![](media/image1.png){width="0.41875in"
height="0.2875in"}![](media/image2.jpeg){width="0.9701388888888889in"
height="0.2902777777777778in"}

**United States Department of Agriculture**

**Natural Resources Conservation Service**

Interim Final Benefit-Cost Analysis

for the

Wetlands Reserve Program

(WRP)

**Food, Conservation, and Energy Act of 2008**

**Title II -- Conservation**

**Subtitle C -- Wetlands Reserve Program**

January 9, 2009

![](media/image3.png){width="2.0694444444444446in"
height="0.4583333333333333in"}

########### 

########### USDA Nondiscrimination Statement

########### The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, age, disability, and where applicable, sex, marital status, family status, parental status, religion, sexual orientation, genetic information, political beliefs, reprisal, or because all or a part of an individual's income is derived from any public assistance program. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA\'s [**TARGET Center**](http://www.usda.gov/oo/target/) at 202-720-2600 (voice and TDD).

########### To file a complaint of discrimination write to USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C. 20250-9410 or call 800-795-3272 (voice) or 202-720-6382 (TDD). USDA is an equal opportunity provider and employer

########### 

**Table of Contents**

[**Executive Summary 1**](#executive-summary)

[**Method of Analysis and Key Results
2**](#method-of-analysis-and-key-results)

[**Conclusions 3**](#conclusions)

[**Background 4**](#background)

[**Legislative Authority 4**](#legislative-authority)

[**Rational for Rule 4**](#rational-for-rule)

[**WRP Program Description and Features
5**](#wrp-program-description-and-features)

[**Program Objective 5**](#program-objective)

[**Program Overview 5**](#program-overview)

[**WRP Program History Highlights 8**](#wrp-program-history-highlights)

[**Regulatory Changes 9**](#regulatory-changes)

[**Description of Baseline Resource Conditions
10**](#description-of-baseline-resource-conditions)

[**Resource Base with Respect to United States Wetlands
11**](#resource-base-with-respect-to-united-states-wetlands)

[**Resource Condition Trends 12**](#resource-condition-trends)

[**Analytical Model 13**](#analytical-model)

[**Model Assumptions 13**](#model-assumptions)

[**Development of Expected Program Costs
13**](#development-of-expected-program-costs)

[**Baseline Scenario 14**](#__RefHeading___Toc219260685)

[**Non-Baseline Scenarios 15**](#__RefHeading___Toc219260686)

[**Other Program Costs for the Government and Society
16**](#other-program-costs-for-the-government-and-society)

[**Expected Environmental and Economic Benefits
17**](#expected-environmental-and-economic-benefits)

[**Current Policy Scenario -- Continuation of the 2002 Farm Bill WRP
Provisions 18**](#__RefHeading___Toc219260689)

[**Policy Scenario 1 -- Implement the 2008 Act changes for FY 2009--FY
2012 20**](#__RefHeading___Toc219260690)

[**Policy Scenario 2 -- Implement the 2008 Act changes for FY 2009--FY
2012 21**](#__RefHeading___Toc219260691)

[**Discussion of Scenarios 23**](#discussion-of-scenarios)

[**Conclusions 23**](#conclusions-1)

[**References 24**](#references)

**List of Figures**

[**Figure 1. WRP Acres Enrolled--Cumulative Life of the Program, FY 1992
-- FY 2007. 8**](#__RefHeading___Toc219260736)

[**Figure 2. Percent Wetland Acreage Lost, 1870s-1980s.
10**](#__RefHeading___Toc219260737)

[**Figure 3. Palustrine and Estuarine Wetlands on Nonfederal Land and
Water Areas, 2003. 11**](#__RefHeading___Toc219260738)

[**Figure 4. Average Annual Gross Losses, Gains, and Net Change due to
Agriculture, FY 1997--FY 2003. 12**](#__RefHeading___Toc219260739)

**List of Tables**

[**Table 1. WRP cost summary FY 1992--FY 2007.
8**](#__RefHeading___Toc219260747)

[**Table 2. Baseline scenario: per-acre WRP costs^1/^.
15**](#__RefHeading___Toc219260748)

[**Table 3. Alternative scenarios: per-acre WRP costs^1/^.
15**](#__RefHeading___Toc219260749)

[**Table 4. Wetland bioeconomic linkages^1/^.
17**](#__RefHeading___Toc219260750)

[**Table 5. Expected annual and cumulative acreage changes (baseline
scenario) 18**](#__RefHeading___Toc219260751)

[**Table 6. Estimated WRP costs over the FY 2009--FY 20012 period
(baseline scenario) 19**](#__RefHeading___Toc219260752)

[**Table 7. Estimated total WRP benefits and costs during FY 2009--FY
2012 (baseline scenario). 20**](#__RefHeading___Toc219260753)

[**Table 8. Expected annual and cumulative acreage changes (policy
scenario 1) 20**](#__RefHeading___Toc219260754)

[**Table 9. Estimated WRP costs over the FY 2009--FY 20012 period
(policy scenario 1) 21**](#__RefHeading___Toc219260755)

[**Table 10. Estimated total WRP benefits and costs during FY 2009--FY
2012 (policy scenario 1) 21**](#__RefHeading___Toc219260756)

[**Table 11. Expected annual and cumulative acreage changes (policy
scenario 2) 22**](#__RefHeading___Toc219260757)

[**Table 12. Estimated WRP costs over the FY 2009--FY 20012 period
(policy scenario 2) 22**](#__RefHeading___Toc219260758)

[**Table 13. Estimated total WRP benefits and costs during FY 2009--FY
2012 (policy scenario 2) 23**](#__RefHeading___Toc219260759)

**List of Appendices**

[**Appendix A. Legislative History of Wetlands Reserve Program,
1990-2002 26**](#__RefHeading___Toc219260764)

[**Appendix B. Wetland Policy Highlights
29**](#__RefHeading___Toc219260765)

**Interim Final Benefit-Cost Analysis**

**Wetlands Reserve Program (WRP)**

# Executive Summary

Pursuant to Executive Order 12866, Regulatory Planning and Review, the
Natural Resources Conservation Service (NRCS) has conducted an interim
final benefit-cost analysis of the Wetlands Reserve Program (WRP) as
formulated for the Interim Final Rule. This requirement provides
decision makers with the opportunity to develop and implement a program
that is beneficial, cost effective, and that minimizes negative impacts
to health, human safety, and the environment. Congress passed amendments
to the program that requires the Secretary of Agriculture, within 90
days after the enactment of the WRP amendments, to promulgate
regulations necessary to carry out the program.

In considering alternatives for implementing WRP, the United States
Department of Agriculture (USDA) followed the legislative intent to
optimize environmental benefits, address natural resource concerns and
problems, establish an open participatory process, and provide flexible
assistance to producers who apply appropriate conservation measures that
enable the satisfaction of Federal and State environmental requirements.
Because WRP is a voluntary program, the program will not impose any
obligation or burden upon agricultural producers who choose not to
participate. The program has been authorized by the Congress with an
acreage target for program participation. Funding for WRP comes from the
Commodity Credit Corporation.

WRP provides technical and financial assistance to eligible landowners
to address wetland, wildlife habitat, soil, water, and related natural
resource concerns on private lands in an environmentally beneficial and
cost-effective manner. As will be discussed later, WRP costs include the
purchase of easements and wetland restoration expenses which are the
main costs to consider in this analysis. WRP is an important tool in
restoring and protecting wetlands along with the efforts of other
governmental agencies, non-profit organizations, and landowners. Land
enrolled in WRP can produce substantial improvements in on-site resource
conditions and at the same time substantial off-site environmental
benefits for the public-at-large can also accrue. These on-site and
off-site benefits could include: creation of high value wetlands,
control of sheet and rill erosion as lands are converted form cropland
to wetlands, creation and protection of habitat for fish and wildlife,
including threatened and endangered species and migrating birds;
improving water quality by filtering sediments and chemicals; reducing
flooding; recharging groundwater; protecting biological diversity;
controlling invasive species with planting of natural vegetation; as
well as providing opportunities for educational, scientific, and
recreational activities. To some extent, air quality could be improved
by reduced wind erosion and by an increase in carbon stored in the soil
and reestablished vegetation, leading to reduced atmospheric amounts of
carbon. Many of these benefits are difficult to quantify, although
several studies have attempted to do so. One such study, published in
2008, found that the "public willingness to pay to enroll an additional
acre of typical fresh water marsh in WRP is about \$425 annually."
Capitalizing this benefit flow at a seven percent rate produced a
per-acre value of over \$5,800 for permanent easement agreements; a
value of over \$5,200 for 30-year easement agreements; and, a value of
almost \$3,000 on 10-year restoration agreements. Using a three percent
discount rate, these values become, \$10,935, \$8,330, and \$3,625, for
the three types of agreements discussed above, respectively. These
values take into consideration private benefits that may be derived,
such as income from any fishing, hunting fees, and other recreational
activities that may be realized by WRP landowners.

The main program costs include the purchase of easements and wetland
restoration expenses with the program. Although agricultural production
ceases from lands enrolled in WRP, this output effect is expected to be
small given that WRP parcels are usually marginal agricultural lands
poorly suited for efficient agricultural production. Agricultural
production from lands better suited to agricultural use can easily
compensate for reduced production from newly enrolled WRP land.
Approximately 89.8 percent of the WRP funding has been used for
permanent easement projects; about 7.9 percent for 30-year easement
projects and about 2.4 percent for restoration cost-share agreement
projects. The associated FY 2007 average per-acre program costs for
these projects were estimated at \$3,000 for permanent easements, almost
\$1,100 for 30-year easements, and nearly \$670 for restoration
cost-share agreements.

A comparison of total economic benefits and costs related to restoring
and protecting wetlands on a "typical acre" suggests that WRP can
produce substantial economic net benefits.

## Method of Analysis and Key Results 

The method of analysis for this study relied heavily on program
manager's experience and assumptions. For example, the analysis team
relied on program managers to identify important variables to consider
when developing plausible scenarios. The analysis team took this
information and constructed a small spreadsheet model. The current
policy scenario for this analysis is program performance similar to
those in FY 2007 persisting throughout FY 2009 -- FY 2012. A key
variable in this scenario was the FY 2007 easement acquisition valuation
methodology: primarily by an appraisal of the fair market value of a
parcel before the easement was in place minus the fair market value of
the parcel after the easement was in place -- an approach adopted by
NRCS on recommendations from the USDA Inspector General's Office.
Program managers felt that the post-FY 2007 valuation methodology was
the main driver that caused the appraised value of parcels in many
states to fall below the state's geographic cap and in turn causing a
shift in program acres across states as compared to past years. These
changes shifted WRP acreage from states with relatively low acquisition
costs to those with relatively high acquisition costs which increased
average national per-acre WRP costs significantly. The switch in
methodology did not result in NRCS paying more for the same easement
than it would have paid under the old methodology, but rather
significantly reduced the amount the agency could offer to landowners
for an easement in some states causing landowners to lose interest in
the program. The current policy scenario assumes that FY 2007 valuation
method will be employed and drives model results that suggest total
national WRP acreage would only increase by 294,200 acres over the FY
2009 -- FY 2012 period.

