United States 

Department of 

Agriculture

Economic

Research

Service

Economic

Research

Report

Number 98

June 2010

The Farm Act’s Regional 

Equity Provision

Impacts on Conservation 

Program Outcomes

Cynthia Nickerson

Marc Ribaudo

Nathaniel Higgins
www.ers.usda.gov

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For more information, see: 

Recommended citation format for this publication:

Nickerson, Cynthia, Marc Ribaudo, and Nathaniel Higgins. The Farm Act’s 

Regional Equity Provision: Impacts on Conservation Program Outcomes. 

ERR-98. U.S. Dept. of Agriculture, Econ. Res. Serv. June 2010.
United States

Department

of Agriculture

www.ers.usda.gov

A Report from the Economic Research Service

Abstract

The 2002 and 2008 Farm Acts increased funding for conservation programs that provide 

financial assistance to farmers to implement conservation practices on working farmland. 

Along with seeking cost-effective environmental benefits, these programs have a goal 

of spreading conservation funding equitably across States. The 2002 and 2008 Farm 

Acts strengthened this allocative goal by setting a minimum threshold for conservation funding for each State—one that exceeds historical funding for some States—for 

enrolling agricultural producers in specified conservation programs. This study uses 

conservation program data to examine evidence of the impacts of the Regional Equity 

provision of the 2002 Farm Act, and explores the tradeoffs that can occur among conservation program goals when legislation gives primacy to fund allocation. The study found 

that cross-State shifts in funding reduced the acres receiving conservation treatment for 

many resource problems, but increased the net economic benefits from treatments on 

some of them. Overall impacts on the types of producers enrolled were small. 

Acknowledgments

The authors thank David Nulph of USDA’s Economic Research Service for assistance with 

figures using geographic information systems data. We also thank the following for their 

helpful comments on earlier drafts: LeRoy Hansen, Patrick Sullivan, and Marca Weinberg, 

all from ERS; Noel Gollehon from USDA’s Natural Resources Conservation Service; 

Otto Doering from Purdue University; and two anonymous reviewers. Thanks also to 

Courtney Knauth for editorial assistance and Cynthia A. Ray for layout and design.

Cynthia Nickerson, Marc Ribaudo, and 

Nathaniel Higgins

The Farm Act’s Regional 

Equity Provision: Impacts 

on Conservation Program 

Outcomes

Economic

Research

Report

Number 98 

June 2010
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Contents

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Allocative Goals in Working-Land and Land Protection Programs . . . 4

The Regional Equity Provision: Did Implementation Induce Economic, 

Environmental, or Distributional Tradeoffs? . . . . . . . . . . . . . . . . . . . . . 6

State Funding Levels Will Not Always Be Equally Affected 

by Changes in Overall Program Budgets . . . . . . . . . . . . . . . . . . . . . . . . . 6

Participation Patterns Differ Between RE and Non-RE States . . . . . . . . 8

The Regional Equity Provision Entailed Economic and 

Environmental Tradeoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

The Regional Equity Provision Affected the Number of

Acres Treated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Costs and Benefits Vary Between Contracts Funded in 

RE States versus Contract Applications in Non-RE States . . . . . . . . . . 15

The Regional Equity Provision Is Compatible With Distributional

Goals of Working-Land Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Appendix A. Allocative Goals in Working-Land and Land 

Protection Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Appendix B. Marginal Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Appendix C. Methodology for Estimating Acres Receiving Treatment 

and the Costs per Acre of Treating Resource Concerns . . . . . . . . . . . . 36

Appendix D. Benefit Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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Summary

Federal working-land and farm and grazing land protection programs have 

long allocated program funding among States. In 2002, the Regional Equity 

provision of the Farm Security and Rural Investment Act (the 2002 Farm 

Act) further emphasized the allocative goal by redirecting some funding 

to States that historically had received only limited assistance under these 

programs. The Regional Equity provision mandated that each State receive 

at least $12 million per year between 2003 and 2007 for enrolling eligible 

producers in four conservation programs (the 2008 Farm Act increased 

the threshold to $15 million). This provision may sometimes work at cross 

purposes to the programs’ environmental and economic goals of helping 

farmers adopt cost-effective conservation practices. 

What Is the Issue?

Because overall program budgets were not augmented to cover the minimum 

allocation requirement, the provision shifted funding from States that 

exceeded the threshold to those below it. The provision clearly affected the 

amount of conservation funding allocated to each State in each program. 

However, because conservation programs have multiple goals, it is difficult 

to predict the effects that promoting allocative goals may have on progress toward other program goals. Key questions are whether agricultural 

producers enrolled as a result of such legislation treat similar environmental 

problems and whether their conservation actions provide environmental 

benefits as cost effectively as actions undertaken by other producers, and 

also if particular types of farmers stand to gain or lose. This study analyzes 

program data from the 2004-06 period when the 2002 Farm Act was in 

effect. Data from the Environmental Quality Incentives Program (EQIP) and 

the Wildlife Habitat Incentives Program (WHIP)—the two programs with the 

most detailed data—are used to determine whether the required reallocations 

of funds affected the ability of those conservation programs to achieve environmental goals cost effectively.

What Did the Study Find?

The analysis revealed that the Regional Equity provision’s $12 million 

threshold requirement had unequal impacts across States. Also, it altered the 

environmental and economic outcomes differently in EQIP and WHIP, in 

ways that were not always consistent across years. Major impacts evident 

from the study were: 

•	 The Regional Equity provision reduced the number of acres that 

received treatment for many resource problems in EQIP, but this 

did not always result in a decline in net economic benefits. Changes 

in physical measures (such as acres receiving conservation treatment) 

are not always correlated with economic measures (the net economic 

benefits from conservation treatment), so it is important to measure both 

types of impacts in determining the tradeoffs arising from new policies. 

For instance, in EQIP, even though the cross-State shifts in enrollment 

induced by the provision decreased the number of acres treated for soil 

productivity and other soil erosion issues, in some years these cross-
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State shifts generated additional net economic benefits from improved 

soil productivity and reduced sedimentation (net economic benefits are 

calculated as gross benefits from conservation treatment minus treatment 

costs). This occurred when conservation actions benefited more people 

and when the producers in States that received increased funding (in 

order to reach the $12 million minimum) provided these benefits more 

cost effectively than producers in the remaining States. However, for 

grazing productivity and water conservation issues, the Regional Equity 

provision reduced both the number of acres receiving treatment and the 

corresponding net economic benefits from treatment in each of the 3 

years studied. 

•	 Impacts differed among programs subject to the Regional Equity 

requirements. In WHIP, the funding reallocation resulted in relatively 

large losses of both acres treated and net wildlife-related benefits (at 

least for the impacts the authors were able to measure in the continental 

United States), suggesting the provision may be having an overall negative impact on that program. Because each program targets different 

environmental problems at different costs, reducing the reallocations 

that occur in WHIP as a result of the Regional Equity provision and 

increasing reallocations that occur in the other three programs might 

increase overall net economic benefits from the four programs subject to 

the provision.

•	 The 2002 Regional Equity provision had only a small impact on 

participation by types of producers that are offered more favorable enrollment terms in EQIP to encourage their involvement. The 

study found that the Regional Equity provision reduced the number of 

livestock producers and increased the number of beginning and limitedresource producers enrolled in EQIP. However, the decrease in livestock 

producers was small and did not affect EQIP’s ability to meet a legislated 

requirement that 60 percent of program funding be devoted to livestockrelated practices.

•	 The Regional Equity provision’s fixed minimum funding threshold 

means that any decreases in total program budgets will be borne 

largely by States that exceed that threshold. Because the Regional 

Equity provision is designed as a fixed set-aside and requires that each 

State receive at least the threshold amount of funding, any cuts in total 

program funds must be absorbed by States that receive more than the 

minimum funding. In contrast, program budget reductions would be 

shared by all States if the Regional Equity provision instead required that 

each State receive at least a certain percentage of total program funding. 

In the latter case, as total program budgets change, the funding for each 

State would change in proportion to the State’s specified funding share.
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How Was the Study Conducted?

This study uses conservation program contract data from 2004 to 2006 to 

identify the environmental, economic, and distributional implications of the 

Regional Equity provision within EQIP and WHIP, including the ability 

of the programs to deliver certain net benefits and the effect on enrollment 

patterns of certain producer groups over the period. Contract data were 

not available for the Farm and Ranch Lands Protection Program and the 

Grassland Reserve Program, the other two conservation programs subject 

to the Regional Equity provision. The analysis recognizes that the lowest 

ranked (“marginally accepted”) contracts are the most vulnerable to policyinduced budget shifts. The authors used data on these contracts, including 

the costs incurred, acres treated, and resource concerns addressed—along 

with estimates of technical assistance costs and spatially heterogeneous data 

on the benefits of treating environmental problems arising from agricultural production—to estimate the impacts of the Regional Equity provision. 

Identifying the marginal contracts was particularly important because the 

lowest ranked contracts were more likely to address lower priority problems 

at higher cost. Due to limited data on the benefits of conservation treatment, 

not all conservation activity could be included in the analysis of economic 

impacts; our findings are illustrative of the tradeoffs that occur from implementing the Regional Equity provision. Also, the estimates of net benefits 

were limited to program activity in the continental United States. 

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Introduction

Over the past 20 years, most Federal assistance for conservation activities 

on agricultural land has been directed toward taking environmentally sensitive farmland out of production and enrolling it in the Conservation Reserve 

Program (CRP). Increasingly, however, Federal programs have sought to 

improve the environmental performance of active farms. Programs such 

as the Environmental Quality Incentives Program (EQIP) and Wildlife 

Habitat Protection Program (WHIP) have provided financial assistance to 

producers to implement conservation practices and adopt more environmentally friendly management practices. The Farm and Ranch Lands Protection 

Program (FRPP) and the Grassland Reserve Program (GRP) provide funds 

to permanently restrict conversion of farmland and grazing land to more 

environmentally damaging uses and, in the case of GRP, to restore native 

grasslands.1 The 2002 Farm Security and Rural Investment Act (referred to 

here as the 2002 Farm Act) increased the combined spending for these four 

programs almost 400 percent to about $5.7 billion over the 6 years from 2002 

to 2007. The Food, Conservation, and Energy Act of 2008 (hereafter called 

the 2008 Farm Act) authorized further funding increases, projected by the 

Congressional Budget Office to be almost $9.0 billion over the 5-year period 

from 2008 to 2012.2

The increase in funding for conservation on working lands has resulted in 

farmers’ receiving more conservation assistance through programs that, by 

design, allocate program funds broadly across the country. USDA’s Natural 

Resources Conservation Service (NRCS), the agency that administers the 

working-land conservation programs, allocates program funding to State 

NRCS offices based on conservation and other criteria. These State offices set 

priorities regarding which environmental problems will receive treatment and 

make enrollment decisions. Many State offices allocate funding and program 

decisions to sub-State (county, township, or watershed) offices. In contrast, 

in the CRP general signups in which most enrollments occur, applications 

are pooled nationally and enrollment decisions are made at the Federal level. 

Although some CRP funds are targeted to particular locations, most CRP 

program funds are awarded on the basis of expected environmental benefit 

and cost criteria that do not give particular consideration to location. 

A decentralized program structure that furthers allocative goals can also 

help achieve environmental and economic goals. For example, when environmental problems arising from agricultural production are localized and 

the benefits and costs of treatment vary across the area, decentralized decisionmaking can benefit local jurisdictions economically because it lets them 

set priorities and determine solutions based on local needs and preferences 

(Peltzman and Tideman, 1972). Local decisionmaking would not necessarily 

advance the distributional goals of some conservation programs, however, 

such as ensuring that producers with different income levels and farming 

focuses have the opportunity to participate. Distributional goals, which target 

funds to particular types of farmers based on production characteristics, 

are distinguished from allocative goals, which are defined on the basis of 

geography.3

1Farm legislation refers to the FRPP 

as the Farmland Protection Program.

2Source of the 2002 Farm Act 

spending amounts is from the Office of 

Budget Policy and Analysis; 2008 Farm 

Act spending estimates are from the 

Congressional Budget Office.

3Of the working-land and land protection programs discussed here, only 

EQIP contains legislated provisions that 

target funding by producer type.
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Recent legislative actions have furthered allocative goals in conservation 

programs. In the 2002 and 2008 Farm Acts, the Regional Equity provisions have required that each State receive a minimum amount of funding 

through, collectively, EQIP, WHIP, FRPP, and GRP.4 The 2002 Farm Act 

set the minimum funding threshold at $12 million, and the 2008 Farm Act 

increased it to $15 million. The provision did not include an allowance to 

increase annual program budgets to cover these additional payments to States 

that historically had received lower levels of funding. Those States that had 

been receiving a higher amount continue to receive it if overall program 

funds permit; to ensure, however, that all States receive at least the required 

minimum annual funding, USDA reallocates conservation funds, when 

necessary, among States in the affected programs. 

The Regional Equity provision affects multiple programs, so implementing it 

may involve a broader set of tradeoffs with other program goals than requirements that affect a single program. Each year since it was first passed in 

2002, the provision has resulted in reallocation of funds, in each of the four 

targeted programs, from States that exceeded the minimum threshold to those 

that did not. This provision allows additional lower priority applications to be 

enrolled in States that are allocated more funds and prevents lower priority 

applications from being enrolled in the other States. Funding reallocations 

across States can affect program outcomes in ways that are difficult to predict 

because a program’s applications that are viewed as low priority in one location could be viewed as higher priority, or not a priority at all, in another 

location. Program outcomes could change because the characteristics of the 

applications—and the environmental problems the operators agree to treat—

differ across areas (that is, spatially) and across conservation programs. 

