[Senate Hearing 110-18]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 110-18
 
                WORKING LAND CONSERVATION: CONSERVATION
                   SECURITY PROGRAM AND ENVIRONMENTAL
                       QUALITY INCENTIVES PROGRAM

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION


                               __________

                            JANUARY 17, 2007

                               __________

                       Printed for the use of the
           Committee on Agriculture, Nutrition, and Forestry


  Available via the World Wide Web: http://www.agriculture.senate.gov


                                 ______

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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                       TOM HARKIN, Iowa, Chairman

PATRICK J. LEAHY, Vermont            SAXBY CHAMBLISS, Georgia
KENT CONRAD, North Dakota            RICHARD G. LUGAR, Indiana
MAX BAUCUS, Montana                  THAD COCHRAN, Mississippi
BLANCHE L. LINCOLN, Arkansas         MITCH McCONNELL, Kentucky
DEBBIE A. STABENOW, Michigan         PAT ROBERTS, Kansas
E. BENJAMIN NELSON, Nebraska         LINDSEY GRAHAM, South Carolina
KEN SALAZAR, Colorado                NORM COLEMAN, Minnesota
SHERROD BROWN, Ohio                  MICHEAL D. CRAPO, Idaho
ROBERT CASEY, Jr., Pennsylvania      JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota             CHARLES E. GRASSLEY, Iowa

                Mark Halverson, Majority Staff Director

                      Robert E. Sturm, Chief Clerk

            Martha Scott Poindexter, Minority Staff Director

                Vernie Hubert, Minority General Counsel

                                  (ii)

  
                            C O N T E N T S

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                                                                   Page

Hearing(s):

Working Land Conservation: Conservation Security Program and 
  Environmental Quality Incentives Program.......................     1

                              ----------                              

                      Wednesday, January 17, 2007
                    STATEMENTS PRESENTED BY SENATORS

Harkin, Hon. Tom, a U.S. Senator from Iowa, Chairman, Committee 
  on Agriculture, Nutrition and Forestry.........................     1
Chambliss, Hon. Saxby, a U.S. Senator from Georgia...............     4

                                Panel I

Lancaster, Arlen, Chief, Natural Resources Conservation Service, 
  U.S. Department of Agriculture, Washington, DC.................     6
Shames, Lisa, Acting Director, Natural Resources and Environment, 
  U.S. Government Accountability Office, Washington, DC..........     8

                                Panel II

Cox, Craig, Executive Director, Soil and Water Conservation 
  Service, Ankeny, Iowa..........................................    31
Ham, Jim, President, Georgia Association of Conservation District 
  Supervisors, on behalf of Georgia Association of Conservation 
  District Supervisors, and the National Association of 
  Conservation Districts, Smarr, Georgia.........................    36
Hovorka, Duane, Farm Bill Outreach Coordinator, National Wildlife 
  Federation, on Behalf of the National Wildlife Federation, 
  Sustainable Agriculture Coalition, and Izaak Walton League of 
  America, Elmwood, Nebraska.....................................    35
Merrigan, Kathleen A., Director and Assistant Professor, 
  Agriculture, Food and Environment Program, Tufts University, 
  Boston, Massachusetts..........................................    33
                              ----------                              

                                APPENDIX

Prepared Statements:
    Cochran, Hon. Thad...........................................    50
    Cox, Craig...................................................    53
    Ham, Jim.....................................................    63
    Hovorka, Duane...............................................    67
    Lancaster, Arlen.............................................    75
    Merrigan, Kathleen A.........................................    89
    Shames, Lisa.................................................   100
Document(s) Submitted for the Record:
``Rewards and Challenges for New England Farmers'', The 
  Conservation Security Program..................................   116
``Hidden Treasures'', The Conservation Security Program and 
  Wildlife.......................................................   208
Question(s) and Answer(s):
Lincoln, Hon. Blanche L.:
    Written questions for Arlen Lancaster........................   250
Lancaster, Arlen:
    Written response to questions from Hon. Blanche L. Lincoln...   251



     WORKING LAND CONSERVATION: CONSERVATION SECURITY PROGRAM AND 
                ENVIRONMENTAL QUALITY INCENTIVES PROGRAM

                              ----------                              


                      Wednesday, January 17, 2007

                               U.S. Senate,
                          Committee on Agriculture,
                                   Nutrition, and Forestry,
                                                     Washington, DC
    The Committee met, pursuant to notice, at 9:30 a.m., in 
room SR-328, Russell Senate Office Building, Hon. Tom Harkin, 
Chairman of the Committee, presiding.
    Present or submitting a statement: Senators Harkin, Leahy, 
Nelson, Salazar, Brown, Casey, Klobuchar, Chambliss, Crapo, and 
Thune.

    STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM IOWA, 
   CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY

    Chairman Harkin. The Senate Committee on Agriculture, 
Nutrition, and Forestry will come to order.
    Today's hearing covers the implementation of two programs 
that promote conservation on lands that are in agricultural 
production, the Conservation Security Program and the 
Environmental Quality Incentives Program, otherwise known as 
CSP and EQIP.
    This hearing will examine the choices that have been made 
in implementing these programs and whether they are working as 
intended and delivering maximum environmental benefits.
    The Conservation Security Program was one of my initiatives 
in the 2002 Farm Bill. Now, the objective is to pay farmers and 
ranchers for the environmental goods they produce; to pay them 
not for what they grow but for the benefits of how they grow 
it. Conservation and environmental benefits produced from land 
in production have value to society just like commodities do.
    On the positive side, CSP is up and running in all 50 
States with a high level of producer interest. On the other 
hand, CSP has been compromised in at least two ways. Dedicated 
funding has been taken away in appropriations and budget 
reconciliation bills, and USDA regulations, I believe, have 
distorted what we enacted in a way that excludes many of the 
producers we intended the program to benefit and fails to 
maximize the conservation benefits that CSP has the potential 
to provide.
    For the first time ever in 2003, Congress offset the cost 
of a natural disaster. I want to repeat that. For the first 
time ever in 2003, Congress offset the cost of a natural 
disaster by cutting a mandatory program in the Farm Bill. Never 
been done before.
    We would never consider telling Louisiana that the cost of 
recovery for New Orleans would come out of their State's 
highway funds, or tell California that rebuilding after an 
earthquake would mean we just reduce other Federal spending in 
their State.
    We must never accept taking conservation funds to pay for 
disaster assistance. A disaster is a disaster, whether it is a 
hurricane, a tornado, an earthquake, a fire, a flood, a 
drought, and it should be paid for out of the overall budget of 
the Federal Government just like we pay for every disaster and 
we always have until 2003.
    So rather than the nationwide program that we enacted, the 
program has been limited to just 12.6 percent of the watersheds 
in the continental United States. Even in those watersheds, 
many producers who would be willing to adopt better 
conservation practices are largely excluded.
    NRCS has chosen to give priority to farmers who have 
already adopted conserving practices and exclude those who need 
cost share and transitional funding in order to adopt those 
practices. And we will have more discussion about that with Mr. 
Lancaster.
    This hearing will examine whether these choices by NRCS are 
consistent with the program created in the 2002 Farm Bill, and 
whether they are the best way to achieve the maximum 
conservation benefits for the available funds for the program.
    We will also examine the Environmental Quality Incentives 
Program, EQIP, which provides cost-share and incentive payments 
for conservation.
    A September 2006 report by GAO identified significant 
questions about the funding allocation formula used to allocate 
the annual funding to the States, particularly whether the 
factors in the allocation formula are closely tied to the 
program objectives, which are improving conservation on land in 
agricultural production and also supported by the best 
available data.
    It is important that these EQIP funds are allocated to 
match the conservation needs that our country faces, yet the 
backlog of applications for this program varies widely from 
State to State.
    In 2005, the last year for which figures are available, 
according to NRCS, the percentage of unfunded applications for 
EQIP varied from 7.4 percent in Hawaii to over 73 percent in 
New Jersey. In my own State of Iowa, 60 percent of all 
applications were turned down. Georgia had over 38 percent of 
all applications go unfunded.
    To me this suggests that the problems identified with the 
allocation formula may be resulting in many good conservation 
projects going unfunded. So this hearing will consider the 
allocation issue and look at how both of these programs are 
functioning to promote good conservation practices on working 
lands.
    I will reserve time for when the ranking member, when 
Senator Chambliss gets here for his opening statement. I will 
reserve that time for him. Before we turn to our first two 
witnesses, I would recognize the Senator from Vermont for the 
purposes of an introduction.
    Senator Leahy. Mr. Chairman, thank you very much for the 
opportunity to make a brief opening statement. The Judiciary 
Committee is about to begin an important hearing on 
prescription drug pricing, so I am going to have to leave for 
that.
    I do want to congratulate the Chairman on his ascension to 
the Agriculture Committee Chair for the second time.
    Actually, for the third time.
    Wasn't there about 2 weeks in there somewhere?
    Chairman Harkin. Oh, that is right, we bounced up.
    Senator Leahy. Third time.
    Chairman Harkin. That is right. That is right.
    Senator Leahy. So I have been five or six times majority, 
five or six times a minority. They go back and forth.
    Chairman Harkin. Right.
    Senator Leahy. I say that as an encouragement to everybody 
here. I also pointed out to the new Majority Leader that he is 
the ninth Majority Leader I have served with, so those things 
change, too. I do like the artwork here in the Committee room, 
however.
    [Laughter.]
    Senator Leahy. Sorry about that.
    Mr. Chairman, under your leadership we wrote a tremendously 
successful Farm Bill in 2002. I look forward to working with 
you and Senator Chambliss on the 2007 Farm Bill.
    I would like to briefly welcome Kathleen Merrigan back 
before the Committee. She is sitting back there. She will be 
testifying. She worked on my staff when I chaired this 
Committee. She has had a long and distinguished career.
    I appreciate the work she gave me in helping me to write 
and pass the Organic Foods Production Act of 1990. And Senator 
Luger was ranking in that. We worked very closely, as did you, 
Mr. Chairman.
    Chairman Harkin. I remember we were there.
    Senator Leahy. One of the most successful laws enacted 
during that time, and we needed Kathleen's hard work to make it 
possible.
    Today we are having a hearing on the Conservation Security 
Program, the Environmental Quality Incentive Program. I think 
those are going to be very important to this Committee as you 
write a new Farm Bill.
    The boost in EQIP funding from the 2002 Farm Bill, the 
Regional Equity requirement has been particularly helpful to 
hundreds of Vermont dairies working to restore water quality in 
the Champlain Basin and elsewhere in Vermont. So if we can 
continue to provide additional funding for EQIP and expand the 
Regional Equity requirement this year, something that helps not 
just farmers but it helps everybody looking for clean water, 
looking for a clean environment.
    The CSP has been underutilized in Vermont, but I look 
forward to testimony today on how to strengthen this innovative 
program during the re-authorization process.
    We went a long way to pass this 2002 Farm Bill. I think it 
has made a real difference in rural America, but we have to 
continue these programs to help America's farmers and ranchers.
    And again, Mr. Chairman, I thank you very much for your 
courtesy and the courtesy of my fellow members in letting me 
interject in here.
    Chairman Harkin. Well, Senator Leahy, thank you again for 
being such a great member of this Committee, and I was here and 
you were Chairman at the time when we passed a lot of that, and 
for always being a stalwart supporter of agriculture in all of 
its forms all over America. You have just been a great leader 
in this area. I know you have got to go do Judiciary Committee 
work.
    Senator Leahy. If you would indulge me just a tiny bit, the 
Committee has changed considerably since I first came here. I 
was telling Senator Casey of Pennsylvania the story about 
sitting down, Senator Lugar and I were the two most junior 
members way down where Ms. Shames and Mr. Lancaster are 
sitting. And Senator Talmadge, who is portrayed up there, was 
Chairman. He would sit here in a wreath of cigar smoke. And 
Senator Eastland, who would rarely ever come here, but as 
Chairman of the Senate Judiciary Committee would show up just 
when he had an amendment. He was the senior-most member of the 
Senate, President Pro Tem.
    One day he comes in there and they mutter back and forth so 
nobody could understand it. It appeared that Senator Eastland 
hand a very large amendment, hands it to Chairman Talmadge, and 
Talmadge says, ``Without objection, it is accepted.''
    And Lugar and I both say, ``Well, wait a minute. Can we ask 
what is in that amendment?'' They kind of look down. They try 
to figure who the hell we are. Talmadge takes the gavel and 
says, ``We are adjourned.'' And on the way out, Senator 
Klobuchar, you should know that Senator Humphrey, Hubert 
Humphrey of your State turns to me and says, ``Now do you 
understand the amendment?''
    [Laughter.]
    Chairman Harkin. That is great history there. We will move 
on now with our two witnesses.
    First we will recognize Arlen Lancaster, Head of the 
Natural Resources Conservation Service, the primary agency for 
voluntary conservation on working lands. Before joining NRCS, 
Mr. Lancaster served as USDA Deputy Assistant Secretary for 
Congressional Relations. We got to know him well there.
    Previously, he worked for Congress in a variety of 
positions including Senior Policy Advisor for Senator Mike 
Crapo here, a valued member of our Committee and a good friend, 
Staff Director of the Senate Subcommittee on Forestry 
Conservation and Rural Revitalization, and also a staff member 
for Senator Robert Bennett, and was also very key in working on 
the Conversation Title in the 2002 Farm Bill.
    Before I get to you, Mr. Lancaster, just a couple of notes. 
No. 1, we will recognize all the witnesses for 6-minute 
statements, hope you do not read them but just give us the 
highlights. And then we will engage in rounds of questions of 8 
minutes each, for Senators for each round of 8 minutes each.
    I will recognize our ranking member, our former Chairman, 
Senator Chambliss, for any statement he might want to make.

 STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR FROM GEORGIA

    Senator Chambliss. Thank you very much, Mr. Chairman, and 
thank you for holding this hearing to continue the Committee's 
oversight of two key conservation programs, Conservation 
Security Program and the Environmental Quality Incentives 
Program.
    Last June the Committee held an oversight hearing on all of 
our conservation programs including these. At that time, our 
goal was to ensure the programs were working as effectively as 
possible. Today's hearing will allow us to dig a little deeper 
into CSP and EQIP.
    Without a doubt, CSP has had a difficult time since 2002. 
Difficulties in implementation and lack of funding have kept it 
from becoming what it was intended. CSP raises questions such 
as, What is the WTO status, green or amber box? Should we pay 
producers for conservation they have already achieved? With 
limited conservation dollars and serious environmental 
challenges, shouldn't we be focusing on where we can make the 
biggest environmental gains?
    While not the topic of this hearing, I look forward to 
discussing these issues as the Committee develops the 2007 Farm 
Bill.
    EQIP may not be perfect as we will hear today from the 
Government Accountability Office, but it is doing an excellent 
job of helping to solve agriculture's environmental challenges, 
especially in my home State of Georgia. Perhaps I am biased, 
but my State truly is doing a great job of using Farm Bill 
programs to put conservation on the ground and keep producers 
on the land.
    For those States having trouble with conservation, look to 
Georgia. It is a model of cooperation, science-based decision 
making, and tangible conservation results.
    In large part, Georgia's success is due to the efforts of 
one of our witnesses today, Mr. Jim Ham, in his work in 
cooperation with our Natural Resource Conservation Service, 
State Conservationist, the Georgia Soil and Water Conservation 
Commission and the Georgia Department of Natural Resources.
    Mr. Chairman, I would like to go ahead and just make an 
introduction of Jim right now as opposed to when he testifies.
    Chairman Harkin. Please.
    Senator Chambliss. Jim's family has been friends of mine 
for I guess about 30 or 35 years or so and I know them well and 
I am very proud that he is here.
    Jim is a fifth-generation farmer from Monroe County, 
Georgia, and he operates a 300-head cattle operation with his 
brother on about 1,400 acres of pasture and forest land. Jim is 
a member of the Board of County Commissioners for Monroe 
County, the Towaliga Soil and Water Conservation District and 
the Georgia Association of Conservation District Supervisors. 
He has served as president of this association for the past 2 
years.
    This is Jim's second time testifying before the Committee. 
His first was at the Farm Bill field hearing last June in 
Albany, Georgia. As always, Jim, we appreciate your input as a 
farmer and conservationist.
    And in closing, I would just like to thank all of our 
witnesses for appearing today and look forward to their 
testimony.
    Chairman Harkin. Thank you very much, Senator Chambliss. We 
will now recognize Mr. Lancaster before we go to Ms. Shames. 
Please proceed, and welcome again to the Committee.

