.
    To sum it all up, the state of our programs today is that they are too complicated, not well coordinated, oversubscribed, under funded and serve only a small percentage of our working lands.
    Our delivery system to get these services to producers is the envy of many. It touches producers at the local level, helping them find cost-effective and innovative solutions to resource issues. However, it is straining under the weight of these many programs and the limited funding available to implement them. The fact is that the increase in state and local efforts cannot even come close to making up for the shrinking Federal effort—both need to be expanded significantly.
    Consider the following workload information.
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    Two years ago, NACD and several of its partners collected extensive data on the challenges facing private lands conservation through its National Field Workload Analysis (WLA). The purpose of that analysis was to examine the staff years of technical support needed at the field level to carry out 29 core work elements each year. Most of these core work elements encompass farm bill program objectives.
    The national data collected through the WLA painted a stunning portrait of the private lands workload needs across the countryside. To effectively address the total resource needs on America's private lands would require 359,734 staff years of technical assistance from all sources. If stretched over a 10-year period, this would equate to 35,974 staff years per year, at a cost of nearly $2.4 billion per year for technical assistance alone. We are just now completing a 2001 WLA and early indications are that the need has not gone down but has increased by 15 percent.
    Clearly, increased investments in technical assistance will be necessary to get the conservation job done in this country.
    The Path Forward
    Based on the work of our task force, the results of the Workload Analysis Survey and other studies, what we heard from our partners and, most importantly, what we heard from producers and district officials, America's conservation districts believe the Federal Government needs to embrace a new approach to conservation on private working lands. Rather than creating program after program, each designed to focus on one element of the resource base, we need to adopt an approach that concentrates on the entire landscape and the needs of producers. The focal point of this new way of doing business should be the producer's conservation plan, each one tailored to meet the specific needs of each individual operation. The bottom line for our new approach to conservation is: Conservation plans should drive programs, not the reverse.
    Producers don't need the added headaches of having to choose from a limited set of program options in a vacuum. A better way would be to help them determine what is needed for their operations and then let local decision-makers recommend what program or programs are best suited to their conservation plan.
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    We believe this approach would provide much greater flexibility in decision-making at the local level. Such a shift would allow us to focus on getting conservation on the ground, not on ''implementing programs.'' It also would allow us to better coordinate the existing tools in our conservation tool chest.
    From virtually everyone we talked to, the message was loud and clear that a new incentives program is also needed to encourage producers to implement conservation practices. Practices that not only benefit their operations, but also produce important public benefits such as better soil, cleaner water, cleaner air and more fish and wildlife habitat. A new incentives program, fully funded and available to all producers, is needed to encourage conservation on more of the landscape. We envision rewarding at various levels producers who apply and maintain conservation practices, depending upon the extent and complexity of the conservation systems they install and/or maintain. The concept is very straightforward: The more conservation a producer puts on the land, the higher the incentive payment the producer receives.
    We also envision a different option for implementing this new approach. Rather than implementing this concept exclusively through the traditional Federal approach, we think states that have the capacity and the interest should be given a greater role and have the option of implementing it themselves, in cooperation with NRCS. As I mentioned earlier, state and local governments have strengthened their capacity significantly in the past several decades and many now have the capacity to be the driving force behind the implementation of this new Federal-state-local-private paradigm.
    We believe the benefits of a new incentives program and a greater state and local role in its implementation would be tremendous. It would be cost-effective and provide needed coordination among current and future conservation initiatives. It also would leverage even more state, local and private sector investment in private lands conservation.
    This new paradigm also would bring more control back to the local level where decisions could be made by those who know what is needed and what works best. However, we recognize that there still would be a need for Federal oversight and review.
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    By calling for this new agenda, we're not suggesting that we throw out existing programs; we need those to complement what we're proposing. In fact, we strongly support better funding and broader application of the existing USDA conservation programs to help producers get the conservation on the land they need to qualify for the new incentives and to meet the requirements of new and growing environmental regulations.
    In shifting the focus of our delivery system, we also ardently support enhancing and elevating the priority of USDA's natural resources and environment mission. We believe that the Natural Resources Conservation Service must be maintained as a stand-alone agency and should have the responsibility for carrying out all of USDA's non-forestry environment and natural resources programs, including both technical and financial assistance components.
    NRCS should also continue its role in providing technical and financial assistance for the current farm bill and other USDA conservation programs. The agency's role in providing leadership and guidance for national programs, as well as maintaining a national system of technical standards and guidelines, should be strengthened.
    Private working lands forestry programs also should be strengthened and continue to be carried out through the Forest Service's State and Private Forestry programs. Targeted toward 44 percent of America's forestlands, these important programs are implemented in cooperation with state forestry agencies and usually involve conservation districts. They provide technical and other help the nation's nearly 10 million nonindustrial private forestland owners need to plan and apply complex conservation treatments.
    And where do the traditional commodity programs fit in this mix? We are by no means suggesting that our new approach supplant all traditional farm support programs. Although changes may be needed in that arena, too, producers need these programs to compete in world markets. We believe that incentives for producers to provide conservation and environmental benefits from private working lands would complement those programs and could become an important component in future farm policy. In the context of today's chaotic agricultural economy and globalization of trade, it makes sense for conservation to be part of agriculture's economic, as well as environmental agenda.
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    Projected Benefits
    By reaching far more producers, by providing for more local control and by delivering conservation assistance effectively and efficiently, we believe our new model would provide much greater benefits across the landscape than current, top-down and highly targeted programs.
    The investment required for this vision will be significant—we estimated a fully functioning incentives program alone could cost up to $8 billion annually. But we need to keep in mind that preventing resource problems now is far less costly than solving them later. We also need to keep in mind the return we'll get on that investment:
     better soil;
     cleaner water;
     greater profits; and
     a brighter future.
    Even beyond these, we believe that better managing and enhancing our private working lands will result in more abundant wildlife, higher quality woodlands and wetlands, clearer air, safe and affordable food and fiber and an enhanced quality of life for all Americans.
     Recommended Changes to Existing USDA Conservation Programs
     Environmental Quality Incentives Program
    EQIP authorizing legislation establishes a single, voluntary program to provide flexible technical, financial and educational assistance to farmers and ranchers to address threats to soil, water and related natural resources on agricultural lands, including grazing lands and forestland. Although authorized for funding at $200 million annually, Congress limited funding at $174 million in fiscal years 1998 through 2000.
    Requests from producers for assistance through EQIP have been overwhelming—far exceeding the amount of funds available and further stressing the already overburdened NRCS-conservation district delivery system. With additional funding, EQIP has the potential to garner tremendous environmental benefits. It also provides an opportunity to reach out to socially disadvantaged producers who traditionally have not participated in USDA's conservation programs. To further enhance the program's outreach, water quality—including irrigation water management—soil conservation and wildlife habitat benefits, conservation districts recommend extending EQIP's authorization and increasing funding to $1 billion annually. Twenty percent of this amount should be designated to fund technical assistance support of this program.
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    Over its five-year operating period, several adjustments have been made to respond to producer concerns about how the program is being implemented. In 1999, responding to a survey from NACD, more than 1,500 conservation districts identified additional revisions, both administrative and statutory, needed to make EQIP function more effectively and efficiently.
    Legislative Changes Needed to EQIP
     Increase funding authorization to $1 billion annually.
     Remove prohibition on expenditures being made in the same fiscal year as a contract's execution.
     Provide for an annual practices component and contracts of less than five years in duration.
     Remove the 10-year limitation on EQIP contracts.
    Administrative Changes Needed to EQIP
     Provide that a minimum of 35 percent and a maximum of 55 percent of EQIP funds, as determined by the local work group, be made available to producers outside of priority areas.
     Give local work groups more decision-making authority.
     Remove requirement for developing a comprehensive resource management plan prior to submitting an EQIP application.
     Allow the planning process to be limited to problem areas rather than an entire operation.
     Streamline the administration of EQIP by dropping the requirement for concurrence by the Farm Service Agency.
     Conservation Reserve Program
    The CRP provides cost-share assistance and rental payments to farmers to retire highly erodible and environmentally sensitive cropland for 10- to 15-year contract periods. In addition to dramatically reducing soil erosion on cropland by nearly 695 million tons per year, it provides myriad other benefits including stemming agricultural runoff and providing critically needed wildlife habitat. To maximize CRP's environmental benefits, conservation districts recommend, along with some program improvements, extending its authorization and increasing the acreage cap to 45 million acres.
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     Conservation districts support the following policy changes on CRP:
     CRP should continue to use the enrollment process whereby land is bid into the program with a productivity-adjusted rental rate thus reflecting the true cost of the land.
     CRP should be balanced so that benefits, whether economic or environmental, occur over the full landscape of American farmland
     CRP should be used to help prevent urban sprawl by extending contracts to 30 years or perpetual easements.
     CRP enrollment should continue targeting through the Environmental Benefits Index (EBI) with those lands achieving a high benefit also achieving the highest rental payment.
     The EBI should be a product of the State Technical Committee and not designed as a ''one size fits all'' program criteria at the national level. States should retain the flexibility that will allow them to choose the criteria that give them a high EBI. For instance, if soil productivity and soil erosion are major concerns, the EBI should be structured to account for a mix of on-site as well as off-site soil erosion benefits.
     The CRP should be geared toward retaining long term retention of benefits once investments by the producer and the public are made. These enrolled lands should be retained in the pool of eligible lands and producers should be offered other incentives such as easements to retain them in the program. Easements should be paid for on the value of the land based on free market factors and not on the EBI or soil productivity index.
     The CRP should continue as a targeted approach as provided for in CREP if the state so chooses and provides a matching component to the targeting of Federal funds. The original intent of setting aside 40—45 million acres of highly erodible farmland in a CRP should be retained.
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     The goal of having 12.5 percent of the CRP acreage planted in trees should be increased with added incentives for the producer. Targeting those acres should be done at the local and state levels. Contract extensions of 10 years should automatically be offered to those who elect to plant trees rather than grass cover so producers can gain the economic benefit of planting trees at the end of 20 years.
     Haying, grazing and timber harvest on CRP lands should be prohibited unless those activities conform to a district-approved plan that will maintain buffers, benefit wildlife, improve cover quality and reduce erosion. Conservation districts urge Congress to accept recommended language proposed by USDA to amend CRP to allow high intensity, short-term livestock grazing as an authorized maintenance and management practice on CRP contract lands with the authority given to state FSA Committees and NRCS State Conservationists to set the timing and criteria of this practice.
     The contract provisions for CRP should not provide for an early out during the contract period since it was a mutually acceptable contract period at the time of signing. Early out provisions would further disrupt national plans to remove highly erodible, fragile or otherwise environmentally sensitive lands from production.
     Conservation districts are opposed to any land-use practice that will change the contract between the producer and the Federal Government or the agreed rental rate as originally established at the beginning of the contract.
     Wildlife Habitat Incentives Program
    WHIP is designed to help landowners improve wildlife habitat on private lands. The program was authorized to use $50 million in CRP funds to help producers enhance wildlife habitat. WHIP provides cost sharing to landowners for developing habitat for upland wildlife, wetland wildlife, endangered species, fisheries and other wildlife. It also provides for consulting with state technical committees to set priorities for cost-share measures and habitat development projects. WHIP has also proven to be extremely popular and exhausted its funding authorization in two years. Conservation districts recommend extending its authorization and funding the program at $50 million annually.
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     Wetlands Reserve Program
    The WRP provides assistance to farmers to restore cropped wetlands through easements and cost-share payments. In addition to its environmental and wildlife habitat benefits, this voluntary wetland protection program has been extremely popular among farmers and ranchers. Originally capped at 975,000 acres and nearing that cap, the fiscal year 2001 agriculture appropriations bill authorized enrolling an additional 100,000 acres in the program. Conservation districts recommend extending WRP's authorization and allowing enrollment of an additional 250,000 acres annually.
     Farmland Protection Program
    FPP is a voluntary program that authorizes USDA to join with state or local governments to purchase conservation easements on important farmland threatened by conversion to other uses. It is increasingly clear that preserving farmland preserves quality of life for all citizens, including urban and urbanizing areas. It also helps guide and direct urban sprawl, thereby having inherent and popular value for everyone. Conservation districts recommend extending the Farmland Protection Program's authorization and increasing its funding to $65 million annually.
     Conservation of Private Grazing Lands Program
    Congress enacted the Conservation of Private Grazing Lands Program (CPGL) provision to provide technical, educational, and related assistance to landowners and operators on the nation's 642 million acres of private grazing lands. Funding was authorized at $20 million in 1996, increasing to $60 million by the third year. To help reverse the deteriorating trends on roughly 60 percent of US rangeland and about 46 percent of permanent pasture, conservation districts recommend maintaining the funding authorization for CPGL at $60 million annually.
     Forest Stewardship Program
    The Forest Stewardship Program (FSP) helps nearly 10 million nonindustrial private forestland (NIPF) owners—who own 44 percent of the nation's forestland—better manage and use their forest resources. Under FSP, every state has developed and is implementing a comprehensive management program to ensure that private forestlands are managed under stewardship plans. The program is cost-shared with states and provides high quality technical and stewardship planning assistance. Conservation districts recommend extending FSP and increasing its funding authorization to $50 million annually.
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     Forestry Incentives Program (FIP) and Stewardship Incentives Program (SIP)
    The U.S. public derives tremendous benefits from non-industrial private forest. There is an urgent need to assure that these benefits continue to be realized. Of the 737 million acres of forest in the United States, close to half (about 350 million acres) are considered non-industrial private forest (NIPF). NIPF lands include all private forest ownerships above one acre that do not contain a wood processing facility. The majority of NIPF lands are owned by people who may have strong interest in seeing their forest managed sustainably, but simply do not have adequate knowledge or resources to do this. Given that the management of these forests has a tremendous influence on the quality of our nation's water, watersheds, air, wildlife habitat and timber resources, the owners of these lands must be provided the resources they need to assure proper management.
    A recent survey of landowners with Forest Stewardship Plans—long term multi-resource management plans prepared under the Forest Stewardship Program—indicates that landowners with such plans are almost three times more likely to implement their plans if they receive financial and/or technical assistance than if they don't.
    Federal funding to landowners for the implementation of sustainable forestry practices is currently insufficient. The two existing programs designed to provide financial incentives to NIPF landowners are either not funded (Stewardship Incentives Program) or under-funded (Forestry Incentives Program). Experience has taught us that neither of these programs provides sufficient flexibility for the states to 1) target their highest priority needs or 2) tailor program management to their state administrative structures.
    A new financial assistance program is urgently needed and should replace the Stewardship Incentive Program (SIP) and the Forestry Incentives Program (FIP). There is strong support for a new landowner incentives program from many groups that work with NIPF landowners, NACD the National Association of State Foresters and the National Council on Private Forestry.
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    The primary differences between this new incentives program and the former programs (SIP and FIP) are that states would have greater flexibility in determining how the funds would be used to meet national and local objectives and the percentage of funds spent for education, financial and technical assistance would depend upon the needs within each state, as determined by the Forest Service and NRCS in partnership with the state forestry agency and state stewardship committees. The new program should allow states to set their own acreage limitations.
     Forest Legacy Program
    The Forestry Legacy Program (FLP) is intended to conserve environmentally important forests under threat of conversion to nonforest uses. From 1978 to 1994, private forestland tracts of 10 acres or less increased from 11 million to 16.6 million acres. A well-funded Forest Legacy Program, through which landowners sell development rights and the right of public access while retaining other rights in private ownership, can, in part, help prevent the fragmentation of the nation's forestlands. It operates on a willing seller-willing buyer concept. Conservation districts recommend extending the Forest Legacy Program and increasing its funding authorization to $50 million annually.
     Urban and Community Forestry Program
    The Urban and Community Forestry Program (UCFP) provides the leadership, in cooperation with states, for improving and expanding urban forest ecosystems in the nation's 45,000 towns and cities where 80 percent of our population resides. The program provides leadership for state of the art technology and grants to urban areas to improve their quality of life through tree planting, maintenance and urban tree protection actions. Conservation districts recommend extending authorization for the Urban and Community Forestry Program and increasing its funding authorization to $50 million annually.
     Resource Conservation and Development Program
    The Resource Conservation and Development (RC&D) Program, a unique program within USDA that empowers rural people and their urban neighbors to help themselves, was extended through 2002 by the 1996 farm bill. The program assists local people by providing tools and technical support to stabilize and grow their own communities while protecting and developing natural resources.. Conservation districts recommend providing the RC&D Program with a permanent authorization and increasing the number of authorized RC&D areas to 450.
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     Compliance and Other Provisions
    In addition to the above financial assistance programs of the farm bill, the Highly Erodible Land and Wetlands Conservation provisions (conservation compliance, sodbuster and swampbuster) of the farm bill have been instrumental in reducing erosion on cropland, pasture and rangeland, and in significantly slowing the conversion of wetlands to agricultural uses. Although enforcement of the compliance provisions has been lax in some areas fine-tuning of these provisions is needed and conservation districts recommend retaining them. We also recommend that the compliance provisions for both erosion on cropland and for swampbuster be extended to all USDA farm program benefits received, including crop insurance.
     General Provisions
    In addition to the above, conservation districts endorses coordinated resource management planning (CRMP) and the ''En Libra'' concept, both of which are used to address and mediate complex natural resource issues at the local level on both public and private lands. These processes also support local, producer-developed conservation plans, implemented with technical assistance provided through conservation districts to coordinate the conservation activities on a given operating unit and with protections for confidentiality.
    Since the farm bill conservation programs are targeted primarily toward lands with a cropping history, the conservation districts support establishing a grassland conservation easements program to protect noncropped native lands. Since such a program would likely operate similar to the current CRP, it would be appropriate to include in the farm bill and implement through conservation districts and NRCS.
    Conservation districts support strengthening conservation research and development and extension activities through the farm bill, as well as establishing goals for the nation's soil quality. Such initiatives should include the potential role of agriculture in bio-fuels, carbon sequestration and mitigating global climate change. It also encourages and supports the development of new technologies such as precision agriculture and biotechnology that can enhance both productivity and environmental quality.
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    All of the farm bill conservation programs should include ''safe harbor provisions'' to help producers deal with endangered species and invasive species situations. All programs also should provide tools and funding to help small and limited resource producers address natural resource issues.
    Technical Assistance
    In carrying out their mission to coordinate and carry out all levels of conservation programs, conservation districts work closely with NRCS to provide landowners the technical (CTA) program to provide the technical and other help farmers and ranchers need to plan and apply complex conservation treatments in implementing these farm bill programs. It is important to keep in mind that CTA is also a program. It was intended as a program in and of itself the purpose of which was to help the nation's farmers and ranchers and other landowners address their resource conservation needs by providing technical support at the local level, including non-HEL lands that are nonetheless eroding at unacceptable levels. It is critical that Congress establish stable sources of funding for the farm bill programs and technical assistance needed to implement them without detracting from NRCS's basic technical assistance mission.
    Mr. Chairman and members of the subcommittee, thank for the opportunity present our views.
     
Statement of Joe Cantu
     Good Afternoon, Mr. Chairman and members of the committee, my name is Joe Cantu and I am President of the National Association of Resource Conservation and Development Councils. I am one of the thousands of volunteers who serve on RC&D councils across the country. I'm from Pipe Creek, Texas and have been a member of the Alamo RC&D council since 1993. I am here to discuss the resource conservation and development program and how it operates.
     The RC&D program began as a pilot USDA effort to address conservation and economic development in rural areas. The Food and Agriculture Act of 1962 authorized the RC&D program. Secretary of Agriculture Orville L. Freeman designated the first 10 RC&D areas in 1964. At that time, the RC&D program focused on multi county geographic areas where major economic and social downturns had occurred. RC&D provided a voluntary, grassroots-driven effort for local residents to plan and work together to solve environmental, economic, and social problems facing their communities.
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     The Resource Conservation and Development Program is based on a number of concepts that make it a truly unique government program. These concepts include:
     Working toward the goal of community sustainability while achieving a balance between rural economic development and natural resource protection.
     The value of grass-roots involvement in making decisions about local areas.
     Leveraging limited federal dollars with private funds to accomplish goals.
     The value of public/private partnerships in making the best use of limited resources.
     Bringing USDA agencies together to focus on the same problems and opportunities.
     An RC&D Area is a multi-county area locally defined, sponsored and directed to carry out a program that encourages land conservation, water management, environmental enhancement, and community development. Each RC&D Area establishes an Area plan, which is a long-term strategic plan that provides direction for the RC&D council in making community improvements and conducting its activities.
     RC&D Councils are the centerpiece of the RC&D Areas. RC&D councils are comprised of an Area's sponsors and community leaders who provide grassroots involvement in the program. RC&D Council members are volunteers that include local, civic, appointed, and elected officials. RC&D Councils are non-profit organizations that work in partnership with USDA's Natural Resources Conservation Service through a federal coordinator. Because RC&D areas are locally organized, locally sponsored, and locally led, the program provides an ideal way for residents to join together to decide what is best for their community.
     When designated by the Secretary, the NRCS provides a coordinator, office space and clerical support to the RC&D council. The coordinator assists the Council in developing and implementing its area plan.
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     The Council holds community meetings to identify concerns, needs and problems within the Area. The Council then collects information about identified problems. It helps the community prioritize the steps needed to address the technical and financial solutions through a Plan of Work. As a nonprofit entity, the council can also seek needed dollars and leverage those funds with volunteer support and technical assistance.
     Councils implement projects and conduct activities that achieve the goals and objectives of their Area plan. Each Council has a process for review and approval of the projects to insure that projects undertaken meet the regions needs. The implementation of a project may include one step or a full range of steps, such as program identification, development of alternatives, plan development, funding and coordination of the project. In most cases, RC&D projects include many worthy community projects that could not be funded directly through either local or state or federal government. RC&D councils see needs in their communities and then look to alternative sources and partnerships to get their activities funded.
     The program has grown significantly over the years as a result of its ability to provide local solutions to local challenges. Today, there are 348 RC&D councils covering 80 percent of the nation and serving over 180 million people. RC&D Councils serve all 50 states, the Caribbean, and the Pacific Basin. There are 27 new applications waiting to be designated. Other areas are in the process of completing their applications for authorization.— Our association has adopted the goal of nationwide coverage of RC&D by 2005.
     RC&D is unique in its ability to identify and address local problems. We are the catalyst for bringing people together to identify their needs and then we search out funds to solve their problems. Here are a few examples:
     The Cherokee Hills RC&D council in Oklahoma was instrumental in the formation of, and continues to provide technical assistance to the Tenkiller Utilities Authority. TUA now represents a coalition of more than 31 cities, towns and water districts, public and private interest and Native American tribal government entities. TUA is a large-scale non-profit organization whose mission is to supply regional water systems with affordable clean water. As result of RC&D assistance, the community is now seeing improved health standards for an underserved population; over 60,000 customers are provided with safe drinking water; uniform water quality and uniform price promote economic opportunities for the region.
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     Alamo RC&D in Texas received a $250,000 grant from Koch Industries to bring to code failing septic systems in rural Wilson County. The project will aid 40 rural homeowners and provides 100 percent financial assistance.
     The Big Country RC&D Area in Texas is working on a project to address water quality concerns for over 30,000 people who are dependent on the surface runoff form the watersheds above Oak Creek Reservoir and Lake Trammell as their supply of potable water. Twenty agricultural producers within the project area voluntarily entered into an agreement to carry out Best Management practices through an individual tailored farm/ranch Water Quality Management Plan. Financial incentives to implement best management Practices are available to those agricultural producers participating in the program. Assistance in developing and implementing the Plans is provided through the Nolan County SWCD and the USDA NRCS.
     The Glacial Hills RC&D Council in Kansas has a Small Business Development Program, which is designed to increase entrepreneurial activity in the six county RC& D region by helping to start micro enterprises. The program conducts business training and individual technical assistance. The goal is to produce a sound business plan that includes the necessary business planning and analysis that provides a road map for success for the entrepreneur. The program also designs and coordinates a series of monthly seminars that bring new ideas and speakers to the region to support new and existing business. The program has a new initiative, ''Sustaining Rural Communities Through Enterprise Development'' that provides planning and technical assistance to rural farm families with developing business plans and new enterprises that grow and market alternative crops and products direct to institutions including a local college, hospitals and nursing homes in the region. During the first 3 years the program has been operating 106 people have completed the group business training. A total of 32 new or expanded small businesses have been completed that created 70 new jobs. Data reveals that at leas $2.7 million in annual sales comes from these new startup businesses and the program is being looked at as a model for other areas and organizations.
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     The ALA-Tom RC&D council in Alabama is very active in a small farmer revitalization effort. The Council has facilitated the formation of four cooperatives and developed basic infrastructure to provide markets for their products. Last year, in spite of a serious drought, one of the cooperatives -- the Selma/Dallas Small Farmers Association made a profit and prevented total crop failures because the RC&D council assisted them with a mulch/irrigation project. The Council has assisted the cooperatives in developing a system so that they can sell their products to the school lunch programs in Alabama and Florida. This effort has improved the quality of life for many minority farm families and stimulated the economy of a rural area.
     St. John Aroostock RC&D in Maine recently did a survey of contributions over the years that shows that for each $1 donated by our sponsors, $1494 were returned to the area for RC&D projects. In 2000 over $672,000 were secured for St. John Aroostook RC&D projects. Additionally, 3133 volunteer days were donated in 2000.
     RC&D councils are making a difference in America's communities and represent the entrepreneurial spirit of rural America. RC&D Councils have played a strong role in creating new businesses, education, conserving our natural resources, bioenergy development, and outreach. However much remains to be done in rural America and new issues arise all the time.
     For FY2001 the RC&D program is funded at $42 million. RC&D is administered by NRCS and receives discretionary funding in the annual agriculture appropriations act. Authority exists to provide financial assistance for RC&D projects but due to federal budget limitations, financial assistance has been phased out. Councils must seek funding for their projects and they have leveraged the $42 million in appropriations into over $1 billion. USDA studies indicate that the national average cost to support an RC&D area is approximately $161,000 per designated area. The FY2001 appropriation through USDA/NRCS provides direct support of approximately $103,000 per council. Currently RC&D councils are underfunded and must do without some of their basic needs for support. Our leveraging ability to assist rural communities could be so much more effective if all RC&D councils and applicant areas were fully funded.
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     Next, I would like to highlight our farm bill recommendations for you. To continue the good work of RC&D council volunteers to serve our communities and to assist in increasing economic development and conservation in communities that are hard hit by low farm incomes, the National Association of RC&D councils requests the following changes to the law authorizing the RC&D program:
     Permanent authorization of the RC&D program
    We believe that the recent growth in the RC&D program from 277 councils in 1996 to 348 councils in 2001 covering 80 percent of the nation and 180 million people is a testament to our success. Congress has recognized the valuable services RC&D councils provide to local communities and has helped to grow this program. In addition, we have successfully leveraged a $42 million federal investment into more than $1 billion annually to directly support conservation and economic development, making a continued investment in RC&D a cost effective investment for taxpayers' funds.
     Update our statement of purpose and write the role of the RC&D council into the law
    This recommendation is a technical change to the law. The original law authorized USDA to work with States, local units of government and non-profit organizations to achieve our mission. The structure of the RC&D councils evolved and USDA recognized RC&D councils as the entity that carried out the mission of resource conservation and development. As a result, we believe RC&D councils need to be recognized in law.
     Define RC&D council and affiliation of Councils
    This recommendation is a technical change to the law. The designated RC&D councils are the responsible leadership of the RC&D area. RC&D councils and associations of RC&D councils are non-profit entities whose members are volunteers and include local, civic, appointed and elected officials. Affiliations of RC&D councils are formed in states and regions.
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     Encourage USDA agencies to provide technical assistance
     The administrative responsibility for the RC&D program is delegated to NRCS with the expectation that full array of USDA programs and service were available to assist local RC&D councils in achieving their goals. An interagency Memorandum of Understanding (MOU) describes the shared objectives and commitments of the participating USDA Resource Conservation and Development (RC&D) Policy Advisory Board (PAB) member agencies. Specifically, the PAB member agencies agree to increase coordination and cooperation within the Department to make their programs and expertise more readily available to RC&D Councils and their associations working on behalf of rural areas and communities. The MOU also recognizes that the RC&D Program will serve to further the overall capacity of member agencies to deliver effective and efficient outreach services through RC&D Councils and will facilitate the development of improved linkages among and between field service units within USDA.
     The following agencies signed the MOU, Agricultural Research Service,
    Cooperative State Research, Education and Extension Service, Economic Research Service, Farm Service Agency, Food and Nutrition Service, Forest Service, Natural Resources Conservation Service, Rural Development, Office of Community Development, Rural Development, and Rural Utilities Service.
     Mr. Chairman and members of the Committee, we request that the Farm bill include legislative language that encourages USDA agencies, consistent with their mission and authorities to bolster these relationships. RC&D councils are an effective delivery system for rural America and we see no need to duplicate the RC&D concept to create new programs or entities to deliver services to rural America.
     Mr. Chairman and members of the committee, thank you again for the opportunity to testify here today. I welcome the opportunity to respond to any questions you may have.
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Statement of Wildlife Management Institute
    The Wildlife Management Institute (WMI), established in 1911, is staffed by professional wildlife scientists and managers. Its purpose is to promote the restoration and improved management of wildlife in North America. Currently, WMI is working with various groups who support enhancement of the conservation provisions of the current farm bill. The collective priorities of several groups, including WMI, are reflected in testimony being presented to the Subcommittee by Ducks Unlimited. To supplement our group testimony, WMI would like to offer our insights concerning additional aspects of the conservation provisions of the farm bill.
    The debate that will occur over the upcoming year is not an either-or proposition. Conservation and the economic viability of farms and ranches both are tied to the quality of the land. Production of wildlife, crops and livestock can exist in harmony and are necessary to provide Americans not only affordable food, but an improved quality of life.
    It now has been five years since the implementation of the programs that comprise the 1996 farm bill. These programs contribute to soil, water, and wildlife enhancement across the United States. Be it growing pheasant populations in the Midwest, or enhanced waterfowl populations across the country, the farm bill has touched not only private landowners, but also your constituents who desire a better environment in which to live. However, although the conservation elements of the farm bill have made a difference, the current law is far from attaining your constituents desires and expectations.
    The conservation provisions of the current farm bill have enabled private landowners to enhance wildlife habitat, and improve soil, water, and air quality in the United States. However, despite the success of the current programs, WMI believes it is important to address the remaining conservation issues on private farms and ranch lands. Thus, the solutions offered in this testimony are intended to expand and build upon the successes of the conservation provisions of the 1996 farm bill.
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    Current 1996 Farm Bill
    The 1985, 1990, and 1996 farm bills created programs that were designed to conserve soil, water, and wildlife resources on private land dedicated to agriculture. Lessons learned since their implementation indicate that there are strong regional differences experienced by those who administer and deliver these programs, and the impacts often vary by state and county. This situation has been exacerbated by recent cuts in USDA staff, to the tune of 2,000 positions since the passage of the 1996 Act.
    Landowners have taken full advantage of farm bill program opportunities to the point that efficient and effective implementation of the conservation benefits may be compromised, primarily caused by a shortage of technical assistance. To date, the ratio between acres offered by producers and those accepted by USDA is 5:1 for the Wetland Reserve Program (WRP) and 2:1 for the Wildlife Habitat Incentives Program (WHIP). The Conservation Reserve Program (CRP) has been oversubscribed by 500,000 acres.
    Without a doubt, farmers and ranchers like these programs and are anxious to participate in the process of integrating conservation on America's private lands. Unfortunately, limited resources have caused these programs to fall short of landowner expectations and environmental needs. It is advantageous to discuss and highlight progress across the nation's landscape. The following regional descriptions include issues that can be addressed through enhanced farm bill conservation programs.
    Western Region (AK, AZ, CA, HA, ID, MT, ND, NM, NV, OR, SD, UT, WA, WY)
    Since the 1996 farm bill, acceleration in conversion of native rangeland still remains a serious problem in the West. According to the1997 Natural Resource Inventory (NRI), there are about 243 million acres of privately owned rangeland in the West. This is approximately 8 million fewer acres than in 1982. Thus, preserving native rangeland is a high priority in the West.
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    Many wetland habitats in the West have been lost, and the few that remain are further threatened by urban development. Wetland preservation is needed. For example, some of Utah's most functional wetlands, associated with the Great Salt Lake, are exposed to significant threats from urban development and the alteration of hydrology. The problems in Utah and many other parts of the West will be compounded in the future as more farmland is converted to subdivisions and irrigation systems are abandoned.
    Serious declines in many wildlife populations occur when native rangeland and wetlands are converted to other uses. Livestock grazing is the dominant agricultural use of land within the region, and the amount and condition of the West's rangeland have significant impacts on grassland nesting species. According to USDA estimates, 24 million acres of privately owned rangeland are in poor condition, 19 million acres have multiple major resource problems, 80 million acres have major erosion problems, and 9 million acres of rangeland have been severely impacted by state-declared noxious weeds. Many populations of grassland-dependent birds are declining. This trend will continue until rangeland loss is stopped and the condition of remaining rangelands is improved.
    Midwest Region (CO, IL, IN, IA, KS, MI, MN, MO, NE, OH, OK, TX, WI)
    Today, most of the native prairie of the Midwest has been lost. More than 95 percent of the tallgrass region has been converted to other uses. Iowa currently has just one-tenth of 1 percent of its 23.5 million acres of pre-settlement tallgrass prairie. Historic trends show continuing and sometimes precipitous declines in grassland-dependent birds, such as grasshopper sparrows, prairie grouse and burrowing owls. Fragmentation of prairie landscapes has been most intense in shortgrass prairie in the Southern Great Plains. The black-tailed prairie dog, once considered a pest throughout the shortgrass region, recently has been petitioned for listing under the Endangered Species Act.
    Although conversion of cropland to grassland habitat through CRP has shown improvement in nest densities on newly enrolled lands, native prairies critical to many species' survival continue to decline in acreage and quality.
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    Southeast Region (AL, AR, FL, GA, KY, LA, MS, NC, SC, TN, VA)
    Over the last 30 years in the Southeast, a number of species have declined to their lowest levels in recorded history. Wildlife species associated with early successional habitats, wetlands and grasslands continue to exhibit negative population trends. The loss of native grasslands, the widespread establishment of exotic warm- and cool-season grasses (a substantial proportion of range and pasture was planted to non-native forage grasses of low value to most species of wildlife, such as tall fescue and bermuda grass) and year-round grazing have resulted in steep declines in 10 of 13 grassland birds. There also has been a steady downward trend in species such as the northern bobwhite quail. In addition, species such as the loggerhead shrike, grasshopper sparrow, lark and savannah sparrows, eastern kingbird, eastern meadowlark and dickcissel, ten federally endangered birds and six candidates for Federal listing are experiencing long-term declines.
    Forested acreage in the Southeast has been stable during the last decade. However, forest composition and quality have changed, negatively impacting many wildlife populations. The diverse hardwood stands and small crop fields in the Southeast have been displaced by expanding pine plantation acres, now occupying 15 percent of the vast coastal plain. Furthermore, recent research on neotropical species has identified significant problems caused by forest fragmentation, which is continuing over much of the Southeast.
    Northeast Region (CT, DE, MA, MD, ME, NH, NJ, NY, PA, RI, VT, WV)
    The impacts of agriculture and forestry, combined with escalating urban sprawl, have altered wildlife habitats dramatically in the Northeast. Less than 1 percent of the old-growth forest remains, 99 percent of the grassland has been lost, and more than 50 percent of pre-colonial wetlands are gone. In fact, pasture acreage has declined by more than 70 percent since the 50's. Most of the conversions are the result of development.
    Those species requiring larger blocks of early successional forests and those requiring open, secure grassland habitats are in serious jeopardy in the Northeast. Grassland bird populations have declined more then any other group of species in the past 30 years. Farmland/grassland species, such as the northern bobwhite quail, have declined by 95 percent. Grasshopper sparrow, eastern meadowlark and ring-necked pheasant have declined by 80 percent. As in other U.S. regions, fragmentation of natural habitats is an extreme and growing problem.
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    More than 50 percent of the original wetlands have been lost in the Northeast. Between 1980 and 1989, about 14 percent of the wetland loss in the Chesapeake Bay watershed was due to agricultural conversion, and 23 percent was due to development. Wetland-dependent species have suffered the second largest decline in the Northeast.
    2002 farm bill Recommendations
    1. To address current and future technical assistance needs, funding to state fish and wildlife agencies and non-governmental conservation organizations offers an alternative to providing conservation plans to landowners who await program enrollment (issue of reciprocation for assistance). Leveraging USDA dollars with conservation organizations is an effective way to tackle technical assistance needs. The assistance provided by fish and wildlife and non-governmental organizations has, in many cases, meant the difference between success and failure for farm bill program implementation.
    2. Link agricultural support payments to conservation compliance. Public monies expended via farm bill programs should be based on comprehensive land stewardship, including wildlife. Improved water quality, and soil and wildlife enhancements are byproducts of conservation compliance. As stated in a recent report released by the Economic Research Service, Agri-Environmental Policy at the Crossroads, conservation compliance is estimated to provide non-market benefits of $1.4 billion/year. These values include impacts to water-based recreation, soil productivity, and municipal and industrial uses. This understates the true value of the reduced soil erosion, because benefits associated with increases in waterfowl populations, improvements in coastal and estuarine recreation areas, increased likelihood of survival of endangered species, increases in marine fisheries populations, and decreases in the cost that airborne soil imposes on industries, scenic views, and others have not been included (Claassen, Hansen, et al., January 2001).
    3. Flexibility in the implementation of farm bill programs is necessary, for there are differences between regions, states, counties and municipalities in how programs are delivered. By providing flexibility, we can reduce the costs incurred by farmers to participate or comply with an agri-environmental program. The geophysical and biological environment, as well as producer management skills, production practices, preferences, and attitudes regarding natural resource performance, vary widely among agricultural producers, even within small geographic areas. While a specific conservation practice may fit well into one farming operation, boosting fish and wildlife benefits on one farm, the same practice may not fit well on another farm. Thus, a one size fits all program often meets resistance. If our goal is to maximize conservation compliance, we need to allow those at the local level to have the flexibility to make adjustments where needed.
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    Specifically we recommend:
    A. Raising the cap on CRP to 63.9 million acres (with a minimum of 45 million acres). A sensible approach to reduce excess production capacity through long-term idling of surplus cropland exists in this very popular program. The demand by landowners is tremendous. The program has enhanced more wildlife populations than any action ever taken in the United States. CRP has helped raise commodity prices, too. The value of the CRP's improvements to wildlife viewing and to pheasant hunting has been estimated at $704 million/year (Claassen et al., 2001). Specific improvements to CRP include state flexibility in addressing rental rates and seed mixtures, along with natural regeneration on riparian buffers in marginal pastures.
    B. Increasing the annual enrollment cap of WRP to 250,000 acres. With a 5:1 ratio of applications to approved projects, the demand exists. Examples include 268 landowners in Iowa who are currently waiting to enroll. Projects should be designed more carefully to help achieve wildlife restoration goals.
    C. Providing $100 million annually for WHIP. WHIP projects have reached non-traditional farm bill programs where they have been able to address many endangered species scenarios while keeping regulations to a minimum. This program was embraced by landowners and formed many partnerships between USDA (NRCS) and non-Federal organizations, resulting in tremendous leveraging of non-Federal dollars.
    D. Increasing funding to $200 million annually for the Forest Legacy Program. The Forest Legacy Program has a proven track record of protecting productive forestlands from development and fragmentation. Whether through conservation easements or fee purchase, Legacy focuses on state assessments of need to set program priorities. Public benefits amass from both environmental and economic values.
    E. Providing $200 million for the Farmland Protection Program. Require conservation easements under the program to consider wildlife habitat, in addition to soil and water conservation.
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    F. Increasing funding to provide at least $300 million per year for EQIP. Expand funding to elevate and integrate wildlife habitat needs into the program legislation.
    G. Providing $50 million per year for Forest Stewardship to increase planning Assistance to Private Forest Land Owners. Non-industrial private forestland owners provide great benefits to wildlife through their forest management. Forest Stewardship plans ensure that non-commodity forest resources such as soil, water, fish and wildlife, recreation and aesthetics are considered and balanced with commodity outputs.
    H. Creating one non-industrial private landowner cost-share assistance program by combining the current Forestry Incentives Program (FIP) with the Stewardship Incentives Program (SIP) and fund at $100 million. A financial incentives program is needed to encourage private forest land owners to adopt management practices that respond to national needs for healthy sustainable forests.
    Suggested new program
    Establish a native grassland/rangeland easement program. Use WRP as a template for this program. The objective would be to protect environmentally sensitive native grass/range from conversion, and the easement program should be funded through the Commodity Credit Corporation.
    Conclusion
    It is obvious that landowners support conservation incentive programs to an extent that the demand exceeds supply. Funding these programs will improve our nation's resources and help farmers and ranchers manage their land. In effect, farm bill conservation programs are a win-win scenario and benefit society as a whole.
    Attention to wildlife habitats such as native prairie rangeland, wetlands and early successional forests is needed. These landscapes are worth saving and enhancing. Innovative ways of providing technical assistance via state fish and wildlife agencies and conservation non-governmental organizations is a viable method to address landowner needs. These are lessons learned over the past 15 years.
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    We stand ready to work with the Subcommittee to enhance conservation programs during the 2002 farm bill reauthorization process. Furthermore, we look forward to the opportunity to participate in the continuing dialogue during the months leading to passage of the next farm bill.
     