Agricultural operations across the United States are diverse, with both the 

types of production and characteristics of farms varying geographically. The 

severity of environmental problems arising from agricultural problems also 

varies geographically, as does the willingness of operators to implement 

conservation practices to address them (Lambert et al., 2006; Caswell et al., 

2001; Claassen et al., 2001). Local government priorities in each conservation program vary geographically as well. Collectively, these variations mean 

that operators in different locations will face different incentives to enroll in 

conservation programs. 

If programs initially were strictly designed to enroll producers who could 

provide the most environmental benefits for the least cost, we might expect 

the tradeoff from expanding participation in selected geographic areas or 

for particular producers to reduce the cost effectiveness of conservation 

programs. Cost effectiveness can decline when program changes result in 

fewer benefits for a given expenditure or in the same level of benefits at a 

higher cost. However, policy changes to strengthen allocative goals may not 

necessarily occur at the expense of economic goals. Conservation programs 

are not designed to single-mindedly maximize environmental benefits, but 

instead attempt to satisfy multiple goals. As a result, reallocating program 

funds can have impacts that are hard to predict. Whether a policy change 

entails a tradeoff between the cost-effective delivery of environmental benefits and other program goals depends on the relative values of benefits and 

costs provided by the contracts that ultimately are, and are not, funded as a 

result of the legislated change.

4The term “State” used in this report 

includes the Pacific Basin territories 

and Puerto Rico.
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The literature provides little guidance on this question. Two recent ERS 

analyses found that efforts to further distributional goals may have increased 

conservation program costs. One study considered the impact of discontinuing competitive bidding in EQIP—the option to bid down payments 

to improve chances of enrollment (Cattaneo et al., 2005). Bidding was 

discontinued in 2002 in EQIP because it was perceived as favoring large 

and well-established producers over small and limited-resource farmers. 

This mandated change affected program costs: the average payment for 

implementing structural conservation practices was 35 percent of cost when 

bidding was allowed (1996-2002), but after bidding was discontinued, 

producers received the minimum Government cost-share of at least 50 

percent, and many producers received the maximum cost-share of 75 percent 

(Cattaneo et al., 2005).5 ERS analysis of post-2002 enrollment patterns 

revealed that they did not shift appreciably to States that—by some estimates—may be likely to generate higher levels of environmental benefits 

(Hansen and Ribaudo, 2008), which suggests that discontinuation of bidding 

may have reduced EQIP’s ability to provide benefits in the most cost-effective manner (an economic goal). Another study found that because beginning 

and limited-resource farmers enrolled in EQIP receive favorable payment 

terms, they tend to receive larger payments per practice, even though they 

tend to treat fewer acres or install smaller structural practices. But they 

also operate more environmentally sensitive land than other participating 

farmers, have different conservation priorities, and receive different levels 

of payments (Nickerson and Hand, 2009). The differences among farmers 

who currently participate suggest that economic and environmental outcomes 

could change if more of these farmers were enrolled. 

The Regional Equity provision furthered allocative goals, described in the 

following section, that already existed in the working-land programs. To determine how the provision’s stipulations for allocating funds affected program 

results, the authors examined data that help identify impacts on key program 

outcomes. This report describes the design structure of working-land conservation programs that allows them to accommodate allocative goals, and analyzes 

the impacts on conservation program outcomes of the Regional Equity provision that further these goals. The authors examine several key issues. First, 

we analyze the effects of the Regional Equity-induced funding reallocations 

on the number and types of contracts that were enrolled. We then evaluate the 

tradeoffs that occurred in terms of the resource problems that were ultimately 

treated. We use these findings to shed light on whether the Regional Equity 

provision reduced the ability of working-land programs as a group to achieve 

environmental and economic goals—by providing environmental benefits 

cost effectively—over the 2004-06 period. We also consider the impact of the 

Regional Equity provision on distributional goals by considering its effects 

on enrollments of livestock producers and beginning and limited-resource 

producers in EQIP—groups that are given favorable enrollment terms to 

encourage their participation. We use a methodological approach that identifies 

characteristics of contracts most susceptible to such changes, which is particularly important in decentralized programs that allow for priority setting and 

enrollment decisions at a local level. Policymakers have a limited set of levers 

for affecting change in conservation programs, which increases the importance 

of understanding the potential tradeoffs from changes in programs that seek 

multiple goals simultaneously.

5The 2002 Farm Act allowed States 

to contribute up to 90 percent of the 

cost of structural practices (e.g., fences, 

lagoons, and vegetative buffers) incurred by beginning or limited-resource 

producers.
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Allocative Goals in Working-Land 

and Land Protection Programs

Along with environmental and economic goals of providing benefits cost 

effectively, regional funding allocation considerations have historically 

played an important role in the design of working-land and farm and grazing 

land protection programs. Since the inception of the programs, financial and 

technical assistance funds to address a variety of environmental problems 

have been made available to producers in all 50 States through EQIP, WHIP, 

FRPP and GRP (fig.1). 

In EQIP, WHIP, FRPP, and GRP, determining the funding each State NRCS 

office will receive involves two steps. First, in each program, most funds 

available for financial assistance are allocated using indicators reflecting 

national priorities in farm legislation.6,7 The specific types of indicators vary 

across programs (Appendix A). NRCS weights each indicator based on an 

assessment of the relative importance of the corresponding resource issue. 

Indicator weights are adjusted from time to time as new information or issues 

come to light. Second, funds for each indicator are then allocated to State 

NRCS offices based on the extent of the environmental concern that the indicator represents in each State. For example, if land condition is a program 

indicator, States with higher percentages of poor quality land will receive 

a larger percentage of the funds allocated to the land condition indicator. 

6Nearly a third of EQIP program 

funding is used for technical assistance 

to assist producers with conservation 

practice implementation. These funds 

have typically been allocated to States 

in proportion to the amount of financial 

assistance the States were awarded.

7NRCS reserves a small portion 

of funds for special reasons, such as 

performance incentive awards.

Figure 1

Initial funding for EQIP, WHIP, GRP, FRPP, 2006 (pre-Regional Equity reallocations)

EQIP - Environmental Quality Incentives Program; WHIP = Wildlife Habitat Incentives Program; GRP Grassland Reserve Program; 

FRPP = Farm and Ranch Lands Protection Program.

*In 2006 only, NRCS administratively lowered the Regional Equity threshold from $12 to $11 million. 

Source: ERS analysis of NRCS fund allocation data. Map excludes funds allocated to Puerto Rico and the Pacific Basin.

Pacific

Mountain

Southern

Plains

Northern

Plains

Lake States

Corn Belt

Delta

States Southeast

Appalachia

Northeast

Dollars, in millions

9-11*

11-18

18-23

23-33

33-49

49-86
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In each program, the total allocation of financial assistance funds for each 

State is the sum of the State allocations for each of the indicators. Allocating 

funds to States based on the relative extent and impairment of resources, 

rather than on absolute quantities, ensures that at least some funds from each 

program will be allocated to each State NRCS office (at least, for those indicators that are present in the State). 

When allocative goals are sought, conservation funds in working-land and 

farm and grazing land protection programs tend to be less geographically 

concentrated among States than they would be otherwise. For example, in the 

Conservation Reserve Program, in which broad distribution of funds is not 

an explicit element of program design (applications are pooled nationally and 

prioritized on the basis of expected environmental benefits and costs), more 

than 56 percent of program outlays were concentrated in eight States in 2006. 

Each of these eight States individually accounted for more than 5 percent 

of outlays (fig. 2).8 In contrast, in EQIP, a decentralized program, only 

one State was allocated more than 5 percent of program funding in 2006. 

The eight States receiving the largest allocations in EQIP accounted for 33 

percent of total funding that year.

Even when conservation funding is allocated across States, program 

outcomes might not change substantially if all States had the same environmental priorities and agreed to fund the same conservation practices at the 

same cost. But State-level priorities and decisions differ. These differences 

have an important bearing on which producers choose to apply for funding, 

as well as which are enrolled and receive conservation payments. The discretion given to local NRCS offices in these programs introduces variations 

that make the impacts of national legislation on program outcomes harder to 

predict. 

8The CRP does place a 25-percent 

cap on cropland enrolled in any one 

county, but there is no explicit enrollment cap at the State level.

Figure 2

Comparative distribution of program funding to States, 2006

CRP = Conservation Reserve Program; EQIP = Environmental Quality Incentives Program.

Sources: USDA-FSA CRP summary data; USDA-NRCS EQIP summary data.

Less than 1 1 - 2.5 2.6 - 5 More than 5

0

5

10

15

20

25

30

Number of States

Percent of program outlays per State

CRP EQIP
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The Regional Equity Provision: 

Did Implementation Induce Environmental, 

Economic, or Distributional Tradeoffs?

An analysis of the Farm Act’s Regional Equity provision reveals how

tradeoffs can arise from furthering allocative goals in conservation programs. 

Although minimum funding thresholds were set in the 2002 and 2008 Farm 

Acts at $12 million and $15 million, respectively, the Regional Equity provision did not dictate how the required minimum thresholds were to be met. 

During the 2004-06 period that we analyzed, USDA’s Natural Resources 

Conservation Service (NRCS) determined how funds for the four programs 

would be reallocated to meet the requirement and the programs in which 

reallocations would occur.9 During this period, only in 2005 did reallocations occur in all four affected programs (table 1). In 2004, NRCS reallocated funds within EQIP, GRP, and FRPP to meet the requirement. In 2006, 

funding was not appropriated for GRP, so reallocations occurred only within 

EQIP, WHIP, and FRPP.

The reallocation that occurred within each program also varied each year. 

In EQIP, declining funds (in both total dollars and percentage of funding) 

were set aside specifically for States below the funding threshold over the 

2004-06 period, while in the other three programs an increasing percentage 

of funds was set aside. Most of the reallocations occurred through EQIP, but 

in 2006, WHIP and FRPP were particularly impacted by the Regional Equity 

provision: 22 and 38 percent of the Regional Equity reallocations occurred 

through these programs, even though the programs represented only 4 and 8 

percent of the combined program budgets, respectively.10

Over the 2004-06 period, the Regional Equity provision tended to shift 

program funds to 12 States—mostly the smaller States in the Northeast, but 

also to Nevada, Alaska, and Hawaii (fig. 3). We define “Regional Equity 

States” (RE States) as the States that were initially below the minimum 

funding threshold and were then reallocated more conservation funds, and 

the “non-Regional Equity States” (non-RE States) as the remaining States. 

State Funding Levels Will Not Always Be Equally 

Affected by Changes in Overall Program Budgets

With its minimum allocations based on a fixed amount, the Regional Equity 

Provision has broad implications for which States gain or lose funding 

when overall conservation program budgets change. In the absence of the 

Regional Equity provision, declines or increases in overall program budgets 

would generally be shared equally by all States in proportion to their funding 

share. In the presence of the Regional Equity provision, however, overall 

program budget reductions will be absorbed by the majority of States whose 

allocated funding exceeds the minimum threshold amount, since States 

with funding levels at the fixed threshold are required to receive at least the 

threshold amount. As program budgets rise, States whose funding exceeds 

the threshold share in the increase, and fewer reallocations are necessary 

to assure that the other States are allocated the minimum required by the 

Regional Equity provision. If budgets become large enough that the Regional 

Equity provision no longer forces reallocation (all States’ budgets exceed the 

9To implement the requirements of 

the Regional Equity provision, during 

2004-06, NRCS took several steps: 

NRCS estimated which States were 

likely to be below the threshold, and by 

how much; NRCS withheld an amount 

equal to this expected shortfall from 

program budgets and allocated the 

remainder to States using the programs’ 

allocation criteria; and NRCS then reallocated withheld funds to the underfunded States according to need. 

10The choice of which conservation programs are used to satisfy the 

Regional Equity requirement can affect 

the ultimate impact of the provision on 

program outcomes. ERS analysis (not 

reported here) revealed that it is possible to implement the Regional Equity 

provision by reallocating funds solely 

within EQIP because its budget is much 

larger than the other programs. Doing 

so would result in States’ receiving 

combined funding levels (from all four 

programs) that are not strikingly different from the current method. However, 

because States would receive different 

amounts through each individual program and because each program targets 

different environmental problems at 

different costs, such a strategy would 

likely result in different environmental 

benefit and cost tradeoffs.
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threshold), all States will share in the budget increase in proportion to their 

funding shares.