    STATEMENT OF ARLEN LANCASTER, CHIEF, NATURAL RESOURCES 
     CONSERVATION SERVICE, U.S. DEPARTMENT OF AGRICULTURE, 
                         WASHINGTON, DC

    Mr. Lancaster. Thank you, Mr. Chairman, and members of the 
Committee, thank you for the opportunity to be here today to 
discuss working lands conservation activities. My full 
testimony has been submitted for the record, and so I will 
summarize.
    In my initial months as Chief of the Natural Resources 
Conservation Service, I have been fortunate to be able to get 
out into the field and view the conservation work the farmers 
and ranchers are achieving. I can attest that the conservation 
accomplishments taking place across the country are as 
important as they are diverse.
    In a single year landowners with NRCS and our partners such 
as State agencies and conservation districts have planned 
conservation systems on 50 million acres, representing a 60 
percent increase over 2001. We have reduced soil erosion by 
more than 75 million tons, created, restored and enhanced 
318,000 acres of wetlands and improved irrigation water 
management on 1.1 million acres.
    And that is just a sample of things that we and our 
partnership brought to the Nation in 1 year.
    Mr. Chairman, these actions did not come about on their 
own. The focus of NRCS is centered on working lands and 
ensuring that these lands continue to produce valuable 
agricultural commodities and contribute to local economies.
    If you visit any county in the U.S., you will likely find 
that the landowners have a relationship with our local NRCS 
staff founded on the technical knowledge and resources that are 
available through our field offices.
    Everything that happens begins with our basic conservation 
technical assistance, and as producers decide to adopt specific 
plans or practices, they may build on that technical assistance 
by utilizing the financial assistance available from the suite 
of Farm Bill programs.
    In turning to the two programs the Committee has interest 
in today, the Environmental Quality Incentives Program is the 
flagship of our portfolio. The increased funding for EQIP in 
the 2002 Farm Bill greatly expanded program availability 
including funding obligated between fiscal year 2002 and fiscal 
year 2006, almost 3.1 billion dollars. EQIP will benefit close 
to 185,000 participants.
    Producer demand continues to be high for EQIP. In fiscal 
year 2002, the agency was able to fund one in every five 
requests. In fiscal year 2005, we funded one in every two 
requests for a total of 49,406 producers receiving contracts 
through this program.
    While EQIP remains an extremely popular program, NRCS 
continues to make ongoing improvements to the program and the 
methodology by which EQIP resources are allocated. For example, 
the EQIP allocation formula is under review and potential 
update.
    As part of its review process, NRCS has awarded a 
competitive contract for an independent review of all NRCS 
conservation program formulas, including the EQIP formula. We 
have also planned to reassess the EQIP financial assistance 
formula to take place after the results of that independent 
review is established.
    As my written testimony describes, unfortunately, the 
merit-based resource allocation formula is not always allowed 
to function properly. Nevertheless, we believe that overall, 
EQIP is providing unparalleled conservation results, and the 
increased program flexibility and improved program features 
will continue to make EQIP one of the most popular and 
effective conservation programs of the Federal Government.
    And while we have numerous other working lands conservation 
programs, I understand the Committee wants to focus on only one 
other effort this morning, the Conservation Security Program. 
CSP provides payments to producers who practice good 
stewardship on their agricultural lands with incentives for 
those who want to do more.
    In its first 3 years, CSP has generated strong interest 
across our Nation among out Nation's producers.
    The first sign-up was held in July of 2004 in 18 priority 
watersheds within 22 States. In 2005 and 2006, CSP was expanded 
and implemented in a total of 280 watersheds nationwide, 
including watersheds in every State as well as Puerto Rico and 
Guam.
    Including the most recent sign-up, CSP has invested in the 
operations of nearly 19,400 stewards on 15.5 million acres of 
working agricultural land.
    Regarding program financial management, NRCS has 
implemented a number of management measures to prioritize 
program spending primarily by delivering the program in 
priority watersheds, targeting enrollment to include good 
conservation stewards, and concentrating payments on 
conservation enhancement activities that generate additional 
resource benefits.
    Additionally, NRCS has instituted several internal 
controls. I would note that out of more that 2,100 initial 2004 
CSP contracts reviewed by the GAO, only 12 have been found to 
contain deficiencies. This is an outstanding record and a 
testimony to the ability NRCS field staff to implement a 
complex program with excellent results. We feel we have made 
significant improvements to CSP and are pleased with the 
results of the program thus far.
    In closing, I am very proud of the accomplishments of NRCS 
and its partners on working lands conservation. While we have 
focused today on just a few of the working lands programs that 
NRCS offers, there is a broad portfolio of work happening out 
in the field. Under tight time constraints and given a 
multitude of demands and pressures, I believe our agency's 
implementation record is impressive.
    Since 2002, NRCS has provided assistance to 1 million 
farmers and ranchers. Together we have applied conservation on 
more than 130 million acres of working farm and ranch land. We 
have also invested $6.6 billion of the taxpayers' funds 
directly with farmers and ranchers to produce environmental 
improvements that will benefit us all.
    I believe we have conservation in the right order of 
priority beginning with sound conservation planning, allocating 
resources based on sound natural resources factors, enabling 
local leadership to set priorities and recognize that 
everything comes back to the voluntary decisions of farmers, 
ranchers and landowners. If this process is allowed to work, 
there is no limit to what can be achieved in conservation for 
our natural resources.
    Thank you again for this opportunity to appear here today, 
and I look forward to responding to any questions the members 
of the Committee might have.
    [The prepared statement of Mr. Lancaster can be found on 
page 75 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Lancaster. Now we 
turn to Lisa Shames, Acting Director at GAO, responsible for 
GAO's work on food and agricultural issues.
    I hope you have all gotten a copy of the GAO's testimony 
today on conservation. It should have been made available to 
you.
    Ms. Shames, welcome to the Committee and please proceed.

 STATEMENT OF LISA SHAMES, ACTING DIRECTOR, NATURAL RESOURCES 
    AND ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE, 
                         WASHINGTON, DC