The changes in the 2008 Act returns the valuation methodology to the
valuation practices used before FY 2007. As a result, program mangers
expect the distribution of acres enrolled in the program to revert back
to its previous pattern. This geographic re-positioning is expected to
be associated with lower average easement costs (assumed to be the fair
market value of land using the Uniform Standards of Professional
Appraisal Practices or an area-wide market analysis) and for geographic
caps to be the primary means used to determine compensation rates. With
the lower geographic per acre project costs becoming more relevant
(assumed to be 25 percent lower than FY 2007 levels and those assumed in
the baseline scenario), WRP acreage is expected to increase by 600,000
acres over the FY 2009 -- FY 2012 period, a substantial increase over
the continuation of existing valuation method.

Because per-acre benefits exceed costs regardless of policy scenario
assumed, all model results suggest that net benefits from WRP are
positive.

## Conclusions

This WRP interim final benefit-cost analysis assumes that the major
driver in program costs over the FY 2009 -- FY 2012 period will be the
method of easement evaluation. The single discretionary policy item
available to NRCS does not alter this result. This item pertains to the
creation of the Wetland Reserve Enhancement Program (WREP) that would
allow States, non-governmental organizations, or Indian tribes to
partner with USDA in the selection and funding of contracts, as long as
selected contracts meet the purposes of WRP.

Data on past WRP enrollment suggests that the 2008 Act changes related
to easement compensation could lead to lower national average per-acre
offer prices paid for easements when compared to pre-fiscal year (FY)
2007. This prediction is dependent upon where acreage is predominantly
enrolled. NRCS anticipates that the new compensation methodology will
encourage re-establishment of historic enrollment patterns. The
assumptions in this analysis suggest the per-acre average costs on WRP
could be reduced by about 25 percent. Although costs are expected to be
reduced, there are no environmental studies to suggest that
environmental benefits from such a change will be altered. Additional
technical information from such sources as the Conservation Effects
Assessment Project, plus empirical data on the nature of the types of
environmental benefits being generated on WRP land across the United
States would be necessary.

Although benefits of wetlands have been estimated on specific sites in a
generalized fashion, researchers of many of these past studies caution
in transferring benefits to other areas or to be interpreted as
"average" values of a typical wetland type. That caveat notwithstanding,
the conclusions of this analysis suggests that the monetary and
non-monetary benefits from WRP in restoring and placing easements on
wetlands can exceed total program costs.

# Background

## Legislative Authority

Title XIV of the Food Agriculture, Conservation, and Trade Act of 1990
(the 1990 Farm Bill), amended the Food Security Act of 1985 (P.L.
99-198) to provide for the establishment of the Wetlands Reserve Program
(WRP). The Secretary of Agriculture delegated responsibility for the WRP
to the Agricultural Stabilization and Conservation Service (ASCS). The
1994 Department of Agriculture Reorganization Act transferred
administrative authority to NRCS for the program in 1995. The Federal
Agriculture Improvement and Reform Act of 1996 (the 1996 Farm Bill),
Public Law (P.L.) 104-387, reauthorized WRP and modified several aspects
of WRP implementation, including creating a non-easement option, placing
equal priority on the three enrollment methods, and requiring that
eligible lands maximize wildlife benefits . WRP was again reauthorized
in the Farm Security and Rural Investment Act of 2002 (P.L. 107-171),
which expanded the ability of the Secretary to grant a waiver for
certain ownership changes and enabled the Secretary of Agriculture to
enroll up to 250,000 additional acres annually into the program.

## Rational for Rule

The rationale for NRCS activities in restoring, enhancing, and
protecting wetlands acreage on eligible land through the use of
easements and restoration agreements is based on the agency's strategic
goal for healthy plant and animal communities.

The current market fails to fully recognize the indirect value of
benefits arising from the existence of wetlands. Real estate markets are
based on many individual decisions which may not fully incorporate
indirect and nonmarket benefits, and can therefore result in excess
destruction of wetlands. Excess conversion of wetlands can result in
less utilization of rural amenities and a diminution of ecological goods
and services (EGS) generated from wetlands. The EGS provided by wetlands
include the beneficial relationship of that land to: climate regulation,
flood control, disease prevention, water purification, carbon
sequestration, biodiversity and wildlife habitat, including certain
endangered species, and a host of others[^1]. Because these outcomes are
indirect and because many of the EGS can be classified as positive
externalities, common property resources, or public goods[^2], they will
be under-valued in private decision makers' actions. Without
intervention, or assistance to create values for EGS to correct this
undervaluation, wetland conversion rates to agricultural and
non-agricultural uses will exceed the socially desirable amount.

# WRP Program Description and Features[^3]

## Program Objective

The objective of WRP is to achieve the greatest wetland functions and
values, along with optimum wildlife habitat, on every acre enrolled in
the program.

The goals of WRP are to provide habitat for wildlife; decrease flood
damages; improve water quality; enhance cultural opportunities for
American Indians; create opportunities for producers to generate
alternative incomes; help recover threatened and endangered species; and
allow farmers and others to maintain ownership of lands suited for
wetland restoration.

## Program Overview

WRP is a Commodity Credit Corporation (CCC) program administered by the
Natural Resources Conservation Service (NRCS) in consultation with the
Farm Service Agency (FSA) and other federal agencies. WRP is a voluntary
program offered nationally. It is available in all 50 states, the
District of Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin
Islands of the United States, American Samoa, the Commonwealth of the
Northern Mariana Islands, and the Trust Territories of the Pacific
Islands. It provides technical assistance (TA) and financial assistance
(FA) to eligible landowners to restore, enhance, and protect wetlands.
The program is offered on a continuous sign-up basis.

The existing program offers three enrollment options[^4]:

1)  Permanent Easement: Prior to the enactment of the 2008 Act, easement
    payments for this enrollment option were determined based on the
    lowest of three amounts: the difference in the appraised fair market
    value of the larger parcel before the easement was in place and the
    appraised fair market value of the larger parcel after the easement
    is in place, an established payment cap, or an amount offered by the
    landowner. In addition to paying for the easement, the U.S.
    Department of Agriculture (USDA) pays up to 100 percent of the cost
    of restoring the wetland.

2)  30-Year Easement: Easement payments through this enrollment option
    are 75 percent of what would be paid for a permanent easement. USDA
    also pays up to 75 percent of restoration costs. For both permanent
    and 30-year easements, USDA pays all costs associated with recording
    the easement in the local land records office, including recording
    fees, charges for abstracts, survey and appraisal fees, and title
    insurance.

3)  Restoration Cost-share Agreement: This is an agreement (generally
    for a minimum of ten years) to re-establish degraded or lost wetland
    functions and values. USDA pays up to 75 percent of the cost of the
    restoration activity. This enrollment option does not place an
    easement on the property.

WRP offers landowners an opportunity to establish, at minimal cost,
long-term conservation and wildlife habitat enhancement practices and
protection. WRP has an acreage enrollment limitation rather than a
funding limit. Congress determines on a year-to-year basis how many
acres can be enrolled in the program and funding is somewhat flexible.
The NRCS estimates program funding needs based on the national average
cost per acre. Main program features include:

[Eligible Landowners]{.underline}:

For conservation easements, landowners must have owned the land offered
for easement for at least 12 months[^5] prior to enrolling in WRP,
unless (1) the land was inherited, (2) the landowner exercised the
landowner's right of redemption after foreclosure, or (3) the NRCS State
Conservationist determines the landowner did not obtain the land for the
purpose of enrolling in WRP. With respect to restoration cost-share
agreements, landowners merely need to show evidence of ownership.

In addition, the Adjusted Gross Income (AGI) provision of the 2002 Farm
Bill affects eligibility for WRP and several other 2002 Farm Bill
programs. Individuals or entities that have an average AGI exceeding
\$2.5 million for the three tax years immediately proceeding the year
the contract is approved are not eligible to receive program benefits or
payments. However, an exemption is provided in cases where 75 percent of
the adjusted gross income is derived from farming, ranching, or forestry
operations.

[Eligible Land]{.underline}:

Private and Tribal land is eligible provided that such land is
restorable and it maximizes wildlife benefits and wetland functions and
values. Eligible land would include the following land uses: wetlands
farmed under natural conditions; farmed wetlands; prior converted
cropland; farmed wetland pasture; agricultural land that has become a
wetland as a result of flooding; range land, pasture, or production
forest land where the hydrology has been significantly degraded and can
be restored; riparian areas which link protected wetlands; lands
adjacent to protected wetlands that contribute significantly to wetland
functions and values; and previously restored wetlands that need
long-term protection.

[Ineligible Land]{.underline}:

Lands that are not be eligible for WRP include: wetlands converted after
December 23, 1985; lands with timber stands established or pasture land
established to trees under a Conservation Reserve Program (CRP)
contract; public lands; and, lands where conditions make restoration
impossible.

[Filing Applications]{.underline}:

Private landowners and Tribes may file an application for participation
with NRCS to restore and protect wetlands through WRP at any time.
Participants voluntarily comply with all the terms of the easement,
contract or agreement including allowing the restoration of the wetland
acreage and any associated adjacent lands, ceasing agricultural
activities on the enrolled land and for easement projects, agree to the
permanent retirement of any existing cropland base and allotment
history. The land remains in private or Tribal ownership. Easements are
held by the United States of America, by and through the CCC.

[Application Selection]{.underline}:

After applications are filed, NRCS makes a land and landowner
eligibility determinations. A site visit is made to collect data
associated with the ranking process, prepare a preliminary restoration
plan, complete National Environmental Policy Act (NEPA) requirements,
and evaluate the site and surrounding area for the presence of hazardous
substances. State Conservationists, with input from State Technical
Committees, develop ranking criteria based on broad national guidelines.
Offers are ranked based on cost and ecological considerations. Separate
ranking lists are kept for each enrollment type.

[Funding]{.underline}:

Funding decisions are made at the State level and are generally based on
the applications' total point score. State Conservationists have the
authority to enroll projects outside of the ranking process if the area
has been designated by the State Conservationist as a "special project"
area. Special project priority may be provided to a particular
geographic area or to a specific project even though the individual
offer might not otherwise rank high enough to be accepted.

[Easement Payments]{.underline}:

NRCS State Conservationists, with advice from the State Technical
Committees, will establish a process to determine easement values. Prior
to the 2008 Act the easement value could not exceed the difference in
the appraised fair market value of the larger parcel before the easement
is in place and the appraised fair market value of the larger parcel
after the easement is in place.

[Easement Acquisition]{.underline}:

After an easement application is selected for funding, NRCS arranges for
an appraisal to provide the applicant with a contracted payment amount
using an option agreement to purchase. The option agreement is the
obligating document. After the landowner accepts the amount offered on
the agreement and NRCS provides approval for CCC, NRCS obligates the
funds for the project in the financial system. The option agreement
generally has an effective period of 12 months from the date of
execution. The effective period may be extended when necessary. The
landowner's signature on the option agreement authorizes NRCS to proceed
with the easement acquisition process. The acreage amount placed on the
option agreement is an estimate of the easement acreage. This acreage
value may have to be adjusted after a survey is complete.

[Determination of WRP Acreage Allocations:]{.underline}

Congress directs NRCS to enroll a specific annual acreage amount
nationally. The NRCS national office utilizes a resource-based formula
when determining State allocations. This formula includes the prior
year's WRP performance along with factors related to ecological
considerations, including: the number of wetlands lost in a state;
whether the state affects migratory birds; the number of potential acres
of restorable wetlands in the state; water quality conditions in the
state; and, the number of threatened and endangered species in the
state.

## WRP Program History Highlights

The WRP funds have been acquiring easements on agricultural lands since
1992 (table 1). NRCS maintains these easement contracts on nearly two
million acres of land which have incurred over \$2 billion since 1992.
The majority of this land is found in the Midwest, Southeast, and
Western United States (Figure 1).