These unequal impacts of budget changes under the Regional Equity provision’s fixed set-asides contrast with the impacts of set-asides that advance 

distributional goals in EQIP. These other set-asides are specified as proportional amounts, such as the 60 percent of the program budget set aside for 

livestock practices, 5 percent for beginning farmers and ranchers, and 5 

percent for socially disadvantaged farmers and ranchers. In these cases, 

the amounts ultimately reserved for targeted groups vary in proportion to 

Table 1

Funding levels and Regional Equity adjustments

Fiscal 

Year EQIP WHIP GRP FRPP Total

2004 Total initial Financial Assistance (FA) 

funding1

$661,005,400 $27,800,000 $54,059,400 $84,833,000 $827,697,800 

Percent of total initial FA funding for 

all 4 programs

80% 3% 7% 10% 100%

Amount of FA funds reallocated to 

Regional Equity States 

$31,476,600 $0 $4,489,700 $8,640,000 $44,606,300 

Share of Regional Equity funds 

reallocated through program

71% 0% 10% 19% 100%

Percent of programs' initial FA funding 

affected by reallocations

5% 0% 8% 10%

Number of Regional Equity States2 14 0 14 10

Number of non-Regional Equity States2 38 0 38 42

2005 Total initial FA funding1 $691,525,000 $33,050,000 $65,960,000 $106,700,000 $897,235,000 

Percent of total initial funding for 

all 4 programs 77% 4% 7% 12% 100%

Amount of funds reallocated for Regional 

Equity - FA $25,500,000 $6,240,000 $9,790,000 $12,000,000 $53,530,000 

Share of Regional Equity funds 

reallocated through program 48% 12% 18% 22% 100%

Percent of programs' initial FA funding 

affected by reallocations 4% 19% 15% 11%

Number of Regional Equity States2 14 13 13 12

Number of non-Regional Equity States2 38 39 37 40

2006 Total initial FA funding1 $697,100,000 $29,170,000 $0 $66,040,000 $792,310,000 

Percent of total initial funding for all 4 

programs

88% 4% 0% 8% 100%

Amount of funds reallocated for 

Regional Equity - FA $18,700,000 $10,270,000 $0 $17,460,000 $46,430,000 

Share of Regional Equity funds 

reallocated through program 40% 22% 0% 38% 100%

Percent of programs' initial FA funding 

affected by reallocations 3% 35% 0% 26%

Number of Regional Equity States2 13 12 0 12

Number of non-Regional Equity States2 39 40 0 40

EQIP=Environmental Quality Incentives Program; WHIP=Wildlife Habitat Protection Program; GRP=Grassland Reserve Program; FRPP=Farm 

and Ranch Lands Protection Program.

1Analysis is limited to initial funding allocations for financial assistance. Performance bonus funding is excluded.

2Regional Equity (non-Regional Equity) States are those that benefited (did not benefit) from the RE provision. 

The number of RE and non-RE States includes Pacific Basin and Carribean. South Carolina became a non-RE State in EQIP in 2006. Maine 

became a non-RE State in WHIP, in 2006.

Source: NRCS data on Regional Equity allocations.
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program budget changes, so all groups are relatively equally affected by 

overall funding changes.

Participation Patterns Differ Between RE 

and Non-RE States 

Conservation program participation patterns differ between Regional Equity 

and non-Regional Equity States, suggesting that Regional Equity-induced 

funding shifts can impact program outcomes in ways that are hard to predict. 

The programs subject to the Regional Equity provision depend on producers’ 

volunteering to participate—to implement conservation practices, restore 

grassland, or sell an easement—in exchange for program payments. The 

requirements imposed by the Farm Act’s Regional Equity provision result in 

some States’ receiving additional conservation money to meet the minimum 

funding threshold even when producer interest in participating and demand 

for program funding in those States is not strong. For example, in 2004 in 

EQIP, to meet the Regional Equity requirements, funds were shifted away 

from non-RE States that had, on average, three times more demand for 

program funds than RE States. In other programs, however, the Regional 

Figure 3

Regional Equity status

Note: “Regional Equity State” means State received funds from other States due to the Regional Equity requirement. South Carolina did not 

receive additional Wildlife Habitat Incentives Program (WHIP) funds in any year; Maine did not receive WHIP funds in 2006. 

Source: ERS analysis of NRCS fund allocation data. Map excludes Puerto Rico, an RE ‘State’ in 2004-2006.

Regional Equity status

Regional Equity State in 2004-2006

Regional Equity State in 2004,2005

Non-Regional Equity State in 2004-2006

AK

HI

NV

SC

VT ME

NH

WV

NJ

MA

CT

DE

RI

Pacific

Mountain

Southern

Plains

Northern

Plains

Lake States

Corn Belt

Delta

States Southeast

Appalachia

Northeast
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Equity provision resulted in more funding being allocated to States where 

producer interest in participating was higher. In FRPP, funds were shifted 

toward RE States with more than twice the average demand (demand is 

measured in terms of the dollars associated with unfulfilled contract applications). States with excess demand by producers experience the greatest 

competition for program funds, and they are the places where programs may 

have the greatest opportunity to achieve a given level of benefits at the least 

possible cost.11

If little variation exists across States in the types of environmental problems treated and in the costs and benefits of the contracts funded within 

each program, satisfying an allocative objective by shifting program funds 

between RE and non-RE States will have little effect on program outcomes. 

However, several considerations suggest impacts of shifting funds are likely 

to be nontrivial. The four affected programs (EQIP, WHIP, FRPP, and GRP) 

are designed to address a variety of agriculturally related environmental 

issues, and the severity of these problems varies across the country. For 

example, water conservation has historically been a concern in the Western 

United States, where drought-related problems exist, and reducing fertilizer 

and nutrient runoff has been a concern throughout the country, especially 

in areas such as the Corn Belt and Chesapeake Bay watershed, where water 

quality problems impact local economies (see, for example, Bockstael et al., 

1989, Leggett and Bockstael, 2000, and Secchi et al., 2007). 

State NRCS offices have had considerable flexibility in working-land 

programs in determining which resource problems will receive priority in 

any given year, as well as flexibility with payment rates for practices that 

are cost-shared, and these priorities can vary even across neighboring States. 

Producers vary across States in their willingness to adopt particular practices 

and in terms of the costs they face even when adopting the same practice. 

The social benefits of conservation treatment can also vary across States; 

some types of benefits are highest when actions are concentrated in highpopulation States (Hansen and Ribaudo, 2008; Feather et al., 1999). Taken 

together, the variation in environmental problems, State-level priorities, 

producer preferences, and costs and benefits suggests that shifting funds from 

one State to another could result in very different conservation outcomes.

Summary statistics for two programs, EQIP and WHIP, suggest that by 

several measures—including costs, types of practices, and resource problems receiving treatment—a shift in program funds between RE States and 

non-RE States would result in different types of contracts being funded. In 

terms of costs, the Regional Equity provision has shifted funds to States 

with higher contract payments on average, although in both groups of States 

wide variation exists.12 These average contract payments ranged from about 

$24,000 to $29,000 per contract in RE States over 2004-06, while in non-RE 

States they ranged from about $15,000 to $18,000 (table 2). In WHIP, RE 

States funded contracts that were twice as large, on average, due primarily to 

large contract payments in Alaska and Hawaii. 

One reason contract payments were higher in RE States was that those States 

tended to reimburse participants for cost-shared practices at a higher rate than 

non-RE States. EQIP and WHIP provide cost-share assistance to producers 

who install structural practices (e.g., manure storage, irrigation systems, 

11Even in programs like EQIP that 

seek to maximize benefits, many States 

consider cost in enrollment decisions—

so competition for limited funding 

could induce producers to choose to 

implement less costly conservation 

practices.

12The coefficient of variation (CV) 

is above 1.45 for both RE and non-RE 

States in each year. The CV is a measure of the variation in a population, 

and values exceeding one are typically 

considered high-variance.
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fencing, and field-edge vegetative buffers) and financial assistance to those 

adopting conservation-compatible management practices like nutrient 

management and prescribed grazing. In EQIP, the largest proportion of 

contracts in RE States received cost-share payments for structural practices 

at a 75-percent rate, while in non-RE States most contracts were cost-shared 

at a 50-percent rate. In WHIP, three-quarters of the contracts in RE States 

received a 75-percent cost-share rate compared with half of contracts in 

non-RE States that received that rate.

The higher average cost of contracts in RE States suggests that fewer 

contracts may have been funded across all States in EQIP and WHIP because 

of the Regional Equity provision. However, higher costs do not necessarily mean that program benefits were reduced. RE States tended to fund 

contracts with producers who agreed to address more resource concerns 

and adopt more practices. Further, in EQIP, the RE States tended to fund 

more contracts that implemented combinations of practices—that is, more 

producers in RE States agreed to implement both structural and management practices to address environmental concerns. Implementing a group of 

Table 2

Characteristics of Regional Equity and non-Regional Equity States

EQIP WHIP

Fiscal 

year

RE 

States

non-RE 

States

RE 

States

non-RE 

States

Dollars

Average payments - all 

contracts 2004 $23,400 $15,000 - -

2005 $22,500 $15,300 $16,700 $8,500 

2006 $28,800 $17,800 $23,600 $8,900 

Cost-share rates1 Percent of Contracts1

 50% cost-share rate 2005 28% 52% 3% 18%

 51 - 74% cost-share rate 2005 19% 30% 22% 28%

 75% cost-share rate 2005 39% 13% 75% 54%

 > 75% cost-share rate 2005 14% 5% 0% 0%

Practice type

 Structural only 2006 41% 51% 33% 46%

 Management only 2006 31% 26% 48% 34%

 Structural and management 2006 28% 24% 18% 19%

Spending by resource concern Percent of contract costs

 Soil condition 2006 8% 8% 0% 0%

 Soil erosion 2006 14% 17% 18% 9%

 Domestic animals 2006 8% 11% 0% 1%

 Plant condition 2006 17% 16% 6% 3%

 Water quantity 2006 11% 13% 2% 2%

 Water quality 2006 37% 29% 3% 2%

 Air quality 2006 3% 3% 0% 0%

 Fish and wildlife 2006 3% 3% 72% 84%

EQIP = Environmental Quality Incentives Program; WHIP = Wildlife Habitat Incentives Program.

1Some contracts contain multiple practices cost-shared at different rates, and for these 

contracts the (weighted) average cost-share rate falls between the standard 50%,

75%, or 90% rates.

Source: ERS analysis of NRCS contract data. 
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practices, as in a conservation system, can be more effective at addressing 

environmental problems than single practices (e.g., Lerch et al., 2005; Berry 

et al., 2003).

The resources receiving priority, as measured by costs incurred for treating 

problems, differ somewhat between the RE and non-RE States. In 2006 

in EQIP, the largest share of contract funds in both groups of States was 

devoted to treating surface water quality problems, with RE States spending 

37 percent of funds on these issues compared with 29 percent in non-RE 

States (spending patterns in previous years were similar). In addressing other 

issues, the share of funds spent by both groups of States was more similar 

(table 2). Due to WHIP’s narrower focus on species and habitat protection, it is not surprising that, in both groups of States, most WHIP funds are 

spent on fish and wildlife issues—72 percent and 84 percent of costs in RE 

and non-RE States, respectively—although different species may benefit in 

different States (table 2). Also, a greater share of contract costs in the RE 

States was incurred to treat soil erosion—18 percent compared with 9 percent 

in non-RE States. 

The Regional Equity Provision Entailed Economic 

and Environmental Tradeoffs 

The differences between conservation program contracts and the general types 

of practices adopted in the RE versus non-RE States are indicative of some of 

the likely impacts of the Regional Equity provision. However, it is the specific 

characteristics of the additionally enrolled contracts in RE States, and of the 

applications that did not receive funding in non-RE States, that ultimately 

determine the economic and environmental tradeoffs resulting from enactment 

of the Regional Equity provision. These characteristics also determine whether 

tradeoffs occurred between allocative and distributional objectives, such as 

whether certain producer types gained or lost conservation funding. 

Data on specific contracts funded through EQIP and WHIP, coupled with 

an understanding of the fund allocation formulas used by the conservation 

programs, demonstrate some of the environmental, economic, and distributional impacts of the Regional Equity provision over the 2004-06 period in 

those programs. Our analysis recognizes that the lowest ranked contracts 

(“marginal contracts”) are the most vulnerable to the funding shifts resulting 

from Regional Equity reallocations. We estimated which marginal contracts 

were affected by the Regional Equity-induced changes in State budgets, and 

the characteristics of these marginal contracts formed the basis for our estimates of environmental and economic tradeoffs of the Regional Equity provision (see box, “Methods”).

Using a methodology that relies on information from the marginal contracts 

to estimate the effects of provisions furthering an allocative goal has a 

number of advantages. By definition, the marginal contracts are those least 

preferred for enrollment, which means they are less likely to address the 

resource concerns of highest priority to the jurisdiction, or they do so at 

higher cost. An analysis of contract data reveals that the marginal contracts 

in States that benefited from the Regional Equity reallocations have different 

characteristics than nonmarginal contracts. Using more aggregated data, such 
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Methods

To estimate the effects of the Regional Equity provision, we used the 

programs’ Federal funding allocation formulas to approximate how States’ 

funding for financial assistance changed due to the Regional Equity provision. In the RE States, the Regional Equity provision expanded State 

funding to bring them to the $12 million threshold, so the contracts affected 

by the provision were those funded with the additional money. In these 

States we identified the “marginal” contracts using the ranking score of 

each application, and assumed those applications ranked lowest were the 

additional contracts. In the non-RE States, the RE provision reduced State 

budgets, resulting in some applications’ remaining unfunded. Because 

the Regional Equity provision was enacted during a period of increasing 

program budgets and high producer demand for conservation funding, we 

assumed that the changes in State-level budgets induced by the provision 

did not affect producers’ incentives or decisions to apply to the conservation programs. 