    Ms. Shames. Thank you. Chairman Harkin, Senator Chambliss, 
and members of the Committee, I am pleased to be here today as 
part of your oversight of conservation programs to ensure that 
they promote environmental goals and benefit the agricultural 
sector.
    GAO's full statement has been submitted for the record, so 
what I would like to do now is just highlight two of our 
reports that we have issued recently on EQIP and CSP.
    These programs are substantial. In fiscal year 2006 alone, 
EQIP provided $1 billion and CSP $260 million in financial and 
technical assistance to farmers and ranchers. That is why it is 
critical that EQIP and CSP program benefits help address their 
intended environmental benefits.
    Our work identified opportunities where NRCS can better 
demonstrate that this was happening. First, regarding EQIP's 
general financial assistance formula. NRCS has periodically 
modified the formula's, factors and weights that determine how 
much each State is to receive.
    The most recent update was in fiscal year 2004 following 
passage of the Farm Bill; however, we found no documented 
rationale or explanatory information for the 31 factors. For 
example, the formula included a factor addressing impaired 
rivers and streams, but it was not clear whether or not this 
factor is based on general water quality concerns or specific 
concerns caused by agricultural production.
    In addition, some data sources used to weight the factors 
were questionable or outdated. For example, of 29 data sources, 
we found that five were used more than once, six were not the 
most currently available, and ten could not be verified.
    These factors and weights affect the amount of money each 
State receives. For example, we determined that if the weight 
for a given factor were increased by 1 percent, $6.5 million 
would have been allocated to one factor at the expense of 
another. Consequently, the financial assistance allocated to 
individual States would have been affected. We recommended that 
NRCS document the rationale for its choice of factors and 
weights and use accurate and current data.
    Second, regarding EQIP's performance measures, NRCS has 
begun to develop long-term, outcome-oriented performance 
measures for EQIP along with numeric targets to be achieved by 
2010. These measures can provide valuable performance 
information to NRCS on the progress being made toward these 
targets.
    As a next step, NRCS can use this performance information 
to refine its assistance formula and link EQIP program payments 
to the most significant environmental concerns; however, while 
NRCS agreed that they might eventually make this link, at the 
time of our report they had no plans to do so. We recommended 
that NRCS continue to analyze and use performance information 
so this link can be made.
    Third, regarding duplicate payments, as you know because of 
limited funding, duplicate payments may result in some 
producers not receiving program benefits for which they are 
entitled.
    Our analysis found examples of duplicate payments, as Mr. 
Lancaster mentioned, between CSP and EQIP because of similar 
conservation actions these programs finance. For example, we 
found a producer received a CSP payment of over $9,000 and an 
EQIP payment for almost $800 for the same action, crop 
rotation.
    While NRCS has the authority to recover duplicate payments, 
it did not have a comprehensive process to preclude or identify 
them. We recommended that NRCS develop such a process to review 
both incoming applications and existing contracts and take 
action to recover any duplicate payments that are found.
    In conclusion, EQIP and CSP can play valuable roles to 
encourage farmers and ranchers to act as stewards of the 
Nation's natural resources; however, as you are well aware, the 
Nation is faced with a current deficit and long-term fiscal 
challenges.
    Because we cannot continue business as usual, NRCS must be 
able to better demonstrate that EQIP and CSP payments are 
addressing the most significant environmental concerns and 
benefiting the agricultural sector.
    Mr. Chairman, this concludes my statement. I will be 
pleased to respond to any questions that you or members of the 
Committee may have.
    [The prepared statement of Ms. Shames can be found on page 
100 in the appendix.]
    Chairman Harkin. Ms. Shames, thank you. We will now begin a 
round of 8 minutes each for Senators.
    Mr. Lancaster, again, thank you and congratulations on your 
new position. I think you have got one of the best jobs there 
is in terms of environment, and I am joined, I am sure, with 
your old boss here in wishing you the best in your new 
position.
    I just want to take you through several aspects of the 
Conservation Security Program as implemented. I probably will 
not get them all through in my first 8 minutes, but I will 
finish in my second round.
    NRCS has created a self-assessment workbook for prospective 
applicants. As I understand it, this workbook assesses the 
existing practices on the applicant's farm or ranch to 
determine whether they have achieved the, quote, ``minimum 
treatment level'' for their operation.
    My question is: Does the self-assessment process allow 
producers willing to adopt conservation practices that would 
achieve the, quote, ``minimum treatment level'' to enroll in 
the program?
    Does this assessment process that you have allow producers 
who are willing to adopt conservation practices to achieve the 
minimum treatment level that would allow them to enroll in the 
program?
    Mr. Lancaster. Mr. Chairman, as you know, clearly the CSP 
program is offered in three tiers. The first tier, that lowest 
bar requires that a producer meet at least two national 
priorities to the sustainable level. Based on that, they do 
have the opportunity to improve their other resource concerns 
to that sustainable level.
    Given the nature of the funding for the program, as we 
prioritize and as we look at those applicants that are applying 
for the program, we have the Tier 3, which again is addressing 
all those resource concerns to the sustainable level.
    Tier 2, which is addressing those and again with that 
option to or with that requirement that they increase their 
level of conservation on a national priority to a level of 
sustainability.
    There is a tier available for producers who apply to the 
program, get in and intend to do more. With limited funding, we 
have focused on rewarding those producers who really have 
demonstrated that they are conservation producers and by that 
create the incentive for producers to increase their level of 
conservation.
    Chairman Harkin. Well, Okay. That is my point. You have 
this assessment, you have this workbook. Let's say a rancher 
fills it out and they want to adopt conservation practices that 
would get them to the minimum treatment level.
    Under the rules of NRCS now is they are not allowed in the 
program. They are shifted and sent over to EQIP or some other, 
quote, ``appropriate conservation program.''
    Now, again, there is a reason for my asking that question, 
and I think your answer elucidated a little bit there, and that 
is when we set this up for Tier 1, 2 and 3, it was really our 
expectation that in the initial years of this program that the 
bulk would be in Tier 1, getting everybody in, less in Tier 2, 
less in Tier 3 and that might shift over a period of time as 
you got more and more farmers enrolled.
    It has sort of become topsy-turvy. I am quite surprised, as 
a matter of fact, at the bulk of those that are now in Tier 3, 
but not in Tier 1, which indicates to me that it is not quite 
working as intended.
    The statute does not provide for the exclusion of farmers 
from eligibility for not having adopted practices without the 
program's incentive payments and cost share, does it?
    There is a statute here, and it does not exclude any 
farmers or ranchers who have not adopted practices without the 
program's incentive payments and cost share. In other words, it 
does not say, ``You have got to do all these things first, and 
then you get in the program.''
    The statute does not say that. So again, the reason I am 
pointing this out is that more and more it is becoming more and 
more difficult for farmers with limited means maybe to get into 
this program until they have first adopted some practices.
    Now, basing eligibility on an assessment of the current 
conservation status of an operation rather than on the 
willingness of an applicant to commit to achieving a higher 
level of conservation performance than they currently have 
provides little incentive to producers who need the program's 
cost share or enhancement payments to improve their 
conservation efforts.
    I just want to know if you have a comment on that or not. I 
mean, do you understand the import of what I just said?
    Mr. Lancaster. Yes, Mr. Chairman. When I look at the needs 
of conservation producers or when I look at the needs of 
producers to reach their conservation goals, it is important 
that we have a suite of programs, different tools to help them 
reach their goals, cost-share programs like EQIP. And I also 
believe that a stewardship program like CSP is an important 
part of helping landowners reach their conservation goals.
    As GAO indicated and as you have indicated, the funding for 
the CSP program has changed I think six times in the history of 
this program.
    If you are going to have a program that would be available 
to everyone so that you can reach those producers who are not 
performing at those higher levels of conservation, that would 
be one thing. We have a program, though, that is capped, that 
is limited.
    In looking at the suite of programs, we have a stewardship 
program, which I think has been effective in creating an 
incentive for folks to increase the level of conservation so 
that they can enter into the program. We also have a suite of 
programs that help producers meet their conservation goals, 
increase their level of conservation.
    With limited funding, I think it is appropriate to divert 
those folks who have not reached that bar of being the best who 
are at that higher level of stewardship to a program that can 
help them get there.
    And so with limited funds, Mr. Chairman, I think what NRCS 
has done in rewarding the best is the most effective use of 
that program.
    Chairman Harkin. That is just a value judgment that you are 
placing on it. I do not think the statute intended it to be 
that way. Now, you are right about the limitation on funds and 
stuff; Congress did that, you did not do that. And we have to 
get through that one, but even with these limitations, it seems 
to me a skewing of the program to just say that we are just 
going to take care of those who have already done these 
practices.
    Now, again, and this will be my last question before my 
time runs out, a key feature of CSP is equitable treatment of 
those who have previously adopted conservation practices. They 
are to receive enough of an incentive so they continue those 
practices and are not placed at a competitive disadvantage 
versus those who later adopt the practice with assistance from 
the program. But CSP also specifically provides incentives for 
adopting new practices, delivering new conservation benefits.
    In his written testimony, which I read last night, Craig 
Cox, who is on the next panel, asserts that CSP as currently 
structured is spending nearly all of its funding to reward 
producers for their, quote, ``benchmark conservation 
practices''; that is, the conservation practices that were 
already in place on the farm or ranch for 2 years before the 
producer signed up for CSP.
    Now, is Mr. Cox correct in this?
    Mr. Lancaster. I think when you look at the structure of 
payments, a big part of those payments are for activities that 
have occurred. Again, you are rewarding those producers who 
have proven that they are good stewards to create an incentive 
for other producers to enter into the program. But a large 
portion as well of the CSP program is for enhancements, which 
are those practices that are occurring above the sustainable 
level.
    Chairman Harkin. Well, my last statement is it is my 
understanding that NRCS will not compensate for any new 
practices in the initial CSP contract, but that payment for new 
practices can only happen after the producer signs a second 
modified contract. So I think you can see why some would 
question whether NRCS is getting the maximum environmental 
benefit out of the CSP regulations.
    Now, these are regulations, not the law, so I will come 
back to that in my second round and my time is up and I would 
yield to my friend from Georgia, Senator Chambliss.
    Senator Chambliss. Thank you, Mr. Chairman, and, Arlen, it 
is good to have you back up here. I guess the third hat you 
have worn on the Hill here in recent years. It is always a 
pleasure to have you, and I am pleased that you are in a 
position of NRCS Chief here.
    Georgia farmers and conservationists continue to remind me 
of the need for technical assistance. You addressed that 
somewhat in your opening comments. But what is NRCS doing to 
ensure that it is available even as funding for it declines and 
does Congress need to address technical assistance as it 
develops the 2007 Farm Bill?
    Mr. Lancaster. Mr. Chairman, I appreciate that question. 
When you look at technical assistance, I really believe that 
that is the backbone of our conservation delivery system. In 
this country, we have many producers and what they are seeking 
is that technical assistance, and the financial assistance is 
an added benefit to their efforts.
    When you look at technical assistance, as an agency, I don 
not believe NRCS can do it alone. We work closely with our 
partners, State agencies, with conservation districts and with 
RC&D Councils to deliver this technical assistance to 
landowners.
    And as you look at our discretionary account, I think a 
growing percentage of our conservation operations, our 
conservation technical assistance account, it is earmarked, and 
so those dollars are not going directly to our personnel to 
deliver technical assistance in the field. Many of that is 
going through pass-through projects or in directed activities.
    As you look at the next Farm Bill, we do have the ability 
to deliver technical assistance through our financial 
assistance programs.
    The Committee held a hearing on TSPs recently, or last 
year, and that is an opportunity I think again to increase the 
level of technical assistance that is available to landowners.
    But I think you hit it right on the head that the focus of 
our agency is on that technical assistance. That is the key 
part of the delivery of these conservation programs. And as 
Congress looks at these programs and they look at our 
discretionary accounts, I certainly believe that that is the 
key to effectively delivering these conservation programs is to 
have landowners who have sound technical assistance, who have 
given the effort to develop a conservation plan so that these 
other programs fit within the context of their goals that they 
have outlined.
    Senator Chambliss. Does the 2002 Farm Bill's prohibition on 
bidding down make it more difficult for NRCS to optimize 
environmental benefits as required by EQIP?
    Mr. Lancaster. In 2002 when Congress looked at the bid-down 
authorities, the concern was the impact to limited resource 
producers, that if you allow individuals to bid down to get 
into the program, you are going to disadvantage those who do 
not have the financial resources to pay a higher percentage of 
the cost share in those practices.
    As an agency, when you look at EQIP, I think the increased 
funding has reduced the backlog that we have in the program, 
but we are also able to create separate pools of funding for 
different producers.
    To answer your question directly, I think that there are 
opportunities to look at price discovery that may not 
necessarily require producers to compete with one another on 
what percentage cost share that they are willing to accept for 
a program. If you have better price discovery on what those 
payments are, we are able to address those TA needs without 
necessarily going to a bid-down system.
    Senator Chambliss. What does the Administration believe it 
costs to fully implement CSP per year?
    Mr. Lancaster. There are a lot of assumptions when you look 
at CSP in total funding, but if you do a quick, back-of- the-
envelope penciling out of the program, with 930 million acres 
of non-forested agricultural land, if you assume 50 percent of 
that land was to enroll in the program, our average cost per 
acre is running $17, $20. So you take 450 million acres, $20 
per acre, you are about $9 billion a year for the program.
    Senator Chambliss. Ms. Shames, are there any legislative 
impediments to NRCS implementing your recommendations for EQIP?
    Ms. Shames. No, Senator, there are no legislative 
impediments. What we have recommended are management 
improvements that can help NRCS better demonstrate how its 
program payments are achieving the environmental outcomes.
    Senator Chambliss. I am pleased with NRCS' efforts to 
better understand and quantify the benefits from conservation 
programs. Many others in this room, including Craig Cox, who 
will testify on the second panel, have aided in this effort.
    Optimizing environmental benefits or quantifying 
environmental effects of conservation programs are not as easy 
as it might seem.
    Has GAO done any work on the difficult but important task 
of assessing the environmental benefits of conservation 
programs, and does GAO have any insight or advice on this 
issue?
    Ms. Shames. What I can tell you based on the work that we 
have seen Government-wide is that outcomes that take a long 
time, including conservation improvement. So setting outcome-
oriented goals is a good step to becoming more results 
oriented. We do rely on the subject matter expertise of the 
agencies.
    When GAO looks at programs such as EQIP or CSP, we are 
really looking at the management to make sure that what they 
are doing is as efficient and as effective as possible.
    Senator Chambliss. Arlen, I continue to be concerned about 
the looming deadline of July 31 for livestock operations to 
have the necessary permits and nutrient management plans as 
required by the Concentrated Animal Feeding Operation 
Regulation.
    EPA estimates there are about 18,800 large CAFOs that must 
have a nutrient management plan in place by that date. By NRCS' 
figures, 14,300 plans have been applied.
    What is NRCS doing to ensure the others are prepared for 
that deadline?
    Mr. Lancaster. Mr. Chairman, Comprehensive Nutrient 
Management Plans are, like conservation plans, an important, 
integral base part of an operation.
    We are currently looking at our TSP program, and, as you 
recall from the hearing earlier, there have been questions 
about the effectiveness of that program.
    As we look at our not-to-exceed rates and how we really pay 
an effective and accurate cost share for those TSPs, it is 
important to recognize, one, that the not-to-exceed rates are 
not the maximum that a producer could pay a TSP to carry out 
that work. But the point is we are looking at our TSP program 
to make sure that it is as effective as possible so that that 
is a tool that landowners can utilize to address to reach their 
CNMPs.
    Additionally, Congress has given us the authority, and it 
is something I am pursuing, to pay for CNMPs out of the 
financial assistance program within EQIP. So we recognize that 
deadline as well, and we are working closing with industries to 
develop those programs that can address the need for 
Comprehensive Nutrient Management Plans.
    Senator Chambliss. Thank you, Mr. Chairman.
    Chairman Harkin. Thank you very much, Senator Chambliss.
    Now I will recognize in order, we will go like this: 
Senator Crapo, Senator Casey, Senator Klobuchar, Senator 
Nelson, Senator Brown and Senator Thune. Senator Crapo.
    Senator Crapo. Thank you very much, Mr. Chairman, and I 
welcome this opportunity to welcome Arlen Lancaster here before 
the Committee. As has already been said, he is a tremendous 
hard worker. He has been on my staff and did super work there. 
We hated to lose him, and now he is doing great work for the 
NRCS, and we are looking forward to working with him.
    I also want to indicate that we have a mark-up in the 
Finance Committee on the minimum wage bill that I am going to 
have to leave to momentarily so I will probably have to cut my 
questions short. I apologize for that.
    I did have two questions I wanted to try to get in, and 
Arlen, the first one was for you. As you know, an issue that I 
have been interested in is how the Farm Bill conservation 
programs can work in conjunction with Endangered Species Act 
objectives in terms of recovering species.
    And we need to use the protection and promotion of species 
as a recovery objective, in my opinion, for Farm Bill programs 
as much as possible without violating or leaving the original 
objectives of those programs.
    In your testimony, you mention that NRCS' efforts have been 
engaged in addressing species recovery in some context, 
including sage-grouse habitat in Idaho and in other western 
States. Could you tell us just quickly what work the NRCS is 
involved in that is helping to improve and utilize land 
conservation programs to address threatened and endangered 
species?
    Mr. Lancaster. Mr. Chairman, as you talk about reaching 
goals for species conservation and wildlife, we cannot miss the 
fact that the majority of this country is in private 
landownership, and it is those private landowners and their 
conservation efforts that will really address wildlife needs 
and habitat.
    And as an agency that works with those landowners across 
the suite of our programs from CSP to EQIP to the Wildlife 
Habitat Incentives Improvement Program, we are addressing those 
needs of landowners to implement habitat needs.
    Specific to the Sage Grouse, I think that that is a 
demonstration how effectively private landowners with the help 
of NRCS can work with State agencies, can work with cooperators 
to demonstrate the habitat improvements they are making to 
address the need for the Fish & Wildlife Service to look at a 
potential listing of species.
    We work very closely with the Fish & Wildlife Service on 
our programs. I have worked closely with the Director of the 
Fish & Wildlife Service as we try and get some programmatic 
agreements on our practices.
    When we are implementing practices that provide a net 
benefit to species, we can work closely with the Agency, with 
the Fish & Wildlife Agency to streamline that process so that 
we can get those practices on the ground and those habitat 
improvements implemented.
    And so I think to answer your question, it is hard to pin 
down one thing because when I look at wildlife habitat and I 
look at our programs and as we focus on water quality and water 
quantity and soil quality and air quality, all of those 
measures to improve those resource concerns directly benefit 
species.
    But we are also able to I think target our programs within 
States toward specific species. In Idaho, we have worked 
closely with the State to address Sage-Grouse, to address Bull 
Trout and other issues. In Montana, I know we have worked on 
the Grayling.
    Other parts of the country we have worked on species 
specific by utilizing our State Technical Committee in how we 
target those resources.
    Senator Crapo. And that can be done without abandoning the 
original objectives of the various conservation programs?
    Mr. Lancaster. Absolutely. Again, I think as you optimize 
the environmental benefits, you are providing a direct benefit 
to wildlife.
    Senator Crapo. Well, thank you. I do have a number of other 
questions. I might just submit those to you because of my time 
constraints. But, Ms. Shames, I did have one question I wanted 
to ask you. In your testimony you indicated that there was 
identification of eight cases of duplicate payments between CSP 
and other programs that was in violation of the law. And the 
recommendation I believe is that a very strong new program to 
