TITLE II

CONSERVATION

**SUMMARY OF CONSERVATION TITLE REFORM**

***Recommendations In Brief***

Improve and increase funding of USDA conservation programs to better
serve farmers, the environment, and all U.S. citizens.

***Problem***

USDA has multiple conservation programs within several agencies that can
often lead to overlap and redundancy. Each of these conservation
programs has its own eligibility requirements, regulations, policies,
applications, and administrative actions that can lead to confusion and
complications for producers seeking help. These inefficiencies result in
increased administrative costs, leading to fewer dollars available for
producers and fewer environmental benefits.

These disparate conservation programs are sometimes ill-equipped to
solve complex agricultural landscape problems. These problems point to a
need for streamlining, consolidation, and simplification. John from
Maryland noted, "Currently, programs are implemented in a piecemeal
fashion with no integration or connection with other programs or
activities with similar objectives. We urge better integration and
implementation of conservation programs...to ensure the conservation and
environmental benefits of these programs can be most effectively
realized."

Each program has strengths and administrative flexibilities, but these
beneficial attributes are not applied across all relevant programs.
Additionally, many of these programs do not have market-based or
merit-based funding mechanisms to ensure limited conservation funding is
allocated to the highest needs and best uses.

At the same time, the needs of beginning and socially disadvantaged
producers are not being fully addressed, and demand for existing
conservation programs often outpaces resources available. Tim from
Oklahoma mentioned, "The biggest problem has been an under-funding of
existing conservation title programs." And Philip, from California said,
"A strong conservation title in the 2007 farm bill benefits everyone."

***Recommended Solution***

The Administration is recommending several changes to Title II of the
farm bill -- entitled "Conservation." Following is a list of the major
components of the package.

1.  Consolidate existing programs (Environmental Quality Incentives
    Program, Wildlife Habitat Incentives Program, Agricultural
    Management Assistance Program, Forest Land Enhancement Program,
    Ground and Surface Water Conservation Program, and the Klamath Basin
    Program) that provide financial assistance to customers through
    cost-share and incentives for working lands under a newly-designed
    Environmental Quality Incentives Program (EQIP). Simplify and
    streamline these activities, reduce redundancies, and produce more
    cost-effective environmental benefits. Create a new Regional Water
    Enhancement Program (RWEP) that focuses on cooperative approaches to
    enhancing water quantity and/or quality on a regional scale, and
    invest additional resources in the Conservation Innovation Grants
    program. These important changes to the EQIP program would invest an
    additional \$4.250 billion. (For further information, see the
    proposal entitled "Environmental Quality Incentives Program" on
    pages 43 -- 45.)

2.  Modify the Conservation Security Program (CSP) to create a
    stewardship program that emphasizes incentives for implementing
    higher levels of conservation practices. Expand CSP enrollment from
    its current 15.5 million acres to an estimated 96.5 million acres
    over the next 10 years, increasing investment by an additional \$500
    million funding over the 10 year baseline. (For further information,
    see the proposal entitled "Conservation Security Program" on pages
    46 -- 48.)

3.  Consolidate three existing easement programs for working lands into
    one new Private Lands Protection Program to streamline processes,
    eliminate redundancies, and expand the strengths of each program.
    Invest an additional \$900 million over 10-year baseline in this new
    easement program. (For further information, see the proposal
    entitled "Private Lands Protection Program" on pages 49 -- 50.)

4.  Reauthorize and enhance the Conservation Reserve Program (CRP) to
    focus on lands that provide the most benefits for environmentally
    sensitive lands. And in addition, give priority within whole-field
    enrollment for lands utilized for biomass production for energy.
    (For further information, see the proposal entitled "Conservation
    Reserve Program" on pages 51 -- 52.)

5.  Reauthorize the Wetlands Reserve Program (WRP) and consolidate the
    floodplain easements program of the Emergency Watershed Program into
    the WRP. Increase the total enrollment cap to 3.5 million acres, but
    maintain the fiscal year enrollment goal of 250,000 acres. This
    increase in acreage equates to an investment of \$2.125 billion over
    ten years. Also introduce popular attributes of other easement
    programs into WRP. (For further information, see the proposal
    entitled "Wetlands Reserve Program" on pages 53 -- 54.)

6.  Expand conservation compliance to include "Sod Saver" to discourage
    conversion of grassland to crop production. (For further
    information, see the proposal entitled "Implement 'Sod Saver' to
    Discourage the Conversion of Grassland into Cropland" on pages 55 --
    56.)

7.  Designate a portion of each conservation program specifically for
    beginning farmers and ranchers, as well as socially disadvantaged
    producers. (For further information, see the proposal entitled
    "Conservation Access for Beginning and Socially Disadvantaged
    Producers" on pages 57 -- 58.)

8.  Invest \$50 million over ten years to encourage new private sector
    environmental markets to supplement existing conservation and
    forestry programs. Introduce market forces into existing
    conservation programs to provide greater environmental returns from
    federal and landowner investments in conservation. (For further
    information, see the proposal entitled "Market-Based Approach to
    Conservation" on pages 59 -- 60.)

9.  Repeal Section 1241(d) of the 1985 Food Security Act, the regional
    equity provision, to allow funding to be allocated based on the
    highest need and best use of conservation funding. (For further
    information, see the proposal entitled "Merit-Based Funding
    Allocation" on page 61.)

10. Consolidate two emergency response programs - the Emergency
    Watershed Protection (EWP) and the Emergency Conservation Program
    (ECP) - into a new Emergency Landscape Restoration Program. Provide
    a one-stop source for landowners who need assistance after a
    catastrophic event to restore land to its productive state and
    prevent further land and water impairments. (For further
    information, see the proposal entitled "Emergency Landscape
    Restoration Program" on pages 62 -- 63.)

