Some Thoughts on Voluntary Federal Grazing Permit Relinquishment on Federal Public Lands
by Andy Kerr, The Larch Company
June 2015
Abstract
A growing market is developing in the sale of federal grazing permits to conservation buyers, rather than just the traditional rancher buyers. Holders of federal grazing permits can sometimes sell their interest in such permit to a conservation buyer willing to pay several times more than a rancher buyer. However, for such a market to prosper, the federal government must increase assurance to conservation buyers that livestock grazing will never return to the affected allotment and that the forage is reallocated to wildlife and watershed.
Introduction
In general, there are only two underlying circumstances that would result in a permittee or lessee voluntarily relinquishing a grazing permit (or lease1).
The first case is that permittee wants or has to get out of the business of grazing on public lands and cannot find a qualified rancher buyer (someone that owns a qualifying base property or is in the livestock business) to acquire her interest in a grazing permit. If such is the case, it is a very good indicator of the lack of economic viability of the grazing allotment.
The second case is where a permittee or lessee is compensated by a third-party conservation buyer who wants to see the cessation of livestock grazing on the allotment with the forage reallocated to wildlife and/or watershed. In such cases, the permittee or lessee generally receives compensation for their interest in a federal grazing permit far in excess of what the permit might fetch from a qualified rancher buyer.
A Growing Market of Third-Party Conservation Buyers
There is an emerging and growing market in voluntary grazing permit retirements fueled by the entry of third-party conservation buyers into that market. However, for a market to be successful it must have enforceable contracts and the law must facilitate it.
Congressional Facilitation
Sometimes, the conservation market in federal grazing permits has been facilitated by an Act of Congress, including, but not limited to:
• Black Canyon of the Gunnison National Park Expansion2
• Native Bighorn Sheep and Domestic Sheep Conflicts3
• California Desert Conservation Area4
• Owyhee Wilderness5
• Cascade-Siskiyou National Monument6
• Oregon Caves National Monument7
Land Management Agency Facilitation
In other cases, the third-party conservation buyer of a federal grazing permit has adequate confidence that the federal grazing permit so relinquished will not be issued again. There are several cases of such relinquishments within the Greater Yellowstone Ecosystem and in some other areas.
If the federal land management agency wants grazing permit retirement to be a useful and viable tool to conserve and restore greater sage-grouse or other wildlife and watershed values, that agency must take every step it can to give the most assurance possible to the potential third-party conservation buyer that livestock will not again tread upon that piece of public land.
Unfortunately, there have been cases where a federal grazing permittee or lessee was compensated by a third-party conservation buyer to relinquish their permit or lease that, at the time, had the blessing of the land management agency. However, the land management agency—because of presidential politics, a new cabinet secretary or a new line officer at the field level—changed its mind and again allowed domestic livestock grazing on lands they have previously represented that livestock grazing would permanently cease.
For this reason, it is very important to the conservation buyer (and to the federal grazing permit or lease holder who stands to be rewarded far above the fair market value of selling such a permit or lease to rancher buyer) that livestock grazing not return to the affected grazing allotment.
The Need for “Permanence”
Third-party conservation buyers are only interested in compensating the holder of a federal grazing permit or lease to relinquish their permit, if the buyer is assured that livestock grazing on the lands in question is ended in favor of wildlife and watershed. This permanence can take the form of either legislative or administrative permanence.
Legislative Permanence
Most of the third-part conservation buyer funds come from entities that insist on either:
• expressed legislative permanence by and Act of Congress (the only thing more difficult than achieving an Act of Congress is a second Act of Congress that undoes the first one); or
• delegated legislative permanence through a presidential proclamation establishing a national monument that includes specific permit or lease retirement facilitation language in the presidential proclamation (such can only be issued pursuant to the power Congress delegated to the President by the Antiquities Act of 19068).
There is a very large charitable foundation that has been a path-breaker in funding several federal grazing permit or lease retirements, but their money is only available in the case of legislative permanence. Several other very large charitable foundations have followed the lead of the path-breaker.
