To extend the conservation reserve program for 10 years and the wetlands reserve program for 5 years; to protect vulnerable soil and water resources by facilitating the transition of our Nation's most environmentally sensitive land to conservation uses by enabling farmers to meet conservation compliance requirements through the early withdrawal, modification, re-enrollment, or enrollment of lands in the conservation reserve; to best achieve such conservation purposes with sharply limited resources by permitting the Secretary of Agriculture to negotiate reduced annual rental payments in exchange for granting farmers increased flexibility to withdraw, enroll, or re-enroll parts of land parcels in the conservation reserve program and for permitting limited uses on lands enrolled in the conservation reserve; to permit the transfer of crop bases among owners upon the expiration of enrollment; and to authorize the establishment of demonstration projects.

SECTION 1. EXTENSION OF ENVIRONMENTAL CONSERVATION ACREAGE RESERVE 
              PROGRAM.

    (a) In General.--The following provisions of the Food Security Act 
of 1985 are each amended by striking ``1995'' and inserting ``2005'':
            (1) Section 1230(a) (16 U.S.C. 3830(a)).
            (2) Section 1231(a) (16 U.S.C. 3831(a)).
            (3) Section 1231(b)(3) (16 U.S.C. 3831(b)(3)).
            (4) The first sentence of section 1231(d) (16 U.S.C. 
        3831(d)).
            (5) Section 1232(c) (16 U.S.C. 3832(c)).
            (6) Section 1238B(a)(1) (16 U.S.C. 3838b(a)(1)).
            (7) Section 1238B(a)(2) (16 U.S.C. 3838b(a)(2)).
            (8) Section 1238B(a)(11) (16 U.S.C. 3838b(a)(2)).
            (9) Section 1239(a) (16 U.S.C. 3839(a)).
    (b) Wetlands Reserve Program.--Section 1237(c) of such Act (16 
U.S.C. 3837(c)) is amended by striking ``2000'' and inserting ``2005''.

SEC. 2. AUTHORITY TO MODIFY OR EXTEND CONTRACTS.

    (a) In General.--Subchapter B of chapter 1 of subtitle D of title 
XII of the Food Security Act of 1985 (16 U.S.C. 3831-3836) is amended 
by inserting after section 1235A the following:

``SEC. 1235B. CONVERSION OF LAND SUBJECT TO CONTRACT TO OTHER USES.