[]{#__RefHeading___Toc219260747 .anchor}Table 1. WRP cost summary FY
1992--FY 2007.

**[Contracts]{.underline} [[Acres]{.underline}
[Obligations\*]{.underline} [Dollars per ]{.underline}]{.smallcaps}**

**[Number]{.underline} [Percent]{.underline} [Number]{.underline}
[Percent]{.underline} [Dollars]{.underline} [Percent]{.underline}
[Contract]{.underline} [Acre]{.underline}**

Permanent Easements 7,570 74.5 1,491,228 77.6 \$1,942,307,626 89.8
\$256,580 \$1,302

30-year Easements 1,392 13.7 255,774 13.3 \$170,677,887 7.9 \$122,613
\$667

Restoration Cost-share [1,202]{.underline} 11.8 [174,134]{.underline}
9.1 [\$51,107,659]{.underline} 2.4 \$42,519 \$293

**Totals 10,164 1,921,136 \$2,164,093,172**

\*Total cost estimated based on total appropriations and FY 2001 to FY
2006 actual values as actual for prior years and unavailable for FY
2007.

Source: NRCS, National Wetlands Reserve Program Manager, Tony Puga,
September 11 2008.

> []{#__RefHeading___Toc219260736
> .anchor}![](media/image4.jpeg){width="1.8111111111111111in"
> height="1.2777777777777777in"}Figure 1. WRP Acres Enrolled--Cumulative
> Life of the Program, FY 1992 -- FY 2007.
>
> Source: USDA NRCS, 2008. Available:
> <http://www.nrcs.usda.gov/programs/wrp/2007_ContractInfo/WRPAcresCumul07.jpg>

## Regulatory Changes

The 2008 Act, § 1237- includes both mandatory or statutory required
changes and policy or discretionary changes. These changes are discussed
below.

***[Mandatory Items]{.underline}***

The 2008 Act included eight statutory changes to WRP. These changes can
be grouped into the following four categories:

[Category 1 -- Compensation]{.underline}: In previous years, NRCS
considered three values when accepting WRP applications (listed below).

1)  The difference in the fair market value of the parcel before the
    easement is in place and the appraised fair market value of the
    parcel after the easement is in place;

2)  The geographic area rate cap as determined by the Secretary of
    Agriculture; or

3)  The landowner's offer.

The 2008 Act states that under the first option the Secretary must take
into consideration the fair market value of the land according to the
Uniform Standards of Professional Appraisal Practices or an area-wide
market analysis. Based on this NRCS has changed the first option by
eliminating the requirement that the appraised fair market value of the
parcel be adjusted by the residual value of parcel after the easement is
in place.

[Category 2 -- Enrollment Limitations]{.underline}: The 2008 Act raised
the total program enrollment cap to 3.041 million acres. This represents
an additional acreage enrollment authorization of 766,200 acres above
the existing 2.275 million acres. No more than 10 percent of a county's
cropland acreage may be subject to a WRP easement. Previously, WRP
easement acreage and Crop Reserve Program (CRP) acreage was grouped
together and could not exceed 25 percent. Additionally, eligibility
expands for Indian tribes in that NRCS can now extend 30-year contracts
to them[^6]. Finally, the 2008 Act removed the annual acreage enrollment
goal of enrolling 250,000 acres each calendar year.

[Category 3 -- Land Eligibility Changes]{.underline}: The 2008 Act
increased the required length that a parcel of land be held without
changing ownership before land is eligible for an easement from 12
months to seven years. Additionally, eligible lands are limited to
private and Tribal lands. The 2008 Act expands eligible land in WRP to
include cropland or grassland that was used for agricultural production
prior to flooding from natural overflow of closed basin lakes or
potholes.

[Category 4 -- Payment Limitations and Schedules:]{.underline} The 2008
Act identifies the payment schedule for easements valued at more than
\$500,000 shall be made in five to thirty annual payments unless the
Secretary grants a waiver allowing a lump-sum payment. Easements, valued
at \$500,000 or less, are allowed to be paid in one to 30 annual
installments. For the restoration cost-share agreements, the annual
payments can not exceed \$50,000 per year to an individual or legal
entity, directly or indirectly.

***[Discretionary Items]{.underline}***

The main WRP discretionary requirement in the 2008 Act is:

[Addition of WREP]{.underline}: The 2008 Act creates the Wetland Reserve
Enhancement Program (WREP) to allow States (including political
subdivision or agency of State), non-governmental organizations, or
Indian tribes to partner with USDA in selection and funding of
contracts, as long as selected contracts meet purposes of WRP. WREP
includes the authority for a pilot program that allows landowners to
retain grazing rights when consistent with long-term wetland enhancement
and protection goals.

## Description of Baseline Resource Conditions

Wetlands generally include swamps, marshes, bogs and similar areas
(National Archives and Records Administration, 2006). They act to
modulate hydrologic extremes, provide wildlife habitat, filter
pollutants, retain sediment, store carbon and cycle nutrients.

Wetlands vary widely in hydrologic regime, plant and animal assemblages,
and the extent and number of services they provide \-- from bottomland
hardwoods that play a major role in floodplain management to estuarine
wetlands that serve as valuable nursery habitat for important commercial
fisheries. Their functions and condition are influenced profoundly by
their location in the landscape, their proximity to other wetlands and
surrounding stresses. Moreover, more than 43 percent of all species that
are Federally-designated as endangered or threatened in the United
States are wetland dependent for food, shelter, or breeding at some
point in their life cycle.

Historically, wetlands were viewed by many as land with little value or
as a wasteland. As a result, wetlands were drained and filled for
farmland, housing and other types of development. As a result, much of
the wetlands in the United States have been altered or
destroyed.![](media/image5.jpeg){width="3.452777777777778in"
height="2.4506944444444443in"}

Since the 1870s, 22 states have lost at least 50 percent of their
original wetlands (Figure 2). Seven states - Indiana, Illinois,
Missouri, Kentucky, Iowa, California and Ohio - have lost over 80
percent of their wetlands. Since the 1970s, Louisiana, Mississippi,
Arkansas, Florida, South Carolina and North Carolina have lead the
nation in the states with the most wetland losses.

> []{#__RefHeading___Toc219260737 .anchor}Figure 2. Percent Wetland
> Acreage Lost, 1870s-1980s.

The amount of wetland acres drained for agricultural purposes has been
reduced in recent years, making non-agricultural development account a
larger and larger percentage of newly drained wetlands (Mitsch and
Gosselink, 1993).

# Resource Base with Respect to United States Wetlands

The Fish and Wildlife Service (Dahl, 2005) reported there were an
estimated 107.7 million acres, approximately 5.5 percent of the surface
area, of wetlands in the conterminous United States in 2004. The vast
majority, 95 percent, of the nation's wetlands are freshwater wetlands;
the remaining 5 percent being estuarine or marine systems. These
wetlands are distributed over the United States with a heavy
concentration in the eastern half of the United States (Figure 3).

[]{#__RefHeading___Toc219260738 .anchor}Figure 3. Palustrine and
Estuarine Wetlands on Nonfederal Land and Water Areas,
2003.![](media/image6.wmf){width="6.156944444444444in"
height="4.920833333333333in"}

Almost four million acres or 73 percent of the marine and estuarine
systems are estuarine emergent (salt marsh) dominated systems. The
remaining percentage of marine or estuarine systems is comprised of
estuarine shrub and non-vegetated saltwater wetlands.

Forested wetlands made up 51 percent of United States freshwater
wetlands (Dahl, 2005). The remaining freshwater wetlands were comprised
of freshwater emergent (25.5 percent), shrub wetlands (17 percent), and
freshwater ponds (6.5 percent). About 15 percent of wetlands are found
on cropland, pastureland and CRP land (USDA, NRCS, 2006).

[]{.mark}

## Resource Condition Trends

Based upon data collected for the 1998 to 2004 Status and Trends Report
(Dahl, 2005) it was concluded that for the first time net wetland gains,
acquired through the contributions of restoration activities, surpassed
net wetland losses. The report estimates net wetland acres gained
nationwide, during the aforementioned period, at 191.75 thousand acres,
an average annual net gain of 32 thousand acres. While the report
indicates a net gain in acreage it makes no attempt to draw conclusions
regarding trends in quality of the nation's wetlands.

Agriculture has been an important component of this trend, achieving net
gains within the sector and helping to offset losses from other sources.
Agriculture, once the major cause of wetlands conversion, achieved a net
gain of nearly 100,000 acres, FY 1997--FY 2003 (Figure
4).![](media/image7.wmf){width="5.930555555555555in"
height="3.7256944444444446in"}

> []{#__RefHeading___Toc219260739 .anchor}**Figure 4. Average Annual
> Gross Losses, Gains, and Net Change due to Agriculture, FY 1997--FY
> 2003.**

Although net gains in wetland acreage have recently been registered
reflecting years of accomplishments in wetland conservation by
landowners, conservation groups, States, and federal agencies, the need
for additional wetlands has been recognized around the United States.
For example, a recent report from the U.S. Environmental Protection
Agency (EPA) highlighted five integrated approaches to reduce large
amounts of nitrogen (N) and phosphorous (P) runoff into the Gulf of
Mexico. These five approaches are: (1) promotion, via research and
economic incentives, of environmentally sustainable approaches to
bio-fuel production and associated cropping systems; (2) improved
management of nutrients by emphasizing infield nutrient management
efficiency and effectiveness to reduce losses; (3) construction and
restoration of wetlands, as well as criteria for targeting those
wetlands that may have a higher priority for reducing nutrient losses;
(4) introduction of tighter nitrogen and phosphorous (N and P) limits on
municipal and private industrial point sources; and (5) improved
targeting of conservation buffers, including riparian buffers, filter
strips and grassed waterways, to control surface-borne nutrients. The
report noted that, "More wetlands are needed, especially in those areas
that promise the greatest N and P reductions. Since the greatest N and P
runoff is coming from upper Mississippi and Ohio-Tennessee River
sub-basins, where the highest proportion of tile drainage occurs,
measures to improve drainage water management are urgently needed. In
fact, improved targeting of almost all agricultural conservation
practices in the region \[e.g., conservation buffers, wetlands, land set
aside in the Conservation Reserve Program (CRP), drainage water
management, etc.\] could achieve greater local water quality benefits
and simultaneously contribute to hypoxia reduction." (US EPA, 2007).

# Analytical Model

## Model Assumptions

WRP has been operating since 1992 with steady participation and interest
in the program. The model assumes continued participation levels that
will satisfy the acreage targets identified in any policy alternative
and that needed program funding will be available. The model also
assumes that the WRP has no impact on agricultural commodity markets or
land values.

## Development of Expected Program Costs

NRCS has used several methods over the years for determining the value
for WRP easements. Market value, agricultural value and market value
adjusted for residual value of land after the wetland is in place have
all been used.

For FY 2005 and years prior, easement acquisition costs were determined
primarily by the lower of the agricultural value or the State's
established geographic cap. The geographic cap represented the maximum
amount NRCS was willing to pay for an easement. It usually was
determined by conducting a market analysis to determine the value of
agricultural land in the state or region and then reducing that estimate
by 20 to 30 percent. The 20 to 30 percent reduction represented the
Agency's estimate of the residual value of the parcel to the owner after
the easement was in place.

