Andy Kerr - Voluntary Retirement Option for Grazing Permits

By Andy Kerr

Abstract

Allowing existing federal public land grazing permit holders to sell their livestock grazing privileges—without also having to sell the base property to which the permits are legally and financially attached—could significantly decrease conflicts over public land management, reduce federal spending, improve environmental values, allow better stewardship by the federal land managing agencies, and increase the wealth of permittees. Such a program can and must be implemented without changing public land livestock grazing from a privilege to a right. Conservationists are warming to the idea. Will livestock permittees, federal resource managers, and Congress?

The Present Federal Grazing System

Grazing on the public lands is not stable. Few, if any, bright spots are in the future of federal public land grazing permittees. Beef is losing market share to chicken, pork, seafood, cheese, and vegetables. Concerns about human health and food safety (E. coli, mad-cow disease, etc.) are affecting the beef industry. Subsidies to farm and ranching industries are being phased out on private lands, which does not bode well for subsidies on public lands. The average age of the permittees is rising. Conservationists are paying more attention to the ecological impacts of livestock grazing. Conflicts with recreationists are more frequent. Increased enforcement of water quality standards is likely. More endangered species listings are inevitable, and more litigation is probable. New planning and management processes by federal land management agencies will possibly reduce livestock grazing numbers and certainly place more restrictions on timing, location, etc. The latter scheme requires increased federal spending which is increasingly problematic to secure. Grazing fees are likely to rise. Bidding by environmentalists on state grazing leases will increase pressure to reform the federal grazing fee.

The system for grazing on Forest Service and Bureau of Land Management (BLM) lands in the American West was established by the Taylor Grazing Act of 1934. In most areas, qualifying ranches (“base properties”) were assigned an exclusive amount of AUMs (animal unit months: forage for a cow and calf for one month), theoretically based on the land's carrying capacity.

Public land livestock grazing is a privilege, not a right. If the government chooses to discontinue a “giving,” that does not constitute a “taking” as prohibited by the US Constitution. However, the real estate market—due to the near certainty that the federal government will transfer grazing permits to the new base property owner—recognizes the value of a federal grazing permit attached to a base property. The result is that the base properties have increased in market value to reflect the federal AUMs that are automatically transferred to the new purchaser.

In the rare, but increasing, occurrence when the government does reduce grazing, it is a loss of real money to the permittee; the permittee may suffer a loss of future subsidized grazing, and a reduction in the fair market value of the base property. It is understandable that ranchers—not to mention the banks that hold the mortgages on the base properties—fight so hard to keep their numbers of AUMs up. Given the vagaries of the cattle business, operators would benefit from the flexibility to not exercise their permits, or to be allowed to sell their interests in them. This is not possible under existing law, which mandates “use it or lose it.”

The State of Public Land Grazing

Public land grazing contributes only two percent of the forage consumed by the nation's cattle industry, and only then with a large subsidy from federal taxpayers. Despite overwhelming scientific information and renewed fiscal restraint, government policy toward public land livestock grazing has not changed significantly.

The Interior Columbia Basin Ecosystem Management Plan provides a useful example, as similar efforts will likely spread to all federal lands. While new studies by 170 government scientists to guide management of 75 million federal acres in the Interior Columbia Basin in seven states (and the Oregon portions of the Klamath Basin and Great Basin) acknowledge the ecological destruction livestock cause, no grazing reductions are proposed by government managers. Nonetheless, as more species are listed for protection under the Endangered Species Act (bull trout, westslope cutthroat trout, other fish, lynx, numerous birds, amphibians, reptiles, and plants, etc.), grazing reductions are inevitable.

The alternatives in the Columbia Basin plan vary, but all will make it more expensive for ranchers to graze public lands—not in the fee, but in herding, fencing, restrictions on timing and length of grazing, and other costs. In the plan, the federal government assumes a one percent annual decline in grazing due to economic factors, not environmental forces. The new plan further assumes that even if grazing is reduced by 50% to protect ecological values, sustaining the remaining grazing will cost the government at least $50,000 per permittee per year in the form of mitigation, monitoring, and management. This expense is in addition to the ongoing provision of below-cost forage. (The source for dollar figures in the above paragraph is a leaked draft of the Eastside Draft Environmental Impact Statement being prepared for the Interior Columbia River Basin Ecosystem Management Project. Interestingly, no such information appeared in the published draft issued in May 1997.)

According to the official draft EIS, the 756,000 AUMs on federal lands on the “eastside” (Oregon and Washington east of the Cascade Crest) provide a total of 243 livestock owner, operator, and ranch hand jobs. While higher in certain other western states, the number of jobs provided by federal forage is still trivial. As federal budgets continue to tighten, agency decisions increasingly may be based on how much the new plans cost taxpayers. The least expensive alternative would have the greatest reductions in grazing and logging and would cost about half of what is being spent today to mismanage these lands. The most expensive alternatives are those which continue to prop up livestock grazing.