**ENVIRONMENTAL QUALITY INCENTIVES PROGRAM**

***Recommendation in Brief***

Consolidate existing programs (Environmental Quality Incentives Program,
Wildlife Habitat Incentives Program, Agricultural Management Assistance
Program, Forest Land Enhancement Program, and Ground and Surface Water
Conservation Program, and reauthorize the Klamath Basin Program) that
provide financial assistance to customers through cost-share incentives
for working lands under a newly-designed Environmental Quality
Incentives Program (EQIP). Simplify and streamline these activities,
reduce redundancies, and produce more cost-effective environmental
benefits. Create a new Regional Water Enhancement Program (RWEP) that
focuses on cooperative approaches to enhancing water quantity and/or
quality on a regional scale, and invest additional resources in the
Conservation Innovation Grants program. These important changes to the
EQIP program would invest an additional \$4.250 billion.

***Problem***

Multiple USDA cost-share programs are redundant and overlap. Each of the
current programs has specific land and producer eligibility
requirements, regulations, policies, applications, and administrative
actions that can be confusing and time-consuming to producers.
Additionally, multiple, redundant programs result in increased
administrative costs, reducing funding available to producers. As we
heard from Austin at the Delaware Farm Bill Forum, "there are numerous
programs out there. It\'s hard for landowners to keep them all
straight...any way we can work to streamline those and make it easier, I
think while it\'s obvious, it\'s certainly very important." The
complexity also impacts the program's ability to assist producers. As we
heard from Bill in Nebraska "the process for applying and obtaining EQIP
funds remains an obstacle to successfully helping many producers."

These disparate conservation programs do not always provide the correct
combination of treatment needed to resolve complex agricultural
landscape problems. Under the current system, the focus is often on an
individual resource concern. For example, the Wildlife Habitat
Incentives Program (WHIP) only focuses on wildlife habitat while the
Ground and Surface Water Conservation Program (GSWC) of EQIP only
focuses on water quantity, instead of focusing on what is the best for
the ecosystem as a whole.

Additionally, USDA is limited in the area of technology transfer and
farmer-to-farmer demonstrations, which could rapidly accelerate adoption
of conservation practices. Current programs are achieving results;
however, limited mechanisms are available to transfer those results to
the general public.

***Recommended Solution***

The Administration proposes consolidating the existing agricultural
conservation cost-share programs to strengthen, streamline, and improve
current assistance while increasing the simplicity, accessibility, and
understandability of these services. One program would greatly simplify
the application process for landowners, which can be especially
burdensome for those with multiple land uses on their farms or ranches.
Funding for EQIP would be increased by \$4.25 billion during FY
2008-2017, a 30 percent increase in mandatory funding.

Additionally, the newly enhanced EQIP would be expanded to a broader
cross-section of agricultural producers and private landowners.
Eligibility for EQIP cost-share assistance would include the following:
cropland (including organically farmed land), grazing lands,
agricultural production areas, confined feeding operations, irrigated
land, wildlife habitat, native prairie, and private non-industrial
forest lands. This broader range of land uses should avoid the need for
separate programs under the farm bill to address niche interests.

A more comprehensive program would allow the Department to work with a
landowner to address all the resource concerns identified on America's
working lands instead of issuing one contract for one environmental
solution and a second contract for another environmental fix. This new
approach would allow USDA to address more resources on a wider variety
of land uses as well as optimize technical assistance funding. The new
program would allow for a combination of treatments that effectively
target complex agricultural landscape concerns, such as air quality in
the San Joaquin Valley, nutrient loading in the Chesapeake Bay, hypoxia
in the Gulf of Mexico, or water needs in the Klamath Basin.

The program could be utilized to address major resource concerns such as
air quality, water quality and quantity, soil erosion, and wildlife yet
still effectively target specific concerns such as controlling invasive
species, re-establishing native vegetation, managing non-industrial
forestland, stabilizing streambanks, protecting, restoring, developing
or enhancing unique habitats, removing barriers that impede migration of
certain species, and addressing the needs of threatened and endangered
species across ecosystems.

In addition to the traditional EQIP cost-share program, the
Administration proposes the creation of a new Regional Water Enhancement
Program (RWEP) that focuses on cooperative approaches to enhancing water
quantity and/or quality on a regional scale. The RWEP would invest
mandatory funding of \$175 million to producers annually to address an
important missing component in the federal government\'s conservation
delivery system-large-scale, coordinated water conservation projects.
This new program would:

-   Coordinate and competitively fund large-scale (watershed or
    irrigation district level) water conservation projects

-   Target working agricultural landscapes, including crop, pasture,
    grazing, and orchard lands

-   Focus on one to two key water quantity/quality objectives per area

-   Include performance incentives to encourage a high percentage of
    producer participation in a project area and achieve cooperative
    conservation outcomes

-   Establish interim performance targets that must be achieved in order
    to renew project funding.

This new program in tandem with multiple conservation tools (including
farmland management practices, easement purchases, and ecosystem
restoration assistance) would provide flexibility to cooperative
conservation partners to achieve improved water quantity and quality
goals.

Additionally, a more robust Conservation Innovation Grants (CIG)
program, funded at \$100 million annually (currently funded at \$20
million), would provide opportunities to stimulate the development of
innovative practices, accelerate development of market-based models,
result in emphasis and creativity in addressing regional resource
concerns (i.e., Klamath Basin, Chesapeake Bay, and San Joaquin Valley),
and find tools to assist small-scale producers. Grants would be used for
technology transfer and farmer-to-farmer workshops and demonstrations of
conservation success. These activities will encourage producers to
further adopt innovative conservation practices.

