    [House Hearing, 112 Congress]
    [From the U.S. Government Publishing Office]

                        FORMULATION OF THE 2012 FARM BILL

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

                                    HEARINGS

                                   BEFORE THE

                               SUBCOMMITTEES ON:
      RURAL DEVELOPMENT, RESEARCH, BIOTECHNOLOGY, AND FOREIGN AGRICULTURE;

                      CONSERVATION, ENERGY, AND FORESTRY;

                         LIVESTOCK, DAIRY, AND POULTRY

                          NUTRITION AND HORTICULTURE;

                 DEPARTMENT OPERATIONS, OVERSIGHT, AND CREDIT;

                                      AND

                  GENERAL FARM COMMODITIES AND RISK MANAGEMENT

                                     OF THE

                            COMMITTEE ON AGRICULTURE
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   ----------

                   APRIL 25, 26; MAY 8, 10, 16, 17, 18, 2012

                                   ----------

                               Serial No. 112-30

                                   ----------

                                 Part 2 (Final)

                                   ----------

              Printed for the use of the Committee on Agriculture
                             agriculture.house.gov
                       FORMULATION OF THE 2012 FARM BILL

                                      ----

                                 PART 2 (FINAL)

                       FORMULATION OF THE 2012 FARM BILL

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

                                    HEARINGS

                                   BEFORE THE

                               SUBCOMMITTEES ON:
      RURAL DEVELOPMENT, RESEARCH, BIOTECHNOLOGY, AND FOREIGN AGRICULTURE;

                      CONSERVATION, ENERGY, AND FORESTRY;

                         LIVESTOCK, DAIRY, AND POULTRY

                          NUTRITION AND HORTICULTURE;

                 DEPARTMENT OPERATIONS, OVERSIGHT, AND CREDIT;

                                      AND

                  GENERAL FARM COMMODITIES AND RISK MANAGEMENT

                                     OF THE

                            COMMITTEE ON AGRICULTURE
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

                   APRIL 25, 26; MAY 8, 10, 16, 17, 18, 2012

                                   __________

                               Serial No. 112-30

                                   __________

                                 Part 2 (Final)

                                   __________

              Printed for the use of the Committee on Agriculture
                             agriculture.house.gov

                      U.S. GOVERNMENT PRINTING OFFICE
    74-372                    WASHINGTON : 2012
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                            COMMITTEE ON AGRICULTURE

                       FRANK D. LUCAS, Oklahoma, Chairman

    BOB GOODLATTE, Virginia,             COLLIN C. PETERSON, Minnesota,
        Vice Chairman                    Ranking Minority Member
    TIMOTHY V. JOHNSON, Illinois         TIM HOLDEN, Pennsylvania
    STEVE KING, Iowa                     MIKE McINTYRE, North Carolina
    RANDY NEUGEBAUER, Texas              LEONARD L. BOSWELL, Iowa
    K. MICHAEL CONAWAY, Texas            JOE BACA, California
    JEFF FORTENBERRY, Nebraska           DENNIS A. CARDOZA, California
    JEAN SCHMIDT, Ohio                   DAVID SCOTT, Georgia
    GLENN THOMPSON, Pennsylvania         HENRY CUELLAR, Texas
    THOMAS J. ROONEY, Florida            JIM COSTA, California
    MARLIN A. STUTZMAN, Indiana          TIMOTHY J. WALZ, Minnesota
    BOB GIBBS, Ohio                      KURT SCHRADER, Oregon
    AUSTIN SCOTT, Georgia                LARRY KISSELL, North Carolina
    SCOTT R. TIPTON, Colorado            WILLIAM L. OWENS, New York
    STEVE SOUTHERLAND II, Florida        CHELLIE PINGREE, Maine
    ERIC A. ``RICK'' CRAWFORD, Arkansas  JOE COURTNEY, Connecticut
    MARTHA ROBY, Alabama                 PETER WELCH, Vermont
    TIM HUELSKAMP, Kansas                MARCIA L. FUDGE, Ohio
    SCOTT DesJARLAIS, Tennessee          GREGORIO KILILI CAMACHO SABLAN,
    RENEE L. ELLMERS, North Carolina     Northern Mariana Islands
    CHRISTOPHER P. GIBSON, New York      TERRI A. SEWELL, Alabama
    RANDY HULTGREN, Illinois             JAMES P. McGOVERN, Massachusetts
    VICKY HARTZLER, Missouri
    ROBERT T. SCHILLING, Illinois
    REID J. RIBBLE, Wisconsin
    KRISTI L. NOEM, South Dakota

                                     ______

                               Professional Staff

                          Nicole Scott, Staff Director

                         Kevin J. Kramp, Chief Counsel

                     Tamara Hinton, Communications Director

                    Robert L. Larew, Minority Staff Director

                                     ______

    Subcommittee on Rural Development, Research, Biotechnology, and Foreign
                                  Agriculture

                     TIMOTHY V. JOHNSON, Illinois, Chairman

    GLENN THOMPSON, Pennsylvania         JIM COSTA, California, Ranking
    MARLIN A. STUTZMAN, Indiana          Minority Member
    AUSTIN SCOTT, Georgia                HENRY CUELLAR, Texas
    RANDY HULTGREN, Illinois             PETER WELCH, Vermont
    VICKY HARTZLER, Missouri             TERRI A. SEWELL, Alabama
    ROBERT T. SCHILLING, Illinois        LARRY KISSELL, North Carolina

                    Mike Dunlap, Subcommittee Staff Director

                                      (ii)
    ?

               Subcommittee on Conservation, Energy, and Forestry

                     GLENN THOMPSON, Pennsylvania, Chairman

    BOB GOODLATTE, Virginia              TIM HOLDEN, Pennsylvania, Ranking
    MARLIN A. STUTZMAN, Indiana          Minority Member
    BOB GIBBS, Ohio                      KURT SCHRADER, Oregon
    SCOTT R. TIPTON, Colorado            WILLIAM L. OWENS, New York
    STEVE SOUTHERLAND II, Florida        MIKE McINTYRE, North Carolina
    MARTHA ROBY, Alabama                 JIM COSTA, California
    TIM HUELSKAMP, Kansas                TIMOTHY J. WALZ, Minnesota
    RANDY HULTGREN, Illinois             CHELLIE PINGREE, Maine
    REID J. RIBBLE, Wisconsin            MARCIA L. FUDGE, Ohio
    KRISTI L. NOEM, South Dakota         GREGORIO KILILI CAMACHO SABLAN,
                                         Northern Mariana Islands

                   Brent Blevins, Subcommittee Staff Director

                                     ______

                 Subcommittee on Livestock, Dairy, and Poultry

                      THOMAS J. ROONEY, Florida, Chairman

    BOB GOODLATTE, Virginia              DENNIS A. CARDOZA, California,
    STEVE KING, Iowa                     Ranking Minority Member
    RANDY NEUGEBAUER, Texas              DAVID SCOTT, Georgia
    K. MICHAEL CONAWAY, Texas            JOE COURTNEY, Connecticut
    TIM HUELSKAMP, Kansas                TIM HOLDEN, Pennsylvania
    SCOTT DesJARLAIS, Tennessee          LEONARD L. BOSWELL, Iowa
    CHRISTOPHER P. GIBSON, New York      JOE BACA, California
    REID J. RIBBLE, Wisconsin            KURT SCHRADER, Oregon
    KRISTI L. NOEM, South Dakota         WILLIAM L. OWENS, New York

                  Michelle Weber, Subcommittee Staff Director

                                     ______

                   Subcommittee on Nutrition and Horticulture

                         JEAN SCHMIDT, Ohio, Chairwoman

    STEVE KING, Iowa                     JOE BACA, California, Ranking
    THOMAS J. ROONEY, Florida            Minority Member
    STEVE SOUTHERLAND II, Florida        CHELLIE PINGREE, Maine
    ERIC A. ``RICK'' CRAWFORD, Arkansas  GREGORIO KILILI CAMACHO SABLAN,
                                         Northern Mariana Islands

                    Matt Perin, Subcommittee Staff Director

                                     ______

          Subcommittee on Department Operations, Oversight, and Credit

                      JEFF FORTENBERRY, Nebraska, Chairman

    TIMOTHY V. JOHNSON, Illinois         MARCIA L. FUDGE, Ohio, Ranking
    STEVE KING, Iowa                     Minority Member
    ERIC A. ``RICK'' CRAWFORD, Arkansas  JAMES P. McGOVERN, Massachusetts
    KRISTI L. NOEM, South Dakota         JOE BACA, California

                   Brandon Lipps, Subcommittee Staff Director

                                     (iii)
    ?

          Subcommittee on General Farm Commodities and Risk Management

                      K. MICHAEL CONAWAY, Texas, Chairman

    STEVE KING, Iowa                     LEONARD L. BOSWELL, Iowa, Ranking
    RANDY NEUGEBAUER, Texas              Minority Member
    JEAN SCHMIDT, Ohio                   MIKE McINTYRE, North Carolina
    BOB GIBBS, Ohio                      TIMOTHY J. WALZ, Minnesota
    AUSTIN SCOTT, Georgia                LARRY KISSELL, North Carolina
    ERIC A. ``RICK'' CRAWFORD, Arkansas  JAMES P. McGOVERN, Massachusetts
    MARTHA ROBY, Alabama                 DENNIS A. CARDOZA, California
    TIM HUELSKAMP, Kansas                DAVID SCOTT, Georgia
    RENEE L. ELLMERS, North Carolina     JOE COURTNEY, Connecticut
    CHRISTOPHER P. GIBSON, New York      PETER WELCH, Vermont
    RANDY HULTGREN, Illinois             TERRI A. SEWELL, Alabama
    VICKY HARTZLER, Missouri
    ROBERT T. SCHILLING, Illinois

                   Matt Schertz, Subcommittee Staff Director

                                      (iv)

                                 C O N T E N T S

                                  ----------
                                                                       Page

    Subcommittee on Rural Development, Research, Biotechnology, and Foreign
                          Agriculture, April 25, 2012

    Costa, Hon. Jim, a Representative in Congress from California,
      opening statement..............................................  1605
        Prepared statement...........................................  1608
    Johnson, Hon. Timothy V., a Representative in Congress from
      Illinois, opening statement....................................  1603
        Prepared statement...........................................  1604