The Value of Permits

Permits have a capital value. An estimate of their fair market value can be made by qualified real estate appraisers. The value ranges as much as the quality of the grazing land. According to Professor Robert Nelson, School of Public Affairs at the University of Maryland (formerly with the US Department of Interior Office of Policy Analysis for 18 years), the capital value of a public land grazing AUM across the West is $50-100. For the purposes of this discussion, let us assume an average value of $75/AUM or $900/AU (the real estate and ranching industries deal in “animal units” that equate to 12 AUMs).

Economics of the Existing System

The public land range fee for 1997 was calculated by an arcane and irrelevant statutory formula at $1.35/AUM. Even though the BLM admits spending more on grazing than it takes in, the agency considers only a small proportion of the costs. According to Nelson, a conservative estimate of taxpayer expense in excess of revenue is $20/AUM. While this includes direct and indirect (overhead) costs, it does not include other subsidies from the US Department of Agriculture such as Animal Damage Control services. In contrast, the gross income the federal treasury receives from an AUM is less than $1.35. Depending on the legal classification of the rangeland, 50-62.5% of the $1.35 is dedicated to the Range Betterment Fund—moneys used for fences, water developments, and the like—and does not offset the federal taxpayer expenditure.

A Proposal: The Voluntary Retirement Option

It would be easier—and more just—for the federal government to fairly compensate the permit holders as it reduces cattle numbers. Since the government spends substantially more than it receives for grazing, in a few years the savings realized by reducing livestock numbers can pay for the compensation. It would be less expensive, fiscally and politically, for the agency to simply buy out the problematic grazing permits and save extensive planning, monitoring, research, public involvement, appeal, litigation, and political costs.

Federal law should be changed to:

Allow a permit holder to choose to not exercise any or all of the grazing permit. There would be no penalty to the permittee for not grazing. This would give desirable flexibility to ranching operations, decrease livestock grazing damage, and potentially increase the value of the permit, in the event the permittee later wished to sell. An allotment with more forage is more attractive both to prospective livestock operators and conservation buyers.
Allow existing permittees who hold federal grazing permits to sell or donate their permit to the federal government, which would then retire the allotment. A permittee could choose to sell to the federal government, receiving fair market value for their interests in the permit. Money for tax deductions and for acquisition of permits by federal agencies could be funded by a variety of sources: from the Land and Water Conservation Fund, by reducing agency grazing budgets, by reallocating US Department of Agriculture Animal Damage Control subsidies, by using the Range Betterment Fund, or by earmarking that small fraction of the federal grazing fee that actually makes it into the federal treasury. Alternatively, a permittee could be paid to retire their permit by an individual environmentalist, a state fish and wildlife agency, a private conservation organization, a hunting and fishing club, or any other interested party. If retirement were in the form of a donation to the government, a federal income tax deduction would be available.
Reaffirm that grazing the public lands is a privilege, not a right. Any legislation must expressly state that this change in law in no way increases or diminishes any vested interest the permittee may or may not have in public land grazing; that grazing the public lands is still a privilege and any reduction in grazing by the government is not a compensable loss to the permittee. Existing laws designed to protect the environment would not change. The administering agencies could still choose (or be ordered by a court) to reduce, eliminate, or place additional conditions on grazing to protect ecological or other public values.

Will the Voluntary Retirement Option Work?

How successful might such a buy-out program be? Some examples from northern Nevada suggest it could work. Prior to the establishment of Great Basin National Park, statutes establishing National Parks in the West usually had sunset provisions for livestock grazing. In these examples, the handwriting was clearly on the wall, and in many cases, permittees opted to sell out early to the National Park Service or to conservation organizations specializing in property acquisition.

The 1986 law establishing Great Basin National Park not only grandfathered, but mandated, livestock grazing to continue. The Park Service had very limited ability to restrict grazing to protect park values. In 1995, at the request of the park's cattle grazing permittees, the Nevada Congressional Delegation (two Democrats and two Republicans) attached a rider to the FY96 Interior Appropriations Act to require the Secretary of the Interior to retire grazing permits in the park, if they were donated to the United States. Presently, The Conservation Fund is negotiating to pay the permittees the fair market value of permits in exchange for their donation to the government.

Permittees on the Sheldon National Wildlife Refuge in Nevada also recently opted to retire their permits, concurrent with mutually agreed-upon compensation by The Conservation Fund. The pressure was on because the US Fish and Wildlife Service had ended grazing on the nearby Hart Mountain National Wildlife Refuge in Oregon and was preparing to undertake a process that would likely have resulted in the same at Sheldon.