Statement of Defenders of Wildlife
    Defenders of Wildlife welcomes the opportunity to provide testimony to the House Agricultural Subcommittee on Conservation, Credit, Rural Development and Research on resource conservation programs for the next farm bill. Defenders is a strong proponent of natural resource conservation on private agricultural lands and supports the goals of current programs. Primarily since 1980, the various soil, water, and wildlife habitat conservation programs implemented through the United States Department of Agriculture (USDA) have made substantial contributions to reducing soil erosion, improving water quality, and benefitting wildlife populations. For example, as of the year 2000, nearly 935,000 acres had been enrolled in the Wetland Reserve Program (WRP), most of it in 30 year or permanent easements. More than 80,000 contracts have been implemented through the Environmental Quality Incentives Program (EQIP), providing resource conservation measures on more than 34 million acres. The Conservation Reserve Program (CRP) and conservation compliance have made significant contributions to reducing soil erosion by nearly 40 percent between 1982 and 1997, from about 3.08 to 1.89 billion tons/year. The Wildlife Habitat Incentives Program (WHIP) has funded about 8,400 projects on more than 1.4 million acres, including projects that have targeted imperiled species and their habitats such as the Atlantic Salmon and the Karner Blue Butterfly. Under the 1996 Federal Agriculture Improvement and Reform Act, the conservation of wildlife habitat was designated as a coequal resource objective with soil conservation and water quality. All of these accomplishments are significant and are to be commended.
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    Funding levels for USDA resource conservation programs have generally increased over the years and now most conservation programs have guaranteed, mandatory funding. The USDA services responsible for implementing resource conservation programs benefit from a pool of very dedicated and capable people who provide much needed on-the-ground technical assistance and administrative support.
    Despite the many accomplishments of past conservation efforts, there are important programmatic and implementation questions that need to be addressed in the conservation title of the next farm bill. The purpose of our testimony is to raise issues and provide recommendations that will build upon the past successes of USDA resource conservation programs, and to strengthen their positive impacts on natural resource stewardship in the future. The specific topics addressed below include issues and recommendations for conservation program implementation, the scope of current programs aimed at wildlife habitat, and the proposed Conservation Security Agreement.
1. ISSUES AND RECOMMENDATIONS RELATED TO CONSERVATION PROGRAM EFFECTIVENESS AND EFFICIENCY
    Major Issues
    There are eight major USDA natural resource conservation programs that entail payments to agricultural producers for environmental purposes. These eight programs are fragmented not only by their environmental and ecological purpose, but also by the administrative agency responsible for their implementation. Fragmentation has contributed to problems associated with the lack of producer flexibility, and program complexity and costs.
    There are two dimensions to the lack of producer flexibility: the choice of conservation management practices and incentive mechanisms. Resource conservation management practices are first developed at the national level and then state and local technical committees can then adapt these practices to local conditions. However, the practice itself remains unchanged, and may still be inappropriate for state and/or local environmental, ecological, and economic conditions. There can be low program participation rates where practices are ill-suited, resulting in lower technical effectiveness and higher program implementation costs. Furthermore, there is no timely process for altering conservation management practices to adjust to dynamic technical and economic constraints.
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    Most USDA resource conservation programs are designed with one type of economic incentive mechanism to attract producers. These incentive mechanisms are not substitutable across conservation programs or ecosystems. The lack of flexibility to apply different incentive structures across resource protection programs has discouraged participation amongst some producers whose physical or economic circumstances to do not match the incentives offered.
    From the producer's perspective, the numerous, and sometimes redundant, resource conservation programs are complex and difficult to understand because each has multiple information, eligibility, and technical assistance requirements. This complexity is reinforced by the fact that some programs are accessible to producers only if they have a cropping history for specific commodities. Basing eligibility for incentive programs on the past or present production of a limited number of crops defeats the purpose of universal participation.
    The fragmentation and complexity of conservation programs have contributed to increased administrative and implementation costs. For producers, the transactions costs of gathering information about programs and meeting eligibility criteria have become increasingly burdensome. Administrative costs associated with supporting several types of conservation efforts are higher compared to a more streamlined approach that could consolidate Federal conservation programs into one overall resource conservation agency.
    Funding levels for resource conservation technical assistance and research have remained practically unchanged over the last few years, despite a USDA mandate to implement more conservation programs over a broader geographical area. In real terms, Federal funding for technical assistance to deliver conservation programs, and for the research and development of new conservation technologies, has actually declined over the last ten years. This situation has resulted in the inability of reduced staffs to provide effective and efficient service to the growing numbers of producers waiting to participate in conservation programs. Furthermore, applied research is lagging behind increased regulatory requirements that mandate producers to improve the environmental and ecological performance of their operations.
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    Recommendations
    Consolidation of all existing resource conservation programs under one administrative authority would help decrease the complexity and costs of the current system, and would likely increase producer participation. Although there will continue to be a need for technical and administrative assistance in planning and implementing conservation programs, both functions could be profitably united under one overall USDA resource protection and conservation program. This streamlined system would facilitate producer information acquisition for conservation programs and selection of incentives, and reduce producer transactions costs.
    Federal Government assistance to protect and conserve natural resources on agricultural lands could be provided in the form of grants to states (using Federal guidelines). States would decide how to allocate grants amongst priority resource conservation areas, including the development of a comprehensive resource conservation strategy.
    With respect to conservation management practices, agricultural producers should have the flexibility to design, test, and implement (with the assistance of qualified government technical agencies, third party nonprofit groups, and/or certified private consultants) new agro-environmental technologies and management practices that are appropriate to local environmental and economic conditions. Producers should be allowed to modify existing management practices in order to meet resource conservation goals. Increased flexibility in the application and administration of economic incentives can be achieved by allowing project regions or individual producers to apply for the incentive measure that best fits their physical and economic situation.
    The technical and administrative capacity of Federal conservation agencies to plan, administer and effectively monitor natural resource protection and conservation projects need to be increased. Conservation-related public institutions such as the NRCS and Cooperative Extension Services require additional funding to design, market and implement conservation programs and new agro-environmental conservation management practices. The Land Grant Universities and the USDA Agricultural Research Service also require increased financial support for research and development of production practices that, to the extent possible, simultaneously meet profit and production goals and reduce adverse environmental impacts on water, air, wildlife habitat and/or biodiversity. Increased financial resources must also be made available to support natural resource conservation education.
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    Additional changes to promote more effective and efficient resource conservation programs on agricultural lands include the following:
    A. There needs to be more transparency and private (profit and nonprofit) sector participation in two areas. First, there needs to be a more open process in deciding which best management practices are eligible for cost-sharing. The present system is too top-down and does not take into consideration the expertise of field staff or producers. Second, the competitive process for selecting project applications must be more open to the public, with clear decision criteria for which projects get funded.
    B. The Environmental Benefits Index (EBI) method used for evaluating which projects are funded by Federal conservation programs needs to be revised. The EBI is a measure of economic or financial efficiency in the sense of obtaining the most environmental benefit for least cost. Producers with the highest EBI's get projects funded. However, the benefit measure is essentially subjective in the sense that it is based on the practice implemented and not an actual environmental outcome. Furthermore, there are equity concerns in that some large-scale agricultural producers can submit bids with very low cost estimates (thereby increasing their EBI ratio) because they will spread management costs over a larger number of acres and/or practices. Medium and small-scale producers whose unit costs are higher are put at a disadvantage. A new method of ranking projects should be developed that is based on actual or expected environmental and economic benefits.
    C. As agricultural production intensifies, with resulting increased agro-environmental problems, it will be important for USDA resource conservation staff to be increased in the areas of water quality and biological sciences.
    D. Conservation compliance, sod buster, and swamp buster requirements should be reinstated and vigorously enforced. ''Slippage'' (new lands with sensitive resource problems being brought into production as a result of enrolling production lands in USDA conservation programs) occurs at an alarming rate. Tax payers should not be subsidizing this practice.
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    E. Conservation programs should encourage innovation in meeting national environmental goals by creating program flexibility to build in new practices proposed by research institutions and the private sector. There should be increased use of competitive bidding techniques or other innovative administration of the programs.
    F. Conservation program delivery to agricultural producers needs to be improved. An integrated application/evaluation process for all programs should be created and implemented to make delivery simpler.
    G. Environmental performance goals need to be established for each conservation program. A monitoring and evaluation process needs to be established to determine whether conservation programs are physically effective and whether incentive mechanisms are adequate.
    2. Issues and Recommendations Related to Specific Conservation Programs
    From a conservation perspective, all existing resource conservation programs are important. Although our particular interest is in the Wildlife Habitat Incentives Program, the continuum of conservation programs addresses the diversity of existing resource concerns throughout the country. Specific programs are much more important in some regions than others. The basket of current programs is complementary and need to work together to address regional and local differences in environmental priorities, land values and public demands.
    The demand for conservation programs by landowners far exceeds available funding and staffing. Current use of programs only represents a portion of the real demand. Inadequate funding levels have suppressed demand by landowners because they are not willing to reapply year after year when only a small percentage of the necessary funds are committed by Congress. If delivery and funding were more adequate, many more producers would apply.
    General Recommendations
    A diverse coalition of farm, conservation, environmental, church and hunting and fishing groups support increased agricultural spending for voluntary, incentive- based conservation programs in the next farm bill. In addition to an increased conservation budget, the first principle of the next farm bill should be to maintain and protect the environmental gains made thus far. At a time of crop surpluses, it would be counterproductive for Federal programs to inadvertently create incentives for environmental damage.
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    Increased funding for all conservation programs would help provide a stable source of income to farmers. Many producers have participated in different types of conservation programs in order to make their operations more economically viable. Furthermore, an array of conservation programs can provide financial and technical assistance to assist producers to contribute environmental benefits. The next farm bill is a good opportunity to help producers meet increasing environmental expectations and to comply with existing regulatory mandates for threatened and endangered species, water quality, and air quality.
    There should be an increased effort to leverage state, local and private funding by encouraging partnerships with all levels of government and private enterprises. Models such as CREP, WHIP, FPP are examples of effective leveraging.
    In general, Defenders' believes that there is a need to at least triple the current funding levels of conservation programs to meet the overwhelming existing and anticipated demand. We recommend an annual allocation of $10 billion to resource conservation programs, including technical assistance, agricultural research and grants. A specific breakdown would be as follows: CRP: $1.6B, CSA: $2.5B, WRP: $157M, WHIP: $200M, Sustainable Agriculture Research: $15M, Pilot Carbon Sequestration Projects, $200M, CTA: $600M.
    Specific Recommendations Regarding the Wildlife Habitat Incentives Program (WHIP)
    Defenders of Wildlife particularly advocates expansion of the WHIP program to protect and restore natural habitats and to promote conservation on landscapes in agricultural production. The recommendations presented here are based on three strategies. The first conservation strategy is to permanently protect remaining intact native habitats under private agricultural ownership in the form of an easement and/or management agreement. The second strategy is to restore and then protect native habitats that have been significantly altered by past land uses. The third strategy is to remedy the adverse impacts on wildlife and their native habitat from past or current agricultural production practices, and to encourage a more sustainable use of wildlife, water, and soil resources on agricultural lands that remain in production. These three types of interventions are complementary and require that a tool box or menu of conservation management practices and economic incentives be available to producers.
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     State Habitat Conservation Strategies
    Targeting essential habitats for protection and restoration efforts requires that these habitats first be identified. A state habitat conservation strategy can be implemented to identify essential native habitats that should be permanently protected and/or restored. Such planning efforts have already been completed in Florida and Oregon. Federal funding for additional state-based habitat plans is authorized through Title VIII of the 2001 Interior Appropriations Act and Title IX of the 2001 Commerce, Justice, State Appropriations Act. To date, about 20 states have expressed interest in developing such plans. USDA's experience with conservation programs indicates that there are potentially significant cost savings in designing programs to protect or enhance natural resources on agricultural lands if those programs target lands with the highest potential. The ability to target valuable habitat areas for protection requires that conservation programs be flexible enough to account for different species, habitats, and activities in different parts of the country.
    To a limited degree, the WHIP program has already initiated a state habitat planning process. At the beginning of the authorization of the WHIP program, each state prepared a summary of general wildlife habitat conditions and set priority areas for funding. In some states, threatened and endangered species and their habitats were prioritized for program assistance
     Permanent Protection and Restoration of Natural Habitats
    Natural habitat protection is defined as leaving key lands in their current natural or near-natural condition where these support occurrences of at-risk elements of biodiversity (Federal threatened and endangered species, and critically imperiled, imperiled, and vulnerable species and natural community types as identified by The Nature Conservancy and the network of state Natural Heritage Programs). This approach would involve comprehensive protection and/or restoration of plant communities as well as occurrence of at risk species, not just individual species, and could be implemented by expanding the scope of the current WHIP program.
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    To implement this targeted approach, agricultural landowners and operators could adopt a farm or ranch-level habitat protection and/or restoration plan that is consistent with a statewide habitat conservation strategy. Landowners would have the opportunity to design, test, and implement appropriate management practices and technologies to fit their specific physical environment. The farm-level plan would specify desired environmental and ecological outcomes and include a monitoring program to determine whether those outcomes had been achieved.
    Permanent protection and restoration of essential native habitats would be incentive-driven, thereby increasing the likelihood that biodiversity and species of concern would become an asset to the agricultural land owner and producer. All producers who own property that has been designated as important native habitat for either protection and/or restoration by a state wildlife habitat conservation plan would be eligible to participate in the program and receive funding. Two major types of economic incentives to permanently protect and/or restore wildlife habitat, include (1) measures that encourage long term land protection (rentals, easements), and (2) resource conservation agreements to maintain the biological integrity of protected and restored lands. Under contractual resource conservation agreements, agricultural land owners would receive assistance for restoring and maintaining the ecological integrity of protected areas.
    Incentives for a protection and/or restoration program would be similar to what is now being implemented under the WRP, whereby participants could opt for maintaining a permanent habitat conservation easement and contract to furnish habitat restoration and maintenance activities. Conservation easement payments for those lands supporting occurrences of at-risk elements of biodiversity, as identified in a state habitat conservation strategy, would be set in accord with local land easement values or rental rates for unimproved agricultural or forest land. Assistance under a resource conservation agreement for restoration and maintenance practices would be based on a cost-share schedule. To implement the above concepts, Defenders' advocates pilot programs in Oregon and Florida, two states which have completed their habitat conservation planning process.
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    In addition to concentrating on lands with essential native wildlife habitat, targeting criteria could include prioritizing lands where (1) conservation investments result in multiple benefits [e.g., simultaneous improvements in native wildlife habitat, water quality, flood plain functions, non-impact recreation, and decreased soil erosion, etc.]; (2) lands with the highest marginal benefit per investment in terms of resource protection; and (3) for water quality conservation efforts, the number of contiguous land owners submitting joint applications for resource protection, conservation, or restoration [coordination of individual projects is especially important for improved water quality].
     Habitat Conservation on Agricultural Lands in Production
    Another dimension of a comprehensive strategy is to promote native habitat restoration and conservation on agricultural lands that remain in production. Habitat conservation in these areas is currently being implemented through WHIP, and to some extent, EQIP. Conserving and improving wildlife habitat is also an authorized activity under the proposed Conservation Security Act. There is some evidence of the beneficial, but limited, impact of WHIP projects on these habitats. In 1999, 10 percent of the total area enrolled in the WHIP (about 72,000 acres) was aimed at the habitats of species listed as threatened and endangered.
    Efforts directed toward improving habitat on lands in agricultural production are justified because not all agricultural landowners will want to permanently protect habitats by selling land, placing land in conservation easements, or temporarily retiring land through rental agreements for ecological benefit (e.g., CRP). Furthermore, some agricultural land use activities are compatible with the protection and conservation of native wildlife habitat.
    Policies and programs to make agricultural production more compatible with native wildlife habitat conservation need to be flexible to take advantage of the wide array of physical, environmental, and managerial factors that affect the impacts of production practices on species and habitats. Recognizing the complexities that nature can impose on wildlife protection efforts, biologists have developed some general recommendations to protect and enhance wildlife populations and habitats on working agricultural lands. These recommendations include: (1) allowing conservation programs the flexibility to address local and regional wildlife habitat priorities; (2) reducing farm chemical use; (3) promoting larger contiguous tracts of habitat over smaller isolated tracts; (4) reducing field disturbances; and (5) encouraging conservation tillage. Habitat and species management activities on working agricultural landscapes could also include control of exotic species, and the return of ecosystem processes, such as fire, that are essential to maintaining or restoring occurrences of at-risk species.
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    3. Comments Related to the Proposed Conservation Security Act
    The Conservation Security Act (CSA) is intended to coexist with and complement existing conservation and commodity programs, although producers would have the option of consolidating conservation efforts under EQIP and WHIP into a Conservation Security Plan. The CSA has the potential fill the geographical gaps in conservation effort created by current program requirements. Also, the CSA would reward producers who have voluntarily implemented a minimum level of resource stewardship who are now ineligible for existing programs. The CSA is intended as a national conservation program that will complement existing set-aside programs and encourage increased conservation on lands in agricultural production in all regions of the country. We recommend that the Subcommittee seriously consider the CSA as a complimentary program to existing resource conservation efforts.
     
FORMULATION OF THE 2002 FARM BILL
(CONSERVATION PROGRAMS)

SATURDAY, JUNE 9, 2001
House of Representatives,    
Subcommittee on Conservation, Credit,
Rural Development, and Research,
Committee on Agriculture,
Weatherford, OK.

    The subcommittee met, pursuant to call, at 9:30 a.m., at Southwestern Oklahoma State University, Weatherford, OK, Hon. Frank D. Lucas, (chairman of the subcommittee) presiding.
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    Present: Representatives Moran and Osborne.
OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OKLAHOMA
    This hearing of the Subcommittee on Conservation, Credit Rural Development and Research to review conservation programs will come to order.
    I want to welcome my colleagues on the subcommittee to the third of three hearings to discuss conservation issues. As always, it is a pleasure to be home in the sixth district of Oklahoma, particularly in Weatherford, and I would like to thank my vice chairman from Kansas, Mr. Moran, for attending, and my colleague, Mr. Osborne, from Nebraska for participating in this field hearing. They have been very dedicated members in their attendance to all of these committee meetings, both on the subcommittee and the full committee.
    Part of what we have set about to do in this series of hearings is to prepare the background for the writing of our section of the next farm bill. As many of you know, the 1996 farm bill is about to expire, and it is time to begin the process of writing a new farm bill.
    The Federal Government spends nearly $3 billion a year on conservation programs that affect agriculture and the general public, and we have seen many proposals so far in the hearings that we have conducted now, the previous two, about where we should go with these commodity programs. We have heard comments of anywhere from an additional $5 billion or more dollars to be spent on agriculture.
    The reason we are here is to hear from producers and representative producers concerning the programs as they now exist—basically, to look at what works, what does not work, what can we do better, and how can we do it better. And I would remind all of my panelists, friends, and neighbors out there in the audience that we have approximately $17 billion to spend this time in this coming farm bill annually on commodity programs, conservation programs, research, rural development, and credit title law. And there are far more needs out there than that $17 billion will address.
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    So that is why it is so important that we have these hearings, that we lay the groundwork to put the next farm bill together, and to do the things that—continue to do the things that work and perhaps address better ways of doing the things that do not work.
    And with that, I would turn to my vice chairman, the gentleman from Kansas, Mr. Moran.
OPENING STATEMENT OF HON. JERRY MORAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS
    Mr. MORAN. Mr. Chairman, thank you. Thank you to the Oklahomans and others who are gathered here. I am anxious to hear their testimony, hear what is said, so that we can make those decisions and make good policy, determine our priorities in Washington, DC, in regard to conservation.
    I am pleased to be in Oklahoma. The district I represent is not unlike Mr. Lucas' or Mr. Osborne's. It is the western three-fourths of the State of Kansas. I live in Hays, the last place that Custer left before he went north not to return. And it was pleasing to pull into town. Weatherford reminds me of being home in Hays. We are the home of Fort Hays State University, and the first street sign I happened to notice was called Kansas Avenue. So I am glad to be where at least those of us who Mr. Lucas refers to as northerners are still slightly welcome.
    Mr. Lucas is a good colleague and friend of mine. He is well regarded in agriculture in my district, and he is one that I look to for advice and suggestions as a member of Congress trying to figure out what we can do to keep farmers and ranchers alive and well.
    And it is also great to be here with Mr. Osborne. Mr. Osborne is a legend, almost to the degree that he is in Nebraska and Kansas, in slightly different attitude but totally held in high regard.
    And it is great to have him join us in Congress this year, and it is great to have him as a colleague and participate in today's hearing. And I thank Mr. Lucas for the opportunity to be here and to listen to all of you.
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    Thank you.
    Mr. LUCAS. I am pleased to note, Mr. Moran, that my late grandfather used to refer to Yankees as being anybody who lived north of the Oklahoma State line, had never had the opportunity to meet real Yankees that we work with in the Northeast, so it is a pleasure to have you from Kansas.
    And now to turn to one of the newest members on the Agriculture Committee, and one of the folks who I think will make a great mark on this subcommittee as well as he has made a great mark everywhere in his career, Mr. Osborne.
OPENIGN STATEMENT OF HON. TOM OSBORNE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA
    Mr. OSBORNE. Thank you. It is nice to see all of you here today, and it is a little more relaxed visit to Oklahoma than I usually have. [Laughter.]
    I am glad we got to stay and work. Usually when I came down to Oklahoma everything worked awfully well as far as Oklahoma was concerned. But anyway, my remarks are going to be very brief.
    I feel that one of the reasons I did this at this particular stage of my life was I represent an area that is much like this geographical region. It is about 85 percent of Nebraska. And, as you know, agriculture is very challenged, and it is very troubled. We are losing young people rapidly in these communities. We are losing farmers, and it is not very profitable.
    And so I felt I had one more push left, and I thought I would try to spend it in some area where I might make a difference. And I thought that the third district of Nebraska and in farm country was maybe where I could get the most return for my time, I hope.
    So anyway that is why I am here, and that is why I came down here today. I think the conservation title is going to be critical as far as people and livestock, EQIP. Those types of programs are going to be mostly what they are going to get out of the program. So, anyway, it is a pleasure for me to be here today. I have enjoyed working with Mr. Lucas, Mr. Moran, and we will look forward to hearing your testimony today. Thank you.
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    Mr. LUCAS. And by way of a little background for those of you who may never have had a chance to come to a congressional hearing, you will notice on the front table we have a little machine with a red and an amber and a green light. By the rules that we operate under in the House Agriculture Committee, each of the witnesses will have 5 minutes to offer their testimony, a summation.
    They will have longer documents that they have submitted to the record. After we have heard from each member of this panel, then the subcommittee will have an opportunity to question any or all of the members, potentially more than one round, depending on how the topic matter flows. Then we will have a second panel and conclude it at that point.
    With that, let us turn to our panel. The first panelist who will speak in just a moment is Mr. Ray Wulf, president of the Oklahoma Farmers Union from Oklahoma City, Oklahoma, speaking I believe on behalf of the National Farmers Union as well.
    We have Steve Kouplen, president of the Oklahoma Farm Bureau from Oklahoma City; Scott Dewald, executive director of the Oklahoma Cattlemen's Association from Oklahoma City; Mr. Eddie Bowman, president of the Oklahoma Wheat Growers Association from Enid; and one of my ever great favorites, Billy Wilson, past chairman and a member of the steering committee of the National Watershed Coalition from Kinta, Oklahoma.
    And with that, Mr. Wulf, you may begin when you are ready, sir.
STATEMENT OF RAY WULF, PRESIDENT, OKLAHOMA FARMERS UNION, OKLAHOMA CITY, OK
    Mr. WULF. Mr. Chairman, on behalf of Oklahoma Farmers Union, the National Farmers Union, representing the interests of over 300,000 farm and ranch families across America, it is a pleasure to have this opportunity to share our observations and recommendations about the current and future conservation programs.
    First and foremost, Mr. Chairman, we recognize the leadership that you have demonstrated to authorize and fund watershed rehabilitation. We support and applaud your efforts and encourage you to continue the crusade to ensure that all conservation cost-share investments be considered for rehabilitation efforts where necessary.
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    The current conservation programs authorized under the 1996 farm bill have, for the most part, been sound programs.
They have served to conserve our soil resources, enhance wildlife, and improve the quality of air and water through participation incentives and technical assistance.
    However, it is important that the level of funding be adequate to ensure the long-term success of these initiatives, and that adequate funding be available, so that agriculture producers desiring to implement conservation practices have the funding to do so.
    We support the Conservation Reserve Program. From Oklahoma's perspective, the CRP is a good, long-term conservation investment program that should address soil type and topography for primary selection, wildlife habitat as secondary.
    We support raising the cap on total enrollment to at least 40 million acres, with new enrollment targeted towards riparian areas. We support ensuring compensation rights that are comparable to local rental rates plus a provision for management incentives. Here in Oklahoma we support reenrolling existing CRP acreage, which is a previously accepted grass stand.
    The National Farmers Union organization expresses continued support for the wetlands reserve, farmland protection, and wildlife habitat incentive programs. Additionally, we support the EQIP program, which has been successful in providing financial, technical, and educational assistance.
    However, its success has been limited due to the inadequate funding levels and force singularly focused on broad-based watershed priorities. This has resulted in the rejection of many worthwhile projects that would have received cost share assistance under the old ACP and Great Plains programs, the predecessors to the EQIP.
    We recommend at least 50 percent of the State funding should be directed to statewide concerns allowing more local discretion for targeting priorities.
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    Mr. Chairman, as you know, we recently have wrestled with the designation of the Arkansas River Shiner. Now that the Federal Government has made its determination, the U.S. Fish and Wildlife Service is proceeding forward to determine a recovery plan for the species along a river that stretches three-quarters of the way across the State, impacting private landowners on each side of the river.
    We strongly oppose any action taken by Fish and Wildlife to utilize funds appropriated for agriculture to carry out recovery programs. Such funding should be provided by the agency requiring such actions and not through technical assistance cost share programs where funds are already limited. We do fully support appropriate funding to compensate producers in taking of their land.
    The Conservation Technical Assistance Program is also beneficial to farmers and ranchers. They receive cost share assistance for implementing conservation systems, but needs the resources to assist those producers who want to adapt sound conservation practices but who are not seeking cost share assistance.
    Please also know of our support for the conservation of private grazing land. This initiative is designed to provide technical, educational-related assistance to landowners. We strongly support NRCS to remain as a separate entity, employing its own personnel. The technical expertise of the NRCS has provided service and new technologies to producers with uncompromised technical assistance.
    In addition to the suggested improvements in the existing conservation and technical assistance programs, we also urge the consideration of several new incentives. The Conservation Security Act, a bipartisan congressional proposal, provides voluntary incentive payments to producers for the application of appropriate conservation measures on land that is currently and likely to remain in production.
    We support this framework for conservation payments as a way to reward those who have undertaken the establishment of conservation practices in the past, and those who implement future activities.
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    There are three tiers of practices. Tier I, practices which include nutrient management, pest management, and cover cropping. Tier II, practices or system practices, such as rotational grazing, buffers, and wetlands restoration. And tier III is a whole farm plan. The annual payment cap is $20,000, $35,000 and $50,000, respectively.
    Soil Rehabilitation Program, another item we support, the implementation of an immediate term soil rehabilitation program of three to five years enrollment. That would provide both technical and economic assistance to family farmers to restore the historical productivity level and capacity of the land.
    Also, Carbon Sequestration Program is another item we support appropriate incentives and technical assistance to encourage the implementation of crop and livestock production activities to establish and compensate producers for on-farm carbon sequestration.
    Thank you, once again, for the opportunity to appear before this subcommittee. I will be pleased to respond to any questions at the appropriate time.
    Mr. LUCAS. Thank you, Mr. Wulf.
    Mr. Kouplen.
STATEMENT OF STEVE KOUPLEN, PRESIDENT, OKLAHOMA FARM BUREAU
    Mr. KOUPLEN. Mr. Chairman, fellow committee members, my name is Steve Kouplen. I am a rancher from Beggs in Okmulgee County. I am honored to speak to you today.
    I serve as president of the largest agricultural organization in Oklahoma, the Oklahoma Farm Bureau. We have more than 127,000 member families.
    Our affiliated organization, the American Farm Bureau Federation, has already made extensive comments on this issue. So I will take this opportunity to put an Oklahoma spin on what we would like to see in the conservation title of the next farm bill.
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    Oklahoma has a fervent history of support for conservation ever since the desperate times of the Dust Bowl. Today's farmers and ranchers believe strongly in the conservation of our soil and water because agriculture relies on the sustainability of these resources. Conservation of these basic resources benefit all citizens by providing cleaner air and water, even though the public at large is probably not aware of these benefits.
    We would like to see the next conservation title build upon the foundation of the current one. Following are our specific suggestions.
    Regarding the Environmental Quality Incentive Program, or EQIP, we think the EQIP program should be retained but reformed. The first reform we suggest is to put more money into it. Second, we are not supportive of the existing priority area concept. We feel more producers could be assisted with smaller, yet beneficial projects, if the money was spread around more. And, third, technical assistance needs to be expanded in this and other programs.
    Regarding the expansion of State and Federal regulations on agriculture producers, we think there should be a program to provide financial assistance to farmers and ranchers to help them implement unfunded State and Federal regulatory mandates.
    These mandates farmers and ranchers are facing include such things as requiring clean air and water permits for smaller animal feeding operations, requiring producers to meet a total maximum daily load water quality goal in their watershed, and using the Clean Air Act to require control of dust and odor in agricultural operations. EQIP could serve as the vehicle to provide this type of assistance to producers.
    Regarding the environmental incentive payments, we support a voluntary environmental program that provides producers with additional options for adopting and continuing conservation practices to address air and water quality, soil erosion, and wildlife habitat. Oklahoma is an ardent supporter of continuing the grasslands conservative initiative. More than 23.5 million acres of land in Oklahoma is used for grazing. This is a tremendous renewable resource.
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    Regarding the Conservation Reserve Program, or CRP, we continue to support this program. We support a limited increase in the amount of acreage eligible to be enrolled in CRP with new acreage targeted toward buffer strips, filter strips, wetlands, and grass waterways.
    I would like to leave you with these thoughts. Keeping agriculture producers on the land by assisting them with conservation programs and technical assistance demonstrates a laudable commitment by this Nation to the long-term sustainability of domestic production agriculture. Voluntary conservation programs have a history of success.
    I urge you to keep these programs voluntary and to maintain the confidentiality of the farmers and ranchers who participate in them. Voluntary conservation programs and the technical assistance provided by the NRCS are the best buffers against costly and unnecessary regulation of production agriculture. I urge you to continue these types of programs which have a broad benefit for all citizens.
    I would also like to comment and say that the work that your committee will do probably will have the most impact on farmers and ranchers in the future for two or three main reasons. One, because of the WTO and the implications of payments we receive, payments that will come from the conservation area will fall into the green box, which could be unlimited.
    And as you know, under the conditions that farmers and ranchers are facing today, your income payments are necessary to keep them on the farms and ranches. Also, because of the influence or the regulations and mandates that we are going to see come down the line, we are going to need assistance in meeting those mandates for clean air and water, and we know that your committee has the ability to see that those will be done to keep that one additional straw off the camel's back and keep farmers and ranchers out there on the land.
     I appreciate the opportunity to visit with you today.
    Mr. LUCAS. Thank you.
    Mr. Dewald.
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STATEMENT OF SCOTT DEWALD, EXECUTIVE DIRECTOR, OKLAHOMA CATTLEMEN'S ASSOCIATION

    Mr. DEWALD. Chairman Lucas, and members, thank you for holding this public hearing of the Subcommittee on Conservation, Credit Rural Development and Research in Oklahoma.
    Chairman Lucas, we welcome you back home, and we thank you for your ongoing commitment to being home as much as possible and for your dedication to your constituents in Oklahoma, particularly as it regards the farm bill and conservation issues, including such things as research and rehabilitation of flood control structures.
    Members, we thank you for participating in this hearing. Your presence here is indicative of your commitment to shaping public policy, which is in the best interest of rural America.
    I am Scott Dewald, executive vice-president of the Oklahoma Cattlemen's Association. And we are very grateful for this opportunity to provide you with our views on the conservation provisions of the 2002 farm bill. This bill must include a strong, effective, and well-funded conservation title.
    Livestock production is important to the management of our Nation's agricultural lands. Grassland, pasture, and range was the single-largest land use in the country, and livestock operators manage more than 300 million acres of cropland.
    These statistics provide ample justification for a major Federal investment in conserving the lands. The investments made by USDA have consistently declined since the passage of the 1985 Food Security Act. The 2002 farm bill must make a major new commitment to providing livestock producers with conservation cost share and incentive payment assistance in the context of voluntary incentive-based programs.
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    Livestock producers continue to face costly environmental regulations as a result of State and Federal law designed to protect water quality, the Federal regulations under the Clean Water Act, including total maximum daily loads in the proposed new concentrated animal feeding operations, and animal feeding operation permit requirements.
    Federal regulators are also exploring the possibility of expanding Federal regulation of agriculture under the Clean Air Act. The 2002 farm bill should reverse the trend that started with the 1985 Food Security Act and restore technical assistance to at least pre–1985 levels. The need for this technical assistance will do nothing but escalate.
    Current water quality expectations for our industry are projected by our industry to cost livestock producers with more than 50 animal units at least $12.2 billion over the course of the next 10 years. Explicit provisions must be enacted that structure and support the joint effort of Federal and non-Federal technical assistance providers that will be needed to support this work. A voucher system could be developed to support the non-Federal technical assistance provider roles as needed.
    There is a great deal, obviously, to be accomplished over the course of the next 10 years, and it is going to be an expensive effort. But we believe we can start addressing these issues through substantial amendments to the existing EQIP program, or perhaps even an entirely new program.
    If carried out through EQIP, it must be amended to focus exclusively on soil, water, and air quality issues. If we focus on these issues, we will do a much better job of conserving our resources and still obtain benefits for wildlife.
    The current wildlife objectives supported by EQIP should be moved to the existing Wildlife Habitat Incentives Program, making WHIP the wildlife program for working ag lands. We believe it is counterproductive to many conservation efforts to predicate program decisions on anything less than our original objective of conserving soil and water.
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    Management systems must also be funded. This could be done in EQIP or through some other incentive payments program. An incentive payment program will work only if the payments are tied to real costs according to conservation plans that are accountable and where producers will still have ownership of those practices.
    And the Conservation Reserve Program should be amended. There should be flexibility in the CRP program to enable producers to enroll whole fields, partial fields, and buffer strips. This added flexibility will allow us to utilize site-specific information so that producers in the programs can focus resources where they are needed most.
    The CRP should include provisions to manage CRP lands for long-term sustainability. Currently producers are prohibited from managing for healthy grass stands. Management tools include prescribed burning, haying, and even grazing should be available to landowners for the sustainability of CRP lands. Payment adjustments may be necessary to ensure that parity among producers is achieved.
    Lastly, as it regards CRP and other programs, we feel it counterproductive to displace the use of non-natives with natives, which in many cases results in a loss of productivity. In many cases, these decisions detract from our original goal of conserving soil and water. These decisions must be left up to the producer, and he or she, with adequate informed technical assistance, can then base their decisions on agronomy and soil health.
    The farm bill should fully fund the Grazing Lands Conservation Initiative and its voluntary technical assistance program for grazing lands. Conservation programs, as you well know, are a two-way street. Programs have no merit if landowners are not willing to implement them.
    The disincentives to participate are starting to outweigh the incentives.
    Having spent the past 18 months dealing with the proposed listing of critical habitat for the Arkansas River Shiner, we have become quite familiar with the term ''Federal nexus.'' As we understand it, the provisions which establish a Federal nexus and what authority that grants non-agricultural agencies are statutory, and they are found in the Endangered Species Act.
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    We would be grateful if this committee would forward our concerns regarding this issue to the House Resources Committee, which we understand has jurisdiction over the ESA. Producers are reluctant to enter into agreements when they are uncertain of the liability or unforseen responsibilities they may incur, and the confidentiality, or, more importantly, the lack thereof, of any information that they may provide.
    We also want to thank this committee for its ongoing efforts in research. And with that, I thank you very much, Mr. Chairman.
    Mr. LUCAS. Thank you.
    Mr. Bowman.
STATEMENT OF EDDIE BOWMAN, PRESIDENT, OKLAHOMA WHEAT GROWERS