[]{.mark}

In FY 2006 and FY 2007 easement acquisition costs were determined
primarily by an appraisal of the fair market value of a parcel before
the easement was in place minus the fair market value of the parcel
after the easement was in place. This was caused by a change in FY 2006
in the Agency's easement valuation methodology based on recommendations
from the USDA Inspector General's Office. The new valuation methodology
caused the appraised value of parcels in many states to fall below the
state's geographic cap.

The change in easement valuation methodology caused a significant shift
in the distribution of acres enrolled in the program among the states.
In addition, the distribution of acres shifted from states with
relatively low acquisition costs to those with relatively high
acquisition costs. As a result of this shift in the geographic location
of easements average per acre acquisition costs nationally, increased
significantly. The switch in methodology did not result in NRCS paying
more for the same easement than it would have paid under the old
methodology, but rather significantly reduced the amount the agency
could offer to landowners for an easement in some states causing them to
lose interest in the Program.

The changes in the 2008 Act returns the valuation methodology to the
valuation practices used before 2006. As a result Program managers
expect the distribution of acres enrolled in the program to revert back
to its previous pattern.

[]{#__RefHeading___Toc219260685 .anchor}**Baseline Scenario**

Costs associated with WRP easement and restoration agreements for the
baseline scenario are assumed to be similar to FY 2007 costs. This
assumption reflects the cost structure as would be expected given a
continuation of the 2002 Farm Bill and the easement valuation
methodology put in place in FY 2006. These costs are listed in the
following general grouping and include a discussion of expected producer
costs, as well as the costs to the government.

[Permanent Easement Costs]{.underline}: NRCS provides 100 percent of the
restoration costs for permanent easements therefore, an assumption was
made that landowners incur no costs for implementation of restoration
practices. Landowners may have costs for local and state permits,
attorney's fees, or other transactions costs for the filing of the
easement. Because the need for these costs varies according to local and
state laws; these are not included in the landowner's costs.

[30-year Easement Costs]{.underline}: NRCS provide landowners with 75
percent of what the value of a permanent easement on the parcel would be
and 75 percent of the cost of restoration practices on the parcel.
Landowner's incur 25 percent of the restoration costs.

[Restoration Cost-share Agreement Costs]{.underline}: NRCS incurs no
acquisition costs with this program. Restoration cost sharing assumes
the level of practice installation needed to ensure the expected wetland
benefits. For this analysis, NRCS' and landowners' costs are based on a
75 percent cost-share agreement.

For all three enrollment programs restoration includes the conservation
practices normally used to restore wetlands (wetland restoration;
wetland enhancement; and wetland creation) along with the management and
supporting/facilitating practices necessary for the wetland to function
as designed, including associated upland acreage. Cost sharing for these
practices varies from 75 percent to 100 percent depending on the type of
easement. The Program typically provides 100 percent cost share for
restoration on permanent easements and 75 percent cost share for
restoration practices implemented on 30-year easements and restoration
cost-share agreements.

+---------------------+----------------+-------------+----------------+
| []{#__RefHea        |                |             |                |
| ding___Toc219260748 |                |             |                |
| .anchor}**Table 2.  |                |             |                |
| Baseline scenario:  |                |             |                |
| per-acre WRP        |                |             |                |
| costs^1/^.**        |                |             |                |
+---------------------+----------------+-------------+----------------+
| **Item**            | **Permanent    | **30-year   | **Restoration  |
|                     | Easement**     | Easement**  | Cost-share**   |
+---------------------+----------------+-------------+----------------+
|                     | > **- - - - -  |             |                |
|                     |  - - - - - - - |             |                |
|                     | > dollars per  |             |                |
|                     | > acre - - - - |             |                |
|                     |  - - - - - - - |             |                |
|                     | > -**          |             |                |
+---------------------+----------------+-------------+----------------+
| Easement cost       | \$1,824        | \$307       | \$ 0           |
+---------------------+----------------+-------------+----------------+
| Administration      | \$ 176         | \$ 71       | \$ 0           |
| costs^2/^           |                |             |                |
+---------------------+----------------+-------------+----------------+
| Restoration costs   | \$ 471         | \$ 81       | \$ 38          |
| (Government)        |                |             |                |
+---------------------+----------------+-------------+----------------+
| Technical           | [\$            | [\$618]{    | [\$61          |
| Assistance (TA)     | 61             | .underline} | 8]{.underline} |
|                     | 8]{.underline} |             |                |
+---------------------+----------------+-------------+----------------+
| **Total Government  | **\$3,089**    | **\$1,077** | **\$656**      |
| Cost**              |                |             |                |
+---------------------+----------------+-------------+----------------+
| Landowners          | [\$            | [\$         | [\$            |
| restoration cost    | 0]{.underline} | 27]{        | 1              |
|                     |                | .underline} | 3]{.underline} |
+---------------------+----------------+-------------+----------------+
| **Total Economic    | **\$3,089**    | **\$1,104** | **\$669**      |
| Cost**              |                |             |                |
+---------------------+----------------+-------------+----------------+
| ^1/^Based on        |                |             |                |
| estimated FY 2007   |                |             |                |
| obligations.        |                |             |                |
+---------------------+----------------+-------------+----------------+
| ^2/^Appraisal and   |                |             |                |
| closing costs.      |                |             |                |
+---------------------+----------------+-------------+----------------+

[]{#__RefHeading___Toc219260686 .anchor}**Non-Baseline Scenarios**

The 2008 Act's change pertaining to the methodology for determining
value of easements is expected to lower average easement costs compared
to the baseline. Because the changes in the valuation methodology
mandated by the Act are similar to the methodology used by NRCS prior to
FY 2006 the analysis uses the Program's easement acquisition costs in FY
2005 adjusted to 2007 dollars to approximate the fair market value of
land using the Uniform Standards of Professional Appraisal Practices or
an area-wide market analysis.

The geographic caps used are calculated by reducing the fair market
value by 25 percent. Accordingly, they are expected to be lower and
similar to the relationship between fair market values and geographic
caps during the pre-2006 period. WRP managers believe that geographic
caps will be the primary means used to determine compensation rates
under the valuation methodologies mandated by the 2008 Act. As a result
this analysis uses the geographic caps as calculated above to determine
easement acquisition costs.

+---------------------+----------------+-------------+----------------+
| []{#__RefHea        |                |             |                |
| ding___Toc219260749 |                |             |                |
| .anchor}**Table 3.  |                |             |                |
| Alternative         |                |             |                |
| scenarios: per-acre |                |             |                |
| WRP costs^1/^.**    |                |             |                |
+---------------------+----------------+-------------+----------------+
| **Item**            | **Permanent    | **30-year   | **Restoration  |
|                     | Easement**     | Easement**  | Cost-share**   |
+---------------------+----------------+-------------+----------------+
|                     | > **- - - - -  |             |                |
|                     |  - - - - - - - |             |                |
|                     | > dollars per  |             |                |
|                     | > acre - - - - |             |                |
|                     |  - - - - - - - |             |                |
|                     | > -**          |             |                |
+---------------------+----------------+-------------+----------------+
| Easement cost       | \$1,147        | \$ 697      | \$ 0           |
+---------------------+----------------+-------------+----------------+
| Administration      | \$ 129         | \$ 108      | \$ 0           |
| costs^2/^           |                |             |                |
+---------------------+----------------+-------------+----------------+
| Restoration costs   | \$ 582         | \$ 376      | \$522          |
| (Government)        |                |             |                |
+---------------------+----------------+-------------+----------------+
| Technical           | [\$            | [\$         | [\$45          |
| Assistance (TA)     | 45             | 459]{       | 9]{.underline} |
|                     | 9]{.underline} | .underline} |                |
+---------------------+----------------+-------------+----------------+
| **Total Government  | **\$2,317**    | **\$1,640** | **\$981**      |
| Cost**              |                |             |                |
+---------------------+----------------+-------------+----------------+
| Landowners          | [\$            | [\$         | [\$17          |
| restoration cost    | 0]{.underline} | 125]{       | 4]{.underline} |
|                     |                | .underline} |                |
+---------------------+----------------+-------------+----------------+
| **Total Economic    | **\$2,317**    | **\$1,765** | **\$1,155**    |
| Cost**              |                |             |                |
+---------------------+----------------+-------------+----------------+
| ^1/^Based on FY     |                |             |                |
| 2005 obligations    |                |             |                |
| brought to 2007     |                |             |                |
| dollars using a GDP |                |             |                |
| deflator of 1.05998 |                |             |                |
| and reduced 25% to  |                |             |                |
| reflect the         |                |             |                |
| geographical cap.   |                |             |                |
+---------------------+----------------+-------------+----------------+
| ^2/^Appraisal and   |                |             |                |
| closing costs.      |                |             |                |
+---------------------+----------------+-------------+----------------+

## Other Program Costs for the Government and Society

The assumed per-acre costs associated with the administration, easement
purchase, and restoration efforts are discussed above and presented in
tables 2 and 3. Total costs would depend on these assumed costs and
their associated enrolled acreage.

It should be noted that program costs may be reduced through the use of
a reverse-auction to value wetlands and enroll acreage. In such a
program, eligible applicants could submit per-acre bids along with
information on their land's potential ability to supply environmental
benefits if it was returned to wetlands. The bids could then be
evaluated based on their corresponding "environmental score". These
scores would then be compared across all applicants to help select the
most desirable acreage for the program. An advantage of a reverse
auction is that the bidding process selects land parcels with the
highest environmental value per dollar of government cost. This
advantage would need to off-set the potentially higher cost in
administering such an auction, its potential effect to increase bids on
some parcels of land (such as those that receive an initial high
environmental score in a two-bid auction program), and its perception of
favoring applicants with the greatest potential to bid lower than others
based on their income and initial wealth. Theory and limited evidence of
a 2006 and 2007 pilot NRCS program suggest that this approach could
lower over-all program costs while self-selecting parcels producing high
levels of environmental benefits. This option is not included in the
policy scenario section although the authority to conduct such auctions
already exists in 1237A (f)(5): \"Enrollment Procedure.-Lands may be
enrolled under this subchapter through the submission of bids under a
procedure established by the Secretary.\" NRCS retains the right to
implement WRP, in part or in whole, through reverse auctions or other
bidding types of processes in the future.

The national average costs for easements and restoration costs vary from
year to year based on changes in market conditions and changes in the
geographic location of easements acquired. The effect of geographical
shifts in the location of easements on the national average can vary
dramatically. As a result, it would not be appropriate to assume that
the differences in national average costs reported in tables 2 and 3
reflect only the effect of the different appraisal methods. The
appraisal method used indirectly affects the national average cost to
the extent that it contributes to a shift in the geographic location of
the easements.

In addition average costs for 30-year easements and restoration
cost-share agreements vary widely from year to year because the
represent a small portion of acreage enrolled in program in any one
year. Their use also varies widely from year to year in each state. As a
result the national average in any year highly sensitive to the states
that these easements happen to occur.

National average technical assistance costs vary from year to year
mainly due changes in the number of easements enrolled, rather than from
changes in geographic location of easements. Technical assistance costs
for an easement are basically the same regardless of the size of the
parcel enrolled. This means that the larger the parcel or the lower the
per acre cost for technical assistance. Thus, the cost of technical
assistance in table 3 is lower than the cost of technical assistance in
table 2 because more acres are expected to be enrolled in Program when
table 3 costs are used than when table 2 costs are used.

## Expected Environmental and Economic Benefits

Wetlands benefit the nation by providing habitat for fish and wildlife,
including threatened and endangered species; improving water quality by
filtering sediments and chemicals; reducing flooding; recharging
groundwater; protecting biological diversity; as well as providing
opportunities for educational, scientific, and recreational activities.