identify these overpayments be adopted by NRCS, and I certainly 
agree with that objective.
    The question I have is this: As I do the math, it appears 
that, depending on how you interpret the numbers that you have 
come up with, NRCS is about 96 to 97 percent effective in 
avoiding those duplicate payments, which I think is a pretty 
good record, and we are talking about how to get that last 3 to 
4 percent. Even if you make all the assumptions in favor of 
that, it might even be down to maybe 1 percent of payments that 
are duplicate stopped.
    And the question that obviously comes to my mind is how 
costly will it be to put a program in place to find that last 
couple of percentage points versus what we are losing in the 
current system even given the fact that the NRCS has indicated 
they have even added additional programs now to try to address 
this? Did you study that?
    Ms. Shames. There is always a tradeoff between what a 
program is going to cost and what the outcome is going to be. 
What we recommended, in fact, was that there be an automated 
system put in place for NRCS to better identify incoming 
applications that may potentially have duplicate payments and 
also to review existing contracts. So we are talking about 
building a management tool to help NRCS do that.
    Senator Crapo. And you think that can be done without a 
significant increase in administrative cost?
    Ms. Shames. We did not examine the administrative costs, 
but surely that is one of the factors that should be 
considered.
    Senator Crapo. All right. Thank you. I apologize, Mr. 
Chairman, I am going to have to run to that Finance Committee 
meeting, but thank you for holding this hearing.
    Chairman Harkin. You have set an example; you are yielding 
back 2 minutes of your time.
    Senator Crapo. I am yielding back 2 minutes. Can I get it 
some other time in another hearing?
    [Laughter.]
    Chairman Harkin. Right, exactly, bank it. Thank you very 
much, Senator Crapo.
    Now we welcome a new member of our Committee, the Senator 
from the great Keystone State of Pennsylvania, Senator Casey. 
Welcome to our Committee, Senator Casey, and please proceed.
    Senator Casey. Thank you, Mr. Chairman. I appreciate this 
opportunity to question these witnesses, and I appreciate your 
leadership of this Committee and we are honored to be here.
    I was somewhat surprised that Senator Leahy told in a 
public setting the story that he told me in private about 
Senators from long ago, but I appreciate his openness on that.
    Just a couple of questions, and I may reserve some time for 
later, but the interaction between the two of you, and we 
appreciate your testimony and the expertise you bring to these 
issues. It reminds a great deal about the work I did in State 
Government.
    I spent 10 years there, eight of those ten as the Auditor 
General of Pennsylvania, kind of a GAO-type public official in 
that sense. And I was always struck by in State Government, and 
I think it has application to what we do in the Federal 
Government, as to what happens when a report like this is 
submitted, what happens on the end of the scale where the GAO 
is focused on an issue and provides recommendations and 
findings, but also what the Government does in response to 
that.
    And I guess my first question was more along the lines of 
the process in terms of how that benefits taxpayers, and I 
guess my first question is this, and I guess, Ms. Shames, this 
would be addressed to you: How does this normally transpire if 
GAO, as it is done here, and I guess your report is dated 
today, I guess. What happens from here after you have submitted 
your report after the Government agency has a chance to 
respond, what is the timeframe there in terms of how they 
respond and how you deal with that and how that is made part of 
the public record?
    Ms. Shames. Agencies are to provide a letter within 60 days 
in terms of how they are going to follow up with GAO 
recommendations. That letter is what we use then as a basis for 
whether or not agencies have been responsive to what we have 
suggested.
    GAO has its own tracking process, so we do follow 
recommendations to see, in fact, if they have been taken care 
of, and if they have, we do write that up as an Accomplishment 
Report.
    We have found based on tracking these recommendations over 
the years that if agencies have not implemented the 
recommendation within 4 years, that it is not likely that the 
recommendation will ever been implemented.
    Senator Casey. How quickly between the time you have 
reported and the time that you have a sense of implementation 
or at least a process to begin implementation, what is the 
timeframe within which the public would know that? In other 
words, do you do a 6-month review or a 1-year review or how 
does that----
    Ms. Shames. We do an ongoing review in terms of the 
recommendations, and ultimately that does become part of the 
public record. When we have decided that the recommendation has 
been followed, there is an Accomplishment Report. That is 
publicly available.
    Senator Casey. It is called an Accomplishment Report?
    Ms. Shames. Yes.
    Senator Casey. Mr. Lancaster, one question I had because it 
was cited early in the report about performance measures, would 
you just tell us a little bit about that in terms of even apart 
from what GAO is reporting on today, how do you and the team 
you work with monitor and keep track of and try to be cognizant 
of performance measures with regard to CSP or really any other 
program that you administer?
    Mr. Lancaster. As was alluded to, when you are talking 
about conservation practices and deriving the actual outcomes 
of those practices, it can often be difficult. You are talking 
about resonance times of nutrients in the soils, you are 
talking about measures that are oftentimes difficult to 
capture.
    We have a process underway, the Conservation Effects 
Assessment Project, to really to determine the outcomes of 
those programs.
    But specific to performance of our programs and how we are 
implementing them, we have included within our business lines 
and within our strategic plan outcome-based goals for our 
programs so that we can measure those things that are easily 
quantifiable in terms of numbers of acres with conservation 
plans applied or numbers of acres with irrigation practices 
applied or acre feet that we are addressing through specific 
practices.
    Again, we are building that into our business alliances as 
an agency, and so we do measure ourselves against that 
performance level. It is something that I closely look at 
throughout the course of the year to see where we are at in 
reaching those goals.
    In terms of GAO, I find their reports constructive, and 
what we have done with these recommendations in many cases has 
been to implement them. There are some points that we may 
disagree on, but those that we agree on we implement.
    One of their recommendations was to take those outcome-
based measures, those performance measures and integrate them 
into our factors of our allocations. That is something we 
intend to do once we have good confidence in those numbers and 
that data as well as understand the effects of that on that 
allocation process.
    Senator Casey. I know I am almost out of time, but I guess 
my last question, I may reserve some time, would be when you 
look at these findings today in this report and you hear some 
of the dialog and the question and the answer today, where do 
you believe there is the most significant conflict between what 
GAO is saying today and what you believe to be the case in 
terms of how you measure your performance?
    I realize you may agree in some areas, what area or what 
finding creates the most conflict between what you believe you 
are doing and what GAO is finding, if you can?
    Mr. Lancaster. The point that we would disagree with is 
that we are not optimizing the benefits of the EQIP program. I 
think if you look at our factors, those are resource-based 
factors so we are addressing those resource concerns, as well 
as the entire process for distribution of those dollars.
    I do not think GAO is saying that the projects that are 
being funded are not optimized, that we are not addressing 
those resource concerns within a State. So when you look at the 
allocation formulas to the States, the State evaluation and 
ranking process, the State Technical Committee in their role in 
making recommendations on how we rank and look at those 
projects, I think the projects that are occurring, the 
landowners that are getting funded, we really are optimizing 
the program and we are addressing the program purposes.
    Senator Casey. Thank you. I may reserve some time, but I 
will move one.
    Chairman Harkin. This is great. This is setting great 
examples here. Next was Senator Leahy, who has gone, Senator 
Klobuchar, who is not here, and Senator Nelson. Senator Nelson.
    Senator Nelson. Thank you, Mr. Chairman. With the 
concurrence of the Chair, I would like to make an introduction 
of someone who is going to be in the next panel from Nebraska 
because my schedule is not going to permit me to be here.
    It is really a pleasure for me to introduce Duane Hovorka 
from Elmwood, Nebraska. He is the Farm Bill Outreach 
Coordinator for the National Wildlife Federation. He also 
serves on the NRCS State Technical Committee for Nebraska and 
on the University of Nebraska Center for Grassland Studies 
Advisory Board.
    He has been involved in the analysis and development of 
Farm Bill proposals dating back to the 1990 Farm Bill. Today he 
will be testifying on behalf of the National Wildlife 
Federation, the Sustainable Agriculture Coalition and the Isaac 
Walton League of America.
    Duane has 25 years of experience in public policy analysis, 
and he recently joined the National Wildlife Action Federation 
after 10 years as a consultant doing public policy work for 
wildlife and agricultural organizations including the National 
Wildlife Federation, the Sustainable Agriculture Coalition, the 
Center for Rural Affairs, which is located in Nebraska and the 
Nebraska Wildlife Federation. So it is my pleasure. I am sorry 
that I will not be able to be here for his presentation, but I 
know I am looking forward to reading it.
    Mr. Lancaster, is it possible for two farms in the same 
eligible watershed to receive the same grade or ranking on 
their CSP applications but have one of them not receive a 
contract based solely on the lack of funding for all eligible 
farms in the watershed?
    In other words, were any farms eligible for CSP contracts 
but not awarded a contract for no other reason than inadequate 
funding, and if that is the case, is it fair, and what should 
we be doing to achieve the goals for CSP? Is there a way to 
prorate funding or what are your suggestions?
    Mr. Lancaster. If there are two equal operations----
    Senator Nelson. Equal opportunities.
    Mr. Lancaster [continuing] Equal rankings, they would be 
included in the program. The difficulty we have is when you 
have operations that are not equal, again with limited funds, 
and certainly, when you are looking at fairness in the program, 
one of the criticisms I have heard across the country is folks 
are saying, ``It is a have or have not program, that I would 
otherwise be eligible, I have met the criteria when you look at 
the Self-Assessment but there is not funding available to me.''
    In our ability to go with a strict ranking system like we 
do in the EQIP program prohibits our ability to give someone a 
clear delineation of who would be in and who would be out of 
the program. But if all things are equal, those individuals 
would be in the program.
    Senator Nelson. Both at the same level?
    Mr. Lancaster. At the same level.
    Senator Nelson. You would not have one kicked out because 
you did not have enough money and you could not prorate, right?
    Mr. Lancaster. If the resource concerns are similar or if 
they are addressing the same resource concerns, if they have 
the same score in their assessments and if they have the same 
score on their SEI and those resource concerns, Senator, I 
believe they would be in the program.
    Senator Nelson. All right. I think we may have an example 
where that was not the case, which we will bring to you with 
follow-up correspondence.
    Now, recently I learned that a Nebraska farmer failed to 
achieve a funded level because he was told that he, quote, 
``performed one too many tillage operations'' on his ridge-
planted land, even though ridge planting has long been the 
conservation standard for gravity irrigated in flat land 
farming and it has allowed him to use half the residual corn 
herbicide in his crop rotation.
    It is my understanding there are no credits given in the 
grading for using less pesticide, and is that in fact accurate 
and what would be the explanation?
    Mr. Lancaster. In trying to implement the program as 
equitably as possible, we are trying to find scientifically 
valid standards that we can measure against. And in many cases, 
that is your Soil Conditioning Index, and a big part of that is 
the tillage that occurs.
    Again, in some cases folks my disagree whether or not it is 
fair, but what we need to do is we need to have a criteria that 
we can measure applicants against that are apples to apples.
    Senator Nelson. Well, you can have it for fairness, but 
doesn't it have to be valid?
    Mr. Lancaster. Yes. And I believe when you look at our 
tools, our erosion tools and our Soil Conditioning Index, those 
are scientifically based tools that when you look at what is 
out there and what has been proven, those are programs and 
tools, models with a long track record.
    Senator Nelson. Will you take a look at this, because it 
seems to me that one of the valuable things that you would want 
to achieve is less chemicals.
    Mr. Lancaster. That certainly is a factor. I would be happy 
to sit down with you and take a look at this. But again, when 
you look at the program, a lot of those measurements are on the 
soil quality and there are a lot of other issues in addition to 
chemical use that we want to try and address.
    Senator Nelson. I think they all ought to be considered and 
the ranking of them should be clearly considered.
    Ms. Shames, you testified that GAO found instances where 
producers received duplicate payments from EQIP and CSP for 
similar related conservation actions, and you noted the number 
of producers that may have received duplicate payments, but do 
you or GAO or Mr. Lancaster have an estimate of the dollar 
amount as opposed to just the number of instances that was paid 
out under these programs that would be duplicate payments?
    Ms. Shames. We do not have an aggregate figure for either 
the total dollar value for the duplicate payments nor the 
number of cases. When we asked NRCS, they could not provide an 
aggregate figure either.
    So while we do not know what the total is, we do know that 
the possibility exists and that duplicate payments have 
happened and we also note that the possibility can increase as 
CSP is extended to other watersheds and also the possibility 
can increase because the contracts are multiple years, so the 
duplicate payment would happen not only in the first year but 
in successive years.
    Senator Nelson. Now, does GAO recommend that this be taken 
care of or does GAO in recommending that it be taken care of 
provide a management tool for the department to avoid having it 
happen in the future?
    Ms. Shames. We recommended that NRCS put in such a 
management tool that you are referring to, an automated process 
that eventually would be able to help identify incoming 
applications for possible duplicate payments as well as review 
existing contracts and then to take follow-up action.
    Senator Nelson. Mr. Lancaster, do you have some idea of 
what kind of money we are talking about here? Are we talking 
millions or are we talking hundreds of thousands or is there 
any way of knowing?
    Mr. Lancaster. Senator, we have introduced in our contract 
management software tools that will prevent those duplicate 
payments between our contracts. We have created a bright-line 
distinction between practices that we may get some push back on 
because that is there. Based on that, we can address those 
prospective payments.
    When you look at previous payments, we are undertaking an 
effort to review duplicate payments, based on those 12 found in 
2004, we are really talking about tens of thousands of dollars 
rather than hundred thousands or millions of dollars, and we 
are going back to get that number.
    Senator Nelson. I commend you for doing that. I think that 
it is important that we not have any waste of taxpayers' funds 
but we do not want to make a mountain out of a molehill in the 
process either. We just need to have a process in place to 
correct it and avoid it in the future. So thank you, Mr. 
Chairman.
    Chairman Harkin. Thank you, Senator Nelson. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman. I first want to 
follow up on Senator Casey's questions on not so much process 
but you talked about optimizing programs, setting priorities, 
all of that.
    In Ohio in the last 10 years, maybe 20 years but especially 
10 years, an acceleration of the number of factory farms in 
Ohio, and would you sort of talk to us, if you would. It seems 
to me that EQIP is disproportionately reaching factory farms to 
the exclusion of smaller family farms.
    Could you talk about any data you could give us about that 
and which farms are most likely and if you have by size or if 
you see any trends there? I am understanding the factory farms 
have more needs by definition of their size, but if you could 
shed some light on that for us.
    Ms. Shames. Addressed to GAO, Senator?
    Senator Brown. Addressed to either of you actually, 
probably Mr. Lancaster.
    Mr. Lancaster. Senator, I can respond to you in writing or 
afterwards. We do keep data on the type of applications or the 
type of projects that are funded.
    I can tell you anecdotally when we look at the projects, 
when you look at how we are distributing those funds, it is 
based on resource concern. How are we addressing those resource 
concerns in a given watershed? Where is the impact?
    This is one issue when we look at our factors in terms of 
water quality, agriculture can make a contribution to improving 
our water quality, our wildlife habitat, our air quality, and 
so when we look at those funds, we target those concerns. And 
so I have not seen that distinction necessarily between again 
whether or not we are excluding small farmers to the benefit of 
large farmers, but I can get that data for you.
    Senator Brown. Ms. Shames, do you have any thoughts on that 
that you have been able to see from GAO?
    Ms. Shames. We did not review that data.
    Senator Brown. The second question, and I am new to this 
Committee, obviously, and new to some of these issues, and we 
just did sort of a cursory survey of watersheds in Ohio and 
from what we could find, there are 300-plus watersheds and 
there was only one, Sandusky in northern Ohio, not far from 
Lake Erie, that was funded that was at least added to the mix 
recently.
    What should that tell me that others were added to the mix 
earlier and ongoing, Sandusky is just now, or that a lower 
proportion of these watersheds are getting into the program?
    Mr. Lancaster. I think when you look at the selection of 
our watersheds, we have a two-tiered system essentially. We 
have a system within the State to look at our national criteria 
for the program to see which watersheds would most benefit from 
the program being in those watersheds.
    At the national level, based on limited amount of funding, 
we need to determine how best can we get regional diversity, 
nationwide diversity, crop diversity as well as reach the 
largest number of producers in that selection process.
    If a watershed was recently added, it is a process of where 
do those watersheds stand relative to need versus others.
    Senator Brown. Does that number of 1 out of 300, should 
that concern me? I mean, when Sandusky was added to the mix, 
many of those others are already in the mix at an earlier time 
in an ongoing way?
    Mr. Lancaster. When you look at our programs, and I do not 
have the number in front of me, but there is a limited number 
of watersheds overall that have entered in the program.
    The Greater Miami Watershed from last year was the largest 
to date in terms of enrollment in the program. But again, with 
limited funds, what we are trying to do is stretch those 
dollars so that we can address diversity across the Nation, 
across program crops, and get as many folks into the program as 
possible.
    Senator Brown. And partly following Senator Nelson's 
question, there are criteria that are met with no real, I mean, 
I know it is not an ``entitlement program,'' so-called, but if 
the point levels or however the criteria are met, that gets you 
admission into the program without other kinds of factors 
typically?
    Mr. Lancaster. The difficulty we have is again the bar for 
the program is such that there are a number of folks who are 
eligible but with limited funding we cannot possibly reach all 
those producers that might otherwise be eligible for Tier 1, 
Tier 2 or Tier 3, and therefore we need to prioritize how we 
are going to enroll those individuals.
    I would be happy to share with you as well a map on the 
program scope of the watersheds that are involved in the CSP 
program.
    Senator Brown. Okay.
    Mr. Lancaster. It appears there are couple of others within 
Ohio that have pretty good coverage.
    Senator Brown. When you hear those numbers in Ohio, is that 
unusual, are you surprised by that that it is that relative 
small number?
    Mr. Lancaster. If that were the case and depending on the 
size of the watershed, clearly there would be concern, but the 
map I am looking at, Ohio actually has relatively large 
coverage within the State.
    Senator Brown. Okay. Thank you. Thank you, Mr. Chairman.
    Chairman Harkin. Senator Thune.
    Senator Thune. Thank you, Mr. Chairman, and I want to 
commend you for holding this hearing and also note that this is 
going to be an important subject in the next Farm Bill debate, 
and I look forward to working with my colleagues to ensure that 
we get producers the tools they need to achieve economic 
success at the same time that they are achieving critical 
conservation measures.
    I think the challenge for us is going to be how do we 
strike that balance between making sure that we have got the 
food and fiber and homegrown renewable energy demands of the 
country met at the same time that we are seeing that the most 
vulnerable lands are protected from erosion and that we are 
promoting and strengthening wildlife habitat.
    I know that any Farm Bill is a balance that we have to 
strike and this certainly will not be any exception, and also 
at the same time looking at what we can do to strike the 
balance between retirement of land as well as conservation of 
working lands.
    In the 2002 Farm Bill we made an effort, I think a much 
stronger effort, in the Conservation Title, and as a member of 
the House at that time, I actually was the author of the CSP 
program that the Chairman authored over here in the Senate, and 
like you have been disappointed that it has not been 
implemented or has not achieved the level of application that 
we had hoped it would when it was initially proposed and 
adopted back in 2002.
    But I think the challenge before us now is to figure out 
how do we best achieve those results and further the 
development of working lands conservation programs, including 
the EQIP program, which I think has been a big success.
    I know it is not the subject of this hearing, but the 
conservation programs that have achieved a high level of 
success in my State include CRP, WRP, some of the set aside 
programs, and in many respects have made South Dakota the envy 
of other States like Iowa when it comes to pheasant production. 
That has become a very big part of our economic success in 
South Dakota, and more and more producers have put lands aside 
and been able to benefit from the commercial benefit that comes 