    Mr. BOWMAN. Mr. Chairman, and committee members, it is a privilege for me, as president of the Oklahoma Wheat Growers Association, to discuss our views on conservation with you this morning.
    My name is Eddie Bowman, and I have the pleasure of producing wheat and beef cattle in north central Oklahoma near Billings. Some of the most fertile and productive soil in the southern Great Plains is in this area of our great State, and, unfortunately, some of the most conservationally sensitive also. Few places exhibit the obvious benefits and needed continuation of sound and effective voluntary conservation programs even more.
    Wheat and grain producers in Oklahoma have made tremendous strides, often at personal cost, to improve not only the environmental impact of our blessed Earth, but its productivity and longevity through conservation in the past 20 years. The Oklahoma Wheat Growers Association and its members are fully committed to the improvement of our Nation's rich land and environment through the continuation of objective, equitable, voluntary, incentive-based flexible conservation programs that have allowed agriculture to make these impressive gains.
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    With that said, OWGA realized the importance of the conservation title in the forthcoming farm bill, but we remain completely committed to seeing the goals and financial objective of the commodity title realized as a first and foremost priority.
    OWGA views conservation as a necessary complement to ensure that we maintain and improve the productivity of the land, the health of the environment, and the quality of our Nation's food supply. Government should continue to provide incentive-based assistance to conservation but not seek to replace food production as the primary objective of our Nation's agricultural lands.
    OWGA supports the locally led conservation efforts that maximize environmental benefit through targeted management of our land resources. We believe the current CRP enrollment cap of 36.4 million acres nationally is adequate and should not be raised. We recommend that the Environmental Benefits Index criteria have a greater emphasis on wind and water erosion, with the intention of refocusing CRP to use on our marginal soils and most fragile lands.
    We recognize the tremendous positive impact that the CRP program has made in Oklahoma and support its broad, whole farm enrollment features, but only in the most sensitive scenarios where the revised EBI would warrant broad program enrollment. Whole farm continuous enrollment should only be used to assist producers with addressing site-specific problems that cannot be addressed in a cost-effective manner on a limited acreage basis.
    In similar fashion, we see the Environmental Quality Incentives Program, EQIP, or a similar program as a means to address site-specific conservation needs. We also believe that the EQIP program should be more equitable and should be amended to allow commodity producers to better utilize the program.
    Either the priority area process should be revised, or some of the focus should shift from places to practices, allowing the program to be flexible to specific concerns and specific area. A program similar to that of the previous Great Plains Conservation Program could work wonderfully in cooperation or conjunction with more locally focused and guided programs that will allow property owners to address such situations as total maximum daily load allocations in certain areas through best management practices.
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    With regard to the management of wetlands, OWGA believes that, as with the CRP programs, acreage caps on existing wetlands programs should not be expanded. Furthermore, OWGA supports additional flexibility and greater equality on wetland programs and that regulations be reflective of a clear and uniform mission or outcome for the programs.
    Mr. Chairman and committee members, agriculture faces many challenges, as you are all well aware. The Oklahoma Wheat Growers Association is sincerely appreciative of the opportunity to share our views with those present today on the successes and future needs of conservation in agriculture.
    Our association believes that the successful conservation practices that have been developed and utilized in the past will be further improved upon in the future. OWGA also realizes that the cost effective productivity and longevity of our land will not be maintained without a successful complimentary and supportive conservation title in the next farm bill—a title that will function effectively and efficiently with improved commodity programs.
    With commodity and conservation programs working together, the Oklahoma Wheat Growers Association sees further commodity productivity as well as continued improvement in the condition of our land, air, water, and wildlife resources for all to enjoy.
    Thank you.
    Mr. LUCAS. Thank you.
    Mr. Wilson.
STATEMENT OF BILLY R. WILSON, PAST CHAIRMAN, NATIONAL WATERSHED COALITION

    Mr. WILSON. Thank you, Mr. Chairman, and Mr. Osborne, and Mr. Moran, especially for coming here to Oklahoma today to be with us.
    I can't pass up an opportunity to brag on Chairman Lucas, if you would permit me, in front of this crowd. We are certainly excited and pleased to have you, sir, represent us in Congress.
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    Linda, listen to what I am saying. [Laughter.]
    It is rare in these days when we find someone in Congress who understands the things that we go through every day out here on the farm, and we appreciate all three of you people for being here, and we know that you understand that. And we hope that you continue to serve in this capacity for many years to come.
    I am here representing the National Watershed Coalition, as you said. I have prepared a beautiful piece of work here in written testimony. If you promise me you will read it, I won't read it all to you. OK? [Laughter.]
    And I understand that this is not about appropriations, and you mentioned that—early on that this committee had $17 billion allocated to it to do all of the things that we are here telling you to do. I will tell you today that isn't enough money to do what we need to do. I know nobody knows that better than you, and we will work as hard as we can to get that piece of the pie increased in the future. OK?
    I met with the Budget Committee earlier this year and did talk with them, and I know there is certainly a lot of interest to do some things in the future. So when we talk about numbers here that are outside the limits of the $17 billion, we are looking at a five- to a 10-year plan here. We understand that in this farm bill, and so we encourage you to take that into serious consideration when you start to write this farm bill, and especially the conservation title.
    We think we need to spend $8 billion to $12 billion a year just on the conservation title. And we know you don't have that this year, but we are committed, as members of local sponsors across this country, to help you get that kind of money.
    I also represent local sponsors of watershed projects, which in most cases conservation districts are local sponsors. And I am serving as vice president of the national association. I represent 3,000 conservation districts, 17,000 district officials, and about 6,000 employees here today as well. So we certainly have an interest in the conservation title, not only as it talks about in the watershed program but in the entire title itself.
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    I do want to say one thing, too, before I move on about the support that we got from Chairman Lucas in the passage of Public Law 106–472, the watershed rehabilitation amendments.
    Mr. Osborne and Mr. Moran, we are in the Washetaw River Watershed, a Public Law 534 project, where we are sitting today. There is, I believe, 1,040 dams in this project here, and the first one that was built in the world was built right here in this watershed. We had a 50-year dedication a couple of years ago that Mr. Lucas helped us do and attended at that site.
    We have started rehabilitation on some of these structures in this project, and that is certainly something that is very absolutely needed in our—rural America as our infrastructure starts to reach the end of its design life and needs major repair.
    We are well on the way to do that, and I am proud to announce that Oklahoma, Mr. Lucas, the legislature here has seen fit—and you introduced some legislators this morning that were helpful in that that Oklahoma has set aside the money to do the match for the State. So we are looking forward now to being able to get some appropriations to do that work.
    I am going to turn now to a thought that I want to share with you that represents—as a representative of the districts and the local—and I think it is time that the conservation districts and our partners regain the lead in setting the agenda for conservation.
    And the reason I say that is I think in the 1985 farm bill we saw that taken away from us, and we have been criticized by our producers, our cooperators, in that we have not been able to address the things that they need to do, that our staff has only been able to address those things that are connected to the mandatory programs. We think it is time we changed that.
    We have been criticized in those days by some segments of our society that we weren't addressing the environmental issues, and that criticism is warranted in many cases. Since then, we have passed the Clean Water Act, the Endangered Species Act, and a number of other laws that have addressed those concerns.
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    We admit today that we didn't or weren't doing as good a job at that time as we should have been, but we think we have turned the corner. We think we are ready now to again lead the agenda and provide the services that the American people want and the products on our farms in the environmental area as well as in the commodity area.
    So I would encourage you—each of you—to go back and tell your chairman, Mr. Combest, that it is time that the conservation partnership lead the agenda for the conservation program in this country.
    The EQIP program has been talked about quite a bit here today. This is the conservation plan for my farm in eastern Oklahoma. This is what conservation operations account does for us as producers. We go in and request services, and these people come and help us design a plan for our farm.
    Under the EQIP program, the way it operates, if we are not in a priority area there isn't anything available to help us. Or if we are a limited resource producer and we can't compete in the bidding process, then we don't get to participate. We need to change the EQIP program if we are going to continue to use that.
    There are a number of authorities, including the watershed program, that we can use. We need to add a conservation incentives program so that farmers can be compensated for the things that we produce, the products, in the environmental arena that we have been producing for 60 years.
    I know my time is up, but I would like to answer any questions that you all might have in this area. But at this time, I am just going to say that it is time that we step up as a conservation partnership, retain or regain leadership in this role, and we want to stand shoulder to shoulder with you.
    Mr. LUCAS. Thank you.
    When in doubt, improvise. And if I could begin the questioning, and then I will turn to my colleagues in just a moment, in no real particular order.
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    But, first, to Mr. Wulf, where you commented on the potential goal of raising CRP from 36 1/2 million acres approximately to 40 million acres—tell me, what do you think the impact of that would be on rural America? Would it be positive, negative, indifferent?
    I know from the political perspective we work in in DC that it is a very popular concept with folks looking at this issue from the environmental side. But it costs about $160 million a year. Share for a moment if you would.
    Mr. WULF. [inaudible]
    Mr. LUCAS. The challenges of the technical equipment.
    One last thought. Ray, you mentioned the Arkansas River Shiner and the mixing of mandates from one part of Federal law with another and how that channels conservation resources. Are you saying, if I understand you correctly, that if we are going to do things under a different agency, whether it is addressing something like the River Shiner or some other issue, that that other agency should be paying for it, that those resources shouldn't come out of our conservation funds?
    We will turn for a moment to Steve. Steve, you commented about the need for technical assistance, of course more resources in EQIP in general, but technical assistance. In one of the earlier hearings we had, one of the assistant chiefs at NRCS on the national level testified that their personnel were working somewhere between 100 and 110 percent of the time, i.e. saying that meeting the present conservation requirements were putting everyone on edge.
    Your feel, your response from your memberships and on your own farm out there, do we have enough technical assistance people to do what we are doing now, let alone if we are able to put more resources in? And if not, is it going to take more people to make it possible to do the paperwork, to do the planning, to move the dirt?
    Mr. KOUPLEN. Granted, the key problem is dollars. You know, I mean, I know they have probably got less personnel out there than they need, but I would say the No. 1 key issue is getting more dollars in the program and then the—probably the people will follow.
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    We know that there are a lot of mandates coming down the line, like I said, from different areas—the Clean Air Act and the Clean Water Act. And we know these are going to be thrust upon our producers. They are going to need assistance.
    We have read estimates that it will cost anywhere from $2,000 to $60,000 to put together one of these plans, management plans. Our producers at this point in time, with the incomes that they are receiving for what they produce, they won't be able to meet those costs. I mean, it will just be another—like I said earlier, another straw on the camel's back for a lot of producers.
    So I would say that initially the need is for more financing, and then I am sure personnel is probably secondary in that issue.
    Mr. LUCAS. Scott, you commented on the potential cost of $12 billion over the next 10 years to producers meeting the KAFOs and a number of other requirements coming down that will have a direct impact on, in particular, the livestock industry.
    If those resources don't come in the form of some sort of an assistance in conservation, I guess my No. 1 question is, who is going to eat those expenses? And then, No. 2, ultimately who gains the most from those expenses? Then No. 3 is there an obligation to the entire process?
    Mr. DEWALD. Thank you. I hope I am able to answer that in the order in which it was presented. I think the most important and fundamental thing that people have to remember—and you all certainly do, but your other colleagues up there don't.
    Our producers have no way of passing additional costs on to anyone else, and those costs are costs that we must absorb. We can't go out and mark up our product in order to pay for a program. So the first answer is we can't pass that on, so we either have to absorb it in an operation that is already having profit problems, or we merely have to get rid of that particular operation. And that has a lot of us quite fearful right now, in fact.
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    You are looking at—$12.2 billion is a lot of money. And EPA to come out and say, ''We don't think this will have a huge—we don't think this is significant, that we are going to put people out of business,'' I think is just a crass statement to be made to begin with.
    Now, then, as I recall, one of the other questions was, who is the ultimate beneficiary of the program? The ultimate beneficiary is the whole, and that is the whole country. And the philosophy I think is fairly simple. It is if it is for the good of the whole, then the whole should finance it rather than finance it on the back of the producers.
    So we would view that as an opportunity for, if we believe that we need to have KAFO and AFO, TMDL, Clean Air, and other things out there in terms of regulation to protect the waters of the United States, then the beneficiary being the whole should finance that.
    I hope I have addressed the three questions there in that being the beneficiary would be the citizens of the United States and future generations.
    Mr. LUCAS. And I will ask my last question in two parts. Would you point out to all of us on the subcommittee what you believe, based on your analysis, to be the unmet funding requirements for the rehabilitation program? Something that clearly you and I and those of us in Oklahoma have worked on long and hard for generations.
    How far behind are we on rehabilitating those dams that provide flood protection from the back side all the way to New Orleans in this particular part of the country?
    And if you would, in a nutshell, discuss the cost effectiveness of what the districts do in regard to how the funds that come through them are utilized.
    And then we will turn quickly to my final question to Eddie at that point, who offered the observation, I believe, that is very important that providing food and fiber in basis is still the most critical part of any farm bill, if you would touch on, you think, how in your time in farming and through farm bills how maybe that has changed a little bit perhaps one way or the other. And then I will turn to my colleagues for the next round.
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    Mr. WILSON. As far as the unfunded requirements for the rehab—and we don't have solid dollars because, as you know, in the bill the first couple of years we were going to do an analysis—are going to do an analysis of what the true need is out there. But the best number we have, and the number that we have used, is about $600 million.
    We started out $60 million a year for 10 years. We didn't get that much authorized in the first year—$15 million, as you know, what we got authorized this year. But it steps up from that. And as far as we can tell, that is what the need is.
    As far as the second question, the cost effectiveness of what districts do, again, it is something that is hard to measure. We are getting better at that. Our partner, NRCS, has been criticized some by GAO in a report that I have here that they do not capture the benefits necessarily that the program or the partnership gets from the districts, or from the partners is what they call it here, which are primarily the districts.
    District officials spend a lot of time, and I say ''officials'' because we are officials. We are not volunteers. We don't get paid for what we do. We don't get a salary. But we are elected officials. When we get elected or appointed, we take the same oath of office that you did when you got—when you went into office.
    We have an obligation to the citizens in our districts and a responsibility that is spelled out in the statutes, in the law, and we take that very seriously. But at the same time, we do an awful lot of work without being paid for it, and we do it because we think we know it is the right thing to do.
    So as far as the cost effectiveness, it is something that is hard to put a handle on. GAO has criticized NRCS for not being able to do that as well as they should, and they are working on that. But we do need to account for the many hours that is put in.
    State governments appropriate equally at this point as much money as the Federal Government does to go into conservation. And we have those figures. It is almost a 50/50 split right now.
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    Mr. BOWMAN. Mr. Chairman, I have had the privilege the last couple of years to go outside the borders of the United States, and both times coming back to the United States I was glad I was from the United States. We do have the safest and the cheapest food in the world. I mean, I am not scared to go in our grocery stores and knowing what I am going to buy is safe and good for the American people.
    Something that I just came across the other day on a survey, the American people gives the American farmer a lot of credibility. As farmers, we have almost 90 percent credibility with the American people. And they feel comfortable with what we are producing and furnishing the food. And the last thing on the survey was they even give our wives our little bit more credibility than us. [Laughter.]
    Thank you.
    Mr. LUCAS. And, no, for some of my friends out there that doesn't mean we are shifting to the left from your perspective. [Laughter.]
    Now I call upon the statesman from Kansas, Mr. Moran.
    Mr. MORAN. Mr. Lucas took my line away.
    Let me see. Mr. Wulf, your testimony talks about that the EQIP program has hurt low-till and no-till producers. And I wondered if you would expand upon that as to what damage EQIP has caused or why it is a negative and not just a neutral.
    Mr. WULF. Congressman, if I may stand here. The only detriment there is the inadequate funding of the program itself. You know, when the bid process and the funds are out there available there is just too many other competing sources for those funds.
    Certainly, the thing that all of us have continued to hit on this morning is adequate funding, so that our neighbors are not having to compete with each other out there. And good conservation practices are going uncompleted and unfinished.
    Mr. MORAN. Thank you very much. I was concerned that there were specific programs or requirements within EQIP that were causing problems for no-till farmers as compared to what I understand your testimony to be, kind of an allocation of resources, what direction the program is utilized.
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    Mr. Dewald, it seems to me that this KAFO issue is—ought to have a high priority. That it is an area, certainly in our part of the country, that trying to comply with new rules and regulations is going to cost the industry significant dollars. What needs to occur to allow EQIP to better work to solve the issues that confined feeding operations are going to encounter?
    Mr. DEWALD. If I may, I would like to expand that just a little bit, because perhaps one of the most damaging things is that we are not only talking about concentrated animal feeding operations anymore, we are now extending to animal feeding operations—people with 300 cows in holding facilities and those types of things.
    So what we could see within the program on EQIP would be manure management. Manure is the big issue, the big word. The big word that is being spread in Washington right now is, ''What do we do with the manure?'' There needs to be technical assistance in terms of being able to take the manure to places and utilize it.
    I think the other thing that we have tried to stress—manure is an asset if used properly. So our producers need technical assistance and forms of nutrient management plans. They need technical assistance in terms of utilizing animals manure, and the community out there needs to have technical assistance in how it can accept and use animal manures.
    Mr. MORAN. Are there size restrictions that limit the success of the current conservation programs?
    Mr. DEWALD. As I understand it, yes, there are size restrictions at this point. If the fundamental goal is to protect the environment, which I think it is conservation of soil and water, and with existing restrictions on the size of the operations that might be able to benefit from that, and with EPA's continuing philosophy that it is coming from the larger producers, then we have to provide some access to those larger producers so that we can solve the problem, if indeed that problem exists.
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    Mr. MORAN. So, problems sometimes cannot be addressed with the current size restrictions?
    Mr. DEWALD. That is exactly right.
    Mr. MORAN. I have one more question. This may be for you again, Mr. Dewald, but really anyone. I also want to know how we can make the CRP program better work for—to cover pasture, to cover the non-cultivated areas. It seems to me that we focused a lot of CRP effort on the cultivation side of agriculture and not much on pasture.
    And I would like—in particular, I was interested to hear I think you talk about the opportunities to graze, which at least in Kansas creates among our cattlemen some controversy. Is there some balance that we ought to be looking for as far as CRP and its availability for the cattlemen?
    Let me also compliment you on your analysis of Washington and manure spreading.
    Mr. WILSON. There are some ironies there, are there not?
    In my testimony, one of the things that I discussed was the need for land managers such as these folks in this room today and across the street and in Kansas to manage land. The CRP program doesn't allow us to do that. You end up going out, putting a stand of grass in, and have no opportunity to manage it, whether it be prescribed burning, haying, or grazing.
    That is not the best thing for conservation. And so we also say in our testimony, and I certainly agree with you, that there may need to be adjustments in payments if there is grazing, so that there is parity amongst producers. That is very clear.
    But one of the significant problems, and we have seen it—absentee landowners or even existing—landowners that are right there—without an opportunity to manage that grass stand, you are not going to get an effective grass stand if you can't manage it. You are going to end up in the third or fourth year with a stagnant production cycle.
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    So that is—we would like to see the CRP program allow for management, allow to manage for conservation, and allow to manage for good grass stands.
    Mr. WILSON. First, Mr. Moran, I would like to commend you for your support in the Conservation Enhancement Act. I think your addressing these problems that you—in that Act, and we support you on that. Congratulations. Thank you for doing that.
    As for as CRP for grazing and for grasslands, there certainly is a lot of things, especially if we are talking about looking at riparian areas and buffer strips along streams and things like that, I could give you some examples out here in Oklahoma, if we had the time, and we maybe can do that after this hearing, specific examples where this is working, not in cropland but in grazing land. And it is very important. It is a very important tool that our people do accept.
    And I have got one example. I am particularly proud of it. I could share it with you, but I don't have the time here—where it could work. So you bet, we can change the CRP program, we can change the EQIP program to make them a lot more manageable.
    And the deal is, just like Scott said, it is managing the working lands. What we are interested in is less emphasis on setaside programs and more emphasis on the working lands of America that we make our living on every day.
    Mr. WULF. If I could follow up on when we were talking about increasing it from 36.4 up to 40 million, increasing that cap. One of the things that we were looking at is using that increase on riparian areas, like was said earlier.
    And, certainly, if we are looking at the grazing perspective of it, if there is areas within wheat fields that can be conserved, and that we can go in there and get some conservation practices on those, and allow us during off season of the major growing areas and the growing times during the seasons there, incidental grazing of those buffer strips, so that we are not having, as producers, to fence those areas off when we are out there grazing our stock or cattle during that period of time.
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    Mr. MORAN. Thank you very much. This issue of grazing and the CRP grass on terrace strips to me is closely related, and we have worked hard at trying to get USDA to agree. In fact, Congress put language in legislation a year ago to return the continuous signup for grass strip terraces, and then we have problems with you can't graze the terraces, so it creates a real problem for the farmer who has some grass that can be grazed and some grass that can't on the same area of his farm.
    Mr. Chairman, thank you.
    Mr. LUCAS. Thank you, Mr. Moran.
    Mr. Osborne.
    Mr. OSBORNE. Thank you. Thank you for your testimony today, and I have tried to sit here and figure out what areas of agreement we have, because essentially at some point you have got to put something down on paper. We have a pretty broad spectrum here from Farmers Union to Farm Bureau to cattlemen and wheat growers and watershed, and so on.
    So, very quickly, I am going to check this out on you. It seems to me like there is a universal appeal, not just with this committee but with others who we have heard, that there is a tremendous need for increased technical assistance. I am assuming no one here would disagree.
    Occasionally, I have heard people suggest a voucher system, that maybe the current system is overloaded and maybe we need to go to the private sector and be able to obtain some help, because that seems to be very common.
    The second thing that we hear a lot is that EQIP is underfunded, that we need more funding. I think only something like one-third of the people who currently apply for EQIP dollars are accepted.
    Part of the problem I think with EQIP, and also with technical assistance, is that so many people have to go through all of the paperwork and the planning, and then they don't get approved. So you are wasting technical assistance and dollars, and it is not working very well.
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     I assume most of you would agree with that, that EQIP needs to be reformed in some ways—shorter contracts, apply to the larger producers as well, and move wildlife to WHIP, and so on.
    The last thing that I hear you saying, and I hear other people saying, is that in conservation practices we need to target more specifically. Instead of farm-wide or broad programs, you need to take specific buffer strips, particular erodible land, and so on. So those are the things that I think we agree on.
    The areas that I don't hear agreement on, and I would like to have you comment on—I am not going to give a monologue here, which often happens in Washington. We are out of Washington now, so we better not do that—is the issue of CRP. Some people want to expand it. Some people want to keep it the same. And some have—you know, they may not say it publicly—would like to reduce it.
    So would anybody like to comment? I know that it was mentioned earlier by various people, but some folks say it raises the price of land, it makes rental land more expensive. And so is there anybody who would like to comment on that, make a general observation?
    What I think I will do, because of the microphone situation, I am going to ask two or three questions, and then any one of them that you want to comment on, well, please do. OK? So that is one.
    The second issue is funding, and you have all mentioned that—that we have got the Conservation Security Act. And if you figure maybe $20,000 to $30,000 a farm, you are talking $5 billion to $7 billion, and I think Mr. Wilson mentioned as much as $8 billion to $12 billion. And as the chairman mentioned, we are looking at $17 billion total.
    And I think Mr. Bowman said that he wanted a lot of money there for commodities, and so you see where the rub is coming. If anybody has a thought on, you know, how you would like to address that problem.
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    And then, just lastly more of a specific question, and that is carbon sequestration. You hear about that a lot. Exactly what does that mean?
    And, you know, we have people who have owned a ranch for a hundred years, and they have taken good care of that ranch. And do you pay that guy, or do you just pay somebody who has been farming marginal land and all of a sudden puts it back into grass? That is a difficult issue to get a handle on. Exactly how do you quantify carbon sequestration? How do you pay for it? So if anybody has a thought, I would be glad to hear that.
    And so with that, I will hand the mike back to you, and see if anybody has any reaction to those questions.
    Mr. WILSON. Thank you, Tom, and I will go first.
    You mentioned a couple of things in your opening that you said we agreed on, and there are some. You mentioned one thing you called the vouchers to hire outside people, and that is a possibility. We have a lot of experience in the watershed program doing that with consulting firms and things coming in to do that, but that doesn't mean that doesn't cost anything. It costs just as much and sometimes more to have it done that way than if we had staff available to do it.
    And I will point to a comment by the GAO as they looked at the NRCS. They said that these officials noted several potential drawbacks to using organizations, and there are several of us that do that—watershed coalition contracts with NRCS to provide training as we speak.
    But there is a lack of consistency across these organizations in terms of technical skills and concerns about the ability of these organizations to uniformly apply the criteria used to evaluate the environmental benefits of land offered for the Conservation Reserve Program and questions about the availability of suitable contractors in some middle areas.
    So we do have some concerns about that, although that is a possibility certainly if, you know, in the short term we can do that.
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    As far as whether or not to expand the CRP or reduce it, or whatever, as I said in the final comment that I made a while ago in response to Mr. Moran's question, our emphasis—we would like to say the direction, as we talk about taking the leadership of the conservation, pointed more towards emphasis on the working lands and less on setasides.
    That doesn't mean we are opposed to CRP. We think CRP has done a good job in this country. There are some concerns in some rural areas that it has had an adverse effect on the economy, and we are certainly, you know, sensitive to that. But the CRP can work and should continue to work.
    But we would like to see less emphasis on the setasides and more emphasis on the working lands is the point that I would still like to make.
    As far as the funding I mentioned, you have got $17 billion. We understand that. Mr. Lucas often reminds me that he is not an appropriator. And if we could get the money—and I said earlier we just need more money in conservation. There is no question about that. You mentioned the commodity title. There is a subcommittee working on commodity title, and they will write a commodity title. We support the commodity programs, but we still are going to continue to say that we need more money for conservation, if you will, and hopefully we will.
    Carbon sequestration, as you mentioned, is something that is hard to get a handle on. It is hard for people to understand. But it certainly may give us an opportunity in the global warming issue to capture some revenue from some sources other than the taxpayer, the general fund, to pay for these.
     I have no problem personally at this point as to whether or not—I think if a rancher has been doing a good job for three generations in the family, and they have been sequestering carbon to, you know, improve the air quality and the environmental quality of the global warming situation, they should be compensated for that.
    There again, it takes money. Where is the money going to come from? We are going to work on that for you and with you.
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    Mr. BOWMAN. As you know, I am a farmer. And if we—and I am surely speaking for the farmers here in Oklahoma. If we could get profitability back into what we are raising, that would save conservation a lot of money as we farmers would be willing to put more of our money into the cost sharing program.
    And I would like to bring up an example right now just on one of my farms, and this has been a fight with EQIP. My farm is not in a priority site in this county. But every year when I—after I take my wheat crop off, I go out there in those ditches in the field and I work those ditches, because I don't have any terraces. The people that own the land—she is 90 years old. She just—you know, she has to have the grant to live on. And so I do what I can.
    But I don't understand why this farm could not be put in EQIP. It is because it is not in a priority site. But to let you know something, I have just been notified by a pipeline company that—I knew there was one pipeline across this farm, but now I have found out there is three pipelines that goes across this farm. And one of them goes from Enid to Tulsa, Oklahoma.
    There is some law where it is stated that those pipelines have to be buried four feet or deeper. They are telling me now these pipelines are less than three feet deep. So we have lost over a foot deep of soil on this farm, and it still does not qualify for EQIP.
    So I just wanted to bring that to your attention, because I do think that this site priority needs to be changed.
    Mr. WULF. Congressman, CRP—certainly, we not only encourage increasing that cap on that, but also looking at reenrollment. And that is about to come out. We think this has been a tremendous program that has allowed to take some variable type of land and get productive land back out there, and it has also had a side benefit for wildlife as well.
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    And that is certainly a topic that has had a lot of attention put to it in the past, and also looking at on the enrollment side of coming back in under the same plans and the type of grasses that was approved on the initial part and was approved and put in during that point.
    And if we talk about supply and demand forces within the market, and we like to go towards a market-oriented program of some kind, we must also take into account the fact that there must be some type of inventory management to allow supply and demand to truly work. CRP has certainly been one of those items you look at when we are looking at inventory management.
    Now, if I could just expand a little bit on carbon sequestration, the issues being raised about the possibility of global warming occurring out there, certain agriculture is in a unique perspective, Congressman, to implement those types of programs to sequest that carbon into the soil. And we would certainly like to see some incentives allowed out there for us in agriculture to do that, because we so are unique in that area.
    Mr. KOUPLEN. To begin with, let me say that the Farm Bureau will take a stand somewhere in between on the CRP. We are not for freezing at the current 36 million acres, but, you know, we would like to see that raised possibly up to $38 million.
    We think that there are some areas like for conservation purposes—buffer strips and the like—that could be enrolled, but we would not like to see more than 25 percent of any county enrolled in CRP. We think that could be a problem for the local producer in that case.
    As far as carbon sequestration goes, that is something we do support, although we are somewhat like yourself, Congressman Osborne, we kind of are wondering how that would work. I mean, we think a producer that does a good job should be paid for that. It looks to me like it is a revenue source for the producer. That does not come from the taxpayer, and that is probably the biggest benefit from carbon sequestration that I can see.
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    I have forgotten what the other question was now. One thing I would like to mention, and I mentioned it briefly when I was testifying earlier, that all of this should be—in your area should be kept in context. I know you are not dealing with actual funding. You are dealing with conservation.
    But all of this does come in a green box WTO, and we have got to keep that in mind as we are going forward, because a lot of things have been brought up to help producers and raising loan rates, etcetera. Anything that deals with production or price falls in the amber box, and we have got to stay away from that or the WTO will get into big problems. So I think your committee has a great avenue there to deal with an area that can help producers with their revenue sources.
    And one thing I was going to say, CRP I think has been used by a lot of producers as a revenue source. I mean, they have used that as a revenue source for their operations.
    Mr. LUCAS. With that, we will take a break and do some technical rewiring here.
    [Recess.]
    Mr. LUCAS. I believe we have improvised and overcome some of the technical challenges, so let us bring our subcommittee hearing back into order. I lose at least one of my colleagues, Mr. Osborne, in a little while, to the necessity of catching a plane. So I think that the more efficiently we can bring this into focus the better.
    I would like to invite the second panel to our table. Dan Lowrance, vice-president of the Oklahoma Association of Conservation Districts from Oklahoma City. Also, Mr. Bob Drake with the Grazing Lands Conservation Initiative, Davis, Oklahoma; Dr. Richard Conner, Professor of Range Economics, Texas A&M, College Station, Texas, on behalf of the Nature Conservancy; Mr. Dan Limmer, director of the South Dakota Audubon Society, Lake Norden, South Dakota, on behalf of the Audubon; and Mr. Alfred Miller, president of the Oklahoma Association of Resource Conservation & Development Councils, Corn, Oklahoma.
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    And with that, we turn to you, Dan.
STATEMENT OF DAN LOWRANCE, VICE-PRESIDENT, OKLAHOMA ASSOCIATION OF CONSERVATION DISTRICTS, OKLAHOMA CITY, OK
    Mr. LOWRANCE. Mr. Chairman, and members of the subcommittee, I am Dan Lowrance, and I am a rancher from Alma, Oklahoma. I serve as director of the Stephens County Conservation District and appreciate your invitation to be here today to share my thoughts on the current and future farm bills.
    I am here today as the vice-president of the Oklahoma Association of Conservation Districts, representing 88 district boards comprised of 440 locally elected and appointed directors and their 211 employees.
    The Association of Conservation Districts believes that the conservation programs for the 1996 farm bill have, for the most part, been a success. The problem lies in the fact that an adequate workforce needed to implement these programs has been lacking.
    The Conservation Technical Assistance Program of the NRCS has been unable to meet all of the demands for existing conservation programs. We understand that it takes people to implement programs. In Oklahoma, the NRCS workforce has decreased from over 600 in 1981 to only 320 people today. Not only have the numbers of people decreased, but also the complexity of the work that they are asked to do has increased.
    In addition, as we embark on the mission of rehabilitating thousands of upstream flood control structures, thanks to the work of Chairman Lucas, we realize that the people who provided the engineering and the technical knowledge to build these structures are now, for the most part, missing from the NRCS workforce.
    Apart from Federal conservation programs, its conservation districts in Oklahoma, we also rely on our Federal partners to provide technical assistance for the implementation of our own multi-year, multi-million dollar state conservation cost share program.
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    In short, Mr. Chairman, OACD believes that the success of the conservation programs in the new farm bill will directly depend upon the expertise and the availability of the workforce to implement them. Based on a current workload analysis, we believe that an increase in the Conservation Technical Assistance Program of $345 million nationally over current funding levels is needed to correct this problem.
    The current Federal agriculture conservation programs are turning away clients at an alarming rate. EQIP alone is only handling about 25 percent of the available demand for conservation work.
    The environment in which current programs are carried out is growing increasingly complex with a broader range of resource issues being identified. And within this context, we do not want to lose sight of the fact that voluntary incentive-based conservation remains the best way to address resource issues in the countryside.
    The centerpiece of any farm bill should be a locally-developed, comprehensive, and coordinated conservation plan for the individual farm or ranch. The conservation plan, rather than a laundry list of program selections, should drive the implementation of conservation on private lands.
    As landowners and conservationists, we view the individual conservation plan as the last firewall of protection before the next step of government regulation.
    In spite of the shortfalls in personnel and in spite of the underfunded programs, we are absolutely sure of one thing. That the partnership between local conservation districts and the USDA natural resources conservation service is absolutely the best and most appropriate delivery system if you wish to see the results of the new farm bill efficiently and effectively written on the land.
    farm bills, USDA, NRCS, needs to remain uncompromised in their role as the premier independent conservation technical assistance agency.
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    When addressing program changes, I suggest that Congress needs to use the following yardstick as a test for new proposals, as well as for considering renewal or extension of existing programs.
    farm bill programs should, No. 1, maintain a voluntary, incentive-based approach to help private landowners and managers.
    Number 2, increase local leadership and involvement in implementing the conservation plan and programs.
    Number 3, it should utilize science-based technology in making conservation decisions.
    Number 4, provide land managers with the technical assistance they need to achieve conservation objectives.
    Number 5, emphasize the value of cost-effective conservation practices that, for all Americans, enhance quality of life, restore air and watershed health, and contribute to safe and affordable food and fiber.
    And, finally, to ensure that all citizens share the financial responsibilities for reaping the benefits that conservation on private lands offers to all of society.
    On behalf of OACD, I thank you for the chance to visit with you this morning.
    Mr. LUCAS. Mr. Drake.
STATEMENT OF BOB DRAKE, GRAZING LANDS CONSERVATION INITIATIVE

    Mr. DRAKE. Mr. Chairman, Mr. Osborne, it is awful good to see you up there, not on the field. I am from Oklahoma University, and we are certainly happy to see you in Congress and not on that field.
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    I know you are going to be leaving shortly, so I will just point this out right off. EQIP is now a total and absolute wreck. It needs dollars and people. Without dollars and people, it needs to be completely redone. There is a lot of good about it, but it has got to be taken care of.
    That wasn't in my testimony, but I thought I would throw it out because you will be leaving.
    Looking at the old programs. Not all of them were bad, though. The Great Plains Program, HACCP program, some of them have a little something to offer.
    Now, let us move on here. Cooperation, not regulation. Mr. Chairman, I am Bob Drake from Davis, Oklahoma. I am a producer. I am a farmer. I am a rancher. I walk the walk, talk the talk. Primarily, though, I am a volunteer. I am a volunteer for the conservation of our great country. I love the grazing lands.
    I will tell you that a lot of my friends have given great testimony. My testimony is in front of you. I won't be using any of it, but it is in front of you. I appreciate the opportunity to venture out a little bit on it.
    The last thing that I said—''voluntary''—that is what I like to hear. I like to hear ''voluntary,'' and you had a lot of folks up here earlier that are voluntary. You have them up here now. We don't cost a whole lot, but we do the job.
    My coalition is American Farm Bureau, American Fords and Grass, American Sheep Industry, Berry Industry, National Association of Conservation Districts, National Cattlemen, National Farmers Union, Society for Rangemen, Society for Soil and Water Conservation Society.
    Now, sir, if I can work with that group, you can work with that group. And we agree on one thing. We don't agree on a lot totally, but we agree on one thing, and that is conservation for those lands out there, those great, wonderful, grazing lands, 50 percent of our country.
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    I am not going to give you a whole lot of the testimony that—of how you can do it, because you have already had it. You have got it in all of the literature that I have seen, wonderful presentations, and nothing that I say or would hope to say will contradict any of the testimony that you have heard from these different associations. I don't want that to ever happen.
    But that testimony that I had written for me—and it is wonderful, did a great job—it comes from the head. And anything I tell you might come from the heart. In fact, that is where it does come from. And I love it. If I didn't love it, I wouldn't be here. I wouldn't drive 175 miles and get up at 4:30 not knowing how far Weatherford was. [Laughter.]
    Had a little time at the coffee shop, visited with a lot of fine folks. [Laughter.]
    You know, I talked a moment ago about volunteers, and we also have drafts. We draft a lot of people, and I spend a lot of time drafting people. The reason I want to draft them is because I want them to become volunteers. Our Nation has been served well over the years with volunteers.
    In fact, the other day a gentleman was telling me a story, and this is a true story. He happened to be going through the South, and he was walking through a county courthouse square, and on a park bench an old man was sitting there. I said, ''Your old courthouse is kind of run down.'' He said, ''No, sir, it will do for our little town.''
    I said, ''Your little flag has leaned a little bit, and that is a ragged old flag you have got hanging on it.'' He said, ''Is this your first visit to our little town?'' I said, ''I think it is.'' He said, ''Well, have a seat.''
    And I sat down, and he said, ''You know, I don't like to brag, but we are kind of proud of that ragged old flag. You see, we got a little hole in that flag there when Washington took it across the Delaware. It got a powder burn in it that Francis Scott Key started watching it and saying, 'Oh, can you see?' He wrote that and he sat down, and it got a bad rip and New Orleans, Packingham and Jackson tugging at its seam.
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    It almost fell at the Alamo. But that is the Texas flag. She waves on, though. She got cut with a sword at Chancellorsville, and she got cut again at Shiloh Hill. There was one at Robert E. Lee, Bovert, and Bragg, and the south wind blew hard on that ragged old flag.
    On Landers Field in World War I she got a big hole from a Bertha gun. She turned blood red in World War II. She hung limp and low a time or two. She waved in Korea and Vietnam while she went where she was supposed to for Uncle Sam.
    Now she waves with our ships on briny foam, and now they just about quit waving her here back home. In her own good land here she has been abused and burned, dishonored, denied, and refused. And the government for which she stands has been scandalized throughout.
    Now she is wearing thin, but she is in good shape for the shape she is in, because she has been through the fire before and I believe she can take a whole lot more. So we raise her up every morning, and we take her down every night. And we don't let her touch the ground. We fold her up just right.
    On second thought, I do like to brag because you say I am mighty proud of that grand, ragged old flag.
    Now, how does that relate to conservation? Did I compare conservation and the volunteers, therefore, with the wonderful volunteers that we had during that war and all of those wars? Of course not. But I compare volunteers with volunteers.
    When you get us out there, we will follow you anywhere. You can lead us. But if you try to push us, if you try to regulate us, we are like a herd of cats. We will go in every direction. We will fight you forevermore.
    You can't drive us. You can lead us. You can give enough money, and it doesn't take a lot of money to do a lot of the things that I think needs to be done. And we will have time in this, hopefully, for questions. But there are things that can be done that it won't take the money that you think it will take because we have people wanting to do it.
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    You heard of vouchers. Of course we have a lot of people out there that would use the vouchers. We have consultants that used to work for NRCS. We can bring those people in here. We can make it happen, and it won't take a lot of money to do that.
    And I hope that you gentlemen, when you pass the next conservation title, that one thing will be paramount in your mind—good old cowboy common sense. Put people on the ground and let us do what we do best, and we will make you all look good.
    Thank you.
    Mr. LUCAS. Thank you, Mr. Drake.
    Mr. Conner.
STATEMENT OF RICHARD CONNER, PROFESSOR, RANGE ECONOMICS, TEXAS A&M UNIVERSITY, ON BEHALF OF THE NATURE CONSERVANCY