The value of non-market or public services provided by wetlands may be
significant. If this is the case, then the value of these non-market
services to society could be greater than their value in their apparent
next-best private use alternative. In rural areas the next-best use is
typically agriculture. In areas on the urban fringe it is most likely to
be development.

  --------------------------------- ----------------------- --------------- ------------------------ ----------------------- ------------ --------------
  []{#__RefHeading___Toc219260750                                                                                                         
  .anchor}**Table 4. Wetland                                                                                                              
  bioeconomic linkages^1/^.**                                                                                                             

                                    **[Private                              **Mixed                  **[Public                            
                                    Values]{.underline}**                   [Values]{.underline}**   Values]{.underline}**                

  **Wetland**                       **Forestry**            **Fisheries**   **Recreation**           **Flood control**       **Water      **Endangered
                                                                                                                             quality**    species**

  Function                          Tree growth medium      Fish habitat    Wildlife habitat         Flood retention         Water        Wildlife
                                                                                                                             filtration   habitat

  Service                           Commercial timber       Commercial fish Recreational waterfowl   Reduced flood           Cleaner      Biodiversity
                                    harvest                 harvest         harvest                  flows/peaks             water        

  Economic value                    Net economic value of   Net economic    Net economic value of    Net economic value of   Net economic Net option and
                                    timber                  value of        hunting experience       reduced damages         value of     existence
                                                            commercial                                                       reduced      values
                                                            catch                                                            damages      

  Source: Adapted from Bergstrom                                                                                                          
  and Brazee (1991)                                                                                                                       

  ^1/^Heimlich et al., 1998                                                                                                               
  --------------------------------- ----------------------- --------------- ------------------------ ----------------------- ------------ --------------

Unfortunately, many of these values are very difficult to measure since
they are site specific. In this case, some researchers have used
"meta-analysis" as a basis for transferring the value of benefits from
one site to another, and to develop estimates for national programs.
Tree recent meta-analyses have studied wetland valuation worldwide:
Brouwer et al., 1999; Woodward and Wui, 2000; Brander et al., (2006). A
more recent study by Borisova-Kidder (2006) conducted a meta-analysis
using only studies of wetlands in the United States. This study was
updated and refined by Randall et al. (2008).

Randall et al. (2008) found in their study that the "public willingness
to pay to enroll an additional acre of typical fresh water marsh in the
Wetland Reserve Program is about \$425 annually\..." They based their
estimate on a meta-analysis of 72 valuations of wetlands drawn from 32
studies of wetland values in the United States. This estimate has a high
degree of uncertainty around it. Wetland values within the 90 percent
confidence interval constructed around the \$425 estimate ranged from
\$255 to \$707 per acre. This estimate represents a national average
that would vary considerable depending on location and other
site-specific attributes. Although we use the \$425 per acre estimate
for calculation of benefits for all easements and restoration cost-share
agreements, we are not intending to imply a high degree of certainty.
The Woodward and Wui (2000) study and Brander (2006) used valuation of
wetlands from around the world. Woodward and Wui estimated the mean
value of per acre of wetland to be about \$200. The Brander study
estimated the pre acre value of wetlands to be \$1,938. The
Borisova-Kidder, which was based only on US wetlands, estimated the mean
value for an average wetland to be \$262.

The present value of this stream of benefits was calculated for each
type of easement based on the contract life of the practice. For
permanent easements this produced a \$5,865 per acre value; for 30-year
easements this produced a \$5,274 per acre value; and for restoration
cost-share agreements (10-year) a \$2,985 per acre value. These values
were generated using a seven percent discount rate. These values become
\$10,935, \$8,330, and \$3,625, for permanent easement, 30-year
easement, and restoration cost-share agreement using a three percent
discount rate. The benefit value using the seven percent discount rate
is applied to the enrolled acreage in this analysis.

[]{#__RefHeading___Toc219260689 .anchor}**Current Policy Scenario --
Continuation of the 2002 Farm Bill WRP Provisions**[^7]

**(total acres enrolled equals 2.275 million)**

The baseline scenario (no-action scenario) involves not proceeding with
the implementation of program changes to WRP as required by Congress in
the 2008 Act, but obligating new contracts at the same annual rate as
the FY 2007 annual funding/acreage rate over the four-year period, FY
2009--FY 2012. Thus, this scenario assumes the WRP continues to operate
under the rules of the 2002 Farm Bill. The expected annual acreage
increases and cumulative totals over FY 2009--FY 2012 assumes that the
participation and acreage by permanent, 30-year easement, and
restoration cost-share agreements are understood to be distributed as
they were during FY 2001 through FY 2007 (table 5). NRCS program
personnel expect that annual acreage enrollment would increase by
100,000 acres per year or approximately what was enrolled in FY 2007.
NRCS program personnel expectations are based on the FY 2007 experience
with the use of the revised appraisal method which better reflected the
fair market value of the land before the easement was in place minus the
fair market of land after the easements. We believe that this method
increased the average cost of easements, lowering the level of total
acreage enrolled in the program. Fiscal year 2007 was used because it
was the only year that this appraisal method was fully in effect. In
addition, the enrollment cap of 2.275 million acres, as stated in the
2002 Farm Bill, is assumed to exist and restricts this annual increase
throughout the entire period.

  --------------------------------- ----------------------------------------------------- --------------------- --------------------- ----------------- ----------------------
  []{#__RefHeading___Toc219260751                                                                                                                       
  .anchor}**Table 5. Expected                                                                                                                           
  annual and cumulative acreage                                                                                                                         
  changes (baseline scenario)**                                                                                                                         

                                    **FY 2009**                                           **FY 2010**           **FY 2011**           **FY 2012**       **FY 2009--FY 2012**

                                    **- - - - - - - - - - - - - - - - - - - - - - - -                                                                   
                                    Acres - - - - - - - - - - - - - - - - - - - - - - -                                                                 
                                    -**                                                                                                                 

  Permanent Easements               77,600                                                77,600                73,200                0                 228,400

  30-year Easements                 13,300                                                13,300                12,500                0                 39,100

  Restoration Cost-share            [9,100]{.underline}                                   [9,100]{.underline}   [8,500]{.underline}   [0]{.underline}   [26,700]{.underline}

  **Annual Totals**                 **100,000**                                           **100,000**           **94,200**            **0**             **294,200**

                                                                                                                                                        

  **Cumulative**                    **2,081,000**                                         **2,181,000**         **2,275,000**         **2,275,000**     N/A
  --------------------------------- ----------------------------------------------------- --------------------- --------------------- ----------------- ----------------------

**[Baseline Scenario -- Costs]{.underline}:** Total obligations over FY
2009--FY 2012 are estimated at \$765.2 million with 294,200 acres
enrolled (table 6). All costs (and benefits) are expressed in constant
2007 dollars. Costs are adjusted to account for the contract life.
Enrollment and restoration expenditures are assumed to be incurred in
the same year[^8]. The values for easements (or program costs) are based
on the national average obligated for the WRP for FY 2007 using the same
logic as discussed above for the baseline calculations.

Participant costs include direct costs over the FY 2009--FY 2012
baseline period which are projected to total \$1.4 million (table 6).
For both the 30-year easement and restoration contracts, it is assumed
that 25 percent of the restoration costs, including materials, equipment
services, and labor to install the practices, are borne by the
participant. The average participant costs are estimated to at \$27 for
30-year easements and \$13 for restoration cost-share agreements (table
6). This represents a direct cost to the participant even when the costs
are provided by a partner organization at no cost to the participant.
Participants will also incur additional administration costs and
maintenance costs over the life of the program, but these costs were not
included in this analysis.

Program (government costs) plus participant costs represent the total
economic costs of the program. Under the baseline (FY 2009--FY 2012)
economic costs are estimated to total \$766.6 million.

+----------------+--------+-------+-----------+---------+------------+
| []{            |        |       |           |         |            |
| #__RefHeading_ |        |       |           |         |            |
| __Toc219260752 |        |       |           |         |            |
| .              |        |       |           |         |            |
| anchor}**Table |        |       |           |         |            |
| 6. Estimated   |        |       |           |         |            |
| WRP costs over |        |       |           |         |            |
| the FY         |        |       |           |         |            |
| 2009--FY 20012 |        |       |           |         |            |
| period         |        |       |           |         |            |
| (baseline      |        |       |           |         |            |
| scenario)**    |        |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+
|                | **I    | **    | **Total   | **Part  | **Total    |
|                | nitial | Total | Ob        | icipant | Government |
|                | oblig  | Ac    | ligations | Cost    | and        |
|                | ations | res** | (Govt     | s^2/^** | Producer   |
|                | per    |       | Costs)**  |         | Costs**    |
|                | acre   |       |           |         |            |
|                | ^1/^** |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+
| Permanent      | \      | 22    | \$70      | \$0     | \$7        |
| Easements      | $3,089 | 8,400 | 5,527,600 |         | 05,527,600 |
+----------------+--------+-------+-----------+---------+------------+
| 30-year        | \      | 3     | \$4       | \$1,    | \$         |
| Easements      | $1,077 | 9,100 | 2,110,700 | 055,700 | 43,166,400 |
+----------------+--------+-------+-----------+---------+------------+
| Restoration    | [      | [26,7 | [\$17,51  | [\      | [\$17,     |
| Cost-share     | \$656] | 00]{. | 5,200]{.u | $347,10 | 862,300]{. |
|                | {.unde | under | nderline} | 0]{.und | underline} |
|                | rline} | line} |           | erline} |            |
+----------------+--------+-------+-----------+---------+------------+
| **Totals**     | **\$4  | *     | **\$765,  | *       | **\$766    |
|                | ,822** | *294, | 153,500** | *\$1,40 | ,556,300** |
|                |        | 200** |           | 2,800** |            |
+----------------+--------+-------+-----------+---------+------------+
| ^1/^Costs      |        |       |           |         |            |
| based on FY    |        |       |           |         |            |
| 2007           |        |       |           |         |            |
| obligations.   |        |       |           |         |            |
| Includes       |        |       |           |         |            |
| estimated cost |        |       |           |         |            |
| of NRCS        |        |       |           |         |            |
| technical      |        |       |           |         |            |
| assistance of  |        |       |           |         |            |
| \$618 per      |        |       |           |         |            |
| acre.          |        |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+
| ^              |        |       |           |         |            |
| 2/^Participant |        |       |           |         |            |
| costs are      |        |       |           |         |            |
| calculated     |        |       |           |         |            |
| assuming that  |        |       |           |         |            |
| the average    |        |       |           |         |            |
| per-acre       |        |       |           |         |            |
| cost-share     |        |       |           |         |            |
| paid by        |        |       |           |         |            |
| participants   |        |       |           |         |            |
| are:           |        |       |           |         |            |
|                |        |       |           |         |            |
| \$0 for        |        |       |           |         |            |
| permanent      |        |       |           |         |            |
| easements;     |        |       |           |         |            |
| \$27 for       |        |       |           |         |            |
| 30-year        |        |       |           |         |            |
| easements;     |        |       |           |         |            |
| and, \$13 for  |        |       |           |         |            |
| restoration    |        |       |           |         |            |
| cost-share     |        |       |           |         |            |
| agreements.    |        |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+

**[Baseline Scenario - Benefits]{.underline}**: Assuming the per-acre
benefit values produced with a seven percent discount rate, the benefits
of maintaining the baseline are expected to generate more than \$1.6
billion over the four-year period FY 2009--FY 2012. These results
suggest that the federal outlays for WRP produce positive net benefits,
even when acreage is constrained at the historical funding and acreage
target levels (table 7).

