Agricultural Conservation Issues in the 111th Congress
Released: 2010-09-21T00:00:00

Introduction

Agricultural conservation has been a public policy issue for more than 60 years, an issue repeatedly recast as new problems have emerged or old problems have resurfaced. Early conservation efforts were focused on two themes—reducing high levels of soil erosion and providing water to agriculture in quantities and quality that enhanced farm production.

Congress responded repeatedly to these themes by creating or revising programs designed to reduce resource problems on the farm. By the early 1980s, however, concern was growing that these programs were not adequately dealing with environmental problems resulting from agricultural activities (especially off the farm). Publicized instances of significant problems, especially high soil erosion rates said to rival the dust bowl era, increased awareness and intensified the policy debate. In 1985, conservation policy took a new direction when Congress enacted four major new conservation programs in the conservation title of the Food Security Act of 1985 ( P.L. 99-198 ): the Conservation Reserve Program (CRP), Sodbuster, Conservation Compliance, and Swampbuster. These programs, all administered by the U.S. Department of Agriculture (USDA), were the first conservation programs designed to deal with environmental problems related to the off-farm impacts of agricultural activities.

Provisions enacted in subsequent farm bills, including in 1990, 1996, 2002, and 2008, reflect a rapid evolution of the conservation agenda, including the growing influence of environmentalists and other non-agricultural interests in the formulation of conservation policy, and a recognition that agriculture was not treated like other business sectors in many environmental laws. Congress also began funding many of these new programs through mandatory spending for the first time, using the borrowing authority of USDA's Commodity Credit Corporation (CCC) as the funding mechanism instead of annual appropriations. In addition to the original soil erosion and water quality and quantity issues, the conservation agenda has continued to expand to address other natural resource concerns such as wildlife habitat, air quality, wetlands restoration and protection, energy efficiency, and sustainable agriculture.

Many conservation programs receive continued support among producers and Congress, as evidenced by the recent reauthorization and expansion of existing programs and creation of new ones in the most recent farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246 ). The enacted bill addressed several emerging issues, such as payment structure, geographic targeting, program complexity, the importance of large-scale conservation efforts, and measurement of costs and effectiveness. Funding also played a large role in the 2008 farm bill debate as a pronounced domestic budget constraint caused several conservation groups to compete with other farming interests for the necessary resources to expand and continue many conservation programs. Many of these general policy issues were central to outcomes in the enacted conservation title of the farm bill.

Current Major Activities

USDA's conservation efforts have centered in recent years on implementing conservation programs that target working lands, remove land from production (also known as retiring land) or create conservation easements, and provide technical assistance. Funding for the overall conservation effort has grown significantly since the 2002 farm bill ( P.L. 107-171 ) and many reauthorized programs received increases in funding in the 2008 farm bill. Recent trends in policy for the suite of conservation programs include less emphasis on land retirement and on land producing row crops, and more attention to conservation on land in other agricultural uses and to livestock producers. Congress in the 2008 farm bill expanded many program benefits to include specialty crop producers, producers transitioning to organic production, forested and managed lands, pollinator habitat and protection, and nutrient and pest management.

Lead agricultural conservation agencies within USDA are the Natural Resources Conservation Service (NRCS), which provides technical assistance and administers most programs, and the Farm Service Agency (FSA), which administers the largest program, CRP. These agencies are supported by others in USDA that supply research and educational assistance, including the Agricultural Research Service, the Forest Service, and the Economic Research Service. In addition, the conservation effort involves a very large array of partners, including other federal agencies, state and local governments, and private organizations, among others, who provide funds, expertise, and other forms of assistance to the conservation effort.

Overview of Conservation Programs

There are currently more than 20 USDA agricultural conservation programs that assist private landowners with natural resource concerns. Conservation programs are grouped into working land programs, land retirement and easement programs, watershed programs, and other programs. For a brief description of the individual USDA agricultural conservation programs, see CRS Report R40763, Agricultural Conservation: A Guide to Programs , and for program funding levels, see the Appendix . Figure 1 illustrates the estimated amount of funding in FY2009 for each group of programs.

Working Lands

Working lands conservation programs are typically classified as programs that allow private land to remain in production, while implementing various conservation practices to address natural resource concerns specific to the area. The largest of these programs is the Environmental Quality Incentives Program (EQIP), currently authorized at a total of $7.3 billion between FY2008 and FY2012. Others, such as the Wildlife Habitat Incentives Program (WHIP), Agricultural Management Assistance (AMA), and Agricultural Water Enhancement Program (AWEP), operate similarly to EQIP; however, they target specific resource concerns or geographic areas. The new Conservation Stewardship Program (CSP) replaces the Conservation Security Program and is designed to encourage producers to address specific resource concerns in a comprehensive manner.

Land Retirement and Easement Programs

Land retirement programs provide federal payments to private agricultural landowners for temporary changes in land use or management to achieve environmental benefits. Conversely, conservation easements impose a permanent land-use restriction that is voluntarily placed on the land in exchange for a government payment. The largest land retirement program is the Conservation Reserve Program (CRP), which removes land from production and is authorized to enroll up to 32 million acres. Other programs such as the Wetlands Reserve Program (WRP) and the Grasslands Reserve Program (GRP) use a combination of long-term or permanent easements as well as restoration contracts to protect wetlands and grasslands from production. The Farmland Protection Program (FPP) also uses easements; unlike the aforementioned programs, however, it does not remove land from production, but rather restricts productive farmland from being developed for non-farm purposes.