with pheasant operations.
    So that is another subject that I am very interested in 
this whole debate and how do we continue to promote that type 
of wildlife production and everything that is attendant to it. 
So I suspect we will get into the CRP discussion of that 
program as well at some point.
    But I do have a couple of questions with regard to the 
subject of the hearing today, primarily dealing with the EQIP 
program. And I know that in the 2002 Farm Bill, that was always 
one of the big successes. EQIP was one of the big winners in 
the 2002 Farm Bill in terms of the additional funding that went 
into the program.
    But I would like to have our panelists, if they would, 
comment on the issue of some of the backlog in EQIP 
applications because that was originally the issue was we do 
not have enough funding. We put more funding into it and I am 
interested in knowing what can be done in the next Farm Bill in 
addition to funding to help streamline the application approval 
process and increase the success rate of EQIP applications.
    Mr. Lancaster. Senator, one of my goals in looking at our 
programs is to make conservation easier. I truly believe that 
landowners when given the information, given the resources want 
to make good decisions on those lands. I mean, after all they 
are there to pass those operations on to future generations.
    So as I look at the EQIP program, we have reduced the 
backlog from 5 to 1 to about 2 to 1 in terms of applicants into 
the program, which is great success but it also demonstrates 
based on the almost tenfold increase in the program that there 
is great demand for the EQIP program in the Nation.
    I think as we make the process easier, as we make the 
applications easier, as we look at opportunities for potential 
price discovery we can make those dollars stretch. One of the 
things that I do is look at our cost share rates within the 
program.
    Within our regional equity States, many of those cost-share 
rates are up near the cap. They are near 75 percent. Other 
States, the cost-share rate again is dipping down to 50 percent 
or more.
    There are many instances where producers would accept a 
lower level of cost share to implement those practices and we 
can allow those dollars to stretch further as well.
    Senator Thune. Well, even if let's assume it is down and 
you get 50 percent of the applications are accepted and the 
remaining 50 percent go unfunded, what you are saying though 
with the cost-share issue that this still is an issue of 
funding, or are a lot of these folks who are applying into the 
EQIP program, how many of them just do not meet the eligibility 
requirements?
    Mr. Lancaster. I cannot give you that.
    Senator Thune. I know you have reduced the backlog, but 
that still seems like when you are only getting 1 out of 2 who 
are applying to the program that are actually getting funded, 
that does not seem like a real good rate of success.
    Mr. Lancaster. I cannot give you the specific number on how 
many of those would otherwise be eligible for the program or if 
that entire amount is eligible for the program.
    But when you look at these programs, I think there will 
always be more demand than there is available. We have 930 
million acres of non-forested agricultural land where 
producers, I think given the tools, would want to access those 
funds, and so in many cases it is a matter of prioritizing what 
resource concerns are you trying to address.
    As you look at those land ownership patterns, you look at 
those watersheds, I think every State has areas of specific 
concern to the State and others where one operation may not 
make a difference in that stream quality or other issues.
    So as we look at the program, I think it is important to 
again look at that prioritization of funds and whether or not 
EQIP is a program that everyone is entitled to 50 percent of 
implementing conservation practices, or if it is one where we 
need to target those resource concerns that are most concerned 
to those within a State.
    Senator Thune. In the 2002 Bill there were some sub-
programs created within EQIP focusing on particular regions or 
specific environmental concerns, and I know there are some 
groups who are advocating additional subgroups. Does that make 
sense in terms of your notion of targeting?
    Mr. Lancaster. I will say even within the EQIP program 
there is a carve-out for the Klamath Basin. The application 
backlog exists within that program as well, and so it is one of 
those that I think you could create a number of sub-parts, but 
you will probably always have that backlog. Because with that 
130 million acres of eligible land, not to mention forest land, 
and if you really are trying to address resource concerns, 
every acre counts, there will always be a backlog within those 
programs.
    Senator Thune. It is the one program in the Farm Bill that 
livestock producers can benefit from. They never have wanted 
really to be in the other parts of the farm program, so it is 
the one thing that we can do that gives them access to a source 
of funding that can help them with their operations. So I want 
to make sure we have got the best program possible that is 
available to livestock producers.
    One final question very quickly and it is a little bit back 
to the whole question of CRP but it could become a working 
lands issue.
    If CRP acres are put into grasses that might be used for 
energy production, native grasses, bluestems, switchgrass, that 
sort of thing, can that accomplish the wildlife production, 
conservation, all the things that we want to see that are 
benefits in addition to being used or harvested for energy 
production? Can all those things compliment each other?
    Mr. Lancaster. First, let me say in terms of EQIP, it is 
our most flexible program. It is kind of the flagship for our 
programs, and I agree with you with the need to include a 
program that has that flexibility to address livestock 
producers, crop producers and others.
    In terms of CRP, NRCS provides technical assistance to 
landowners engaged in that program through the Farm Service 
Agency. When you look at perennials and the ability to harvest 
those, I think a lot of the wildlife benefit would be in those 
management systems of when you are harvesting, how you are 
harvesting those perennials.
    Senator Thune. But those objectives are not mutually 
exclusive. You could accomplish an energy production objective 
as well as continue to promote conservation, wildlife 
production, all those things.
    Mr. Lancaster. Based on the data I have seen, I think that 
that is an accurate statement. I would reserve the right to 
talk with our technical staff to talk about what really could 
be done there and what those impacts are. But based on the data 
that I have seen in the literature I have read, I do not 
believe it is mutually exclusive.
    Senator Thune. Thank you, Mr. Chairman.
    Chairman Harkin. Thank you, Senator Thune. I look forward 
to working with you. I thought that last question you asked was 
very probative.
    That is as we are going to try to use the Farm Bill to move 
more incentives for cellulosic production for ethanol biomass 
production, what programs do we have out there that would 
enable farmers to switch to do that and still give them the 
incentives so that they are not losing their productive 
capacity and not losing payments that they would normally get 
on a program crop or something like that.
    I just think you have hit on something that we really are 
going to have to spend some time and examine here in this next 
Farm Bill. I do not know which program would be the best. There 
is the grasslands program, there is CRP, CSP, figure out which 
is the best one or a combination that we can use together, so I 
look forward to working with you on that.
    It has got to be a big part of this Farm Bill, some way to 
moving to more cellulosic production for energy production for 
energy use. So I thought that was a very probative question and 
I appreciate it very much. And I will follow up on that with 
more questions about energy production some other time.
    Mr. Lancaster, my friend from Georgia had asked you about 
how much this would cost, CSP would cost, and you said, and I 
wrote this down, back-of-the-envelope is 930 million acres, 50 
percent enrollment, average cost 20 an acre, $9 billion a year.
    How much has OMB estimated the cost of this program if 
uncapped?
    Mr. Lancaster. I do not know that answer, Senator. I can 
certainly sit down with them. Part of the issue is that the 
program is capped and----
    Chairman Harkin. Yes, but I think it is about one-ninth of 
that, to tell you the truth, so I think that $9 billion is 
really a bogus number. I saw all the reporters writing very 
furiously when you mentioned that number there.
    I mean, first of all, 450 million acres, some of that is in 
the Grassland Reserve Program, some of that is in CRP. I do not 
know if you were counting CRP or not. Some of that is in EQIP. 
So right away you have got to start thinking about all these 
other programs, and we do not want to have duplication, so you 
have to carve that out.
    Second, I do not know how you assume 50 percent. What has 
been your history in the watersheds? As far as I know, you have 
not had 50 percent signed up in the watersheds. Have you?
    Mr. Lancaster. No, Senator.
    Chairman Harkin. No.
    Mr. Lancaster. Certainly, when you look at the program, you 
are talking about 930 million acres of land and so you would 
back out the 36 million of CRP land, you would back out the 
EQIP lands.
    As you have indicated a preference to have a program that 
allows folks to enter into the program with the intent to 
increase their level of conservation so that they would benefit 
from the program, you are really lowering that bar so that 
regardless of what level of conservation is currently on your 
farm, you can get into the program and we would then help you 
reach that higher level of conservation.
    Currently, the bar is set higher than that for entry into 
the program and so I do not know if you can say, ``What is your 
percentage of acceptance into the program now within a 
watershed,'' and extrapolate that to what an estimate might be 
of the program.
    Chairman Harkin. I do believe that you need more Tier 1 
involvement, and I do not think that you are getting that right 
now. Again, this is a balancing thing. One of the reasons we 
did CSP the way we did was I am sure that every one of us at 
this table, all the Senators who are here or Congressmen on the 
other side have heard more than once from farmers who say, 
``You know, I have been a good steward. I have practiced good 
conservation. My neighbor down the road, he plants up and down 
the hillside, does not do anything, and then they get the 
money.''
    Or they have had some land they had to go out and plow it 
up in order to qualify for a conservation program. So we have 
heard these stories for years. So one of the things was to say 
to those farmers who had been good stewards, ``You can get in 
this program.''
    You know that ``reward the best, incentivize the rest,'' I 
do not mind that as far as that goes, but if you are just going 
to reward the best and keep people out who need the incentive 
to get into Tier 1 so you can build them up to Tier 3, that was 
the whole idea of it. So there has to be a balance, and I 
think, quite frankly, it has gotten out of balance.
    Mr. Lancaster. Senator, I believe the CSP is a good 
program. I think again, as you are looking at conservation 
needs of landowners, you need to have a variety of tools, a 
stewardship tool and a cost-share tool like we have with EQIP.
    When you are talking about building up, I have seen an 
increased level of applicants for Tier 3 over the course of the 
program, and part of what that is telling me is that landowners 
recognize the benefit to being in the program. They are 
increasing their level of conservation so that they can get 
into the program, and therefore this policy of rewarding the 
best really is motivating other producers to increase their 
level of conservation because we are looking at those producers 
who have been good stewards, who have addressed their resource 
concerns. If they are in the program it is creating incentive.
    I have seen that across the country where folks are 
increasing their level of conservation because they anticipate 
the availability of the program someday coming to their 
watershed so that they will be prepared to enter into the 
program.
    I think the CSP program has been a success from that 
perspective.
    Chairman Harkin. I agree with you on that. I agree with you 
except that yes and no. The watershed-based program, of course, 
I cannot find it anywhere in the statute that we set up a 
watershed-based program, so we have some anomalies out there.
    We have a watershed, for example, where you have a farmer 
that is in the watershed and they are doing certain 
conservation practices. They are eligible for CSP. A farmer 
five miles down the road outside the watershed doing equally as 
good, if not better, conservation practices cannot get in. That 
is having a depressing effect on people.
    And the fact that if you are in a watershed and you are 
eligible and you do get in the program on the first round, and 
then you say, ``Well, Okay, I want to then do better 
conservation practices, when is the next time around that that 
watershed will come around?'' Something like 90 years?
    I do not know what it is, but it is something that is so 
far that not in their lifetime will they ever be able to get 
back in the program, so I cannot see that that is any kind of 
an incentive. Do you see what I mean?
    Mr. Lancaster. Mr. Chairman, those members that are in the 
program or those participants that are in the program have the 
opportunity to modify their contracts and increase their level 
of conservation.
    Chairman Harkin. That are in the program. I am talking 
about people in the watershed who did not get in the program 
because they did not quite meet it. Now they say, ``Oh, I see 
my neighbor is doing this. I want to get in that program. I 
will increase my conservation.'' But the next time that that 
watershed will be eligible, how many years?
    I was told it was 8 years, but I think it is much, much 
longer than that.
    Mr. Lancaster. Chairman, our original plan was an 8-year 
rotation again with a capped program and with that percentage 
of TA, we really needed to find a way to offer the program. I 
think that the watershed approach was an attempt to allow for a 
program that would have nationwide reach.
    Certainly, what I have seen for producers that are not in 
the program, they do recognize, ``My neighbor is in the 
program, I see some benefits, I am going to increase my level 
of conservation so that when I have the opportunity to enroll, 
I will be eligible.'' And I am seeing that across the country.
    Chairman Harkin. Well, maybe. I would like to know more 
about that, because what I have heard is that people in a 
watershed who did not qualify say, ``Well, gosh, I will not be 
eligible.'' I said 90 years. I do not know where I picked that 
figure up, but it is a long time. It is more than 8 years now, 
maybe double that.
    They say, ``Well, I will do something else.'' So I do not 
know that that is much of an incentive. But this is not your 
problem. That is our problem because we capped the program. I 
do not say me, but Congress did.
    And that is why this program was designed as an uncapped 
entitlement program. CSP is just like a commodity program, just 
like corn and cotton and wheat and beans and rice and 
everything else, it was a commodity program.
    Because conservation should be looked up as having a value, 
a producing value, a value to society. All of the programs in 
conservation in the past have always been dealing with how you 
get land out of production but for the EQIP program. They have 
been good programs, but we needed to do some environmental 
stuff on producing lands and put a value on that.
    It was wrong to take money out of the program for disaster 
payments. As I mentioned in my opening statement, that has 
never been done before. Hopefully, it will never be done again. 
And then to cap the program as was capped, there would be a 
howl from around the country if we capped a commodity program.
    We say, ``Okay. You are eligible for a target price, loan 
rate, deficiency payments, LDPs, but there is only so much 
money available,'' and first come first serve or you set up 
some kind of a scheme to reward farmers.
    That was the intention of this CSP was to make it like that 
so that if you did certain things and met certain things and 
you were eligible, you got in the program.
    But again, that is more of a problem for Congress overcome, 
not yours. In fact, I would just say publicly, Mr. Lancaster, 
that with the constraints that we have had on it, you have done 
a great job in implementing the program, so I do not want you 
to misinterpret what I am saying here. I am just trying to for 
the public's benefit and for the hearing benefit is to point 
out that the CSP is not operating as was envisioned in the law 
as was set down in statute. Now, again, part of that is because 
we capped it. Then when you cap it and you limit it, then you 
are forced to do certain things to make it try to work.
    Our job I think in the Farm Bill is going to be to see how 
we can modify that and perhaps make it a little better and more 
fair. One of the things I think is going to big is what Senator 
Thune just mentioned and how we couple that with providing 
incentives for energy production in a conserving way. Because 
most of these energy crops that we are talking about are very 
conserving in nature, and so this seems to me a great place to 
look for that kind of an incentive.
    Mr. Lancaster. Mr. Chairman, I would share I absolutely 
agree with you one hundred percent that conservation has value, 
and I think there are opportunities in the marketplace to 
reward that value.
    We have entered into a memoranda agreement with the 
Environmental Protection Agency on a water quality credit 
trading opportunity. We are looking at similar agreements with 
the Fish & Wildlife Service on habitat credit trading 
agreements and that is a market-based incentive, market-based 
opportunity to inject private capital into conservation.
    Even with the Conservation Security Program, I have seen 
Tier 3 producers who are marketing their product as a Tier-3-
grown commodity, and they are getting a premium in the 
marketplace for again placing a value on conservation.
    Chairman Harkin. You are absolutely right. One last thing 
before I yield to Ms. Shames is I want to follow up on Senator 
Nelson's point.
    Now, I have heard from a lot of organic farmers who 
practice good conservation. They have no runoff, they do their 
ridge tilling, they plow back in manure in the ground, they do 
it in an environmentally sound way, they cannot get in the 
program.
    Now, again at the outset I want to say perhaps my history 
is one of being a very strong supporter of no-till farming. I 
believe in that without exception. Well, not without 
exceptions, maybe there are exceptions, and that is for certain 
organic farmers, for certain people who have an environmentally 
sound practice but do not put on herbicides, pesticides, things 
like that, so we need to examine how we change this so that 
they are eligible.
    And I am open for any suggestions that you might have from 
your agency what we might do in the Farm Bill to accomplish 
that.
    Mr. Lancaster. I would be happy to share thoughts with you. 
When I do look at organic producers and I do look at how they 
are qualifying, they are qualifying in similar ratios to other 
producers in the watersheds.
    Because you are an organic producer does not necessarily 
mean that you are farming in a conservation-oriented manner in 
terms of tillage. In many cases, you have to till, which 
disturbs the soil, and you have to apply some type of manure or 
fertilizer for that opportunity. But, again, I want to make 
conservation easier. I want to look at our programs to see how 
we can make sure that we are not disadvantaging any one sector. 
Because agricultural in this County is very diverse. We need to 
have opportunities for organic producers, for row-crop 
producers, for livestock producers, all to participate in our 
conservation programs.
    Because again, I believe they have a built-in incentive to 
operate in a sustainable manner, and we want to find the tools 
to help them do that.
    Chairman Harkin. I appreciate that. Last, just keep in mind 
that as we proceed in this Farm Bill and as we try to build in 
incentives for the production of energy crops, cellulosic 
crops, we can marry that up with conservation I think in a 
very, very beneficial way for farmers and for our national 
security.
    Ms. Shames, I have not asked you anything, but the only 
thing I ask is both of you on this idea of duplicate payments, 
we do need to know what is happening out there and as I have 
heard, we do not really know. We know it is happening, but we 
do not really have a handle on it.
    Do I have your assurance, Mr. Lancaster, that we are going 
to try to implement the recommendations that the GAO gave you 
on that?
    Mr. Lancaster. Mr. Chairman, we have already begun 
implementation of those recommendations.
    Chairman Harkin. Then I would like to follow up on that. 
Let me know what you have done on that down the pike.
    Mr. Lancaster. Absolutely.
    Chairman Harkin. Senator Chambliss.
    Senator Chambliss. Just one question, Mr. Chairman. Arlen, 
is there any general consensus within the Administration as to 
which box the CSP program falls in within the WTO?
    Mr. Lancaster. Chairman, there are a number of different 
payments within the CSP program. I do not think that there has 
been any final determination on where each of those payments 
would fall in terms of WTO. I can certainly look into that and 
get back to you.
    Mr. Chairman, we have a number of programs or a number of 
payment structures within the CSP program, the stewardship 
payment, the enhancement payment, the incentive payment. Each 
of those would have to face its own review in terms of whether 
or not that would meet tests in terms of WTO and which box that 
might be placed in.
    So I do not believe that we have looked closely at those 
programs individually or those payments individually to see 
where that would be categorized.
    Senator Chambliss. As we move forward with the 
consideration of the Farm Bill, we are going to need some 
guidance on that because that is obviously going to be critical 
to us in our deliberations, so we will look forward to staying 
in touch with you on that issue. Thank you.
    Chairman Harkin. A very good point. Thank you, Senator 
Chambliss. I thank this panel. Is there any last thing before I 
dismiss you and bring up the second panel?
    Mr. Lancaster. Senator Chambliss, the staff notifies me we 
are currently notifying WTO, so we are working with them on 
which categories those would be in.
    Chairman Harkin. Thank you again, Mr. Lancaster. Thank you, 
Ms. Shames. Thank you both for appearing here, and we will 
follow up on some of these things with both of you. Thank you, 
Mr. Lancaster.
    Now we will call our second panel. Mr. Craig Cox, the 
Executive Vice President of the Soil & Water Conservation 
Society; Ms. Kathleen Merrigan, Director of the Agriculture 
Food and Environment Program for the Center for Agriculture 
Food and Environment in Winchester, Massachusetts; Mr. Duane 
Hovorka, Farm Bill Outreach Coordinator of the National 
Wildlife Federation from Nebraska; Mr. James Ham, President of 
the Georgia Association of Conservation District Supervisors 
from Smarr, Georgia.
    We welcome our second panel, and again, 6-minute statements 
each. If you can cut them shorter than that, we would be most 
appreciative, and then we will open it up for 8-minute round 
questions.
    First we have Mr. Craig Cox, Executive Director of the Soil 
& Water Conservation Society. Mr. Cox, welcome again to the 
Committee and we look forward to your testimony.