  --------------------------------- ---------------------------- ---------------------------- ----------------------------
  []{#__RefHeading___Toc219260753                                                             
  .anchor}**Table 7. Estimated                                                                
  total WRP benefits and costs                                                                
  during FY 2009--FY 2012 (baseline                                                           
  scenario).**                                                                                

                                    **Total Benefits**           **Total Costs**              **Net Benefits**

  Permanent Easements               \$1,339,638,442              \$705,527,600                \$634,110,842

  30-year Easements                 \$206,207,241                \$43,166,400                 \$163,040,841

  Restoration Cost-share            [\$79,700,091]{.underline}   [\$17,862,300]{.underline}   [\$61,837,791]{.underline}

  **Totals**                        **\$1,625,545,774**          **\$766,556,300**            **\$858,989,474**
  --------------------------------- ---------------------------- ---------------------------- ----------------------------

[]{#__RefHeading___Toc219260690 .anchor}**Policy Scenario 1 -- Implement
the 2008 Act changes for FY 2009--FY 2012**

**(total acres enrolled equals 2.581 million).**

The policy scenarios described in the following sections reflect NRCS
best estimate of the program changes given the 2008 Act. All mandatory
items are incorporated in the analysis where possible. The only
discretionary item concerns the introduction of WREP which is assumed to
be incorporated in these changes implicitly.

In policy scenario 1, the enrollment cap of 2.275 million acres, as
stated in the 2002 Farm Bill, is replaced with a higher cap of 3.041
million. The annual acreage target is set at 150,000 acres. We assume
that WRP is funded sufficiently to enroll this annual total and makes
the cumulative total at the end of FY 2012 almost 2.581 million acres --
under the new cap of 3.041 million acres mentioned above (table 8).

The 150,000 acres per year target represents the average amount of
acreage enrolled in WRP from FY 1996 through FY 2005. The FY 1996 to FY
2005 average was used because the payment rates used during that period
reflect the payment method outlined in the 2008 Act. Thus, acreage or
participation levels were assumed to increase to reflect to the pre-FY
2006 average. The distribution of acreage by permanent, 30-year
easement, and restoration cost-share agreements for this scenario is
assumed to be the same as previously stated (e.g. FY 2001 to FY 2007 WRP
acreage distribution was used).

  --------------------------------- ----------------------------------------------------- ---------------------- ---------------------- ---------------------- ----------------------
  []{#__RefHeading___Toc219260754                                                                                                                              
  .anchor}**Table 8. Expected                                                                                                                                  
  annual and cumulative acreage                                                                                                                                
  changes (policy scenario 1)**                                                                                                                                

                                    **FY 2009**                                           **FY 2010**            **FY 2011**            **FY 2012**            **FY 2009--FY 2012**

                                    **- - - - - - - - - - - - - - - - - - - - - - - -                                                                          
                                    Acres - - - - - - - - - - - - - - - - - - - - - - -                                                                        
                                    -**                                                                                                                        

  Permanent Easements               116,400                                               116,400                116,400                116,400                465,600

  30-year Easements                 20,000                                                20,000                 20,000                 20,000                 80,000

  Restoration Cost-share            [13,600]{.underline}                                  [13,600]{.underline}   [13,600]{.underline}   [13,600]{.underline}   [54,400]{.underline}

  **Annual Totals**                 **150,000**                                           **150,000**            **150,000**            **150,000**            **600,000**

                                                                                                                                                               

  **Cumulative**                    **2,131,000**                                         **2,281,000**          **2,431,000**          **2,581,000**          N/A
  --------------------------------- ----------------------------------------------------- ---------------------- ---------------------- ---------------------- ----------------------

**[Policy Scenario 1 -- Costs]{.underline}:** Total obligations over the
four-year period FY 2009--FY 2012 are estimated to total \$1.26 billion
with 600,000 acres enrolled (table 9). All costs (and benefits) are
expressed in constant 2007 dollars. Costs are adjusted to account for
the contract life. Easement costs are assumed to be similar to the
national average obligated for the WRP for FY 2005 (updated to reflect
2007 dollars) using the same logic as discussed above. Participant costs
are direct costs associated with their obligations to match the
government cost-share rate. For 30-year and restoration contracts, 25
percent of materials, equipment services, and labor to install the
practices are born by the participant. In total, participant costs are
estimated at \$4.87 million per year and projected over the FY 2009--FY
2012 period to add up to \$19.47 million (note: participants are also
likely to incur additional administration costs and maintenance costs
over the life of the program, but these costs were not included in this
analysis).

+----------------+--------+-------+-----------+---------+------------+
| []{            |        |       |           |         |            |
| #__RefHeading_ |        |       |           |         |            |
| __Toc219260755 |        |       |           |         |            |
| .              |        |       |           |         |            |
| anchor}**Table |        |       |           |         |            |
| 9. Estimated   |        |       |           |         |            |
| WRP costs over |        |       |           |         |            |
| the FY         |        |       |           |         |            |
| 2009--FY 20012 |        |       |           |         |            |
| period (policy |        |       |           |         |            |
| scenario 1)**  |        |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+
|                | **I    | **    | **Total   | **Part  | **Total    |
|                | nitial | Total | Ob        | icipant | Government |
|                | oblig  | Ac    | ligations | Cost    | and        |
|                | ations | res** | (Govt     | s^2/^** | Producer   |
|                | per    |       | Costs)**  |         | Costs**    |
|                | acre   |       |           |         |            |
|                | ^1/^** |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+
| Permanent      | \      | 46    | \$1,07    | \$0     | \$1,0      |
| Easements      | $2,317 | 5,600 | 8,795,200 |         | 78,795,200 |
+----------------+--------+-------+-----------+---------+------------+
| 30-year        | \      | 8     | \$13      | \$10,   | \$1        |
| Easements      | $1,640 | 0,000 | 1,200,000 | 000,000 | 41,200,000 |
+----------------+--------+-------+-----------+---------+------------+
| Restoration    | [      | [54,4 | [\$53,36  | [\$9    | [\$62,     |
| Cost-share     | \$981] | 00]{. | 6,400]{.u | ,465,60 | 832,000]{. |
|                | {.unde | under | nderline} | 0]{.und | underline} |
|                | rline} | line} |           | erline} |            |
+----------------+--------+-------+-----------+---------+------------+
| **Totals**     | **\$4  | *     | *         | **      | **\$1,282  |
|                | ,398** | *600, | *\$1,263, | \$19,46 | ,827,200** |
|                |        | 000** | 361,600** | 5,600** |            |
+----------------+--------+-------+-----------+---------+------------+
| ^1/^Includes   |        |       |           |         |            |
| estimated cost |        |       |           |         |            |
| of NRCS        |        |       |           |         |            |
| technical      |        |       |           |         |            |
| assistance of  |        |       |           |         |            |
| \$459 per      |        |       |           |         |            |
| acre.          |        |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+
| ^              |        |       |           |         |            |
| 2/^Participant |        |       |           |         |            |
| costs are      |        |       |           |         |            |
| calculated     |        |       |           |         |            |
| assuming that  |        |       |           |         |            |
| the per-acre   |        |       |           |         |            |
| cost-share     |        |       |           |         |            |
| paid by        |        |       |           |         |            |
| participants   |        |       |           |         |            |
| are:           |        |       |           |         |            |
|                |        |       |           |         |            |
| \$0 for        |        |       |           |         |            |
| permanent      |        |       |           |         |            |
| easements;     |        |       |           |         |            |
| \$125 for      |        |       |           |         |            |
| 30-year        |        |       |           |         |            |
| easements;     |        |       |           |         |            |
| and, \$174 for |        |       |           |         |            |
| restoration    |        |       |           |         |            |
| cost-share     |        |       |           |         |            |
| agreements.    |        |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+

**[Policy Scenario 1 - Benefits]{.underline}**: The benefits of policy
scenario 1 are expected to continue at the same annual rate as was
assumed during the FY 2003--FY 2007 WRP program years. Per-acre costs
are lower than under the baseline, producing higher net benefits
estimates (table 10).

  --------------------------------- ----------------------------- ---------------------------- ----------------------------
  []{#__RefHeading___Toc219260756                                                              
  .anchor}**Table 10. Estimated                                                                
  total WRP benefits and costs                                                                 
  during FY 2009--FY 2012 (policy                                                              
  scenario 1)**                                                                                

                                    **Total Benefits**            **Total Costs**              **Net Benefits**

  Permanent Easements               \$2,730,891,677               \$1,078,795,200              \$1,652,096,477

  30-year Easements                 \$421,907,400                 \$141,200,000                \$280,707,400

  Restoration Cost-share            [\$162,385,205]{.underline}   [\$62,832,000]{.underline}   [\$99,553,205]{.underline}

  **Totals**                        **\$3,315,184,282**           **\$1,282,827,000**          **\$2,032,357,082**
  --------------------------------- ----------------------------- ---------------------------- ----------------------------

[]{#__RefHeading___Toc219260691 .anchor}**Policy Scenario 2 -- Implement
the 2008 Act changes for FY 2009--FY 2012**

**(total acres enrolled equals 3.041 million).**

WRP is funded sufficiently to enroll 265,000 acres per year increasing
the total enrollment to 3.041 million acres. This alternative assumes
that WRP rules are changed in accordance with the 2008 Act as was the
case in policy scenario 1, but enrollment jumps to 265,000 acres per
year to permit the program to reach the enrollment cap by the last year
of the Farm Bill (table 11).

  --------------------------------- ----------------------------------------------------- ---------------------- ---------------------- ---------------------- ----------------------
  []{#__RefHeading___Toc219260757                                                                                                                              
  .anchor}**Table 11. Expected                                                                                                                                 
  annual and cumulative acreage                                                                                                                                
  changes (policy scenario 2)**                                                                                                                                

                                    **FY 2009**                                           **FY 2010**            **FY 2011**            **FY 2012**            **FY 2009--FY 2012**

                                    **- - - - - - - - - - - - - - - - - - - - - - - -                                                                          
                                    Acres - - - - - - - - - - - - - - - - - - - - - - -                                                                        
                                    -**                                                                                                                        

  Permanent Easements               205,700                                               205,700                205,700                205,700                822,800

  30-year Easements                 35,300                                                35,300                 35,300                 35,300                 141,200

  Restoration Cost-share            [24,000]{.underline}                                  [24,000]{.underline}   [24,000]{.underline}   [24,000]{.underline}   [96,000]{.underline}

  **Annual Totals**                 **265,000**                                           **265,000**            **265,000**            **265,000**            **1,060,000**

                                                                                                                                                               

  **Cumulative**                    **2,246,000**                                         **2,511,000**          **2,776,000**          **3,041,000**          N/A
  --------------------------------- ----------------------------------------------------- ---------------------- ---------------------- ---------------------- ----------------------

**[Policy Scenario 2 -- Costs]{.underline}:** Total obligations over FY
2009--FY 2012 are estimated at \$2.27 billion and cover over nearly
1,060,000 acres (table 12). All costs (and benefits) are expressed in
constant 2007 dollars Costs are adjusted to account for the contract
life. Enrollment and restoration expenditures are assumed to be incurred
in the same year[^9]. The values for easements (or program costs) are
based on the national average obligated for the WRP for FY 2005 using
the same logic as discussed above. Costs to participants are direct
costs associated with matching the NRCS cost-share rate and in this
case, are estimated at over \$8.6 million per year or \$34.4 million
over FY 2009--FY 2012. For 30-year and restoration contracts, 25 percent
of materials, equipment services, and labor to install the practices are
born by the participant (note: additional administration costs and
maintenance costs over the life of the program are not included in this
analysis).