How much interest will there be among livestock permittees in such a program? There is no reliable way to estimate. Factors will include the financial viability of ranching operations, the personal situations of permittees, the existing and anticipated level of conflict regarding grazing on an allotment, the price of beef, etc. Anecdotal surveys suggest that about half of the ranchers who have taken advantage of buy-out offers have moved on to other work, and about half have purchased livestock operations not dependent on public land. The latter stayed in ranching, but wanted to be the masters of their own domains.

The Benefits of The Voluntary Retirement Option

Species and ecosystems would recover at maximum rates and in the most cost-effective manner. As permits are retired, taxpayer costs of subsidizing forage are reduced proportionally. The Forest Service and BLM could more easily meet the environmental protection standards of state and federal law if livestock grazing were reduced, resulting in better stewardship.
Controversy could be severely diminished. There would be less litigation, less need for funds to be spent mitigating livestock grazing damage, and less call to overturn environmental protection statutes.
While not vesting a legal right to graze (something permittees have never had), such a program would provide more options to livestock permittees. A permittee could choose to sell a federal permit, but still live on and/or raise livestock on the base property. Very importantly, the choice to exercise the voluntary retirement option rests solely with the permittee; if a rancher didn't want to retire, he or she would be free to continue to take his or her chances in a dynamic economic, regulatory, budgetary, and political environment.

The Costs of the Voluntary Retirement Option

A one-time increased cost to taxpayers is inevitable, but would be recouped in a few years by the elimination of ongoing subsidies. After recoupment, the continued savings could be used for national debt reduction and other beneficial activities such as stream restoration, erosion control, weed eradication, etc.

Under current budgeting policies, new expenditures must be offset by savings during the same budget year. This can lead to a penny-wise, pound-foolish result where, even though the investment of buying and retiring AUMs has an average payback of 3.75 years, it is budgetarily impossible to undertake. An exception is clearly justified in this case.

As livestock grazing decreases, there will be less need for direct agency staffing support (range conservationists, etc.) of public lands ranching operations. In an era of downsizing, staff reductions are already occurring.

Just as the public land grazing permittee presently has no option but to fight desperately to hold on to the AUMs attached to the base property, conservationists have no option but to exercise traditional environmental protection strategies in the arenas of administrative reform, judicial enforcement, and legislative change. While these methods have been and can continue to be somewhat effective, they are not necessarily the most efficient use of resources; they can cause social and political stress, and are not always successful. To take advantage of the voluntary retirement option, some conservationists—and some ranchers—would need to rethink their traditional strategies.

Following implementation of the voluntary retirement option program, there would be less litigation needed to enforce the nation's environmental laws, as would there be less lobbying for a higher grazing fee, better regulatory standards, improved public processes, and/or abolition of livestock grazing. There would be more lobbying for funds to provide for permit acquisition from willing sellers. Existing fiefdoms would be affected. Environmentalists who believe as a matter of principle that it is wrong to allow livestock grazing permittees to profit from the privilege of grazing on the public lands will not be placated. For those permittees who desire to stay in public land livestock grazing, the status quo nominally remains.

If enough willing sellers exercise their option, however, remaining permittees will be affected. As their numbers decrease, so will their political influence and ability to maintain current subsidies. The public will increasingly see a stark contrast between recovering retired allotments and those still being grazed. This will also increase pressure on remaining permittees. Citizens who enjoy living in “ranching communities” will feel a loss as these communities accelerate their ongoing diversification. Ranchers who believe as a matter of principle that it is wrong to reduce livestock grazing on the public lands will feel threatened by this proposal.

Conclusion

While the voluntary retirement option is a radical departure from the traditional debate on public land livestock grazing, it is equally rational. It addresses directly the market value of federal grazing permits, which is the major subtext in the debate over public land livestock grazing. It has the potential to achieve substantial ecological benefits on the ground, without additional government regulations. Politically, the fairness and rationality of the proposed policy change can appeal to conservationists, taxpayers, politicians, permittees, fiscal conservatives, compassionate liberals, and others. Since it is a solution outside the box we are all in, it will require leadership in all camps and a willingness to try something different.

Andy Kerr writes and consults on environmental issues from Oregon's Wallowa Valley. Until 1996, Kerr spent two decades with the Oregon Natural Resources Council. He is now writing a book about the wilderness of the Oregon High Desert.

Kerr, Andy. 1998. The Voluntary Retirement Option for Federal Public Land Grazing Permittees. Rangelands. Vol. 20, No. 5. October. 26-30.

Kerr, Andy. 1998. The Voluntary Retirement Option for Federal Public Land Grazing Permittees. Wild Earth. Vol. 8, No. 3. Fall. 63-67