    Mr. CONNER. Thank you, Mr. Chairman, panel members. The Nature Conservancy appreciates the opportunity to provide testimony on the 2001 farm bill legislation. With me today is Jeff Eisenberg, senior policy advisor for agriculture for the Conservancy.
    After the statements from the panel are presented, Mr. Eisenberg will answer questions related to general farm bill and conservation policy. I will answer questions for the Conservancy related to the status of economics of grasslands in the country.
    In the farm bill, the Conservancy is seeking funding for three programs—the Wetland Reserve Program, the proposed Grasslands Reserve Program, and the Conservation Research Program. Our experience on the ground has shown that these conservation programs have the greatest potential for meeting the needs of conservation and production agriculture.
    Other programs such as the Environmental Quality Incentives Program, the Wildlife Habitat Incentives Program, the Farmland Protection Program, and a proposed Stewardship Incentive Program have merit as well.
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    The Wetland Reserve Program is one of the best examples of a program that serves conservation and production agriculture interests. Wetlands are one of the most important natural features found on private lands. They maintain the land by absorbing excess water flows. They provide important filtration functions for groundwater, rivers, and streams. And they provide habitat for fish and wildlife.
    These ecological benefits also provide support for production agriculture. The absorption function of wetlands mitigates the severity of flooding events, thereby reducing the loss of valuable farmland. The filtration function reduces non-point source runoff and helps producers avoid regulatory sanction. As sure as highways and bridges are important infrastructure for commercial vitality in this country, soil and water resources are indispensable infrastructure for agriculture vitality.
    To date, the Wetland Reserve Program has restored 1 million acres. The demand for participation in the program far outstrips the availability of funding by approximately a 4 to 1 ratio. Oklahoma and South Dakota are among the top 10 States in the country for producer participation in the program. A major restoration effort of wetlands is underway in Nebraska along the Missouri River. In Kansas, the program has doubled in activity during the past two years.
    The Nature Conservancy has been working hand in hand with the National Cattlemen's Beef Association to create a program that protects grasslands.
    You might ask why two disparate organizations would actively cooperate to promote an important piece of Federal legislation. The answer is that both share a strong commitment to keeping working landscapes intact. The Conservancy understands that unless there is economically viable activity in rural America, the land could be lost to less desirable uses such as development.
    The Nature Conservancy's No. 1 conservation goal in the west is to keep large grass lands intact. The cattlemen want to keep their ranchers on the ground. The two organizations' interest in this matter are, thus, very much in alignment.
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    I am here testifying before you today primarily because of a study that my colleagues and I conducted at the request of The Nature Conservancy and the National Cattlemen's Beef Association. The organizations requested this study in order to document what was happening to grasslands throughout the country and why.
    An executive summary of the report is attached to this testimony, and the entire report will be made available to your various offices and committee staff next week.
    The study documents that the pre-European settlement coverage of grasslands in the contiguous 48 States was approximately 923 million acres, about half of the total land. Most of this potential grassland was west of the Mississippi River, and about 582 million acres of it was on land that is now privately owned.
    By 1997, USDA reported only 402 million acres of rangeland in the 22 States west of the Mississippi River, excluding Federal lands.
    Losses of grasslands have been greatest in the tall grass prairies and savannas because these lands were better suited for crop production. Thus, States like Iowa, Illinois, and Indiana, have virtually lost all of their potential grasslands. However, conversions to cropping and other land uses are not restricted to just tall grass areas.
    Mixed and short grass prairies have also been lost. For example, Oklahoma had only about 14 million acres of rangeland in 1997, compared to the 38 million acres of potential grasslands. Similar comparisons for Kansas show 16 million acres remaining from 47 million; for Nebraska there is 23 million left from 44 million.
    Grassland losses continue to occur. Historically, the greatest threat to grasslands in the United States was the plow. Conversion of grassland to cropland remains an important threat today, largely as a result of Federal policy providing perverse incentives to convert grass.
    Government programs such as loan deficiency payments, subsidized crop insurance, and disaster relief, can act as powerful incentives to convert grass to cropland. This is especially true for land marginally suited for cropping.
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    Other land use conversions, which are population and income driven, have become more important sources of grassland losses in recent times. Many of the remaining grasslands are located in areas with high natural amenities. Low direct economic incentives to an aging population of grassland owners, compared with the longest economic boom in the United States history, advances in telecommunications and other socioeconomic changes, contribute to pressure to convert grasslands into large lot and rural or x-urban homesites.
    Between 1990 and 2000, the market price of agricultural land increased 66 percent in the western United States indicating a significant increase in the demand for rural land. Most of this demand originated from non-agricultural interests as prices notably exceeded the productive value of the land.
    For example, in many parts of Texas, wildlife-based enterprises, primarily lease-hunting, are generating more income per acre of rangeland than livestock production. This kind of complementary land use activity may offer one of the best hopes for providing the economic vitality needed to sustain the ranching industry in many other parts of the United States in the future.
    Unless abated, these income- and population-based demands will not only continue to remove grasslands from their historical uses, but will continue to fragment the grasslands that remain to the point that they may not be of sufficient size to support their natural biodiversity. Additionally, ranchers need large blocks of land to form economic size operations.
    I see that my time is out, so I think I will stop at this point.
    Mr. LUCAS. We will have some questions for you.
    Mr. CONNER. Thanks.
    Mr. LIMMER. Mr. Limmer.
STATEMENT OF DAN LIMMER, DIRECTOR, SOUTH DAKOTA AUDOBON SOCIETY
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    Mr. LIMMER. Chairman Lucas, Mr. Moran, Mr. Osborne, I appreciate this opportunity to be here today and represent the National Audubon Society. The National Audubon Society has over 1 million members and supporters in over 518 individual chapters across the Americas.
    Importantly, I also greatly appreciate the opportunity to be here today and represent myself, a very small family farmer from east central South Dakota. I own and operate a farm of just under 300 acres.
    I would like to briefly highlight some of the guiding principles in the written testimony that we have submitted, those being the fact that we think it is important that we build on past successes. We have heard a lot today about voluntary, incentive-based programs. Clearly, they work.
    They have worked very well over the past 15, 16 years, as evidenced by the fact that, according to many estimates, CRP alone has provided society over $13 billion in benefits, as evidenced by the fact that in WRP, a very popular program, and in EQIP, another very popular program, we have had interest and participation at a ratio of 5 to 6 interested applications being turned down to everyone being funded—again, a clear call for more funding for conservation not less, even in light of the funding realities that we are dealing with in this round in this next farm bill.
    More specifically, I would like to key in on what I believe we need and is necessary for these programs and programs like them—voluntary, incentive-based—to become even more successful in future agricultural policy implementation. We need additional implementation flexibility.
    Most of the resource issues, many of them contentious across the country, at a minimum are regional in nature, and often times are local in nature. More farm or ranches should input on a local basis, whether it is through farm organizations or whether it is through the local conservation districts, is important.
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    Audubon in the Dakotas has worked very hard over the last 2 years, reaching out to landowners, attending farm shows, winter farm shows, attending farm organizational meetings, doing farmer-to-farmer outreach programs, field trips, et cetera, et cetera, reaching out to landowners to receive their input and ask for their ideas and advice on how to improve the implementation of these very important programs.
    We also need to expand program eligibility. Both conservation and commodities are areas in the farm bill, both titles that I believe need expanded eligibility. We need to get the benefits and the assistance to those people who need it the most.
    In addition, as we go forward and we develop this conservation title, I think it is important that we try real hard not to continue to pit conservation provisions against commodity provisions. We have examples out there in the past ag policy where this impact is the case. One example is the alarming rate of grassland conversion, particularly across the northern prairies, due to the fact that there are other provisions in the commodity title that, in fact, at times can encourage that conversion.
    Audubon also supports the Grassland Reserve Program, which will be a new program in the next farm bill, of course. I think that echoes some of the concerns we heard on the first panel today, that there is a need to reward the good players, to reward those people who have resisted the need at times, often times, to possibly convert their native grasslands for the purposes of realizing benefits from the commodity title and farm policy.
    And it is important as we go forward that we protect existing and ongoing stewardship gains and resources. Not all people on lands out there are good players. And in spite of the fact that we go forward with voluntary, incentive-based approaches, in spite of what we have heard here today, a resoundingly clear message I believe from all the groups particularly on the first panel, there is a clear desire by those people on the land to go forward and continue and expand a sound land stewardship ethic.
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    It is our responsibility, as we go forward developing the conservation title and the commodity title in this next farm bill, to give them the tools necessary to allow that to occur, and to be even more successful than it has been in the past.
    And, finally, I would like to echo concerns that we have heard from many of the other witnesses that it is important that we recognize the need for funding of more technical assistance in the field. Groups like Audubon, other private organizations like Ducks Unlimited, Pheasants Forever, and so on, have in the past provided voluntary assistance to the county offices to help implement those programs.
    Those desires I think are still there, and that is one of the ways I believe that we can leverage help from the private sector, without necessarily using the voucher approach, to help leverage the limited amount of funding that we have to go forward in the conservation title in this next farm bill.
    Thank you.
    Mr. LUCAS. Mr. Miller.
STATEMENT OF ALFRED MILLER, PRESIDENT, OKLAHOMA ASSOCIATION OF RESOURCE CONSERVATON AND DEVELOPMENT COUNCILS

    Mr. MILLER. Thank you, Mr. Chairman. It is indeed a pleasure to be able to come before you as a group, Mr. Osborne, and Mr. Moran.
    Being today is Saturday, I feel like our sound system wants to take a day off. It is not working like we had planned for it to work, but at the same time it is doing the best it can.
    Mr. Lucas, I want to thank you for everything that you do for our district. I appreciate all of the work that you do. I will say it this way. I am glad you have got your job and I have got mine.
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    I am volunteer with the Great Plains Resource Conservation and Development Council, serving as the chairman of the board, as well as the president of the Oklahoma Association of RC&D Councils. RC&Ds have played a strong role in our State by enhancing the environment and improving the quality of life in our communities.
    Today I am requesting that Congress support permanent authorization of the RC&D program in the farm policy legislation—legislation that authorized RC&D sunsets in the year 2002.
    RC&D was established in the 1960's as a pilot program to perform a number of conservation and rural development activities in areas where major economic and social downturns had occurred. The program has grown significantly over the years a result of its ability to provide local solutions to local challenges. Today there are 348 RC&D Councils serving 80 percent of the Nation and 180 million people. We leverage a $43 million Federal investment into over $1 billion annually to directly support conservation and economic development in local communities.
    Today RC&Ds are not sufficiently funded to sustain the program. Since 1990, the number of RC&D areas has increased 50 percent without increased funding.
    In addition, to continue the good work of RC&D Council volunteers to serve our communities, and to assist in increasing conservation and economic development in communities hard hit by low farm incomes, I would urge Congress to support three additional technical changes to the law authorizing the RC&D program in the farm policy legislation.
    Number one, update our statement of purpose and write the role of the RC&D Council into law. This recommendation is a technical change to the law. The original law authorized the USDA to work with States, the local units of government, and non-profit organizations to achieve our missions. The structure of RC&D councils evolved, and USDA recognized RC&D Councils as the entity that carried out the mission of resource and conservation and development. As a result, we believe RC&D councils need to be recognized in the law.
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    Number two, define R&D council and affiliations of councils. This recommendation also is a technical change to the law. The designated RC&D councils are the responsible leadership of the RC&D area. The RC&D councils and associations are non-profit entities whose members are volunteers and include local, civic, appointed, and elected officials. Affiliations of RC&D councils are formed in States, regions, and at the national level.
    Number three, encourage USDA agencies to provide technical assistance. Language is requested that encourages the USDA to be consistent with their mission and authorities to aid RC&D councils to plan, develop, and carry out programs for resource conservation and development.
    I would like to conclude with a brief reference to two projects that were recently completely with Great Plains RC&D Area Association. And, Congressman Lucas, you are very well aware of these two projects. They are in your area.
    The Scotch Thistle Eradication Program in Roger Mills County with the Upper Washita Conservation District. We worked directly with 42 landowners on land treatment and provided county residents with information and education for control of invasive weeds, spending $40,435 of local money, and we are currently waiting for $15,000 in Federal matching grant.
    Watershed Rehab for flood control structures reaching their designed life of 50 years. Operation and maintenance of these aging structures are becoming very expensive for the conservation districts that have this responsibility without a real revenue source to cover the expenses.
    The Great Plains RC&D, along with Upper Washita, Custer County, and North Fork of the Red River Conservation Districts sponsored an AmeriCorp Team that donated 2,688 hours of labor for rehab of flood control structures.
    This infrastructure that is quickly approaching its engineered life expectancy of providing flood control needs reinvestment. Upstream Flood Control through the FP–534 and Public Law 566 laws were some of the most successful Federal projects ever performed in the United States—maybe too successful in that they have not required a tremendous amount of Federal dollars to operate on an annual basis. The original cost has been recovered many times over in the prevention of property and life loss.
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    On behalf of the RC&D Councils, I would thank you for your time.
    Mr. LUCAS. Thank you, Alfred.
    I now turn to Mr. Osborne, with what little time he has left before he has to go to the airport.
    Mr. OSBORNE. Thank you, Mr. Chairman. Sorry I have to leave early. The few other times I was down here I wanted to leave early, too, but this time I got a chance to——
    [Laughter.]
    Just a couple of questions. Mr. Drake, you mentioned that EQIP is a wreck, and that is very graphic. But do you have any specific recommendations that you would like to see implemented to fix EQIP?
    Mr. DRAKE. Well, I thought maybe I would get your attention on that. That is what I was trying to do, Mr. Osborne.
    Dollars and people. If you are going to have a program, and you have a program with just so many dollars, and there is not enough people to carry that program out, and if you have five applications and one is approved, you have four unhappy people. And, particularly, if those people happen to be out in the great panhandle, say somewhere close to Mr. Combest or Mr. Stenholm, it creates a lot of problems for people in DC that don't need to have those created, i.e. the NRCS.
    So what I am saying is if you want to leave it called EQIP, fine. If you want to change the name—it used to be called something else—fine. Make it happen, but put—if you put the dollars in there, allow it to have enough money to have the people to carry it ought.
    It is like building a beautiful facility on your campus at Nebraska, and then you don't have any money to either staff that facility or put the equipment in there. We do it all the time in Oklahoma, as we all know.
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    You need to build the facility and then allow enough money to put the people and the staff and the equipment to carry those facilities out. The same way for EQIP.
    Mr. OSBORNE. So your main concerns are funding. I assumed so. I understand that.
    Mr. DRAKE. Funding and people, but together.
    Mr. OSBORNE. Dr. Conner, and Mr. Limmer, both of you represent private agencies primarily. But I know you have a common concern, and that is the loss of natural habitat, the breaking of the grazing lands. My question to you both is: what in the way of Federal policy—I mean, that is our problem here is Federal policy—what do you see that might be done or that you would recommend that might reverse the process or enable us to preserve more of our grazing lands?
    Mr. CONNER. With your permission, since the question is about policy, I would like to ask Mr. Eisenberg to answer for me.
    Mr. OSBORNE. Sure.
    Mr. EISENBERG. Congressman, the Conservancy has worked hand in hand with the National Cattlemen's Beef Association to develop a proposal that would protect grasses through easements, basically, 30-year permanent easements, no regulation on the grazing, and basically to allow that economic activity to stay in place.
    And the reason why we favor that kind of approach is because the two principal threats are population increases and also cropping pressures from, you know, a variety of economic factors.
    So we feel that you need to have sort of a longer term protection to do that, and that is consistent with NCDA policy since 1998, which very specifically was introduced in the House on May 2 by Congressman Schaffer and Mike Thompson. You know, our answer is that the bill that we worked on with NCDA, that has been introduced.
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    Mr. OSBORNE. Let me just—so you are saying that a 30-year Federal easement—30-year easement, which would be encouraged or funded somewhere by Federal dollars, is that——
    Mr. EISENBERG. Yes, it is 30-year and permanent easements that are consistent basically with——
    Mr. OSBORNE. Well, then, after 30 years it goes away, is that right? Or——
    Mr. EISENBERG. For that, yes.
    Mr. OSBORNE. OK. All right.
    Mr. Limmer, did you have anything that you wanted to add?
    Mr. LIMMER. I also would reiterate Audubon's support for a similar type program, which I referenced in my testimony as the Grasslands Reserve Program, which it is being labeled, but basically it is supported by most advocacy groups that are working in that area.
    Also, I would go back to reiterate my remarks relative to the fact that not everyone out there on the land is a good player. In spite of the reality of the market stresses that are out there, and the great temptation these days for grassland conversion, in spite of all that, we have got to, I believe, continue some of the past disincentive provisions that we have had in farm bill policy.
    What that has been called in the past are not real popular names. One is called Swamp Buster; one is called Sod Buster. They have been cause for great consternation over the last 15 years or 16 years, since they were first put into place.
    I don't happen to believe that they necessarily have to continue in that role. I do, however, strongly believe that we need some level of disincentives in place to deal with the tremendous temptation by some to capitalize on other producers within a commodity title that are there, and at times, often times, unfortunately, facilitate that temptation.
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    And, quite frankly, to deal with an ethic out there that is more of a corporate ethic than it is a small farmer ethic. A corporate ethic that is based more in terms of strict and pure economics than it is in its stewardship ethic—that stewardship ethic that you clearly heard today from both panels
    Mr. LUCAS. Thank you, Mr. Osborne, and you had better head for the plane.
    Mr. Moran.
    Mr. MORAN. Mr. Chairman, thank you. I would like to thank my colleague, Mr. Osborne, for joining us, and we will see you in Washington next week.
    I want to pursue kind of the last question here. I am particularly interested in the grassland issue, the pasture issue. I was thinking as this topic was highlighted about—I have a fourth grade daughter and a seventh grade daughter, and they come home from school and they learned about the rainforest and its important role in ecology, the ecosystem of our world. And yet I am not sure that they have ever heard about the importance of grasslands.
    And, Dr. Conner, I wondered if you could highlight the role that grasslands play in our system, and perhaps compare that to the emphasis that we sometimes place on places in the world that we have a lot less control over.
    Mr. CONNER. I will make an attempt, in a brief fashion, to address some of the primary ones. I think the first one that is probably nearest and dearest to all of our hearts is the role that grasslands play as a watershed. The fact is that most of the surface water that we use in the U.S. today is produced on the grasslands.
    And that role, the role of grass in ensuring the quality and the quantity of water that we need, is there, and the future is very important. Any change in the land use that changes grasslands for cropping or to other uses almost invariably results in lessening the quality of the water that results from runoff off of those lands.
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    Other areas, nitrogen and other nutrient cycling is another very important role that the grasslands provide. It, of course, provides forage and a habitat base for a wide variety of livestock—excuse me—wildlife as well as forage for livestock.
    And we have heard mentioned earlier in the panel here that there is a role for grasslands in terms of carbon sequestration. Particularly, that role can be quite dramatic in terms of returning former grasslands to grass after they have been cropped and lost a lot of their organic carbon over the 40 or 50 years that they may have been croplands.
    Those are just a few of the very important ecological functions that grasslands play.
    Mr. MORAN. In reading the testimony, it appeared to me that the bill is for a 30-year easement. But what I heard Jeff say, it was a 30-year easement or a permanent easement?
    Mr. EISENBERG. Actually, the reason why both of those options are there is because there is demonstrated interest from landowners across the country to have both options there.
    In California, for example, ranchers have submitted requests to the California Rangeland Trust for 380,000 acres of permanent easements. This we get from the California Rangeland Trust. So whether or not TNT was—some environmental organization was in the picture, cattlemen themselves have been seeking these easements. They formed Rangeland Trust in Colorado. They formed them in Wyoming and other—and, I mean, your very own KLA is considering that very kind of step, as well as Oregon and Idaho.
    So, you know, some people have problems with permanent easements. They make some people uneasy. But there is enough demonstrated interest that the NCDA thought it was a good option to have. And from a conservation point of view, we like having it in there.
    Mr. MORAN. Unlike CRP, what would the rancher be unable to do on land enrolled in the Grassland Reserve Program that that rancher is able to do today?
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    Mr. EISENBERG. The expectation is they will be able to do everything they are able to do today, but they are expected to have reasonable management. We have been talking about higher price and all kinds of reasonable management. The only limitation would be that—not to be producing hay off the land until after the end of the local burning season.
    And so, you know, there was this wetland proposal that went—a CRP wetland proposal last year that had a flat rule of no haying after July 15. Well, Capilan called up and said, ''You know, that is really nice. But it is sort of dopey because, you know, our burning season is all year long.'' And so we tried to be very flexible and responsive to producer needs.
    Otherwise, though, as far as grazing practice, it doesn't address it at all. The intent is to keep the land intact, let economic return be made off of it.
    Mr. MORAN. Generally, the land enrolled in a grassland reserve program would already be grassland. But is there much likelihood that we would return cultivated land to pasture?
    Mr. EISENBERG. Well, the original idea, you know, this has been evolving through discussion nationally. The original idea was just to have existing grass, and then some TNT and cattlemen chapters were saying, ''That is really great, but it doesn't do nothing for our State.''
    And so then we had a restoration provision in there for States like Illinois and Missouri, so that they would be able to get—support their cattle industry as well. And then Idaho has been telling me that they would like to have it possible for damaged lands, lands damaged by cheap grass or fire, to be eligible for restoration dollars as well.
    So right now it has restoration in terms of broad landscape, and there may be some additional work done in that area to accommodate Idaho's concerns.
    Mr. MORAN. And, Mr. Limmer, your testimony—potential program changes. A healthy grassland needs to be disturbed periodically, either by fire or some other method. Does that other method include grazing?
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    Mr. LIMMER. Are we talking about a grassland reserve program?
    Mr. MORAN. In your testimony you are talking about changes in the CRP program.
    Mr. LIMMER. OK. CRP. Yes, it would—limited, restricted grazing. The issue of grazing and haying both on a periodic and limited and restricted basis, and in response to emergency disaster declarations on the northern Plains, particularly in the two Dakotas and eastern Montana.
    As you may recall, in the past it has been a highly contentious and hotly debated issue. The conservation and wildlife groups were concerned, and I think continue to be concerned that we not turn a program who—like CRP, for example—which one of the three major objectives and goals is, in fact, the management perpetuation of wildlife habitat, that we don't turn that program into a national forage base.
    That concern was also echoed by parts of the—other parts of the ag industry relative to people who put up hay relative to, in some cases, the cattlemen's associations up in the north.
    I think there is a place for limited and restricted grazing. I agree with what Mr. Eisenberg said that in most cases we would prefer that that limited disturbance occur after the nesting season, depending on which part of the country that you are in. On the other hand, some grazing—the research that has been done shows that grazing and nesting success are much more compatible than, for example, early haying and mowing and nesting success.
    But to answer your question more succinctly, yes, I think there is room for those types of disturbances in both programs.
    Mr. MORAN. I assume there would be support for continuous signup under CRP for grass strips on terraces that Mr. Jeff——
    Mr. EISENBERG. Our basic position on CRP, we basically are following the wildlife group's proposal for 45 million acres. But generally, though, we really prefer the continuous signup, and your other suggestions, including your suggestion to—in fact, all of these programs could serve producers more closely than they have in the past, and are very supportive of the suggestions made by yourself and the other panel members today.
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    Mr. MORAN. Thank you very much, panel. I appreciate the information you have provided me.
    Mr. LUCAS. Thank you, Mr. Moran.
    Being a native of western Oklahoma now for several generations, and having a degree in agricultural economics from OSU, and coming from a county that had 14,000 warm bodies in 1930, and at the last census reported 3,400 warm bodies—a rather dramatic drop in two-thirds of a century. And I haven't seen this morning's obituaries yet, so I am not sure just how many of my neighbors are still there with a population of good, solid, but older citizens.
    This concept about a grassland reserve program I find fascinating. And I know on first appeal, of course, the concept of holding property in grass is tremendous. The thought of giving producers the ability perhaps to stay on in those areas is tremendous, too.
    But like everything else we do in DC it is the devil in the detail. So if I could for a moment, let us focus on that concept, if we possibly could.
    Now, in the way that you gentlemen envision such a program being put together, whether it is a 30-year easement or a permanent easement, tell me what all kind of requirements that you would imagine being put in there. I know on the producer's mind, the question that is going to be on his mind is, will I get to run cattle? Yes.
    Will I get an annual payment or a one-time payment? Is it what we envision as being some sort of an annual payment over 30 years, or a permanent annual payment, if it was a permanent easement? Give me some feedback, please.
    Mr. EISENBERG. We are in the process of getting the bill introduced in the Senate, and that is a subject that came up in one of the States from a likely introducer. But what we had in there was a one-time payment for the 30-year, and a permanent option, and then the producer groups from the State said, ''Well, we need annual payments for the 30-year agreement.''
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    So we said, ''Fine. Let us have a second option under the 30-year agreement that you could let the producer take it how he wants it. Let them take a lump sum, or let them take annual payments for the 30-year term.'' It seems as a practical matter it would be difficult to do annual payments in perpetuity for a permit, but—but for a 30-year—actually, and what we also had originally was that even for the lump sum they could take it one time or over a 10-year period.
    But we want this to work for producers, and, really, there is no constructive suggestion which hasn't been accommodated.
    Mr. LUCAS. Because I know I have discussed with several members of the panel in the past some of the consequences relative to this. In my own area, Roger Mills County is one of those counties with 25 percent enrolled CRP. We are maxed out.
    It has definitely had an effect on land prices and rental prices. When those CRP figures came in, that, in effect, set a floor. Would you be—after implementing such a program, would you see land sales, rangeland sales immediately go up, the cash price of the land reflect whatever the payment schedule would be?
    I would like an observation on that if you would, and what effect that would have.
    Another question: if a rancher signed up for this program—as Mr. Limmer very accurately pointed out, not everyone is the typical good steward of his or her ranch or his or her farm that we all want to be. Unfortunately, some are not.
    If you signed up for this kind of agreement, would you be agreeing to a stocking rate on that piece of property for the next 30 years? Or forever?
    Mr. EISENBERG. The answer to your second is no. NCDA's policy that they want their members to be good stewards—we were talking to them about how you would possibly translate the national legislation. And it was enough to bring us to our knees, and we put that one aside.
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    The only enforceable term would be, ''Don't break the soil,'' and then—so there is nothing about regulation or——
    Mr. LUCAS. But I have watched some of my neighbors define good grazing practice at the most amazing quail habitat. And then I have seen other neighbors who define the surface of that desk as good grazing practice, too. How you enforce that I think really is my question.
    And there are some other areas—in western Oklahoma, we have energy production and development. There is even wind energy companies coming into the picture. As you envision these 30-year or permanent grassland reserve program easements, would it be prohibitive of the pipeline companies that are laying pipe, would it affect the ability of people to do seismograph work? What would it do to oil and gas leases?
    I know these are a lot of questions, but there are things that have to be thought through, I believe, and perhaps you have already done all of this in any kind of a concept.
    Mr. EISENBERG. How much, if any of that, do you want answered? You know, the bottom line is the goal is to keep the land intact and so it is unrestricted completely of grazing practice. There is other things—you know, there is a lot of factors that—you know, we want to get it right. That is the basic answer.
    Mr. LIMMER. I just want to respond. Mr. Chairman, I think you are right on mark. I think what you are doing is, in fact, emphasizing what I indicated earlier in my testimony, the need for more local input and more local control, because, as I stated earlier, we have both societal and resource issue concerns that are usually, at a minimum, regional in nature, and more often than not very localized in nature, all the way down often times to a township.
    And the kinds of issues that you bring up and point out relative to land market dynamics, relative to deed encumbrances, whatever they may be, pipeline easements, etcetera, etcetera, are the kinds of issues that, in my mind, it is imperative or addressed on a local level.
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     And I would, again, reiterate my call for, in this conservation title, more program implementation flexibility to provide for that kind of control. We have a vehicle in place that has been operating in some States relatively well; in others, maybe not so well. It is called the NRCS State Technical Committee.
    It is a forum where landowners, producers, farmers, ranchers, farm organization reps can come together and work in a local sense on these kinds of issues. We have been doing that in South Dakota—in South Dakota, in eastern South Dakota, for the last two years. As you may be aware, we have been dealing with an extremely contentious wetland issue relative to NRCS wetlands determination of both depressional wetlands and sloped wetlands.
    The result was a lawsuit and a lawsuit settlement. And we have gone forward, and we worked in an unprecedented, collaborative way with a myriad of farm organizations, conservation and wildlife groups, on an agreement in principle that we could all live in what is now being implemented this month—a farmable wetlands pilot program to deal with just one of those highly contentious issues.
    So, again, I would just reiterate in answer to your concerns that, in my opinion, the answer to those concerns is program implementation flexibility and local input.
    Mr. CONNER. If I might just address the question you had regarding land prices. There would be a lot of regional variation here, I think, that the bottom line is—if I might, is that I think when you are talking about programs the size of this one, you are not talking about creating a huge source of demand for land. In fact, the demand for land itself is not there. It is the demand for development rights.
    So to the extent that in some areas where there is a lot of demand, this is just another competing source of funds, and it would have, in at least the short run, potential for increasing prices perhaps a little bit.
    In the long run, I don't think it would be significant at all, though. And primarily because what you are doing here is not preempting the land used for agriculture; you are simply preempting the development of that soil.
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    Mr. LUCAS. Well, even with 5 million acres in the very beginning, this is the kind of program that obviously would be popular with a lot of my colleagues, especially those who don't live in the directly-impacted area. And the question of whether it is spread out or concentrated could certainly have an impact within any community.
    But I do, as a member of this committee, and as a member of the full committee, have a responsibility as an advocate of conservation, as an advocate of promoting the consistent supply of food and fiber for this great Nation, also to keep an eye and an ear turned towards those beginning farmers and ranchers, those young people out there trying to break in.
    And a lot of the programs that we have discussed and we have on the books do have a direct position on those folks. And in my home community there is a growing trend of absentee land ownership, and I am not talking about people who live five miles down the road. I am talking five States away. That is having an impact on us, and I think we have to factor that into these decisions, too. But that will come on another day.
    Mr. Moran, do you have any further questions?
    Mr. MORAN. I do not. Thank you, Mr. Chairman.
    Mr. LUCAS. We would like to thank the panel for your insights and your input, and we will continue to work together as we work our way through the challenges of writing the next farm bill.
    In recent days, there has been a little bit of a change in the circumstances on the other side of the building in Washington, DC, in the United States Senate, so that will add some unseen twists. But we will work our way through.
    So, first, let me once again thank Southwestern Oklahoma State University for the use of the facilities. We thank the Oklahoma Association of Conservation Districts for the refreshments back there.
    Without objection, the record for today's hearing will remain open for 10 days to receive additional material and supplemental written responses from witnesses to any question posed by a member of the panel.
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    This hearing of the Subcommittee on Conservation, Credit, Rural Development, and Research is adjourned.
    [Whereupon, at 12:05 p.m., the subcommittee was adjourned, subject to the call of the Chair.]
    [Material submitted for inclusion in the record follows:]
Statement of Dan Limmer

    Mr. Chairman, thank you for the opportunity to testify before your Subcommittee on the Conservation Title of the farm bill. I will outline Audubon's general objectives for the Conservation Title of the next farm bill. I will also discuss my view from working in the Dakotas on the strengths and benefits of the current programs and changes or new programs which would further the goals of conserving our resources in rural America.
    Audubon has over a million members and supporters in 518 chapters throughout the Americas. Our organization works to conserve and restore natural ecosystems, with a focus on birds, other wildlife, and their habitats for the benefit of humanity and the earth's biological diversity.
    Role of Audubon: Audubon is uniquely situated to take a leadership role in developing and implementing a strategy to promote conservation programs during 2001 and for the next farm bill. With the policy expertise resident in Audubon's Washington, D.C. office, we have a knowledgeable staff with a proven capability to impact the consideration of the next farm bill. With our field staff in the Dakotas and other agricultural states, we can effectively seek input from local landowners and develop ''on-the-ground'' advocates for new farm conservation provisions.
    In the current year, Audubon has worked to lay solid foundation of support to continue strong conservation provisions in the farm bill. We propose to take a leadership role in this effort by developing broadbased collaboration in Washington D.C. in conjunction with our state-based offices nationwide to support continuation and enhancement of the Conservation Reserve Program (CRP), Wetland Reserve Program (WRP) and other conservation provisions in the next farm bill. These partnerships will consist of conservation and wildlife groups, together with farmers, ranchers, and their organizations. Our objective will be to develop effective positions for the Conservation Title in the new farm bill.
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    Audubon has developed an initial set of priorities for the next farm bill that focuses on continuation and expansion of the CRP and the WRP, together with the introduction of amid- and long-term Grassland Easement Program (GRP). These priorities also include the continuance or replacement of disincentive programs such as ''Swampbuster'' and ''Sodbuster'', to deter wetland and grassland conversion. Audubon has a solid record in this area, which makes us uniquely qualified to lead a collaborative conservation effort, in conjunction with conservationists, farmers, and ranchers.
    The following briefly summarizes Audubon's ongoing and projected program initiatives for conservation farm policy and the upcoming farm bill.
    Washington DC-based Farm Policy Initiatives: The efforts of Audubon in regard to ongoing resource issues of agricultural land use on local, regional and national levels continues to raise the visibility and impact of our organization on these critical fronts. For example, subsequent to our involvement in the recent wetlands litigation with the USDA/Natural Resource Conservation Service (NRCS) in South Dakota, Audubon has participated in months of working meetings with a litany of stakeholder groups. These meetings focused on the field determination and implementation by USDA/NRCS of wetland mapping conventions and minimal effect exemptions for linear and sloped wetland subsequent to the lawsuit settlement. As a result, a consensus agreement for mapping conventions that establishes an appropriate depressional wetland identification process has been signed by the NRCS, the US Fish and Wildlife Service (USFWS), the Environmental Protection Agency (USEPA) and the US Army Corps of Engineers (USACE). The presence and participation of Audubon has been key to the development of USDA policy and procedures that sustain and protect wetland habitat in the northern prairies that are critically important to wetland-dependent wildlife species.
    Concurrently and in complement with these agricultural land use conservation issues, Audubon has developed a summary of guiding principles for the ongoing implementation of agricultural programs and for the development of the 2002 farm bill. These guiding principles are designed to further promote the partnerships between farmers, ranchers, landowners, and conservation organizations and agencies that Audubon has worked long to achieve. We continue to strongly support voluntary, incentive-based programs that inspire and promote economically sustainable land use. While recognizing that farmers and ranchers are the primary stewards of our soil, water, and wildlife, we believe that with the right tools we can improve the quality and productivity of the nation's agricultural lands while also protecting and enhancing our precious natural resources.
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    Policy Priorities: 1More funding for conservation, not less. Continued and increased funding for expanded conservation programs is critical to giving farmers, ranchers, and landowners the ability to conserve soil, water and wildlife with permanent solutions while supporting and maintaining family farming operations. Expanded and fully funded Conservation Reserve Program (CRP), Wetland Reserve Program (WRP), Environmental Quality Enhancement Program (EQIP) and Wildlife Habitat Incentives to Program (WHIP) are key to effectively and efficiently assisting land managers to implement strong conservation plans on the agricultural landscape. New programs are needed to conserve and protect native grasslands and other areas that exhibit significant ecological values.
    Soil, water and wildlife benefits must be treated as valuable conservation commodities. The most recent USDA Natural Resources Inventory data show that conservation efforts continue to fall short. Agricultural and forestlands are being lost at a rate of three million acres each year. Topsoil is eroding into waterways at a rate of two billion tons each year. Wetland losses continue at 54,000 acres each year. The continuance and expansion of voluntary, incentive-based policies and programs will help to improve the quality and productivity of private agricultural lands.
    Agricultural policy and conservation programs must be expanded beyond traditional farm commodities. Farmers, ranchers and landowners, regardless of the type of agricultural production, must be eligible for farm program benefits and support. It is critical to a sound land stewardship ethic to provide assistance to those who need it most. Alternative and traditional agriculture must receive the support necessary to implement farm and ranch conservation plans that provide conservation benefits for both the owner/operator and society. Towards this end, Audubon will continue to formulate innovative partnerships to develop effective, on-the-ground conservation agriculture policies.
    Adequate funding for conservation program field support staff is imperative. To effectively and efficiently administrate and implement conservation programs in the field, USDA/NRCS field personnel must be fully funded, staffed and trained. Innovative technical assistance on the ground is critical to any effort to advance sound conservation stewardship.
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    As the national debate over farm programs, production support, and the 2002 farm bill goes forward, Audubon will continue to give high priority to initiatives that support our farmers, ranchers and landowners as they work to conserve soil, water and habitat resources for all the birds and other wildlife that depend upon them.
    Field Based Farm Policy Initiatives: Work closely with local landowners. Audubon has been actively implementing Landowners/Stakeholder Meetings in the Prairie Pothole Region to link habitat protection on privately owned lands with effective farm policy, now and in the future. In addition to working with local farmers to identify on-the-ground avian predator management and habitat conservation strategies, Audubon is bringing landowner input to the national policy level, as result of the interface between Audubon staff in the field and in D.C. Most recently, we gave a farm bill presentation to farmers and ranchers at the North Dakota Grazing Conference, and received valuable input for program elements of the proposed ''Grasslands Reserve Program''.
    Educational activities for farmers. Audubon participated in Winter Farm Shows across the state of North Dakota in the 1999–2000. In addition to educating and working with private landowners about conservation programs and options for their farming operations, Audubon utilized this opportunity to get input and suggestions for conservation provisions for the upcoming farm bill directly from the people who utilize these programs on the ground.
    Promote economic incentives for farmers. Audubon has actively supported and promoted a ''Farm Stewardship Initiative'' that will provide economic and conservation opportunities for farmers to protect riparian areas in the Red River Valley of North and South Dakota and Minnesota. This effort includes the possible development of a Conservation Reserve Enhancement Program (CREP) for the Red River Basin and has the potential to become a program role model for other areas of riparian concern across the country.
    Work collaboratively with other local organizations. Building on our success with past Farmer-to-Farmer outreach, Audubon worked with the US Fish and Wildlife Society, Ducks Unlimited, and North Dakota Wetlands Trust, and Delta Waterfowl on Summer Grasslands Tours in 1999 and 2000. These opportunities were used to promote landowner and legislator awareness and support of the conservation and economic benefits of long- and mid-term grassland easements. Similar efforts will be used in the future to promote a ''Grassland Reserve Program'' in the 2002 farm bill.
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    Educate congressional representatives. Working as a member of the Northern Great Plains Working Group, Audubon is partnering to compile an informational booklet on farming for Waterfowl and other migratory birds in the Northern Great Plains. This will be targeted to congressional representatives and their staff, to demonstrate the importance of conservation provisions in current and future farm policy bills.
    Active participation in local technical advisory committees. In South Dakota, the litigative settlement for our joint wetland delineation lawsuit against the Natural Resource Conservation called for the establishment of State Technical Committee Working Groups to determine environmentally sound methods for mapping wetlands and determining minimal effects parameters. Audubon has been a very active participant in these working groups, and as a result has helped to develop policies that will protect the temporary and seasonal wetland resource so critical to migratory birds.
    Work at the local level to develop needed legislation. In South Dakota, Audubon worked on an ''Agreement in Principal'' with over 35 organizations and agencies to promote wetlands conservation on private lands. These collaborating entities range from Duck Unlimited and the SD Game, Fish and Parks Department to the SD Farm Bureau and Cattleman's Association. This agreement was the basis for Senator Tom Daschle's small farmed wetlands legislation, which is scheduled for implementation in early June 2001.
    Potential Program Changes 1)Farmers and ranchers should have the option to ''disturb'' CRP contract lands to enhance grassland/rangeland management. This is particularly important with re-enrolled CRP acreage because over time, other weeds and grasses can choke native grasses out. Healthy grasslands need to be disturbed periodically, either by fire or some other manipulation.
    Grassland Reserve Program: It would be both beneficial and appropriate to reward those farmers/ranchers who have practiced wise stewardship on their lands by not converting native grasslands to crop production. A Grassland Reserve Program would help to offset the continued conversion of the lands highlighted by recent USDA Natural Resource Inventory reports.
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    The USDA should not require a minimum acreage requirement for a Grassland Reserve Program. This requirement could inadvertently preclude the enrollment of small, but intact parcels of native grasslands, which should be preserved.
    If a contract bid point system for a Grassland Reserve Program is structured in a way similar to the Conservation Reserve Program, neighbors with contiguous parcels of grassland should receive proximity points to facilitate the enrollment of less fragmented tracts of grassland.
     