    ``(a) In General.--Prior to or upon the expiration of a contract 
entered into under this subchapter with respect to environmentally 
sensitive land (as defined by the State technical committee established 
under section 1261 in the State in which the land is located, or until 
such committee is formed, the State technical working group), the 
Secretary shall extend the duration of the contract, or modify the 
terms of the contract, in accordance with this section. The Secretary 
shall place a priority on extending or modifying under this section 
contracts entered into under this subchapter in such a way as to enable 
owners and operators to comply with the applicable plan referred to in 
section 1232(a)(1).
    ``(b) Options for Owners and Operators.--The Secretary shall permit 
an owner or operator who has entered into a contract under this 
subchapter that is in effect on the date of the enactment of this 
section--
            ``(1) before the expiration of the contract, to remove land 
        (including partial fields) from enrollment in the conservation 
        reserve established under this subchapter if--
                    ``(A) the land is not highly erodible cropland;
                    ``(B) the Soil Conservation Service has classified 
                the land as class I, II, III(s), III(w), or III(c), and 
                the land is covered by a conservation plan approved by 
                the local conservation district (or, if the land is not 
                within a conservation district, a plan approved by the 
                Secretary) that limits the soil erosion to such land to 
                not more than the soil loss tolerance level referred to 
                in section 1201(a)(7)(A)(ii); or
                    ``(C) the land is replaced by land of the same 
                owner that, according to the local conservation 
                district or the Secretary, is more environmentally 
                sensitive;
            ``(2) before the expiration of the contract, to re-enroll 
        in the reserve for not more than 10 years portions of land 
        enrolled in the reserve if--
                    ``(A) the land will remain planted to permanent 
                cover and devoted to filter strips, field borders, 
                waterways, terraces, wildlife corridors, well-head 
                protection; buffer strips adjacent to rivers, streams, 
                lakes, wetlands, or any other conservation purpose that 
                the Secretary deems appropriate; and
                    ``(B) future production on the re-enrolled land 
                will not contribute to erosion in excess of the soil 
                loss tolerance level referred to in section 
                1201(a)(7)(A)(ii);
            ``(3) before the expiration of the contract, to enter into 
        negotiations with the Secretary to receive reduced annual 
        rental payments in exchange for permission to allow limited 
        uses (as defined by the State technical committee established 
        under section 1261 in the State in which the land is located, 
        or until such committee is formed, the State technical working 
        group) on enrolled land, including haying, grazing, seed 
        production, production of bio-mass, timber, or such other uses 
        as the Secretary may deem appropriate;
            ``(4) upon expiration of the contract, to retain or 
        transfer cropland bases, with respect to crops for which there 
        is a production adjustment program, to other lands, as long as 
        enrolled croplands remain in permanent cover; or
            ``(5) upon expiration of the contract, to offer cropland 
        bases, with respect to crops for which there is a production 
        adjustment program, on land subject to the contract, for lease 
        or sale to producers for use on cropland in the county in which 
        the land is located or in an adjacent county, in exchange for 
        maintaining the land in permanent cover, as approved by the 
        State technical committee, or until such committee is formed, 
        the State technical working group.
    ``(c) Limitation on Annual Rental Payment for Re-Enrolled Land or 
Land Permitted To Be Devoted to Limited Uses.--Annual rental payments 
made under this subchapter with respect to land that is the subject of 
an agreement entered into pursuant to paragraph (2) or (3) of 
subsection (b) shall not exceed an amount equal to 80 percent of the 
annual rental payment made under this subchapter with respect to the 
land for the 12-month period ending on the date the agreement takes 
effect.''.
    (b) Conforming Amendment.--Section 1232(a)(7) of such Act (16 
U.S.C. 3832(a)(7)) is amended by inserting ``except to the extent 
authorized under section 1235B,'' after ``(7)''.

SEC. 3. DEMONSTRATION PROJECTS.

    (a) Grant Authority.--
            (1) In general.--The Secretary of Agriculture may make 
        grants to producers of agricultural commodities to retain land 
        in the conservation reserve established under subchapter B of 
        chapter 1 of subtitle D of title XII of the Food Security Act 
        of 1985, or to enroll land in the reserve, for the purpose of 
        enabling the owner of the land to grow grass or raise legumes 
        (or do both) on such land, in rotation, as approved by the 
        State technical committee established under section 1261 of 
        such Act in the State in which the land is located or until 
        such committee is formed, the State technical working group.
            (2) Number of sites.--The Secretary may not select more 
        than 3 sites in each State with respect to which grants are to 
        be made under paragraph (1).
    (b) Evaluation.--Not later than 3 years after the first grant is 
made under subsection (a), the Secretary shall evaluate the economic 
and environmental effects of the uses to which grants under subsection 
(a) have been put, and shall submit to the Congress a report that 
contains the findings of the Secretary.
    (c) Limitations on Authorization of Appropriations.--For grants 
under subsection (a), there are authorized to be appropriated to the 
Secretary not more than $500,000 for each of fiscal years 1996, 1997, 
and 1998.

Summary: Amends the Food Security Act of 1985 to extend: (1) the Environmental Conservation Acreage Reserve Program. And (2) the wetlands reserve prgram. Authorizes the Secretary of Agriculture to extend or modify conservation reserve contracts under specified circumstances. Authorizes a demonstration grant program to permit grass and or legumes to be grown on reserve land. Authorizes appropriations.