                                   Witnesses

    Conner, Hon. Charles F., President and Chief Executive Officer,
      National Council of Farmer Cooperatives, Washington, D.C.......  1610
        Prepared statement...........................................  1612
        Submitted material...........................................  1667
    Larson, Hon. Donald, Commissioner, Brookings County, South
      Dakota; Chairman, Agriculture and Rural Affairs Steering
      Committee, National Association of Counties, Brookings, SD.....  1615
        Prepared statement...........................................  1617
        Submitted questions..........................................  1674
    Mazer, Leanne, Executive Director, Tri-County Council for Western
      Maryland, Frostburg, MD; on behalf of National Association of
      Development Organizations......................................  1622
        Prepared statement...........................................  1624
        Submitted questions..........................................  1675
    Dunmire, Frank, Executive Director, Illinois Rural Water
      Association, Taylorville, IL; on behalf of National Rural Water
      Association....................................................  1635
        Prepared statement...........................................  1636
        Submitted questions..........................................  1675
    Stewart, Robert B., Executive Director, Rural Community
      Assistance Partnership, Washington, D.C........................  1638
        Prepared statement...........................................  1640
        Submitted questions..........................................  1678
    Rozzelle, David G., Executive Vice President, Suddenlink
      Communications; Member, Rural and Small System Operator
      Committee, National Cable Telecommunications Association, St.
      Louis, MO......................................................  1644
        Prepared statement...........................................  1645
        Submitted questions..........................................  1681
    Bahnson, Mark, Chief Executive Officer and General Manager,
      Bloomingdale Communications, Bloomingdale, MI; on behalf of
      National Telecommunications Cooperative Association;
      Organization for the Promotion and Advancement of Small
      Telecommunications Companies; Western Telecommunications
      Alliance.......................................................  1651
        Prepared statement...........................................  1653
        Submitted questions..........................................  1683

                               Submitted Material

    McCormick, Jr., Walter B., President and Chief Executive Officer,
      United States Telecom Association, submitted letter............  1671

       Subcommittee on Conservation, Energy, and Forestry, April 26, 2012

    Peterson, Hon. Collin C., a Representative in Congress from
      Minnesota, opening statement...................................  1690
        Prepared statement...........................................  1692
    Roby, Hon. Martha, a Representative in Congress from Alabama,
      prepared statement.............................................  1693
    Thompson, Hon. Glenn, a Representative in Congress from
      Pennsylvania, opening statement................................  1687
        Prepared statement...........................................  1689

                                   Witnesses

    Schmidt, Gene, President, National Association of Conservation
      Districts, Washington, D.C.....................................  1694
        Prepared statement...........................................  1695
        Submitted questions..........................................  1784
    Scholl, Jon, President, American Farmland Trust, Washington, D.C.  1697
        Prepared statement...........................................  1698
        Submitted questions..........................................  1787
    O'Toole, Patrick, President, Family Farm Alliance, Washington,
      D.C............................................................  1705
        Prepared statement...........................................  1707
    Nomsen, David E., Vice President of Governmental Affairs,
      Pheasants Forever, Inc., St. Paul, MN..........................  1717
        Prepared statement...........................................  1719
    Niemeyer, Garry, President, National Corn Growers Association,
      Auburn, IL.....................................................  1723
        Prepared statement...........................................  1724
    Bell, David K., Executive Director, Wild Blueberry Commission of
      Maine, Orono, ME; on behalf of Specialty Crop Farm Bill
      Alliance.......................................................  1743
        Prepared statement...........................................  1744
    Gordon, Randall C., Acting President, National Grain and Feed
      Association, Washington, D.C...................................  1746
        Prepared statement...........................................  1748
        Supplementary material.......................................  1792
    Homan, Carl V., dairy producer, Homan Family Dairy Farms, Centre
      Hall, PA; on behalf of National Sustainable Agriculture
      Coalition......................................................  1752
        Prepared statement...........................................  1754
    Hopper, Sara, Agricultural Policy Director, Environmental Defense
      Fund, Washington, D.C..........................................  1756
        Prepared statement...........................................  1758
    Petty, David D., cattle producer, Iowa River Ranch; Member,
      Environmental Working Group, National Cattlemen's Beef
      Association, Eldora, IA........................................  1761
        Prepared statement...........................................  1763
        Submitted questions..........................................  1788

                               Submitted Material

    Hammer, Thomas A., President, National Oilseed Processors
      Association, submitted statement...............................  1775
    Sebert, Dan, Executive Director, National Watershed Coalition,
      submitted statement............................................  1779
    Shay, Russ, Director of Public Policy; Lynne Sherrod, Western
      Policy Manager, Land Trust Alliance, submitted letter..........  1781
    United States Department of Agriculture, submitted supplementary
      material.......................................................  1789

         Subcommittee on Livestock, Dairy, and Poultry, April 26, 2012

    Cardoza, Hon. Dennis A., a Representative in Congress from
      California, opening statement..................................  1839
        Prepared statement...........................................  1840
    Ribble, Hon. Reid J., a Representative in Congress from
      Wisconsin; statement and letter submitted on behalf of:
        Etka, Steve, Coordinator, Midwest Dairy Coalition............  1933
        Fischer, Laurie, Executive Director, Dairy Business
          Association of Wisconsin...................................  1935
    Rooney, Hon. Thomas J., a Representative in Congress from
      Florida, opening statement.....................................  1837
        Prepared statement...........................................  1838

                                   Witnesses

    Brown, Ph.D., Scott, Assistant Research Professor, Integrated
      Policy Group, Division of Applied Social Sciences, College of
      Agriculture, Food and Natural Resources, University of
      Missouri, Columbia, MO.........................................  1841
        Prepared statement...........................................  1844
        Supplementary material.......................................  1921
    Wright, Patrick Joseph ``Joe'', V&W Farms, Inc.; President,
      Southeast Milk Inc., Avon Park, FL.............................  1873
        Prepared statement...........................................  1874
    Barcellos, Tom, Owner/Operator, T-Bar Dairy; Board President,
      Western United Dairymen, Porterville, CA.......................  1877
        Prepared statement...........................................  1879
    Davis, Jon, Chief Executive Officer, Davisco Foods International,
      Inc., Le Sueur, MN; on behalf of International Dairy Foods
      Association....................................................  1881
        Prepared statement...........................................  1883
        Supplementary material.......................................  1922
    Kozak, Jerome J., President and Chief Executive Officer, National
      Milk Producers Federation, Arlington, VA.......................  1886
        Prepared statement...........................................  1888

            Subcommittee on Nutrition and Horticulture, May 8, 2012

    Baca, Hon. Joe, a Representative in Congress from California,
      prepared statement.............................................  1945
    Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
      opening statement..............................................  2021
        Prepared statement...........................................  1944
    Pingree, Hon. Chellie, a Representative in Congress from Maine,
      opening statement..............................................  1941
        Prepared statement...........................................  1943
    Sablan, Hon. Gregorio Kilili Camacho, a Delegate in Congress from
      Northern Mariana Islands, prepared statement...................  1946
    Schmidt, Hon. Jean, a Representative in Congress from Ohio,
      opening statement..............................................  1937
        Prepared statement...........................................  1940
    Southerland II, Hon. Steve, a Representative in Congress from
      Florida, prepared statement....................................  1944

                                   Witnesses

    Lee, Jerry, Environmental Services Manager, Monrovia Growers,
      Cairo, GA......................................................  1947
        Prepared statement...........................................  1949
    Jarrard, Michael, President and Chief Operating Officer, Mann
      Packing Company, Salinas, CA...................................  1954
        Prepared statement...........................................  1956
    Schacht, Lisa L., Owner/Operator, Schacht Family Farm and Market;
      President, Ohio Produce Growers & Marketers Association, Canal
      Winchester, OH.................................................  1959
        Prepared statement...........................................  1961
    Libby, Russell W., Executive Director, Maine Organic Farmers and
      Gardeners Association, Unity, ME...............................  1963
        Prepared statement...........................................  1964
    Richey, Daniel R., President and Chief Executive Officer,
      Riverfront Packing Company; Member, Board of Directors, Florida
      Fruit & Vegetable Association, Vero Beach, FL..................  1967
        Prepared statement...........................................  1969
        Submitted questions..........................................  2035
    Bivens, Rodney W., Founder and Executive Director, Regional Food
      Bank of Oklahoma, Oklahoma City, OK............................  1986
        Prepared statement...........................................  1987
    Haskins, Ph.D., Ron, Senior Fellow, Economic Studies Program,
      Brookings Institution; Co-Director, Center on Children and
      Families, Washington, D.C......................................  1991
        Prepared statement...........................................  1993
    Dean, Stacy, Vice President for Food Assistance Policy, Center on
      Budget and Policy Priorities, Washington, D.C..................  2002
        Prepared statement...........................................  2003
        Supplementary material.......................................  2029
    Blalock, Philip A., Executive Director, National Association of
      Farmers Market Nutrition Programs, Alexandria, VA..............  2014
        Prepared statement...........................................  2016

                               Submitted Material

    Naasz, Kraig R., President & Chief Executive Officer, American
      Frozen Food Institute, submitted statement.....................  2029
    Share Our Strength, submitted statement..........................  2033

     Subcommittee on Department Operations, Oversight, and Credit, May 10,
                                      2012

    Baca, Hon. Joe, a Representative in Congress from California,
      prepared statement.............................................  2042
    Fortenberry, Hon. Jeff, a Representative in Congress from
      Nebraska, opening statement....................................  2039
        Prepared statement...........................................  2040
    Fudge, Hon. Marcia L., a Representative in Congress from Ohio,
      opening statement..............................................  2041
        Prepared statement...........................................  2042

                                   Witnesses

    Frazee, Bob, President and Chief Executive Officer, MidAtlantic
      Farm Credit, Westminster, MD; on behalf of Farm Credit Council.  2043
        Prepared statement...........................................  2045
    Gerhart, Jeffrey L., Chairman, Bank of Newman Grove; Chairman,
      Independent Community Bankers of America, Newman Grove, NE.....  2049
        Prepared statement...........................................  2050
    Williams, Matthew H., Chairman and President, Gothenburg State
      Bank; Chairman-Elect, American Bankers Association, Gothenburg,
      NE.............................................................  2060
        Prepared statement...........................................  2061
    Walton, Michael G., urban farmer; Owner, Tunnel Vision Hoops; Co-
      Founder, NEO Restoration Alliance, South Euclid, OH............  2066
        Prepared statement...........................................  2067
    Doerr, Justin D., beginning farmer, Plainview, NE................  2069
        Prepared statement...........................................  2071

                               Submitted Material

    Gerber, Michael A., President and Chief Executive Officer,
      Federal Agricultural Mortgage Corporation (Farmer Mac),
      submitted statement............................................  2089
    Niklas, David W., President, Clackamas Greenhouses Inc.; on
      Behalf of Society of American Florists, submitted statement....  2090
    Spearman, Kenneth A., Chairman, Farm Credit System Insurance
      Corporation, submitted letter..................................  2094

          Subcommittee on General Farm Commodities and Risk Management
                                  May 16, 2012