Statement of Steve Kouplen
    Mr. Chairman. Fellow Committee members. Hello. I'm Steve Kouplen, a rancher from Beggs in Okmulgee County. I'm honored to speak to you today. I serve as president of the largest agricultural organization in Oklahoma, the Oklahoma Farm Bureau. We have more than 127,000 member families.
     Our affiliated organization, the American Farm Bureau Federation, has already made extensive comments on this issue. So, I will take this opportunity to put an Oklahoma spin on what we would like to see in the conservation title of the next farm bill.
Oklahoma has a fervent history of support for conservation—ever since the desperate times of the Dust Bowl. Today's farmers and ranchers believe strongly in the conservation of our soil and water because agriculture relies on the sustainability of these resources. Conservation of these basic resources benefit all citizens by providing cleaner air and water, even though the public at-large is probably not aware of these benefits.
We would like to see the next conservation title build upon the foundation of the current one. Following are our specific suggestions.
     Regarding the Environmental Quality Incentive Program, or EQIP, we think the EQIP program should be retained but reformed. The first reform we suggest is to put more money into it. Second, we're not supportive of the existing ''priority area'' concept. We feel more producers could be assisted with smaller, yet beneficial projects, if the money was spread around more. And third, technical assistance needs to be expanded in this and other programs.
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     Regarding the expansion of state and Federal regulations on agriculture producers, we think there should be a program to provide financial assistance to farmers and ranchers to help them implement unfunded state and Federal regulatory mandates. These mandates farmers and ranchers are facing, include such things as: requiring Clean Water Act permits for smaller animal feeding operations; requiring producers to meet a Total Maximum Daily Load water quality goal in their watershed; and using the Clean Air Act to require control of dust and odor in agricultural operations. EQIP could serve as the vehicle to provide this type of assistance to producers.
Regarding Environmental Incentive Payments, we support a voluntary environmental program that provides producers with additional options for adopting and continuing conservation practices to address air and water quality, soil erosion, and wildlife habitat.
Oklahoma is a ardent supporter of continuing the Grazing Lands Conservation Initiative. More than 23.5 million acres of land in Oklahoma is used for grazing. This is a tremendous renewable resource.
    Regarding the Conservation Reserve Program, or CRP, we continue to support this program. We support a limited increase in the amount of acreage eligible to be enrolled in CRP with new acreage targeted toward buffer strips, filter strips, wetlands, and grass waterways.
I would like to leave you with these
thoughts. Keeping agriculture producers on the land by assisting them with conservation programs and technical assistance demonstrates a laudable commitment by this Nation to the long-term sustainability of domestic production agriculture. Voluntary conservation programs have a history of success. I urge you to keep these programs voluntary, and to maintain the confidentiality of the farmers and ranchers who participate in them.
Voluntary conservation programs and the technical assistance provided by the NRCS are the best buffers against costly and unnecessary regulation of production agriculture. I urge you to continue these types of programs which have a broad benefit all citizens. Thank you.
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Testimony of Alfred Miller
    I am a volunteer with the Great Plains Resource Conservation and Development (RC&D) Council, serving as chairman of the board, as well as the President of the Oklahoma Association of RC&D Councils. RC&D have played a strong role in our state by enhancing the environment and improving the quality of life in our communities. Today I am requesting that congress support permanent authorization of the RC&D program in the Farm Policy Legislation.
    RC&D was established in the 1960's as a pilot program to perform a number of conservation and rural development activities in areas where major economic and social downturns had occurred. The program has grown significantly over the years as a result of its ability to provide local solutions to local challenges. Today there are 348 RC&D Councils serving 80 percent of the Nation and 180 million people. We leverage a $43 million Federal investment into over $1 billion annually to directly support conservation and economic development in local communities.
    In addition, to continue the good work of RC&D council volunteers to serve our communities and to assist in increasing conservation and economic development in communities hard hit by low farm incomes, I would urge Congress to support three additional technical changes to the law authorizing the RC&D program in the Farm Policy Legislation:
     Update our statement of purpose and write the role of the RC&D Council into the law.
    his recommendation is a technical change to the law. The original law authorized USDA to work with States, local units of government and non-profit organizations to achieve our mission. The structure of the RC&D councils evolved and USDA recognized RC&D councils as the entity that carried out the mission of resource conservation and development. As a result, we believe RC&D councils need to be recognized in law.
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     Define RC&D council and affiliation of Councils.
    This recommendation is a technical change to the law. The designated RC&D councils are the responsible leadership of the RC&D area. The RC&D councils and associations are non-profit entities whose members are volunteers and include local, civic, appointed and elected officials. Affiliations of RC&D councils are formed in states, regions and at the national level.
     Encourage USDA agencies to provide technical assistance.
    Report language is requested that encourages the USDA agencies, consistent with their mission and authorities to aid RC&D councils to plan, develop, and carry out programs for resource conservation and development.
    I would like to conclude with a brief reference to two projects that were recently completed by the Great Plains RC&D Area Association.
    Scotch Thistle Eradication in Roger Mills County with the Upper Washita Conservation District. We worked directly with 42 landowners on land treatments and provided county residents with information and education for control of invasive weeds spending $40,435 of local money and we are currently waiting for $15,000 in Federal matching grant.
    Watershed Rehabilitation for flood control structures reaching their designed life of 50 years. Operation and maintenance of these aging structures are becoming very expensive for the conservation districts that have this responsibility without a real revenue source to cover the expenses. The Great Plains RC&D along with Upper Washita, Custer County, and North Fork of Red River Conservation Districts sponsored an AmeriCorp Team that donated 2688 hours of labor for rehabilitation of flood control structures. This infrastructure that is quickly approaching its engineered life expectancy of providing flood control needs reinvestment. Upstream Flood Control through the FP–534 and PL–566 laws were some of the most successful Federal projects ever performed in the United States. Maybe too successful in that they have not required a tremendous amount of Federal dollars to operate on an annual basis. The original cost has been recovered many times over in the prevention of property and life loss.
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Testimony of Bob Drake
    Mr. Chairman and Members of the Subcommittee:
    I am Bob Drake a rancher and resident of Davis, Oklahoma. I am Chairman of the National Grazing Lands Initiative (GLCI) Steering Committee and am here today to provide testimony on behalf of the GLCI. GLCI is founded on the principles of voluntary conservation efforts and respect for private property rights. GLCI emphasizes high quality, voluntary technical assistance, expanded grazing land research and education, and a more knowledgeable and informed public.
    The Grazing Lands Conservation Initiative (GLCI) formed in 1991, today is a partnership of nine organizations including the National Association of Conservation Districts, the National Cattlemen's Beef Association, the Soil and Water Conservation Society, the Society for Range Management, the American Sheep Industry, The American Farm Bureau, the National Farmers Union, the American Forage and Grassland Council, and the Dairy Industry. GLCI recognizes that technical assistance for private lands is not adequate to meet the conservation needs of the Nation's grassland resources. Through this partnership, we have encouraged Congress, USDA, and the public to provide the necessary assistance to meet the growing challenges of grassland management.
Grasslands are the thread and fabric that tie the Nation's landscape together. Rangeland, pastureland, and other grazed lands are included in the nation's one-half billion acres of non-Federal grasslands. Since 1982, 22.7 million acres of grasslands, an area roughly the size of Indiana, have been converted to other uses. Use of improved management strategies is paramount if these grasslands are to continue meeting the growing societal demands and provide economic stability for rural communities.
    Grassland is a substantial component of the agricultural economy and is the largest of all agricultural uses. ''The forage-livestock industry contributes more than $60 billion in farm sales annually, and the $11 billion hay crop is the third most valuable crop after corn and soybeans.'' (American Forage and Grassland Council/AFGC) The country's economic and environmental well being depends on these lands. Society benefits from an available supply of food and fiber, clean air, healthy wildlife populations and habitat, improved fisheries and aquatic systems, healthy riparian areas, improved water quantity and quality, reduced potential for flooding, and less sediment in streams and reservoirs, by having healthy grazing land.
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    Private grazing lands constitutes nearly half of the non-Federal lands in the United States. Our land represents the single largest land use in the nation. Furthermore, private-grazing lands represents some of the most extensive wildlife habitats in the United States. A large variety of wildlife species are dependent upon private grazing lands for some or all of their habitat need, even as the American economy depends more on these lands for its water and food supplies.
    Grass establishment serves as the foundation for many of today's conservation practices, but lack of management after establishment reduces the total benefits that could be provided. Current farm bill programs have limited applicability (funding and authority) in addressing the resource concerns of grazing lands. Additionally, many programs that are being utilized to address grazing land problems are lacking scientific support. The 1996 FAIRA included provisions for a Conservation of Private Grazing Lands program. The intent of the program is to accelerate technical assistance from the USDA Natural Resources Conservation Service to grazing lands, allowing ranchers to voluntarily increase the level of management to improve the amount of benefits provided by properly managed grasslands. Funding authorized for $60 million has yet to be appropriated.
    Today over 355 million acres of grazing land (280 million acres of rangeland and 75 million acres of pastureland) are in need of conservation treatment. At the current rate of investment in technical assistance, a little over 3 percent of the conservation needs on grazing land is being met (12 million acres treated annually). If we are to get ahead of the game we need an increased investment in on the ground technical assistance. With the appropriate amount of assistance we can reduce the nations dependence on the use of regulations to protect our natural resources, that we as ranchers enjoy the privilege of managing. We know that good land management is a benefit to both our economic well being and the nations environmental health.
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    Significant national issues impacting grazing land are:
    Invasive brush and weed species —Wind and water erosion—Wildfires —Salinity problems—Urban sprawl—Droughts—Market volatility—Inadequate grazing systems—Overgrazing—Complexity of resource laws, programs, and regulations & other resource issues!
    Trends. The relative importance of the nation's grassland ecosystems is now being recognized for both the economic and environmental values. ''The maximum values of these benefits are in most cases meet by lands that are in good health and capable of sustained production through active management decisions based on scientific principles. (Society for Range Management/SRM)
    Increased understanding of grasslands allows owners and managers greater opportunities to develop and implement enterprise diversification plans, improving the economic stability of the operation. Dairy farmers are finding that grass-based dairies in many situations can improve net revenues, while increasing aesthetics, environmental benefits and quality of life. Conservationists rely more on grass and its management to improve resource conditions. Grasslands are serving the Nation as buffer strips, grassed waterways, riparian buffers and heavy use areas, as well as backyard habitat for wildlife.
    Conservation Needs. Current public policy fails to take full advantage of our forage, grassland, and range resources. As a result, we are failing to reap the full economic, environmental, recreational, and aesthetic benefits. Even worse, we are jeopardizing the long-term health of the grassland agriculture system that has served as a foundation of all sustainable agriculture and of human civilization for millennia.'' (AFGC)
    Technical Assistance funding needs to be increased to facilitate NRCS's ability to accomplish their traditional mission of providing assistance to landowners to plan and apply resource management systems. Increased assistance will also enhance the effectiveness of current and future farm bill programs. The need for ecosystem planning is paramount to the stewardship and sustainability of private grazing lands. This planning needs to be provided to landowners by NRCS and it needs to start on the farm or ranch level.'' (SRM) Funding for NRCS technical assistance must be restored to pre–1985 levels or more to allow us, as owners of the nations private grazing lands, to voluntarily manage these valuable natural resources.
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    The upcoming 2002 farm bill provides an opportunity to revise existing programs or develop new ones to meet grazing landowners needs. Flexible programs providing appropriate assistance, both technical and financial are needed to address grassland management, and restoration needs. These programs will need to be science based, and adaptable to the local conditions and customs. The bottom line is that grassland agriculture cannot be left out of the technical and financial assistance arena of the next farm bill.
    Public Benefits
    Forage, grassland, and range resources promise benefits to every American in many important areas, including:
     Food and clothing from plant and animal products, including meat, milk, and wool
     Abundant wildlife habitats and aesthetically pleasing landscapes for recreation, enjoyment, and appreciation
     An alternative source of energy and industrial raw materials
     Environmental protection for soil, water, and air
    The economic value of these benefits is very significant. Equally important, although difficult to quantify in dollars, are the environmental, aesthetic, and recreational benefits, which provide an invaluable public good.'' (AFGC)
    Available conservation assistance will allow grazing landowners and managers to develop and implement their conservation planning decisions that maintain and improve grazing land resources. Benefits include an increase in forage production, increase in water infiltration, decrease in soil erosion, increase in sequestering green house gases, improved nutrient management, a decrease in water runoff, and an increased opportunity for recreation.
    NRCS is the technical assistance agency that can assist the grazing landowner and manager to economically address the environmental concerns of the public. Today there are more potential conflicts than ever before on private grazing land. Grazing landowners implementing their conservation plan decisions reduces the need to develop and implement new regulations for land management. Today's management of grazing land is not just about making a profit, but managing the land to maintain it's economic capabilities while increasing or maintaining environmental qualities on and offsite.
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Testimony of Dan L. Lowrance
    Mr. Chairman and members of the subcommittee, I am Dan Lowrance, a rancher from Alma, Oklahoma. I serve as a director of the Stephens County Conservation District and appreciate your invitation to be here today to share my thoughts on the current and future farm bills.
    I am here today as a Vice President of the Oklahoma Association of Conservation Districts, representing 88 district boards comprised of 440 locally elected and appointed directors and their 211 employees. I believe that it is appropriate that these hearings are being held today in western Oklahoma. Within a few miles of where we sit this morning stand some of the milestones of the conservation movement in this country. In 1948 near the community of Cloud Chief the first upstream flood control dam constructed by USDA-Natural Resources Conservation Service (then Soil Conservation Service) Cloud Creek Site 1 still stands today providing flood protection for citizens along the great Washita River Basin. The trees of the first conservation windbreak planted in this country still stand near the community of Dill City. Along with the miles of terraces, waterways, and hundreds of other conservation practices installed over the past 60 years, the efforts of local conservation districts and our partners the state conservation agency, and the Natural Resources Conservation Service have helped bring this area and indeed a large area of the Great Plains from the desolation of the Great Dust Bowl to the prosperity we see today. By protecting and preserving our soil and water, we are protecting our way of life.
    My invitation to testify here today asked me to address three questions.
     How are current farm bill programs operating?
     What changes need to be made to farm bill programs and their funding levels?
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     Are current programs or new programs needed to help producers comply with regulatory standards?
    These three questions are complexly intertwined and will be addressed and discussed here together.
    The Oklahoma Association of Conservation Districts believes that the conservation programs of the 1996 farm bill have for the most part been a success. The problem lies in the fact that an adequate workforce needed to implement these programs has been lacking. The Conservation Technical Assistance (CTA) Program of NRCS has been unable to meet all of the demands for existing conservation programs. It takes people to implement programs. In Oklahoma alone the NRCS workforce has decreased from over 600 in 1981 to presently only 320 people. Not only have the numbers of people decreased, but also the complexity of the work they are asked to do has increased. The impact of concentrated animal agriculture activities on water quality has created a need for the education of urban Oklahomans on the whole concept of private lands conservation. New emphasis on grazing land conservation has introduced the issues of invasive plant species and threatened and endangered animal species. In addition, as we embark on the mission of rehabilitating thousands of upstream flood control structures, thanks to the work of Chairman Lucas, we realize that the people who provided the engineering and technical knowledge to build these structures are now for the most part missing from the NRCS workforce. Apart from Federal conservation programs, as conservation districts in Oklahoma, we also rely on our Federal partners to provide technical assistance for the implementation of our own multi year, multi million dollar state conservation cost-share program. Our state conservation cost-share program figures reflect that Oklahoma's private landowners have invested an average of $3.50 for each state dollar spent for conservation on private lands.
    In short Mr. Chairman, OACD believes that the success of the conservation programs in the new farm bill will directly depend upon the expertise and availability of the workforce to implement them. Based on a current workload analysis, we believe that an increase in the Conservation Technical Assistance Program (C001) of $345 million nationally over current funding levels is needed to correct this problem.
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    The current Federal agriculture conservation programs are turning away clients at an alarming rate. EQIP alone is only handling about 25 percent of the available demand for conservation work. To meet current existing demands, EQIP needs to be funded at the $350 million dollar level. There is also a need for some of the procedural and bureaucratic barriers born out of the Commodities Credit Corporation to be removed from the current system.
    The environment in which current programs are carried out is growing increasingly complex with a broader range of resource issues being identified. There has also been a proliferation of well meaning, but ill-conceived, regulations aimed at addressing many of these issues. Within this context, we do not want to lose sight of the fact that voluntary incentive based conservation efforts remain the best way to address these resource issues in the countryside. The centerpiece of any farm bill should be a locally developed, comprehensive and coordinated conservation plan for the individual farm or ranch in question. The conservation plan, rather than a laundry list of program selections, should drive the implementation of conservation on private lands. Furthermore, additional funding is needed in the new farm bill to put conservation practices on private lands. Currently an average of $17.00 Federal funds per acre is spent on public land for conservation measures as opposed to an average of $3.00 per acre on private land. Private lands require and deserve a much higher figure.
    In spite of the shortfalls in personnel and in spite of the under funded programs, we are absolutely sure of one thing: That the partnership between local conservation districts and USDA Natural Resources Conservation Service is absolutely THE best and most appropriate delivery system if you wish to see the results of a new farm bill efficiently and effectively written on the land. farm bill to farm bill, USDA-NRCS needs to remain uncompromised in their role as the premier, independent, conservation technical assistance agency. The unique partnership between local conservation districts, state conservation agencies, and the Natural Resources Conservation Service, has over a 60 year history been one of the true success stories of American government. It has provided voluntary, incentive-based assistance to citizens and private landowners whose goals have been to improve their productivity, their environment, and their way of life. As landowners and conservationists, we view the programs provided by these agencies as the last ''firewall'' of protection before the next step of government regulation.
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    It's a simple concept. With voluntary technical assistance based on environmentally sound principles comes economic growth, and a flourishing environment for our rural and urban landscape in America. With regulation comes economic shutdown. OACD believes that the importance of preserving this partnership is maybe even more important today than it was in the 1930's. There have been rumors in the past and even today that there are those who wish to dilute this partnership by combining Federal agencies for ''efficiency's'' sake. We believe that would be a grave mistake and we urge this Committee to use its power and authority to ensure that the Natural Resources Conservation Service always remains a stand-alone agency of our Federal Government.
    When addressing program changes, I suggest that Congress needs to use the following yardstick as a test for both new proposals, as well as for considering renewal or extension of existing programs.
    farm bill programs should:
     Maintain a voluntary, incentive based approach to help private landowners and managers protect their soil, water, wildlife, and related resources. The National Association of Conservation Districts has recently proposed an $8 billion dollar incentive based program for locally-led incentive based voluntary conservation. The Oklahoma Association of Conservation Districts supports this concept.
     Increase local leadership and involvement in implementing the conservation plan and programs, setting priorities, developing policies and advocating natural resource conservation and management.
     Utilize science-based technology in making conservation decisions, including those for accountability and baseline establishment.
     Provide land managers with the technical assistance they need to achieve conservation objectives.
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     Emphasize the value of cost-effective conservation practices that, for all Americans, enhance quality of life, restore air and watershed health, and contribute to safe and affordable food and fiber.
     Ensure that all citizens share the financial responsibilities for reaping the benefits that conservation on private lands offers to all of society.
    On behalf of OACD, I thank you for the opportunity to address you this morning.
     
Statement of Scott Dewald
    Chairman Lucas, and members, thank you for holding this public hearing of the Subcommittee on Conservation, Credit, Rural Development, and Research in Oklahoma. Chairman Lucas we welcome you home and we thank you for your ongoing commitment to being home as much as possible and for your dedication to your constituents in Oklahoma particularly as it regards the farm bill and conservation issues including such things as research and the rehabilitation of flood control structures. Members we thank you for participating in this hearing, your presence here is indicative of your commitment to shaping public policy which is in the best interest of rural America.
    I am Scott Dewald, Executive Vice-President of the Oklahoma Cattlemen's Association. The size, scope and breadth of our agricultural industry is well known by each of you, so therefore I will not belabor those points. We are very grateful for this opportunity to provide you with our views on the conservation provisions of the 2002 farm bill.
    This bill must include a strong, effective and well-funded conservation title.
    Livestock production is important to the management of our nation's agricultural lands. Grassland pasture and range was the single largest land use in the country, accounting for 31 percent of the major land uses in the lower 48 states. Livestock operators manage more than 300 million acres of cropland. These statistics provide ample justification for a major Federal investment in conserving the lands. The investment being made by USDA has consistently declined since the passage of the 1985 Food Security Act.
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The 2002 farm bill must make a major, new commitment to providing livestock producers with conservation cost share and incentive payments assistance in the context of voluntary, incentive-based programs.
    Livestock producers continue to face costly environmental regulations as a result of state or Federal law designed to protect water quality. The Federal regulations under the Clean Water Act include the Total Maximum Daily Load Program (TMDL's), and the proposed new Concentrated Animal Feeding Operations (CAFO's) permit requirements. Federal regulators also are exploring the possibility of expanding Federal regulation of agriculture under the Clean Air Act.
    The commitment to financial assistance that is needed in the 2002 farm bill has to be matched by a similar commitment of public and private technical assistance. The 2002 farm bill must reverse the trend that started with the 1985 Food Security Act, and restore technical assistance to at least pre–1985 levels. Further, while we strongly oppose it, we are none the less in what appears to be a never ending call for more stringent (although not always technically sound) regulations from a variety of Federal agencies including, EPA and the USF&WS. Because of this, the need for technical assistance will do nothing but escalate.
    Current water quality expectations for the livestock industry are projected by the industry to cost livestock producers with operations of more than 50 animal units at least $12.2 billion over 10 the next years. Please see attachment 1 for additional information.
    
xplicit provisions must be enacted that structure and support the joint effort of Federal and non-Federal technical assistance providers that will be needed to support this work. A voucher system should be developed to support the non-Federal technical assistance providers' role.
    There is a great deal to be accomplished in the next 10 years and this will be an expensive effort, but we could start addressing these issues through substantial amendments to the existing Environmental Quality Incentives Program (EQIP), or in an entirely new program.
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     If carried out through EQIP, EQIP must be amended to focus exclusively on soil, water and air quality issues. If we focus on these issues we will do a much better job of conserving our resources and still obtain secondary benefits for wildlife.
he current wildlife objectives supported by EQIP should be moved to the existing Wildlife Habitat Incentives Program (WHIP), making WHIP the wildlife program for working agricultural lands.
We believe that it is counter productive to many conservation efforts to predicate program decisions on anything less than our original objective of conserving soil and water.
    Producers' costs and technical assistance needs for the ongoing maintenance of manure management systems must also be funded.
his could be done in EQIP or through some other incentive payments program.
An incentive payments program will work only if the payments are tied to real costs, according to conservation plans that are accountable and where producers will have ownership of the practices.
he program must ensure that producers be compensated fairly relative to producers across county, state and regional lines for the work and activities undertaken with the incentive payments.
    The Conservation Reserve Program (CRP) should be amended. We believe there should be flexibility in the CRP program to enable producers to enroll whole fields, partial fields and buffer strips. This added flexibility will allow us to utilize site specific information so that producers and the programs can focus resources where they are needed the most.
     We also believe that the CRP should include provisions to manage CRP lands for long-term sustainability. Currently producers are prohibited from managing for healthy grass stands. Management tools including prescribed burning, haying, and even grazing should be available to landowners for the sustainability of CRP lands. Payment adjustments may be necessary to ensure that parity among producers is achieved. Lastly as it regards CRP and other programs, we feel it counter productive to displace the use of non-natives with natives which in many cases results in a loss of productivity. In many cases these decisions detract from our original goal of conserving soil and water. These decisions must be left up to the producer and he or she with adequate informed technical assistance can base their decisions on agronomy and soil health.
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    This farm bill should fully fund the Grazing Lands Conservation Initiative (GLCI) and its voluntary technical assistance program for grazing lands. Further, we should provide individual producers with options in this Conservation Title directed at protecting and preserving grasslands which have been largely ignored in past farm bills.
    As you well know conservation programs are a two way street. The best programs have no merit if landowners are not willing to implement them. We are extremely concerned that the disincentives to participate are starting to outweigh the incentives. Having spent the past 18 months dealing with the proposed listing of critical habitat for the Arkansas River Shiner we have become quite familiar to the term ''Federal nexus.'' As we understand it, the provisions which establish a Federal nexus and what authority that grants non-agricultural agencies, are statutory and are found in the Endangered Species Act. We would be grateful if this committee would forward our concerns regarding this issue to the House Resources Committee, who we understand has jurisdiction over the ESA. Producers are reluctant to enter into agreements when they are uncertain of the liability or unforeseen responsibilities they may incur, and the confidentiality or more importantly the lack thereof of any information they may provide.
    Lastly we want to take this opportunity to thank this committee for its commitment to research. Our Association if fully supportive of the research facilities in Oklahoma including the Southern Plains Range Research Station at Woodward and the Grazing Lands Research Laboratory in El Reno. We thank each of you for your commitment to ensuring that our research facilities are properly maintained and equipped so they may continue to carry out fundamental research projects which meet the needs of a progressive and long standing industry. The research facilities in Oklahoma are extremely important to the economy of this entire diverse region, and we recognize these regional differences and understand their respective research programs must reflect them.
    Again Mr. Chairman, Thank you for hosting this public hearing in Oklahoma.
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ATTACHEMENT 1
    Staff considered the costs associated with both structural and agronomic measures and the associated technical assistance. The analysis also includes an estimate of the costs operators will face as they seek additional land for the application of their manures. The analysis uses estimates of capital costs for such work, as used recently by USDA, current public and private programs that are carrying out such activities, and published USDA estimates of the number of livestock and poultry operations of various sizes subject to these provisions.
    The up front costs are approximately $9.8 billion, and include the costs associated with preparation of a Comprehensive Nutrient Management Plan (s), the financial and technical assistance costs of designing and constructing or upgrading manure management systems, and the initial costs of simply locating persons with land that are willing to accept excess manure. The on-going management costs total approximately $2.4 billion, and include the financial and technical assistance costs of ensuring that manures are applied according to sound agronomic and conservation practices.
    This analysis does not represent the full costs of meeting EPA's recently proposed CAFO regulation. It does not include the regulation's proposal for covering all swine lagoons and poultry manure, nor does it include the costs of lining lagoons and pits in areas that could leak to groundwater that are in turn connected to surface waters. It also does not include the costs of hauling excess manure for application to the additional land necessary to meet a phosphorous standard (although we have estimated the costs of finding the land that could be used for this purpose).
More than $12.2 billion is needed to address the projected 10-year costs of Federal, state and local mandatory manure management, water and air quality protection requirements. The structural elements of these costs are projected to be $9.8 billion (including the preparation of comprehensive nutrient management plans), and the ongoing 10-year management costs are projected to be $2.4 billion. EPA has estimated the costs of its proposed CAFO/AFO regulations for operations with more than 300 animal units at $930 million a year. EPA has underestimated the true costs to these livestock and poultry operators because, by OMB scorekeeping rules, they assumed that all of these operations are already in full compliance with current Federal CAFO standards and requirements. We also believe that EPA has underestimated the true costs that operations between 300 and 1000 animal units will face to ensure they are not exposed to significant Clean Water Act liability.
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     These needs are national priorities that must be met with the funds made available for this purpose, irrespective of other priorities that might exist for the program.
     
Statement of Ray L. Wulf
    Chairman Lucas, Members of the House Agriculture Subcommittee, on behalf of the Oklahoma Farmers Union and the National Farmers Union, representing the interests of over 300,000 farm and ranch families across America, it is a pleasure to have this opportunity to share with the Subcommittee our observations and recommendations about current and future conservation programs. And, it is a delight to have you as Chairman of the committee and holding this field hearing in Oklahoma. Our friendship goes back many years to our association while you were at the State Legislature. It is a friendship I have valued and look forward to for many years to come.
    Current Programs. The conservation programs currently authorized under the Federal Agriculture Improvement and Reform (FAIR) Act of 1996, have, for the most part been sound programs. They have served to conserve our soil resources, as a side benefit enhance wildlife habitat and improve the quality of both air and water through participation incentives and technical assistance. However, we believe there is room for improvement. It is important that the level of funding be adequate to ensure the long-term success of these initiatives and that adequate funding be available so that agriculture producers desiring to implement conservation practices have the funding to do so. We believe such an approach will serve to promote the broadest possible development and application of conservation measures. After reviewing the current programs we make the following observations and suggestions concerning conservation program authorities and funding:
    Conservation Reserve Program (CRP). Te Conservation Reserve Program has been successful in targeting marginal lands and bringing them out of production. The original CRP legislation significantly reduced soil erosion and dramatically improved wildlife habitat (as a side benefit), by idling highly erodible and environmentally sensitive land. The current CRP, however, placed wildlife habitat conservation on equal footing with soil and water conservation priorities. From Oklahoma's perspective, the CRP is a good long-term conservation investment program that should be returned to the original CRP direction that also accomplished wildlife habitat. Continuing the current direction, producers should receive additional payment for the added wildlife benefits they are not being compensated for under the current bill.
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We support:
     Raising the cap on total enrollment to at least 40 million acres with the difference from the current level of 36.4 million acres to be used primarily for enrollment of riparian areas such as filter strips and other areas subjected to water erosion on slopes and hillsides and to heavy wind erosion and sanding. We would additionally support incidental grazing of these riparian areas with restrictions during the growing season. This would work well with wheat pasture grazing where grazing does not occur until after the growing season for grasses has been completed but yet where riparian areas exist along side green wheat.
     Reducing emphasis on whole farm enrollments.
     Ensuring compensation rates that are comparable to local rental rates plus a provision of management incentives.
     Reviewing and enforcing the aggregate county-entry limits.
     Reviewing the requirements and benefits of planting expensive and often un-needed five-way seed mixtures as cover crops.
     We need to recognize differences exist in the country and one size does not fit all. Here in Oklahoma we support re-enrolling existing CRP acreage which has a previously accepted grass stand according to conservation practices recommended at the time of first enrollment. Producers should not be required to destroy current stands to meet a multi-diversity culture standard that results in additional costs to producers, the government, the environment and wildlife as a result of a stand that may require multiple years for re-establishment. Short of the above, the Secretary should be given authority to grant waivers based on local determination of whether stripping existing stands is a viable local option given local conditions.
     Return to method of placing the most emphasis on soil types and topography rather than wildlife benefits for determining eligibility.
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     Allowing whole field enrollment that would encourage producers to maximize the full benefits of the program.
    Wetlands Reserve Program (WRP). We recommend expanding the WRP by removing the cumulative acreage cap and providing such funds necessary to address the current and future demand for this program.
    Farmland Protection Program (FPP). A number of states have initiated state-funded farmland protection programs. We support additional funding for this program to encourage greater cooperation between Federal and state authorities in order to protect and preserve farmland from development.
    Wildlife Habitat Incentives Program (WHIP). The Wildlife Habitat Incentives Program is a program to encourage the development of habitat for fish and wildlife on private property through cost-share assistance for habitat development and implementation. We support the goals of the program to be re-authorized and funded at sufficient levels.
    Environmental Quality Incentives Program (EQIP). This program has been successful in providing financial, technical and educational assistance to farmers and ranchers. However, its success has been limited due to funding levels that were reduced shortly after the program was authorized. This lack of adequate funding has resulted in the rejection of many worthwhile projects that would have received cost-share assistance under the old Agriculture Conservation Program (ACP) and Great Plains program, the predecessors to EQIP, and forced a singular focus on broad-based watershed priorities. As you might expect, this has created bitter feelings among some farmers and ranchers. There are so few technical assistance funds available that some producers will not apply because they know of the limited funding. The lack of funding combined with low farm income is hurting our investment in the land. As much as producers would like to take care of their land, they will only do as much as current farm prices will allow.
    The current EQIP program has left out many low-income producers. The process should be based on need. It has hurt low-till and no-till producers who are already adapting as early innovators conservation cost-saving measures at their own expense.
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    Ratings should be based on soil and water conservation as the primary priority with the accomplishment of wildlife objectives as a secondary benefit. Applications with other benefits should not receive greater weighted scoring than those targeted for traditional soil and water conservation needs. We should focus on marginal lands based on soil type. We recommend additional funding for EQIP to address the tremendous demand for this program, which has been estimated at three times the current funding level. We recommend at least 50 percent of state funding should be directed to ''statewide concerns'' allowing more local discretion for targeting priorities.
    Along the lines of cost share assistance funding, we believe priority should be placed on providing assistance to producers impacted by drought, flood and other natural disasters to assist with restoration. One example would be to provide funding for restoring native grasslands eliminated by drought.
    Mr. Chairman, as you know we recently have wrestled with the designation of the Arkansas River Shiner as a threatened species here in Oklahoma. Now that the Federal Government has made its' determination and designation, the U.S. Fish and Wildlife Service is proceeding forward to determine a plan for re-establishment of that species along a river system that stretches three-fourths of the way across the state impacting private landowners across this state. We strongly oppose any actions taken by Fish and Wildlife concerning threatened and endangered species to utilize funds appropriated for agriculture to carry out recovery plans mandated on producers. Such funding should be provided by the agency requiring such actions and not through EQIP or similar technical assistance cost share programs where funds are already limited. If such programs should be used for this purpose, those funds should be transferred from the impacting agency's budget and administered within the USDA function.
    While we do not support the use of EQIP funding or other agriculture conservation mechanisms for these purposes, we fully support appropriate funding compensating producers in this taking of lands.
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    Watershed and Other Conservation Measures Rehabilitation
Mr. Chairman, we recognize and appreciate the leadership that you have demonstrated on working to authorize and fund watershed rehabilitation. We support your efforts and encourage you to continue the crusade to ensure that all conservation cost-share practices be considered as part of this concept so that all of our conservation efforts are maintained with rehab investment dollars.
    Conservation Technical Assistance (CTA). This program is beneficial to farmers and ranchers that receive cost-share assistance for implementing conservation systems. However, action is needed to ensure that NRCS has the resources to provide technical assistance to those producers who want to adopt sound conservation practices but are not seeking cost-share assistance.
    For example, if a producer already has terraces in place and wants to shift from a minimum tillage to no-till planting, he needs access to timely technical assistance in order to successfully make the transition to a higher level of applied conservation.
    Conservation of Private Grazing Land Initiative (CPGL)
This initiative is designed to provide technical, educational and related assistance to owners of private grazing lands in order to expand the multifunction of this resource through better management, erosion protection, water conservation, habitat development and greenhouse gas sequestration. Although not a cost-share program, the technical assistance concepts contained in the CPGL are clearly consistent with the development of a mutually beneficial private/public partnership to enhance the productivity and sustainability of privately owned resources and should be supported.
    NRCS Management Continuation. We strongly support NRCS remain as a separate entity and employment of personnel not be included under the Farm Service Agency management. The technical expertise of the NRCS has provided service and new technologies to producers with uncompromised technical assistance on a voluntary basis.
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    New Initiatives. In addition to suggested improvements in the existing conservation and technical assistance programs, the National Farmers Union also urges consideration of several new initiatives that are complementary to the ongoing efforts to ensure the sustainability and high level of stewardship of our agricultural natural-resource base.
    Conservation Security Act (CSA). The Conservation Security Act (CSA), a bipartisan Congressional proposal, provides voluntary incentive payments to producers for the application of appropriate conservation measures on land that is currently and likely to remain in production. The CSA is designed to target conservation payments to family farmers and ranchers engaged in production agriculture in a way that is consistent with our obligations under the World Trade Organization (WTO), while encouraging increased levels of environmental stewardship. We support this framework for conservation payments as a way to reward both those who have undertaken the establishment of conservation practices in the past and those who implement future activities.
     The Conservation Security Act creates the Conservation Security Program (CSP) which provides a comprehensive, flexible, voluntary approach to farm conservation policy by providing incentive payments to all farmers and ranchers (farmers) for maintaining or adopting conservation practices on land in production.
     Stated objectives of the CSP: Promote conservation of soil, water, and energy.
     Conservation Security Contract: Farmers enter these contracts, which contain a conservation security plan outlining the practices to be adopted, with the Secretary of Agriculture. There are three Tiers of practices. Tier I contracts last 5 years and Tier II & III contracts last from 5 to 10 years (at the option of the farmer or rancher). Tier III practices are the most extensive.
     Tier Practices: Tier I practices which include nutrient management, pest management and cover cropping, can be adopted individually. This tier recognizes those producers who voluntarily implement conservation practices, and receive no compensation for their investment. Tier II practices are system practices such as rotational grazing, buffers and borders and wetland restoration which all are in addition to Tier I practices. Tier III is a whole farm conservation plan that addresses all resources in addition to Tier I & II practices.
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     Tier Payments: The Tier I annual payment cap is $20,000. The Tier II annual payment cap is $35,000. The Tier III annual payment cap is $50,000. Payments are per individual or entity.
     Advance Payments: For participating in CSA, farmers and ranchers will receive a one-time immediate payment equal to the greater of 20 percent of the annual payment or $1,000 for Tier I, $2,000 for Tier II, or $3,000 for Tier III, respectively that is deducted from the total value of the contract.
     Payment Criteria: Payments would be based on implementation of management programs and best management practices, foregone income for maintaining or instituting practices and cost associated with farm research and demonstration projects.
     Other Conservation Programs: The CSP complements current conservation programs—it does not take money away from other Federal conservation programs. Farmers can still receive incentive and cost-share payments under Federal agriculture programs that cover non-CSP land. A participant may receive payment and cost-share from any other non-Federal source on the same land enrolled in the CSP.
     Funding: Funding for the CSA comes from the Commodity Credit Corporation. In addition to the technical assistance funds provided to USDA (NRCS), the CSA CCC funding includes education, outreach, and monitoring investment.
     Trade Implications: The payments fit into the Green box and are not trade distorting
    Soil Rehabilitation Program. In many parts of our country, adverse weather, disease, and pests have decimated significant areas of cropland. The incidence of these problems has reduced the productive capacity of the land and poses an ongoing threat to that capacity for at least an intermediate term of 3 to 5 years.
    We support the implementation of an intermediate-term soil rehabilitation program that would provide both technical and economic assistance to family farmers so they may undertake needed stewardship activities to restore these resources to at least a historic level of productivity.
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    For example, here in Oklahoma, where we have experienced devastating droughts and floods in recent years, soil productivity has been severely affected. We have seen many examples of reduced productivity because we have been given limited tools to address soil and pasture rehabilitation problems. Without Federal assistance, this scenario is beyond the economic capacity of most producers. This program would also help mitigate the loss of Actual Production History for crop insurance purposes over time and reduce crop insurance indemnity payments as well as reduce the need for ad hoc disaster programs in the near term. This program would allow the soil to build itself up and be in reserve for future generations production.
    Carbon Sequestration Program. Agriculture is in a unique position to provide an environmental offset to carbon dioxide releases into the atmosphere through sequestration of carbon in the soil. We support appropriate incentives and technical assistance to encourage the implementation of crop and livestock production activities to establish and compensate producers for on-farm carbon sequestration. In addition, this initiative should promote the development of a commercial market for carbon sequestration credits that is open to participation by producers and or their cooperatives.
    Thank you once again for the opportunity to appear before this Subcommittee. I will be pleased to respond to any questions at the appropriate time.
     