***Background***

The 2002 Farm Bill contains six voluntary conservation cost-share
programs, each providing a Federal payment to share in the cost of
implementing conservation practices on private land. The current
programs provide assistance to eligible producers for specific resource
concerns or specific types of land.

EQIP addresses soil, water, air, and related natural resource concerns,
with two EQIP components focusing on specific concerns: the GSWC
addresses irrigated land; the Klamath Basin program addresses specific
concerns to that region of the country; WHIP addresses development of
habitat for upland wildlife, wetland wildlife, threatened and endangered
species, and fish; the conservation portion of the Agricultural
Management Assistance Program addresses risk management activities
related to irrigation, grazing lands, and organic growers; and the
Forest Land Enhancement Program addresses resource concerns on private
forest lands. Each program has a unique regulation, unique programmatic
requirements for participation, and unique application, contracting, and
payment processes. Programs are implemented through landowners and land
users who apply structural, vegetative, and land management practices on
eligible lands on a voluntary basis. All of the programs are delivered
locally with local producers, producer groups, and other interests
having input into the solutions to resource problems.

CIG is a voluntary program to leverage Federal investment to stimulate
the development and adoption of innovative conservation approaches and
technologies. Under CIG, EQIP funds are used to award competitive grants
to non-Federal governmental or non-governmental organizations, Tribes,
or individuals. CIG enables the Administration to work with other public
and private entities to accelerate technology transfer and adoption of
promising technologies and approaches to address some of the Nation\'s
most pressing natural resource concerns. CIG benefits agricultural
producers by providing more options for environmental enhancement and
compliance with Federal, State, and local regulations.

**CONSERVATION SECURITY PROGRAM**

***Recommendation in Brief***

Modify the Conservation Security Program (CSP) to create a stewardship
program that emphasizes incentives for implementing higher levels of
conservation practices. Expand CSP enrollment from its current 15.5
million acres to an estimated 96.5 million acres over the next 10 years,
increasing investment by an additional \$500 million funding over the 10
year baseline.

***Problem***

CSP is complicated for customers and staff. Complaints about its
complexity surfaced during the USDA Farm Bill Forums, during recent
Congressional farm bill hearings, in correspondence from Members of
Congress, and in applicant complaints and appeals. Another problem with
the current program is the low level of environmental benefit per dollar
invested.

CSP does not have the resources to accept every eligible applicant,
despite being viewed by some as an entitlement. The level of funding
available for the program has changed six times. At the Farm Bill
Forums, Art from Washington State contended, "to only offer this program
to certain identified watersheds creates an uneven playing field amongst
neighboring farmers." While Gary in Ohio added, "the CSP must be
available to all producers, implemented as a nationwide program that is
workable, and adequate funds must be appropriated to make it an
effective program."

An additional concern with the CSP program, as currently structured, is
that some of the payments may be taxable and/or considered
trade-distorting under World Trade Organization (WTO) guidelines.

***Recommended Solution***

The Administration proposes reauthorization of CSP with the following
adjustments: reduce complexity and increase the level of conservation by
moving from three tiers to two; remove base, maintenance, and cost-share
payments; provide for ranking of applications; expand the program by
increasing funding during FY 2008-2017 to approximately \$8.5 billion,
\$0.5 billion above the budget baseline for the current program; and
allow the program to reward the best stewards in the nation. These
changes would protect the program from WTO challenges, result in more
equity in availability and distribution of the program, and provide a
greater environmental return.

A tier of the existing CSP would be eliminated, resulting in a
two-tiered system with a Progressive Tier and a Master Tier. This
simplification would allow USDA to more easily delineate those who are
performing conservation and want to do more, and those who are currently
performing at the master conservation level. Combining aspects of
current Tier I and Tier II requirements, the Progressive Tier would be
available in five year contracts to producers who have addressed water
and soil quality concerns to a sustainable level and agree to address a
third resource concern to a sustainable level by the end of the
contract. Like the current Tier III, the Master Tier would be available
in 10 year contracts to producers who have addressed all existing
resource concerns to the sustainable level and will undertake additional
activities, such as higher levels of conservation treatment, on-farm
demonstrations, and field trials.

The enhanced CSP would enroll about 10 percent of the Nation's eligible
land, or 96.5 million acres, during the 10 year period FY 2008-2017,
compared with 15.5 million acres participating in the program in 2006.

Providing financial assistance for CSP through enhancement payments
rewards exceptional conservation efforts and additional activities that
provide increased environmental benefits above the normal level required
to sustain a natural resource. By removing the base and maintenance
payments, the new program eliminates payments that may be taxable and/or
considered potentially trade-distorting under WTO criteria. Eliminating
the cost-share payments eliminates a redundancy with the Environmental
Quality Incentives Program, which also simplifies the program.

The current program prohibits ranking of applicants. As such, it
requires a complex process for selecting applications when applications
exceed the available funding. By ranking applications the best may be
rewarded and technical assistance costs reduced. A simplified two-tier
system, with ranking, would allow the program to be offered annually on
a broader geographic basis rather than only in a limited number of
watersheds. This competition raises the level of conservation practiced
nationally and provides additional environmental benefits generated by
program participants.

***Background***

The Conservation Security Program (CSP) is authorized by the Farm
Security and Rural Investment Act of 2002. The CSP is a voluntary
program that provides financial and technical assistance to producers
who advance the conservation and improvement of soil, water, air,
energy, plant and animal life on Tribal and private working lands.

The current program, which provides stewardship payments to producers,
has increased the level of conservation across the country as producers
seek to become eligible for the program. However, statutory changes in
the program and a complex structure have hindered its potential.

