To improve consistency between commodity and conservation
programs, compliance provisions require farmers to meet
some minimum standard of environmental protection on environmentally
sensitive land as a condition of eligibility for many
Federal farm program benefitsincluding farm commodity
program payments. Under current compliance requirements,
farm program eligibility could be denied to producers
who:
- Fail to implement and maintain a Natural Resources
Conservation Service (NRCS)-approved soil conservation
system on highly erodible land (HEL) that is currently
in crop production and was cropped before 1985a
provision known as conservation
compliance;
- Convert HEL to crop production without applying
an approved soil conservation systemreferred
to as sodbuster;
or,
- Produce an agricultural commodity on a wetland
converted after December 23, 1985, or convert a wetland
after November 28, 1990, in a way that makes the production
of an agricultural commodity possiblereferred
to as swampbuster.
Producers who violate compliance requirements risk losing
all Federal farm programs paymentsnot just those
payments that were (or might have been) made on the HEL
or wetland in question.
Sodbuster and swampbuster provisions became effective
on December 23, 1985, when the Food Security Act became
law. Conservation compliance was implemented over a
period of years. By 1990, producers growing crops on
HEL were required to have an approved conservation plan.
Plans were developed site by site to account for the
broad diversity of resource conditions, cropping patterns,
and producer preferences. By 1995, producers were required
to be actively applying the conservation systems specified
in their conservation plan. All three types of compliance
have been continued in subsequent Farm Acts (1990,
1996, 2002, and 2008).
The 2008 Farm Act could affect producers who till native
sod (land that has never been cultivated) in Prairie
Pothole National Priority areas, which span Iowa, Minnesota,
Montana, North Dakota, and South Dakota. Native-sod
acreage that has been tilled for production of an annual
crop could be ineligible for crop insurance and non-insured
disaster assistance during the first 5 years of planting.
The provisions would be implemented only with the approval
of individual Governors in those five States.
Compliance mechanisms can also leverage farm program
payments for environmental gainwithout additional
paymentsto the extent that producers adopt conservation
practices to retain farm program eligibility. Compliance
mechanisms are a unique policy tool, distinct fromand
in some ways more effective thanconservation payment
incentives (e.g., cost sharing). In particular, compliance
may be more effective than payments in deterring environmentally
harmful actions. For example, a hypothetical subsidy program
designed to prevent wetland drainage would require policymakers
to pay for protection of all wetlands on agricultural
landa potentially expensive propositionor
decide which wetlands are sufficiently vulnerable to agricultural
conversion as to warrant protectiona potentially
difficult task. In contrast, swampbuster penalties are
assessed only when a violation occurs, eliminating the
need for broad-based subsidies or the need to anticipate
the potential for a violation to occur on any given wetland.
No direct costs are imposed on producers who comply, although
there may be an opportunity cost associated with production
forgone on wetlands.
The Compliance Incentive: Producers Weigh Benefits
Against Costs
In making decisions about land use and production practices,
agricultural producers respond to a range of market signals
in the context of available technology, the resources
they control (e.g., land), and their own skills and preferences.
Any change in land use, investment (e.g., new machinery),
or production practices (e.g., reduced tillage) involves
both benefits and costs. Likewise, producers who decide
to meet compliance requirements are likely to do so because
the benefits of compliance outweigh the costs.
Farm Program Benefits and Compliance
Farm program benefits subject to complianceincluding
farm commodity, disaster, and conservation programsranged
from $8 billion to $27 billion between 1997 and 2007.
Farmers may also become ineligible for loan and loan
guarantee programs that offer reduced interest rates
or improved access to credit. Whether these benefits
are large enough to leverage conservation depends on
whether they exceed the cost of required conservation
actions. Because farm program payment levels are set
independent of the compliance requirement, there is
no guarantee that they will exceed compliance costs.
d
Correlation between payments and conservation needs is
critical to the (environmental) success of any compliance
requirement, as on highly erodible cropland.
Compliance Costs
Producers may incur direct costs and/or opportunity
costs in meeting compliance requirements. Direct costs
include the cost of applying and maintaining a conservation
system, which depends on the erosion standard to be met
and the characteristics of the land (e.g., inherent erodibility).