    Boswell, Hon. Leonard L., a Representative in Congress from Iowa,
      opening statement..............................................  2105
        Prepared statement...........................................  2105
    Conaway, Hon. K. Michael, a Representative in Congress from
      Texas, opening statement.......................................  2097
        Prepared statement...........................................  2099
    Costa, Hon. Jim, a Representative in Congress from California;
      submitted statement on behalf of:
        Specialty Crop Insurance League..............................  2339
    Lucas, Hon. Frank D., a Representative in Congress from Oklahoma
      opening statement..............................................  2103
        Prepared statement...........................................  2104
    Peterson, Hon. Collin C., a Representative in Congress from
      Minnesota, opening statement...................................  2101
        Prepared statement...........................................  2102

                                   Witnesses

    Outlaw, Ph.D., Joe L., Professor and Extension Economist-Farm
      Management & Policy, Department of Agricultural Economics,
      Texas A&M University; Co-Director, Agricultural and Food Policy
      Center, College Station, TX....................................  2106
        Prepared statement...........................................  2108
        Supplementary material.......................................  2305
    Schnitkey, Ph.D., Gary D., Full and Associate Professor,
      Department of Agricultural and Consumer Economics, University
      of Illinois, Urbana, IL........................................  2115
        Prepared statement...........................................  2116
        Submitted questions..........................................  2347
    Collins, Ph.D., Hon. Keith, Economic Advisor, National Crop
      Insurance Services; Former USDA Chief Economist, Centreville,
      VA.............................................................  2122
        Prepared statement...........................................  2123
    Bowling, Chip, Member, Board of Directors, National Corn Growers
      Association, Newburg, MD.......................................  2146
        Prepared statement...........................................  2147
    Raun, Linda C., Chairwoman, USA Rice Producers' Group; Partner,
      LR Farms, El Campo, TX; on behalf of USA Rice Federation; U.S.
      Rice Producers Association.....................................  2158
        Prepared statement...........................................  2160
        Submitted questions..........................................  2347
    Stallman, Bob, President, American Farm Bureau Federation; rice
      and cattle producer, Columbus, TX..............................  2169
        Prepared statement...........................................  2170
    Vaughan, Dee, President, Southwest Council of Agribusiness,
      Dumas, TX......................................................  2176
        Prepared statement...........................................  2177
    Coley, C.B. ``Chuck'', Chairman, National Cotton Council;
      President, Coley Gin and Fertilizer Company, Vienna, GA........  2185
        Prepared statement...........................................  2186
    Brown, Scott W., President, National Barley Growers Association,
      Soda Springs, ID...............................................  2193
        Prepared statement...........................................  2195

                                  May 17, 2012

    Conaway, Hon. K. Michael, a Representative in Congress from
      Texas, opening statement.......................................  2205

                                   Witnesses

    Younggren, Erik, President, National Association of Wheat
      Growers, Hallock, MN...........................................  2206
        Prepared statement...........................................  2207
    Morris, Armond, Chairman, Southern Peanut Farmers Federation,
      Irwinville, GA.................................................  2215
        Prepared statement...........................................  2216
    Johnson, Roger, President, National Farmers Union, Washington,
      D.C............................................................  2221
        Prepared statement...........................................  2222
    Stewart, J.B., Vice Chairman, National Sorghum Producers, Keyes,
      OK.............................................................  2235
        Prepared statement...........................................  2237
    Wellman, Steve, President, American Soybean Association,
      Syracuse, NE...................................................  2241
        Prepared statement...........................................  2243
        Submitted questions..........................................  2348
    Thompson, Jim, Chairman, USA Dry Pea and Lentil Council,
      Farmington, WA.................................................  2244
        Prepared statement...........................................  2246
    Gerdes, Ruth, President, The Auburn Agency Crop Insurance, Inc.;
      Chair, Regulatory Affairs Committee, Crop Insurance
      Professionals Association, Auburn, NE..........................  2270
        Prepared statement...........................................  2272
    McSherry, CIC, Brian M., President, McSherry Agency, Inc.;
      Chairman, Crop Insurance Task Force, Independent Insurance
      Agents and Brokers of America, Flanagan, IL....................  2281
        Prepared statement...........................................  2283
    Weber, Tim, President, Crop Insurance Division, Great American
      Insurance Company, Cincinnati, OH..............................  2285
        Prepared statement...........................................  2287
        Submitted questions..........................................  2349

                               Submitted Material

    Pitts, Hon. Joseph R., Member of Congress; Davis, Hon. Danny K.,
      Member of Congress, submitted joint statement..................  2306
    Cowan, Wade; Klint Forbes; David Dickerson, West Texas Guar,
      Inc., submitted statement......................................  2307
    Graham, Larry, Chairman, Coalition for Sugar Reform, submitted
      statement......................................................  2308
    Greig, Hon. George D., Secretary, Pennsylvania Department of
      Agriculture, submitted statement...............................  2315
    Smith, Garrett, President, American Pop Corn Company; on Behalf
      of Popcorn Institute, submitted statement......................  2316
    American Sugar Alliance, submitted statement.....................  2322
    United States Conference of Catholic Bishops; Catholic Relief
      Services; National Catholic Rural Life Conference, submitted
      joint statement................................................  2341

        Subcommittee on Conservation, Energy, and Forestry, May 18, 2012

    Costa, Hon. Jim, a Representative in Congress from California,
      submitted statement; on behalf of:
        Wentworth, Rand, President, Land Trust Alliance; Ackelson,
          Mark, President, Iowa Natural Heritage Foundation; Wayburn,
          Laurie, President, Pacific Forest Trust; Difley, Jane A.,
          President/Forester, Society for the Protection of New
          Hampshire Forests; Livingston, Gil, President, Vermont Land
          Trust......................................................  2455
    Holden, Hon. Tim, a Representative in Congress from Pennsylvania,
      opening statement..............................................  2355
        Prepared statement...........................................  2355
    Schrader, Hon. Kurt, a Representative in Congress from Oregon,
      prepared statement.............................................  2356
    Thompson, Hon. Glenn, a Representative in Congress from
      Pennsylvania, opening statement................................  2351
        Prepared statement...........................................  2353

                                   Witnesses

    Greenwood, Hon. James C., President and Chief Executive Officer,
      Biotechnology Industry Organization, Washington, D.C...........  2357
        Prepared statement...........................................  2359
    Stroschein, J.D., Ryan W., Co-Director, Agriculture Energy
      Coalition, Washington, D.C.....................................  2378
        Prepared statement...........................................  2380
    Reinford, Steve, Owner/Operator, Reinford Farms Inc.,
      Mifflintown, PA................................................  2383
        Prepared statement...........................................  2385
    Taylor, Jr., Jerome ``Jerry'', President and Chief Executive
      Officer, MFA Oil Company; Co-Founder, MFA Oil Biomass LLC,
      Columbia, MO...................................................  2388
        Prepared statement...........................................  2389
    Haer, Gary L., Chairman, National Biodiesel Board; Vice
      President, Sales and Marketing, Renewable Energy
      Group', Inc., Washington, D.C.......................  2397
        Prepared statement...........................................  2399
    Burke III, John W., Chairman, Board of Trustees, American Forest
      Foundation; tree farmer, Woodford, VA..........................  2418
        Prepared statement...........................................  2420
    Dye, C. Randy, Forester, West Virginia Division of Forestry;
      President, National Association of State Foresters, Charleston,
      WV.............................................................  2424
        Prepared statement...........................................  2426
    Holmes, Charles A., Chairman, Forest Resource Policy Group,
      National Association of Conservation Districts, Demopolis, AL..  2429
        Prepared statement...........................................  2430
    Schwab, Richard W., Procurement Manager, M.A. Rigoni, Inc.,
      Perry, FL; on behalf of American Loggers Council; Southeastern
      Wood Producers Association.....................................  2433
        Prepared statement...........................................  2435
    Goergen, Jr., Michael T., Executive Vice President and Chief
      Executive Officer, Society of American Foresters, Bethesda, MD.  2437
        Prepared statement...........................................  2439
        Supplementary material.......................................  2461

                               Submitted Material

    Julia, Tom, President, Composite Panel Association, submitted
      statement......................................................  2461
    Rigdon, Philip, President, Intertribal Timber Council, submitted
      letter.........................................................  2463
    Waslaski, Kevin, Chairman, U.S. Canola Association, submitted
      statement......................................................  2466
    Wellman, Steve, President, American Soybean Association,
      submitted statement............................................  2467
    Wood Fiber Coalition, submitted statement........................  2468

                       FORMULATION OF THE 2012 FARM BILL
                          (RURAL DEVELOPMENT PROGRAMS)

                                  ----------

                           WEDNESDAY, APRIL 25, 2012

                      House of Representatives,
          Subcommittee on Rural Development, Research,
                Biotechnology, and Foreign Agriculture,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 2:33 p.m., in
    Room 1300 of the Longworth House Office Building, Hon. Timothy
    V. Johnson [Chairman of the Subcommittee] presiding.
        Members present: Representatives Johnson, Thompson,
    Stutzman, Scott, Hultgren, Hartzler, Schilling, Costa, Cuellar,
    and Sewell.
        Staff present: Mike Dunlap, Tamara Hinton, DaNita Murray,
    Lauren Sturgeon, Suzanne Watson, Andy Baker, Liz Friedlander,
    John Konya, Jamie Mitchell, and Caleb Crosswhite.