CSP emphasizes water quality and soil quality as nationally significant
resource concerns. Currently, the CSP rewards three levels of
conservation treatment. Tier I participants must address water quality
and soil quality concerns to the sustainable level *on part of their
operation prior to application.* Tier II participants must have
addressed water quality and soil quality concerns to the sustainable
level *on their entire operation prior to application.* Tier II contract
participants must also treat an additional significant resource concern
by the end of the contract period. For Tier III, the contract
participant must have addressed *all existing resource concerns to the
sustainable level on their entire agricultural operation before
application*.

USDA currently uses a watershed approach to administer CSP. Watersheds
are prioritized based upon a nationally consistent process that uses
existing natural resource, environmental quality, and agricultural
activity data. Sign-ups for CSP participation are rotated between
watersheds on an annual basis. This priority watershed delivery approach
has reduced the administrative burden on applicants and minimized the
cost of processing a large number of applications that could not be
funded.

Technical assistance is available to the participants through USDA or an
approved Technical Service Provider. These services include application
assistance, conservation stewardship plan development, and conservation
application. CSP financial assistance payments include:

-   An annual stewardship component for the base level of conservation
    treatment;

-   An annual existing practice component for the maintenance of
    existing conservation practices;

-   An enhancement component for exceptional conservation effort and
    additional activities that provide increased resource benefits
    beyond the prescribed level; and

-   A one-time new practice component for additional needed practices.

**PRIVATE LANDS PROTECTION PROGRAM**

***Recommendation in Brief***

Consolidate three existing easement programs for working lands into one
new Private Lands Protection Program to streamline processes, eliminate
redundancies, and expand the strengths of each program. Invest an
additional \$900 million over 10 year baseline in this new easement
program.

***Problem***

USDA has multiple working-lands easement programs with the shared goal
of protecting agricultural lands and open spaces. Each has unique land
and producer eligibility requirements, regulations, policies,
applications, and administrative actions. Multiple programs result in
increased administrative costs, which reduce the efficiency of the
programs and resources available to expand environmental benefits.

A concern commonly expressed during Farm Bill Forums was articulated by
Gordon in Connecticut, who said, "We have some of the best farmland in
the world...But, we are rapidly losing it irretrievably to development."
Wayne in Missouri added, "the reason grassland is so expensive depends
less on the price of cattle than the amount speculators are willing to
pay for it to turn it into 10-acre ranchettes and strip malls." While
Bruce in Montana noted a consolidated program would provide additional
benefits for producers suggesting, "The Wetlands Reserve Program, the
Farmland Protection Program, the Grassland Reserve Program might be
combined under one umbrella."

Currently, flexibilities and strengths of individual programs are not
applied across all easement programs, such as the leveraging of Federal
funds with State, local, and private contributions under the Farm and
Ranchland Protection Program (FRPP). Additionally, regulatory
assurances, such as those provided under the Healthy Forest Reserve
Program (HFRP), are not currently available when protecting and
restoring native grasslands under the Grasslands Reserve Program (GRP).

***Recommended Solution***

The Administration proposes consolidating the existing working-lands
easement programs (FRPP, GRP, and HFRP) into a new Private Lands
Protection Program.

The new easement program would invest an additional \$90 million in
annual mandatory funding over the current baseline of \$97 million. This
near-doubled funding commitment would preserve prime and unique
cropland, open space, grazing lands, native prairie, floodplains, and
associated private non-industrial forest lands. The single program would
reduce the variety of standards and regulations that result in increased
complexities and add to the length of time to consider applications. The
program also would provide mechanisms to support the monitoring
necessary to ensure compliance and demonstrate the long-term benefits of
the program. The program would provide additional consideration in the
ranking process for landowners who provide open access for public
recreation on easement lands.

The program would build on the popular attributes of existing programs:

-   As with GRP, it would allow for third parties to hold easements
    while preserving the option for the federal government to hold the
    easement, as well.

-   The new program would incorporate market-based features, such as
    including landowner contributions and other leveraging opportunities
    of FRPP as a key feature of the new combined program and a means of
    gaining the maximum benefit for the investment of taxpayer dollars.

-   As with HFRP (and similar to the Wetlands Reserve Program), a key
    feature of the combined program would involve allowing the landowner
    to perform restoration of the site.

-   As with HFRP, the new program would provide assurances and certainty
    in compliance with Federal and State regulations using a cooperative
    conservation approach.

***Background***

The 2002 farm bill contains two voluntary conservation easement programs
for working-lands; each provides a federal payment to secure certain
rights desired by the public. While the statutory purposes of each
program slightly differs, there is a common theme to each of the
programs -- protect the Nation's agricultural lands, including its
natural resources, from land fragmentation and transition to other land
uses.

The current programs pay eligible producers for specific rights on their
land. FRPP addresses protection of prime and unique farm and ranch land;
GRP addresses grasslands; and HFRP, which was authorized in the Healthy
Forest Restoration Act, addresses forest land which provides habitat for
threatened and endangered species.

These easement programs are implemented through landowners who
voluntarily agree to a deed restriction and some degree of landscape and
resource restoration. Each program has unique regulations, unique
programmatic requirements for participation, and unique application,
contracting, and payment processes.

**CONSERVATION RESERVE PROGRAM**

***Recommendation in Brief***

Reauthorize and enhance the Conservation Reserve Program (CRP) to focus
on lands that provide the most benefits for environmentally sensitive
lands. And in addition, give priority within whole-field enrollment for
lands utilized for biomass production for energy.