As eventually implemented, producers could meet compliance
requirements by designing conservation systems to obtain
"significant" erosion reduction using "technically
and economically feasible" practices. In most cases,
conservation systems could be based on inexpensive management
practices such as conservation cropping, crop residue
management, and conservation tillage. More than half of
the HEL cropland acres that meet the Conservation Compliance
requirement have approved conservation systems made up
of these three practices alone or in combination.
Producers may also incur opportunity costs when they
refrain from converting additional HEL or wetland that
could have been profitably cropped. With wetlands, the
opportunity cost equals the value of the land for crop
production, less the cost of drainage and land use conversion
(e.g., removing trees). HEL not previously cropped can
be converted to crop production if an approved conservation
system is applied. Compliance cost equals the lower of
(1) the opportunity cost of forgoing agricultural production,
or (2) the cost of applying a conservation system. On
land not cropped before 1985, however, conservation systems
must reduce erosion to the T level (soil loss tolerance
level)a potentially expensive task.
Enforcement
USDA's major enforcement tool is the annual Compliance
Status Review (CSR). Each year, through the CSR, USDA
field staff assess HEL and wetland compliance on a sample
of "tracts" that are identified as part of farms
receiving Federal farm program payments subject to compliance
provisions. Some tracts are selected at random from the
national Farm Service Agency (FSA) database, while others
are added by State FSA offices because of potential for
noncompliance. For example, tracts on which temporary
variances or waivers were previously granted must be checked
to establish a return to full compliance.
According to the CSR, overall compliance is high. Based
on 1997 CSR data, 95.9 percent of producers subject to
compliance were actively applying approved conservation
systems. In more recent years, the CSR has shown compliance
rates of roughly 98 percent. However, a recent GAO
report (2003) identified a variety of deficiencies
in the CSR, among them the methods used to select the
sample for review, consistency, and clarity of guidance
provided to local offices, data handling and analysis,
failure to cite producers for significant deficiencies,
and inadequate justification for waiver of penalties.
This suggests that the actual level of complianceand
whether environmental gains have been realizedcannot
be clearly understood using CSR data alone.
What Have Compliance Mechanisms Accomplished?
The rate of soil erosion on U.S. cropland and the rate
of wetland drainage for agricultural production have dropped
significantly in recent decades. Cropland erosion fell
from 3.1 billion tons in 1982 to about 1.9 billion tons
in 1997, a reduction of 1.2 billion tons or just under
40 percent. Wind erosion declined by 542 million tons
per year (40 percent), while water erosion declined by
633 million tons per year (38 percent). The rate of wetland
conversion for agriculture has also declined from
235,000 acres per year during 1974-82 to 19,000 acres
per year for 1992-2002.
Although these trends coincide with implementation of
compliance mechanisms, the trends alone are insufficient
to show compliance's efficacy. Environmental gain can
be attributed to compliance mechanisms (or any agri-environmental
program) only to the extent that the incentive prompted
a change in producer behavior. In other words, we can
attribute wetland conservation or erosion reduction to
compliance only if the producer or landowner would have
done otherwise in the absence of compliance. Because producers
respond to a wide range of market and policy incentives,
isolating the effect of compliance mechanisms can be difficult.
Has Conservation Compliance Reduced Soil Erosion?
Between 1982 and 1997, annual soil erosion from cropland
dropped by 1.2 billion tons. (Erosion reduction data are
from the National
Resources Inventory (NRI). Of this total, 442 million
tons occurred on non-HEL landwhere conservation
compliance did not applyleaving 732 million tons.