Statement of Billy R. Wilson
    Mr. Chairman and Members of the Subcommittee: I am Billy Wilson, Past Chairman and a member of the National Watershed Coalition (NWC) Steering Committee. I am a rancher and a registered professional land surveyor from Kinta, Oklahoma, and I am pleased to represent the National Watershed Coalition and its members at this farm bill hearing. The National Watershed Coalition is privileged to present this testimony in support of the most beneficial water resource conservation programs ever developed in the United States, and very likely in the world. Subcommittee Chairman Lucas said, ''the farm bill is too important not to meet those that will be affected by it face to face.'' You could not have picked a better location to do that, than here in Oklahoma with our rich heritage and leadership in developing, promoting and implementing watershed conservation programs. I welcome you to our state. Oklahomans and many National Watershed Coalition members are conservation pioneers. We also understand that conservation and protecting the environment will be major goals of the next farm bill. We support those goals. We understand this is not a budget or appropriations hearing, but we would be remiss if we did not raise some financial issues for your consideration. In an earlier hearing, Chairman Lucas recognized that funding was a key issue, and your subcommittee wanted to look at how conservation dollars are utilized. Funding and program policy and implementation are closely related. I hope however, to emphasize the conservation benefits these programs provide. Those benefits far outweigh program costs, and should be the centerpiece of our national conservation programs and policy. I will also make other conservation suggestions not focused solely on the watershed. All these programs should complement one another, and are of interest to the NWC.
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    Before I get into program specific issues, let me offer some general observations. All Americans have a great deal at stake in the 2002 farm bill. No activity is as important to the nation's landscape and environment as is agriculture and rural America. Private crop, pasture and rangelands account for 50 percent of our land, and private forests another 20 percent of the land in the lower 48 states. The next farm bill, properly crafted, can provide funds and incentives to help farmers and ranchers achieve national goals for the environment, farm communities, and public health. What happens to rural America and American agriculture over the next five years, and the farm bill determines that direction, may be as critical to our nation's economic and environmental future, as what has happened over the last 50 years. We propose reforms where we believe reforms are needed, not for reform's sake. Farm programs currently cost about seven-tenths of one percent (0.7 percent) of the Federal budget. This low expenditure allows Americans to enjoy a food supply whose abundance, quality, and affordability are second to none. We believe this amount should be increased. Things I discuss will provide immense value every day to every citizen.
    Annual direct payments to farmers have skyrocketed from less than $10 billion in the early 1990's to a record $32 billion in 2000. Through this period, annual conservation spending has held constant at less than $2 billion, a decline from 20 percent to 6 percent of spending. Without fundamental changes, the next farm bill will likely average $20 billion a year for traditional farm commodity programs over the next five or more years. But traditional commodity programs at best modestly advance, and can to a significant extent undermine, efforts to help family farmers, the environment, and public health. A new farm bill should move comprehensively. It should focus at least $12 billion per year on conservation programs and stewardship incentives, as well as programs for research, marketing, and rural economic development that supports independent and resource-conserving farms. Farmers and ranchers can and want to take practical steps to enhance water supplies, reduce flood damages, control erosion and sedimentation, improve wildlife habitat and long-term soil productivity. However, almost three out of four who seek assistance for most conservation programs are turned away because of a lack of funds.
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    Family farmers and ranchers also face serious economic problems. When Federal farm programs began there were more than six million farms. Today there are fewer than 2 million. Today's farmers face increasingly concentrated and diminished marketing alternatives and record low prices. Farm policies have encouraged these declines because they primarily support farmers only to the extent they grow large volumes of a small number of ''program crops.'' Farm programs can do more to help farmers and farm communities, while at the same time creating a healthier environment for us all. That should be a major goal of the next farm bill. Our NWC sees the Small Watershed Programs as an underutilized tool in achieving these ends. They should be the 2002 farm bill centerpieces. Virtually every conservation activity or practice can be delivered by using the Small Watershed Programs. No other program has that flexibility.
    THE SMALL WATERSHED PROGRAMS.
    Since the National Watershed Coalition (NWC) represents the sponsors of nearly 2000 watershed project sponsors throughout the country, I will start with comments regarding the USDA assisted watershed programs. These programs were designed to fill a critical gap in natural and water resources protection, the gap between those individual conservation plans which address needs on individual farms and ranches, and the much larger natural resource projects planned and installed by Federal agencies such as the U.S. Army Corps of Engineers, and the Department of Interior's Bureau of Reclamation and Bureau of Land Management. Another critical difference, and a strength of these watershed programs, is they are federally assisted, not Federal. They are led and directed by those local people most directly affected by the problems and solutions. The Federal Government helps as a partner, contributing technical and financial cost-sharing assistance. Watershed project sponsors are special purpose entities of state government such as soil and water conservation districts, watershed districts, conservancy districts, counties, etc. Their officers support the voluntary, locally led with incentives approach to getting conservation applied to the land.
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    It is not an overstatement to say that our nations small watershed programs (PL 78–534 & PL 83–566, along with the Resource Conservation and Development, RC&D, Program) have provided benefits to our citizens far in excess of their costs. Yet these programs, which have the potential to improve environmental health and provide exceptional monetary returns to society, are not adequately funded. There are many reasons why that is the case. Many people oppose development even though those it provides benefits to society, and is planned using current environmental rules and regulations. It's somewhat like the situation we have with energy in the west today. If needs and demand grow, and no plans are made to address those needs, shortages and damages result. The main reason usage of these programs to provide watershed protection has fallen, is that after the great Midwest floods of 1993, Congress took funds from the watershed program accounts to assist with flood recovery efforts. Congress knew the NRCS would need to devote its energy and personnel to flood recovery efforts, and reasoned the cut could be made in 1994 while recovery was going on. Those cuts were promised to be restored to the watershed programs when the recovery work was done. It's no secret that those funds were never restored to the ongoing watershed programs. While the Federal share of the need throughout the country is estimated at about $250 to $300 million a year for watershed project installation, the annual amount available since 1994 has been less than $100 million. We sincerely believe Congress and the Administration should restore these watershed programs to the robust place they occupied in our conservation arsenal some years ago. We desperately need them working for our nation.
    Why should the Federal Government be involved with these watershed programs?
     They are programs whose objectives are the sustaining of our nation's precious natural resources for generations to come.
     They are not Federal, but federally assisted, locally initiated, sponsored and owned. Project decisions are made by the people affected.
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     They share costs between the Federal Government and local people. Local sponsors pay between 25 and 40 percent of the total costs of watershed projects.
     They produce net benefits to society currently estimated at $2 billion per year. The most recent watershed program evaluation demonstrated the actual ratio of benefits to costs was approximately 2.2:1. The actual adjusted economic benefits exceeded the planned benefits by 34 percent. The study also recognized that not all benefits were accounted for, particularly environmental benefits. Wouldn't it be nice if other Federal programs did so well?
     They consider environmental values. Projects are subject to the discipline of being planned and implemented following the National Environmental Policy Act (NEPA) and the Federal '' Principles and Guidelines for Land and Water Projects.'' That is public scrutiny.
     They are flexible programs that can adapt to changing needs and priorities. Objectives that can be addressed are flood damage reduction, watershed protection (erosion and sediment control), water quality improvement, rural water supply, water conservation, fish and wildlife habitat improvement, recreation, irrigation and water management, etc. These are flexible programs emphasizing multiple use, a very valid resource concept.
     They can address the needs of low income and minority communities.
     And best of all they are programs people like!
SUGGESTIONS FOR IMPROVEMENTS TO THE WATERSHED AUTHORITIES
    There are some watershed program improvements we suggest be addressed in the 2002 farm bill. If adopted the legislation would be strengthened and made more consistent with other authorities. Some would involve amending the legislation. We suggest:
     All watershed project authorizations go only to the Agricultural Committees in the House and Senate, instead of having some of the larger plans go to the ''Public Works'' committees. The Public Works committees are used to dealing with the larger Federal projects planned by the US Army Corps of Engineers for example, and don't really handle these smaller USDA federally assisted projects smoothly. Nor do the Public Works Committee's fund these projects. Funding comes through the Agriculture budget.
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     Clarify and simplify the cost-share rate for municipal and industrial water supply to be 50/50 for both current and future needs, and remove the internal obstacles that prevent the USDA from utilizing this portion of the watershed authority. Rural development is still a stated USDA and Federal priority. Helping rural areas with water supplies is rural development. The authority allows USDA to cost share on municipal and industrial water supplies, but they have not been allowed to use that authority.
     Eliminate the requirement that projects have a ''minimum of 20 percent of their benefits attributed to agriculture.'' Too often that requirement has been used to keep rural development from occurring, or keep a small, rural community from participating.
     Provide an equal standing for non-structural measures when the primary purpose of the project is flood control.
     Authorize the use of conservation easements on all land uses.
     Provide project sponsors the same terms and conditions for easement acquisition as provided in the Wetland Reserve Program and the Emergency watershed Protection Floodplain Easement Program.
    The local sponsors of these ''federally assisted'' watershed projects have a tremendous investment also. In many cases they have paid to get options on needed land easements or rights, in anticipation of the Federal share of the funds being available on a timely basis. Many sponsors have had their easement options expire, as the Federal share of the money was not available for years. Not only do they lose what money they had invested, but also when they again attempt to purchase the option or the land rights, the price has increased dramatically.
AGING WATERSHED INFRASTRUCTURE
    The National Watershed Coalition would like to publicly thank the Chairman for the yeoman work he did in leading the passage PL 106–472, the Small Watershed Rehabilitation Amendments of 2000. The issue of the current condition of improvements constructed on our landscape by all conservation programs, is of great concern. It has been estimated that from 1935 through 1980 the cumulative investment in the agricultural sector of the US economy was $19.1 billion in actual dollars. Those were years in which we invested the most in our rural infrastructure. That cumulative investment in real terms was about $43 billion. Slightly less than half of all conservation measures installed since 1935 should still be in place. The rapid growth phase of installing these practices ended about 1955. By then, depreciation began to outweigh new investment. The replacement value of conservation improvements on farms peaked in 1965 at $27.6 billion. In the period 1976 to 1980, depreciation of on farm measures averaged $677 million per year. New investments during that same period averaged only $447 million per year. If one assumes the $677 million to be the annual cost if maintaining existing productive capacity, which is not unreasonable, our current investments do not even attain a simple maintenance state. That same principle applies to the watershed infrastructure we have installed. That is why the Chairman's work on watershed rehabilitation is so important. We depend on the benefits produced by these watershed projects and conservation measures for our food and fiber. Just as with our homes and property, maintenance is critical and often delayed until costs skyrocket.
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    Many of the nearly 11,000 dams built with the small watershed programs assistance no longer meet current dam safety standards largely as a result of development, and need to be upgraded to current standards. We estimate that in the next ten years, $600 million will be needed to rehabilitate these installed works. Of that amount, $100 million would come from local project sponsors. NRCS conducted a more recent survey, and in just 22 states, about $540 million in structure rehabilitation needs were identified. Thanks to the Chairman, we now have the authorization to get on with the rehabilitation task. What is needed is, once again—the Federal share of the funds. If we don't start to pay attention to our rural infrastructure needs, the ultimate cost to society will only increase, and project benefits will be lost. This is a serious national issue. We have included some charts and graphs demonstrating this problem and the national needs, in the introductory material to this statement that was made available to the members of the Subcommittee. If we do our rehabilitation job as we should, and bring these older structures up to current health and safety standards, they will continue providing benefits far into the future.
WATERSHED PROGRAM FISCAL ACCOUNTABILITY
    For many years USDA/NRCS had a very accurate and descriptive accounting system for appropriated funds that allowed the agency to report to Congress and the American people
on how their tax dollars were being spent and what was being accomplished. Over time that system has been changed. We believe it is because some who oppose project type programs, both in the various administrations and the Congress, wanted to reduce funding, and yet mask the published numbers to imply more was being spent than actually was. For example, the PL–534 and PL–566 programs are authorized by different acts and operating rules. For years some have tried to eliminate the PL–534 program or combine it with PL–566 in order to be ''more efficient.'' What has happened over time, is the appropriations for PL–534 have been eliminated as a line item, and there has been language in the appropriations bills that suggests PL–534 project funds be taken from the PL–566 account. The end result is that the Federal share of funds for both programs has been reduced. Another way to claim that more ''watershed conservation'' work is being done than actually is the case, is to suggest that Emergency Watershed Program (EWP) work is actually part of the ongoing watershed activity, which it is not. EWP work responds to natural disasters, requires supplemental appropriations for funding, and has its own separate legislative authority. EWP rules mandate that the program cannot provide any protection from natural disasters, but can only restore properties to their ''pre-disaster'' condition.
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    With watershed rehabilitation nearing reality, we can anticipate more ''budget games'' being played by those who oppose watershed conservation work. It would be very easy for appropriators to simply use the normal PL–566 appropriation, say some amount was intended for rehabilitation work, again resulting in reduced funding available for both the ongoing program and rehabilitation. The rehabilitation legislation did modify PL–566 after all. We suggest Congress reestablish the following watershed program accounts for program accountability.
     Watershed Surveys and Planning (06)
     Watershed Operations (08)
     Watershed Rehabilitation (?)
     Flood Prevention Operations (03)
     Emergency Watershed Protection (16)
    Accounts 1, 2, & 3 are authorized by PL–566. Account 4 is authorized by PL–534, and account 5 is authorized by PL–516 and PL–334. There are compelling reasons why this should be done. Some are:
          Ensures emergency supplemental funding does not get combined with normal year appropriations to mask a reduced baseline of funding to ongoing project implementation.
     Demonstrates to Congress that appropriations are utilized on intended projects.
     Provides a higher standard of accountability for USDA/NRCS.
     Demonstrates to Congress and the people that program accomplishments are attributable to the intended program.
     Will demonstrate for all to see, Congress and the people, that funding of new projects is not done at the expense of on-going project implementation.
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RESEARCH
    In all our conservation work, there is a research and development (R&D) component that is often overlooked or ignored. With watershed structure rehabilitation activities looming on the horizon, it is imperative this R&D component be addressed. In USDA, the Agricultural Research Service (ARS) undertakes most of this research work. The Oklahoma ARS laboratories, particularly the one in Stillwater, have led the effort to examine rehabilitation problems. ARS has drafted a multi-laboratory research plan, with two of the three labs in Oklahoma, the other in Mississippi, which lays out the way to proceed. That need is currently estimated at $1.5 to 2.0 million annually in additional funding, and the NWC believes this estimate is far short of the true need. In addition to developing the technology to more effectively evaluate and rehabilitate existing flood control structures, this research would evaluate upstream and downstream changes to stream channel systems in cases of structure decommissioning, evaluate the water quality impact of stored sediment releases, and evaluate impacts of the loss of flood protection among other things. Research is also needed to develop and test new environmentally oriented farming techniques, systems, and marketing policies to assist family farmers meet resource conservation and farm income goals.
OTHER ISSUES CONGRESS SHOULD ADDRESS TO IMPROVE FARM POLICY
    The 2002 farm bill should also address some other issues to make farm policy work better for farmers, ranchers, rural communities, public health and the environment. Farm programs can do more to actually help farmers and farm communities. Stewardship incentives can be shaped to support income, not just defray the cost of environmental measures, and can be offered to all kinds of farmers. Programs can help farmers make the transition to new, promising markets that reward environmental stewardship, to diversity their production, and to find new marketing opportunities to increase their share of the food dollar. Some examples are:
          Provide stewardship payments to farmers and ranchers who reduce fertilizer and pesticide use, prevent soil erosion, adopt resource-friendly grazing systems, and manage manure more safely and effectively as a resource. Such programs should be structured to both achieve environmental benefits and support income.
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     Create incentives for farmers to enhance and preserve native grasslands, restore wetlands, stream buffers, and other sensitive lands.
     Provide incentives to manage forestlands in a manner that protects the forest's ecological integrity, recreational opportunities, and productivity.
     Increase the technical assistance needed to deliver programs and respond to farmer needs. This is absolutely critical. NRCS is desperately short of the technical disciplines needed to carry out their national responsibilities.
    The work your Subcommittee is doing is extremely critical to the welfare of the United States as a nation. The NWC believes that soil and water conservation, indeed all resource conservation, is as important as national defense. It really is a vital component of national defense. We stand ready to assist your Subcommittee as it goes about this important work.
    Mr. Chairman and members of the Subcommittee, I thank you for the opportunity to present our National Watershed Coalition ideas. We also support those suggestions you received from the National Association of Conservation Districts (NACD) at your hearing in Washington, DC on June 6. Our organization focuses on the nation's watershed programs, but all the conservation programs should be complementary, and NACD's suggestions are important and on target. I would be happy to respond to any questions.
     
Statement of Richard Conner
    The Nature Conservancy, America's largest conservation organization, appreciates the opportunity to provide testimony on 2001 farm bill legislation. The Nature Conservancy views the many important programs under the jurisdiction of this committee as part of a larger mosaic in rural America—programs that help support economic development and the conservation of our precious natural resources. With me today is Jeff Eisenberg, the Senior Policy Advisor for Agriculture for the Conservancy. After statements from the panel are presented, Mr. Eisenberg will answer questions related to general farm bill and conservation policy. I will answer questions for the Conservancy related to the status and economics of grasslands in the country.
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    The Nature Conservancy is dedicated to preserving the plants, animals and natural communities that represent the diversity of life on Earth by protecting the lands and waters they need to survive. The Conservancy has more than 1.1 million individual members and over 1,900 corporate sponsors. We currently have programs in all 50 states and in 27 nations. To date our organization has protected more than 12 million acres in the 50 states and abroad, and has helped local partner organizations preserve millions of acres abroad. The Conservancy itself owns more than 1,340 preserves—the largest private system of nature sanctuaries in the world. Our conservation work is grounded on sound science, strong partnerships with farmers and ranchers and others, and tangible results at local places.
    Currently, the Conservancy is working at approximately 150 sites around the country to implement conservation through community-based projects. Our plan is to increase this number to 500 sites within the next decade. Because much of the privately held land is used for agricultural production, we are naturally working ever more closely with crop and livestock producers. This work will only succeed if it is built on a foundation of fundamental trust with producers.
    In the farm bill, the Conservancy is seeking funding for three programs: the Wetland Reserve Program (WRP), the proposed Grassland Reserve Program (GRP), and the Conservation Reserve Program (CRP). Our experience on the ground has shown these three conservation programs to have the greatest potential for meeting the needs of conservation and production agriculture. Other programs such as the Environmental Quality Incentives Program, the Wildlife Habitat Incentives Program, the Farmland
Protection Program, and a proposed Stewardship Incentive Program have merit as well.
    Additionally, we believe a program to stimulate the formation of small businesses in rural America, including environmentally compatible businesses, is also worthy of the Committee's attention. Resource benefits supporting production agriculture, producer income, and the environment deserve the thoughtful support of the Committee in formulating long-term agriculture policy in the next farm bill.
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WETLAND RESERVE PROGRAM (WRP)
    WRP is one of the best examples of a program that serves conservation and production agriculture interests. Wetlands are one of the more important natural features found on private lands. They maintain the land resource base by absorbing excess water flows, they provide important filtration functions for groundwater, rivers and streams, and they provide habitat for fish and wildlife.
    These ecological benefits also provide direct support for production agriculture. The absorption function of wetlands mitigates the severity of flooding events thereby reducing the loss of valuable farmland. On needs only look at recent flooding events in the upper Mississippi watershed to gain an appreciation for the value of intact wetlands. The filtration function reduces non-point source runoff and helps producers avoid regulatory sanction. As sure as highways and bridges are important infrastructure for commercial vitality in this country, soil and water resources are indispensable infrastructure for agriculture vitality.
    Because of these important benefits, the Nature Conservancy considers WRP to be the most important conservation program authorized by the Agriculture Committee. The case for expanding the program is strong. At one time, there were more than 220 million acres of wetlands in this country. This number has now been reduced to 110 million acres on private land and approximately 20 million acres on public land.
    To date, the Wetland Reserve Program has restored 1 million of these acres. The demand for participation in the program has far outstripped the availability of funding by approximately a 4:1 ratio. Oklahoma and South Dakota are among the top 10 states in the country for producer participation in the program. A major restoration effort of wetlands is underway in Nebraska along the Missouri River. In Kansas, the program has doubled in activity during the last two years.
    Why do producers enroll in WRP? There are a variety of reasons. Some producers simply love the land. They have worked all their lives and want to preserve its natural character. Some producers are in financial distress and need the cash infusion made available by the program. Other producers decide to retire flood-prone land and use WRP money to purchase more productive land. Some producers use the money to make additional capital investments in their operation or save the money for their retirement. Many producers generate additional income through the program by renting WRP land to hunting groups.
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    As indicated, the current program is very popular and much needed. The need for the program was further increased by the Supreme Court's recent decision in Solid Waste Agency of Northern Cook County (SWANCC) v. Army Corps of Engineers, which weakened protection for isolated wetlands on agricultural and other lands. For these many reasons, the Conservancy recommends authorizing the enrollment of 1.25 million new acres through the structure of the existing program.
B. GRASSLAND RESERVE PROGRAM
    The Nature Conservancy has been working hand in hand with the National Cattlemen's Beef Association to create a program that protects grasslands. The Grassland Reserve Program, H.R. 1689, was introduced by Congressmen Schaffer and Thompson on May 2, 2001. The bill protects grasslands through permanent and thirty-year easements. It imposes no regulation on grazing. The principal prohibition in the bill is against breaking the soil for crops or any other purpose. The bill also allows private entities, such as ranching land trusts, to hold easements under the program,.
    You might be asking yourself what common interest would lead these two disparate organizations to actively cooperate to promote an important piece of Federal legislation. The answer is that both share a strong commitment to keeping working landscapes intact. The Conservancy understands that unless there is economically viable activity in rural America, the land could be lost to less desirable uses such as development. The Nature Conservancy's number one conservation goal in the west is to keep large grass landscapes intact. The Cattlemen want to keep their ranchers on the ground. Our interests in this matter are thus very much in alignment.
    I am here testifying before you today primarily because of a report me and my colleagues, Andrew Seidl, of Colorado State University, Larry VanTassell of the University of Idaho and Neal Wilkins also of Texas A&M conducted at the request of The Nature Conservancy, The National Cattlemen's Beef Association, and Ducks Unlimited. The study is entitled ''United States Grasslands and Related Resources: An Economic and Biological Trends Assessment''. The organizations requested the study in order to document what has been happening to grasslands throughout the country and why. An executive summary of the study's conclusions is attached to this testimony. The study itself will be made available to your various offices and committee staff next week.
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    The study documents that the pre-European settlement coverage of grasslands in the contiguous 48 states was approximately 923 million acres, about half of the total land. Most of this potential grassland (883 million acres) was west of the Mississippi River and about 582 million acres of it was on land that is now privately owned. By 1997, USDA reported only 402 million acres of rangeland in the 22 states west of the Mississippi River, excluding Federal lands.
    Losses of grasslands have been greatest in the Tall Grass Prairies and Savannas because these lands were better suited for crop production. Thus, states like Iowa, Illinois, and Indiana have virtually lost all of their potential grasslands. However, conversions to cropping and other land uses are not confined to just the Tall grass areas, Mixed and Short Grass Prairies have also been lost. For example, Oklahoma had only about 14 million acres of rangeland in 1997 compared to its 38 million acres of potential grasslands. Similar comparisons for Kansas (16 remaining from 47 million); Nebraska (23 left from 44 million); South Dakota (22 remaining from 46 million) and North Dakota (11 left from 37 million) show similar or even greater losses.
    Grasslands provide both ecological and economic benefits to local residents and society in general. The importance of grasslands lies not only in the immense area they cover, but also in the diversity of benefits they produce.
    The ecological services provided by grasslands include nutrient cycling and storage of substantial amounts of atmospheric carbon. In general, these ecological functions can be sustained under moderate to light grazing. However, following cultivation grassland soils are likely to lose up to 50 percent of their original carbon within the first 40 to 50 years.
    Grasslands are also key to an efficient hydrologic cycle. The quality and quantity of water runoff and infiltration is dependent upon the quality of ground cover. Converting grasslands to other uses, like cropping, results in increased soil erosion and decreased water quality through increases in sedimentation, dissolved solids, nutrients, and pesticides.
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    Native grasslands and rangelands directly support the livestock industry. Over 86 percent of the breeding sheep in the United States are located west of the Mississippi River along with numerous domestic goats and horses whose main feed source is derived from grasslands. The annual inventory of cows that have calved in states west of the Mississippi River have averaged over 25 million head this past decade. Grasslands make up over 95 percent of the deeded acreage it takes to maintain beef cattle in the Great Plains and Western United States.
    Grasslands also support recreational based activities. According to the United States Fish and Wildlife Service, more than 27 million people in the states west of the Mississippi River participated in fishing, hunting, and wildlife observation in 1996. Expenditures related to these activities exceeded $37 billion.
    The benefits of open space and scenic amenities afforded by private grasslands are increasingly recognized. Land prices bordering open space have been found to be seven to thirty-two percent higher than those not bordering open space. Large working farms and ranches also make fewer demands on community services than the rural residential development that often replaces them.
    Unfortunately, the biotic diversity of North American grasslands is probably the most altered by human impact of any of the continent's terrestrial ecosystems. The ecological status of many existing grassland systems are heavily influenced at the local level by combinations of habitat fragmentation, undesirable habitat changes due to fire exclusion, declining range conditions due to improper grazing management, and loss of habitat values due to the spread of invasive and non-native plants. Further complications arise from demographic trends related to changes in land ownership. As a result, many species endemic to grasslands have declined substantially in the recent past.
    Moreover, grassland losses continue to occur. Historically, the greatest threat to grasslands in the United States was the plow. Conversion of grass to cropland remains an important threat today largely as a result of Federal policy providing perverse incentives to convert grass. Government programs such as loan deficiency payments, subsidized crop insurance and disaster relief, converting land to, or keeping land in, crops can act as powerful incentives to convert grass to cropland. This especially true for land that is marginally suited for cropping.
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    Other land use conversions, population and income driven, have become more important sources of grassland losses in recent times. Many of the remaining grasslands are located in areas with high natural amenities. Low direct economic incentives to an aging population of grassland owners, combined with the longest economic boom in United States history, advances in telecommunications and other socioeconomic changes, contribute pressure to convert grasslands into large lot, rural or x-urban homesites.
    Between 1990 and 2000, the market price of agricultural land increased 66 percent in the western United States, indicating a significant increase in the demand for land. Most of this demand originated from non-agricultural interests as prices notably exceeded the productive value of the land. For example, in many parts of Texas, wildlife based enterprises, primarily lease-hunting, are generating more net income per acre of rangeland than livestock production. Fortunately, ranchers in these areas have learned to manage both their livestock and wildlife enterprises so that they are largely complementary. This kind of complementary land use activity may offer one of the best hopes for providing the economic viability necessary to sustain the ranching industry in many other parts of the United States in the future. There is evidence that wildlife-based land uses are becoming more important in several other states. For example wildlife hunting is becoming much more economically important in North and South Dakota and is already impacting land tenure and land use decisions.
    Unless abated, these income and population based demands will not only continue to remove grasslands from their historical uses, but will continue to fragment the grasslands that remain to the point that they may not be of sufficient size to support their natural biodiversity. Additionally, ranchers need large blocks of land to form ranches of the right size to run economic operations.
    The Nature Conservancy recommends enactment of H.R. 1689 with an initial enrollment of five million acres. A grassland protection program should provide an option for producers to sell a permanent easement to the government. Permanent easements are overwhelmingly the choice of producers who enroll in the WRP, and the Conservation Reserve Enhancement Program in Illinois. Ranchers in California have submitted requests for 380,000 acres of permanent easements to the California Rangeland Trust.
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    On a recent tour of ranchland in eastern Montana, a fourth generation rancher was asked whether he would prefer a term, rather than permanent, easement for his land to ensure that his children would retain the option to dispose of the land as they saw fit. He said he would want the permanent easement in place.
    Producers love the land from which they earn a living and a significant number want to preserve for future generations the object of their life-long effort. The Nature Conservancy urges the Committee to respect the demonstrated wishes of a significant portion of the producer community and make a permanent easement option available under both the Grassland and Wetland Reserve Programs. Producers who oppose permanent protection are under no obligation to sell such an easement to the government. farm bill conservation programs are voluntary.
C. CONSERVATION RESERVE PROGRAM (CRP)
    CRP and its constituent parts, continuous sign-up and the enhanced program, provide significant wildlife, water quality, and income benefits to producers and the public. CRP provides the security of a stream of income for the life of a contract, which will be available regardless of what happens with commodity prices. The Conservancy particularly favors the enhanced and continuous sign-up components of CRP because of the environmental benefits delivered by protecting riparian zones.
    The Conservancy supports making CRP more economically accessible to producers while also maintaining environmental benefits. One example of such an accommodation would be to allow the use of CRP land to produce seeds for native grasses. Additionally, we support haying and grazing of CRP acres provided appropriate measures are taken to protect rivers and streams and haying occurs after the nesting season for birds. Finally, the contract dollar cap for individual participants should be raised to make possible the realization of conservation benefits on large landscapes.
    The Nature Conservancy recommends increasing to 45 million the acres for enrollment in CRP.
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D. OTHER CONSERVATION ISSUES
    EQIP is an important source of cost-share dollars to help producers abate non-point source runoff. The Nature Conservancy understands that many producer groups want to ensure that all their members have a chance to enroll in the program regardless of whether they reside in a conservation priority area. We share the view that the program should be simplified.
    A proposal the Conservancy has previously shared with the committee would allocate dollars to the various states on the basis of producer demand, rather than a national mandate as is currently the case with conservation priority areas. Incentives could be introduced in areas that have special resource concerns, principally clean water, to promote producer response to the concern. The proposal is an effort to reasonably balance producer frustration with limited eligibility to participate in the program with the need to ensure that some conservation benefits are actually being delivered with program dollars.
    We appreciate the support the Committee has shown for agriculture conservation through the years, and this opportunity to present testimony written statement to you. The Conservancy looks forward to working with you on these important issues.
     
Statement of Eddie Bowman
     Mr. Chairman and committee members, it is a privilege for me, as President of the Oklahoma Wheat Growers Association, to discuss our views on conservation with you this morning. My name is Eddie Bowman and I have the pleasure of producing wheat and beef cattle in North Central Oklahoma near Billings. Some of the most fertile and productive soil in the Southern Great Plains is in this area of our great state, and unfortunately, some of the most conservationally sensitive also. Few places exhibit the obvious benefits and needed continuation of sound and effective voluntary conservation programs more.
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    Wheat and grain producers in Oklahoma have made tremendous strides, often at personal cost, to improve not only the environmental impact of our blessed earth, but its productivity and longevity through conservation in the past twenty years. The Oklahoma Wheat Growers Association and its members are fully committed to the improvement of out nations rich land and environment through the continuation of objective, equitable, voluntary, incentive based flexible conservation programs that have allowed agriculture to make these impressive gains.
     With that said, OWGA realized the importance of the conservation title in the forth coming farm bill, but we remain completely committed to seeing the goals and financial objectives of the commodity title realized as a first and foremost priority. OWGA views conversation as a necessary compliment to insure that we maintain and improve the productivity of the land, the health of the environment and the quality of our nations food supply. Government should continue to provide incentive based assistance to conservation, but not seek to replace food production as the primary objective of our Nation's agricultural lands.
    OWGA supports the locally led conservation efforts that maximize environmental benefit through targeted management of our land resources. We believe the current CRP enrollment cap of 36.4 million acres nationally is adequate and should not be raised. We recommend that the Environmental Benefits Index criteria have a greater emphasis on wind and water erosion with the intention of refocusing CRP to use on our marginal soils and most fragile lands. We recognize the tremendous positive impact that the CRP program has made in Oklahoma and support its broad whole farm enrollment features, but only in the most sensitive scenarios were the revised EBI would warrant broad program enrollment. Whole farm continuous enrollment should only be used to assist producers with addressing site-specific problems that cannot be addressed in a cost effective manner on a limited acreage basis.
     In similar fashion, we see the Environmental Quality Incentives Program (EQIP) or a similar program as a means to address sight specific conservation needs. We also believe that the EQIP program should be more equitable and should be amended to allow commodity producers to better utilize the program. Either the priority area process should be revised, or some of the focus should shift from places to practices, allowing the program to be flexible to specific concerns and specific areas. A program similar to that of the previous Great Plains Conservation Program could work wonderfully in cooperation or conjunction with a more locally focused and guided program that would allow property owners to address such situations as Total Maximum Daily Load (TMDL) allocations in certain areas through best management practices.
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     With regard to the management of wetlands, OWGA believes that, as with the CRP program, acreage caps on existing wetlands programs should not be expanded. Further more, OWGA supports additional flexibility and greater equality on wetland programs and that regulations be reflective of a clear and uniform mission or outcome for the programs.
     Mr. Chairman and committee members, agriculture faces many challenges, as you are all well aware. The Oklahoma Wheat Growers Association is sincerely appreciative of the opportunity to share our views with those present today on the successes and future needs of conservation in agriculture. Our association believes that the successful conservation practices that have been developed and utilized in the past will be further improved upon in the future. OWGA also realizes that cost effective productivity and longevity of our land will not be maintained without a successful complimentary and supportive conservation title in the next farm bill. A title that will function effectively and efficiently with improved commodity programs. With commodity and conservation programs working together, the Oklahoma Wheat Growers Association sees further commodity productivity, as well as, continued improvement in the condition of our land, air, water, and wildlife resources for all to enjoy. Thank You.
     

Statement of the National Governors Association
    This testimony is respectfully submitted on behalf of the National Governors Association (NGA) for inclusion as part of the record of the June 9, 2001 hearing before the House Agriculture Subcommittee on Conservation, Credit, Rural Development, and Research on the subject of conservation issues to be addressed in the 2002 farm bill.
     The National Governors Association was formed in 1908 as a direct result of the National Conservation Conference of our Nation's Governors convened by President Theodore Roosevelt. President Roosevelt identified the need for a national policy for stewardship of our natural resources, and understood the importance the Governors played in implementing that strategy. Since then, NGA has continued to promote the need for genuine stewardship and conservation of our Nation's resources.
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     The two highest priorities for this farm bill must be the pursuit of a healthy, prosperous farm economy and protection of our Nation's natural resources. Farm support programs should foster a rural America that furthers our Nation's conservation goals and protects family farmers and ranchers.
    Conservation Programs. The environmentally oriented conservation programs operated by the U.S. Department of Agriculture (USDA) have been of significant value to farmers, rural communities, wildlife, and the environment. The Conservation Reserve Program (CRP) continues to provide farmers with an alternative to production on environmentally sensitive lands. NGA wholeheartedly supports CRP, and believes the benefits justify continued funding at least at current levels. Also, by enabling States to supplement Federal CRP dollars, through the Conservation Reserve Enhancement Program, States have been able to protect distinctive characteristics and unique lands.
     Unfortunately, many States are still waiting for approval of enhancement programs they have submitted to the Secretary of the U.S. Department of Agriculture. Congress must work to streamline the approval process for State-submitted enhancement programs. These are extremely valuable and effective tools used to combat urban sprawl and protect sensitive areas and need to be expedited by the Secretary of Agriculture. Every minute that these programs are not approved, soil is lost, water quality continues to degrade, and critical environmental areas remain unprotected.
     The Wetlands Reserve Program (WRP) is another important conservation program. It ensures that wetlands will be restored or protected from development or agricultural production through perpetual or 30-year easements. Perpetual easements are by far the most popular choice among landowners with 78 percent of agreements falling in this category. In all cases, landowners retain title of the land and control access and use in accordance with easement provisions. This popular and important program can and should be continued in the next farm bill.
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     Programs like these provide significant value to our nation by protecting environmentally sensitive lands and preserving open space. However, there are still important steps that need to be taken.
    Working Lands Conservation. Our next national challenge in conservation and environmental policy is improving conservation practices on lands producing food, fiber, and other agricultural commodities. We need to provide greater incentives for landowners to employ best conservation practices on all of their lands—including working lands.
     Farmers, by the nature of their work, are close to the land and deserve their reputation as the ''first conservationists.'' However, with prices low and many family farms at a financial precipice, the government must help farmers implement practices that require funds and technical assistance. The need to ensure genuine stewardship of the Nation's natural resources poses one of the most significant challenges and opportunities facing agriculture today. We must work in partnership with private landowners to preserve and protect our national assets for future generations, while maximizing their lands' productivity today.
     New policy must build a national understanding of the importance of private lands conservation. The general public benefits when landowners employ good conservation practices. These ''conservation commodities'' include improved air and water quality for downstream communities, enhanced wildlife habitat for fishers, hunters, and outdoor enthusiasts, and preserved rural landscapes. Resource stewardship is the responsibility of all, and State and Federal programs must help landowners by spreading the costs of conservation to all who benefit. Environmental benefits are valuable, and farmers should be compensated for producing these valuable commodities the same way they are paid to produce fruits, vegetables, grains, trees, and livestock.
    State-Federal Partnerships. The 1996 farm bill required development of the State Technical Committee, which is responsible for providing recommendations to USDA on conservation programs. This committee consists of representatives from State and Federal natural resource agencies and agricultural and environmental organizations. We believe the committee has improved coordination among local, State, and Federal programs, including USDA programs. The State Technical Committees should be continued, while at the same time finding new ways to utilize their technical expertise to address a State's specific areas of need.
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     The diverse nature of America's agricultural lands makes a one-size-fits-all approach to conservation impractical. A conservation program should be developed that allows Governors—through partnerships with USDA and State governments—to target priority lands within their State. Under such a program, Governors would be allowed to set priorities that address the unique issues and characteristics of a region that must be considered if a landowner is to be sufficiently empowered to produce the most environmental benefits, while continuing to utilize his or her assets.
     The strengthening of State-Federal partnerships is critical to implementing efficient and effective conservation programs. As President Roosevelt realized almost one hundred years ago, the Governors are the key to effectively implementing a national conservation program. States are uniquely situated to provide the leadership needed to implement a simple, flexible conservation strategy that enables farmers and ranchers to develop a holistic farm resource management plan. The Governors believe we must strengthen the States' role in the planning for—and allocation of—Federal resources conservation dollars. States are responsible for achieving a wide variety of environmental protection goals, yet State officials are often not included in decisions affecting their State's economies and environment. Congress must afford States greater flexibility and an increased role in the allocation of Federal monies funding to accommodate State priorities.
    This only can be done by adequately investing in conservation programs. Current funding levels for conservation programs do not come close to addressing our environmental needs. While the current farm economy makes it difficult to expect a producer to invest scarce resources in non-revenue generating projects, increased Federal conservation dollars will help both the environmental needs of our nation and the economic needs of our farmers.
     Inadequate funding for Federal conservation programs has prevented thousands of farmers and ranchers from receiving technical and financial assistance so that they might address pressing environmental challenges. During every CRP enrollment period, applications to enroll acres have exceeded those that USDA can accept by millions of acres. For every landowner who has sold a conservation easement, another six are waiting for the same opportunity. In addition, more than 2,700 landowners have offered to enroll more than 560,000 acres of wetlands into the Wetlands Reserve Program, but have not been accepted. Three-out-of-four farmers and ranchers seeking Federal assistance to restore lost wetlands are rejected due to inadequate funding or program caps. Yet, many of the lost wetlands being offered by farmers and ranchers are in places where scientists have concluded wetlands restoration is among the most cost-effective solutions to many environmental problems.
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    Governors recognize that Congress must set priorities and ponder return on investment. Increasing funding for conservation programs will improve the farm economy and protect our Nation's natural resources while providing the greatest return on the investment.
    Confined Animal Feeding Operations
     The National Governors Association also is concerned about the Environmental Protection Agency's (EPA) proposed Concentrated Animal Feeding Operation (CAFO) regulations. NGA is a strong proponent of controlling run-off from non-point sources to improve water quality. While we believe that the Federal National Pollutant Discharge Elimination System (NPDES) permit program has an important role to play, several of the changes to the current regulation proposed by EPA could potentially have a significant financial impact on States and operators of these facilities.
    Many States already have nutrient management and permitting programs to address animal feeding operations. The current authority for States to develop these programs should not be preempted, nor should the Federal Government add conflicting requirements to State programs. A State functionally equivalent program, which allows a State to design a program that is best suited to its water quality needs, must be recognized as an appropriate alternative to the Federal NPDES permit program.
     CAFO/AFO operations could benefit from a Governor's ability to target conservation money by providing the incentives and means to attain and maintain Federal water quality standards. Farmers and ranchers who participate in such voluntary programs should be entitled to the certainty that if they implement measures consistent with the State program, they will be protected from program revisions or additional costly requirements for a reasonable period.
    Again, with an increased Federal-State partnership, we can make great strides toward improving our Nation's environment, while improving the farm economy. Maintaining the current Federal conservation programs, and strengthening Federal-State partnerships that enable States to enhance and expand conservation efforts, will contribute greatly to the pursuit of our national conservation goals, support farm income, and expand rural economies. Agriculture is a vital component of the economies of many of our States, and we are eager to be more active partners in agriculture policy, both in designing strategies and in implementing programs.
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    Thank you for the opportunity to submit comments for the record.
     