***Problem***

As CRP contracts expire in the coming years, high commodity prices and
other market forces within agriculture will likely provide incentives
for producers to convert current CRP land into agricultural production.
Growing demands for agricultural commodities globally and for use in
energy production have increased the competition for land. As Eric from
Alabama told us during a Farm Bill Forum, "Many of the landowners in my
area... appreciate it. However... our area needs that land back in
production... We suggest that you take a deeper look at this program in
the future." And many wanted the CRP program to have a stronger focus on
environmentally-sensitive lands, such as Jane, from Montana who said,
"The Conservation Reserve Program should place its highest emphasis on
environmentally-sensitive land and practices that will improve the soil
and water quality in the long term."

***Recommended Solution***

The Administration proposes to focus CRP on lands that provide the most
effective environmental benefit. Under the proposal, these
environmentally sensitive lands would continue to be enrolled in
continuous CRP and the Conservation Reserve Enhancement Program (CREP).
The criteria for continuous CRP would be revised to ensure at-risk
landscapes would be considered, such as enrollment of partial fields or
irrigated land in areas where water availability is limited.

General CRP sign-ups would continue to give priority to environmentally
sensitive land. However, USDA would also prioritize farmland planted in
a biomass reserve of perennial crops used for cellulosic energy
production. Currently, over 27 million acres of Conservation Reserve
Program (CRP) contracts are on farmland capability classes I to IV,
lands that are suited for growing crops. These lands could continue to
provide various environmental benefits while being used for biomass
production. These lands would also retain the ability to fulfill
wildlife habitat needs. The program would establish clear requirements
that biomass could only be harvested after nesting season. The rental
payment would be limited to income forgone or costs incurred by the
participant to meet conservation requirements in those years biomass was
harvested for energy production.

***Background***

The CRP was established by the Food Security Act of 1985 with the dual
purposes of preventing soil erosion and achieving crop supply control.
The program grew into its current emphasis on soil erosion, water
quality, air quality, and wildlife habitat through a succession of Farm
Bill amendments over the years. The CRP and the CREP are voluntary
programs for agricultural landowners or operators. Both programs provide
annual rental payments based on the agricultural rental value of the
land and cost-share assistance. The program currently has 37 million
acres of agricultural land, with about 7 million acres reserved for
continuous CRP and CREP.

The CRP is notified to the World Trade Organization (WTO) as a program
of structural adjustment through resource retirement. Under WTO
criteria, to be eligible for "green box" status, such payments must be
part of a well-defined government program that removes land or other
resources from marketable agricultural production for a minimum of three
years (permanently for livestock). Payments shall not require or specify
an alternative use for the retired resources that involves the
production of marketable agricultural products. CRP is notified as
"green box" by the United States.

Because biomass would be harvested for commercial use, the payments made
to biomass reserve participants would not qualify for "green box" status
as a structural adjustment program. However, the payments under the
biomass reserve would be designed to qualify for "green box" status as
an environmental program. To be eligible for green box status as an
environmental program, payments must be part of a clearly-defined
government environmental or conservation program and must fulfill
specific conditions under the program, including those related to
production or inputs. In addition, payments must be limited to the extra
costs or loss of income involved in complying with the program.

**WETLANDS RESERVE PROGRAM**

***Recommendation in Brief***

Reauthorize the Wetlands Reserve Program (WRP) and consolidate the
floodplain easements program of the Emergency Watershed Program into the
WRP. Increase the total enrollment cap to 3.5 million acres, but
maintain a fiscal year enrollment goal of 250,000 acres. This increase
in acreage equates to an investment of \$2.125 billion over ten years.
Also introduce popular attributes of other easement programs into WRP.

***Problem***

The WRP has active projects in all 50 States and Puerto Rico and a total
acreage enrollment of 1,893,671, with an additional 250,000 acres
expected to be enrolled in calendar year 2007. The program is scheduled
to expire in 2007. USDA heard broad support for this program in the farm
bill forums; comments like those of Cheryl in Georgia, "these programs
provide benefits to all taxpayers by providing clean water and air,
healthy soil, recreation opportunities and wildlife habitat...these
conservation programs should be reauthorized...the level of funding
should be increased and the allowable acreages for these programs should
be increased."

Currently, flexibilities and strengths of working lands programs, such
as leveraging of federal funds with state, local, and private
contributions under the Farm and Ranchland Protection Program (FRPP),
are not applied to the WRP. The Federal government pays the entire cost
of the easement and incurs all the long-term costs associated with
managing the easement. The program offers no regulatory protections for
performing activities that result in a net-benefit to the environment.
For example, under the Healthy Forest Reserve Program (HFRP), landowners
can receive certain regulatory protections when performing activities
that will result in a net-benefit to species. However, WRP participants
do not receive these same regulatory assurances.

***Recommended Solution***

The Administration proposes consolidating the floodplain easement
function of the Emergency Watershed Program into a new WRP and
increasing the enrollment cap from 2,275,000 acres to 3,525,000 acres.
Similar to the 2002 farm bill, the authorization for WRP would only
extend for the five years covered by the new farm bill, adding \$2.125
billion in mandatory funding to the program.

This expansion would be critical to meeting the Nation's environmental
goals, including the President's Wetlands Initiative to restore,
protect, or enhance 3 million acres of wetlands by 2009. The single
program would reduce the variances in standards and regulations, which
result in increased complexities and length of time required to review
applications.

Additionally, we recommend maintaining the annual enrollment goal of
250,000 acres, but basing the goal on fiscal year instead of calendar
year. This policy change would be consistent with how funds are
appropriated by Congress and would improve overall program
administration. Enhanced WRP monitoring and compliance activities should
be explicitly authorized to demonstrate the long-term environmental and
taxpayer benefits of the program.

This enhanced WRP should also build on the popular attributes of other
existing programs:

-   Like FRPP, it would allow for third parties to hold easements while
    preserving the option for the federal government to hold easements,
    as well.