    OPENING STATEMENT OF HON. TIMOTHY V. JOHNSON, A REPRESENTATIVE
                       IN CONGRESS FROM ILLINOIS

        The Chairman. This hearing of the Subcommittee on Rural
    Development, Research, Biotechnology, and Foreign Agriculture
    to assess rural development programs in advance of the 2012
    Farm Bill will come to order. I have a brief opening
    statement--not as brief as I would like but be what it is--to
    read before we start, and I ask the Ranking Member, Mr. Costa,
    to do likewise.
        Good afternoon and welcome to this hearing to review the
    rural development programs in advance of the 2012 Farm Bill.
    This is the first of eight hearings which will be held by the
    various Subcommittees to review Federal farm policy before we
    begin drafting the reauthorization of ag programs. These
    Subcommittee hearings are a continuation of the Committee's
    work to gather information on farm policy. We have also
    conducted 11 audits of farm programs--three of which were held
    by this Subcommittee--and four field hearings to gather input
    directly from producers across America.
        Today, we are focusing on how the Federal Government makes
    investments in rural communities. While the infrastructure
    needs such as water, wastewater, and broadband access are
    similar throughout every town and city in America, small, rural
    towns that make up a good part of our districts face unique
    challenges. Each farm bill seeks to address long-standing
    challenges and adapt to new ones in the rural development
    title.
        Without a doubt, access to water, energy, and broadband
    infrastructure plays a critical role in each community's
    ability to create a competitive business environment. Even with
    the right infrastructure in place, limited access to credit and
    business training could impede the community's ability to
    develop and start new enterprises.
        And I might say parenthetically that at least three or four
    of us were at a Subcommittee hearing in Springfield, Illinois,
    where we specifically dealt and focused on the broadband issue,
    it was very instructive and very helpful. Our staffs did a
    great job and I hope we will be able to integrate some of the
    input received and add that into a final product.
        Today's discussion will take us across a wide range of
    issues as we look at the range of programs offered by the USDA.
    It is in part the sheer number of programs which makes it
    difficult to gauge the effectiveness of current policy. Just a
    few weeks ago, we heard testimony from GAO regarding the extent
    of duplication and fragmentation among Federal agencies. As the
    Committee considers how to reauthorize current programs, it
    seems prudent to also seek ways to weed out activities and
    authorities that are either redundant or ineffective and in
    doing so, these programs would be made more accessible to
    applicants, reduce USDA's administrative burden, and focus
    program resources on core responsibilities. As Congress looks
    at ways to address the deficit, scarce funds must be stretched
    to accomplish more than ever.
        Before us today are two panels comprised of organizations
    that assist rural America in a variety of ways, but are
    universally focused on developing the livelihoods and economies
    of virtually every rural town and county. As partners and
    implementers of USDA programs, our witnesses will be able to
    provide an in-depth discussion of the farm bill and ways to
    strengthen our approach to rural economic development.
        Our first panel includes representatives of co-ops,
    counties, and development organizations whose members are found
    in every corner of the country. Among the issues we hope to
    address with our first panel is the fragmentation of programs,
    challenges of regional coordination, and ways to improve
    program applications.
        Our second panel will focus on infrastructure programs and
    how our water, wastewater, and telecommunications programs are
    functioning. Particularly in light of budget constraints, we
    hope to receive additional feedback on how the programs can be
    adjusted to reach more communities with the given resources.
        We appreciate the time that each of the witnesses have
    given us to prepare their testimony. The testimony received
    today will be significant as we begin the process to
    reauthorize the farm bill.
        [The prepared statement of Mr. Johnson follows:]

      Prepared Statement of Hon. Timothy V. Johnson, a Representative in
                             Congress from Illinois

        Good morning and welcome to this hearing to review rural
    development programs in advance of the 2012 Farm Bill. This is the
    first of eight hearings which will be held by the various Subcommittees
    to review Federal farm policy before we begin drafting the
    reauthorization of agricultural programs. These Subcommittee hearings
    are a continuation of the Committee's work to gather information on
    farm policy. We've also conducted 11 audits of farm programs--three of
    which were held by this Subcommittee--and four field hearings to gather
    input directly from producers across America.
        Today we are focusing on how the Federal Government makes
    investments in rural communities. While the infrastructure needs such
    as water, wastewater, and broadband access are similar throughout every
    town and city in America, the small, rural towns that make up a good
    part of our districts face unique challenges. Each farm bill seeks to
    address long-standing challenges and adapt to new ones in the rural
    development title.
        Without a doubt, access to water, energy, and broadband
    infrastructure plays a critical role in each community's ability to
    create a competitive business environment. Even with the right
    infrastructure in place, limited access to credit and business training
    can impede a community's ability to develop and start new enterprises.
        Today's discussion will take us across a wide range of issues as we
    look at the range of programs offered by USDA. It is, in part, the
    sheer number of programs which makes it difficult to gauge the
    effectiveness of current policy. Just a few weeks ago, on March 21st,
    we heard testimony from the Government Accountability Office (GAO)
    regarding the extent of duplication and fragmentation among Federal
    agencies.
        As the Committee considers how to reauthorize current programs, it
    seems prudent to also seek ways to weed out activities and authorities
    that are either redundant or ineffective. In doing so, these programs
    would be made more accessible to applicants, reduce USDA's
    administrative burden, and focus program resources on core
    responsibilities. As Congress seeks ways to address the deficit, scarce
    funds must be stretched to accomplish more than ever.
        Before us today are two panels comprised of organizations that
    assist rural America in a variety of ways, but are universally focused
    on developing the livelihoods and economies of virtually every rural
    town and county. As partners and implementers of USDA programs, our
    witnesses will be able to provide an in-depth discussion on the farm
    bill and ways to strengthen our approach to rural economic development.
        Our first panel includes representatives of cooperatives, counties,
    and development organizations whose members are found in every corner
    of the country. Among the issues we hope to address with our first
    panel is the fragmentation of programs, challenges to regional
    coordination, and ways to improve program applications.
        Our second panel will focus on infrastructure programs, and how our
    water, wastewater, and telecommunications programs are functioning.
    Particularly in light of budget constraints, we hope to glean
    additional feedback on how the programs can be adjusted to reach more
    communities with the given resources.
        We appreciate the time that each of our witnesses took to prepare
    their testimony and travel to be here today. The testimony we receive
    today will be invaluable as we begin the process to reauthorize the
    farm bill.

        The Chairman. With that, I would like to turn to my friend
    and colleague from California, the Ranking Member, Mr. Costa,
    for a statement as well.

       OPENING STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN
                        CONGRESS FROM CALIFORNIA

        Mr. Costa. Thank you very much, Mr. Chairman, for your
    leadership and your comments. And let me take this opportunity
    since this is the first Subcommittee hearing that we have held
    since your announcement regretfully to make this your last term
    in serving the people of Illinois as a distinguished Member of
    the House; we appreciate all of the good work that you have
    done over the years and the hard work that you have done on
    behalf of your constituents, as well as a terrific Member of
    the House Agriculture Committee. Your focus and your care are
    well known and the sacrifices you and your family have made so
    you could serve the people of our United States is truly
    appreciated. So let me thank you again on behalf of all the
    Members of the Subcommittee and our colleagues for a job well
    done and we will look forward to continuing to work with you
    before the end of this year is out.
        The Chairman. Let me just say a very sincere thanks to you
    for not only the comments but for the wonderful partnership
    that we have created on this Subcommittee and the input and
    role that you play, which is overwhelmingly appreciated and
    your friendship is as well. So those comments are especially
    important to me and thank you so much.
        Mr. Costa. Well, thank you again, Mr. Chairman.
        This hearing is important, as all the hearings that this
    Subcommittee has held, as it relates to the rural development
    title of the farm bill and the organizations that are going to
    testify in terms of your input and as it relates to the United
    States Department of Agriculture's rural development programs,
    which I think, and Members of the Subcommittee believe, are
    critical as we reauthorize the 2012 Farm Bill.
        Rural America, as we all know, comprises \3/4\ of the
    nation's land and is home to more than 50 million people. The
    rural development programs in this title help their interests
    and the prosperity of those communities that we represent.
    These programs authorized by the rural development title of the
    farm bill support an array of public facilities and services.
    In addition, rural development programs have allowed
    communities to apply for loans, loan guarantees, and grants,
    which are critical throughout rural America.
        Over the course of nearly 80 years, since the Great
    Depression, the landscape of rural America has changed greatly.
    Our nation's policy related to rural America has also changed.
    And even as manufacturing and service sectors have replaced
    some agricultural production as dominant economic forces in
    some of rural America, we know that there are a lot of
    commonalities that rural America share together, including the
    bountiful harvest of American agriculture.
        As we look at the reauthorization of the farm bill, it is
    my belief that this Subcommittee and the full Committee should
    look closely at what it means to be rural in the 21st century
    and how increasingly limited Federal resources can be leveraged
    to assist our rural communities.
        In February 2011, we held a hearing of this Subcommittee
    examining the definition of rural as it applies to the USDA
    programs. However, to date, sadly, we still have not received
    the report promised by the United States Department of
    Agriculture clarifying that definition. Please, Secretary
    Vilsack, if you are hearing this anywhere, members of the USDA,
    if you are hearing this anywhere, we would like to get the
    report.
        In fact, my Congressional district is one of the most
    productive agriculture regions in the country and many of our
    communities not only are rural but many of my communities are
    poor and disadvantaged. Despite the clear need, my district
    struggles with eligibility requirements under the rural
    development programs, as, for example, whether or not rural
    housing help or essential community facilities can be included
    largely because of the criteria used to define what rural
    means. Establishing a nationwide definition of rural presents
    challenges, I understand, regionally from the South to the
    Northeast the Midwest to the West. However, it seems to me that
    we ought to be able to work through this.
        We have a very able state director with USDA who is here in
    the audience today, Dr. Glenda Humiston, who I work with on a
    regular basis. She just told me that in looking at the 2011
    Census data, as an example, 98 communities in California will
    no longer be deemed as falling under the definition of rural,
    which more tragically or unsatisfying for many of my colleagues
    represent 80 percent of their loan portfolio. So with the new
    definition, because of population increases that are taking
    place, 98 communities in California will no longer be
    considered rural and that impacts 80 percent of the loan
    portfolio as the state director just informed me. And by the
    way, I want to thank Dr. Glenda Humiston for doing the terrific
    job that she does.
        I think everyone here, our witnesses included, would be
    hard-pressed to come up with a singular definition. I know that
    is tough--that accurately portrays what it means to be rural in
    every state. There isn't a one-size-fits-all I do not believe.
    Recent farm bills have updated the definition of rural, so I
    look forward to hearing the witnesses' view on how we might
    address this issue. If more of our rural communities can be
    better served with a different set of criteria or a different
    regionally based approach, then let's hear about it before we
    reauthorize the 2012 Farm Bill.
        That said, Mr. Chairman, I am particularly interested in
    hearing from representatives of the telecommunications
    organizations responsible for delivering broadband services to
    consumers in rural communities connecting rural America to what
    we know is a global economy. Whether it is in my home State of
    California or anywhere between, Federal programs and private
    service providers have made great strides in deploying
    broadband. The hearing that you mentioned in Illinois that the
    Subcommittee held last year brought that out in terms of the
    access to broadband, and you had some very good witnesses that
    testified.
        I want to highlight a few California figures that
    illustrate why the issue of rural broadband is so important not
    just in my district but in states and communities all across
    rural America. When you think of California--and I know that
    people have a lot of different thoughts when they think of
    California--but oftentimes it is Silicon Valley, its high-tech
    sector are probably many things that come to mind. According to
    a 2008 report, California Broadband Task Force, we are a
    leading state in broadband penetration. However, that figure is
    misleading. The same report found that 1.4 million rural
    Californians lacked access to broadband and barely \1/2\ the
    state's residents have broadband access at home. For these
    households with annual incomes of $25,000 or less, many in my
    district, the situation is even bleaker with less than \1/4\ of
    the households subscribing to broadband.
        What this shows me is despite relative success in putting
    wires in the ground, the Federal Government and private sector
    broadband providers, public institutions still have a lot of
    work to do in bridging the divide between the haves and the
    have-nots. And let me tell you why I think this is so
    important, especially in rural America--because we are closely
    reaching our ability to have access or capacity on broadband.
    American agriculture is at the cutting edge around the world in
    this broadband technology as it relates to irrigation
    technologies, as it relates to tillage technologies. Broadband
    is being used to make our farmers more efficient and more
    effective. Yet when you limit their capacity or the broadband
    capacity for American farmers, dairymen, and ranchers, it has
    an economic impact in this global economy that they have to
    compete in.
        Finally, Mr. Chairman, research is an important task of the
    Subcommittee and the separate title of the farm bill and I just
    want to take a moment to speak on that. Research has been at
    the core of the United States Department of Agriculture for
    nearly 150 years since the Department of Agriculture was
    created. Particularly, through our land-grant institutions--and
    many of us represent land-grant institutions--research driven
    by the United States Department of Agriculture has helped
    ensure safe, abundant, and affordable food supply and fiber
    that has not only made American farmers and farm households
    thrive but be among the very best in the entire world.
        Equally important to these efforts is the research
    conducted by even many of our non-land-grant agricultural
    schools such as my alma mater, Fresno State--go Bulldogs--which
    is one of the premier ag schools in the West. I am sure it
    comes as no surprise to many of my colleagues that of
    particular interest is the research being conducted in
    Specialty Crops Research Initiative that many of us fought very
    hard for in the 2008 Farm Bill. It was created there for the
    purpose of continuing to expand that. It expires this year.
    Specialty crops represent approximately \1/2\--\1/2\--of the
    United States agricultural exports without support in the farm
    bill. So it is an assistance through technical programs such as
    market access, such as Specialty Crops Research Initiative,
    such as efforts for pest detection and eradication--I can get
    it out I know I can--that help us thrive when we deal with
    infestations.
        So I look forward to the reauthorization and working
    together on a bipartisan basis in the farm bill. It is
    critically important that competitive research dollars remain
    available to our institutions throughout the United States to
    support American agriculture. I look forward to hearing from
    the witnesses who participate in the rural development programs
    and their views and their proposals about how we can maintain
    and strengthen the United States Department of Agriculture's
    largely successful rural development programs in a cost-saving
    environment that we know that we are in as we reauthorize the
    2012 Farm Bill.
        Mr. Chairman, thank you. I spoke longer than I should have
    but I had a lot to say this afternoon. Thank you.
        [The prepared statement of Mr. Costa follows:]