Because compliance was formulated to avoid forcing land
out of production, erosion reduction due to land use change
(365 million tons, including CRP enrollment) was probably
not caused by compliance, leaving 367 million tons. Erosion
reduction to levels below the soil loss tolerance (T)
level (36 million tons) also cannot be attributed to conservation
compliance because conservation compliance requiredat
mostthat erosion be reduced to T. Finally, erosion
reduction on farms that do not receive government payments
(36 million tons) cannot be attributed to compliance,
leaving 295 million tons, or 25 percent of the 1.2-billion-ton
reduction in cropland soil erosion between 1982 and 1997.
d
Furthermore, some erosion reduction may have occurred
even in the absence of a compliance requirement. For example,
conservation tillage can preserve soil moisture where
rainfall is limited and can also reduce machinery, fuel,
and labor costs, making it profitable for some producers
regardless of its effect on soil erosion. Tillage and
planting machinery needed to practice conservation tillage
became widely available only in the mid- to late 1970s.
Because widespread adoption of new practices often occurs
over a long period of time, producers who included conservation
tillage in compliance plans may have eventually adopted
the practice for economic reasons even without the compliance
requirement.
Still, evidence suggests that compliance did have an
effect. Reductions in excess erosion (i.e., erosion in
excess of T) were larger on farms that received farm program
payments than on farms that did not. Excess wind erosion
declined by 31 percent on farms receiving payments, but
only 14 percent on farms not receiving payments. Excess
water erosion dropped by 47 percent on farms receiving
payments and by 41 percent on farms not receiving payments.
d
Has Swampbuster Slowed Agricultural Wetland Conversions?
Though wetland conversion for agricultural production
has declined over time, the role of swampbuster is not
entirely clear. Swampbuster penalties constrain wetland
conversion only when: (1) wetlands are located on farms
that participate in Federal programs subject to swampbuster,
(2) those wetlands could be profitably converted to crop
production in the absence of swampbuster, and (3) other
policies (e.g., Section 404 of the Clean Water Act) are
not applicable or not effective in deterring wetland conversion.
Many wetlands, ostensibly subject to swampbuster, are
in remote areas unlikely to be converted to cropland because
they cannot be easily incorporated into an existing farm.
Of roughly 90 million acres subject to swampbuster, only
12.9 million are adjacent to existing cropland. These
wetlands appear to be located in areas that receive large
government payments.
Commodity Payments and Wetlands Adjacent to Existing
Cropland
Even so, swampbuster deters conversion only if conversion
would otherwise be profitable. In the absence of swampbuster
sanctions, Claassen
et al. (2000) estimate that between 1.5 million and
3.3 million acres of wetlands could be profitably converted
to crop production under favorable market conditions.
Finally, swampbuster is just one of a number of policies
designed to deter or discourage wetland drainage. Section
404 of the Clean Water Act (CWA) gives the Environmental
Protection Agency and the Army Corps of Engineers authority
to regulate wetland drainage. Since the January 2001 Supreme
Court decision in Solid Waste Agency of Northern Cook
County (SWANCC) v. United States Army Corps of Engineers,
however, the extent of that authority with respect to
isolated wetlands (which are likely to occur in agricultural
areas) has been in doubt. While many State and local governments
also have wetland laws and regulations on the books and
some have increased wetland regulation since the SWANCC
decision, many heavily agricultural States have little
wetland regulation. In these States, swampbuster may be
the only remaining policy disincentive to wetland drainage.
Future of Compliance
Compliance mechanisms have seemingly been effective
in promoting soil and wetland conservation. While USDA's
Compliance Status Review appears to have flaws, these
flaws do not mean that compliance rates are low. Evidence
from other sources, primarily the National Resource Inventory
(NRI), shows that soil erosion on HEL cropland and wetland
conversion for agriculture have been sharply reduced.
Farms that receive government payments appear to have
reduced erosion more sharply than those that do not receive
payments, especially in the case of wind-erodible soils.
Nonetheless, enforcement of compliance requirements will
continue to be a challenge.
Finally, other problems could also be addressed using
compliance mechanisms. Claassen
et al. (2004) show that a compliance mechanism could
be used to address nutrient runoff from land in crop production
by encouraging the use of nutrient management or buffer
practices. More generally, 86 percent of U.S. cropland
is on farms that receive Federal program payments subject
to compliance requirements. Thus, compliance could provide
leverage in addressing any agri-environmental issue that
occurs largely on land in crop production. However, adding
multiple or costly compliance requirements could threaten
the goal of income support by increasing the cost of farm
program participation relative to its benefits.
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