-   The new program would incorporate market based features, such as
    including landowner contributions and other leveraging opportunities
    of FRPP as a key feature of the new combined program and a means of
    gaining the maximum benefit for the investment of taxpayer dollars.
    For example, the reverse auction piloted in WRP in 2006 reduced
    easement acquisition costs by 14 percent.

-   As with HFRP, the new program would provide assurances and certainty
    in compliance with federal and state regulations using a cooperative
    conservation approach.

-   The Wetlands Reserve Enhancement Program (WREP) should be modified
    to model the Conservation Reserve Enhancement Program, which would
    encourage partnerships with States to provide flexibility and
    cost-share for easement acquisition and activities associated with
    wetland restoration, creation, or enhancement within the state.

***Background***

The WRP and the WREP are voluntary programs that provide technical and
financial assistance to enable qualified landowners to address wetland,
wildlife habitat, soil, water, and related natural resource concerns on
private lands in an environmentally beneficial manner. This program
offers landowners an opportunity to establish, at minimal cost,
long-term conservation and wildlife habitat enhancement practices
through permanent easements, 30 year easements, and restoration
cost-share agreements. WRP was reauthorized in the 2002 farm bill with a
total enrollment cap of 2,275,000 acres.

A national shift from substantial wetlands losses to wetlands protection
has occurred over the past 50 years, driven by changing public
perception, scientific understanding, and policy direction. In April
2004, the President announced a national Wetlands Initiative to
accelerate net-wetlands gains over the next five years and restore,
protect, or enhance 3 million acres of wetlands by 2009.

The WRP goal is to achieve the greatest wetland functions and values,
along with optimum wildlife habitat on every acre enrolled in the
program. At least 70 percent of the wetland and upland areas will be
restored to the original natural condition to the extent practicable.
The remaining 30 percent of the project area may be restored to other
than natural conditions. The WRP focuses on:

-   Enrolling marginal lands that have a history of crop failures or low
    yields

-   Restoring and protecting wetland values on degraded wetlands

-   Maximizing wildlife benefits

-   Achieving cost effective restoration with a priority on migratory
    bird benefits

-   Protecting and improving water quality

-   Reducing the impact of flood events

    **Implement "sod saver" to DISCOURAGE the conversion of grassland
    into cropland**

***Recommendation In Brief***

Expand conservation compliance to include "Sod Saver" to discourage
conversion of grassland to crop production.

***Problem***

Properly managed grasslands provide important ecological functions.
Grasslands help to maintain habitat and migration corridors for
wildlife, supporting a rich biodiversity of plant and animal species.
Since grasslands account for large acreages in many U.S. river basins,
they are important in hydrologic processes involving stream flow,
aquifer recharge, and water filtration. In addition, grasslands
sequester substantial amounts of atmospheric carbon. In addition,
grasslands support livestock production and contribute importantly to
rural economies, including hunting and fishing, wildlife viewing, and
ranch-based recreation.

According to USDA\'s Natural Resources Conservation Service, acreage in
non-Federal grasslands fell by 24 million acres from 1982-2002. A major
factor contributing to the loss of grasslands in recent years has been
urban development and the conversion of grasslands to roads, shopping
centers, and housing developments. In addition, cropland expansion has
contributed to grassland conversion, particularly in years of strong
crop demand. The rate of conversion of grassland to cropland could
increase greatly over the next several years as increased production of
biofuels boosts the demand for corn and other crops.

Under current conservation compliance provisions, producers must adopt
soil and wetland conservation practices on fragile lands to be eligible
for farm price and income support and other USDA program benefits.
However, current conservation compliance provisions do not apply to the
conversion of grassland to cropland, unless the converted grassland is
considered to be highly erodible. Even in this situation, a producer can
elect to convert the grassland to cropland and remain eligible for farm
price and income support and other USDA program benefits, if the
converted grassland is farmed according to a USDA-approved conservation
system that provides for a specified level of erosion control.

***Recommended Solution***

The Administration recommends broadening conservation compliance
provisions to include "Sod Saver." Under the proposed sod saver
provision, grassland (rangeland and native grasslands, not previously in
crop production) converted into crop production would be permanently
ineligible for farm price and income support and other USDA program
benefits.

***Background***

The 1985 and succeeding farm bills have included conservation compliance
requirements for farmers who utilize certain USDA benefits. Conservation
compliance provisions for highly erodible land (HEL) are commonly
referred to as Sodbuster, and wetland conservation (WC) compliance
provisions are often called Swampbuster. While the legislation has been
amended several times over two decades, the central premise of wetland
and highly erodible land preservation remains in place.

The objectives of conservation compliance are to: (1) reduce soil
erosion on the Nation\'s cropland; (2) protect the Nation\'s long-term
capability to produce food and fiber; (3) reduce sedimentation and
improve water quality; and (4) preserve and protect the Nation\'s
wetlands.

To be eligible for a USDA program benefit when producing an annual
agricultural commodity, USDA program participants must apply an approved
conservation system that provides a substantial reduction in soil
erosion or a substantial improvement in soil conditions on a field or
fields that contain highly erodible land. To maintain program
eligibility, in most cases participants must also certify that they have
not produced crops on wetlands converted after December 23, 1985, and
did not convert a wetland to agricultural production after November 28,
1990.