    Prepared Statement of Hon. Jim Costa, a Representative in Congress from
                                   California

        Thank you, Chairman Johnson, for calling today's hearing, to
    discuss the rural development title in the farm bill and hear from
    organizations that participate in the USDA rural development programs
    in advance of the 2012 Farm Bill.
        Rural America comprises \3/4\ of the nation's land area and is home
    to more than 50 million people. The rural development programs under
    this title help advance the interests and prosperity of these
    communities.
        The programs authorized through the rural development title of the
    farm bill support an array of public facilities and services. In
    addition, rural development programs allow communities to apply for
    loans, loan guarantees, and grants, which provide much needed
    assistance to help advance their farm or community.
        In one form or another, the Federal Government has assisted rural
    families and communities since the Great Depression.
        Over the course of the nearly 80 years since that time, the
    landscape of rural America has changed greatly, and our nation's
    policies related to rural America have changed with it.
        Even as the manufacturing and service sectors have replaced
    agriculture production as the dominant economic force in much of rural
    America, the common needs of our rural communities remain.
        As we look to reauthorize the farm bill, it is my belief that this
    Subcommittee and the full Committee must look closely at what it means
    to be a rural community in the 21st century and how increasingly
    limited Federal resources can be leveraged to position rural areas to
    better compete in a global economy.
        In February 2011, we held a hearing in this Subcommittee examining
    the definition of rural as it applies to USDA programs. However, to
    date, we have still not received the report promised to us by USDA
    clarifying the definition.
        The fact is, my Congressional district is one of the most
    productive agricultural regions in the country and many of our
    communities are not only rural, but also largely poor and
    disadvantaged.
        Despite the clear need, my district struggles with eligibility for
    rural development programs, whether it is rural housing, health, or
    essential community facilities, largely because of the criteria used to
    define rural communities.
        Establishing a nationwide definition of rural presents challenges
    for communities in all corners of the country.
        I think everyone here, our witnesses included, would be hard-
    pressed to come up with a singular definition that accurately portrays
    what it means to be rural in each and every state.
        Recent farm bills have updated the definition of rural, so I look
    forward to hearing our witnesses' thoughts on whether further reforms
    should be considered in the next farm bill to more effectively and
    efficiently operate rural development programs.
        If more rural communities can be better served with a different set
    of criteria or a different regionally-based approach to development,
    then that is something this Committee should consider in this farm
    bill.
        That said Mr. Chairman, I am particularly interested in hearing
    from the representatives from the telecommunications organizations
    responsible to delivering broadband services to consumers in rural
    communities and connecting rural America to the global economy.
        Whether it's in my home State of California or anywhere in between,
    Federal programs and private service providers have made great strides
    in deploying broadband.
        I want to highlight a few California figures that illustrate why
    the issue of rural broadband is so important for my district, my state
    and communities all across rural America.
        When you think of California, Silicon Valley and our high-tech
    sector are probably among the first things that come to mind. And
    according to a 2008 report by the California Broadband Task Force,
    California does lead the nation in broadband penetration, with 96
    percent of Californians having access to the technology.
        But this figure is also misleading. The same report found that 1.4
    million rural Californians lack access to broadband and barely \1/2\ of
    the state's residents have broadband access at home.
        For those households with an annual income of less than $25,000--
    many of which are in my district--the situation is even bleaker, with
    less than \1/4\ of households subscribing to broadband.
        What this shows me is that despite relative success in putting
    wires in the ground the Federal Government, broadband providers and
    public institutions still have a lot of work to do in bridging the
    divide between the haves and have-nots when it comes to broadband,
    particularly in rural America.
        Finally Mr. Chairman, research is another important task of this
    Subcommittee and a separate title of the farm bill, and I want to take
    just a moment to speak on that.
        Research has been a core mission of USDA for the nearly 150 years
    since the Department was created.
        Particularly through our land-grant institutions, the research
    driven by USDA has helped ensure a safe, abundant and affordable supply
    of food and fiber that has helped American farmers thrive.
        Equally important to these efforts is the research conducted by our
    non-land-grant agriculture schools, such as Fresno State University in
    my district.
        I'm sure it comes as no surprise by now to my colleagues that of
    particular interest to me is the research being conducted through the
    Specialty Crops Research Initiative, which was created in the 2008 Farm
    Bill.
        The mandatory funding for this program expires after Fiscal Year
    2012.
        Specialty crops represent approximately \1/2\ of the value of U.S.
    agriculture without support from title I of the farm bill, so
    assistance through technical programs such as the Market Access Program
    and research programs like the Specialty Crops Research Initiative are
    particularly important to help this vital sector thrive.
        As we look toward reauthorization of the farm bill it is critically
    important that competitive research dollars remain available to these
    institutions to continue their good work on behalf of American
    agriculture.
        I look forward to hearing from our witnesses who participate in
    USDA rural development programs and their views and proposals about how
    we can maintain and strengthen USDA's largely successful rural
    development programs in a cost-saving environment in the 2012 Farm
    Bill.
        Thank you again, Mr. Chairman, for calling this hearing. I yield
    back my time.

        The Chairman. Thank you, Mr. Costa. And no, you didn't
    speak too long. In fact, your comments are right on point and I
    really appreciate them.
        Our first panel today is comprised of three individuals,
    all of whom are highly regarded in their area. Mr. Chuck
    Conner, my friend and President and CEO of the National Council
    of Farmer Co-Ops; former Secretary of Agriculture, Mr. Don
    Larson, Commissioner, Brookings County, South Dakota, on behalf
    of the National Association of Counties; and Leanne Mazer, I
    believe, the Executive Director of the Tri-County Council for
    Western Maryland, Frostburg, Maryland, speaking on behalf of
    the National Association of Development Organizations.
        So with that, Mr. Conner, the floor is yours.

     STATEMENT OF HON. CHARLES F. CONNER, PRESIDENT AND PRESIDENT
        AND CHIEF EXECUTIVE OFFICER, NATIONAL COUNCIL OF FARMER
                     COOPERATIVES, WASHINGTON, D.C.

        Mr. Conner. Chairman Johnson, Ranking Member Costa, and
    Members of the Subcommittee, on behalf of the nearly 3,000
    farmer-owned cooperatives and their producer members, we
    appreciate the opportunity to testify today.
        Rural development programs are intended to bolster rural
    communities and position them to better compete in a global
    environment. As such, it is important that USDA rural
    development programs focus on agriculture and farmer co-ops as
    the foundation for helping encourage and support rural
    economies.
        There are more than 88 programs administered by 16
    different Federal agencies specifically targeted at rural
    economic development. With a significant decrease in funding
    for farm bill programs, coupled with declining USDA resources
    to administer those very programs, it just makes sense to us to
    consolidate the programs that all have the same objective. It
    takes the same amount of staff time, Mr. Chairman, to
    administer a million-dollar program as it takes to administer a
    $100 million program.
        At the same time, the requirements for applying for grants
    have become overly complicated and too burdensome and have
    spawned a cottage industry for consultants. Some feedback I
    have received from my members is that while they are interested
    in applying for a rural development grant, they don't have the
    resources to navigate the process and the time and energy
    required to apply isn't worth the amount of funds they would be
    eligible for in the end. Simplifying the application process
    would lead to more applications resulting in better projects.
        That said, Mr. Chairman, the Value-Added Producer Grants
    Program has been successfully utilized by farmer co-ops. I have
    specific examples provided by several NCFC members that I would
    ask at this point be submitted for the record. The program has
    been instrumental in helping co-ops overcome many barriers
    faced when developing new products for the marketplace, one of
    which is working capital. This is particularly acute for
    advanced planning that requires substantial capital investment
    or commitment of resources up front.
        The program has helped producers launch new agricultural
    products through their co-ops both domestically and
    internationally. Having access to Value-Added Producer Grants
    allows co-ops to capitalize on new business opportunities that
    would otherwise simply go unexplored. These successful products
    have resulted in more stable income from the marketplace for
    producers. The program is administered on a matching-fund
    basis, thereby doubling the impact of such grants and helping
    encourage investment and ventures that ultimately benefit all
    of rural America.
        Co-ops bring many producers, Mr. Chairman, together who
    individually do not have the size, expertise, or resources to
    take advantage of the value chain beyond their own farm gate
    and gives them the opportunity to profit from those downstream
    activities. NCFC strongly believes that co-ops, by spreading
    the benefits of Value-Added Producer Grants among a large
    number of producers can give the American taxpayers the
    greatest bang for their buck.
        In 2011, USDA made significant improvements to the program
    rules that recognize those very benefits that I describe. NCFC
    supports those changes and ask that they carry through in this
    farm bill reauthorization process.
        Another area of interest to many of my members is the
    Cooperative Services Program. Over time, that program area has
    lost many of its experienced professional staff. At one time,
    the program housed well over 100 employees, but today, that
    number is less than ten. We are not advocating for additional
    staff but we do want to see the resources that exist better
    spent.
        For example, there are many research needs that Cooperative
    Services could provide that would be specifically beneficial to
    NCFC and our member cooperatives, but currently, much of that
    research is simply not being done. We often hear from NCFC
    members that are searching for timely and complete statistics
    on farmer co-ops. There is an evident lack of complete and
    timely research on the impact of farmer co-ops on rural
    economies and those lacking items include number of farmer co-
    ops and their location, number of employees, aggregate payroll
    amounts, farmer co-op market share of various commodities, and
    of course, the patroness dividends that we return to our farmer
    owners.
        In addition, we encourage Cooperative Services to revisit
    and update the very useful legal and tax publications that have
    been a cornerstone of cooperatives in the past. NCFC does seek
    inclusion of report language better directing the focus of
    USDA's Cooperative Services and looks forward to working with
    this Committee in this regard.
        So I thank you, Mr. Chairman, for the opportunity to
    testify before your Subcommittee today and look forward to
    answering questions at the appropriate time.
        [The prepared statement of Mr. Conner follows:]

       Prepared Statement of Hon. Charles F. Conner, President and Chief
    Executive Officer, National Council of Farmer Cooperatives, Washington,
                                      D.C.