Ideally, data on proposed practices and the acres and resource issues to 

be treated would be available from a review of all conservation program 

applications, and these data could be used to characterize how outcomes 

would have changed if additional applications had been funded in the 

non-RE States. However, such data are available only on contracts that 

received funding. In the absence of applicant data, several alternatives 

exist for proxying the practices and actions applicants would be willing to 

undertake if additional funds were available to increase enrollments. One 

alternative is to assume that previously unfunded applicants’ parcels have 

similar characteristics to the entire farmland population. Using simulations 

coupled with program cost data, we could estimate, on average, how many 

acres applicants would be willing to treat, for which resource concerns, 

and at what cost. However, this strategy may not be ideal in programs 

like EQIP and WHIP, which, our analyses show, enroll a non-homogenous 

set of contracts in any given year (see Appendix B). We used a different 

strategy, one that assumes an expanded budget would enroll land that most 

closely resembles a much narrower segment of farmland: the applications that got funded but were of the lowest priority for enrollment—those 

contracts that were ranked just slightly higher than rejected applications. 

Assuming similarity between these two groups implies that producers with 

low-priority contracts that were accepted and those that just missed being 

accepted have similar expectations about the profitability of implementing 

particular practices to mitigate particular physical effects.* By comparing 

the characteristics of marginal contracts in the RE States to those in the 

non-RE States, we were able to discern how acres receiving treatment, the 

types of physical effects receiving treatment, practice types and costs, and 

participant types were affected by the Regional Equity provision. 

* This approach also assumes that a sufficient amount of acreage remains that 

needs treatment for the resource concerns that were addressed by the marginally 

accepted contracts. EQIP and WHIP have historically had a large backlog of applications, so it is plausible that an adequate supply of land needing treatment exists.
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as the characteristics of the “average” contract—which is tempting because 

it would involve simpler calculations—can be misleading for policy analysis 

(see Appendix B). Our method also takes into account the variation in local 

priorities afforded by the decentralized structure of working-land programs. 

Other methodological approaches are less able to accommodate this variation, which is likely to have important impacts on local enrollment incentives 

and program outcomes. 

Our analysis involved three steps to identify environmental and economic 

impacts of the Regional Equity provision:

•	First, to estimate environmental impacts, we used the data on marginal

contracts affected by the Regional Equity provision to estimate the 

change in the number of acres that received treatment for various environmental problems as a result of the funding shifts across States. 

•	Second, to estimate economic impacts, we analyzed the costs of treating

environmental problems associated with the contracts affected by the 

Regional Equity provision (see Appendix C). Because the goal of the 

economic analysis was to compare changes in treatment costs to changes 

in benefits from the treatment effort, the cost analysis was limited to the 

subset of conservation treatment activities for which benefit estimates 

were available. These were activities undertaken to reduce erosion from 

wind and water (to improve onsite soil productivity and water and air 

quality and reduce sedimentation); to improve grazing productivity, 

water conservation, wildlife habitat, and pheasant-hunting opportunities; and to create wetlands. EQIP and WHIP contracts address more 

issues than this limited set of activities, but a lack of information on the 

benefits of treating other issues meant a substantial portion of conservation activity was excluded from our analysis. In EQIP, 24-50 percent of 

contract costs mapped to these nine benefit categeories over the study 

period; in WHIP, 56-75 percent did so (see box, “Conservation Activities 

Linked to Environmental Benefits”). 

•	Finally, for each category of conservation treatment we considered, we

combined per acre cost and benefit data with estimates of the number of 

acres treated in the watershed in 2004-06 to find out whether the changes 

in conservation treatment resulting from the Regional Equity provision 

resulted in additional net benefits or costs (see Appendix D for a description of the studies from which the earlier benefit estimates were derived). 

The Regional Equity Provision Affected the 

Number of Acres Treated

Estimates of the acres receiving treatment reveal that the impacts of the 

Regional Equity provision differed over the study period (see Appendix C 

for methods used to estimate acres subject to treatment). In 2004 and 2005, 

the shifts in funding from the non-RE States to the RE States resulted in net 

losses in the acres receiving conservation treatment for a number of environmental problems in EQIP and, in 2005 and 2006, also for WHIP. For 

example, in EQIP in 2004, over 70,000 fewer acres received treatment for 

grazing productivity, sedimentation, and water quality problems and over 

200,000 fewer acres were enrolled for water quantity issues (fig. 4).13 In 

13In some cases, the same acres 

received treatment for more than one 

resource concern, so adding up the net 

gains and losses in acres across categories would likely overstate the net effect 

of the Regional Equity reallocations on 

the total number of acres treated.
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Conservation Activities Linked to Environmental Benefits

Conservation programs provide a wide range of environmental and social benefits. While important, many of these 

benefits are difficult to quantify in monetary terms that enable a comparison to program costs. Due to limited data 

on the benefits of conservation treatment, a relatively small proportion of contract costs for EQIP were included 

in the economic analysis of Regional Equity impacts. In 2004 and 2005, only 24 percent of the costs of marginal 

contracts—those contracts affected by the Regional Equity provision—were incurred to treat problems for which 

benefit estimates were available (see the EQIP contract costs figure below). In 2006, 50 percent of contract costs 

were related to the nine benefit categories. In WHIP in 2005, 56 percent of marginal contract costs were related to 

the seven benefit categories addressed by that program, compared with 75 percent in 2006 (see the figure). There 

could be a number of reasons for the difference in the amount of conservation activity associated with measurable 

benefits in 2006. Local government priorities can change yearly, as can the financial incentives producers have to 

address particular resource problems. We found reasonable consistency across years between conservation practices and the resource problems that local field offices indicated were associated with particular resource concerns 

(see Appendix C). In all years, the analyses were limited to program activity in the contiguous 48 States. Because 

benefit estimates are not available for any resource issues in Alaska and Hawaii or the territories, all costs associated with contracts funded in these places were excluded from our analysis. 

EQIP contract costs by benefit category—contracts affected by RE provision

**Includes all costs of contracts affected by RE provision in Alaska, Hawaii, Pacific Basin Territories, and Puerto Rico.

Source: ERS analysis of NRCS contract data.

WHIP contract costs by benefit category—contracts affected by 

RE provision

2005 2006

Grazing productivity

Irrigation efficiency

Sedimentation

Sheet & rill erosion reduction

Upland game

Water quality recreation

Wetland creation

Wildlife viewing

Wind erosion

No benefits

2005 2006

No benefits

data** 

25%

No benefits

data**

44% 

No benefits

data** 

50% 

No benefits data**

76%
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2005, except for reductions in the amount of land receiving treatment for 

grazing productivity issues, the net changes in acres receiving treatment were 

not as dramatic in EQIP (fig. 5). In 2006, however, the Regional Equity reallocations resulted in significant net gains in treated acres for plant and soil 

condition issues in EQIP (fig. 6). 

In WHIP, program funding levels were significantly lower than in EQIP, and 

fewer resource concerns were treated. The biggest impacts were net losses 

of 20,000 to 55,000 acres treated each year for pheasant-hunting and wildlife 

habitat (figs. 7 and 8).

Costs and Benefits Vary Between Contracts Funded in 

RE States Versus Contract Applications in non-RE States

An analysis of per acre treatment costs for the selected resource concerns 

revealed that contracts funded with Regional Equity funds in RE States had 

higher per acre costs than the contracts that would have been funded, in the 

absence of Regional Equity restrictions, in non-RE States (table 3).14 This 

finding held throughout the 3-year study period, in both EQIP and WHIP, 

almost without exception.15 Costs varied over a wide range, however. In 

some cases, the maximum cost per acre estimate exceeded the mean per acre 

estimate by several thousand dollars in the RE States, due to the installation 

of some expensive practices (e.g., micro-irrigation systems, waste storage 

facilities, and ponds), along with implementation of a broad combination of 

structural, vegetative, and management practices. In some cases, Regional 

Equity funds were used to install less typical practices at a high cost per acre, 

such as shellfish aquaculture management systems. 

14Another important consideration 

was technical assistance costs (TA). 

The contract data contain information 

on the financial assistance (FA) costs 

of implementing practices, but do not 

identify which practices or resource 

issues required TA. TA costs are not 

insignificant outlays—in EQIP between 

2004 and 2006, TA costs represented 

about 21 percent, 24 percent, and 28 

percent of the total program budgets, 

respectively. In WHIP, TA costs were 

22 percent and 28 percent in 2005 and 

2006, respectively. We assumed that TA 

was necessary for meeting nondegradation standards, so in developing the per 

acre cost estimates we increased the 

costs to reflect TA based on these overall portions of the budget (e.g., in EQIP 

in 2006, TA represented an overall 40 

percent of FA costs, so 40 percent was 

added to the cost of contracts in that 

year).

15The one exception was that, in 

WHIP, the marginal contracts in RE 

States provided sheet and rill erosion 

reduction benefits at a lower cost per 

acre.

Figure 4

EQIP 2004: estimated net gain/loss in acres treated due to Regional Equity provision

Source: ERS analysis of NRCS administrative data.

-240,000

-180,000

-120,000

-60,000

60,000

120,000

0

Net loss in acres treated

Acres associated with measurable benefits Benefit measures are not 

available for acres receiving 

treatment in these categories

Onsite soil productivity

Air quality

Grazing productivity

Irrigation efficiency

Sedimentation

Water quality

Wildlife habitat

Pheasant hunting

Forest health

Other soil quality

Land quantity

Other plant health

Other water quantity

Other surface water quality

Other ground water quality

Other air quality

Other habitat quality

Other wetlands health

Wetland creation

EQIP = Environmental Quality Incentives Program. Net gain in acres treated
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Figure 6

EQIP 2006: estimated net gain/loss in acres treated due to Regional Equity provision

Source: ERS analysis of NRCS administrative data.

Acres associated with 

measurable benefits

EQIP = Environmental Quality Incentives Program. Net loss in acres treated Onsite soil productivity Air quality Grazing productivity Irrigation efficiency Sedimentation

Water quality

Wildlife habitat

Pheasant hunting

Other water quantity

Other air quality

Domestic animals

Other fish and wildlife

Other plant condition

Other soil condition

Other soil erosion

Other water quality

Wetland creation

Net gain in 

acres treated

−240,000

−180,000

−120,000

−60,000

0

60,000

120,000

180,000

Benefit measures are not available for acres 

receiving treatment in these categories

Figure 5

EQIP 2005: estimated net gain/loss in acres treated due to Regional Equity provision

Source: ERS analysis of NRCS administrative data.

Acres associated with 

measurable benefits

EQIP = Environmental Quality Incentives Program. Net loss in acres treated Onsite soil productivity Air quality Grazing productivity Irrigation efficiency Sedimentation

Water quality

Wildlife habitat

Pheasant hunting

Forest health

Other soil quality

Land quantity

Other plant health

Other water quantity

Other surface water quality

Other ground water quality

Other air quality

Other habitat quality

Other wetlands health

Wetland creation

-240,000

-180,000

-120,000

-60,000

0

60,000

120,000

Net gain in 

acres treated

Benefit measures are not available for acres 

receiving treatment in these categories
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Figure 8

WHIP 2006: estimated net gain/loss in acres treated due to Regional Equity provision

Source: ERS analysis of NRCS administrative data.

Acres associated with 

measurable benefits

WHIP = Wildlife Habitat Incentives Program.

Benefit measures are not available for acres 

receiving treatment in these categories

Net loss in acres treated

Onsite soil productivity

Air quality

Grazing productivity

Irrigation efficiency

Sedimentation

Water quality

Wildlife habitat

Pheasant hunting

Wetland creation

Net gain in 

acres treated

−240,000

−180,000

−120,000

−60,000

0

60,000

120,000

Other water quantity

Other air quality

Domestic animals

Other fish and wildlife

Other plant condition

Other soil condition

Other soil erosion

Other water quality

Figure 7

WHIP 2005: estimated net gain/loss in acres treated due to Regional Equity provision

Source: ERS analysis of NRCS administrative data.

Acres associated with 

measurable benefits

WHIP = Wildlife Habitat Incentives Program.

Benefit measures are not available for acres 

receiving treatment in these categories

Net loss in acres treated

Onsite soil productivity

Air quality

Grazing productivity

Irrigation efficiency

Sedimentation

Water quality

Wildlife habitat

Pheasant hunting

Forest health

Other soil quality

Land quantity

Other plant health

Other water quantity

Other surface water quality

Other ground water quality

Other air quality

Other habitat quality

Other wetlands health

Wetland creation

Net gain in 

acres treated

-240,000

-180,000

-120,000

-60,000

0

60,000

120,000
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The benefits from conservation treatment also appeared to vary between RE 

and non-RE States, at least for the subset of conservation activities for which 

benefit estimates were available. Regionally varying estimates of benefits that 

were drawn from a number of studies reveal that the average per acre benefits 

from reducing sedimentation and increasing water quality were higher in 

RE than non-RE States (table 4). (See Appendix D for a description of the 

studies from which the benefit estimates were derived.) This suggests that 

shifting conservation efforts to RE States to mitigate these problems could 

produce greater conservation benefits. The benefits from creating wetlands 

are an order of magnitude higher than the other benefits, because wetlands 

generate a whole set of benefits, including improved water quality, wildlife 

habitat, and recreational opportunities. Though wetland-related benefits are 

likely to vary by area, regional estimates were not available.

Despite reducing the number of acres that received treatment for many 

resource problems, the RE provision increased the net benefits from treating 

some of them (net benefits are calculated as gross benefits minus costs). The 

RE provision allowed EQIP to generate an estimated additional $4.5 million 

and $2.4 million in sedimentation reduction benefits in 2005 and 2006, and 

an estimated additional $490,000 in soil productivity benefits in 2004 and 

2005 (fig. 9). These changes occurred because the acres that were treated 

in RE States (in those treatment areas for which we have benefit measures) 

generated higher levels of benefits than the acres that would have received 

treatment in the non-RE States, due partly to higher surrounding population levels that benefit from improved environmental conditions. In terms of 

grazing productivity benefits, the RE provision generated net losses of about 

$2 million yearly. The effects also varied by year. For the nine categories of 

environmental issues considered, the RE provision collectively resulted in 

losses of net benefits in EQIP of about $2.5 million in 2004, a gain of $2.3 

million in net benefits in 2005, and losses of $3 million in 2006. 