  STATEMENT OF CRAIG COX, EXECUTIVE DIRECTOR, SOIL AND WATER 
               CONSERVATION SERVICE, ANKENY, IOWA

    Mr. Cox. Thank you, Mr. Chairman, Senator Chambliss, 
members of the Committee, for the opportunity to appear here 
today.
    I would like to applaud you for holding this hearing on 
working land conservation. It is imperative that we have an 
effective working land conservation effort on our Nation's 
working lands. In many respects, the viability of agriculture, 
the health of our resources and the quality of our environment 
depends on the effectiveness of that effort.
    I would first like to echo comments that have been made 
already about the importance of technical assistance to our 
working land conservation effort. I have no doubt that the 
administrative tasks of writing contracts and cutting checks to 
get money out the door will in fact be accomplished in both 
EQIP and the Conservation Security Program, but I have serious 
and growing doubts about whether the scientific and technical 
support will be there to make those checks meaningful for both 
producers and the environment.
    At the end of the day, it is the skills, knowledge, 
creativity and commitment of people, both our producers and the 
professionals that they work with, that will determine whether 
we achieve the goals of working land conservation or not.
    In 2002 this Committee and Congress took important steps to 
strengthen our technical assistance network. In my testimony, I 
outline additional steps I would recommend, but at the end of 
the day I truly believe the most fundamental Federal role in 
working lands conservation is to build and support the 
technical assistance network that we need. I think in the long 
term that effort will be more important than EQIP or CSP in 
driving effective working lands conservation.
    Now, about EQIP. EQIP has emerged as the most important 
financial assistance program in our working lands conservation 
effort. Overall, our past and ongoing assessments of EQIP have 
indicated mixed results in terms of the performance of EQIP, 
but with reasons for optimism that the program is performing 
effectively.
    I have outlined a number of opportunities in my written 
statement that I think would ramp up the performance of EQIP. 
Let me just mention one, which I think is far and away the most 
promising opportunity and this is to focus more of EQIP's 
resources through special projects.
    Now, let me be clear about what I am saying here. What I am 
not recommending is going back to the bad old days where we 
drew arbitrary lines on maps and told people you were in or out 
depending on which side of the line you are on.
    What I am talking about is focusing technical and financial 
resources on projects like, Mr. Chairman, Lake Rathbun in Iowa 
that are designed to strategically and effectively address 
conservation issues of great importance to local communities. 
The scientific, the technical, the political advantages of this 
kind of focus on high value resources through special projects 
is remarkable.
    And if you think about it, we could mandate 30 percent of 
EQIP dollars be spent on special projects, either alone or 
through a strengthened partnership and cooperation section of 
the 2002 Bill, and still leave us the capability to operate a 
base program in every county of this country at funding levels 
that are unprecedented in recent history.
    I think striking a better balance between special projects 
and a more diffuse allocation of dollars is far and away the 
biggest opportunity we confront in EQIP.
    I have reserved CSP for the last not because it is least 
important but just the opposite. I was going to start my 
remarks on CSP by trying to make the case that urgent action is 
required to fully realize the promise of CSP, but frankly, the 
earlier session has, I think, made that case more compellingly 
and more articulately than I could have done.
    So let me just skip to the two big issues I think we 
confront, both of which have been raised already in the 
previous session, and those are money and environmental 
performance.
    As has already been discussed, the statute envisions a 
stewardship entitlement, but the reality has been strict 
funding caps. Trying to match vision to reality has created a 
number of compromises in the implementation of the program that 
have created serious criticism, much of which has been echoed 
today.
    The problem we face is we cannot fix those problems, we 
cannot reverse those compromises, without a substantial 
increase in funding. In fact, CSP has to grow in funding every 
year just to maintain the current limited program. Whatever we 
come out with in 2007, we either have to adjust the vision to 
the funding or make sure the funding matches the vision. We 
simply cannot go forward in the current situation without doing 
serious damage to the program.
    On environmental performance, the biggest concern of 
conservationists is: how much money can we afford to pay to 
reward the status quo when we so desperately need to change the 
status quo?
    As I mention in my written statement, most of CSP funds to 
date are going to benchmark payments that reward the status 
quo. We simply have to strike a better balance between 
rewarding the status quo and changing the status quo. If we can 
deal with the funding and deal with this balance, I think we 
can recover the promise of CSP, and, frankly, we must 
accomplish that.
    So thank you very much for the opportunity to be here, and 
I look forward to working with the Committee.
    [The prepared statement of Mr. Cox can be found on page 53 
in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Cox. Now we turn 
to Kathleen Merrigan, who was earlier introduced by Senator 
Leahy. Again, Ms. Merrigan has worked as Administrator of USDA 
Agriculture Marketing Service, prior to that was Senior Analyst 
at the Henry A. Wallace Institute for Alternative Agriculture. 
She holds a BA from Williams College, a Master's in Public 
Affairs from the LBJ School in Texas, and a Ph.D. in 
Environmental Planning and Policy from MIT.
    Ms. Merrigan, welcome to the Committee. Please proceed.

   STATEMENT OF KATHLEEN A. MERRIGAN, DIRECTOR AND ASSISTANT 
  PROFESSOR, AGRICULTURE, FOOD AND ENVIRONMENT PROGRAM, TUFTS 
               UNIVERSITY, BOSTON, MASSACHUSETTS

    Ms. Merrigan. Thank you, Mr. Chairman. Thank you all. It is 
an honor to be here and a pleasure to see so many old friends 
and colleagues.
    Let me first say behind every successful professor stands 
dedicated hard working graduate students, many of whom are here 
today. This is a group effort that I am presenting on in which 
we studied farms in New England. We asked the question: Does 
CSP work for farmers in our region?
    Although based upon a small number of case studies, our 
study nevertheless revealed several interesting things. I want 
to highlight eight recommendations from our report here today.
    First, the funding issue: previous speakers have covered 
this. We need more money. The program is not living up to what 
we would hoped it would be, because of insufficient resources.
    Second, all the bureaucracy that has been created by NRCS 
necessarily because of the limited funds has made the program 
less than farmer-friendly, to say in the least.
    Third, NRCS does great fieldwork and our farmers want and 
need more of it. The cap on technical assistance is making this 
program unworkable. We need more technical assistance.
    Fourth, there is an over-reliance on this program in using 
the Soil Conditioning Index as a threshold criterion for 
eligibility of the program. It is fundamentally flawed not so 
much that it should be thrown out all together but it should 
only be one tool in a toolbox for NRCS assessments.
    Fifth, the effort for small farmers and for NRCS staff to 
put together CSP contracts is significant. We recommend that 
there be a minimum payment for small farmers of the amount of 
$500 a year for farms 50 acres or less, $1,000 for farms 
greater in size so that it makes it worthwhile to participate 
in the program.
    Sixth, one-stop shopping always has great appeal. We heard 
from a number of NRCS agents and farmers that they would like 
to see a universal application for all NRCS programs. They 
would not have to go through this paperwork and that paperwork 
but they could sit down and do whole farm planning with NRCS 
through a universal application.
    Seventh, new practice payments under this program are 
confusing. Do they really exist? They are there on paper, but 
they do not seem to be offered, at least in our region, and 
there are questions that our study raises about the 
complementary with the EQIP program and the program payments 
there, which are much more sizable.
    Finally, the question some farmers face is to plant or to 
apply. The timing of the money coming through the program and 
when the sign-ups are has had an unfortunate collision with 
planting times for farmers making it difficult for them to go 
through the program.
    So those are some issues that I get into more depth in my 
testimony. We have also provided full copies of our study for 
the Committee's review.
    We think Green payments are the way to go. We think the CSP 
program is exciting. It does work. It can work much better with 
some serious fine tuning, and I appreciate all the Committee's 
work and attention to this program that is the future of farm 
policy in this country. Thank you.
    [The prepared statement of Ms. Merrigan can be found on 
page 89 in the appendix.]
    Chairman Harkin. Thank you very much, Ms. Merrigan, and we 
will definitely have some questions for you but great 
testimony.
    Duane Hovorka from Elmwood, Nebraska, the Farm Bill 
Outreach Coordinator for the National Wildlife Federation, and 
today Duane is testifying on behalf of the National Wildlife 
Federation, the Sustainable Agriculture Coalition and the Izaak 
Walton League of America. Mr. Hovorka, welcome.

  STATEMENT OF DUANE HOVORKA, FARM BILL OUTREACH COORDINATOR, 
    NATIONAL WILDLIFE FEDERATION, ON BEHALF OF THE NATIONAL 
  WILDLIFE FEDERATION, SUSTAINABLE AGRICULTURE COALITION, AND 
       IZAAK WALTON LEAGUE OF AMERICA, ELMWOOD, NEBRASKA

    Mr. Hovorka. Thank you and good morning. Over the past, 
year I coordinated a project sponsored by those three 
organizations to try to better understand the USDA Conservation 
Security Program and the benefits for fish and wildlife.
    We interviewed a variety of State and Federal officials, 
nonprofit organizations and others who have on-the-ground 
experience and knowledge about the program. USDA also gave us 
summary data about contracts that resulted from the 2006 sign-
up for enhancement practices that appear to us to provide 
either direct wildlife habitat benefits or that reduce 
pesticide use in ways that should benefit some wildlife.
    That data is reflected in the State case studies that are 
included in the report that you should have before you which 
is, ``Hidden Treasures: the Conservation Security Program and 
Wildlife.''
    Our analysis focused on the enhancement payments because as 
USDA has implemented the program, those have represented about 
four-fifths of all the payments that have actually gone to 
farmers.
    So here are our key findings: First, the Conservation 
Security Program does provide substantial benefits for 
wildlife. Based on our analysis of the USDA data, it appears 
roughly one-half of all program payments that resulted from 
that 2006 sign-up are for practices that either provide 
wildlife habitat benefits or that will reduce pesticide use in 
ways that should benefit some wildlife.
    In most cases, we are buying those wildlife benefits with 
practices that deliver multiple benefits for multiple 
resources, such as grazing management, pest and nutrient 
management. Only a small portion of the payments are actually 
for practices that are designed primarily as wildlife habitat 
management practices.
    Second, the program benefits for wildlife vary considerably 
from State to State. In Missouri, about 88 percent of the CSP 
payments from those 2006 contracts sign-ups are for practices 
that benefit wildlife. In Nebraska, just 26 percent of payments 
resulting from those 2006 contracts met that same test, and it 
appears some States are even lower than that.
    Third, the Conservation Security Program could provide even 
greater wildlife benefits, and here is how: We offer eight 
recommendations in the report that taken together would 
substantially boost the wildlife value and the wildlife 
benefits provided by the program, and we think improve the 
program overall.
    Three of those are things Congress can and should do as it 
considers the 2007 Farm Bill and as it looks at appropriations 
bills this year.
    One, Congress should substantially increase funding for the 
Conservation Security Program so that farmers and ranchers on a 
nationwide basis have timely enrollment opportunities, and I 
think you have heard that again and again today.
    Two, Congress should direct USDA to provide cost share for 
new practices under the Conservation Security Program at the 
same rate as provided for other USDA programs. USDA is 
authorized to provide cost share to install new practices under 
current law, but as you have heard, they have not used that 
authority very often.
    And, three, Congress should require that all Tier 2 and 
Tier 3 contracts address wildlife habitat as a resource of 
concern and the emphasis on wildlife should be increased in 
Tier 1 contracts. Currently, just Tier 3 contracts require that 
wildlife be addressed as a resource.
    Our recommendations for USDA: One, USDA should expand the 
number and variety of wildlife conservation practices available 
to farmers in each watershed, and they should continue to find 
new wildlife-related practices.
    Two, USDA should encourage, not discourage, wildlife 
professionals from helping landowners who are contemplating a 
CSP contract by getting out there early in the process and 
helping them understand their options.
    Three, USDA should continue to review enhancement payment 
rates to ensure that they are fair both for farmers and 
ranchers and for taxpayers.
    No. 4, USDA should ensure that all NRCS State 
Conservationists set standards at the State level that provide 
a consistently high level of wildlife benefits.
    And, five, USDA working with partners should establish a 
more robust monitoring and evaluation program to measure the 
actual outcomes of those conservation practices, and Congress 
should fund that initiative.
    With these important changes, we believe the Conservation 
Security Program could and should play an even bigger role in 
the future in ensuring high quality wildlife habitat and 
bountiful fish and wildlife populations on America's privately 
owned farms and ranches.
    Thank you for the opportunity to be here today.
    [The prepared statement of Mr. Hovorka can be found on page 
67 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Hovorka, for your 
very concise recommendations. Very good.
    Next we turn to Mr. Jim Ham on behalf of the Georgia 
Association of Conservation District Supervisors and the 
National Association of Conservation Districts. Mr. Ham, 
welcome to the Committee.