        Chairman Johnson, Ranking Member Costa, and Members of the
    Subcommittee, thank you for the invitation to testify today on how the
    2012 Farm Bill can best help rural America meet current and new
    challenges, and specifically address issues as you look to write the
    rural development title.
        I am Chuck Conner, President and Chief Executive Officer of the
    National Council of Farmer Cooperatives (NCFC). NCFC represents the
    interests of America's farmer cooperatives. There are nearly 3,000
    farmer cooperatives across the United States whose members include a
    majority of our nation's more than two million farmers. These farmer
    cooperatives allow individual farmers the ability to own and lead
    organizations that are essential for the vitality of the agriculture
    sector and rural communities. Earnings derived by farmer-owned
    cooperatives are returned to their farmer-members on a patronage basis
    thereby enhancing their overall farm income that directly supports and
    keeps capital in the rural economy.
        According to the U.S. Department of Agriculture (USDA), rural
    America comprises \3/4\ of the nation's land area and is home to more
    than 50 million people. USDA rural development programs play a vital
    role in helping to ensure continued prosperity in these communities. We
    appreciate the opportunity to highlight some of these programs, and
    their impact on cooperatives and their farmer-owners.
        These programs serve a variety of purposes including strengthening
    farm income, fostering the incubation of business in areas that are
    capital and financially challenged, and help rural America stay abreast
    of changing technologies. Rural development programs are intended to
    bolster rural communities and position them to better compete in a
    global environment. As such, it is important that USDA rural
    development programs continue to focus on agriculture and farmer
    cooperatives as a foundation for helping encourage and support rural
    economies.
        Inasmuch as rural development programs have offered many benefits
    to American farmers and rural economies, some are often criticized for
    being unfocused and under-funded. It is worth noting that there are
    more than 88 programs administered by 16 different Federal agencies
    specifically targeted at rural economic development. USDA administers
    most of the existing rural development programs and has the highest
    average of program funds going directly to rural counties,
    approximately 50 percent.
        With a significant decrease in funding for farm bill programs,
    coupled with declining USDA resources to administer those programs,
    consolidation of programs, where feasible, is warranted. It takes the
    same amount of staff time to write rules, review applications, and
    administer a $1 million program as it does a $100 million program. It
    is not an efficient use of limited staff resources to be administering
    many programs that have differing application and administrative
    requirements where the overall program objectives are generally
    similar.
        Conversely, the various requirements for applying for grants have
    become complicated and difficult to figure out and thus spawned a
    cottage industry for consultants to assist applicants through the
    process. It would be beneficial to have a system to evaluate the merits
    of a proposal aside from the professionally written content, and where
    it is encouraged that participants write their own grant applications.
    Samples of past grant applications together with work plans may be very
    useful to applicants. While the level of assistance varies from one
    state Rural Development office to the next, NCFC members have found
    their local offices to be extremely helpful resources and USDA staff
    willing to assist when questions arise.
        NCFC supports streamlining the number of programs as well as the
    application process--the result will be a more efficient, effective
    agency, while providing for a more understandable, easier-to-navigate
    application process for all entities.

    Value-Added Producer Grants (VAPG)
        A barrier that cooperatives often face is the capital necessary to
    innovate and process new consumer products. This is particularly acute
    for advance planning by cooperatives that requires substantial capital
    investment or commitment of resources, such as planning for operating
    and expansion expenses. Since its establishment, USDA's Value-Added
    Producer Grants (VAPG) program has been a tremendous success in helping
    cooperatives overcome those constraints. The program has helped
    producers launch new agricultural products through their cooperatives,
    both domestically and internationally. These value-added products
    benefit both producers and consumers.
        With VAPG funds, cooperatives are empowered to capitalize on new
    value-added business opportunities that would otherwise go unexplored.
    VAPG helps cooperatives differentiate and expand production, in turn
    helping them improve the value of their products through processing and
    marketing. The objective is to increase sales not by displacing other
    products, but rather build and sustain a market where one previously
    did not exist. Their successful, self-sustaining products have
    translated into greater and more stable income for producers from the
    marketplace. It also has served to promote economic development and
    create jobs.
        The program is administered on a matching-fund basis, thereby
    doubling the impact of such grants and helping encourage investment in
    ventures that ultimately benefit rural America. As a cost-share
    program, it is as an excellent example of an effective public-private
    partnership bringing a number of self-sustaining products to market.
        Of the 298 recipients of Value-Added Producer Grants for 2012, 26
    are farmer-owned cooperatives. NCFC strongly believes that cooperatives
    efficiently spread the benefits of the VAPG among a larger number of
    producers in the aggregate. Cooperatives by their nature bring many
    producers together who individually do not have the size, expertise and
    resources to take advantage of the value chain beyond the farm gate and
    gives them the opportunity to profit from those down-stream activities.
    Therefore, funds invested by USDA and the benefits of projects
    generated by cooperatives through the VAPG are distributed to a wide
    number of producers. Likewise, by investing in initiatives of
    cooperatives, USDA lowers the overall costs to the government in
    program administration per individual farmer that benefits.
        In 2011, USDA made significant improvements to the program rules
    that recognize those benefits. I urge you to also recognize those
    principles and treat cooperatives as a priority in any direction you
    may give USDA in administering the VAPG.

    Loan Guarantee Programs
        Rural Development loan guarantees are a cost-effective way to
    leverage limited resources and funding. For example, communities in
    rural America need access to capital to upgrade our nation's water
    infrastructure. The water and water disposal guarantee loan programs
    administrated by the Rural Utilities Service of USDA increases ability
    to leverage all resources--public and private--to provide the financing
    necessary for our nation's water systems. This program is a cost-
    effective way to promote public-private partnerships that boost the
    rural economy and enhance the quality of life in rural communities.

    Energy
        Cooperatives play a significant role in the development and
    marketing of renewable energy. In addition to ethanol and biodiesel,
    many cooperatives also are investigating opportunities for creating
    renewable energy from biomass such as dairy cow manure through
    anaerobic digestion. USDA programs also are being used more and more by
    cooperatives to improve energy efficiency in their facilities. We
    strongly support reauthorization of these important grant, loan and
    related programs which research and promote the development and
    advancement of biofuels and opportunities for biomass, as well as such
    programs that assist in reaching energy efficiency goals.

    USDA Cooperative Services Program
        Over time, the Cooperative Services Program has lost many of its
    experienced professional staff. This office was once the premier source
    of information on cooperatives' role in various commodity sectors, and
    on cooperative legal foundations, taxation, finance, member education/
    information, governance, and board/management relations. There are many
    areas in addition to these in which research by Cooperative Services
    could provide especially beneficial information. We often hear from
    NCFC member cooperatives that are searching for timely and complete
    statistics on farmer cooperatives. There is an evident lack of
    comprehensive and updated research on the impact of farmer cooperatives
    on rural economies.
        In addition to research on the economic impacts of farmer
    cooperatives, Cooperative Services should re-visit very useful legal
    and tax publications it has published in the past. These publications
    are used frequently by farmer cooperatives. Materials and/or training
    sessions for boards of directors would also be greatly beneficial.
    Subjects such as financial decision-making, ethics, board make-up and
    representation, and executive succession are all important to the
    success of a cooperative. NCFC seeks inclusion of report language
    better directing the focus of USDA's Cooperative Services, and looks
    forward to working with the Committee in that regard.
        In closing, maintaining a strong agriculture economy is essential
    to the health of rural America. Some of the challenges faced by the
    agricultural industry include dealing with immense regulatory pressure
    and struggling to have access to a legal, stable workforce. While,
    those issues clearly fall out of the jurisdiction of the USDA's rural
    development programs, they are vital to a strong agricultural economy.
    In addition, there are programs contained throughout the farm bill that
    enhance opportunities for rural communities--from maintaining a
    meaningful safety net for producers, to supporting agricultural
    exports.
        Thank you again for the opportunity to testify today before the
    Subcommittee. We look forward to working with you to strengthen USDA's
    Cooperatives Services, keep the VAPG Program viable and available to
    farmer co-ops, and streamline other rural development programs and
    applications. I am happy to answer any questions you may have.

    About the National Council of Farmer Cooperatives
        Since 1929, NCFC has been the voice of America's farmer
    cooperatives. NCFC values farmer ownership and control in the
    production and distribution chain; the economic viability of farmers
    and the businesses they own; and vibrant rural communities. With an
    extremely diverse membership, NCFC members span the country, supply
    nearly every agricultural input imaginable, provide credit and related
    financial services (including export financing), and market a wide
    range of commodities and value-added products.
        American agriculture is a modern-day success story. America's
    farmers produce the world's safest, most abundant food supply for
    consumers at prices far lower than the world average. Farmer
    cooperatives are an important part of the success of American
    agriculture. Cooperatives differ from other businesses because they are
    member-owned and are operated for the shared benefit of their members.

                                   Attachment

    Value-Added Producer Grants
        The purpose of the Value-Added Producer Grant program is to help
    agricultural producers improve the value of their products through
    processing and/or marketing. Grants can be used for feasibility
    studies, developing business plans, working capital and for farm-based
    renewable energy products. Planning grants are available for up to
    $100,000; working capital grants for up to $300,000. The grants are
    limited to 50 percent of project costs. Eligible applicants include
    independent producers, agricultural cooperatives, producer groups and
    majority-controlled producer-based business ventures.