Watershed Programs

Watershed and Flood Prevention Operations (P.L. 83-566 and P.L. 78-534) are two separate program authorities that have almost identical objectives and operations. These programs are sometimes referred to as the Small Watershed Programs. Through these programs, NRCS partners with local sponsors to carry out activities for soil conservation; flood prevention; conservation, development, utilization and disposal of water; and conservation and proper utilization of land. The Watershed Rehabilitation program was authorized in 2000 ( P.L. 106-472 ) to rehabilitate watershed structures created under the Watershed and Flood Prevention Operations programs that have reached or exceeded their design life.

Other Selected Programs

USDA administers several other conservation programs. Technical assistance programs, such as Conservation Operations (including Conservation Technical Assistance, Survey, Soil Survey, Grazing Lands Conservation Initiative, and the Plant Materials Centers) provide landowners with science-based conservation information and technical expertise (e.g., engineering and biological) unique to the region and land-use type. USDA also administers compliance programs such as Sodbuster, Swampbuster, conservation compliance, and Sodsaver, which halt a producer's access to many federal farm program benefits if they do not meet conservation program requirements for highly erodible lands and wetlands. Programs such as the Emergency Conservation Program (ECP) and the Emergency Watershed Program (EWP) provide disaster assistance for farmland rehabilitation and impairments to watersheds, and are funded on an ad-hoc emergency basis.

Agricultural Conservation Issues in the 111th Congress

2008 Farm Bill Implementation

The Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ), the 2008 farm bill, reauthorizes almost all existing conservation programs, modifies several programs, and creates various new conservation programs. The changes address eligibility requirements, program definitions, enrollment and payment limits, contract terms, evaluation and application ranking criteria, among other administrative issues. Following the passage of the 2008 farm bill, USDA has taken steps toward implementation of many conservation programs. In the 111 th Congress, lawmakers' attention likely will be focused on USDA's implementation of these provisions. The following sections provide a brief description of implementation issues within some larger conservation programs and provisions.

Conservation Reserve Program (CRP)

The 2008 farm bill reauthorized CRP and reduced the maximum acreage cap to 32 million acres, down from a cap of 39.2 million acres established in the 2002 farm bill. There are two types of sign-ups for enrolling land in the CRP: general and continuous. General sign-ups are specified enrollment periods during which landowners compete nationally to enroll their land in the CRP. Following the expiration of acres in 2009, which reduced the total enrolled acres below the 32 million acre cap, a general sign-up was expected to enroll additional acres. During a June 2010 hearing before the House Committee on Agriculture, USDA was questioned about the delay in offering a CRP general sign-up. In response, USDA indicated that an executive branch control on mandatory program spending, often referred to as administrative PAYGO, resulted in delayed implementation of CRP, including enrolling additional acres. While Congress may have the understanding that it has given USDA statutory authority and access to mandatory funding to enroll 32 million acres, as well as the expectation that the authority would be used, the process outlined by the Office of Management and Budget (OMB) appears to have prevented USDA from reaching that goal, at least for a time.

USDA eventually announced a new general sign-up in August 2010 (sign-up number 39). Unlike continuous sign-up, general sign-up is always competitive. Approximately 85% of CRP acreage (26.7 million of 31.3 million acres) is currently enrolled through general sign-up. For this most recent general sign-up, FSA enrolled 4.3 million acres of 4.8 million acres offered. Over half the acreage enrolled (over 2.7 million acres, or 57%) was set to expire on September 30, 2010, or had expired in 2009. States with the most offers accepted during the 39 th sign-up were Texas (858,436 acres), Colorado (739,467 acres), and Kansas (618,905 acres).

As of August 2010, there is a total of 31.3 million acres enrolled in CRP. According to USDA, the remaining acres below the 32 million-acre cap are reserved for continuous sign-up and other sign-up efforts. Approximately 4.4 million acres are set to expire on September 30, 2011, possibly creating room for another general sign-up. Future general sign-ups, however, could be further impacted by administrative PAYGO if no congressional action is taken and OMB continues to enforce its current policies.

Environmental Quality Incentives Program (EQIP)

With the 111 th Congress experiencing continued budget constraints, EQIP could face similar challenges, with a potential reduction in mandatory funding levels and a continuing backlog of unfunded applications. The 2008 farm bill continued an increase in authorized mandatory funding that began with the 2002 farm bill. Mandatory funding for EQIP has grown substantially from its FY2002 level of $200 million, to the authorized level of $1.75 billion in FY2012. Despite this significant increase in authorized mandatory funding, annual appropriations acts have reduced the actual funding levels by a total of nearly $1.16 billion from FY2005 through FY2010. Some of this reduction has come at the request of both the current and previous Administrations. The number of pending applications continues to exceed the amount of available funding ( Table 1 ). In 2009, 37% of eligible applications were funded. Many conservation groups are concerned that this has deterred producers from applying and enrolling in the program. Others point out that despite reductions from the authorized level, total funding continues to increase. This issue will likely intensify if annual appropriations continue to reduce actual funding for EQIP below authorized mandatory levels.