FORMULATION OF THE 2002 FARM BILL
(AGRICULTURAL CREDIT)

WEDNESDAY, JUNE 20, 2001
House of Representatives,    
Subcommittee on Conservation, Credit,
Rural Development and Research,
Committee on Agriculture,
Washington, DC.

    The subcommittee met, pursuant to call, at 2:02 p.m., in room 1300 of the Longworth House Office Building, Hon. Frank D. Lucas (chairman of the subcommittee) presiding.
    Present: Representatives: Thune, Osborne, Putnam, Kennedy, Hilliard, Peterson, and Clayton.
    Staff present: Ryan Weston, subcommittee staff director; Dave Ebersole, Callista Gingrich, chief clerk; Susanna Love, Anne Simmons, and Russell Middleton.

OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OKLAHOMA
    Mr. LUCAS. This hearing of the Subcommittee on Conservation, Credit, Rural Development, and Research will now come to order.
     Good afternoon. The subcommittee meets today to continue its responsibilities developing a record for the coming farm bill debate. This afternoon we will hear testimony from witnesses who are involved on a daily basis—and I mean daily basis—delivering credit services to our Nation's farmers and ranchers.
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    I know my colleagues and I are interested in current and future agricultural credit conditions. However, to the extent any of our witnesses have suggestions for improving the agricultural credit statutes under the subcommittee's jurisdiction, we also encourage you to let us know what needs the attention.
    Today, while it is evident that the agricultural sector is suffering, those problems have not yet necessarily reached the lending community. The state of our agricultural lending institutions is generally sound, which, by the way, is a very good thing. I also understand that low commodity prices for a number of years, coupled with high input costs over the last several months, make it difficult for producers and their lenders around the country may make it difficult to put those viable loans together for spring planting.
    Since prices of commodities and inputs do not appear to be moving our way, and by that, I mean, from agriculture's perspective, I can only assume that this fall and next spring will be even more difficult. I am especially interested in the outlook our witnesses can give us on what they believe that we should expect in the next 10 to 12 months from now. If poor conditions persist, we inevitably will see problems in our agricultural banks and cooperative lenders.
    All of us in agriculture know that Federal assistance the last few years has kept farmers afloat and lenders able to stay with most of their customers through another cycle. But we also understand that this assistance, in the long term, probably is not sustainable and some might debate the healthy nature of it also. Congress must provide a safety net that is predictable. It must be a long-term assurance that the Federal Government will be there when the down times come to agriculture.
    Today, we will hear from the folks who are on the front line with the agricultural producers every day. They can give us valuable insight into the state of the agricultural economy, and I look forward to your testimony.
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    And with that, I see our panel is at the table. I would like to make those introductions. Ms. Carolyn B. Cooksie, Deputy Administrator for Farm Loan Programs, Farm Service Agency, USDA, Mr. Andy Lowrey, president and chief executive officer, AgFirst FCB, Columbia, South Carolina, representing the Farm Credit Council; Mr. Miles Robinson, College of Agriculture, Environment, and Natural Sciences, Tuskegee University, Tuskegee, Alabama; Mr. Dale Leighty, president, First National Bank of Las Animas, Las Animas, Colorado, representing the Independent Community Bankers of America; Mr. Terry Hague, chief executive officer, Farmers Exchange Bank, Cherokee, Oklahoma, representing the American Bankers Association; Mr. Henry D. Edelman, president and chief executive officer of the Federal Agricultural Mortgage Corporation, Washington, DC.
    And with that, I would note to my panel that we have just come through a very long and teeth-grinding mark-up in the full committee on a matter of great importance, and don't be surprised if we have Members drifting in as they recover from that joyful experience. With that, Ms. Cooksie, you may begin when ready, please.
STATEMENT OF CAROLYN B. COOKSIE, DEPUTY ADMINISTRATOR, FARM LOAN PROGRAMS, FARM SERVICE AGENCY, U.S. DEPARTMENT OF AGRICULTURE
    Ms. COOKSIE. Good afternoon, Mr. Chairman, and, members of the committee. I am pleased to appear before you today to review the status of the FSA farm loan portfolio, discuss the impact of certain provisions of the 1996 farm bill, and point out some issues of concern for the future.
    FSA offers direct and guaranteed farm ownership and operating loans to farmers who are unable to obtain private commercial credit. The goal of the farm loan program is to assist eligible individuals and families through outreach, technical assistance, and supervised credit so that they can become successful farmers and ranchers. Regardless of the type of loan, FSA's financial assistance provides a safety net for borrowers who have reasonable prospects for economic viability in agriculture.
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    Mr. Chairman, I would like to begin by reviewing the present status of the FSA loan portfolio. I am pleased to report that the FSA farm loan portfolio is showing its best performance in many years. All programs are performing well. Direct loan delinquency is the lowest in over 20 years at 12.3 percent, the direct loan loss rate is the lowest since 1987, and we have made progress in reducing the number of delinquent million dollar-plus direct loan accounts, from 748 at the end of fiscal year 1995 to only 180 at the end of 2000.
    In addition, inventory property numbers are the lowest since 1980. The guaranteed loan portfolio is also performing well. Delinquency is at an all-time low of 1.83 percent, and dollar losses have remained low despite continuing growth of the portfolio. In fiscal year 2000, losses paid were only seven-tenths of 1 percent of the principal outstanding.
    Mr. Chairman, this is particularly noteworthy because, at the same time, FSA loan volume has increased significantly, more than 65 percent in recent years. In fiscal year 2001, demand for FSA's farm loan assistance remains strong. The lending season is currently at its busiest and most critical time, and FSA is working hard to rapidly process the thousands of applications coming into the county offices.
    I believe there is no single factor, but a combination of different factors, which led to these achievements. First, the 1996 farm bill instituted provisions which create strong incentives for FSA borrowers to repay their loans. The 1996 farm bill included provisions which instituted prohibitions on further FSA loan assistance to borrowers who are delinquent, who have received debt forgiveness and a one-time $300,000 limit on debt forgiveness. These limitations have caused FSA borrowers to more carefully consider the consequences of failure to repay their FSA loans.
    Provisions of the Debt Collection Improvement Act have also been beneficial. The possibility of offset of FSA program payments and Federal income tax refunds, and bars on participation in other Federal credit programs provide additional incentives for borrowers to repay their FSA loans.
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    Obviously, Mr. Chairman, borrowers cannot pay if they do not have money to make payments. So the significant amount of the Government farm payments over the past few years is also a major factor in portfolio performance.
    Also, I cannot overstate the importance of the tremendous amount of hard work by FSA field staff in implementing the numerous program changes and in working to help borrowers avoid or to resolve delinquencies. FSA employees have logged many long, hard hours working to assist borrowers. This is a difficult, often frustrating task. Borrowers are under stress. There are no easy solutions, and sometimes the answer is not the one the farmer wants to hear. It is also important to note, Mr. Chairman, the increase in FSA loan volume and reduction of delinquencies have been achieved with no increase in farm loan staffing levels.
    Faced with a heavy workload and limited staff, we have developed ways to decrease the paperwork burden for both staff and program customers. Both guaranteed and direct loan programs now have abbreviated applications for loans of less than $50,000. In February of 1999, we published regulations which simplified and streamlined the loan guarantee process. Within the next few months, we plan to publish final regulations to dramatically streamline and simplify the emergency loan program for both farmers and FSA staff.
    We have also undertaken a major initiative to streamline all program regulations. When this project is complete, 1,200 pages of text will be deleted and the number of required forms reduced by almost 30 percent.
    Now, to the future. Any discussion of the future of agriculture must include beginning farmers since they are the future of farming. There is keen interest in this issue, and rightfully so. FSA is not able to loan all the funds the law required to be targeted to beginning farmers. This should come as no surprise given the current state of the farm economy. When even established farmers are struggling financially, it is extremely difficult for someone with modest financial resources to get started in farming, and it often takes much more than a low-interest FSA loan for a beginning farmer to be successful.
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    Mr. Chairman, as you consider a new farm bill, there are two areas of the 1996 farm bill that I would like to bring to your attention. One imposes a lifetime ban from FSA loans for anyone who has an FSA farm loan debt forgiven. Certainly, there must be limitations to avoid program abuses, such as the revolving door situation.
    However, you may wish to consider whether a different approach is possible, one that will prevent the abuse targeted by the 1996 change, but allow farmers who have had FSA farm loan debt forgiven to have another opportunity to become eligible for FSA loans in the future.
    The second provision from the 1996 farm bill that I mention is operating term limits. A limitation on the length of time a person may receive FSA farm operating loans was imposed. It is possible that a farmer reaching the term limit under economic conditions like those today may have done everything right and still be unable to get private sector financing. The committee may wish to review this provision further.
    Mr. Chairman, I would like to alert the committee to a few other issues that may warrant attention as the farm bill debate develops. The first is the requirement that FSA accept an applicant's projected repayment ability to make an emergency loan if the available collateral is not adequate to secure the loan. The result is FSA is making EM loans without adequate tangible collateral. This marks a return to past policies which resulted in multi-billion dollar losses.
    Secondly, the issue of the shared-appreciation agreement is one that I am sure some of the committee members are familiar with. These agreements were entered into as a part of the process of writing down or writing off debts under the provisions of the Farm Credit Act of 1987. A significant number of these agreements are now coming due. Under the current economic conditions, many farmers may not be able to pay the amount due under this agreement. FSA has taken extensive administrative actions to mitigate the impact. However, even with deferral of payments and development of long-term repayment schedules, some farmers will not be able to keep the agreement and will face liquidation. Any additional relaxation of the requirements of these agreements will require legislation.
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    Third, Mr. Chairman, there is another situation I want to bring to the committee's attention as we help borrowers deal with financial problems. One action that FSA has taken to help farmers through tough times is the deferral of a loan installment to the end of the loan. This is an action that is taken primarily to help borrowers through weather-related cash shortfalls. As of March 31 of this year, 15,862 borrowers had these deferrals on one or more loans on their accounts. Continued prices at current levels will mean that many of these borrowers may not be able to repay the remaining balance when the loans mature. Current plans are to utilize the exiting loan serving authorities in the regulations to address these situations. However, if economic conditions don't improve, some of these farmers could face liquidation.
    In summary, Mr. Chairman, the loan programs have come a long way since 1987, but success is a journey, not a destination, and we will still have a long, challenging trip ahead. We look forward to working with the committee as you wrestle with the issues I have raised today, and other complex farm lending issues as well. This concludes my statement and I will be glad to answer any questions.
    [The prepared statement of Ms. Cooksie appears at the conclusion of the hearing.]
    Mr. LUCAS. Thank you. And to note for the members of the committee, we have a series of one 15-minute vote and two 5 minute votes. I believe the thing to do is to proceed with Mr. Lowrey's testimony and at about 5 minutes until the end of the vote, then we will suspend the hearing, go cast our set of votes and come back. Because this testimony is just too important not to participate in. Mr. Lowrey.

STATEMENT OF F.A. LOWREY, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AGFIRST FARM CREDIT BANK, COLUMBIA, SC, REPRESENTING THE FARM CREDIT COUNCIL
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    Mr. LOWREY. Thank you, Mr. Chairman and, members of the committee. I am Andy Lowrey, President and CEO of AgFirst Farm Credit Bank. Through our 24 far credit associations, we provide 10.6 billion in loans to more than 79,000 producers and rural home owners in 15 mid-Atlantic and southeastern States and Puerto Rico. 69,000 of those loans, or 88 percent of our loans, are less than 100,000 in size. I would like to provide you with an update on Farm Credit's mission and our success in achieving it.
    But, first, a short review of agricultural and credit conditions in our territory. Our area is blessed with a high degree of crop and livestock diversification. However, adverse weather, low prices, and increasing cost, especially for fuel, have created stress in portions of our portfolio. Credit quality remains high, but indications are that many crop producers are facing challenges. While conditions in the poultry and the livestock sector are more favorable, the dairy industry is recovering from low prices in 2000. Farm Credit remains steadfast in its resolve to do all we can to help them.
    Our mission for 85 years is to help ensure the health and economic well-being of American agriculture by providing sound, adequate, and constructive credit. We are meeting these expectations by providing a real and meaningful economic benefit to our cooperative members, as evidenced by our 33-percent market share in our 15-State area, and loan volume growth that increased by more 9 percent last year. We have seen our loan volume grow by more than 24 percent over the past 5 years.
    One story of the AgFirst district that we don't talk enough about is our patronage. We believe our patrons, our member/borrower owners, should share in the success of their cooperative. In April of this year, we returned value to our stockholder customers by providing over $172 million in patronage refunds.
    For the past 12 years, associations in the AgFirst family have returned value to their member borrowers by paying such refunds, distributing more than $1.4 billion back to our customers during that period. That is an average of almost 25 cents of every dollar of interest paid. This money flows back to the local communities so that rural America can benefit. It also helps the farmers we serve cover operating and living expenses. We encourage Members of Congress to ask patrons who do business with our AgFirst associations about the value they are receiving from being part of our cooperative.
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    In the Farm Credit System, we serve all customers, both large and small. While it is well-known that the Farm Service Agency is the lender of last resort, Farm Credit works with FSA through its guarantee program to help both young and disadvantaged, as well as seasoned farmers, who may have difficult times. We actively participate in the Preferred Lender Program and it has proven to be highly successful. We understand the cyclical nature of agriculture.
    Overall, Farm Credit's financial performance remains very strong. That is due to liquidity created through several different Federal Government actions to supplement producers' incomes. In areas of high concentration of program crops, we can readily see the positive impact of Federal assistance. This committee has been farsighted in provisions of economic assistance to rural America and we thank you for that support. We expect, however, that additional Government assistance will be, again, necessary in 2001 and beyond.
    Despite Farm Credit's financial strength, we see challenges. In a recent survey of Farm Credit lenders, 55 percent expect some increase in troubled loans in the coming year. In addition, we note financial difficulties in farm-related businesses and co-ops, in particular, input suppliers.
    To meet the needs of producers, U.S. agricultural credit markets have changed dramatically in the past decade. In addition to expanding the authorities of commercial banks, Congress awarded them with a substantial access to funds from other GSEs. However, Farm Credit's authorities have remained unchanged. Farm Credit's charter needs updating. It changed materially in 1971, but has not changed significantly since, so our authorities have become outdated.
    We support the need for vigorous competition between Farm Credit, commercial banks, and other lenders. In short, pricing is competitive, service is better, because Farm Credit ensures competition in agricultural and rural credit markets. Farmers need solid sources of credit that will be around to help them not just today, but well into the future.
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    I believe the information that I have provided you indicates that Farm Credit is delivering and providing the services that Congress intended we provide when you established us back in 1916. Thank you, Mr. Chairman, for allowing us to share our views and we look forward to answering your questions.
    [The prepared statement of Mr. Lowrey appears at the conclusion of the hearing.]

    Mr. LUCAS. Thank you, Mr. Lowrey. And with that, the Chair asks the indulgence of the panel that we stand in recess subject to the call of the Chair, hopefully for no more than 30 minutes to accomplish our responsibilities of casting votes on your behalf on the floor.
    [Recess]
    Mr. LUCAS. The subcommittee will now reconvene. And, Mr. Leighty, when you are ready, you may begin.

STATEMENT OF DALE LEIGHTY, PRESIDENT, FIRST NATIONAL BANK OF LAS ANIMAS, LAS ANIMAS, CO, REPRESENTING THE INDEPENDENT COMMUNITY BANKERS OF AMERICA
    Mr. LEIGHTY. Mr. Chairman, I am Dale Leighty, the chairman of the ICBA's Ag-Rural America Committee and also President of the First National Bank of Las Animas, Colorado. Thanks for holding this important hearing.
    ICBA appreciates Congressional efforts in passing a fourth consecutive farm aid package. We have supported these farm aid packages to keep farmers and business until the agricultural economy improves. Unfortunately, farmers face the triple whammy of despairingly low prices, sharply rising energy and input costs, and an unlevel playing field in the world trade market. So we do urge the committee to pass a sizable economic assistance package for farmers this year, and a farm bill that provides farmers and bankers with more predictability, higher income payments when prices fall, and one that works hand in hand with an aggressive U.S. trade policy.
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    Our five areas of recommendation to Congress are, number 1, quickly adopt a new farm aid package to offset extremely low prices. Number 2, pass a farm bill with counter-cyclical income mechanisms. Farmers and bankers need more predictability because it enables us all to make timely business and financing decisions. It gives us a better grasp earlier of cash-flow statements. We need to make 3- to 5-year projections based on income levels sufficient to repay debts and family living needs.
    Number 3, provide full funding and new programs for USDA-guaranteed loans. In recent years, Congress had to pass supplemental spending bills to provide money for guaranteed loans while farmers were anxiously trying to get into the field.
    Our recommendations include, provide permanent back-up contingency funding; permanently eliminate the 15-year limit on eligibility; provide some flexibility to increase the loan size limit; enhance Aggie Bonds; and enact authority for a blanket or a single assignment form.
    Number 4 is to complement domestic farm programs with an aggressive U.S. trade policy. Quickly pass trade promotion authority and exempt agriculture from unilateral economic trade sanctions. The U.S. is currently only part to two of the 130 free trade agreements.
    Number 5, diversify rural America without undermining the private sector. The more diversified our rural economies are, the more viable they can be in the long run. We need to diversify our rural economies, but do so in ways that do not undermine the private sector, otherwise, we shoot ourselves in the foot.
    Two actions Congress should pursue would be to increase deposit insurance coverage and index it to inflation, and to increase funding for the Business and Industry Loan Program. Many rural banks are having difficulty growing their core deposit base, which can make it harder to meet local funding needs. This could be addressed by increasing deposit insurance coverage and indexing it to inflation. Please understand, this would help your rural constituents and help agricultural banks in your rural communities. It is very much a farm and rural policy issue. Deposit insurance hasn't been increased since 1980, and its value has been eroded in half. It is time to do something. Banks are willing to pay for the premiums for the increased coverage.
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    Money leaving rural communities cannot be reinvested, which only exacerbates the cycle of less investment opportunity in rural towns and more population flight. New funding sources must then be found by community banks to make up for this loss of depositors and deposits.
    Increased funding for USDA's B&I program—many banks cannot use the program because it always runs out of funding authority. Last year, almost $1 billion in guaranteed loans and 376 projects went unfunded. Providing more funds would be a very cost-efficient way to immediately address the rural development title of the farm bill.
    Finally, please oppose expansion of Farm Credit System. We oppose legislation that undermines the private sector and this includes allowing encroachment by Government-sponsored enterprises into activities that are already being handled adequately by commercial banks. FCS now wants new expanded powers to lend to value-added agricultural business, a term they have not defined. FCS has had many regulatory and legislative enhancements in recent years, net profits of over $1 billion annually for over a decade, and, yet, numerous questions have been raised about FCS not using USDA's loan programs to serve beginning, small, and lower-income farmers. More accountability is needed.
    FCS was protected from failure with bailout bills in the 1980's, while hundreds of community banks were allowed to fail. We object to FCS being given new authority simply to take away loans already being made by private sector lenders. This approach does not expand the economic base of rural America or bring in new businesses. FCS did not describe their proposal, nor did they define its scope. FCS did not suggest ways they would be willing to work cooperatively with local lenders and local communities to further rural development.
    If FCS truly wants competition, they should proposing ways to make the congressionally authorized OFI Program workable and they should pay the same taxes as commercial banks on any new lending activities.
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    We are happy to discuss with the system and others ways we can all work together and we invite such opportunities. But we do not support allowing multi-billion dollar FCS lenders to undermine small community banks and their local markets. We would like to actually see the specific legislative proposals of both FCS and Farmer Mac and the role these proposals envision for community banks.
    In summary, a guiding principle of new farm policy should be to not undermine those in the private sector who do such a great job serving rural America. We look forward to working with you in developing a new and better farm bill. Thank you.
    [The prepared statement of Mr. Leighty appears at the conclusion of the hearing.]

    Mr. LUCAS. Thank you. Mr. Robinson.

STATEMENT OF MILES ROBINSON, COLLEGE OF AGRICULTURAL, ENVIRONMENTAL, AND NATURAL SCIENCES, TUSKEGEE UNIVERSITY, TUSKEGEE, AL
    Mr. ROBINSON. Mr. Chairman, and, members of the committee, I am happy to be a part of this activity today as far as providing testimony to this Subcommittee on Conversation, Credit, Rural Development, and Research on behalf of Tuskegee University Small Farm Rural Economic Development Center and the family of 1890 Land Grant Institutions and Community Based Organizations—thank you—including the Rural Coalition and The Federation of Southern Cooperatives, as well as Arkansas Land Development and Farm Corporation, as it relates to access to credit by minority and small scale farmers.
    The family of 1890 Land Grant Institutions and Community Based Organizations referenced here are culturally diverse organizations of small-scale farmers of all races and in every region of the Nation.
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    In outline form, for example, the African-American farmer, as does all minority and small-scale farmers, have the right to farm. At their height in 1920, there were 925,000 African-American farmers in the United States. By 1997, this number had declined by 98 percent, to 18,451.
    They have the right to obtain and retain land. They have the right to access to financial and program support. No group has qualified, based on their limited resource status, for USDA financial and program support, Commercial Bank, or other farm credit system support, but such support has been denied because of documented by the United States Commission on Civil Rights: The Decline of Black Farming in America, and the more recent report of the USDA National Commission on Small Farms: A Time to Act in 1998, Implementation of the Civil Rights Action Team Report, USDA, 1997.
    The criteria used by the USDA to determine eligibility systematically has discriminated against minority and small-scale farmers because it does not take into account the low financial status and various of young beginning small farmers in comparison to large-scale farmers who have had the ability to accumulate wealth over hundreds and hundreds of years.
    The United States has the responsibility to see that these rights are enforced. There must be equitable access to credit, as well as equitable delivery of programs and services in order to provide a safety net for all minority and small-scale farmers, especially in the area of credit.
    The current structure of agriculture programs strongly favors large producers over small. Recent increases in the payment limitation and return to annual and untargeted disaster relief subsidies, while politically feasible as emergency response, have enlarged and redirected farm support payments to even larger farmers.
    These policy changes have resulted in a continually declining proportion of agricultural spending, supporting the small farm sector. In addition, many minority and other small farm producers who did not produce program crops, have not participated in agriculture programs at all.
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These farmers are dependent upon declining sources and access to Federal credit programs, leaving their families in a continuing cycle of debt without any real access to markets.
    Currently, the Farm Service Agency offers several loans for beginning farmers and ranchers—guaranteed and direct farm ownership loans, as well as guaranteed and direct farm-operating loans, provides joint financing plans. This program also provided retiring farmers with a means of transferring land to a future generation of farmers and ranchers. The Commission on Small Farms, recommended examining existing State programs and the development of nationwide programs that facilitate established farmers in beginning farmer programs.
    Recommendations: Additional resources needed to be directed to the small farm community for access. Perhaps, Target Direct Loan and Guarantee Loan Program for additional funding to minority and small-scale producers. Agricultural credit programs currently proposed an increase by 765 million over last year. Total loan authorization level, $3.8 billion, which is the same as the President's request. A proportionate amount should be directed at the minority and small-scale producers.
    The USDA is the lender of last resort, however, there are so many unwarranted requirements and stipulations placed on loans to small-scale producers, including liens on homes. Non-farm assets should be distinguished and a recommitment to USDA's mission as a lender of last resort is very much needed by focusing greater attention to serving credit needs of minority and small-scaled producers.
    Perhaps providing a safety net, just as large farmers. There is no program of such for small farmers. One recommendation would be to provide a new Small Farms of the New Millennium Support Program aimed at minority and small-scale producers—suggestion, perhaps, a minimum subsidy of maybe $10,000 per year.
    Another concern would be the legislation should be proposed to repeal the provision that prohibit farmers who have previously had any debt forgiveness from receiving USDA loans or credit assistance.
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    Another consideration would be fair access and servicing of FSA programs—adequate funding and fair access. In addition, we would also have some concerns as it relates to Farm Credit System. Some have concluded, and correctly so, that the reason for the decline in the loans and in black farming and in other minority, small-scale producers, can be attributed, in part, to the lack of financing.
    USDA has attempted to reverse that that decline by implementing outreach programs and programs to target direct loan funds and guaranteed funds to socially disadvantaged farmers and ranchers. Accessing these and other programs of USDA has not been user-friendly, as it should have, as evidenced by the recent lawsuits and settlements and others pending.
    There was an attempt to have a Memorandum of Understanding between USDA and National Bankers Association. The MOU would have provided at least $18 million to fund guaranteed loans, however, the MOU is still pending.
    The Farm Credit System was created in 1916, as we understand it. Through direct Government/taxpayer assistance, the Farm Credit System has been able to position itself to reach the unprecedented high levels of profitability and capital and currently enjoying such. The indirect Government/taxpayer assistance continues today and will continue tomorrow, as evidenced by special appropriations.
    The point here is, we want to accent CRA, not necessarily require a CRA in the Farm Credit System, but rather, to put a similar program in place such that those persons in the community would be able to enjoy similar rewards from funding by the Farm Credit Systems. Additionally, we are recommending that all references in the Farm Credit Act to young, beginning, and small farmers and ranchers are similarly amended to include SDA.
    And, Mr. Chairman, and the Commission, we would very much be available to answer any questions at this point and stand ready to support any and every action that is directed at increasing the financing that is made available to the small and minority-scale farmers. Thank you.
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    [The prepared statement of Mr. Robinson appears at the conclusion of the hearing.]

    Mr. LUCAS. Thank you. Mr. Hague.