Table 3

EQIP contract costs per acre by benefit type - ‘marginal’ contracts affected by the Regional Equity 

provision, 20061

Onsite soil 

productivity 

benefits

Air 

quality 

benefits

Grazing 

productivity 

benefits

Irrigation water 

conservation 

benefits

Sedimentation 

benefits

Water quality 

benefits

Wildlife 

habitat 

benefits

Pheasant 

hunting 

benefits

Wetland 

creation 

benefits

Average contract cost per acre2

RE States $207.26 $180.81 $359.52 $785.25 $311.97 $574.84 $511.91 $451.95 -

Non-RE States 58.94 27.77 54.88 142.03 73.97 100.26 39.8 50.09 -

Standard deviation

RE States 339.6 148.68 582.64 1,224.42 450.7 1,024.29 843.29 711.8 -

Non-RE States 174.27 46.13 90.11 235.21 143.27 225.64 54.77 121.33 -

Minimum contract cost per acre3

RE States 0.07 0.07 1.46 0.37 1.73 1.54 1.36 4.67 -

Non-RE States 0.1 0.2 0.7 0.14 0.1 0.3 0.51 0.51 -

Maximum contract cost per acre

RE States 1,513.08 507.88 2,154.63 5,354.42 1,759.24 4,968.55 3,407.07 1,958.09 -

Non-RE States 1,217.43 192.82 490.73 760.05 639.93 1,348.83 186.92 646.56 -

EQIP = Environmental Quality Incentives Program.

1Table includes costs associated with mitigating those physical effects for which monetary estimates of benefits exist.

2The costs per acre used to create these descriptive statistics were the contract cost per acre at the watershed level.

3Many contracts treated multiple resource concerns, and in those cases contract costs were divided among the resource concerns. 

This contributes to the small minimum cost per acre estimates.

Source: ERS analysis of NRCS contract data. 
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In WHIP, for the nine environmental categories considered, the Regional 

Equity provision generated losses of net benefits of about $1.8 million in 

2005 and $4.9 million in 2006 (WHIP was not affected by the Regional 

Equity provision in 2004) (fig. 10). The contracts enrolled in several States 

addressed different resource concerns between the 2 years, which contributed to this large difference. The measurable losses in net benefits in WHIP 

were also larger than those in EQIP in 2006, even though WHIP is a smaller 

Figure 9

Effects of the Regional Equity provision on selected net benefits in EQIP1

Source: ERS analysis of NRCS administrative data.

1

Includes only the conservation activity funded through Environmental Quality Incentives Program (EQIP) in the continental U.S. for which 

estimates of the benefits of treatment are available in dollar terms.

$ change in net benefits

-5,000,000

-4,000,000

-3,000,000

-2,000,000

-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

2004 2005 2006

Soil productivity

Air quality

Grazing productivity

Irrigation efficiency

Sedimentation

Water quality

Wildlife habitat

Pheasant hunting

Wetland creation

Table 4

Average benefits from conservation measures (in 2004 dollars)

Benefits from reduced erosion 

from wind and water Other benefits

Onsite soil 

productivity 

benefits

Air 

quality 

benefits

Sedimentation Water 

quality

Grazing 

productivity

Irrigation water 

conservation

Wildlife 

viewing

Pheasant 

hunting

Wetland 

creation

Dollars per acre

RE States $3.43 $1.82 $32.27 $16.83 $9.03 $2.61 $19.60 $0.06 $550.00 

Non-RE States:

Appalachia 3.83 - 24.14 14.43 12.00 - 23.47 0.16 50.00 

Corn Belt 5.49 - 11.89 11.90 10.49 0.75 25.38 4.04 550.00 

Delta 1.53 - 12.64 5.46 13.22 5.54 22.81 0.20 550.00 

Mountain 0.09 3.87 $0.98 0.23 3.33 14.31 0.73 0.19 550.00 

NE & Lake States 3.54 0.04 18.99 15.62 9.44 - 25.69 2.66 550.00 

Northern Plains 0.74 1.68 2.64 1.87 5.24 2.98 3.55 1.92 550.00 

Pacific 0.51 2.02 5.08 4.67 5.57 19.19 0.32 - 550.00 

Southeast 1.79 - 19.78 7.54 12.64 2.86 23.31 - 550.00 

Southern Plains 0.51 1.95 5.87 3.41 6.36 4.68 15.12 0.08 550.00 

RE = Regional Equity Provision.

Note: Benefit measures are not available for Alaska, Hawaii, Puerto Rico, Pacific Basin Countries, and the Caribbean.

Source: Source: See Appendix D.
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program in terms of overall program funding. These cross-program effects 

might have been different, however, if data constraints had not prevented 

analysis of the impacts on net benefits for the full set of conservation activity 

in both programs. Benefit measures were available for more conservation 

activity in WHIP than in EQIP, so more EQIP activity was excluded from 

our analyses (see box, “Conservation Activities Linked to Environmental 

Benefits” and fig. 6). 

These analyses reveal that the Regional Equity provision resulted in a 

number of tradeoffs that were likely to affect the ability of the programs to 

provide environmental benefits cost effectively. They also reveal that the 

direction and magnitude of environmental and economic impacts of the 

Regional Equity provision are resource specific. For grazing productivity and 

water conservation issues in EQIP and wildlife and pheasant-hunting habitat 

in WHIP, the funding shifts across States reduced both the amount of land 

receiving treatment and the net benefits from treatment, at least during the 

3-year period we studied. For most other resource issues, there were reductions in the amount of land receiving treatment, but the economic impacts 

were negligible or positive. The differing impacts across programs also 

suggest that the way an allocative policy is implemented may be an important 

determinant of the collective environmental and economic impacts. 

Figure 10

Effects of the Regional Equity provision on selected net benefits in WHIP1

Source: ERS analysis of NRCS administrative data.

1

Includes only the conservation activity funded through Wildlife Habitat Incentives Program (WHIP) in the continental U.S. for which 

estimates of the benefits of treatment are available in dollar terms.

$ change in net benefitsSoil quality

Air quality

Grazing productivity

Irrigation efficiency

Sedimentation

Water quality

Wildlife habitat

Pheasant hunting

Wetland creation

-5,000,000

-4,000,000

-3,000,000

-2,000,000

-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

2005 2006
21

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The Regional Equity Provision Is Compatible With 

Distributional Goals of Working-Land Programs

The Regional Equity provision does not appear to work at cross-purposes 

with distributional goals in working-land programs. In addition to environmental, economic, and allocative goals, EQIP is designed to provide 

favorable treatment for certain types of operations and producers. Because 

targeted producers who participate in EQIP are not distributed equally among 

States and States do not always prioritize them for enrollment, the minimum 

funding allocations of the Regional Equity provision could have unintended 

impacts on participation by targeted producers. For example, by law, at 

least 60 percent of overall EQIP funding must be used for livestock-related 

conservation practices (USDA treats all practices implemented by livestock 

producers as livestock related (USDA, 2003)). Our analyses of payments by 

producer type suggest the 60-percent threshold would have been satisfied 

with or without the Regional Equity provision: Livestock operators received 

between 66 and 71 percent of EQIP funding annually after the Regional 

Equity funding reallocations occurred. Satisfying the Regional Equity provision reduced the number of livestock contracts, but only by an estimated 1.5 

percent, or 500-700 contracts annually over the 2004-06 period. 

Beginning farmers and farmers with limited financial resources also receive 

special attention in EQIP. The 2002 Farm Act authorized these producers 

to receive higher cost-share reimbursement rates (up to 90 percent of practice installation cost compared with a 75-percent maximum rate for other 

producers). The 2008 Farm Act authorized additional favorable payment 

terms, expanded eligibility for favorable terms to socially disadvantaged 

farmers, and required that beginning farmers and socially disadvantaged 

producers have access to at least 5 percent of program funds. Over the 

2004-06 period, a larger proportion of contracts in the RE States were held 

by beginning and limited-resource producers, and while the Regional Equity 

reallocations allowed more of them to be enrolled, the impacts were small—

an average of 100 additional contracts were written with these producers 

annually over the 2004-06 period. The funding shifts also had no appreciable 

impact on the overall EQIP funding received by beginning farmers, which 

averaged 11-12 percent of financial assistance annually over the 2004-06 

period. 
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Conclusions

Allocative goals established by congressional legislation play an important role in the design of U.S. conservation programs for working lands. 

In conservation programs such as EQIP, WHIP, FRPP, and GRP, program 

funds are allocated to State program offices, where decisions are made about 

which resource problems will receive priority and which applications are 

accepted—either at the State or sub-State level. In EQIP, State offices can 

delegate these decisions, as well as the authority to choose payment rates 

and the conservation practices that will be funded, to local (sub-State) NRCS 

offices. This decentralized structure results in broad distribution of conservation funds, with producers in neighboring jurisdictions potentially having 

different incentives for enrollment. 

How these legislative provisions are structured can have broad implications 

for which groups or regions are affected by program changes. In particular, 

policies that require fixed set-asides for particular regions result in disproportional impacts of program budget changes. For example, the Regional 

Equity provision guarantees that each State NRCS office is allocated funding 

equal to or greater than the fixed threshold ($12 million annually through 

EQIP, WHIP, FRPP, and GRP combined in the 2002 Farm Act, raised to 

$15 million in the 2008 Farm Act). If overall program funding were to 

fall, and there were no Regional Equity provision, each State NRCS office 

would experience a reduction in conservation program funding in proportion to the share of the budget that State normally receives. With a binding 

Regional Equity provision, however, a decline in overall program funding 

would be absorbed by the subset of States without protected funding. As 

program budgets rise, the impact of the Regional Equity provision on the 

States without protected funding is reduced. Alternatively, when set-asides 

are specified as a proportion of overall funding—such as the mandated 

60-percent set-aside for livestock practices or the 5-percent set-aside for 

beginning farmers—the funding reserved for targeted groups is scaled up and 

down proportionally as budgets change.

When legislation applies to programs that already seek to achieve environmental, economic, distributional, and allocative goals, it is difficult to 

predict the direction and magnitude of potential tradeoffs when new legislation furthering an allocative goal is layered on top. Our analysis suggests 

the Regional Equity provision of the 2002 Farm Act resulted in a number of 

tradeoffs with other program goals. Meeting the requirement meant that each 

program agency had to shift funds among States. This changed the number 

and mix of producers who were accepted into the program in different States. 

While the provision did increase conservation funding for the dozen or so 

States that historically had received limited amounts through Federal conservation programs, it resulted in declines in the number of acres receiving 

EQIP funding to treat most environmental problems. The funding shifts also 

resulted in increased treatment costs per acre for many environmental projects funded by EQIP and WHIP. However, the shifts also resulted in more 

conservation activity being given to States where the benefits per acre from 

treatment were higher because more people benefited from the conservation activity undertaken by producers. In some cases, the increase in the per 

acre benefits was greater than the increase in treatment costs. For example, 
23

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the Regional Equity provision decreased the net benefits (calculated as 

gross benefits minus costs) from improving grazing productivity by about 

$2 million annually over the 2004-06 period in EQIP, but increased the net 

benefits from reducing sedimentation problems by $4 million in 2005 and 

over $2 million in 2006.16 While the Regional Equity provision’s overall 

impact on benefits provided by the affected conservation programs could not 

be estimated because of data limitations, the patterns we found clearly show 

that the provision affects program benefits.

When program agencies have flexibility for implementing legislation, an 

understanding of the economic, environmental, allocative, and distributional impacts of alternative implementation options can guide the decisionmakers’ choice of a strategy that minimizes the losses of benefits from all 

affected programs. The Regional Equity provision reduced net benefits from 

addressing environmental problems in WHIP in the 2 years of our study 

when WHIP was subject to the provision’s requirements, but the impacts in 

EQIP were more mixed. Impacts may not be correlated with program size; 

even though WHIP is smaller than EQIP in terms of overall funding, in 2006 

the net losses to WHIP that we could measure with existing data were oneand-a-half times larger. 

Policymakers face important decisions about how to use conservation 

program funds to deliver environmental benefits in a cost-effective manner. 

In conservation programs that are also designed to achieve distributional 

goals, it is not immediately apparent what impact a policy change to further 

allocative goals will have on a program’s cost effectiveness or the amount 

of land receiving treatment. As analysis of the effects of the Regional Equity 

provision demonstrates, even when the amount of land receiving treatment 

decreases, net environmental benefits could increase if conservation activity 

shifts to places that provide more benefits. Because the environmental and 

economic characteristics of farms participating in conservation programs 

vary widely, understanding the characteristics of the contracts affected by a 

policy change—the conservation choices, treatment costs, and value of benefits provided by treatment—is necessary to determine the impacts of policy 

changes on all program goals in working-land programs. 