+----------------+--------+-------+-----------+---------+------------+
| []{            |        |       |           |         |            |
| #__RefHeading_ |        |       |           |         |            |
| __Toc219260758 |        |       |           |         |            |
| .              |        |       |           |         |            |
| anchor}**Table |        |       |           |         |            |
| 12. Estimated  |        |       |           |         |            |
| WRP costs over |        |       |           |         |            |
| the FY         |        |       |           |         |            |
| 2009--FY 20012 |        |       |           |         |            |
| period (policy |        |       |           |         |            |
| scenario 2)**  |        |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+
|                | **I    | **    | **Total   | **Part  | **Total    |
|                | nitial | Total | Ob        | icipant | Government |
|                | oblig  | Ac    | ligations | Cost    | and        |
|                | ations | res** | (Govt     | s^2/^** | Producer   |
|                | per    |       | Costs)**  |         | Costs**    |
|                | acre   |       |           |         |            |
|                | ^1/^** |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+
| Permanent      | \      | 82    | \$1,90    | \$0     | \$1,9      |
| Easements      | $2,317 | 2,800 | 6,427,600 |         | 06,427,600 |
+----------------+--------+-------+-----------+---------+------------+
| 30-year        | \      | 14    | \$23      | \$17,   | \$2        |
| Easements      | $1,640 | 1,200 | 1,568,000 | 650,000 | 49,218,000 |
+----------------+--------+-------+-----------+---------+------------+
| Restoration    | [      | [96,0 | [\$94,17  | [\$16   | [\$110,    |
| Cost-share     | \$981] | 00]{. | 6,000]{.u | ,704,00 | 880,000]{. |
|                | {.unde | under | nderline} | 0]{.und | underline} |
|                | rline} | line} |           | erline} |            |
+----------------+--------+-------+-----------+---------+------------+
| **Totals**     | **\$4  | **1   | *         | **      | **\$2,266  |
|                | ,398** | ,060, | *\$2,232, | \$34,35 | ,525,600** |
|                |        | 000** | 171,600** | 4,000** |            |
+----------------+--------+-------+-----------+---------+------------+
| ^1/^Includes   |        |       |           |         |            |
| estimated cost |        |       |           |         |            |
| of NRCS        |        |       |           |         |            |
| technical      |        |       |           |         |            |
| assistance of  |        |       |           |         |            |
| \$459 per      |        |       |           |         |            |
| acre.          |        |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+
| ^              |        |       |           |         |            |
| 2/^Participant |        |       |           |         |            |
| costs are      |        |       |           |         |            |
| calculated     |        |       |           |         |            |
| assuming that  |        |       |           |         |            |
| the per-acre   |        |       |           |         |            |
| cost-share     |        |       |           |         |            |
| paid by        |        |       |           |         |            |
| participants   |        |       |           |         |            |
| are:           |        |       |           |         |            |
|                |        |       |           |         |            |
| \$0 for        |        |       |           |         |            |
| permanent      |        |       |           |         |            |
| easements;     |        |       |           |         |            |
| \$125 for      |        |       |           |         |            |
| 30-year        |        |       |           |         |            |
| easements;     |        |       |           |         |            |
| and, \$174 for |        |       |           |         |            |
| restoration    |        |       |           |         |            |
| cost-share     |        |       |           |         |            |
| agreements.    |        |       |           |         |            |
+----------------+--------+-------+-----------+---------+------------+

**[Policy Scenario 2 - Benefits]{.underline}**: The benefits realized in
policy scenario 2 are simply the results of policy scenario 1 multiplied
by the acreage expansion factor reflecting the higher acreage targets
(table 13).

  --------------------------------- ----------------------------- ----------------------------- -----------------------------
  []{#__RefHeading___Toc219260759                                                               
  .anchor}**Table 13. Estimated                                                                 
  total WRP benefits and costs                                                                  
  during FY 2009--FY 2012 (policy                                                               
  scenario 2)**                                                                                 

                                    **Total Benefits**            **Total Costs**               **Net Benefits**

  Permanent Easements               \$4,825,982,972               \$1,906,427,600               \$2,919,555,372

  30-year Easements                 \$744,666,561                 \$249,218,000                 \$495,448,561

  Restoration Cost-share            [\$286,562,127]{.underline}   [\$110,880,000]{.underline}   [\$175,682,127]{.underline}

  **Totals**                        **\$5,857,211,660**           **\$2,266,525,600**           **\$3,590,686,060**
  --------------------------------- ----------------------------- ----------------------------- -----------------------------

# Discussion of Scenarios

**[Current Policy Scenario]{.underline}:** This scenario establishes a
benchmark for comparing policy alternatives. In this scenario, annual
acreage targets can not be met throughout the future period because of
the Farm Bill 2002 enrollment cap. The enrollment cap is hit in FY 2011
when the program is limited by the cap to enrolling only 294,200 acres.
In FY 2012, no new acres can be enrolled in the program.

**[Policy Scenario 1]{.underline}:** The major change in WRP brought
about by the 2008 Act (the suggested use the fair market value appraisal
or market analysis approach) is expected to lead program managers to
rely more heavily on geographic caps in making easement offers. The
reason behind this is that the use of the fair market value appraisal
approach does not take into account the residual value of the land after
the easement is placed. In many areas this will lead to higher appraised
values than would have been the case before. As a result the appraised
value of land being considered for enrollment will now be higher than
the established geographic caps.

As a consequence of this change enrollment in the program would shift to
areas where the appraised values using the previous method were
significantly lower than the geographic cap. The net results of these
actions are (1) lower national average costs for easements on a per-acre
basis and (2) a shift of WRP acreage to regions with lower land prices.

**[Policy Scenario 2]{.underline}:** This scenario produces similar
acreage shifts as described under Scenario 1, but acreage enrolled is
expected to increase to the maximum allowed under the cap. Total costs
for both the government and participants will increase proportionately
with the increase in acreage.

## Conclusions

Wetlands benefit the nation by providing habitat for fish and wildlife,
including threatened and endangered species; improving water quality by
filtering sediments and chemicals; reducing flooding; recharging
groundwater; protecting biological diversity; as well as providing
opportunities for educational, scientific, and recreational activities.

Changes made to WRP by the 2008 Act will likely result in an additional
600,000 to 1 million acres being enrolled in the program. Total economic
costs of this expansion of the program could range from \$1.3 to \$2.3
billion. Continuation of the program under the 2002 Farm Bill would have
increased acreage by an additional 294,200 acres at an economic cost of
\$767 million.

There is a growing knowledge base concerning the benefits of wetlands.
In a few cases these benefits have been monetized. Although benefits can
be estimated on a generalized basis from selected study sites, caution
must be exercised in using these benefits. That caveat notwithstanding
it appears that the monetary and non-monetary benefits from wetland
restoration under the WRP exceed their costs.

# References

Borisova-Kidder, A. (2006). Meta-analytic Estimates of Values of
Environmental Services Enhanced by Agricultural Conservation Programs.
PhD dissertation, Ohio State University.

Brander, Luke M., Florax, Raymond J. G. M. & Vermaat, Jan E. (2006,
February). The Empirics of Wetland Valuation: A Comprehensive Summary
and Meta-Analysis of the Literature. Environmental and Resource
Economics, 33, 223-250.

Brouwer, R., Langford, I.H., Bateman, I.J., & Turner, R.K.. (1999,
November). A Meta-Analysis of Wetland Contingent Valuation Studies.
Regional Environmental Change 1, 47-57.

Heimlich, Ralph E., Weibe, Keith D., Claassen, Roger, Gadsby, Dwight, &
House, Robert M. (1998, September). Wetlands and Agriculture: Private
Interests and Public Benefits. Economic Research Service, U.S.
Department of Agriculture, Agricultural Economic Report No. 765.
Washington DC.

Dahl, T. E. (2005, December). Status and Trends of Wetlands in the
Conterminous United States 1998 to 2004. U.S. Department of the
Interior, Fish and Wildlife Service, Fisheries and Habitat Conservation.
Washington, DC.

Mitsch, William J., & Gosselink, James G. (1993). Wetlands, 2^nd^
Edition, New York: Wiley.

National Archives and Records Administration. (2006). Code of Federal
Regulations, Title 40, Section 230.3(t). Washington, D.C.; U.S.
Government Printing Office.

Randall, Allan, Kidder, Ayuna, & Chen, Ding-Rong. (2008). Meta Analysis
for Benefits Transfer -- Toward Value Estimates for Some Outputs of
Multifunctional Agriculture. 12^th^ Congress of the European Association
of Agricultural Economists -- EAAE 2008.

United States Department of Agriculture, Commodity Credit Corporation.
(1996). Wetlands Reserve Program Final Rules, 61 FR 42137. Natural
Resources Conservation Service. Available:
<http://www.nrcs.usda.gov/programs/farmbill/1996/WetRule.html> \[2008,
September 5\]

United States Department of Agriculture, Natural Resources Conservation
Service. (2006). Wetlands Conservation. Conservation Brief.

United States Department of Agriculture, Natural Resources Conservation
Service . (2008). Wetland Reserve Program: Final Programmatic
Environmental Assessment.

United States Environmental Protection Agency. (2007, December). Science
Advisory Board, Science Advisory Board report of Gulf Hypoxia: Hypoxia
in the Northern Gulf of Mexico: An Update by the EPA Science Advisory
Board. Washington, D.C.

Woodward, Richard T. & Wui, Yong-Suhk. (2000, November). The Economic
Value of Wetland Services: A Meta-analysis. Ecological Economics, 37,
257-270.

Zinn, Jeffrey. (1995, December 29). Soil and Water Conservation: Policy
Issues for the 1995 Farm Bill. National Council for Science and the
Environment, Congressional Research Service (CRS) Reports. Available:
<http://cnie.org/NLE/CRS/abstract.cfm?NLEid=408> \[2008, September 5\]

[]{#__RefHeading___Toc219260764 .anchor}**Appendix A. Legislative
History of Wetlands Reserve Program, 1990-2002**

> ***1990 Farm Bill, § 1438 - Establishes program requiring Secretary to
> acquire one million acres of wetlands in long-term easements by the
> end of the 1990 Farm Bill.***

The 1990 Farm Bill authorized the Wetlands Reserve Program (WRP). WRP
was designed to prohibit destructive activities on defined wetlands by
paying landowners to obtain 30-year or perpetual easement payments to
landowners. Priority for enrollment was given to permanent easements. It
has been reauthorized or amended in every Farm Bill since.

WRP had a cap of 1 million acres total with no more than 200 thousand
acres being allowed into the program in any one year. Eligible lands
included:

1)  Farmed wetlands or converted wetland, together with adjacent land,
    where the conversion commenced before December 23, 1985.

2)  Farmed wetlands enrolled in Conservation Reserve Program (CRP) and
    that were likely to return to production after they leave CRP.

3)  Riparian areas linking wetlands that were protected by easements or
    some other device.

The Farm Bill provided that those lands enrolled in CRP could be
converted over to a WRP easement before the expiration of the contract.

Easements were required to be in accord with a conservation plan made
through an agreement with the Natural Resources Conservation Service.
The conservation plan must prohibit:

1)  The alteration of wildlife habitat, unless specifically permitted by
    the plan.

2)  Chemical spraying.