Administrative Permanence
There are some third-party conservation buyers that do not require legislative permanence, but choose to rely—if the circumstances warrant—upon an “administrative permanence,” where the buyer assesses the probabilities of a federal land management agency ever reissuing a federal grazing permit or lease in a particular case and then decide whether or not to assume that risk. While there is no single clear standard for an administrative permanence, such as there is for legislative permanence, there are factors, which in some combination, can give adequate assurance to the third-party conservation buyer, including but not limited to:
• Buying out federal grazing permits or leases on units of the National Park System or National Wildlife Refuge System. In these cases, the general conservation “lean” of the National Park Service or Fish and Wildlife Service—neither of which has a multiple-use mandate that includes “range” (i.e. livestock grazing)—in terms of both management philosophy and policy are adequate to ensure that livestock grazing will not returned to a retired allotment.
• The grazing permit is within a highly branded (known and loved) landscape. An example is the Greater Yellowstone Ecosystem, with its multiple charismatic megafauna that are harmed by livestock grazing on public lands, including but not limited to: American bison, bighorn sheep, Rocky Mountain elk, pronghorn and greater sage-grouse.
• Areas where livestock grazing on public lands has become so marginal that market forces militate against it ever returning.
• The transaction costs of again grazing livestock on the piece of public lands is likely prohibitive. Such costs include, but are not limited to, public relations, planning, infrastructure re-establishment (fences, corrals, water sources, etc.), user conflicts, litigation, etc. compel any federal land manager no end their contemplation of returning livestock grazing to an area.
For both the USDA Forest Service that manages the National Forest System and the USDI Bureau of Land Management that administers most other federal public lands grazed by livestock, the law (statutes and regulations) on livestock grazing essentially boil down to this: If the area of federal public lands land is suitable for livestock grazing, some qualifying party wants to graze it and the agency hasn’t made a reasoned decision to not to graze it, then it must be grazed.
“[S]uitable is defined by the managing agency, but generally means it has to have a modicum of forage productivity. “[Q]ualifying party” means one who is in the business of grazing livestock. “[R]easoned decision” can mean a discretionary determination by the land managing agency that the land is better used for something else (watershed, wildlife, biological diversity, recreation, etc.) and/or non-discretionary obligations under other federal laws (including, but not limited to the Clean Water Act, Endangered Species Act, and Clean Air Act) require the managing agency to limit livestock use.
More Broadly Legislating Legislative Permanence
In 2013, the Senate Committee on Energy and Natural Resources included a “pilot” provision in the so-called “Grazing Improvement [sic] Act” (GIA) that would have allowed 25 federal grazing permits each in the states of Oregon and New Mexico to be retired. The legislative language provided the requisite permanence sought by most third-party conservation buyers. It also capped the number of permits that could be retired each year.9 Unfortunately, the provision was struck from the final version of the GIA that became law.
Although having a voluntary option to potentially sell their grazing permit or lease at a far greater price to a conservation buyer as compared to a rancher buyer is of great value to the membership of the public lands livestock grazing industry, such is considered threat by the leadership of the public lands livestock grazing industry. Those in the leadership plan to stay in the business—often using a business model that buyouts failing fellow public lands ranchers at a price artificially deflated price by current government policy that limits owning of grazing permits and leases to only those in the livestock grazing business.
Congress should enact legislation to facilitate the voluntary relinquishment of federal grazing permits and leases because (1) it’s a potentially remunerative voluntary option for federal grazing permittees and lessees; (2) it will reduce government expenditures subsidizing public lands grazing; and (3) is good for the conservation and restoration of wildlife and watersheds.
Strengthening Administrative Permanence
While a federal land management agency line officer cannot promulgate an administrative rule in the Code of Federal Regulations that would facilitate the voluntary relinquishment of federal grazing permits and leases for conservation purposes, the Secretary of Agriculture could do so for the National Forest System and the Secretary of the Interior could for BLM lands.
While such an administrative rule wouldn’t have as much permanence as that provided by an Act of Congress, if crafted properly, such a rule might be enough to attract sizable third-party investments into the conservation market for federal grazing permits.