The following USDA benefits may be affected:

(a) Direct and Counter-Cyclical Payments

(b) Marketing assistance loans, including loan deficiency payments and
    marketing loan gains

(c) Farm storage facility loans (not subject to WC)

(d) Disaster payments

(e) Farm Operating Loans authorized under the Consolidated Farm and\
    Rural Development Act

(f) Conservation Security Program (CSP)

(g) Conservation Reserve Program (CRP)

(h) Environmental Quality Incentives Program (EQIP)

(i) Farm and Ranch Land Protection Program (FRPP)

(j) Grassland Reserve Program (GRP)

(k) Wetlands Reserve Program (WRP)

(l) Wildlife Habitat Incentives Program (WHIP)

(m) Agricultural Credit Act of 1976 payments (not subject to WC)

(n) Public Law 83--566, Small Watershed Program contracts

**CONSERVATION ACCESS FOR BEGINNING AND SOCIALLY DISADVANTAGED
PRODUCERS**

***Recommendation in Brief***

Designate a portion of each conservation program specifically for
beginning farmers and ranchers, as well as socially disadvantaged
producers.

***Problem***

Natural resource concerns are indiscriminate with regard to landowner
boundaries. Beginning farmers and ranchers, as well as socially
disadvantaged producers, often have less exposure to USDA programs and
less familiarity with conservation practices. However, when provided
information and tools to assist them with their long-term conservation
goals, they take full advantage of the assistance.

Beginning farmers and ranchers, as well as socially disadvantaged
producers, are underserved by USDA programs. Beginning farmers and
ranchers are an important component of all principle operators, yet less
than one percent of this producer group applied for the Environmental
Quality Incentives Program in fiscal year 2006. These producers have not
traditionally worked with farm bill programs and are often not aware of
the types of practices needed to address common soil and water
conservation problems. Extensive outreach is appropriate to ensure these
producers are aware of these programs and practices. As Lorette noted at
the North Carolina Farm Bill Forum, "the current programs cannot be
accessed by small and particularly minority farmers. We need a lot more
resources to work one-on-one with farmers to eradicate all the problems
in the system, to get farmers into the programs that do exist."

Economies of size enable larger commercial farms to have low unit costs
when implementing conservation measures while addressing large resource
concerns. As with socially disadvantaged producers, the majority of
beginning farmers and ranchers have small operations (the majority of
beginning farmers and ranchers have operations of fewer than 50 acres).
Without special incentives, these producers are less likely to have
competitive applications for farm bill programs that target more complex
resource needs.

***Recommended Solution***

To increase adoption of conservation practices, the Administration
proposes reserving 10 percent of farm bill conservation financial
assistance for beginning farmers and ranchers, as well as socially
disadvantaged producers under a new Conservation Access Initiative. This
new initiative would maintain the higher rates of Federal cost-share,
but also direct a greater technical assistance percentage than the
traditional program to better address the needs of socially
disadvantaged agricultural producers.

Funds set-aside under the Conservation Access Initiative within the
Conservation Innovation Grants would be used for technology transfer,
farmer-to-farmer workshops, and demonstrations of conservation success
to further adoption of innovative conservation practices.

Demonstrating benefits of conservation in communities without high
adoption of conservation practices is critical to national conservation
goals. To expand the horizons of USDA conservation activities, setting
aside funds specifically for competition among beginning farmers as well
as socially disadvantaged producers will result in greater environmental
benefits for society.

The Administration also supports statutory flexibility within this
program to allow the Secretary to reallocate these reserved funds if
projections indicate that some of this funding will go unused.

***Background***

The 2002 farm bill recognizes the unique challenges of farmers and
ranchers who are just beginning their agricultural businesses. These
beginning farmers and ranchers are given special recognition in the farm
bill to encourage Americans to take up careers as farmers and ranchers
and help them succeed.

The number and percentage of beginning farmers and ranchers drops as
operation size increases. Minorities represent around 5.1 percent of all
farmers and ranchers in the United States. They operate almost 80
million acres, 8.4 percent of U.S. farmland, which is an 8 million acre
increase from 1997 to 2002.

**MARKET-BASED APPROACH TO CONSERVATION**

***Recommendation in Brief***

Invest \$50 million over 10 years to encourage new private sector
environmental markets to supplement existing conservation and forestry
programs. Introduce market forces into existing conservation programs to
provide greater environmental returns from Federal and landowner
investments in conservation.

***Problem***

Many conservation and environmental benefits produced on U.S. farms and
private forestlands do not have an assigned value in the market place or
lack a private market altogether. Consequently, farmers, ranchers, and
forestland owners have little financial incentive to provide these
public goods and services.

While private markets for environmental goods and services are emerging,
their viability has been hampered by several barriers including; high
transaction costs, the small quantity of benefits that can be provided
by individual farmers or landowners, performance risks and liability,
and uncertainties in quantifying benefits. New authorities could
overcome these barriers and promote the establishment of markets for
agricultural and forestry conservation activities.

In addition, several current conservation programs use static payment
systems for cost-share, rental, and easement payments. Under more
market-based approaches, existing conservation programs could be
restructured to foster competition, allowing resources to reach more
farmers and landowners.

Support for this concept was articulated by John from California who
said, "We urge consideration of programs that leverage private dollars
for the provision of public benefits and we look forward to exploring
options such as carbon sequestration, threatened and endangered species
mitigation banking, and other possibilities that can help landowners
continue to provide natural resource services and goods to the nation."

***Recommended Solution***

The Administration recommends USDA and other federal agencies be
authorized to ensure that environmental goods and services produced by
agriculture and forests can be used as offsets in regulatory, voluntary
partnerships and incentive programs. Generating substantial
private-sector demand for environmental goods and services hinges on the
ability to use environmental credits generated by agricultural and
forest conservation activities. For example, a business that is a point
source of water pollution could pay a farmer to establish buffer strips
to reduce nutrient runoff. These buffer strips might also rehabilitate
wetlands, sequester carbon and provide wildlife habitat.

Mandatory funding of \$50 million dollars is recommended to be available
until expended to be utilized to develop uniform standards for
quantifying environmental services; establish credit registries; and
offer credit audit and certification services. Additionally, existing
programs should be amended to allow for market-based and price discovery
mechanisms, such as bidding and reverse auctions.