    Farmer-Owned Cooperatives: A Few Examples of VAPG Activities
        Blue Diamond: In 2003, Blue Diamond developed a line of three
    highly seasoned added value almond products. The goal was to attract
    new users to improve the grower's return long-term by creating a
    sustainable and meaningful source of revenue. The goals of the VAPG
    were exceeded by an eightfold increase in sales projections and a
    successful new line of almond products for consumers was launched that
    continues to fuel additional demand for a crop that has tripled in the
    last 10 years. Blue Diamond ``Bold'' sales were over $40.2 million in
    2011, growing more than 18 percent compounded annually. ``Bold''
    flavors have increased fourfold to 12 flavors in 2011.
        In addition, the new line now accounts for almost 17 percent of
    total Blue Diamond snack almond sales; Blue Diamond total snack almond
    household penetration is now over 11 percent, up from 2.3 percent in
    2003; the ``Bold'' line is distributed in over 35,000 of the nation's
    largest retail stores.
        Blue Diamond Growers is a farmer-owned cooperative headquartered in
    Sacramento, CA. The co-op created a commercial California almond
    industry when it organized in 1910. Today, it represents over half of
    U.S. almond growers and is the leading global manufacturer of almonds.
    Blue Diamond almond growers are small family farmers, averaging about
    55 acres each.
        Pacific Coast Producers: Beginning in April of 2003, Pacific Coast
    Producers (PCP) has earned four separate Value-Added Grants. These
    grants have assisted PCP Retail Sales, Operations, R&D and Marketing
    groups in launching dozens of new items into the retail grocery trade
    including, but not limited to a line of shelf stable, private brand
    plastic fruit bowls, canned extra light syrup fruits, organic canned
    tomatoes, fire roasted canned tomatoes and fortified canned fruits. A
    new grant awarded in February 2012 will serve as a major enabler to
    rebrand canned and shelf stable fruit and tomato products, making
    canned food products more relevant in the future and increasingly
    desired by new consumers.
        With the assistance of the USDA Value-Added Grants since 2003,
    Pacific Coast Producers was able to build our plastic fruit bowl
    program into a 7,500,000 case per year industry juggernaut, added
    approximately 240,000 cases per year to our canned fruit program in the
    Extra Light Syrup sub-category, built an organic tomato program from
    nonexistent to almost 450,000 cases per year and a fire roasted tomato
    program of 440,000 cases per year, encompassing annual sales of
    approximately $78 million dollars and growing. These sales do not
    displace products from other manufacturers, but rather built and
    sustained where no interest existed prior to the initial launch with
    the assistance of the VAPG program. PCP expects each of the
    aforementioned newly created sub-categories of shelf stable food to
    continue their rapid growth and for the rebranding of canned items
    through its Fresh as Fresh Can Be campaign, to permanently lift the
    sustainability of its California Cooperative Farmers.
        Sunsweet: In an effort to stimulate demand for its farmers'
    production, Sunsweet has used the VAPG program to assist in launching
    innovative products. ``Sunsweet Ones'' recast prunes as a ``candy
    nutrient'' by individually wrapping moist prunes in cellophane, making
    them a ``snack-on-the-go.'' In 2007, Sunsweet began marketing a light,
    low-calorie version of its PlumSmart juice products which is made from
    fresh prune plums which normally are less visually appealing than the
    varieties grown for fresh markets. Because the PlumSmart line
    represents prune-plums as snacks, nutrition-on-the-go, or food with
    specific nutritional claims, it requires advertising to engage consumer
    interest.
        In addition, the VAPG assisted in launching other Sunsweet products
    addressing consumers' preferences and expanding demand for their
    farmers production. The ability for new product development and making
    a market has been greatly enhanced due to USDA's VAPG.
        Founded in 1917 as the California Prune and Apricot Growers
    Association, the cooperative served as a marketing agent to offer the
    crops of its members--under the brand name ``Sunsweet''--to consumers
    at better prices than were offered by individual growers. Today,
    Sunsweet processes and markets the dried fruit production of more than
    300 grower-members.

        The Chairman. Thank you, Mr. Conner.
        Mr. Larson?

       STATEMENT OF HON. DONALD LARSON, COMMISSIONER, BROOKINGS
                    COUNTY, SOUTH DAKOTA; CHAIRMAN,
      AGRICULTURE AND RURAL AFFAIRS STEERING COMMITTEE, NATIONAL
                 ASSOCIATION OF COUNTIES, BROOKINGS, SD

        Mr. Larson. Thank you, Chairman Johnson, Ranking Member
    Costa, and Members of the Subcommittee, for our opportunity to
    speak to you today. I am Don Larson. I am a County Commissioner
    from Brookings County, South Dakota, and I serve as chair of
    the National Association of Counties Agriculture and Rural
    Affairs Steering Committee and I am honored to bring the
    collective perspective of our nation's counties as I represent
    NACo today.
        A vast majority of our nation's 3,068 counties are rural;
    therefore, our new farm bill with emphasis on rural development
    is critical to our American counties. Today, we are talking
    about America's food, fiber, and renewable energy fuels
    producers and their local economies. Before I get into the
    details of the testimony, I want to thank the leadership and
    the membership of the House Agriculture Committee for your
    commitment to passing the farm bill this year.
        In my testimony, Mr. Chairman, I want to make three points,
    which I lay out in more detail in the written comments
    provided. First, the lack of sufficient and coordinated
    infrastructure development and capital are two critical
    obstacles to economic development and competitiveness in small
    town and rural America. USDA's broad range of rural development
    programs should be made a priority in the farm bill because
    they are a critical source of grant and loan funding that is
    leveraged by rural business, rural communities, and rural
    people to overcome these challenges and create jobs.
        The programs that assist communities with financing of
    water infrastructure, community facilities, electric utilities,
    and broadband deployment are the basic building blocks all
    communities need to compete. Water and community facilities
    programs are consistently ranked as the most critical. Rural
    business programs all increase capital availability and help
    counties play their important role as intermediaries and
    technical assistant providers.
        Most importantly, the rural development title helps rural
    communities improve economic opportunity and quality of life.
    The bipartisan Beginning Farmer and Rancher Opportunity Act,
    H.R. 3236, provides a model that NACo supports for the kind of
    initiatives necessary to invest in the next generation of
    American producers. The rural development title also provides
    critical support to new and beginning farmers through its
    ability to finance the infrastructure necessary for local and
    regional food systems. This growing sector will be enhanced by
    the NACo-supported Local Farms, Food, and Jobs Act, H.R. 3286.
    NACo supports maintaining the $150 million in mandatory funding
    provided in the 2008 Farm Bill.
        The second key point is that rural people, businesses, and
    communities are increasingly operating in dynamic regional
    economies and USDA rural development programs must be reshaped
    to a more locally driven strategic regional approach. The
    importance of Federal investments in regional planning and
    project implementation is clear in eastern South Dakota. My
    county, partnered with the City of Brookings, the County of
    Brookings, South Dakota State University, our state created the
    South Dakota State University Innovation Campus, the first one
    in South Dakota. Our Innovation Campus provides a place where
    people and ideas are coming together to enhance the economic
    vitality of our region.
        We use the ability of our First District Association of
    Local Governments to develop a business plan and regional
    strategy with Federal EDA funding. These planning investments
    provided vital gap funding that helped make our regional vision
    a reality. EDA got this project off the ground.
        USDA, the main Federal partner in rural America, is not
    structured to make this kind of success story happen.
    Currently, USDA rural development programs all too often are
    structured to serve individual communities rather than a larger
    county and multi-jurisdictional facility and regional
    strategies and goals. Funding decisions are based on the best-
    written application as determined by Federal officials, not
    state and local actors. We suggest the next farm bill direct
    the Secretary of Agriculture to give priority to projects that
    demonstrate collaboration and cooperation at the local and
    regional level. Our towns, cities, and counties can no longer
    afford to compete in a race to the bottom; rather, we are
    learning that cooperation and collaboration best utilize
    limited resources. Incentivizing projects that involve
    collaboration across jurisdictions is smart policy and
    supported by rural America.
        Our last point is the Campaign for a Renewed Rural
    Development is a collaboration of 35 national organizations
    with a sincere interest in rural America's future that is
    united in six key priorities for the next rural development
    title. Those are mentioned in my previous report to you.
        Ladies and gentlemen, we are here as your partner and we
    want to work with you to recreate some of these things. And we
    know if we keep doing what we are doing, we are going to get
    what we got. Thank you, Mr. Chairman.
        [The prepared statement of Mr. Larson follows:]

       Prepared Statement of Hon. Donald Larson, Commissioner, Brookings
    County, South Dakota; Chairman, Agriculture and Rural Affairs Steering
           Committee, National Association of Counties, Brookings, SD

        Thank you Chairman Johnson, Ranking Member Costa and Members of the
    Subcommittee for the opportunity to testify today regarding an
    assessment of rural development programs in advance of the 2012 Farm
    Bill.

        My name is Don Larson. I am a County Commissioner in Brookings
    County, South Dakota and I serve as chair of the National Association
    of Counties' (NACo) Agriculture and Rural Affairs Steering Committee.
    Brookings County is located in the eastern corner of South Dakota and
    has a population of around 32,000 people.
        Before I get into the details of my testimony I want to start by
    commending the leadership and membership of the House Agriculture
    Committee for your commitment to passing a farm bill this year. NACo
    supports you in that effort in partnership with a broad coalition of
    groups that urged passage this year. NACo supports all titles in the
    2012 reauthorization of the farm bill which is critical to all of our
    nation's counties due to the important programs and policies that are
    enacted for rural development, agriculture, nutrition, conservation,
    research, forestry, energy and a host of other provisions. NACo calls
    on Congress to place a particular emphasis on crafting a bill that
    provides a robust and improved Rural Development title and is
    appreciative of the focus on this topic in today's hearing.
        My goal today in covering this important topic is to give you some
    concrete examples from my county and region and I'm honored to also
    bring the collective perspective of our nation's rural counties as I
    represent NACo. NACo looks forward to working with as you consider ways
    to improve USDA's Rural Development portfolio during the farm bill
    reauthorization process. We share your deep commitment to rural America
    and believe that through our working partnership, rural individuals,
    communities, farmers, ranchers and all other rural businesses will be
    given more flexibility to expand their economic potential and compete
    in the global economy.

    About the National Association of Counties
        The National Association of Counties (NACo) is the only national
    organization that represents county governments in the United States.
    Founded in 1935, NACo provides essential services to the nation's 3,068
    counties. NACo advances issues with a unified voice before the Federal
    Government, improves the public's understanding of county government,
    assists counties in finding and sharing innovative solutions through
    education and research, and provides value-added services to save
    counties and taxpayers money. For more information about NACo, visit
    www.naco.org.