A Few Other Things to Keep in Mind
Prices
There are two distinct markets for federal grazing permits. The first market includes all federal grazing permits and is limited to qualifying parties, i.e. those in the business of raising livestock in the area. Fair market values of transaction prices range from as low as $5 per permitted AUM (animal unit month; the amount of forage to sustain a cow and calf for one moth) in the very dry California Desert to over $100/AUM in the well-watered national forests of the Northern Rockies. The market value of federal grazing permits and leases that are used for livestock grazing is not limited the capital value of privileged access to and government-subsidized forage, but are also affected by the “hat value.” Hat value is the monetary premium a person with adequate means is willing to spend so as to be able to call himself or herself a “rancher” and be credible to wear the requisite hat, boots and buckle of a cowboy. This monetary premium is the excess in price paid for a ranch with (attached federal grazing permits) over its capitalized value as a producer of livestock.
A second market, which consists of grazing permittee and lessee seller and third-party conservation buyers is now quite limited—primarily by the lack of “permanence” of the transaction between buyer and seller (see above). To the degree that a higher amount of permanence is afforded more federal grazing permits or leases, the larger the conservation market in federal grazing permits and leases will become. There is often, but not always, a premium attached to a federal grazing permit or lease that sells for a conservation purpose. Prices of late have ranged as high as $200/AUM to $300/AUM. In these cases, the third-party conservation buyer targeted very particular allotments. This is not unlike knocking on someone’s door and saying you must by their house, not a comparable house elsewhere.
Buyouts Versus Buydowns
Congressional permanence language has anticipated the reduction—not just the elimination—of livestock grazing on a parcel of land (e.g. where a permittee or lessee is paid to reduce their numbers on an allotment or to eschew certain pastures within an allotment or, in the case of a common allotment, where not all of the permittees of lessees grazing the same allotment wish to sell their grazing privilege to a third-party conservation buyer. Nonetheless, as the greater conservation benefits accrues from the elimination of livestock grazing, most third-party contracts with federal grazing permittees or lessees require that all livestock be removed from an allotment or that the allotment be fenced to ensure that livestock grazing permanently ceases on a portion of the allotment.
Conclusion
Voluntary federal grazing permit or lease retirement can be a very useful conservation tool for land managers to rebalance multiple uses on public lands, but it will only work if third-party conservation buyers are assured that the livestock forage is reallocated for wildlife and watershed and is never again made available to domestic livestock.
Voluntary federal grazing permit or lease retirement is ecologically imperative, economically rational, fiscally prudent, socially just and politically pragmatic.
Andy Kerr (andykerr@andykerr.net; 503.701.6298 v/t) of The Larch Company (www.andykerr.net) is one of the nation’s premier experts in the matter of the voluntary relinquishment of federal grazing permits and leases to aid the conservation and restoration of native wildlife, watersheds and other resources on federal public lands. Kerr has been instrumental in the voluntary relinquishment of federal grazing permits at Steens Mountain (2000), Cascade-Siskiyou National Monument (2009) and Oregon Caves National Monument (2014). He also significantly assisted in voluntary relinquishments in the Owyhee Wilderness (2009), California Desert (2011) and in domestic sheep grazing allotments that conflict with bighorn sheep conservation (2011). He has served as an advisor to The Wilderness Society, Pew Charitable Trusts, Soda Mountain Wilderness Council, Wild Earth Guardians, Oregon Wild and Oregon Natural Desert Association and others on voluntary grazing permit retirement matters.
1 While there are legal distinctions between a “permit” and “lease” (and therefore “permittee” or “lessee”) those distinctions are not important here, so references to a permit or permittee also mean to a lease or lessee.
2 U.S. Congress. October 21, 1999. Black Canyon of the Gunnison National Park and Gunnison Gorge National Conservation Area Act of 1999. Public Law 106-76.
3 U.S. Congress. December 23, 2011. Consolidated Appropriations Act, 2012. Public Law 112-74.
4 U.S. Congress. December 23, 2011. Consolidated Appropriations Act, 2012. Public Law 112-74.
5 U.S. Congress. March 30, 2009. Omnibus Public Land Management Act of 2009. Public Law 111-11, §1501-1508.
6 U.S. Congress. March 30, 2009. Omnibus Public Land Management Act of 2009. Public Law 111-11, §1401-1406.
7 U.S. Congress. December 19, 2014. Carl Levin and Howard P. "Buck" McKeon National Defense Authorization Act for Fiscal Year 2015. Public Law 133-291, §3041.
8 U.S. Congress. June 8, 1906. The Antiquities Act. 16 U.S.C. 431.
9 Senate Committee on Natural Resources. May 22,2014. Grazing Improvement Act Senate Report 113-116.