STATEMENT OF TERRY HAGUE, CHIEF EXECUTIVE OFFICER, FARMERS EXCHANGE BANK, CHEROKEE, OK, REPRESENTING THE AMERICAN BANKERS ASSOCIATION
    Mr. HAGUE. Chairman Lucas, and, members of the committee, I am pleased to be here on behalf of the American Bankers Association. I am Terry Hague, chief executive officer of Farmers Exchange Bank in Cherokee, Oklahoma, and I am a member of the ABA's Agricultural and Rural Bankers Committee. I am representing the agriculture banking industry and many bankers concerned about their farm and ranch customers. We are also concerned about our small business customers who are dependent upon the financial health of farmers and ranchers for their survival.
    We wish to thank you, Mr. Chairman, and the committee for your prompt and effective response in each of the last few years to the critical needs of farmers and ranchers. You helped divert a serious and extended period of economic disruption.
    At the end of 2000, banks had nearly $75 billion outstanding to farmers and ranchers. For every dollar of agricultural credit outstanding, 41 cents is loaned by banks. Continued low commodity prices and the uncertain nature of future Federal assistance to agriculture has heightened our concern about the continued viability of our farm and ranch customers.
    From early January to early May of this year, staff of the ABA's Center for Agricultural and Rural Banking conducted 19 listening sessions in 14 States. Nearly 1,000 bankers and other stakeholders participated in the sessions. In the sessions we talked about a wide range of topics, from Federal support for agriculture, to trade, to FSA programs, to recommendations for the 2002 farm bill.
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    There was consensus about the need to create a farm policy that is consistent and allows for some level of certainty, both for producers and the bankers that finance them. Many bankers concluded that they are uncomfortable with the Price Assistance Program that works best only when there is an average to above average crop yield. The FSA guaranteed farm loan programs are some of the most cost effective tools that Congress can provide to farmers and ranchers.
    Funding for operating loans with interest assist has run out for the year and there is a backlog of unfunded applications in excess of $20 million. Because these programs are such an important part of excess to credit, we urge you to make funding for these loan programs a priority. We also strongly recommend that Congress permanently repeal a 15-year term limit on guaranteed loan eligibility.
    In 1992, Congress approved a low documentation loan program for FSA guarantees and set the limit at $50,000. We recommend increasing this ceiling to $150,000 on these applications. Many USDA services still require direct farmer contact by the FSA, but guaranteed lending is not one of them. Because many program delivery problems stem from the highly localized structure that USDA maintains, we recommend that FSA consolidate guaranteed loan making and loan servicing in specialized offices to ensure consistency of program delivery.
    For the past 3 years, Congress has approved emergency assistance to farmers. USDA determined that these payments could not be assigned with an existing assignment form, even if a producer had assigned to the bank payments from all programs. We recommend that FSA create a blanket assignment form for USDA benefits that would attach to all program benefits now and in the future.
    Bankers are very aware of work that this committee and others have done to improve the Federal Crop Insurance Program in recent years. We urge you to seek additional ways to make crop insurance a more effective tool for producers to manage production and price risk.
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    Bankers are enthusiastic about farm accounts. Farm accounts will encourage producers to save in the good times and use the balance during the bad times. Additionally, farm accounts will provide a new source of deposits to banks to lend back to businesses and individuals in their communities.
    Aggie Bonds allow banks to use the bonding authority of participating States to fund qualified beginning farmers. More credit could be made available by banks to more beginning farmers if Aggie Bonds were exempted from Federal revenue bond volume caps. Bankers support efforts to stimulate economic development in rural America by lending to the businesses that support, in some way, or add value to the crops and livestock produced by farmers and ranchers.
    The Business and Industry Guaranteed Loan Program allows us to make loans, to retain existing businesses in our communities, and to help attract new businesses. Some past problems with the program have now been prudently addressed. Unfortunately, all future borrowers are being asked to pay the price through increased loan fees. We oppose increasing loan fees on B&I guarantees.
    Finally, we are concerned about the Farm Credit System. We support the U.S. Department of Treasury in their call for the withdrawal of the proposal to grant national charters to the Farm Credit System institutions. Also, we oppose the expansion of the System's charter and we question the need to continue the GSE status of the System. We believe that it is time for Congress to review the public policy purpose of this System and to retire their GSE status.
    The banking industry remains committed to agricultural in rural America. I am happy to answer your questions.
    Mr. LUCAS. Thank you. Mr. Edelman.
STATEMENT OF HENRY D. EDELMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, FEDERAL AGRICULTURAL MORTGAGE CORPORATION
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    Mr. EDELMAN. Thank you, Mr. Chairman. Mr. Chairman, distinguished members of the subcommittee, my name is Henry Edelman. I am president and chief executive officer of Farmer Mac. It is an honor to appear before this subcommittee to offer testimony on these important and timely matters—the delivery of agricultural credit to the farmers and ranchers of America and Farmer Mac's role in that process.
    I am pleased to appear before you today on behalf of a company rapidly advancing in its Congressional mission of operating an efficient secondary market for agricultural mortgages. Our recent successes, effective programs, and strong current condition, were all made possible by your support and foresight in enacting the Farm Credit System Reform Act of 1996. We have worked hard in the intervening years to justify the confidence Congress placed in Farmer Mac so that today thousands of farmers and ranchers have more than $3 billion of agricultural mortgages backing securities, guaranteed by Farmer Mac.
    We actively support mortgage lenders, large and small, in all sectors of the agricultural credit industry, with effective programs and products. Since 1996, Farmer Mac has contributed to lender liquidity and capital adequacy, facilitating competitive rates on mortgage loans offered to farmers and ranchers. During the same time, Farmer Mac increased its own capital from about $12 million at the end of 1995, to over $100 million at the end of 2000 and satisfied every condition set forth by Congress in the 1996 legislation to ensure its continuing safe and sound operation.
    Over the past 5 years, we have not only assembled programs that have appealed to both agricultural lenders and the farm borrowers they serve, but also broadened the acceptance of Farmer Mac in all sectors of the agricultural credit industry. We believe that we have made a great deal of progress, yet we know there is much more to be done before the industry reaches the level of efficiency and financial sophistication that exists today in the residential home mortgage market.
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    As I noted in my opening comment, the 1996 reform legislation dealt very effectively with statutory limitations that had constrained Farmer Mac's development up to that time and provided the authorities Farmer Mac needed to move forward aggressively in the development of an efficient secondary market for agricultural mortgages.
    The 1996 legislation enabled Farmer Mac to develop and offer to agricultural lenders mortgage credit enhancement programs that have contributed materially to lender competitiveness and mortgage availability throughout the United States. The relationships we have established with those lenders, including the Farm Credit System, commercial banks, and insurance company lenders, should lead to expanded use of the Farmer Mac secondary market over time.
    The process, now underway, should ultimately move lenders away from dependence on mortgage portfolio management strategies, which tend to limit borrowers to less competitive, shorter-term mortgage interest rates, while exposing lenders to concentrated credit risks, and toward greater reliance on mortgage securitization, which permits borrowers grater choice and allows lenders to reduce credit concentrations. As has been proven in the residential sector, this process should benefit both lenders and borrowers in the agricultural sector. Farmer Mac is proud to be an intermediary in this beneficial evolution.
    On a related matter, I would also like to comment on the USDA guaranteed loan programs, which were extensively revised by Congress in the 1996 farm bill. As you know, we purchase FSA guaranteed loans in our Farmer Mac II program. In most respects, we believe that the changes made in 1996 have contributed to a more streamlined and financially sound guaranteed loan program. Many of the lenders we work with report that the administrative processing of guaranteed loans has improved greatly, and the changes in loan limits and the allocation of funds have added much needed flexibility to the programs. Nevertheless, we believe that the programs could be reformed further to provide eligible borrowers with greater access to long-term fixed rate loans at more competitive rates of interest.
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    The primary policy goal for agricultural credit over the next decade should be for the entire industry to achieve a level of parity with the residential mortgage market with regard to financing techniques and structures supporting highly competitive mortgage products for farmers and ranchers. By integrating the use of the Farmer Mac secondary market into their daily operations, agricultural lenders can transition away from portfolio lending to the extent they find it desirable to do so.
    The financial services industry of the 21st century will be one based on the allocation of functions to those players who perform them best. As agricultural lenders increase their focus on the strategic goal of receiving riskless fee income for performing the functions at which they are the two experts—loan origination and servicing—they will be safer, sounder, and better suited to the delivery of lower interest rates to farmers, ranchers, and rural home owners.
    We at Farmer Mac are dedicated to aiding and supporting lenders in that transition and we believe that our secondary mortgage market has reached the stage where the contribution we make is meaningful and real.
    Credit legislation could be framed to support the continuing evolution of the agricultural credit industry toward the strategic goal I have mentioned. This might be accomplished by reference to Farmer Mac secondary mortgage market rates as a benchmark for use by the USDA. Sale and securitization would be logical, but not a compulsory consequence. As applied to those loans, such an approach would open opportunities for farm borrowers to have greater access to long-term fixed rates and for variable interest rates to be standardized and tied to published indices.
    At the same time, adequate lender profits must be preserved to ensure effective competition among lenders and provide borrowers with ready access to multiple lending sources. In addition, adjustments to Farmer Mac's own statutory charter with a view toward reducing or eliminating certain limitations devised some 12 years ago, and toward updating Farmer Mac's business authorities consistent with the evolution of the financial markets generally and the agricultural and rural credit sectors in particular, could contribute to achieving the goal. This could include, for example, expanding the definition of loans eligible for the Farmer Mac secondary market to include rural development loans or rural small business loans, so far as an efficient secondary market would enhance opportunities for lenders and Farmer Mac is qualified and able to expand its market to include them.
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    These ideas are preliminary, but are submitted for examination by the members and staff of this subcommittee. We welcome the opportunity to discuss our ideas further with you, Mr. Chairman, and with other members of the committee and subcommittee at your request. We thank you for this opportunity.
    [The prepared statement of Mr. Edelman appears at the conclusion of the hearing.]
    Mr. LUCAS. Ms. Cooksie, unless my math is wrong, looking at the testimony you have provided, it appears that one-third of the borrowers at FSA's farm program loan portfolio are beginning or what might be better described as socially disadvantaged farmers and they receive about a one-quarter of your $7.5 billion in loans that are available to family farmers. And my understanding is that in this coming fiscal year, the numbers will be even more impressive. From your perspective, do you believe that this represents a commitment by USDA to make progress in those areas and do you think we can continue in that direction?
    Ms. COOKSIE. Mr. Chairman, absolutely. Absolutely, I think, that it represents a commitment. But what we need to remember is that when we talk about targeted funds to SDAs and beginning farmers, other than the downpayment program for beginning farmers, we are only talking about targeted funds. We are not talking about any changes in the program. So when SDA farmers come to the door, they are subject to the same provisions of the regulations as any other farmer—the same interest rates, the same collateral requirements, and the whole 9 yards.
    So I think when we talk about SDA programs, there are some people who think that it means something other than what it does. Now, statutorily, the only authority we have for SDA programs are the targeted funds. So I think that in the debate we need to talk about whether those authorities need to be expanded or not or whether that is sufficient. Because the only thing that really is there now is targeted funds.
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    Mr. LUCAS. I was particularly pleased to hear your comments about some of the positive consequences of the 1996 farm bill. And lots of times, whether it is in the subcommittee hearings or full committee or in my town meetings back home, we tend to hear the more complicated challenging side of the issues and why things have not been quite so effective. Has the Department, in your area, done any quantitative analysis about how much of the income assistance, AMTA, and the market loan assistance money that we have appropriated, wind up in the hands of folks who are FSA borrowers?
    Ms. COOKSIE. I can't answer that question. I know that we have done it in FSA, but that doesn't mean that some other research department in USDA has not done it. We can certainly inquire to see if anybody in USDA has done that kind of analysis.
    Mr. LUCAS. I think that would be fascinating. Mr. Robinson, in your testimony, you make comments about potentially creating some sort of a matching grant program to help beginning farmers establish that foothold in agricultural production. Could you expand, for just a moment, on that? I mean, who would provide the matching money and, in your concept, how would this work?
    Mr. ROBINSON. Yes. Thank you, Mr. Chairman. The concept is active and well, even as we speak, but from other sources. We have realized for some time, quite a number of years, that some farmers, or even just general businesses, agricultural businesses, rural businesses, need a jump start. They may not necessarily meet the eligibility criteria for standard loans—and I quote, ''standard loans.'' And not being able to meet the standard criteria even by local banks or of USDA. So sometimes a $5,000 or a $10,000 loan just to give a farmer a jump start, for operating expenses, to get a crop in the ground, to be able to generate a revenue, to repay even sometimes—in some cases, repay loans that he may already have existing with the USDA or the banks.
    The thought is, is to provide such as the same concept that already exists with other large-scale farmers, some types of safety net—create a safety net such that those small, minority-scale farmers will have something to fall back on in terms of a grant to be able to sustain their operation.
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    Mr. LUCAS. You mentioned in your testimony about an effort to create a minority farm registry, which USDA is supposed to be in the process of doing, which apparently have not, as the testimony indicated, much progress is being made on. Do you have any feel for what is going on there or why or why not that is being accomplished?
    Mr. ROBINSON. The information that comes to us as research and as we work hand in hand on a day-to-day basis, seems to be the lack of resources, as I understand it, and work. We work very closely with USDA personnel. We are no strangers in the field. We visit and we cooperate to the extent that we can and, in some cases, under cooperative agreements to work and provide technical assistance. So in other words, there are efforts to work together, but in those efforts to work together, we understand that the complaints come down to their lack of resources.
    And I think the more resources that are placed even within USDA, within their average programs, within the personnel, to carry out and to perform those services, such as developing a registry and really capturing the statistics, I think, is needed.
    Mr. LUCAS. Obviously, with a panel this size, we may well have to have more than one round of questioning. But abiding by the lights, I now turn to the ranking member Mr. Hilliard, for any comments or questions he may have.
    Mr. HILLIARD. Thank you very much, Mr. Chairman. I have three questions, and the first one is to Ms. Carolyn Cooksie. What is the current status of implementation by FSA of the target participation rate for minorities as established in section 335(a)(1) of the Consolidated Farm and Rural Development Act—basically for farm ownership and farm operating loans?
    Ms. COOKSIE. For 2001? Let us see, the obligations for fiscal year 2001 for direct loans is—direct operating loans, we have made 1,815; for guaranteed OL, we have made 312; for direct FO, 231; guaranteed FO, 209. So, so far this fiscal year, we have made 2,567 SDA loans. That is about 3 percent change over last year—up, higher than last year.
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    Mr. HILLIARD. Do you have that in writing before you now?
    Ms. COOKSIE. Yes, sir.
    Mr. HILLIARD. Would you provide the committee with a copy of that, please?
    Ms. COOKSIE. Absolutely.
    Mr. HILLIARD. And, also, would you please provide the subcommittee, for the record, a summary, on a national and State level, of the current participating rates among minorities, farmers, for, (1), FSA farm ownership, direct, (2), FSA farmer ownership guarantee, and, (3), FSA farmer operating direct, and, (4), FSA farmer operating guarantee? And I would very much appreciate that.
    Ms. COOKSIE. We would be happy to, sir.
    Mr. HILLIARD. Thank you. And, to my friends, the bankers, each banking group, the community bankers, the American Bankers Association, Federal Agricultural Mortgage Corporation, Farmer Mac, and the Farm Credit Council, I would like for each of your group to provide to this subcommittee, for the hearing record, a summary on a national and State basis, of the current level of participating rate of minority farmers as compared to other farmers in your subsidized agricultural credit programs that all your members participate in. And, of course, we are going to keep the record open for 10 days.
    Mr. LUCAS. We will add it to the record when the information comes in.
    Mr. HILLIARD. Right. May we have that information? And I will be very happy if you will send me a copy of it as you direct it to the committee. Thank you very much.
    Mr. LUCAS. Mr. Osborne.
    Mr. OSBORNE. Thank you, Mr. Chairman. I guess, first of all, I would like to address this to Ms. Cooksie. One of the complaints that I frequently hear as I travel around my district has to do with the amount of paperwork, the involvement in trying to apply for an FSA loan, and that sometimes young farmers, particularly and those people who are somewhat at risk, bad credit risks, hesitate to apply because of the complexity of the issue. And I wondered if there is much that has been done to alleviate that situation.
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    Ms. COOKSIE. Absolutely. I think we have done it quite successfully in our guarantee program. As I mentioned in my testimony, we are currently working on doing these same kinds of streamlining things in the direct program as we did in the guarantee program. As a matter of fact, in the direct program, we implemented a 1-page application for loans $50,000 and under, just as we had in the guarantee program, that is already out and in the field.
    When, at the end of the day, in a streamlining process, I think customers and our own employees are going to find the program much more user friendly and less paperwork burdensome. As I said in the testimony, we expect we will get rid of 1,200 pages of regulations and about one-third of the forms. So we are working very hard on streamlining the direct loan program. Mainly because we need to make the programs more accessible to our customers, but also with our strained resources of our employees, we have got to downsize the paperwork also.
    Mr. OSBORNE. OK. Thank you very much. And I guess to Mr. Lowrey I would like to address a question. Obviously, Farm Credit has some of advantages. It is a GSE entity. And I guess the assumption I have made, and maybe it is incorrect, that there are probably ascending levels of risk that organizations should take on—FSA maybe the highest level of risk, and then, possibly because of the advantages Farm Credit has been given, in terms of tax advantages and access to funds, maybe the next level of risk, and then maybe the financial institutions, the least level of risk.
    The complaints that we often hear are that Farm Credit is accessing some of the best loans and is sometimes disregarding the loans to younger farmers and those who are at higher risk. And I realize you are more profitable now than you were 15 years ago. And that is a concern. But I just wondered if you had any comments in regard to these accusations that you often hear.
    Mr. LOWREY. Thank you, Congressman. First, to address the GSE status. We are very grateful for our GSE status, and it would be very difficult for us to survive without our GSE status. But I would like to point out that every regulated lender in this country has some protection, the Federal backstop that is provided by the Congress. While our GSE status allows us to issue our debt and our investors can take some comfort in the GSE status and require less of a premium, commercial banks raise their funds through their deposit base. And if the taxpayer was not standing behind those deposits, then obviously they would have to pay more to raise the funds that they raise through their deposit base.
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    There are many large banks in this country. There are some 30 to 40 that would come under what some people call sometimes too large to fail. Because they are considered too large to fail, the assumption is made that Congress would always stand behind these banks and not allow them to fail. So because of that, they are able to keep their stock prices probably higher than they would be otherwise. And they are also able to raise deposits at a cheaper rate than they would be otherwise.
    My point being is that Congress is the backstop behind the methods that we use to raise funds for all of our regulated institutions. We take very seriously our role to finance farmers, to finance all farmers. At the end of the day, though, we are a private institution with a public purpose. My goal, as CEO of the AgFirst Farm Credit Bank, is to make sure that we never have to come and stand before you again, as we did in the eighties, with too much adverse paper in our portfolio that creates the problems that you had to deal with back in the eighties.
    And let us face it, if we had not had the support that you have given to farmers over the last 3 to 4 years, there would be some very difficult times among all the commercial banks and parts of the Farm Credit System. So I would challenge you somewhat in that we want to help every farmer that we possibly can. We want to make every loan that is bankable, but, at the same time, we cannot step down a level of risk from what you would see in other privately owned commercial institutions.
    Mr. OSBORNE. Thank you, Mr. Chairman.
    Mr. LUCAS. Mrs. Clayton.
    Mrs. CLAYTON. Thank you, Mr. Chairman. Ms. Cooksie, could you—the designation of—is it socially disadvantaged farmer?
    Ms. COOKSIE. Yes, ma'am.
    Mrs. CLAYTON. Is that a farmer who has a gross income of $100,000 and less?
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    Ms. COOKSIE. The socially disadvantaged designation in the statute is women and minorities, and I don't think it has anything to—it doesn't say income limits in there, I don't believe.
    Mrs. CLAYTON. OK. There is recent research that is done by the agricultural research community where they are looking at what we call a safety net. And in that, they are looking at all the resources that come from agriculture to socially disadvantaged, retired farmers, main farmers, farmers, $250,000, very large farmers, over $500,000, and then those who are over that. And looking at not only the AMTA payments, but looking at loans themselves, has there ever been a delineation between those—in incomes of those that you know of?
    Ms. COOKSIE. I know the Agricultural Research Service a few years ago did some extensive research in answer to some questions about where loan money was. There is quite an extensive booklet on that that we could provide. I think it does link a little bit along the lines that you are talking about.
    Mrs. CLAYTON. Right. If you could provide that to the committee, so the committee, as they look at the farm bill next year, to see actually by income level in addition to minority and disadvantaged, which sometimes we describe only as female and minorities it would be good to also look at the income and to see how the distribution of those loans have been made.
    Ms. COOKSIE. We will provide the information they gave us to you.
    Mrs. CLAYTON. OK. Now, in response to the chairman's question about the commitment of USDA making resources available to traditionally the social disadvantaged farmer. My understanding of his account was that one-third—and I think he took it from your testimony that 71,000 family farmers—is that what you were referring to, Mr. Chairman? And then you looked at 24,000 and roughly, I guess, they came to one-third. Now, again, would that be, in your traditional sense, the social disadvantaged, meaning less than 40,000 small, minority, and women?
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    Ms. COOKSIE. Socially disadvantaged, as we use the term, as under the statute, is for women and minorities, and that is exactly what it says. I don't know that we equate it with an income limit or anything like that.
    Mrs. CLAYTON. So when you made the statement, you are saying that in fiscal year 1999 and fiscal year 2000, FSA provided loans and loan guarantee totaling $7.5 billion to over 71,000 family farmers.
    Ms. COOKSIE. Yes.
    Mrs. CLAYTON. Of this 24,000 should be women and minorities.
    Ms. COOKSIE. No. We have totaled those together right there. There is 24,000 were beginning and SDA farmers.
    Mrs. CLAYTON. OK.
    Ms. COOKSIE. So we are talking about a total. That is the one time in the testimony we put it——
    Mrs. CLAYTON. So I—OK.
    Ms. COOKSIE. Yes.
    Mrs. CLAYTON. You do have that here.
    Ms. COOKSIE. Right.
    Mrs. CLAYTON. You have where beginning and socially disadvantaged——
    Ms. COOKSIE. Right. And they are not inclusive, necessarily, though. Because we have beginning farmers and then we have minorities and women under beginning farmers, and then we have socially disadvantaged, which are women and minorities.
    Mrs. CLAYTON. Could you break that down for us, please as to ones you consider socially disadvantaged.
    Ms. COOKSIE. I think we can do that.
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    Mrs. CLAYTON. I would appreciate it. I also wanted to ask could you describe how the FSA reaches out to its new and beginning farmers in the credit programs in general and its beginning farm programs, in particular? What procedures would a potential new or beginning producer use to access the regular information? In other words, describe your—if you don't have it now, do you——
    Ms. COOKSIE. Yes.
    Mrs. CLAYTON. You know it funds outreach——
    Ms. COOKSIE. Well, I think it differs. I don't think we have a prescribed measure for every State. It is different for every State. We have goals that States have to reach. And so some States go out and they kind of beat the bushes and do a lot of outreach and speeches and they go to extension offices and that kind of stuff. Others put out newsletters to bring people in. I think there are a variety of things that we do.
    One of the things that you will see in my testimony, though, is that even with all the outreach that we do, the problem that we are having is that we are not using all of our targeted beginning farmer money and talking to the States, because we were trying to figure out why we weren't using all of the targeted money. It is because farming right now is just a really hard business to get into. And so I think the bare question that we have got to deal with is how do we make the programs more accessible for beginning farmers? Because they are out there.
    Mrs. CLAYTON. Yes.
    Ms. COOKSIE. It is just hard to access the programs.
    Mrs. CLAYTON. OK. I yield.
    Mr. HILLIARD. Would the gentlelady yield?
    Mrs. CLAYTON. Yes.
    Mr. HILLIARD. Thank you very much. Let me make sure we don't have a problem with the information I requested in terms of question.
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    Ms. COOKSIE. Yes.
    Mr. HILLIARD. The information I have requested of each one of the groups, I am asking for a breakdown based on not minority and women, but based on race, ethnicity, and gender. Thank you very much.
    Mrs. CLAYTON. I take back my time. Or do I have any time? I guess I am out of time.
    Mr. LUCAS. I can give you an additional 1 minute.
    Mrs. CLAYTON. OK. Thank you. Ms. Cooksie, we are about to write a farm bill, hopefully, and credit is an essential part of getting into banking. And if you are talking about new farmers, obviously, that is certainly a part of it. And I will talk to Mr. Robinson and the Farm Credit on my second round. But are there things that if we are talking about increasing the opportunity to new farmers and making sure that family farmers and the individuals who are considered less than $100,000 gross—and I think that how they net it out is less than $40,000 net. If we are not pushing them out, what are the things we should be doing as an agency, financial last resort? Because it seems like the bigger boys and girls are now more at the trough and you are pushing the little family farmers—and you are not doing it, but the system seems to be the market system and everything is pushing the little guys out. And if we keep that continuing going either by our extensive omission or commission, we will see less families in farming, because they can't go to the banks who don't have the available debt. So and from a financial and a credit resource, what would you like to have us consider?
    Ms. COOKSIE. Well, of course, let me make clear that the Secretary is just assembling her team, so we are not in a position to talk about any proposals or anything like that. But let me go back to a statement that I made a few minutes ago. And that is about, for instance, SDAs. I think that there are some people who believe that the SDA designation means that we have a different program to offer socially disadvantaged, which is minorities and women, than we do any other farmer that walks through the door. But we don't. Every farmer that walks through the door, with few exceptions, are following the same rules and regulations than any other farmer. And it doesn't matter whether your income is the $40,000 you are talking about, or if it is $200,000. If you qualify for the program, you qualify.
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    So, perhaps, at some point, the committee would might want to look and to see if it makes sense to look at whether it makes sense for every farmer to fall under the same interest rate, the same collateral requirement, the same repayment terms, those types of things. It may bear out that it won't make a difference, but I do think that is one of the things the committee might want to look at in the long term.
    Mrs. CLAYTON. But, Mr. Chairman, just for the record, we do have differentiations in USDA because we do make a difference in home loans. And we make a difference in income. Safety nets, by economic standards, are made different. So in the farming business, agri-business of farming itself, if we are holding each farmer, regardless of their economic status, we are not adhering to the same public interest usually the Government has a right to get in. It is to assist those who can't go necessarily to the private sector or can't get it somewhere else. So there is a reason for the Government's intervention.
    Ms. COOKSIE. The only difference is, is that some farmers may qualify for what we would call limited resource, which is a smaller interest rate. But in the long term, it doesn't really help a lot of farmers.
    Mrs. CLAYTON. OK. I will take another round later. Thank you.
    Mr. LUCAS. And we will, indeed, have another round. Mr. Leighty, in your testimony, you comment about the fact that Congress enacted the FSA loan eligibility limits in the 1996 farm bill. And that was apparently an effort to, of course, to free up USDA loan funds so that they could be concentrated on other areas beginning in small farmers. If Congress were to eliminate those limits permanently, do you have any thoughts about how we would be able to spread that limited credit around among the various and competing needs?
    Mr. LEIGHTY. Are you referring to the 15-year limit of graduating people out of the program?
    Mr. LUCAS. That is part of it. Yes.
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    Mr. LEIGHTY. And the question is, do I have a suggestion of how to allocate those funds?
    Mr. LUCAS. If you take the various eligibility limits that are off, 15 years being part of that, and other things, that means then there are more competing demands for that limited pool of resources. How do we make the decision about how to allocate that is what I am asking you for some guidance on?
    Mr. LEIGHTY. It seems to me that the focus needs to expanded in the guarantee program in that that is the best bang for the buck, or the most leverage of dollars. I think the records would show that that has been quite successful and that allows a larger amount of guarantees. It is, of course, the private lenders' funds that are laid out to the borrowers. Of course, they are guaranteed if you would have a large catastrophe or problems in the system-wide. But I would say, in a nutshell, the best way to approach that would be in the guaranteed level instead of direct loans.
    Mr. LUCAS. Could you expand on that, Mr. Hague, and also touch on your comments about the importance of the assignments issue?
    Mr. HAGUE. Yes. I basically agree with that. I think when the 15-year limitation, for example, was set, no one envisioned the kind of economic times we would be faced with right now in agriculture. And it is really a bad time to be asking people to leave the program. And your other question was?
    Mr. LUCAS. About the assignments issue on the payments.
    Mr. HAGUE. The assignments issue is basically a paperwork nightmare for banks and USDA because the farmers come in and basically give a blanket assignment to banks on Government payments. But then when we do the supplemental programs, the USDA said, well, that assignment doesn't cover those. So what we are asking for is the farmer's intention was to assign those payments, which he did, and the paperwork should be sufficient to cover those so we don't need to do more paperwork.
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    Mr. LUCAS. The comment was made in the discussion about the importance of increasing the deposit insurance limit. Could either or both of you comment on—and I know that is not the jurisdiction of this subcommittee. But sitting on Financial Services, which is a committee I also sit on, this is an issue that intertwines with capital availability, I think, in rural areas. Could you touch on that for just a moment, either or both of you?
    Mr. LEIGHTY. I would be glad to. We think it is a very important issue. I would like to expound—earlier on the GSE status. I think it is very important to distinguish that deposit insurance is paid for by the banks, and those who are protected by the deposit insurance are the depositors. And there is a very important distinction to be made there. And we do find that expanding this would, we believe, change the outflow of funds. We see many cases where elderly people pass on and the funds that are in local rural banks, tend to leave to the next generation that has moved to the metropolitan areas. And we do believe that expanding the deposit insurance levels would help rural community banks with funding sources.
    And, as was pointed out, there are a few large institutions that are deemed—whether it is correct or not, that are viewed to be too big to fail, whereby depositors feel that they can put unlimited amounts and have a safety net behind them. That is not the case in the majority of the community banks that exist in this country. And that insurance level has not changed since 1980. We believe it should be indexed for inflation, which would be close to double that amount here 21 years later.
    Mr. HAGUE. I have no major disagreement with that. I think one of the issues is at what cost will be that additional insurance coverage. And as long as that cost is reasonable and fair, most or many community bankers do support that and also supports some type of indexing.
    Mr. LUCAS. We are back to Mrs. Clayton.
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    Mrs. CLAYTON. Mr. Leighty, in your testimony, you emphasized your preference for the direct loan, but when you get down to the guarantee farm safety net, you have several pieces in which I find interesting. One, was first quickly adopting a new farm aid package. That was today. And that was——
    Mr. LEIGHTY. That is pretty quick.
    Mrs. CLAYTON. That is pretty quick.
    Mr. LEIGHTY. Thank you.
    Mrs. CLAYTON. And those are grants. And I like that idea. And I just wanted to tell you I like direct loans too, and that is less than a grant. But you like the idea of giving direct aid to farmers, but the direct loan, you don't like too much, but you like the guarantee loan. Could you explain the difference of those three?
    Mr. LEIGHTY. Well, what I was probably not very adequately explaining, but it seems to me to broaden those that are touched by these programs, that the guaranteed lending is a way for the Government to make funding available to a larger number of qualified borrowers by allowing the private sector funds to be directly loaned to them with the safety net there in the form of guarantees. I think it could even be explored that in—and the percentage guarantees—I think it should be open for discussion, what is the appropriate amount for that.
    I might, if I could digress, although you didn't ask this, at this time, and when we are talking about starting or trying to help the start-up—the young person in the family farms, nothing that you can do will have the same impact as helping to restore profitability to the industry. I am not sure we do these young people a favor getting them into farming if we cannot have an industry that doesn't hold some promise of them being able to make a respectable living.
    And right now, many of our borrowers, young and old alike, simply are not making a respectable return on their investment, let alone their labor.
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    Mrs. CLAYTON. I agree with that. We are in agreement.
    Mr. LEIGHTY. And I hope I didn't depart from your question, but——
    Mrs. CLAYTON. You did, but I agree with your departure. That they are struggling. But I guess I wanted to point out that the equation of making direct loans to young, beginning farmers, is less riskier than giving a grant to farmers.
    Mr. LEIGHTY. Yes.
    Mrs. CLAYTON. Yet we have no problems in giving big grants to farmers who are having problems in it. But we have problems in making more direct loans to struggling or beginning farmers. I just want the ground to be even for those who are struggling as for big persons.
    Mr. LEIGHTY. I would clearly agree and I hope nothing in my written or oral statement would imply that it would not be in favor of the direct loans.
    Mrs. CLAYTON. OK.
    Mr. LEIGHTY. Just recognizing the limited number of dollars available is where the emphasis was made on the guaranteed loans.
    Mrs. CLAYTON. I think you are right that, though we do have more—you spread the money out. But there is a need for the Government to always keep that opportunity for people who want to get in or, indeed, who are struggling in that area. Otherwise, you foreclose that. The other one that you made and I am going to comment on is, No. 5, adopting new policies that are capital and business opportunities to rural America. And I couldn't agree with you more. Because about 6 percent of our rural Americans are actually in farming, but, indeed, the other part of us, we are not. And as the farming goes, so will rural communities. So we need a healthier environment in rural America if we are going to survive. What—would you recommend some things that you had in mind when you made that recommendation?
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    Mr. LEIGHTY. Well, I think that one of the important things, although it is not an easy task, is to try to find ways to diversify our rural communities. In driving across Kansas within the last couple of months, I note that so many of the farmsteads that were once viable that housed families with children getting on the busses, are not rusting away. They are sitting empty. And the population of the community that I live in has seen a decline since the 1940's steadily. Every decade there has been a decline. As people move away in Colorado to the front-range area where there are just more opportunities.
    And it seems like that there is such a change in the nature of agriculture that we are going to have to find diversification, whether that be through value-added programs and more manufacturing of the finished product at the point of source than there is currently. I am not wise enough to tell you how we can do that, but it seems unless we can diversify some of these rural communities, it is a pretty bleak outlook.
    Mrs. CLAYTON. Thank you. We are trying to get this committee to consider rural developments. So I thank you for your testimony. It helps me lay the foundation for it. Mr. Robinson, you referenced a Memorandum of Understanding. Was that a Memorandum of Understanding with Farm Credit, or was that a Memorandum of Understanding with USDA? And did it involve Farm Credit? And the other part of the question is, you mentioned that Farm Credit was not—did not adhere to the principle of CRA. What do you have in mind? I know they aren't required to, but what do you have in mind?
    Mr. ROBINSON. Right. Yeah. What we had in mind there—well, first of your question—that it does make reference—the Memorandum of Understanding with USDA were in conjunction with the National Bankers Association——
    Mrs. CLAYTON. Is it with the USDA or with Farm Credit?
    Mr. ROBINSON. USDA.
    Mr. ROBINSON. That was the distinction—USDA. And as I understand it, there was a pending Memorandum of Understanding, which, I understand, was signed by then Secretary Glickman, which was not actually implemented.
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    Mrs. CLAYTON. What would it have done?
    Mr. ROBINSON. It would have created an opportunity for mainly minority-owned banks, institutions, to provide nearly $18 million, which would have served as—conceptually similar to the USDA guarantee and service, additional collateral——
    Mrs. CLAYTON. Oh. These banks came together to pool their resources to make available dollars that could be guaranteed by—oh Ms. Cooksie, do you know where that is or what that is——
    Ms. COOKSIE. Well, I know that the memorandum that was signed previously.
    Mrs. CLAYTON. OK.
    Ms. COOKSIE. We worked with Mr. Tillman Carr and for some time and the Department on that. It was signed. It has expired. I understand that it has been brought back to the Department. But as I said, the people that would sign it are really not in place. I think that is probably the biggest hold up on it at this point. But let me just say that the points that we had with it the last time, when we originally got it, were things that we could not have done statutorily, which caused some problems.
    Mrs. CLAYTON. OK.
    Ms. COOKSIE. One of the pieces of it, we were asked to put aside a certain amount of guaranteed money for this Memorandum of Understanding, which legally we could not do because we are, by statute, first come, first served.
    Mrs. CLAYTON. OK.
    Ms. COOKSIE. So there were some things that we had to work around. There was an issue with the Office of Outreach that they would actually work with the farmer and the bank that we are talking about. The Office of Outreach, at that point, did not feel with the existing 2501 contracts that they had enough money—in the 2051 Program, enough money and that the contracts weren't clear for the 2501s to do that, and they would have to be re-negotiated.
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    So there were a number of issues. But having said that, we did, Secretary Glickman, at that time, did sign an MOU with NBA. And I don't really see why that USDA may not be willing to do that again. I think the problem is, is that the people who would sign it are not actually in place to get it through the system and get it done at this point.
    Mrs. CLAYTON. Does the statute allow you to do it as you now—I mean——
    Ms. COOKSIE. As it is now—as the old MOU was, it certainly did allow us to do it because we agreed that we couldn't set aside funds for that and some other things that we couldn't do. And we agreed on what we could do. So as the old MOU, certainly we could—if we could have done everything in there, obviously it would have been signed. Yes.
    Mrs. CLAYTON. I am abusing my time, but I am going to ask the Farm Credit to respond to Mr. Robinson's concern about the lack of diversity. I think he said CRA, and CRA is a requirement that the bankers have. I am not negative to the Farm Credit at all, but I am also very pro to the principle of having financial institutes serve all of their services areas. And so I would like you to respond.
    Mr. LOWREY. Thank you, ma'am. And so are we. We want to make sure that we are serving all the farmers out there. I certainly don't want to come away from this hearing with any perception that Farm Credit is not serving small and beginning farmers or serving minority farmers. And I would like to point out to you that in our 15 States in the AgFirst district, that while we agree that there is a terribly small number of minority farmers, and based on the 1997 census, there is only 2.6 percent of the farmers in our 15 States and Puerto Rico who would qualify as minorities. That percentage of loans that we have in our portfolio is actually 3.7 percent. So it is important to us to be able to show to you that we are actually exceeding, in our portfolio, what the demographics would say.
    Mr. LUCAS. Thank you, Mrs. Clayton.
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    Mrs. CLAYTON. Thank you. Mr. Chairman, could he provide it to the committee?
    Mr. LUCAS. I would be pleased. Any information would be made available.
    Mr. LOWREY. And I would like to follow up just a second on one of the things that Mr. Hilliard asked for. We can certainly provide that to you based at the district level. We are prohibited from collecting this information about race, creed, religion, that sort of thing, at time of application by the Equal Credit Opportunity Act. As I suspect, some of these other gentleman and ladies will be also. So we can give you information that we are able to collect by surveys and that sort of information, but it may be very difficult for us to provide the information by State, simply because we are prohibited from collecting that information at the time of application for a loan.
    Mr. LUCAS. The committee understands that and we will expect you to provide what is available and within the guidelines of Federal law, of course.
    Mr. LOWREY. And we will do that.
    Mr. LUCAS. And I certainly would assure one of my dear colleagues, that rural development is an important thing for this entire committee and this Chairman certainly. Mr. Osborne.
    Mr. OSBORNE. Thank you, Mr. Chairman. I guess I would like to start with Mr. Hague. And I noticed that you mentioned that you oppose national charters, Farm Credit, oppose GSE status, Farm Credit. And I would like to maybe flip that question a little bit. Rather than removing some things from Farm Credit, do you see some things that could be added to the bankers that would make what you would feel a more level playing field?
    Mr. HAGUE. Well, I agree with your original comment that banks are the No. 1 lenders to American agriculture. And we stand by the U.S. Treasury's statement that expansion of the Farm Credit System is bad public policy. And I think what you are getting at is that banks pay taxes. There have been some things talked about that could benefit banks in that regard and possibly level the playing field. And one is that banks be able to retain earnings.
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    And, as you know, any business, you have got to retain capital and earnings in order to serve your customers and we are real proud of our record in servicing small, beginning family farmers. And in order to do that, to serve the businesses in our communities, we have got to retain capital. So if we could retain that capital and not pay taxes on it until later—I am not advocating that we never pay taxes on it. If, at a later date, we should pay out that capital, or those retained earnings, say, in the form of dividends, then, at that time, it would be taxed. Am I getting at your question?
    Mr. OSBORNE. Right. And also, in access to capital. Do you feel like you are getting adequate access to capital at the present time?
    Mr. HAGUE. Well, obviously, we don't have GSE status, which is an advantage that we don't have. We are continually working on new ways to access capital. And I think you will find, and we have discussed, that the access to capital in rural America is often times a big problem. One thing the American Bankers Association is doing, we are working on a project now in connection with some others, and it is in its infancy stages, but to develop ways to get more capital to rural America where it is badly needed. Your point is very well taken.
    Mr. OSBORNE. OK. Thank you. Just quickly, a couple of other questions. We have been talking a lot about small farmers and beginning farmers. I would like to ask Mr. Robinson, first of all, how do we define a small farmer? How do we define a beginning farmer or a young farmer? And in the area I am from, maybe 50 years old is a young farmer because the average is 60. And it seems to me that unless we have some adequate definition, it is very difficult to set up programs as to who these folks are.
    Mr. ROBINSON. Thank you for the question. I think the standard definition has been those that have the gross receipts—well, for the small farmers, those who have gross receipts less than $250,000, which encompasses a large number of farmers. The beginning farmer that we have come to know on a day-to-day basis, those persons—you could be 50 years old and just starting. Those persons, as I understand it, through definitions, through guidelines of the USDA, those persons who have been farming less than 10 years. That also encompasses quite a number of farmers—up to 10 years. So a person could be a beginning farmer and having been there all but 9 years or so.
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    The person that I think that, in my testimony, that I have really emphasized has been those struggling—and as has been alluded to by the other member of the committee, those struggling, those with limited resources, minority, small-scale producers, who still would like to reap the benefit of having some of its tax dollars returned to their communities. So those are the persons that I think we make the reference to when we say beginning, minority, small-scale farmers—those who do not meet eligibility criteria to walk into banks and really be able to meet the standard criteria. They need a safety net, a shot in the arm, something that will cause them to get those funds, for they are not able to get them otherwise.
    Mr. OSBORNE. All right. Thank you, Mr. Chairman.
    Mr. LUCAS. Mr. Kennedy.
    Mr. KENNEDY. Yes. And thank you all for your testimony. As I talk with farmers and other panels we have heard today, a lot of the concern they have is that our farm programs really go into higher land prices, not really helping the farmers. And in the 1980's, we struggled, and you all in your organizations, struggled with falling land prices. And yet we have historic low levels of commodity prices, yet the land prices are continuing to hold up.
    But I am not looking, obviously, to reduce land prices and create the same type of issues we had in the 1980's, but I am seeking you guys' input as to how we can make sure we are designing a program that is really going to help the farmer, not just help the landowner, which are increasingly becoming two different people. So those of you that are involved in land lending, if you could please respond to that, I would appreciate it.
    Mr. LOWREY. Congressman, I will give it a shot. Obviously, the net cash flow that you have provided to agriculture has held up the value of properties. And the part of the country that I work with on the east coast and the south, generally has so much of an urban influence that those program payments are not necessarily driving up the price of land in the south and the east coast. In fact, if you look at all of our States, only about 13 percent of the net cash flow, net cash income of farmers, is coming from Government payments because of the high level of specialty crops and livestock operations in our part of the country.
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    Certainly, we think what you have done has been very important to hold up the economic base of agriculture because it touches so many other industries. I know that you are wrestling with ways to touch other crops and deal with AMTA payments. But I think that you don't sell yourself short. You have done a wonderful thing by not only holding up the farm income, but supporting that part of the economic activity of this country that touches agriculture.
    So I probably talked around your question some. I don't know of a way for you to—anything that you do that changes the net cash flow stream back to agriculture, will have some impact on land values. If we keep it high, it has an impact of maintaining the values. But if we let those cash flows change dramatically downward, then you are going to have a slip in land values.
    Mr. LEIGHTY. Yeah. I would agree. I might point out, it is interesting of the area of where I live and serve, we have a large percentage of our land in grass for cattle ranching. And, as you know, our cattle ranchers are not receiving payments, such as the grain producers. And even in those cases, land values continue to march up beyond what you would expect that the prices that they sell for are above what anyone can pay and realize as good a return as they could on most any other investment. So it is not just limited to those land prices affected by the crop payments.
    And I would echo what Mr. Lowrey said, as far as if you don't have a program somewhat similar to what you have done in the past, you are going to see even worse profitability in the industry. We have many borrowers that—in fact, the majority of our borrowers simply would show losses if it had not been for the additional payments that have been made available. And even with those payments, we see a number of our farm producers that 2 years out of 5, the last 5, would show some losses even with those. So as he said, don't sell yourself short. Without what you have been doing, it would have been a disaster.
    Mr. KENNEDY. Well, I think part of the things we are wrestling with is that you are saying is general economic conditions that are increasing land prices, whether it be the northeast or just the fact that there is only so much land in this country—that combined with them also increasing the price of the dollar, is making it very challenging on us here.
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    And, finally, maybe the people from—again, who would sell crop insurance—have you seen much affect in terms of both planting patterns or efforts that go within increased yields or increase usage of crop insurance since we have implemented those reforms in the prior year?
    Mr. LEIGHTY. Most definitely—more use of the crop insurance. It is very—and not as much planting patterns in our own area, but as far as accessing and taking advantage of insuring the crops, we have seen a large increase in our users. Yes.
    Mr. HAGUE. And, as I testified, we would encourage you to continue to make improvements in crop insurance.
    Mr. KENNEDY. I thank you for your comments. And my last question, if someone could respond—I think the American Bankers Association, you talked about on the LDP effects that weren't really 100 percent what you would like. We had the corn growers that presented a proposal to us that had a holistic approach based on farm income, not just on price, and, yet, chose to go with recourse loans instead of non-recourse loans because they were having a holistic approach for their safety net that included both price and quantity. How big of an impact would the farm program moving to recourse loans have on the banking system?
    Mr. HAGUE. We are concerned about a program that relies on average to above-average crops to receive a lot of the payments. And we think there is a better way to do it. The bottom line out there is that our American producers need certainty. They need to know what they are going to get. And when you have got some areas that have had severe droughts and things like that and didn't have the production, then their payments were drastically lower, instead of more certainty, where they should have been higher.
    Mr. KENNEDY. OK. Well, my time has run out. Thank you for your comments.
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    Mr. LUCAS. Mr. Thune.
    Mr. THUNE. Thank you, Mr. Chairman, and thank you, panel. I am just curious what your perspective might be on what we are doing differently today that has put the agricultural lending community in fairly good position relative to where we were back in the 1980's, when we had the same type of depressed commodity prices and all kinds of foreclosures and all kinds of problems.
    And I guess I am curious as to whether it is because as lenders, you have changed the way that you do things and it is more cash flow-oriented versus asset-based or are we, with the farm programs we have today, inflating land values because of all the Government payments that are going out so that if those land values ever started falling, would we have the same sort of problems we had back in the 1980's? And that is a very circuitous way to ask a question, but what are we doing differently today than we were then, because, obviously, it seems to me to be a very different—as someone who sort of observed and lived through that period, a very different period of time now.
    Mr. LEIGHTY. I would take a stab at that. I think the 1970's there was a mentality of inflation in land values, inflation in general. That if any dollars you could borrow to buy land, 3 years later it would be worth 30, 40 percent more, so you had better get on that bandwagon and borrow the money and you could always cash in at that higher price if you needed to. And what we saw was deflation in values and the profitability wasn't there with low commodity prices. So, to a large degree, there was asset-based lending. I think the lenders need to take a great deal of the responsibility for that and the borrowers wanted to participate in that and make money in that form.
    And, in reality, when the land—many people paid 2,000 an acre for land and when they realized they couldn't make their payments, had to go to the auction block, and maybe it sold for $12,000 an acre or $900 an acre. And I do think there has been a shift away from asset-based lending, much more to making the cash flow projections support the borrowing. That would be my opinion.
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    Mr. THUNE. OK. Thank you.
    Mr. LOWREY. Congressman, I would also agree with that. It is some of both. We have certainly done a better job of underwriting our portfolios than we did in the 1970's. I can remember coming to work in the mid-1970's, and there was not a place for the employees to park because there were so many farmers waiting for you to open up to apply for a loan. So it was a much different situation. We are better underwriters. We are much more concerned with the cash flow that an operation can generate, rather than just the collateral under the loan. And I think that flows through all the banking industry. I know it flows through the Farm Credit System.
    Your support that you have given the program, the ad hoc payments that have been on top of some of the other programs, all of that has availed itself to a much better situation today for the lender. And, as I said earlier, had the amount of Government assistance not been there, you would still see some very difficult times with the people on this panel and the people back home.
    Mr. THUNE. If we shifted sort of emphasis on the new program—and I guess, it seems to me at least that the AMTA payments gets factored into the land values and everything else, and, perhaps, artificially inflate some of those land values—if we go to a different delivery system for payments or whatever, I suspect, in some way, a lot of money is going to be out in the agricultural economy, in any case. But is there a scenario in which those land values begin to fall because they aren't supported by the AMTA payments and some of the Government payments that are sort of decoupled from production that we have today?
    Mr. LOWREY. As we talked a little bit a while ago, anything that we do to change that cash flow associated with that piece of property, is going to have some impact on the value. So it is a complicated equation. It has to do with—if the economies in Europe and Asia can pick up and we can get better export prices that help us get better commodity prices, then that changes the equation. But anything that changes that cash flow stream back to the farm associated with that piece of property, is going to have some impact on the value.
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    Mr. THUNE. OK.
    Mr. LEIGHTY. I would fear that any action that would result in lower prices would have the unintended effect of brining in more outside investors—doctors, attorneys, people that might have some extra money to invest—and that it would not have the impact of making land more affordable for beginning farmers. I just think it is very hard to divorce land values from any payment programs that you are going to conceive, whether they are much different than what we have now. I am certainly not convinced that any action that is going to result in lower land values will be beneficial to our country.
    Mr. THUNE. I don't think it would be beneficial to the—certainly the lenders and to the agricultural economy, generally, either. I was just asking, I guess, from a policy standpoint, the current programs, the way they are delivered, they are factored in, I think, in the land values, and whether or not there would be some adjustment that is made if you had a different mechanism by which some of those payments were delivered to producers. Because it is strange, you have to admit. You have got falling commodity prices, or at least commodity prices that have stabilized at a very low level, and, yet, you continue to see these increasing land values and that the productive value isn't there. It it is the payments that seem to be, at least, supporting that. But just an observation. Mr. Chairman, I yield back. Thank you.
    Mr. LUCAS. Thank you, Mr. Thune. And if the panel would indulge for a few more questions, we will then turn you loose and express our appreciation. A couple of the underlying points that come through in testimony, and I have read all of your written testimony—a couple things that reach out and grab me. Number one, the challenge of directing resources so that they address the needs of a large part of our potential farming community out there that have difficulty in the present system.
    That said, though, let me touch for just a moment, Mr. Hague, Mr. Leighty—your resources in your financial institutions are a combination of deposits made by your bank customers and the capital, the equity of your owners. Correct?
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    Mr. HAGUE. Correct.
    Mr. LUCAS. Not your money. It is the money that belongs to those two folks. Mr. Lowrey, your resources are a combination of the patronage capital accumulated by your members, as a co-op, and the bondholders money that you use, borrow to use, and then are accountable for back to them.
    Mr. LOWREY. Yes.
    Mr. LUCAS. Which brings us around to the concept of which is more important, directing resources, or the safety and soundness of those items. From the perspective of all three of you, is it better that you be challenged to direct resources or is it better that some entities, such as USDA, FSA be given the responsibility and the challenge of trying to make sure that those resources wind up in appropriate places?
    Mr. LEIGHTY. I think there has to be a combination, as we currently have now. I would say to you that in the case of independently owned banks, it is my money in the capital account as an investor who is at risk and has money borrowed to pay for that stock in the bank. Believe me, it is not some intangible investor that I don't see and know. It is the local people in our community that are the shareholders, along with myself. So that is a little different approach.
    Mr. LUCAS. But if we legislatively drive resources and clearly, as good financial officers in all of your institutions, if the opportunities to make these loans exist and exist in a fashion that you feel fairly competent in, I would assume you are going to make those loans?
    Mr. LEIGHTY. Yes.
    Mr. LOWREY. Mr. Chairman, if I could, as I said earlier, we want to make every bankable loan that we can make. We want to help every farmer that we can help. And we will use the guaranteed programs, to the extent that we can use those, to help with every situation that we can. I do think, though, that you cannot take a private entity. We are a cooperative. We are owned by all the members who do business with us. It is a difficult situation that you get into if you have one group of stockholders actually subsidizing another group of stockholders.
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    Also, it is very difficult to maintain a credit culture where sometimes you are doing what we sometimes refer to as soft credit and the other times you are trying to maintain good underwriting standards. So I think that we have to establish a culture that generates acceptable underwriting standards so that we will always be a safe and sound institution. We want to help everywhere that we can. But if we do anything that takes us beyond the pale of being a safe and sound institution, then we have created a problem for the taxpayer, and potentially created a problem for the investor.
    And while it is an admirable public purpose that we support, we think much of that has to be done through USDA.