Conservation Stewardship Program (CSP)

The original Conservation Security Program, established in the 2002 farm bill ( P.L. 107-171 ), faced numerous implementation challenges, drawing criticism by many in Congress. The 2008 farm bill established the new Conservation Stewardship Program (CSP) to restructure and replace the old CSP. NRCS implements CSP through a final rule published in the Federal Register on June 3, 2010. Applications for CSP are accepted on a continuous basis and ranked and funded based on established cut-off dates. During the first sign-up period in FY2010, NRCS funded over 10,600 contracts enrolling approximately 12.7 million acres. States enrolling the most applications were Missouri (1,007), Minnesota (906), and Iowa (729).

One possible implementation issue with the new CSP could be similar to one faced by the old CSP—cost restrictions. NRCS argued that because the 2002 farm bill placed a statutory 15% limit on technical assistance cost to administer CSP, program implementation was constrained. The new CSP could face similar implementation concerns owing to a 2008 farm bill requirement that the program achieve a national average program cost of $18 per acre. This per-acre cost includes all financial assistance paid to the producer, technical assistance, and any other expense associated with enrollment or participation in the program. Depending on the cost of implementing CSP, the total per-acre payment offer to producers during a sign-up could be reduced in order to meet the average $18 per-acre cost requirement. This lower per-acre funding level could also impact the type of acres enrolled if NRCS must enroll 12.7 million acres annually. For example, following the FY2010 sign-up period, 62% of enrolled acres are range, pasture, and non-industrial private forest land, which have a lower per-acre payment than cropland ( Figure 2 ).

Wildlife Habitat Incentives Program (WHIP)

The 2008 farm bill placed new limitations on lands eligible for enrollment in WHIP, which will likely reduce the number of eligible acres in traditionally high participation states. Language was added requiring WHIP to be used "for the development of wildlife habitat on private agricultural land, nonindustrial private forest land, and tribal lands." The addition of this language reverses the previous interpretation by NRCS, which extended eligibility to all privately owned land, tribal land, state/local government land, or federal land. By previously offering support for wildlife habitat projects on all land and aquatic areas, WHIP provided an assistance option to landowners who were unable to meet the specific eligibility requirements of other USDA conservation programs. The new requirement of agricultural production could shift financial assistance for WHIP contracts away from the traditionally large-allocation states in the Northeast to more agriculturally intensive states in the West and Midwest. For example, in FY2007, prior to the agricultural production requirement, states that received large WHIP allocations were Rhode Island, Alaska, Hawaii, Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, and Vermont. In FY2009, following the agricultural production requirement, states that received large WHIP allocations were Texas, Alaska, California, New Hampshire, and Florida.

Wetlands Reserve Program (WRP)

The 2008 farm bill reauthorized WRP and increased the maximum enrollment to 3,041,200 acres, an increase of 766,200 acres above the previous cap established in the 2002 farm bill. The program receives mandatory funding through the Commodity Credit Corporation (CCC) and is estimated at $441 million for FY2009. Between FY2003 and FY2007, WRP enrollment was reduced through annual appropriations bills. As Congress faces continued budget constraints, WRP could see similar reductions in the future.

One provision in the 2008 farm bill has generated considerable response from the environmental and conservation communities. Under Section 2203, Congress extended the length of time required to own the land before an applicant is eligible for the program from one year to seven years. The bill retained the exemptions to the ownership requirement, allowing a landowner to enroll land owned for less than seven years if the land was obtained (1) through inheritance; (2) through foreclosure; or (3) for any reason that gives NRCS assurance that the property was obtained for a purpose other than placing it in WRP. An investigation, conducted by the House Agriculture Committee, prior to the seven-year requirement found that NRCS "routinely ignored, or excluded its non-compliance with, the twelve-month ownership requirement" when in many cases partnering organizations would purchase the land for the explicit purpose of enrolling it into a WRP easement. Many environmental organizations believe the seven-year requirement is excessive and will reduce the number of eligible lands and discourage enrollment. Supporters of the requirement point to the results of the House Agriculture Committee's investigation, which stated that NRCS "became a cash cow enabling partner organizations to acquire private lands at discount prices."

Farmland Protection Program (FPP)

The 2008 farm bill ( P.L. 110-246 , Sec. 2401) reauthorized FPP and made significant changes. The enacted bill changes the program's purpose from protecting topsoil to protecting the land's agricultural use by limiting nonagricultural uses and including lands that promote state and local farmland protection. It also restructures the program to emphasize longer-term and renewable cooperative agreements, and changes the authority of the Secretary from purchasing conservation easements to facilitating the purchase of conservation easements. Some conservation organizations have praised the increased authority for partners, while others have expressed concerns that it could create inconsistencies within the program.

New Programs

In addition to the changes made to existing agricultural conservation programs, the enacted 2008 farm bill also expands the range of USDA conservation activities by creating several new programs, including a program expanding conservation activities in the Chesapeake Bay region, a new state grants program, a provision to limit production on native sod, and a provision promoting market-based approaches to conservation. The progress USDA has made in implementing these new programs varies and could be of interest for congressional oversight.