    STATEMENT OF JIM HAM, PRESIDENT, GEORGIA ASSOCIATION OF 
    CONSERVATION DISTRICT SUPERVISORS, ON BEHALF OF GEORGIA 
   ASSOCIATION OF CONSERVATION DISTRICT SUPERVISORS, AND THE 
 NATIONAL ASSOCIATION OF CONSERVATION DISTRICTS, SMARR, GEORGIA

    Mr. Ham. Thank you, Mr. Chairman, for having me. Good 
morning. I am Jim Ham, a middle Georgia farmer, a County 
Commissioner, President of the Georgia Association of 
Conservation Districts, recently elected Farm Bureau Director 
for the State of Georgia and a charter member of the Two Rivers 
RC&D Council.
    That is a lot, but the one thing I want you to pick up on 
is full-time farmer, Mr. Chairman. I think I am the only full-
time farmer to speak today, so I think I am where the rubber 
meets the road, if you will.
    I farm in an area that is changing. The rural/urban 
interface is outside of my front door. I also have an EQIP 
conservation contract that has allowed me to cross-fence 
pastures, better utilize my grass, fence out ponds and streams 
to protect water quality, install stream crossings and renovate 
heavy-use areas to prevent soil erosion and manage animal 
waste.
    According to the 2002 census in Georgia, while the number 
of farms is about the same as in 1997, the number of acres in 
farming has decreased by about 500,000 acres. Changes in land 
use such as fragmentation due to new friends from the city 
moving into the country adds pressure to farms and services 
that conservation districts and NRCS personnel provide through 
conservation programs.
    In many ways, conservation programs and policies help keep 
me on the farm while I get other support from commodity 
programs. The conservation tools, both technical and financial, 
have helped me and many others avoid regulations and allow me 
to continue farming in an ever-changing environment.
    Today we are discussing the needs and updates or additions 
to EQIP and the CSP Programs as well as all the programs in the 
Conservation Title. We hope the Committee will look into 
increasing access to EQIP and other programs, evaluate whether 
consolidation of numerous conservation programs makes sense or 
streamlining the application process provides for smoother, 
more efficient program participation on the ground.
    We do, however, hope that any streamlining does not result 
in taking funding away from conservation programs. The next 
Farm Bill must balance programs focusing on land retirement 
with working land programs such as EQIP and CSP.
    EQIP is a very popular program in Georgia. In the fiscal 
year 2004, we funded 1,175 contracts; in 2005, we funded 1,281 
contracts; and in 2006, 1,084 contracts; all totaling over $42 
million. For these 3 years, there were 3,619 unfunded 
contracts. I want to say that again: We had 3,619 unfunded 
contracts for these 3 years.
    As you can see in Georgia with the EQIP program alone, 
there is a high demand and we only see that demand for 
conservation assistance increasing. EQIP funding in Georgia has 
been put to use supporting manure management, water quality and 
water quality issues.
    Our growing poultry industry has utilized EQIP cost-share 
dollars to create stack houses to ensure that manure does not 
create a water quality problem in the local community. Without 
these cost-share dollars, these facilities would not have been 
built, resulting in inadequate storage.
    There is also a growing need in Georgia for funding to 
address forestry concerns. Due to previous conservation 
programs, there is an overabundance of timber that needs to be 
thinned in order to keep the land productive and in order to 
improve wildlife habitat. EQIP dollars have been used in 
Georgia to meet some of these needs, but the needs outweigh the 
assistance currently available.
    The CSP program that resulted from the 2002 Farm Bill is a 
little different than we expected. We hoped for a program that 
was easy for producers across the country to understand 
resulting in graduated support for increasing adoption of 
conservation practices. Unfortunately, the result was an 
extremely targeted program with complex implementation.
    The program is too complicated both for general 
understanding of the program design and application complexity 
by the producer, coupled with limited watershed- based 
availability and lack of additional assistance on the ground 
needed to implement the program.
    The watersheds selected in Georgia were very small with 
limited agricultural production, which has resulted in 37 
contracts in 2004, 111 contracts in 2005, and 58 contracts in 
2006, all totaling $62 million, if you consider the lifetime of 
the contract, the 10 year contract, if the contract was funded 
every year.
    Although we only had 31 unfunded contracts, I feel with 
greater education and understanding of the recordkeeping 
requirements, we would have move applications for CSP programs.
    The CSP self-assessment tool is a step in the right 
direction to further improve this program. Due to the 
complexity of the CSP application process, USDA should place 
some emphasis on educating producers about recordkeeping and 
information required prior to the application process 
beginning.
    While CSP has been well-received in Georgia, EQIP continues 
to reach more landowners. This is perhaps due to EQIP being an 
established program and having the flexibility to meet the 
needs of landowners.
    Conservation financial assistance provided through the Farm 
Bill programs is an important component in achieving 
agricultural sustainability, both economically and 
environmentally. But in addition to talking about EQIP and CSP, 
I must stress the importance of technical assistance. Technical 
assistance allows the NRCS staff at the local level to work 
with districts, we do a lot of work with districts in Georgia, 
landowners and State and local agencies to address local 
resource concerns.
    Technical assistance is utilized to work with landowners on 
conservation plans. Funding for technical assistance allow NRCS 
employees to meet face-to-face with landowners, visit their 
operation and help them design strategies for the resource 
needs of individual agricultural operations.
    Technical assistance must continue to be a fundamental 
element of the next Farm Bill, both as a stand-alone program 
and built into the delivery of every individual conservation 
program.
    We all have a great opportunity in this 2007 Farm Bill to 
build on the good programs and policies that were advanced in 
2002. Georgia Conservation Districts and those across the 
country want to be a constructive and active player in the 
development of the 2007 Farm Bill.
    We want to work with the Committee to make sure the next 
Conservation Title provides meaningful assistance to producers 
and results the taxpayers can also appreciate and enjoy.
    In doing so, we believe that programs should balance 
efforts to achieve soil, water, air, plant, animal and wildlife 
goals necessary to address the Nation's agricultural and 
natural resource needs.
    Thank you, Mr. Chairman, for bearing with me.
    [The prepared statement of Mr. Ham can be found on page 63 
in the appendix.]
    Chairman Harkin. All right, Mr. Ham, thank you very much 
for a great testimony.
    I think one thing I got through every one of your 
testimonies is that we need more technical assistance, No. 1, 
and No. 2, we need to reduce the complexity of the program. 
Both of those came through in all of your testimonies, and in 
your written testimonies, which I had read previously, that CSP 
does hold great promise for the future.
    I will start with Mr. Cox. Again, getting to the technical 
assistance, I am encouraged by your support for strengthening 
the partnerships in cooperation section. I believe this section 
has great promise for increasing the reach of our conservation 
efforts. It would also fit well with this Administration's 
stated desire to foster cooperative conservation efforts, so my 
specific question is related to both of these topics.
    If Congress were to do as you suggest and strengthen and 
clarify the partners in cooperation section, would doing so 
provide any opportunities to address the shortfall in technical 
assistance?
    Mr. Cox. Mr. Chairman, I believe the answer to that is yes. 
As you well know, the notion behind the partnerships in 
cooperation section was to provide the opportunity to integrate 
Federal, State, and local programs at the local level in an 
effective way to get at important conservation programs at the 
local level.
    If the partnerships in cooperation section allowed us to 
use Federal program funding including the technical assistance 
dollars that flow with EQIP and CSP and other programs as part 
of those Partnership in Cooperation agreements, then I think I 
does provide an opportunity to build a more dense 
infrastructure at that project level.
    Chairman Harkin. Let me ask Mr. Ham. I was reading your 
final statement and you said that the ``CSP program did not 
work out like we expected it to.'' Join the chorus here. Being 
the author of it, it never turned out like we intended it 
either.
    But through all of your testimony, it seems to me you are 
saying that we need to get off of this watershed basis that we 
are on because it is inequitable, it is unfair, it is not what 
we intended, it was never in the legislation in the statute.
    And all of you seem to indicate that there should be a 
better system. It should be like a nationwide-type sign-up 
system. I guess my question is: Is it possible to have a 
nationwide sign-up system but with limited funding?
    I mean, I am a realist. I see what we have got out there, 
and I do not know how long this limited funding is going to 
last, but if we have the limited funding, is it possible to 
have something other than this watershed basis on a national 
sign-up that would be simpler, more transparent, more clear-
cut? Is that possible, and if so, how?
    So I am just opening it to anyone who grabs a mic down 
there if you have got any ideas about this. Ms. Merrigan, you 
talked a lot about that in your statement about the complexity; 
of course, Mr. Ham did too.
    Ms. Merrigan. And certainly we saw farmers in New England 
where their farm might be in three different watersheds at the 
same time, and so the watershed approach is different from the 
traditional NRCS program approach, which means then you have to 
rely more upon NRCS staff to walk you through what to do. You 
are eligible if the majority of your farm, whatever watershed 
that is in, but it does add another layer of confusion.
    But without more resources, Mr. Chairman, I am not sure 
what NRCS is to do. Much of the program complexity, and that 
was the No. 1 complaint certainly that we heard from farmers in 
our work, layers have been put on to have a program that meets 
the financial constraints that they are working with.
    Chairman Harkin. But even with those financial constraints, 
Mr. Hovorka, again, is there a system where we could have a 
national system without having it watershed- based with limited 
funding, any thoughts on that?
    Mr. Hovorka. I do think it is going to be extremely 
difficult to do that with the current funding base. So if you 
increase the funding base, even if you do not provide all the 
money that we hope will be available, that would certainly help 
a lot.
    I do think there are some things that NRCS could do to 
simplify the program, but I think the key to the farmer is 
knowing that it is coming around. Even if you do not get it 
this year, if you know that within say the next 3 years it is 
coming to your watershed so you can plan ahead on it so you can 
get up to speed, do your recordkeeping and be ready when it 
comes. But you have that certainty that it is coming soon and 
not that certainty that it could be 15 or 20 years before they 
get around to you.
    Because I think that is a problem for farmers is knowing 
that it is coming and knowing when it is coming and having some 
reasonable certainty that it is coming soon.
    Chairman Harkin. Yes. Again for your benefit, I am sure you 
probably already know this figure, and I think one of you 
mentioned it in your testimony, we are now $4.3 billion less in 
the CSP program than what was passed in law and the funding 
that was supposed to be allocated to this Committee.
    Again, I say this only for the record again that when we 
passed the Farm Bill in 2002, we met all the budgetary 
guidelines. We met the budgetary guidelines. Within those 
guidelines, it was envisioned that so much would be spent on 
CSP. Out of that we have lost $4.3 billion.
    So I can only say what do you think the program might look 
like had we had that extra $4.3 billion in there? So again, you 
are all correct in talking about the funding aspect of it.
    Mr. Cox. Mr. Chairman?
    Chairman Harkin. Yes.
    Mr. Cox. Could I try to answer your question?
    Chairman Harkin. On?
    Mr. Cox. On how to touch more producers under funding caps.
    Chairman Harkin. Sure. Go ahead.
    Mr. Cox. I think there are two possible opportunities I 
would suggest. One is that if we focus the program on rewarding 
and incentivizing what I would call management-intensive 
conservation systems rather than capital-intensive conservation 
systems. By that I mean grazing management, nutrient 
management, soil management, irrigation water management, where 
the real issues are risk and knowledge. Those systems can 
produce tremendous environmental benefits at relatively low 
cost. And if we focus CSP in that fashion, we could touch more 
producers even under existing funding caps.
    And sort of a subset of that approach, it seems to me that 
there is a tremendous opportunity in 2007 and beyond to focus 
CSP on sustainable biomass production systems for biofuels and 
other alternative energies.
    As you well know, biomass production for energy can have 
tremendous conservation and environmental benefits, but there 
is also significant risk involved in intensifying that 
production.
    I think there is a tremendous opportunity to create a real 
niche for CSP as the program that is focused on developing, 
testing, demonstrating, implementing innovative, sustainable 
approaches to producing biomass to help us reach our energy 
independence goals.
    Chairman Harkin. So the two approaches, one is to use a 
management-based rather than a capital-based program?
    Mr. Cox. Correct.
    Chairman Harkin. Second, looking at biomass production?
    Mr. Cox. Correct.
    Chairman Harkin. Of course, that fits in a lot with energy 
production, too, obviously.
    Mr. Cox. Correct.
    Chairman Harkin. Those are good recommendations. Use those 
as a basis maybe for allocating or for deciding who falls where 
on the scale, and you could do that nationwide because 
obviously the management base is applicable to any State, any 
region.
    Biomass production, I assume that is applicable to most 
every State, too, I guess. It might be different kinds of 
crops.
    Mr. Cox. Correct.
    Chairman Harkin. Different kinds of practices, but it would 
still be biomass production. That is a good suggestion. We are 
going to have to follow up on that, and if you have any more 
insight into that, I would like to know because that rings a 
bell with me, so I appreciate that.
    One last thing. I have only got 29 seconds left. Ms. 
Merrigan, Soil Conditioning Index. We heard Senator Nelson talk 
about that with the earlier panel, and I am concerned about 
that also.
    Are you familiar with the term ``soil tilth''? We have a 
National Soil Tilth Laboratory in Ames, Iowa, at Iowa State, to 
measure the tilth of soil, the health of the soil, the bugs, 
the things that are in the soil that make it productive.
    Might that be something used, could we use that? How do we 
get off the Soil Conditioning Index that we have been using for 
the CSP program?
    Ms. Merrigan. It is a great question. Certainly, the Soil 
Conditioning Index is a tool, but it is a computer-based model. 
It is not actually going to the farm and seeing what is there 
and it only measures organic matter of the soil and there are 
other aspects of soil quality that are not being evaluated.
    So we really need to look at that and deal with it because 
your earlier question about the organic farmers, they do till 
more.
    Chairman Harkin. Yes.
    Ms. Merrigan. In our experience in New England, some 
organic farmers were knocked out because of little shifts in 
their Soil Conditioning Index that made what NRCS agents and 
American Farmland Trust considered to be exemplary, 
conservation-oriented farms yet they were losing out on the 
Soil Conditioning Index. Crazy, really.
    In New England where we have a farm that might be 200 
acres, you could have so many different slopes and so many 
different kinds of fields that also it is a bureaucratic 
nightmare for NRCS to actually do the index appropriately for a 
farm.
    One NRCS agent told us if you send 25 guys out to a 
particular field, you will get 25 different SCI measurements. 
So it is a tool that really needs to be reevaluated.