16Conservation programs fund 

activities that can increase the amenity, scenic, and recreational value of 

agricultural land in ways that are not 

easily expressed in dollar terms. These 

values can be higher when more people 

have access to the amenities (Feather et 

al., 1999), which suggests that shifting 

program activity to higher population 

States can increase these nonmarket 

benefits. 
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Hansen, L., and M. Ribaudo. 2008. “Economic Measures of Soil 

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Appendix A. Allocative Goals in Working-Land and 

Land Protection Programs

In U.S. working-land and land protection programs, each program uses a 

unique set of design options that allow allocative as well as environmental, 

economic, and distributional goals to be met.

The Environmental Quality Incentives Program (EQIP) 

EQIP is USDA’s major conservation program for working lands. It provides 

funding for conservation activities that address a wide range of resource 

issues, including soil quality, water quality, air quality, greenhouse gases, 

water and energy conservation, and wildlife habitat. All agricultural 

producers engaged in crop and livestock production are eligible to apply, as 

long as they comply with highly erodible land (Conservation Compliance) 

and wetland (Swampbuster) conservation requirements and do not exceed 

specified income levels.

EQIP has a long history of operating as a decentralized program with allocative goals. EQIP was enacted in 1996 and combined the conservation functions of four preexisting programs. One of its predecessors, the Agricultural 

Conservation Program (ACP), allocated program funds to State NRCS 

offices almost from its inception in 1936, with the goal of targeting funds to 

specific practices in all counties (Mercker, 1936). In 1996, the newly formed 

EQIP continued to allocate funds to State NRCS offices, based on conservation priorities. However, emphasis shifted to enrolling producers in locally 

determined “priority areas” facing the greatest environmental problems, 

rather than distributing enrollments across counties. In 2002, the practice 

of targeting enrollments to priority areas was eliminated, due primarily to 

producer dissatisfaction with the limited opportunities for enrollment outside 

priority areas (USDA, 2003). 

In recent years, 31 indicators have been included in the mechanism used to 

allocate financial assistance across State NRCS offices. These indicators are 

of two types: (1) indicators measuring resource availability in the State (e.g., 

acres of grazing land and wetland) and (2) indicators measuring the extent 

of resource impairments (e.g., acres of highly erodible cropland, and the 

potential for pesticide runoff) (table A.1) (U.S. GAO, 2006). NRCS weights 

each indicator based on an assessment of the relative importance of the 

corresponding resource issue. In 2006, the 31 resource indicators were each 

allocated between 0.5 and 6.2 percent of financial assistance funds. Funds for 

each indicator were then allocated to each State NRCS office based on the 

extent and impairment of the indicator in the State.

Since 2002, EQIP has given States wide flexibility in awarding contracts 

within their allocated funds, allowing States to target enrollments to meet 

their individual needs. Some States pool all applicants and make enrollment 

decisions at a State level, while others allocate all funds to sub-State NRCS 

offices that make the enrollment decisions. Some States adopt a mixture 

of these two approaches, retaining a portion of funds at the State level for 

specific resource concerns and allocating remaining funds to local NRCS 

offices. Each jurisdiction can have unique point systems for ranking and 
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enrolling contracts, unique sets of conservation practices that are eligible for 

funding, and different payment rates (although since 2002, payment rates for 

conservation practice installation have been constrained by law to between 

50 and 75 percent of practice cost, but up to 90 percent for beginning and 

limited-resource farmers). This means that producers in neighboring jurisdictions (even within the same State) can face different incentives for enrolling 

in EQIP. Since 2007, locally developed point systems have been required to 

assign a positive weight to national resource priorities (though the weights 

assigned to national issues need not be the same as those used to allocate 

funds to States). In addition to the relative weights of resource problems, 

many State and sub-State NRCS offices also consider contract cost in their 

rankings. 

Table A.1

Indicators and weights used to allocate EQIP funds to States, 2006

Indicators for resource issues Weight

Acres of nonirrigated cropland 3.2

Acres of irrigated cropland 4.3

Acres of Federal grazing land 0.5

Acres of non-Federal grazing land 4.3

Acres of forestlands 1.1

Acres of specialty cropland 3.2

Acres of wetlands and at-risk species habitat 4.6

Acres of bodies of water 3.2

Livestock animal units 5.8

Animal waste generation 5.8

Waste management capital cost 3.5

Acres of American Indian tribal lands 3.3

Number of limited resource producers 5

Acres of grazing land lost to conversion 0.8

Air quality nonattainment areas 1.4

Acres of pastureland needing treatment 5.5

Acres of cropland eroding above T 6.2

Acres of fair and poor rangeland 6.2

Acres of forestlands eroding above T 1.4

Acres of cropland and pastureland soils affected 

by saline and/or sodic conditions 2.6

Miles of impaired rivers and streams 3.6

Potential for pesticide and nitrogen leaching 1.3

Potential for pesticide and nitrogen runoff 1.7

Ratio of livestock animal units to cropland 1.7

Number of concentrated animal feeding operations 2.8

Ratio of commercial fertilizers to cropland 0.9

Wind erosion above T 4.2

Phosphorus runoff potential 3.9

Riparian areas 0.8

Carbon sequestration 3.6

Coastal zone land 3.6

 Total 100

Note: T is the soil loss tolerance factor (tolerable rate of soil erosion). 

EQIP = Environmental Quality Inventives Program.

Source: GAO, 2006.
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EQIP is subject to a number of Farm Act provisions for meeting distributional goals that target funds to specific producer types. At EQIP’s inception, 

Congress mandated that 50 percent of funds be used to address resource 

issues on livestock and poultry operations, and this set-aside was raised to 

60 percent in 2002. In 2002, the Farm Act granted favorable payment terms 

to beginning farmers and limited-resource producers, which were extended 

to socially disadvantaged farmers in 2008. The 2008 Farm Act requires 

that 5 percent of EQIP funds first be made available to beginning farmers, 

and another 5 percent to socially disadvantaged producers. States consider 

the set-aside requirements when designing their application processes, but 

because these requirements are easily met, there has been no national requirement for each State to set aside a particular percentage of funds. 

Wildlife Habitat Incentive Program (WHIP)

WHIP was implemented in 1996 to assist landowners with developing or 

improving wildlife habitat on agricultural land. As in EQIP, NRCS allocates 

WHIP funds to State NRCS offices to achieve allocative goals and grants 

States flexibility to tailor the program to meet their individual needs. The 

funding allocated to each State is based on major wildlife-related resource 

priorities identified in Farm Act legislation (table A.2). Unlike EQIP applications, all WHIP applications are pooled and ranked at the State level, 

although, as with EQIP, States develop their own wildlife habitat priorities, 

sets of conservation practices that can receive funding, and applicationranking criteria. These ranking criteria include the expected longevity of the 

habitat to be created, parcel size and use, proximity to other, similar habitat 

(agglomeration benefit), cost, and any funding from other sources (USDANRCS, 2004b). As with EQIP, the State priorities and associated weights 

may differ from national priorities upon which the State allocations were 

based.

Table A.2

Factors and weights used to allocate WHIP funds to States

Resource concerns Weight

At-risk wildlife species 20

At-risk wildlife species native habitat 20

Non-Federal acres 10

Total non-Federal acres enrolled in CRP, GRP, WRP 10

Declining grasslands needing restoration 8

Declining forestland needing restoration 7

Declining wetlands needing restoration 7

Aquatic species 8

At-risk aquatic species 10

Total 100

WHIP = Wildlife Habitat Incentives Program; CRP = Conservation Reserve Program; 

GRP = Grassland Reserve Program; WRP = Wetlands Reserve Program.

Source: GAO, 2006.
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Grassland Reserve Program (GRP) and Farm and Ranch Lands 

Protection Program (FRPP)

GRP and FRPP provide payments to purchase easements to prevent the 

conversion of grassland (GRP) and farmland (FRPP) to other uses. Like 

EQIP and WHIP, these programs are decentralized and have made funds 

broadly available to producers in all States since program inception (in 1996 

for FRPP, and 2002 for GRP). In both FRPP and GRP, State program offices 

use program funds and make enrollment decisions based on USDA State and 

national resource priorities. However, applications must be sponsored by a 

local entity willing to contribute a portion of the easement cost (i.e., a land 

protection program established by a State or local government or nongovernmental organization). These entities submit parcels for consideration that 

satisfy their own program goals, so ultimately the easements funded through 

FRPP and GRP reflect a combination of national, State, and local priorities.

In FRPP, NRCS has historically made program fund allocations to States 

based on the amount of farmland previously converted to developed uses 

in the State, the risk of further farmland conversions, estimates of landowner interest in selling easements in FRPP, and the financial contributions 

and historical performance of cooperating entities that sponsor landowner 

enrollments.17

In GRP, the two agencies responsible for program administration, NRCS 

(for easements) and USDA’s Farm Services Agency (for rental agreements), 

typically allocate program funding to States based on the number of grazing 

operations, pasture, and range acres under threat of conversion, and biodiversity considerations.18 These funds are used to purchase easements, to fund 

long-term rental agreements to maintain grassland cover, and to provide costsharing assistance to restore or install grassland.

17Farm and Ranch Lands Protection 

Program, Final Rule, Federal Register, 

Vol. 68, no 95, Page 26461-26478, May 

16, 2003. Online at http://edocket.access.gpo.gov/2003/03-12064.htm

18Grassland Reserve Program Final 

Rule, Federal Register, Vol 69, no 99, 

Page 29181-29182, May 21, 2004. 

Online at http://frwebgate1.access.gpo.

gov/cgi-bin/PDFgate.cgi?WAISdocID=

418564507624+5+2+0&WAISaction= 

retrieve.
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Appendix B. Marginal Contracts

It may be tempting to estimate the impacts of policy changes based on 

aggregate measures like the “average” contract. However, as the following 

analyses reveal, the characteristics of conservation program contracts vary by 

priority. The underlying differences suggest that estimating impacts of policy 

changes based on the resources or size of the area treated by the “average” 

contract can be misleading. We use a small (10-percent) increase in conservation program budgets as an example to demonstrate how different estimated impacts might be. 

As program budgets or other program factors change, funds allocated to 

each State will change. Marginal contracts (the lowest priority contracts that 

received program funding) and marginally rejected applications (unfunded 

applications with scores just below those of the marginal contracts) will be 

most affected by these budget changes. Figure B.1 illustrates how hypothetical changes in State allocations affect marginal contracts and applications that offer to treat two problems: erosion and grazing productivity. 

Each dot represents a score based on the application’s expected reduction 

in erosion and improvement in grazing productivity, and each dot’s coordinates in the figure depend on the extent to which the producer agrees to treat 

each problem. The solid line represents the amount of erosion reduction and 

grazing improvements that can be funded with the available budget; it can be 

thought of as a cutoff line. For simplicity, unit costs of treating erosion and 

grazing lands are assumed to be the same for all producers. The olive-green 

dots have the highest scores and are funded contracts (accepted offers), given 

Figure B.1

Increasing program budgets allow more contracts to be funded

Source: USDA, Economic Research Service. Adapted from Cattaneo et al., 2006.

State A

Increasing budget

Marginal contracts

Contracts accepted into conservation program

Contracts rejected by conservation program

State B

Decreasing budget

Erosion

reduction

Erosion

reduction

Grazing productivity Grazing productivity
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the available budget. The black dots have the lowest scores and are rejected 

applications. The gray dots, those closest to the cutoff line, are the marginal 

contracts and marginally rejected applications. If the budget increases 

slightly (cutoff line moves closer to the origin, as in State A’s figure), applications with the next highest scores would be funded—they become the 

marginal contracts. When budgets decline slightly (as in State B’s figure), 

the marginal contracts no longer receive funding—they become “marginally 

rejected.” The positions of the dots vary between the two States depicted 

in the figure, reflecting the idea that the mix of problems that producers 

agree to treat varies across States. The locations and slopes of the budget 

lines reflect, respectively, the variation in the size of State budgets and the 

different priorities States place on treating different problems. The impacts 

that relatively small program changes will have on program outcomes will 

depend largely on the characteristics of marginal contracts and marginally 

rejected applications in each State—the number of acres producers agree to 

treat, the payment producers are willing to accept, and the environmental 

benefits they are willing to provide. However, when legislation represents a 

major overhaul of a program, the incentives that producers face will change, 

and consideration of how the set of producers who apply to a program may 

change in response (the number and positions of the dots in the graphs) will 

be important. 

When conservation programs are decentralized and allow for multiple 

jurisdictions to make enrollment decisions, as in EQIP and WHIP, multiple 

ranking tools will be at work in each program. In EQIP, many ranking 

tools can exist within each State. This decisionmaking structure means that 

marginal contracts, and marginally rejected applications, will exist for each 

application pool—potentially yielding a set of marginal contracts and applications that vary widely in terms of resource problems and costs of treatment. 

How Do Marginal Contracts Differ From Higher Priority Contracts?

Because of the diversity in the resource problems that producers face, the flexibility producers have in deciding which problems to treat, and the few limitations on eligibility for working-land conservation programs, contracts enrolled 

in these programs can vary in many ways. State agencies administering 

conservation programs also affect the characteristics of enrolled contracts 

through the conservation priorities the agencies establish. The process for 

prioritizing applications in a conservation program suggests that differences 

are likely to exist between those of higher priority for enrollment and those 

of lower priority. An obvious difference is that higher priority contracts are 

more likely to address higher priority resource concerns. They may also be 

more likely to address these issues at lower cost, at least in jurisdictions that 

consider per acre treatment costs in the prioritization process. Whether the 

contract addresses concerns arising from livestock operations, or aids particularly disadvantaged producer types, may also differ by contract priority. 