Chesapeake Bay Watershed Program

This program (Sec. 2605) is targeted at conserving and protecting the Chesapeake Bay and the water sources that make up the watershed. The bill authorizes $188 million in mandatory funding (FY2009-FY2012) to be used through existing conservation programs. Targeting funding to specific geographic regions was debated during the 2008 farm bill. The effectiveness of targeting federal conservation spending through identified states, regions, or watersheds is still a question when developing conservation policy. The Chesapeake Bay Watershed Program has received widespread support indicating that similar programs targeting other watersheds could be created by Congress in the future.

Voluntary Public Access and Habitat Incentives Program

Also referred to as the "Open Fields" program, this program authorizes state grants to encourage landowners to provide public access for wildlife-dependent recreation. The bill provides $50 million in mandatory funds (FY2009-FY2012) for the program. The Farm Service Agency (FSA) implements the program through an interim rule published in the Federal Register on July 8, 2010. Only state and tribal governments are eligible for grants under this program. Funds may be used to either expand existing public access programs or create new public access programs, or to provide incentives to improve habitat on enrolled program lands. It is unclear how program funding will be divided among these two program objectives.

Sodsaver Provision

This 2008 farm bill provision (Sec. 12020) makes producers that plant an insurable crop (over 5 acres) on native sod ineligible for crop insurance and the noninsured crop disaster assistance (NAP) program for the first five years of planting. The conference agreement states that this provision may apply to virgin prairie converted to cropland in the Prairie Pothole National Priority Area ( Figure 3 ), if elected by the state. USDA established a sign-up date of February 15, 2009, in which no governors opted to participate in the program. Additional opportunities to participate are possible though thought unlikely if the program remains voluntary.

Environmental Services Markets

The 2008 farm bill also included a new conservation provision intended to facilitate the participation of farmers and ranchers in emerging carbon and emissions trading markets by directing USDA to establish guidelines for standards, accounting procedures, reporting protocols, and verification processes for carbon storage and other types of environmental services markets (this is discussed further in the section on " Ecosystem Services Markets ," below). This provision was also intended to help address some of the measurement and quantification issues surrounding agricultural and forestry carbon credits, as well as to expand existing voluntary conservation and other farm bill programs, provide incentives that could accelerate opportunities for agriculture and forestry to reduce emissions associated with climate change, adopt energy efficiency measures, and produce renewable energy feedstocks.

In December 2008, USDA announced it would create a federal government-wide Conservation and Land Management Environmental Services Board to assist USDA with the "development of new technical guidelines and science-based methods to assess environmental service benefits which will in turn promote markets for ecosystem services including carbon trading to mitigate climate change." A federally chartered public advisory committee will advise the board, and will include farmers, ranchers, forest landowners, and tribal representatives, as well as representatives from state natural resource and environmental agencies, agriculture departments, and conservation and environmental organizations. USDA's press release also announced that USDA was establishing a new Office of Ecosystem Services and Markets, which would provide administrative and technical assistance in developing the uniform guidelines and tools needed to create and expand markets for ecosystem services in the farming and forestry sectors. In March 2010, USDA announced that the office's title had changed to the Office of Environmental Markets (OEM), and its functions were moved to the USDA Natural Resources and Environment (NRE) mission area. No additional information has been provided on either the board's or the office's activities.

Payment and Income Limitations

Two types of payment limits exist for conservation programs. One sets the maximum amount of conservation program payments that a person or legal entity can receive during a specified period of time. The other (known as the adjusted gross income or AGI limit) sets the maximum amount of income that an individual can earn and still remain eligible for conservation program benefits. Limitations on payments received through conservation programs were expanded in the 2008 farm bill. Prior to the 2008 farm bill, most conservation programs were affected by an income limitation, not a limitation on payments. Now, most programs are affected by both (see Table 2 ).

Payment Limits

Payment limits are the maximum amount of conservation program funding that a person or legal entity can receive during a specified period of time. As with commodity programs, payment limits for conservation programs are controversial because of issues relating to the size of operations receiving support and who should receive payments. The effect of payment limits varies by program and the conservation practices implemented. Most conservation programs with higher payments tend to be skewed to farms and ranches with larger acreage because payments for many conservation practices are scaled by the number of acres on which that practice is applied.

Supporters of payment limits are often advocates for smaller farms and opponents of large animal feeding operations. Most conservation programs provide a percentage of the cost to install conservation practices (known as cost-share) or implement site-specific management practices. As noted above, most of these payments are made on a per-acre applied basis, thereby skewing larger payments to contracts with more acres enrolled. Small farm advocates claim that this disproportionately benefits large agricultural producers by making less money available for small producers. Also, in the case of EQIP, cost-share assistance is provided for more expensive practices such as animal waste storage facilities in concentrated animal feeding operations (CAFOs). Opponents of these animal operations cite the higher payment limit as "further subsidizing an environmentally destructive method of production."

Those who oppose payment limits (or support higher limits) for conservation programs counter that conservation programs should focus on land with the greatest environmental need and not be limited to a price per participant. They argue that higher payment limits allow for greater environmental stewardship on farms and ranches, particularly larger operations with a greater land base, which may have greater natural resource concerns. Others claim that payment limits on restoration agreements could create a disincentive to enroll larger conservation easements, which are the most desirable. Because most conservation easement programs, namely WRP and GRP, enroll land that will also require restoration, a limit on restoration payments could reduce the enrollment of large acre tracts.