3)  Any activities on adjacent land that diminishes the functional value
    of the wetland.

4)  The adoption of any other practice the Secretary determines would
    defeat the purpose of WRP.

A restoration plan must also be developed through an agreement with a
local representative of the Natural Resources Conservation Service. The
easement may allow for compatible uses, such as hunting and fishing, and
even periodic haying and grazing, as long as the activity is consistent
with the long-term protection of the wetland.

The Farm Bill stated that compensation for the wetland shall not "exceed
the fair market value of the land less the fair market value of such
land encumbered by the easement." Owners are given the opportunity to
bid for enrollment into WRP. The easement will be paid for in five to 20
annual payments, unless it is a permanent easement, in which case the
payment can be in a lump sum. Easement payments for any year were
limited to \$50 thousand, and the payments would not count against any
other payment limitation in the Farm Bill commodity programs.

If the owner violates the terms of the easement, the easement will
remain in force and the owner may be required to refund all or part of
the payments. WRP requires the owner to agree to retire any existing
cropland base and allotment history for the land in the easement.

The Secretary will pay 50 to 100 percent of the cost of the improvements
to the land, with greater cost share going to longer easements. The
Secretary may modify the easement if the present owner agrees and the
modification is consistent with the goals of WRP. The easement may be
terminated if the Secretary and current owner agrees and the Secretary
determines such termination is in the public interest.

> ***1996 Farm Bill, § 333 -- Limits the number of acres in WRP to 975
> thousand and designates a new type of legal arrangement (restoration
> cost-share agreements) that can be used in WRP besides easements.***

The 1996 Farm Bill scaled back to 975 thousand the total number of acres
that could be enrolled in WRP. The bill created a new type of legal
arrangement that could be used under WRP called a "restoration
cost-share agreement," which required the owner to restore wetlands but
did not include an easement. The program offered three enrollment and
payment options:

1)  Permanent Easement, payment was figured on the lowest of three
    amounts: the difference in the appraised fair market value of the
    larger parcel after the easement is in place; an established payment
    cap, or an amount offered by the landowner. In addition to paying
    for the easement, USDA paid up to 100 percent of the cost of
    restoring the wetland.

2)  30-year easement, payments were based on 75 percent of what would
    have been paid for a permanent easement. For both permanent and
    30-year easements, USDA paid all of the administrative and
    acquisition cost.

3)  Restoration Cost-share Agreement payments were base on 75 percent of
    the cost of the restoration activity.

The 1996 Farm Bill required the Secretary to divide enrollment evenly
between permanent easements, 30-year easements, and restoration
cost-share agreements and prohibited the Secretary from entering into
additional permanent easements until he or she has enrolled at least 75
thousand acres in temporary easements. The bill also added a wildlife
component to eligibility requirements by requiring that the easements
maximize "wildlife benefits and wetlands values and functions."

As to cost share, the bill allowed for the Secretary to pay 50 to 75
percent of improvements on land under 30-year easement or restoration
cost-share agreements, and 75 to 100 percent of improvements to land in
permanent easements.

The 1999 Omnibus Appropriations Act (P.L. 105-277, § 730 (October 21,
1998)) restricted USDA from enrolling more than 120 thousand acres in
WRP in fiscal year 1999. The 2000 Agricultural Appropriations Act (P.L.
106-78, § 728 (October 22, 1999)) restricted USDA from enrolling more
than 150 thousand acres in fiscal year 2000.

The 2000 Agricultural Appropriations Bill provided the Secretary the
authority to enter in to cooperative agreements for the acquisition of
goods or services from states, political subdivisions, public or private
organization, or any other person if the agreements served the purpose
of carrying out WRP. P.L. 106-78 § 717 (October 22, 1999).

The 2001 Appropriations Bill P.L. 106-387 § 808 (October 28, 2000)
allowed for up to 1.075 million acres to be enrolled in WRP, as long as
funding for technical assistance provided by USDA would be paid for by
the Commodity Credit Corporation (CCC). The Bill also required that the
amount necessary to enroll the 1.075 million acres would be designated
as emergency moneys.

> ***2002 Farm Bill, § 2201- Increases the maximum enrollment to 2.275
> million acres and removes the quotas under the different types of
> legal instruments.***

2002 - The 2002 Farm Bill more than doubled the maximum amount of
enrollment in WRP to 2.275 million acres. The bill removed the 1996
quotas that required newly enrolled land should be equally distributed
among permanent easements, 30-year easements, and restoration cost-share
agreements.

In 2004, President George W. Bush announced a new strategy for
increasing wetlands acres and their quality by establishing an
aggressive new national goal, moving beyond the "no net loss" of
wetlands to an overall increase of wetlands each year. President's Bush,
goal was to create, improve, and protect at least 3 million wetland
acres through year 2007. It enabled WRP to continue to be a viable
option for the nation's private landowners who wanted to restore
wetlands.

[]{#__RefHeading___Toc219260765 .anchor}**Appendix B. Wetland Policy
Highlights**

**[Getting To "No Net Loss"]{.underline}:** The Economic Research
Service (Heimlich et al.) reported that prior to European colonization
of America there were approximately 224 million acres of wetlands in
what was to become the continental (lower 48 states) United States.
Between first settlement and 1954, approximately 42 percent of original
wetlands were drained or filled.

Most of this wetland conversion was for agricultural purposes, with as
much as 50 million acres drained between the late 19^th^ and early
20^th^ centuries. Government policies and local cooperative
encouragement during this period resulted in the converting of wetlands,
to agriculture, at an average net rate of 850 thousand acres a year.

The pace of wetland net conversion slowed to approximately 460 thousand
acres a year for the two decades following 1954. Federal policy changes,
such as the Clean Water Act's Section 404 and Executive Order 11990, and
State wetland laws further reduced the wetland conversion rate starting
in the 1970's.

By the 1980's, with the Swampbuster provisions of the 1985 Food Security
Act, more rigorous enforcement of Section 404 permitting, changes in
preferential income tax and State wetland regulations, as well as,
falling agricultural prices, net wetland conversion was further reduced.
From 1982 to 1992 net wetland conversion averaged less than 80 thousand
acres per year.

Gross conversion to agricultural use was only 31 thousand acres a year
and the country was approaching a "No Net Loss" of wetlands goal.

**["No Net Loss" and Beyond]{.underline}:** In 1987 the Environmental
Protection Agency (EPA) asked the Conservation Foundation's president,
William Reilly, to convene a forum of environmental, agricultural,
business, academic, and government leaders to consider ways to improve
wetland regulation (Heimlich et al.). From this forum came the idea that
"No Net Loss" was a reasonable goal. "No Net Loss" was later adopted as
a policy goal by both the Bush and Clinton administrations (1991 and
1993). And Vice-President Gore's Clean Water Action plan would call for
achieving a net gain of 100 thousand acres of wetlands by 2005 (Gore,
1997).

President Bush, Earth Day 2004, announced a wetlands initiate that
established a federal policy of beyond "No Net Loss" (Dahl). The policy
seeks to obtain an overall increase in both wetland quality and quantity
while setting a goal of restoring, improving, or protecting more than 3
million acres in five years. The President further directed the Fish and
Wildlife service to provide an updated wetlands status and trends study
in 2005.

**[Highlights of Past WRP Acreage Enrollment and
Expenditures]{.underline}:** Approximately 50 thousand acres were
enrolled in the WRP Nine-State Pilot Program in FY 1992. No funding was
provided in FY 1993. For FY 1994, funding of more than \$66 million was
approved to enroll 75 thousand acres in 20 states. In FY 1995, Congress
provided \$93 million to enroll an estimated 100 thousand acres
nationwide. More than \$66 million was approved to enroll 75 thousand
acres in 20 States. Congress provided \$93 million to enroll an
estimated 100 thousand acres nationwide. More than 575 thousand acres
were offered for enrollment. The top states were Louisiana (66.3
thousand acres) and Texas (64.6 thousand acres). Also, additional acres
were enrolled when emergency funding was appropriated to respond to the
floods of 1993 in the upper Midwest (Zinn, 1995). The FY 1996
Agriculture Appropriations legislation combined two water planning
programs together in a single line item to fund the WRP at \$77 million,
to enroll up to 100 thousand acres.

The WRP met the acreage limit established prior to the 2002 Farm Bill.
However, Congress raised the program's total acreage enrollment limit to
2.3 million acres. This action enabled WRP to continue to be a viable
option for the nation's private landowners who wanted to restore
wetlands through 2007. In FY 2006, 9,951 projects have been enrolled on
1.9 million acres. Landowner interest in the program remains strong.
NRCS anticipated enrolling 150 thousand acres in FY 2007. The 2008 Act
will raise the WRP area cap to 3.0 million acres through FY 2012.

Enrolled lands are mostly marginal, high-risk, flood prone restorable
agricultural wetlands. All states and Puerto Rico have active WRP
projects. The top 10 states in terms of enrollment are Louisiana,
Arkansas, Mississippi, California, Florida, Missouri, Iowa, Texas,
Minnesota, and Oklahoma.

From 1992 through 2007 the WRP average size of a wetland enrolled per
year was 197 acres for permanent easements, 184 acres for 30-year
easements, and 145 acres for restoration cost-share agreements.

The average cost per contract is as follows: \$1,302 for permanent
easements, \$667 for 30-year easements, and \$293 per acre for
restoration cost-share agreements. Total costs were \$256,580 per
permanent easement, \$122,613 per 30-year easement and \$42,519 per
restoration cost-share agreement.

[^1]: For a background on ecosystem services and their assessment,
    please see "Millennium Ecosystem Assessment, 2005, Ecosystems and
    Human Well-Being: Synthesis", Island Press, Washington, DC. World
    Resources Institute.

[^2]: Public goods differ from private goods in many respects. With
    public goods, the market can not exclude non-paying consumers from
    enjoying their provision (non-excludability) and one person's use of
    them does not deprive other consumers from using them (non-rivalry).
    Traditional examples include: public television, national defense,
    public health programs, public firework displays on the Fourth of
    July in the United States and to some extent, lighthouses.

[^3]: Based on Program rules prior to passage of 2008 Act. The changes
    in the program authorized by the 2008 Act are described in the
    "Highlights of the Statue" section.

[^4]: Changes in determination of fair market value authorized by the
    2008 Act are described below in the "Highlights of the Statue"
    section.

[^5]: Changed to seven years under the 2008 Act.

[^6]: Note that there exists another enrollment option in the case of
    land owned by Indian Tribes: a variant of the 30-year contract. In
    these cases, the Tribe has the option of enrolling land in a 30-year
    contract, a restoration cost-share agreement or a combination of
    both. The 30-year contract shall have a value equivalent to the
    value of a 30-year easement.

[^7]: Note that all policy scenarios are analyzed relative to the
    "Continuation of the 2002 Farm Bill WRP Provisions" baseline, in
    order to compare the total costs and benefits of the acres enrolled
    under the existing and new policy regimes.

[^8]: This assumption is made in order to simplify the analysis. It
    usually takes two to three years for restoration to be completed
    once the easement has been closed. So in reality, costs would be
    extended into future years, even though no acres were being enrolled
    in the program. The easiest way to handle these costs is to assume
    they all occur the same year as the easement is closed.

[^9]: This assumption is made in order to simplify the analysis. It
    usually takes two to three years for restoration to be completed
    once the easement has been closed. So in reality, costs would be
    extended into future years, even though no acres were being enrolled
    in the program. The easiest way to handle these costs is to assume
    they all occur the same year as the easement is closed.