    Chairman Harkin. Thank you very much. I thank all the 
panel. I will yield now to my colleague from Georgia, Senator 
Chambliss.
    Senator Chambliss. Thank you, Mr. Chairman. I hear a common 
theme coming from all of you relative to funding. And it is not 
unusual to hear that in these days and times around Washington 
because we are running some significant deficits now as 
compared to the surpluses that we were in in 2002.
    With that being the case, we are not going to have more 
money, we are going to have in all probability less money to 
work with. So we have got to figure out what the proper balance 
is not only between commodity, conservation, and nutrition 
programs, but within those respective titles, we have got to 
try to figure out what is the proper balance. So it is going to 
be a challenge for every member of this Committee to try to 
figure out what that balance ought to be and how we are going 
to be able to accomplish all the good things that you all have 
talked about.
    The good news is that you do see some positive results of 
existing programs. We have just got to figure out a way to be 
able to manage those existing programs and hopefully expand 
them somehow.
    Mr. Cox, why do you think that technical assistance has 
less support and funding even though it has been the foundation 
of our conservation programs, and what can we as policymakers 
do to change that course?
    Mr. Cox. A couple of comments, Senator Chambliss, and 
Senator, I think in some ways we have lost our way. We have 
forgotten that in the olden days, when I was actually working 
in the field some 30 years ago, the purpose of conservation was 
to enable producers to gain knowledge, understanding in the 
ability to themselves manage their farms and ranches in ways 
that protected resources and sustained the environment.
    I think the advent of such large financial assistance 
programs has been in a sense a double-edged sword. It has given 
us money we never could have dreamed of 20 years ago when I was 
in the field.
    But the financial assistance has tended to overshadow the 
fundamental importance of technical resources and science and 
technology and technical assistance and knowledge, and most of 
our policy attention has followed that focus toward talking 
about financial assistance programs.
    I think that has been reinforced by the laudable switch of 
financial assistance programs to the CCC account, but that has 
also tended to distract attention from the all-important 
discretionary accounts that fund most of our technical 
assistance functions.
    I think that you, Senator, and others are clearly trying to 
reverse that last five or 10 years of lack of attention to 
technical assistance and its value, and I think there are 
opportunities to do that.
    One, which I suggest in my testimony, is why don't we allow 
producers to sign up for a technical-assistance-only contract 
under some of our financial assistance programs where we could 
really demonstrate the cost effectiveness of technical 
assistance alone. But that would be my contribution.
    It is very frustrating to us because conservation science 
and technology has evolved at an incredibly rapid pace in the 
last five or 10 years, and we simply are using day to day much 
less than we know scientifically and technically about 
conservation, and as a result, we are missing opportunities on 
a daily basis, and it is extremely frustrating.
    The payoff from relatively small investments in the 
technical services network would be tremendous if we could make 
that happen.
    Senator Chambliss. I am afraid as policymakers we tend to 
feel and react to that pressure from the farmer in the field 
from a financial perspective sometimes more so maybe, not that 
we should or should not, but that we ought to be paying more 
attention sometimes to those technical aspects than what we do, 
so I appreciate your comments.
    Mr. Ham, the GAO provided testimony that the shortcomings 
in EQIP's funding allocation process hinder it from optimizing 
environmental benefits.
    Please describe how we in Georgia allocate our EQIP funds, 
and do you believe that on the State level EQIP achieves the 
greatest environmental benefits and does it respond to our 
greatest environmental challenges?
    Mr. Ham. Senator, in Georgia, we have our State Technical 
Committee, who is not an inactive committee. It is a very 
active committee. We meet often and we are able to make 
decisions. We also work with our districts, our local 
districts.
    We have a new Conservationist in Georgia, James Tillman, 
who has been on the job about 2 years. And he believes very 
strongly and has brought some of the openness from, I think, 
Arkansas where he is from to share and move some of the 
responsibilities that others had to bring it back to the local 
level. I think this helps us put good practices on the ground 
that local directors can be happy with.
    Senator Chambliss. Are there changes that this Committee 
should make in the 2007 Farm Bill to improve conservation 
programs in the Southeast?
    Mr. Ham. Are there changes that need to be made?
    Senator Chambliss. Right.
    Mr. Ham. I think simplifying, especially with CSP, if it is 
going to stay around. To be able to qualify has got to be 
simplified. We talked a little bit about getting off river 
basins. I am not sure how I personally feel about that because 
I think that is a good idea to use river basins where that 
basin starts and where it comes through your State. We have 52 
basis, as you know, in Georgia.
    It is a pretty good idea because what is affecting that 
basin at the middle of the State comes all the way through the 
State, and what is being done in the middle part of the State 
could have a dramatic effect in South Georgia, and I am not 
sure we need to get away from that totally.
    That is a change that I am not sure we want to make so 
quick. We need to remember that CRP in Georgia is a lot 
different from CRP in the Midwest. When we signed up for CRP in 
1985, it was really a 40-year program and not a 10 or 15-year 
program.
    Once that land went into timber, Senator, even though we 
could get out in 15 years, it did not make sense to get out 
because that timber was finally approaching the size that we 
might see a little profit from.
    Where in the Midwest, you can get out of CRP tomorrow. If 
you are out, you can set a fire, burn off and you are ready to 
till and have a crop. We cannot do that.
    Please keep that in mind when you are working on the Farm 
Bill, when you are working on the biomass aspect of it, if 
there is a way to get some of this timber that is now just 
approaching chipping-saw size, if there is an incentive to move 
that timber out so it could be replanted to produce a pulp 
biomass.
    Those are options and there are many more, and I will be 
glad to try to get you up a good long list, and I am sure that 
you will review it.
    Senator Chambliss. I am sure between you and David you all 
will do that.
    Mr. Ham. Yes, sir.
    Senator Chambliss. Okay. Thank you. Thank you, Mr. 
Chairman.
    Chairman Harkin. Thank you, Senator Chambliss. Normally, I 
would recognize Senator Klobuchar but, Senator Salazar is 
expected on the floor. He has to go over to the floor right 
away and he asked if he could just have a minute prior to 
Senator Klobuchar. So I recognize Senator Salazar.
    Senator Salazar. Thank you, Senator Klobuchar, and thank 
you, Chairman Harkin. I look very much forward working with you 
as chairman and, Senator Chambliss, I very much enjoyed our 
working relationship in the past and look forward to working on 
farm issues together this year.
    I have just a very quick comment. First on the EQIP 
program, Senator Harkin, it has been a great program for 
Colorado. In the ten listening sessions that I had with 
Colorado farmers this last year around the State, there was 
tremendous support for the EQIP program.
    We receive some $35 million and it is distributed 
throughout the State of Colorado. Very, very popular among our 
agricultural community.
    And second, the CSP program, I want to commend you for your 
efforts and creativity and pushing that program forward. What I 
hear from my farmers in Colorado is that our problem is that we 
just do not have enough CSP, that we would like to be able to 
do a lot more and I know that that is a shared view from all 
the agricultural organizations. So I look forward to working 
with you to improve upon and see how we can expand both of 
these programs.
    Thank you very much, Mr. Chairman, and thank you for 
yielding to me, Senator Klobuchar.
    Chairman Harkin. Thank you, Senator Salazar. Senator 
Klobuchar.
    Senator Klobuchar. Thank you and thank you, Mr. Chairman, 
for convening this hearing on this important topic and also for 
the work that you did to create the CSP in the last Farm Bill.
    CSP has generated a lot of interest in Minnesota, and there 
are many producers eager to enroll and get involved; however, I 
have seen that interest turn to disappointment as Mr. Ham was 
talking about.
    Mr. Ham, I have to note that you have one of the best names 
for a farmer that I have ever heard, and I was hoping that 
maybe, Chairman Harkin, if I can find Mr. Bacon in Minnesota 
that he could come testify.
    [Laughter.]
    Senator Klobuchar. But in any case, it is very similar to 
some of the issues that raised how the program has been limited 
to a small fraction of the farmers and ranchers in our State.
    The 2006 CSP sign-up added just one new watershed to 
Minnesota's eligible areas, for a total of seven watersheds. 
Roughly seven-eighths of the land in our State is not eligible 
for CSP enrollments and yet Minnesota is a leading agriculture 
State. It is the sixth in the Nation.
    In 2006, there were just 712 CSP contracts in Minnesota and 
206,000 acres of farmland enrolled in the program. Minnesota 
farmers received $6.25 million in CSP payments for their 
conservation practices.
    And by contrast, 86 of our 87 counties are enrolled in 
EQIP, and Minnesota farmers were able to receive $26 million in 
payments under EQIP last year.
    I actually looked into what was going on with our CSP 
applications, and in 2006, 73 percent of the eligible CSP 
applications in Minnesota were rejected. With EQIP in 2006, 
roughly one-third of eligible EQIP applications in Minnesota 
were rejected.
    So my questions are along those lines. I guess I would 
first ask Dr. Merrigan. You talked about the complexity of CSP, 
in fact, all the witnesses did, and how that has deterred 
farmers from enrolling, and I just mentioned our disappointing 
sign-up in Minnesota.
    What do you think would be in a little more detail in what 
would be the most valuable changes that NRCS could make to the 
way the program is administered to make it easier for farmers 
to enroll?
    Ms. Merrigan. Thank you for that question. First of all, it 
is so frustrating for farmers to go through that self-
assessment workbook and the whole application process and be 
deemed eligible, wait around to find out what the money game is 
and ultimately find out that they are in some sub-category of 
some tier. There are so many different caps and reduction rates 
that they do not know from the get-go whether all of their 
effort and the effort of the NRCS is going to be worth their 
while.
    So we need to remove all of those caps on these different 
kinds of payments. That would go a long way to helping things 
out.
    The second thing is because of the program complexity and 
all the kinds of information that needs to be inputted to come 
up with the CSP eligibility, NRCS understandably tends to favor 
farmers who are already in the NRCS family, so to speak. People 
who are already beneficiaries of NRCS programs are more likely 
to be successful in CSP because the data is already there. And 
if you have the cap on technical assistance and you have to 
amass all this information on the farm, well, then we should 
expect that the winners will always be winners.
    If we really want to have this program really penetrate 
into the farm community, have the kind of reach that the 
Committee hoped it would have in 2002, then we really need to 
remove that cap on technical assistance and we really want to 
consider the idea of a universal application.
    Senator Klobuchar. Okay. Thank you. And then, Dr. Cox, you 
were just talking about the questions from Senator Harkin about 
the biomass development and how this could be a major focus of 
the program, and our State is a leader, of course, in corn and 
soybean crops.
    I wondered if you could elaborate on the kind of 
conservation practices you see as particularly suited to 
renewable fuels production?
    Mr. Cox. Thank you, Senator. Some of us think Iowa are 
leaders in corn and soybean production as well.
    Senator Klobuchar. I think they are one above us for 
soybeans, maybe two, maybe three.
    Mr. Cox. I have to amend that remark by saying that I grew 
up in Minnesota and my mother voted for you.
    Senator Klobuchar. Well, then, Dr. Cox, all my remaining 
questions will be for you.
    [Laughter.]
    Mr. Cox. She will be thrilled to know that I actually met 
you.
    I think intensification of corn production to feed ethanol 
plants could be, if poorly managed, a real negative for the 
environment for soil and water and wildlife. So I think the 
first thing we need to do is that intensification of corn 
production needs to go hand-in-hand with intensive working land 
conservation.
    So a lot of our traditional practices that we already are 
trying to encourage, reduce tillage, diverse rotations, 
buffers, contour grass strips, I mean, a lot of what is basic 
in the conservation toolbox could be employed through CSP to 
make sure as we intensify corn production that we do it in a 
way that pays off for our soil and water and wildlife as well 
as for our energy budget.
    Then in the longer term, there is a lot of really 
interesting work going on about incorporating additional crops 
into traditional corn and soybean rotations that increase 
biomass production overall, cover crops, nurse crops, strip 
cropping.
    This is sort of a new and advancing field of conservation 
science and technology, and CSP could really be employed I 
think to expand that or to take that innovation from the lab to 
the field, and with really tremendous long-term promise for 
both dealing with the biomass production but also solving a lot 
of the soil and water problems we currently have with intensive 
row crop production.
    So both the basics we understand today and the things that 
are emerging in universities could be promoted by CSP.
    Senator Klobuchar. Thank you. One last question for Dr. 
Hovorka. In your written testimony, you talked about how 85 
percent of Minnesota's CSP payments from 2006 enrollment are 
for practices that benefit wildlife either by providing habitat 
or reducing pesticide use.
    Has your research found measurable benefits to wildlife 
populations in Minnesota or other States as a result of the CSP 
practices?
    Mr. Hovorka. That is a good question. Thanks for the 
compliment, but I am not a Doctor.
    Senator Klobuchar. That is fine. Did your mom vote for me 
though?
    [Laughter.]
    Mr. Hovorka. She would have had she lived in Minnesota.
    In fact, that is a really good question, and the answer is 
not yet. Because what we mostly measure is acres and dollars 
through USDA programs. And what USDA is trying to get better at 
and what we are encouraging to get much better at is measuring 
those actual outcomes.
    So we can measure not only just the practices and how many 
acres we have, but what is the actual change in water quality 
in that stream, what is the actual change in populations in 
terms of wildlife.
    So we cannot give you numbers and say, ``We have created 
this many pheasants,'' but we think that USDA needs to move 
further toward measuring those outcomes not just on a local 
basis but also so at a program level we have a better 
understanding of what we are buying with the dollars.
    Senator Klobuchar. Thank you.
    Chairman Harkin. Senator Klobuchar, thank you, and thank 
you all very much to this panel and the previous panel. Great 
testimony, great written statements.
    Again, I am going to follow up or our staff will with you 
for any ideas, suggestions you have on how we might do a 
ranking system or a national kind of a system not based on 
watersheds.
    Mr. Cox gave us some ideas. Maybe some of you have other 
ideas from the standpoint of an actual hands-on farmer to 
others, but we need that kind of advice and input for that, and 
as we move ahead in the Farm Bill, we will look forward to your 
continued input, advice and consultation.
    Thank you all very much. The Committee will stand 
adjourned.
    [Whereupon, at 12:02 p.m., the Committee was adjourned.]
      
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                         QUESTIONS AND ANSWERS

                            January 17, 2007



      
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