Income Limits

The AGI limit sets a maximum amount of income that an individual can earn and still remain eligible for program benefits. The 2008 farm bill made the AGI limitation for conservation programs higher than the AGI limitation for the commodity farm support programs; however, income limitations on conservation programs have been somewhat controversial. Previously, the AGI limit for both conservation and commodities programs was set at $2.5 million and had an exception if three-fourths of AGI was earned from farming sources. Now, if the three-year average of non-farm income AGI exceeds $1,000,000, no conservation program benefits are allowed. The exception to this limit is if two-thirds of the three-year AGI was earned from farming sources. In addition, this limitation may be waived by USDA on a case-by-case basis for the protection of environmentally sensitive land of special significance. In general, the AGI limit for conservation programs is higher than that for commodity programs to encourage environmental stewardship on farms and ranches, particularly larger operations that may have greater natural resource problems.

Supporters of AGI limits believe that tighter limits benefit small producers and gain additional public support for all agricultural programs through fiscal responsibility. Opponents of AGI limits on conservation programs believe that if there are greater conservation benefits provided to the general public, then, irrespective of wealth, a producer's enrollment is good for the general public.

Conservation Funding and Oversight

The majority of conservation program funding is mandatory and funded through the Commodity Credit Corporation (CCC). Other conservation programs, mostly technical assistance, are discretionary and funded through annual appropriations. Reductions in mandatory funding and an increase in earmarks within discretionary funding, as well as fund accountability and quantifying environmental benefits of conservation practices, could be issues for Congress.

Spending Limits on Mandatory Funding

The 2002 farm bill authorized significant increases in mandatory funding for many conservation programs. Unlike the discretionary conservation programs, which must be funded through the annual appropriations process, mandatory programs have an authorized level of funding (or acreage enrollment) that is available unless reduced to smaller amounts in the appropriations process. If appropriators do not set a spending limit or reduce the authorized level, then the program receives the authorized level of funding. Mandatory conservation programs are usually authorized through omnibus farm bills for four to five years. Mandatory funds are provided by the CCC, USDA's financing entity for many other agricultural programs and export subsidies.

Despite the increase in mandatory funding authority, many conservation programs have been reduced or capped through annual appropriations acts since FY2003. Many of these spending reductions were at the request of the Bush Administration. The mix of programs and amounts of reduction have varied from year to year. Some programs, such as the CRP, have not been reduced by appropriators in recent years, while others, such as EQIP, have been repeatedly reduced below authorized levels. EQIP's authorized mandatory funding was reduced by almost $1.16 billion from FY2005 through FY2010. Even with these reductions, total mandatory funding for conservation programs has remained relatively constant at a total over $4 billion annually. For more information about reductions in mandatory program spending, see CRS Report R41245, Reductions in Mandatory Agriculture Program Spending .

Although some titles in the 2008 farm bill received a reduction in funding over the next five to ten years, the conservation title received increased funding. Many supporters of conservation programs viewed this as a victory during the farm bill debate and were surprised to see that the FY2010 President's budget requested a reduction of over $500 million in mandatory funding from many conservation programs. While the FY2010 Agriculture appropriations bill ( P.L. 111-80 ) did not include many of these reductions (with the exception of EQIP), the FY2011 President's budget again requested multiple reductions in mandatory conservation funding. Advocates for these programs contend that these limitations are significant changes from the intent of the farm bill, which they say compromise the programs' ability to provide the anticipated magnitude of benefits to producers and the environment. Others, including those interested in reducing agricultural expenditures or in spending the funds for other agriculture purposes, counter that, even with these reductions, overall funding for conservation has not been reduced. With the 111 th Congress facing tighter budget constraints, it is possible for conservation programs to face spending reductions either in the appropriations process or if budget reconciliation is required.

Congressionally Directed Projects

The Watershed and Flood Prevention Operations program has received discretionary funding for an increasing number of congressionally directed projects (commonly referred to as earmarks). The program is not authorized at a specified amount. Annual appropriations reached a high of $200 million, including a $94 million supplemental, in FY2002 and have declined steadily to $30 million in FY2010. The program also received $145 million as part of the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ). As appropriated funding decreased, the number of earmarks increased, reaching 97% of appropriated funding in FY2009 and 74% in FY2010. The past five presidential budget requests, including the FY2011 request, have sought zero funding for the program, citing the number of earmarks. Currently there are approximately 300 unfunded authorized watershed projects totaling over $1 billion.

Technical Assistance

Two issues associated with technical assistance have been whether NRCS has the capacity to meet the growing technical assistance demand and how technical assistance costs should be funded for mandatory programs.

The 2002 farm bill ( P.L. 107-171 , Sec. 2701) dramatically increased financial assistance in conservation programs. This increase in financial assistance also led to an increased demand for technical assistance. The 2002 farm bill allowed NRCS to augment its technical assistance capacity by allowing producers to use approved third parties to provide assistance. As of February 2010, approximately 1,140 individuals and businesses were certified and registered as third-party providers with NRCS. Despite this increase in capacity, NRCS, like other organizations, is facing personnel attrition in "mission critical occupations" (most of which provide technical assistance). The 2008 farm bill further increased funding for mandatory conservation programs, which could cause the demand for technical assistance to increase, placing additional strain on the current capacity.