***Background***

Agriculture and forestry conservation activities can produce
environmental services, such as clean air and water, at lower costs than
conventional pollution controls on industrial emissions and effluent.
Traditional environmental regulations require firms to reduce pollution
to a set level or to install specific technologies and practices. While
fairly straightforward, this approach can be costly both to the firms
and to society because firms with high costs of pollution reduction and
those with low costs are required to meet the same requirements, which
may waste resources. In addition, voluntary private-sector partnerships,
and incentive programs, both public and private, are generating demand
for environmental goods and services associated with agricultural and
forest conservation activities. Private sector environmental markets can
offer efficiency improvements over traditional regulations and could
result in overall increases in environmental and conservation benefits.

In current programs such as the Environmental Quality Incentives
Program, the Conservation Security Program, and the Farm and Ranchlands
Protection Program, USDA does not have the authority to rank
applications based on bidding and consideration of an applicant's
willingness to increase their share of funding contributed. As part of
the continued efforts to improve the efficiency of conservation
programs, market-based and price discovery mechanisms should be added to
USDA's authorities.

**MERIT-BASED FUNDING ALLOCATION**

***Recommendation in Brief***

Repeal Section 1241(d) of the 1985 Food Security Act, the regional
equity provision, to allow funding to be allocated based on the highest
need and best use of conservation funding.

***Problem***

Section 1241(d) of the 2002 farm bill, the regional equity provision,
fails to allocate funding based on the highest need and best use of
limited conservation funding. Section 1241(d) allocations have also
resulted in questionable program projects and diverted USDA attention
and capacity away from other priority conservation initiatives.

Using non-merit based factors in allocating resources results in
inefficient allocation of resources and less benefit per dollar
invested. From fiscal year 2004-2006, more than \$150 million have been
diverted to other regions compared to a merit-based, resource allocation
process. As John, from Oregon, suggested, "Dollars for conservation and
environmental objectives should be prioritized to ensure resources are
addressing the most important needs of the landscape."

***Recommended Solution***

The Administration recommends the elimination of Section 1241(d) of the
2002 farm bill, the regional equity provision. This policy change will
recognize merit-based, quantitative program allocation and ranking
processes as the most efficient and cost-effective method of allocating
Federal resources.

***Background***

The 2002 farm bill requires that "*Before April 1* of each fiscal year,
the Secretary *shall* give priority for funding under the conservation
programs under subtitle D *to approved applications* in any State that
has not received, for the fiscal year, an aggregate amount of at least
\$12,000,000 for those conservation programs." Programs covered by this
regional equity provision include the Environmental Quality Incentives
Program (EQIP), the Wildlife Habitat Incentives Program (WHIP), the Farm
and Ranchland Protection Program (FRPP), the Grassland Reserve Program
(GRP), and the Conservation on Private Grazing Lands Program.

In FY 2005, the regional equity provision was fully implemented. A total
of \$80 million was shifted from initial allocation totals and
redistributed to 13 states which fell below the \$12 million threshold.
More meritorious applicants in other states were denied \$40 million in
EQIP funding, \$10 million in WHIP funding, \$15 million in FRPP
funding, and \$15 million in GRP funding due to this provision.

**EMERGENCY LANDSCAPE RESTORATION PROGRAM**

***Recommendation in Brief***

Consolidate two emergency response programs - the Emergency Watershed
Protection (EWP) and the Emergency Conservation Program (ECP) \-- into a
new Emergency Landscape Restoration Program. Provide a one-stop source
for landowners who need assistance after a catastrophic event to restore
land to its productive state and prevent further land and water
impairments.

***Problem***

Although natural disasters are unpredictable, the fact that they will
occur is certain. The devastation caused by Hurricane Katrina
demonstrated that the distinction is not always clear between activities
covered under the ECP and those covered under the EWP, leading to
further confusion and frustration among citizens facing a natural
disaster. Lines of authority between individual federal disaster
programs sometimes lead to duplication or gaps between programs.

***Recommended Solution***

The Administration proposes a new Emergency Landscape Restoration
Program to restore agricultural landscapes from the devastation of fire,
drought, flood, and other resource impacting natural events. The new
program would provide a one-stop source of assistance for restoring land
back into its productive state, preventing further impairment of land
and water, and further protecting our natural resources.

The Emergency Landscape Restoration Program would eliminate unclear
areas in statutory authority between rehabilitating watersheds versus
rehabilitating agricultural lands. Providing this comprehensive
landscape approach will allow better and more comprehensive natural
resource benefits to be realized in the wake of disasters.

Funding for this new program would be subject to appropriations, similar
to current law funding of the ECP and the EWP. Funding would be provided
for an individual assistance pool and a public assistance pool. Over the
ten year period from 1997-2006, annual appropriations have averaged
\$158 million for EWP and \$58 million for ECP.

***Background***

EWP implements recovery measures to address natural disasters that have
caused an impairment of a watershed. The program works through providing
assistance to local sponsors such as neighborhood associations, cities,
counties, watershed councils, and conservation districts. EWP provides
financial and technical assistance to remove debris from streams,
implement measures that protect destabilized streambanks, establish
cover on critically eroding lands, repair conservation practices, and
purchase flood plain easements.

ECP provides emergency funding and technical assistance for farmers and
ranchers to rehabilitate farmland damaged by natural disasters and for
carrying out emergency water conservation measures in periods of severe
drought. The funds are utilized to rehabilitate farmland, which may
include debris removal, restoration of fences and conservation
structures, and the providing of water for livestock in drought
situations. The program works on a reimbursable basis of up to 75
percent of the cost to implement the approved conservation practices.
Funds are available when appropriated by Congress.