Comparing the characteristics of marginal to higher priority contracts in EQIP 

and WHIP—the financial and cost-share assistance received, the types of 

practices implemented, and the resource concerns addressed—illustrates how 

these contracts vary in programs treating environmental problems on working 

lands. We identified contracts as marginal or not using the contract’s ranking 

score and information about which contracts were pooled and ranked against 
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each other in the selection process, information which is included in the 

program administrative data maintained by NRCS.19 We defined low-priority 

contracts as those that ranked the lowest in each funding pool, which, in total, 

comprised 10 percent of program funds. Highest priority contracts were those 

that ranked the highest and comprised 10 percent of program funds. 

Marginal contracts differ from higher priority contracts in a number of ways. 

For example, marginal contracts in EQIP received significantly smaller (in 

a statistical sense) contract payments compared with the highest priority 

contracts (table B.1). A regional-level analysis reveals that this pattern held, 

almost without exception, across USDA production regions and over the 

3-year period 2004-06. Contract payments on marginal contracts were lower 

because these contracts tended to receive both lower rates of cost-share 

assistance and smaller financial assistance payments. In EQIP, participants 

receive cost-share assistance to help offset part of the cost of installing structural or vegetative practices, and financial assistance to adopt more environmentally friendly management practices.20 In 2006, the average rate for 

cost-shared practices was 57 percent and 61 percent for marginal and highpriority contracts, respectively (table B.1). 

Low- and higher priority contracts also differ based on the amount of land 

that receives treatment and types of practices producers agree to implement. 

Analysis of 2006 EQIP contract data reveals that the typical lowest priority 

contract treated fewer acres compared with higher priority contracts, ranging 

from 5 percent fewer acres treated for water quality issues to 84 percent 

fewer acres for fish and wildlife issues. Most EQIP contracts involve implementation of a single type of practice—in 2006, about 70 percent of all EQIP 

contracts implemented only structural, vegetative, or management practices 

(fig. B.2). Of these contracts, low-priority contracts tended to implement 

strictly structural or vegetative cost-shared practices more frequently than 

higher priority contracts did (50 percent versus 41 percent), while more 

of the highest priority contracts included combinations of practice types. 

Installing conservation “systems” involving multiple practices may be the 

most efficient way to treat a variety of resource problems (Lerch et al., 2005; 

Berry et al., 2003). 

19Ranking scores reflect the agency’s 

numerical determination of the priority 

for enrolling a particular contract with 

funds from a particular pool, and higher 

ranking scores imply higher priority. 

In a few instances, groups of contracts 

were assigned to one of three priority 

categories (priority = 1st, 2nd, or 3rd). 

We assigned ranks to the lowest priority 

contracts based on costs, consistent 

with the ranking approach in Kansas 

and Mississippi (the two States with 

the most contracts ranked on a priority 

basis). When a contract was missing 

a ranking score, we used regression 

analysis to predict the ranking score 

based on contract characteristics, but 

because the decision and ranking processes are so decentralized, this effort 

was not successful even at a State level. 

Thus, we assigned the average ranking 

score from contracts within the relevant 

funding pool to unranked contracts. 

20In this report we define structural 

practices as practices with a 15-year 

life that are likely to treat multiple 

fields (lagoons, ponds, etc). Vegetative practices include vegetative filter 

strips, buffers, and small structural 

practices that are likely to treat single 

tracts/fields. Management practices 

include, for example, integrated pest 

management, nutrient management, and 

conservation tillage.

Table B.1

Characteristics of EQIP contracts by priority, 2006

Characteristic Marginal 

contracts

Highest priority 

contracts Difference

Average contract payment, dollars $11,795 $15,720 -$3,925**

Average percentage rate for 

cost-shared practices

0.57 0.61 -0.04**

Average incentive payment, dollars $2,707 $3,231 -$524**

Number of practices, average 2.63 3.4 -0.77**

Size of commonly adopted practices: 

Fencing, feet 4,216 5,992 -1,776**

Nutrient management, acres 400 341 59**

Pasture and hay planting, acres 51 79 -28** 

**Difference is significant at a 95% confidence level. 

EQUIP = Environmental Quality Incentives Program.

Source: USDA-NRCS administrative data for EQIP, 2006. 
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In recent years, policymakers have sought to improve participation rates by 

certain producer groups in EQIP. For example, the 2002 and 2008 farm legislation provided for higher levels of financial assistance and other measures 

to reduce barriers to participation by beginning farmers and limited-resource 

producers (the 2008 Farm Act includes favorable terms for socially disadvantaged farmers, as well). The 2006 enrollment data suggest beginning 

and limited-resource farmers and ranchers tend to get enrollment priority 

in EQIP. When viewed from a national level, 68 percent of payments on 

high-priority contracts are made on contracts held by beginning farmers and 

ranchers, while just 10 percent of payments to low priority contracts are 

received by these farmers (fig. B.3). Payment patterns are similar for limitedresource producers. 

Marginal Contracts: Implications of Differences 

for Program Analysis

Knowledge about the many ways in which lower and higher priority 

contracts differ can be particularly important for understanding the environmental, economic, distributional, and allocative impacts of policy changes, 

as well as for estimating how program administration requirements (such 

as staffing and provider needs for technical assistance) might change in 

response. Taking this variation into account is important even for relatively 

small program changes. For example, in EQIP, if estimates of impacts of a 

10-percent budget increase on contract numbers were based on the “average” 

contract size rather than the smaller size of marginal contracts, the number 

of additional contracts enrolled would have been understated by 42 percent. 

Further, estimates of the number of acres receiving treatment for plant conditions, soil erosion, soil conditions, and fish and wildlife problems would be 

Figure B.2

Percent of EQIP contracts by practice type and priority

Types of practices defined:

Struct = large structural practices with a 15-year life; Mgmt = management; Veg = vegetative practices and small structural practices 

treating single tracts/fields.

Source: ERS analysis of NRCS administrative data.

5%

24%

45%

1%

5%

16%

4% Struct

Mgmt

Veg

Struct + mgmt

Struct + veg

Mgmt + veg

Struct+mgmt+veg

4%

27%

38%

1%

6%

21%

4%

Low-priority contracts High-priority contracts
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overstated by more than 40 percent, because marginal contracts tend to treat 

fewer acres than the average contract. 

Understanding differences among contracts by producer type is also important, especially when certain producers require additional technical or other 

types of Government assistance. The average EQIP payment to all livestock producers was about $21,120 in 2006, while payments for livestock 

producers with marginal contracts were about half as large. If the impacts 

of a 10-percent budget increase were based on the size of the “average” 

contract and livestock contracts continued to receive 66 percent of any additional funding (the proportion of all funding received by this producer group 

nationally), the number of new livestock contracts that could be enrolled with 

a 10-percent budget increase would be underestimated by about 45 percent. 

The number of contracts with beginning and limited resource farmers would 

also be underestimated by 25 percent, if similar assumptions about contract 

sizes were made.

Figure B.3

Proportion of contract payments to beginning farmers in EQIP, 2006

PB = Pacific Basin Countries; PR = Puerto Rico.

EQIP = Environmental Quality Incentives Program.

Source: ERS analysis of NRCS administrative data.

U.S. Northeast LakeStatesCornbeltNorthern

Plains

AppalachiaSoutheastDelta Southern

Plains

Mountain Pacific AK

and

HI

PB

and

PR*

0

20

40

60

80

100

Lowest priority contracts Medium & high priority contracts Highest priority contracts

Percent of contract costs for beginning farmer contracts
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Appendix C. Methodology for Estimating Acres 

Receiving Treatment and the Costs per Acre of 

Treating Resource Concerns 

The EQIP and WHIP data we used to estimate treatment costs included the 

cost of implementing each practice, identifiers for the fields where each 

practice was to be installed, indicators of physical effects to be treated, and 

information on how many acres were receiving treatment under the contract, 

as identified by local NRCS field offices. We used these locally determined 

links between costs and environmental problems to estimate watershed-level 

costs of treatment. The advantage of using the locally determined links is that 

they incorporate the natural variation in practice costs across different States, 

which depend on local priorities and circumstances. 

Agricultural producers address resource concerns by implementing conservation practices that mitigate the underlying physical effects of production. 

For example, pasture and hay planting and fencing are practices often used 

to mitigate overgrazing, a physical effect that addresses the resource concern 

of the productivity of grazing land. Often more than one practice is used to 

address a physical effect. Also, some practices, like fencing, can mitigate 

multiple physical effects (e.g., overgrazing and streambank erosion) that 

address more than one resource concern (such as grazing productivity and 

water quality). In developing our cost estimates, we accounted for both the 

multiple-practice and multiple-resource concerns evident in the data. 

The study’s primary goal in developing the cost estimates was to do so 

in such a way that the costs could ultimately be compared to benefits for 

addressing particular resource concerns. Three factors were important: (1) 

linking the physical effects to resource concerns (such as water quality or 

grazing productivity) to develop cost estimates of addressing the concern; 

(2) identifying which costs were incurred to mitigate which physical effects 

(such as soil erosion or grazing land health); and (3) grouping practices based 

on the years of benefits that they were likely to generate. 

In fiscal years 2004 and 2005, NRCS field offices could assign practices to 

as many as 76 physical effects, depending on the environmental problem the 

practice was expected to treat. In 2006, NRCS changed and expanded the 

list to include 82 physical effects. For our analysis, we grouped the physical 

effects by resource-concern categories for which we had benefit estimates 

(see Appendix D for a description of benefit estimates). For 2004-2005, 28 of 

the 76 physical effects were mapped to resource concern categories for which 

benefit estimates existed; in 2006, 17 of 82 physical effects were mapped. 

Table C.1 identifies which subsets of physical effects linked to which 

resource concerns. Although the physical effects receiving treatment differed 

somewhat during the study period, we reviewed the data and found reasonable consistency across years between the practices that were associated with 

particular resource concerns.21

In some cases, the practice-to-physical-effect links in the data appeared 

tenuous—for example, ponds were identified as reducing wind erosion in 

some contracts. In such cases, we imposed restrictions on the data. We paid 

particular attention to large structural practices (e.g., creating ponds, waste 

21This method puts greater reliance 

on the NRCS field office judgments 

about which resource concerns a practice is actually intended to address. An 

alternative method, which might ensure 

more consistency across years, would 

be to impose a strict mapping between 

practices and the resource concerns 

they are intended to address. However, 

this alternative would limit the spatial 

variability in the data as well as the 

ability of practices to address multiple 

resource concerns. The spatial variability in this study is particularly important 

because we are distinguishing effects of 

the Regional Equity provision among 

different States.
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storage facilities, etc.) that were associated with unlikely physical effects and 

that would have the most significant effects on net benefit estimates. In addition to restrictions on links between large structural practices and particular 

physical effects, the primary restrictions we imposed were on the types of 

practices related to wetland creation and grazing productivity issues (e.g., 

we assumed practices funded through WHIP were not intended to mitigate 

grazing land productivity issues).

To identify the costs of mitigating physical effects, we used the contract data 

to link practices both to the fields on which they were installed and to the 

indicators of physical effects expected to be mitigated by those practices (we 

Table C.1

Physical effects included in benefit categories

Resource concerns Physical effects receiving treatment

Fiscal 2004, 2005 Fiscal 2006

Benefits from reduced erosion from 

wind and water

Onsite soil productivity benefits Sheet and rill erosion reduction, reduction 

in irrigation-induced soil erosion

Sheet and rill erosion reduction, reduction 

in irrigation-induced soil erosion

Air quality benefits Reduction in wind erosion and particulate 

pollution

Reduction in wind erosion and particulate matter less than 10 micrometers in 

diameter

Sedimentation reduction benefits Reduction in damage from sediment 

deposition and erosion from roadsides and 

construction sites; reduction in shoreline 

and streambank erosion; reduction in sediment deposition

Reduction in damage from sediment deposition and erosion from road sides and 

construction sites; reduction in shoreline 

and streambank erosion; improvement in 

capacity of conveyances from reducing 

sediment deposition

Water quality benefits Reduction in surface water salinity, sediment and eutrophication, heavy metals, 

pesticides, acid rain problems, and temperature extremes; reduction in bioaccumulation of toxins; improvement in water for 

fish and wildlife

Reduction in surface water salinity, sediment and turbidity, heavy metals, pesticides, petroleum and harmful temperatures; rectifying inadequate water for fish 

and wildlife

Grazing productivity benefits Reduction in noxious and invasive plants, 

improvement in rangeland site stability 

Improvement in quantities and quality 

of feed/forage/plants, reduction in noxious and invasive plants, improvement 

in rangeland site stability and hydrologic 

cycle

Irrigation efficiency benefits Improvement in water supply for irrigated 

land

Improvement in efficiency of water use on 

irrigated land

Wildlife viewing benefits Improving population imbalances and species diversity, reduction in loss/degradation 

of riparian habitat/vegetation, reduction of 

nonindigenous plant or animal species 

Improving population imbalances, food, 

space, and populations of threatened 

and endangered species and species of 

concern

Hunting benefits Reduction in loss/degradation of forest or 

grass cover and habitat fragmentation

Improving cover/shelter for wildlife and 

reducing habitat fragmentation

Wetland creation benefits Reduction of significant hydrological modificationReduction in excessive subsurface water

Source: USDA-NRCS administrative data for Environmental Quality Incentives Program (EQIP) and Wildlife Habitat Incentives Program (WHIP).
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assumed that practices completely addressed the identified physical effects 

on all fields where the practice was installed). This yielded cost estimates 

that varied by practice, year, and field level. Most practices were installed on 

a single field, but in some cases they were installed on many fields. In 2004 

and 2005, 79 percent and 87 percent of EQIP contract items were coded to 

three or fewer physical effects, with 46 percent and 66 percent of contract 

items coded to just one physical effect in those years.