Congress has addressed the issue of how to fund technical assistance in mandatory programs in the past and will likely do so again in the future. The central issue is whether NRCS has the authority to pay for technical assistance for mandatory programs using the mandatory programs' funding. Previous conflicting interpretations by the Office of Management and Budget resulted in Congress providing clarifying language through enacted legislation in 2002, 2005, and 2008. The clarifying language appeared to resolve the issue until recently. The 2008 farm bill reauthorized and amended other mandatory conservation programs not originally authorized under the 1985 farm bill. Because previous language only addressed those programs authorized under the 1985 farm bill, the issue of where technical assistance funding should originate for non-1985 farm bill programs was once again raised. On February 17, 2009, Congress enacted clarifying language for this issue in Section 103 of the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). The new language allows all mandatory programs established or amended in the 2008 farm bill, excluding those in Title I, to use CCC funds for administrative expenses and technical assistance. Congress will likely need to address this issue again because the new language only covers FY2009 and FY2010, while funding authority for most farm bill programs expires at the end of FY2012.

Financial Audit and Contract Administration

Most USDA agencies are covered by a consolidated financial statement audit for the entire department. In FY2007, the OMB required NRCS to conduct a stand-alone audit for the FY2008 financial statement. In FY2008, NRCS contracted with a private auditing firm, KPMG, to review the agency's financial statements in its first stand-alone audit. KPMG was unable to provide an opinion on the agency's financial statements because NRCS could not document or support its transactions or account balances.

The FY2008 audit was NRCS's first attempt at a comprehensive financial statement audit. The lack of an opinion from the auditing firm was a result of several problems—namely, NRCS was unable to provide material in support of transactions and account balances with respect to obligations, accrued expenses and undeliverable orders, and unfilled customer orders. According to NRCS, the agency has taken corrective actions to address the deficiencies found in the audit, including training over 300 employees in accounting principles, developing an automated tool for general ledger accounts, and performing quality assurance reviews on over 160,000 open obligations. Despite these corrective actions, a FY2009 audit of the NRCS financial statements returned a similar no-opinion result. The auditing firm again cited NRCS's inability to provide material in support of transactions and account balances.

The 111 th Congress continues to take action on this issue. On March 25, 2009, the House Committee on Agriculture's Subcommittee on Conservation, Credit, Energy, and Research held a hearing to review the administration of conservation contracts. A similar hearing to review the delivery of conservation programs conducted by the same subcommittee was held on July 1, 2010. Also, in the FY2009 Omnibus Appropriations Act, Congress provided $10 million in Conservation Technical Assistance (CTA) funds to "strengthen the agency's program and financial management capabilities." According to the committee print, NRCS is expected to use the funds to enhance the agency's budgeting, accounting, contracting, and information technology systems. The agency is expected to issue a report to Congress detailing the use of these funds. The committee print also requires NRCS to issue a report to Congress regarding the 2008 audit and any corrective actions being taken.

Conservation Effects Assessment Project (CEAP)

Following the significant increase in funding for conservation programs in the 2002 farm bill, USDA initiated a project to measure the environmental benefits of many of these programs. The project is a multi-agency effort known as the Conservation Effects Assessment Project (CEAP). CEAP's stated purpose is to aid policymakers in developing new conservation programs and help existing conservation program managers implement programs more effectively and efficiently to meet the goals of Congress and the Administration.

Now in its seventh year at USDA, CEAP continues to be supported by many in the conservation community as a much-needed evaluation system to ensure that conservation programs produce the desired environmental and production outcomes. Although the project is not legislatively mandated, many believe its potential outcomes could prove useful in shaping future policy debates surrounding environmental issues in the 111 th Congress, namely environmental services markets.

Despite some of the strides made to quantify the environmental benefits of conservation practices through CEAP, there are possible limitations to its use, namely the availability of data. To date, the depth of information gathered through this project is enormous, yet very little has been made available to the public or to other federal agencies. Despite some frustration generated by reporting delays, some in the scientific community support what they say is a meticulous in-depth assessment and evaluation system, claiming it is necessary for statistical credibility. Only a few initial results are currently available based on cropland in the upper Mississippi river basin. Initial findings show beneficial effects from conservation practices as well as additional application needs. Many conservation programs offer financial assistance to producers to implement many of the conservation practices analyzed in the CEAP assessment; however, the assessment does not correlate the effects and benefits of conservation practice to any one federal program.

Emerging and Continuing Issues

Emerging and continuing issues for agricultural conservation in the 111 th Congress revolve around ecosystem services markets, climate change, and bioenergy. The evolving debate over climate change legislation has provoked several questions regarding the role of agriculture and forestry. Other environmental concerns for agriculture, such as concentrated animal feeding operation (CAFO) regulations, greenhouse gas emission reporting for livestock producers, and wetlands mitigation, could lead to expanded opportunities for many conservation efforts. Production pressures generated by corn-based ethanol have also had an ongoing impact on certain conservation programs.

Ecosystem Services Markets

The participation of agriculture and forestry in emerging ecosystem services markets is gaining wide support within the farm community and its supporting organizations and agencies, as well as among the regulatory agencies and some environmental groups. Market-based approaches are often viewed as encompassing broader societal benefits by complementing existing agricultural conservation programs and evolving regulatory approaches intended to address environmental improvements in the farm and forestry sectors. Among the principal questions regarding the inclusion of ecosystem services provisions as part of any major legislative initiative is whether the agriculture and forestry sectors can effectively provide environmental goods and services along with the more traditional food, fiber, and other services these sectors already provide.

Ecosystem goods and services are the benefits society obtains from the environment and ecosystems, both natural and managed, such as water filtration, flood control, provision of habitat, carbon storage, and many others. In most cases, these constitute "free services," since landowners and managers are not compensated in the marketplace. The continued degradation of these services over time has generated interest in creating markets, developed either through regulation or voluntarily, so that providers of ecosystem services can be compensated in private markets for the services they provide. This could offer a potential business opportunity to the agriculture and forestry sectors, which may be able to provide for such services and participate in the market, for example, by creating, restoring, and preserving function and value in a natural resources area, or by capturing and storing carbon before gases that contribute to global climate change are released into the atmosphere. These services would be in addition to the food and fiber services traditionally supplied by the agriculture and forestry sectors.

Conservation practices on agricultural land provide one of the main vehicles through which producers may develop environmental credits and benefits to be sold or traded in a market-based system. Many existing USDA conservation programs offer incentives through financial and technical assistance to implement these practices. For example, cropland tillage practices such as reduced/medium-till, no-till, and ridge/strip-till practices sequester carbon that could be sold through a carbon offset program. Conservation programs such as EQIP, AMA, CSP, and CTA provide incentives for farmers to install these practices. Programs such as WRP offer incentives for wetland restoration, the benefits of which could then be used in a wetlands mitigation program. Other conservation practices such as riparian buffers, setbacks, wind breaks, and buffer strips offered under EQIP, CRP, CSP and WHIP create water quality improvements that could be traded in local water quality credit programs.

The inclusion of these market provisions in legislation has raised procedural and implementation questions as Congress continues to consider the role of the agriculture and forestry sectors in environmental legislation. One key question is how USDA will respond to several existing barriers that may prevent the development of ecosystem goods and services markets involving the farm and forestry sectors, such as participation challenges, and issues of measuring and valuing credits, monitoring, and enforcement, among others. It is also unclear how USDA will bridge existing conservation program benefits with ecosystem services markets, and what direct role the new USDA Office of Ecosystem Service Markets (see " Environmental Services Markets ," above) plans to play.

Climate Change

Among the many questions for Congress regarding the topic of climate change is what role the agriculture and forestry sectors will play; and, if they are allowed to participate, how concerns regarding their participation will be resolved. Farm and forestry activities both emit and sequester greenhouse gases (GHG) from the atmosphere. As reported by the Environmental Protection Agency (EPA), the agriculture and forestry sectors currently account for 6%-8% of estimated total U.S. GHG emissions annually. However, combined carbon sequestration on farm and forested lands is currently estimated to mitigate about 11% of total annual GHG emissions in the United States. The potential to reduce emissions and sequester carbon on agricultural lands is reportedly much greater than current rates.

Congress is considering a range of climate change policy options, including greenhouse gas (GHG) emission reduction programs that would either mandate or authorize a cap-and-trade program to reduce GHG emissions. In general, the current legislative proposals would not require emission reductions in the agriculture and forestry sectors. The drafters of some proposals are reluctant to include opportunities for agriculture and forestry participation due to uncertainties regarding measuring, monitoring, and permanence of agriculture and forestry activities. Others in Congress would like a GHG program to include provisions allowing farm and forestry landowners to receive emissions allowances (or credits) to generate carbon offsets.

Most land management and farm conservation practices can help reduce GHG emissions and/or sequester carbon, including land retirement, conservation tillage, soil management, and manure and animal feed management, among other practices. Many of these practices are encouraged under existing USDA conservation programs that provide financial and technical assistance to farmers, such as EQIP, CRP, CSP, CTA, and WHIP, among others. However, uncertainties are associated with implementing these types of practices depending on site-specific conditions, the type of practice, how well it is implemented, the length of time a practice is undertaken, and available funding, among other factors.

USDA has already expanded some of its existing conservation programs to further encourage emission reductions and carbon sequestration. For example, many of the practices encouraged under EQIP and CSP reduce net emissions. Programs such as CTA, AMA, EQIP, and CSP list a reduction in emissions as a national priority for the program, which affects the funding and ranking of projects. Under CRP, USDA has modified how it scores and ranks offers to enroll land in CRP in order to place greater weight on installing vegetative covers that sequester carbon. USDA also has an initiative under CRP's continuous enrollment provision to plant up to 500,000 acres of bottomland hardwoods, which are among the most productive U.S. lands for sequestering carbon. Recently, USDA has recognized the potential credits generated by these conservation programs and has removed any claim on the credits through recent changes to many of the program rules. Whether or not benefits generated from existing conservation programs would be considered eligible carbon offsets under current legislative proposals varies.

Congress has already taken steps to address some of the challenges associated with measuring carbon changes from forested and agricultural lands and practices. The 2008 farm bill includes provisions that could expand the scope of existing land-based conservation and other farm bill programs by providing incentives to encourage farmers and landowners to sequester carbon and reduce emissions associated with climate change and participate in markets for carbon storage (see " Environmental Services Markets " section, above). The Energy Independence and Security Act of 2007 ( P.L. 110-140 , Sec. 712) directs the Secretary of the Interior to develop a methodology to assess carbon sequestration and emissions from ecosystems. This methodology is to cover measuring, monitoring, and quantifying GHG emissions and reductions, and provide estimates of sequestration capacity and the mitigation potential of different ecosystem management practices. Congress continues to face the question of whether its current authorized activities (and proposed activities) provide adequate and sufficient guidelines for accurately measuring carbon levels from forest and agricultural activities.