 In generating contract-specific cost estimates, we identified whether the 

physical effect was mitigated using one of seven different practice types or 

combinations of types: large structural practices, management practices, 

vegetative practices, large structural plus management practices, large structural plus vegetative practices, management plus vegetative practices, or all 

three types (large structural plus vegetative plus management practices).22

Distinguishing by practice type allowed us to match costs to varying streams 

of benefits, based on the varying lengths of the useful lives of the practices. 

When estimating the per acre cost of addressing a resource concern, we had 

to account for the fact that multiple practices could be applied to the same 

field without double-counting the acres treated. In cases where practices 

addressed a single resource concern, we estimated the contract cost per 

acre (CPA) of addressing resource concern r with all practices of type P by 

summing up the costs of each practice cp over the t years implemented, and 

dividing by the number of acres a the practices are estimated to treat on j

fields (contract subscripts are suppressed to simplify notation):

CPA

c

a

rP t

P

p t

rp

j j

P

P

=

∑ ∑

∑

=1

Ideally, data would be available on the number of acres treated by individual 

practices (a). Because acreage data are only available at the contract level, we 

estimated the acreage treated by each practice on field j (aj

) by allocating the 

total acres treated by the contract across all the fields that were subject to treatment by any practice. Some practices within a contract may be implemented 

on fewer fields than others, so total treated acres (TTA) are divided by the 

maximum number of fields receiving treatment by any practice in the contract:

aj = TTA/argmax(j),

which assumes all fields treated by a contract are of equal size.

The above formulas assume that practices are implemented to address a 

single resource concern. In some cases, practices address multiple physical 

effects that map to multiple resource concerns. These cases raise the question 

of how to allocate practice costs across multiple concerns. Most practices are 

implemented to address a primary physical effect, so a reasonable strategy 

would be to allocate some costs to that effect. For this analysis, we allocated 

practice costs by apportioning them equally across the physical effects being 

mitigated by the practice. 

22We define vegetative practices to 

include small structural practices that 

are likely to treat particular fields or 

tracts, as opposed to large structural 

practices that are more likely to treat 

physical effects on all fields.
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As a sensitivity check, we also analyzed how outcomes would change if 

practice costs and treated acres were allocated entirely to the “primary” 

physical effect treated by the practice. We estimated the primary effect based 

on which physical effect each practice treated most frequently. We calculated 

the primary physical effect by practice within each State, which maintained 

spatial variation across States in the practice-physical effect mappings. With 

costs for addressing physical effects calculated this way, our estimates of the 

impacts of the Regional Equity provision on net benefits differed from our 

results when we apportioned costs equally across all physical effects being 

addressed by the practice, but not in any predictable way. The net benefits 

for some resource concerns increased, while others decreased up to several 

hundred thousand dollars. This suggests that assumptions about how costs 

are allocated when multiple resource concerns are treated can affect the 

outcomes.

Accounting for Outliers in the Data

One issue that arose in calculating the cost per acre for each resource concern 

was that for some contracts, the cost per acre estimates were unreasonably 

high or low. In large part, these outliers were due to inconsistencies in how 

field offices entered data on the acres that received treatment. The primary 

problem was that the number of acres on which the practice was installed 

was reported as “treated acres.” For example, a riparian buffer installed on 

0.2 acres was listed as treating 0.2 acres, when it actually treated (prevented 

soil erosion from leaving) a 20-acre field. This type of inconsistency resulted 

in cost per acre estimates that were unreasonably high. In other cases, 

certain practices were recorded as treating tens of thousands of acres. While 

possible, practices treating such large acreages are not typical, and they result 

in unreasonably low cost per acre estimates. Because calculations of average 

per acre costs at aggregated levels are affected by outliers, we used median 

per acre costs, or the per acre estimates for which half the observations lie 

below the estimate and half lie above (when the per acre cost estimates are 

arranged in order of magnitude).

Summarizing per Acre Costs to the Watershed Level

To be consistent with benefit estimates that varied across watersheds (8-digit 

Hydrologic Unit Codes, or HUCs delineated by the U.S. Geological Survey), 

we summarized the cost data to the watershed level. For each resource 

concern r and practice group p, we calculated the watershed level cost per 

acre as the median cost per acre of contracts in that HUC that treat resource 

concern r with practice group p. We also used the median number of acres 

treating resource concern r, multiplied by the number of contracts treating 

resource concern r, to estimate the number of acres receiving treatment. 
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Appendix D. Benefit Estimates

The benefits from addressing resource concerns were estimated for each 

contract. We estimated these by linking the physical effects addressed in each 

contract to different benefit categories for which benefit values are available from the literature (see Appendix C, table C.1, for a description of how 

physical effects were mapped to benefit categories). These categories include 

benefits associated with erosion reduction (soil productivity, dust, sedimentation, water quality), improved water management (irrigation efficiency), 

grazing land productivity, and habitat creation and improvement (hunting, 

wildlife viewing, wetlands). Most of the procedures and data behind the 

benefit estimates are the same as those used in the benefit assessment of the 

Conservation Security Program (USDA, 2004a). 

Benefit estimates for each category were available at several different 

geographic levels (Hydraulic Unit Code, State, farm production region, or 

national). GIS procedures were used to aggregate benefits to the State level. 

Benefits were placed on a per ton of erosion or per acre basis, depending 

on the category. Benefits from Environmental Quality Incentives Program 

contracts were estimated by applying the per unit values to the amount of 

erosion reduced or the number of acres treated.

Benefits From Reduced Erosion

Benefits from reduced water and wind erosion were obtained from Hansen 

and Ribaudo (2008), who provide economic measures of soil conservation 

benefits for a variety of benefit categories, representing benefits from reduced 

sedimentation, improved water quality, improved air quality, and improved 

soil productivity. Benefits are provided in terms of dollars per ton of erosion 

reduced, by county and the U.S. Geological Survey’s 8-digit Hydrologic 

Regions (although the benefits for sub-State units are often assigned the per 

ton benefit estimated at a State or regional level). 

In the case of erosion reductions, contract data did not contain any information on baseline erosion rates or the expected change in the rates. We 

assumed that practices adopted for the purpose of reducing erosion would 

achieve a reduction equal to the difference between the HUC-wide average 

erosion rate (tons per acre) on cropland eroding at T and more than T. T is 

the “acceptable” level of erosion as defined by NRCS (in tons per acre) and 

a standard target for erosion control practices. Cropland already at or near 

T would not need conservation practices to control erosion. We estimated 

HUC-wide average erosion rates with data from the National Resources 

Inventory on cropland with an erosion rate greater than T, and used this 

information to convert the benefits from reducing erosion on a per ton basis 

to a per acre basis.

Benefits From Improved Water Management 

Benefits from improved water management represent the reduced cost to the 

farmer of water used in irrigation. Estimates of annual per acre water savings 

were obtained from NRCS (USDA-NRCS, 2004a). In that study, the assumption was made that improved water management reduces water use by about 
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13 percent. Potential per acre benefits were calculated using data on irrigation 

water use, water source (surface or ground), and irrigation water costs. 

Benefits From Improved Grazing Productivity 

Improved land management can increase the productivity of grazing lands. 

We used per acre productivity benefit estimates developed by NRCS at 

the multistate level for an analysis of the Conservation Security Program 

(USDA- NRCS, 2004a). Benefit estimates were developed by varying the 

national per acre values ($15.01 for pasture, $5.00 for grazing) across HUCs, 

based on relative soil productivity measures obtained from the NRI. Separate 

benefits were calculated for rangeland and pastureland. Where watersheds 

contained both rangeland and pastureland, we calculated the benefits for 

the HUCs as the weighted average benefit. We used the number of acres in 

rangeland and pastureland in the watershed, estimated using 1997 NRI data, 

as weights. 

Benefits From Improved Hunting Opportunities 

Improving wildlife habitat can produce hunting and wildlife-viewing benefits. We obtained estimates of the value of improved pheasant hunting from 

a study by Feather, Hellerstein, and Hansen (1999). Their study derived 

estimates by applying a Random Utility Model of pheasant hunter behavior 

(Hansen, Feather, and Shank, 1999). Recreation data for the model were 

from the 1991 National Survey of Fishing, Hunting, and Wildlife-Associated 

Recreation, and land-use data were taken from the 1992 NRI. For purposes 

of the present study, we reduced the benefit estimates by 50 percent, on 

the assumption that land remaining in production would generate half the 

benefits of land that is retired in the Conservation Reserve Program (CRP) 

(USDA-NRCS, 2004a).

Benefits From Wildlife Viewing 

The 1999 study by Feather, Hellerstein, and Hansen estimated the impact 

of the CRP on nonconsumptive, wildlife-oriented recreation. In that study, 

data from the Hunting and Fishing Survey (U.S. Department of the Interior 

and U.S. Department of Commerce, 1993, 1997) were used to estimate 

how improvements in habitat affected the number of trips people took to 

view wildlife and the value of a trip in each region. Results were reported 

on a basis of per acre of-land in the CRP. Several studies have shown that a 

number of practices funded through EQIP have benefited wildlife, including 

irrigation water savings practices (which benefited the arctic grayling fish 

species in Montana and Wyoming), conservation tillage (which benefited 

nesting birds) and rangeland practices (which benefited the prairie grouse) 

(e.g., Riley 2004; Martin and Forsyth 2003; Lokemoen and Beiser, 1997; and 

Jahn and Schenck 1991). 

Benefits From Wetland Creation 

Wetland restoration can provide habitat for wildlife species that support 

recreational activities, such as hunting and fishing, and commercial activities 

such as fishing and trapping. Wetlands also have a nonuse value, primarily 

for the viewing of wildlife that depend on wetlands for nesting, cover, and 
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Economic Research Service/USDA

food. We applied annualized recreation, commercial, and nonuse values 

for wetlands of $550 per acre based on values reported in the literature 

(Heimlich et al., 1998). 

Applying Benefit Estimates to Practices

Table 4 reports the annual per acre benefit estimates used to estimate the 

impacts of the Regional Equity provision on net benefits. We took into 

account that the practices implemented under an EQIP or WHIP contract 

produce benefits over multiple years, and using a 7-percent discount rate, 

we calculated the present value of the benefit stream for each contract. We 

allowed the length of the benefit stream to depend on the types of practices 

(management or structural) and the length of the contract (Table D.1). We 

applied estimates of practice lives reported by NRCS (2004): structural practices generate a 15-year stream of benefits, vegetative practices (buffers) 

generate a 10-year stream, and management practices generate a 4-year 

stream. No benefits were assumed to be generated in the initial year of implementing the practice establishment. An implicit assumption with this approach 

is that installed practices mitigate physical effects to a nondegradation level. If 

they do not, the benefits ascribed to the practices will be overstated.

Many participants agree to implement a suite of practices to mitigate a single 

physical effect. We assumed that all the practices would need to be in place 

in order for the contract to generate all of the benefits from conservation treatment. If, for example, both structural and management practices were used to 

mitigate a physical effect on the same land unit, we assumed that both types 

of practices were necessary to treat the land to a nondegradation level. For 

contracts that combined structural and management practices, we assumed 

that benefits from structural practices were reduced by 25 percent once the 

management practices ended after 3 years. For contracts that combined 

structural and vegetative practices, we assumed that benefits from structural 

practices were reduced by 25 percent once the vegetative practices finished 

their useful life after year 10. If both vegetative and management practices 

were implemented, we assumed that the benefits from vegetative practices 

were reduced by 25 percent once the management practices were no longer 

implemented (after 4 years). If all three types of practices were implemented, 

we assumed that total benefits were reduced by 15 percent between years 4 

and 10 when the management practice was no longer implemented, and by 25 

percent when only the structural practice was in place after year 10.
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The Farm Act’s Regional Equity Provision: Impacts on Conservation Program Outcomes / ERR-98

Economic Research Service/USDA

Table D.1

Portion of benefits generated by contract type, by year

Practice type

Struct. Mgmt. Veg. Struct. + Mgmt. Struct. + Veg. Mgmt.+ Veg. Struct+Mgmt+Veg

Benefits in year 1 0 0 0 0 0 0 0

Benefits in year 2 1 1 1 1 1 1 1

Benefits in year 3 1 1 1 1 1 1 1

Benefits in year 4 1 1 1 1 1 1 1

Benefits in year 5 1 1 0.75 1 0.75 0.85

Benefits in year 6 1 1 0.75 1 0.75 0.85

Benefits in year 7 1 1 0.75 1 0.75 0.85

Benefits in year 8 1 1 0.75 1 0.75 0.85

Benefits in year 9 1 1 0.75 1 0.75 0.85

Benefits in year 10 1 1 0.75 1 0.75 0.75

Benefits in year 11 1 0.75 0.75 0.75

Benefits in year 12 1 0.75 0.75 0.75

Benefits in year 13 1 0.75 0.75 0.75

Benefits in year 14 1 0.75 0.75 0.75

Benefits in year 15 1 0.75 0.75 0.75

Note: A value equal to 1 means full benefits are assumed to be generated in that year.

Types of practices defined:

Struct = Large structural practices with a 15-year life.

Mgmt = Management.

Veg = Vegetative practices and small structural practices treating single tracts/fields.

Source: ERS analysis of NRCS contract data.