On June 29, 2009, the House passed H.R. 2454 , which includes a new program for agriculture- and forestry-related GHG offsets within USDA. The so-called "Peterson amendment" was added to H.R. 2454 just prior to the floor debate, following negotiations between the Chairmen of the House Energy and Commerce Committee and the House Agriculture Committee. The Energy Committee's June 26, 2009, manager's amendment included a new Title V to H.R. 2454 —"Agriculture and Forestry Related Offsets." Among other provisions, the Peterson amendment allowed for certain agricultural and forestry activities to become eligible to participate in a carbon offset program, established that this program would be implemented by USDA (rather than EPA), addressed concerns in the agricultural community about existing and evolving renewable energy and certain biomass requirements, and also recognized certain early actions that have already been taken by farmers and landowners to reduce emissions and sequester carbon. For the most part, the provisions in Title V are similar to those found in Title III of H.R. 2454 , with the most notable exception being the difference in implementing agencies.

Similar action was taken in the Senate, where S. 1733 allows for agriculture and forestry offsets as part of a cap-and-trade scheme. S. 1733 differed from H.R. 2454 in terms of the types of projects and activities allowed, the total allowable quantity of domestic versus international offsets, and agency administration of the program, among other differences. The Clean Energy Partnerships Act of 2009 ( S. 2729 ) was introduced by Senator Stabenow shortly after the Senate EPW Committee completed work on S. 1733 . This bill (often referred to as the "Stabenow amendment") is not comprehensive and only expands on the agricultural and forestry carbon offset provisions in these climate bills and also allows for certain other provisions benefitting U.S. farmers and landowners.

Energy Effects

Renewable energy and energy conservation continue to be topics of concern as Congress seeks to reduce the national use of fossil fuels. Renewable energy is energy generated through natural means, including wind, solar, geothermal, hydroelectric, and biomass, among others. With each renewable energy source comes benefits and consequences. Energy sources closely tied to the agriculture and forestry sectors are biofuels derived from corn-based ethanol and cellulosic feedstock. Federal support for ethanol through mandated levels of consumption, grants and loan guarantees, tax credits, tariffs on imports, and research and development projects has generated some controversy. Critics say that important and unwanted environmental consequences resulting from the production of biofuels should be considered when evaluating renewable energy options.

A continued expansion of corn-based ethanol production could have significant consequences for traditional U.S. agricultural crop production and rural economies. Supporters of an expanded renewable fuels standard (RFS, the statutorily required use of renewable fuels) claim that increased biofuels production and use would produce enormous agricultural and rural economic benefits by increasing farm and rural incomes and generating substantial rural employment opportunities. However, large-scale shifts in agricultural production activities will likely also have important regional economic consequences that have yet to be fully considered or understood. As corn prices rise, so too does the incentive to expand corn production to more marginal soil environments. Further, corn production is among the most energy-intensive of the major field crops. This shift could have important and unwanted environmental consequences due to possible increases in fertilizer and chemical use and soil erosion.

Ethanol and biodiesel produced from cellulosic feedstocks, such as prairie grasses and fast-growing trees, have the potential to improve the energy and environmental effects of U.S. biofuels. A key potential benefit of cellulosic feedstocks is that they can be grown without the need for chemicals. Reducing or eliminating the need for chemical fertilizers could address one of the largest energy inputs for corn-based ethanol production. However, additional concerns about cellulosic feedstocks exist, including concerns that required increases in per-acre yields to obtain economic feasibility could require the use of fertilizers; that availability of sufficient feedstock supply is limited and expansion could generate additional land use pressures for expanded production; and that development of harvesting machinery and technology lags behind that of traditional corn-based ethanol production. In addition to these concerns, some groups say that other potential environmental drawbacks associated with cellulosic fuels should be addressed, such as the potential for soil erosion, increased runoff, the spread of invasive species, and disruption of wildlife habitat.

Although the 2008 farm bill expands many existing agricultural conservation programs to encourage producers to adopt energy efficiency measures and produce renewable energy feedstocks, it does not address the potential environmental consequences that could result from biofuels production. Expanding existing conservation efforts or creating new ones can serve as a potential countermeasure to the increased environmental pressures generated by biofuel production. The extent to which this is or could be done is not clear.

The EPA has proposed changes to the RFS program, as required by the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140 ). Two areas of this proposed rulemaking have caused concerns among those in the U.S. agriculture sector: the EISA biomass definition and the requirement that EPA consider so-called "indirect land use" effects when calculating GHG emissions associated with advanced biofuels. Amendments to the Waxman/Markey climate change and energy legislation ( H.R. 2454 ) would change the EISA biomass definition to the definition in the 2008 farm bill ( P.L. 110-246 ) and prevent EPA (for at least six years) from including emissions from international indirect land use changes when weighing biofuels' carbon footprint under the 2007 RFS.

Appendix. USDA Conservation Programs: Funding