    Overview
        In my testimony, Mr. Chairman, I want to make three main points.

       The lack of sufficient and coordinated infrastructure
            development and capital are two critical obstacles to economic
            development and competitiveness in small town and rural
            America. USDA's broad range of Rural Development programs
            should be made a priority in the next farm bill because they
            are a critical source of grant and loan funding that is
            leveraged by rural businesses, rural communities and rural
            people to overcome these challenges in order to create jobs.

       Rural people, businesses and communities are increasingly
            operating in dynamic regional economies and USDA Rural
            Development programs must be reshaped to promote and give
            greater flexibility to these successful regional approaches and
            local collaborations.

       Rural Stakeholders are united in their support for Rural
            Development programs and have provided a comprehensive list of
            recommendations to improve these programs.

    Making Rural Development a Priority
        Our agricultural sector needs more investments in our rural
    community infrastructure to remain competitive, both from a quality of
    life perspective as well as the production, transport and safety of
    agricultural food and energy crops. Rural Development in the farm bill
    context shouldn't be viewed as a competitor, but as a complementary
    component that should be robustly funded with mandatory and
    discretionary dollars. The agricultural sector is a primary beneficiary
    of just about every investment made by USDA Rural Development, whether
    related to improved water and wastewater treatment facilities, improved
    housing options for workers, more affordable access to business
    financing, assistance for value-added production marketing or cheaper
    and reliable services from rural electric, telephone and broadband
    cooperatives.
        Most importantly, the rural development title helps rural
    communities improve economic opportunity and quality of life so that
    the next generation of farmers is able to step forward. The percentage
    of farmers who rely on off-farm income to survive is continuing to
    accelerate and the average age of farmers and ranchers continues to
    increase. New and beginning farmers depend on vibrant rural communities
    to make their operations viable. NACo supports policies that ensure all
    programs recognize that youth play a vital role in sustaining American
    agriculture and rural communities. New programs and updates to ongoing
    programs are needed so that it is possible for young and beginning
    farmers to survive and thrive in the modern agricultural economy. The
    bipartisan Beginning Farmer and Rancher Opportunity Act, H.R. 3236,
    provides a model that NACo supports for the kind of initiatives
    necessary to invest in the next generation of American producers. It is
    a comprehensive marker bill with sound ideas for each title and
    includes rural development programs such as the Value-Added Producer
    Grants and assistance to entrepreneurial farm enterprises.
        The Rural Development title also provides critical support to new
    and beginning farmers through its ability to finance the infrastructure
    necessary for local and regional food systems. Growing up we called
    them truck farms, but today my fellow elected officials and I from
    across the country are seeing more and more young people get their
    start in agriculture through small farm to local market operations.
    NACo supports investments in infrastructure, entrepreneurial programs
    and facilities that process, distribute, and develop value-added
    products using locally-grown commodities purchased from local farmers
    to meet the demand for local, healthy food. The community facilities
    program and business programs provide important sources of capital to
    help these markets grow. These programs directly benefit new and
    beginning farmers, local and regional food systems and the urban and
    suburban consumers who are gaining access to fresh products. It is also
    critical to point out that regional and local food systems are
    bolstering urban--rural economic linkages and providing new economic
    development opportunities in both.
        This growing sector will be enhanced by the NACo supported Local
    Farms, Food and Jobs Act, H.R. 3286. The bill provides important policy
    suggestions for the farm bill that are intended to help farmers and
    ranchers engaged in local and regional agriculture by addressing
    production, aggregation, processing, marketing, and distribution needs
    and will also assist consumers by improving access to healthy food and
    direct retail markets. Local and regional agriculture is a major
    economic driver in the farm economy. There are now more than 7,000
    farmers markets throughout the United States--a 150 percent increase
    since 2000, direct to consumer sales have accounted for more than $1.2
    billion in annual revenues.
        NACo and its municipal counterpart the National League of Cities
    believe that this growing sector exemplifies the success of regional
    collaborations as communities build upon partnerships to improve access
    to healthy, local foods. Access to healthy food is increased when local
    and regional food production, processing, distribution, and retail
    enterprises work together to build stronger markets for healthy foods.
    The regional food effort provides an important source of employment in
    our communities, as it strengthens the viability of small and mid-scale
    farms and other small businesses along the food chain.
        USDA Rural Development also offers capital and infrastructure
    financing that is critical to all sectors of the rural economy. The
    programs that assist communities with financing for water
    infrastructure, community facilities, electric utilities and broadband
    deployment are the basic building blocks all communities need to
    compete. The water and community facilities programs are especially
    important to rural counties. For nearly 40 years, Rural Development has
    successfully partnered with technical assistance (TA) providers to help
    rural communities develop this vital infrastructure through various
    programs, like water and wastewater, solid waste, and mutual self-help
    housing. By partnering with TA providers, Rural Development is able to
    maximize the return on every Federal dollar invested in these programs
    and ensure that they are accessible to all rural communities. We
    support the reauthorization of these programs due to their success in
    leveraging outside resources, minimizing the risk of default on Rural
    Development loans, and developing the capacity of local leaders to
    manage large projects.
        In addition, we urge you to authorize a technical assistance set-
    aside for the Essential Community Facilities program to enable small
    communities to provide vital services like public safety, health care,
    business incubators and other vital services. We also urge you to
    bolster Rural Development staff and TA providers' capacity to assist
    rural communities and regions with comprehensive economic development
    planning. Otherwise, USDA risks funding parallel initiatives that are
    not coordinated with the current economic development plans of rural
    communities and regions.
        The Intermediary Relending Program (IRP), Rural Business Enterprise
    Grant Program (RBEG), Rural Business Opportunity Grant Program (RBOG),
    Business and Industry Loan Program and Rural Microentrepreneur
    Assistance Program (RMAP) all increase capital availability to rural
    businesses. Counties play an important role as intermediaries for
    relending programs and as technical assistance providers through IRP,
    RBEG and RBOG, but are ineligible to serve as the microenterprise
    development organizations that assist microenterprises through RMAP.
    Local governments should be made eligible for RMAP as they are often
    the sole provider of economic development services in many communities.
        Infrastructure development and access to capital remain the most
    significant roadblocks to economic development and competitiveness in
    small town and rural America. USDA Rural Development is effective at
    helping communities overcome these roadblocks, but needs to receive
    mandatory funding, maintain discretionary funding and be directed to be
    more strategic with funding in the coming fiscal years in order to
    overcome these obstacles.

    Shifting USDA to a More Locally Driven, Strategic Regional Approach
        The next farm bill offers a unique opportunity for Federal
    policymakers to start pursuing new Federal policies for rural
    development that ensure the Federal dollar gets stretched farther and
    that rural localities and regions, not Washington, drive the funding
    decisions.
        At the local level I'm proud of our collaboration with the City of
    Brookings on multiple joint projects, which are intended to create more
    opportunities for our residents. NACo and the National League of Cities
    are also united in many of our priorities at that national level. NACo
    and NLC both support Federal policies that advance regional and multi-
    jurisdictional approaches to planning and development. Many
    communities--rural, urban, small and large--are partnering with various
    levels of government, as well as public, private and nonprofit
    organizations to pursue regional development opportunities that grow
    the local economy. While county and city officials work to find
    innovative solutions to revitalize our communities, current rural
    development policy makes it difficult for local leaders to use the
    available resources most efficiently.
        Local jurisdictions pursue regional cooperation for many reasons,
    including as a means to overcome limitations in accessing traditional
    financing mechanisms that have grown overburdened or expensive as a
    result of the current fiscal climate. We think Congress should work to
    promote regional collaboration in rural development. First, rural
    development programs can be oriented to give weight to applicants
    demonstrating local and regional partnerships. Second, the definition
    of regional partners should be broad enough to recognize a variety of
    entities active in the life of a community, including nonprofit and
    for-profit corporations, service providers and other governmental
    groups, which help local governments achieve success. Third, programs
    should incent and reward applicants that demonstrate cost savings and
    avoid duplication of efforts.
        Currently, USDA Rural Development programs all too often are
    structured to serve individual communities rather than larger county
    and multi-county regional strategies and goals. Funding decisions are
    based on the best written application and not the level of
    collaboration and cooperation that a project demonstrates. In today's
    economy, our rural places are not served well by stove piped
    programming, but rather need Federal investments to prioritize
    strategic multi-jurisdictional plans that capitalize on the unique
    economic assets and unique vision of people, businesses and
    organizations in rural regions.
        Rural people and places do not fit nicely into a box. I encourage
    you to avoid getting bogged down in the regional fights that erupt when
    definitions are considered. Instead, I encourage you to focus on
    providing enhanced flexibility for USDA Rural Development's state
    offices to provide assistance that fits the uniquely rural nature of
    their states, by focusing on serving rural regions, both multi-town and
    multi-county. USDA Rural Development funding should be directed towards
    the prioritized assets and needs of rural communities and regions and
    not well written applications written by a consultant in some far off
    urban area.
        The fiscal situation facing all levels of government--Federal,
    state and local--is dire. Therefore, our investments must be based upon
    the best economic research available. Historically, policymakers have
    thought it was impossible for municipalities and unincorporated rural
    areas to work together as one county or for multiple counties to work
    together. The prevailing notion was that our interactions in economics
    and football were the same. We met regularly, but only in competition
    against each other.
        I'm happy to report that this old notion is becoming less and less
    prevalent. Our towns, cities and counties can no longer afford to
    compete in a race to the bottom against each other in search of the
    next big manufacturing plant. No, instead we are being forced to
    consider new ways of governing in an era of limited government
    resources. We are working together more efficiently and are
    streamlining services. NACo pledges to work with you to improve USDA's
    portfolio of rural development programs in order to assist with this
    changing dynamic.
        Incentivizing projects that involve collaboration across
    jurisdictions and sectors of the rural economy does not have to
    disadvantage remote rural communities or lead to more funding going to
    larger rural cities and towns. Funding will still only flow to those
    communities eligible under population criteria standards, but a new
    priority for projects that demonstrate collaboration would allow the
    broader regional strategies formulated jointly by urban, suburban and
    rural areas to be factored into funding decisions as long as resources
    are only going to eligible rural jurisdictions.
        A model for incentivizing multi-jurisdictional and multi-sector
    collaboration without leaving behind those communities that do not want
    to or cannot collaborate is a funding bonus. An example is the U.S.
    Economic Development Administration's (EDA) very small but effective
    economic development district (EDD) planning program, which is the only
    national program that requires rural communities to think and plan
    regionally. The agency rewards local governments and grantees with a
    ten percent Federal bonus within its public works and economic
    adjustment assistance programs if they engage in multi-county planning
    and development. Those that do not engage in this process are still
    funded, but do not receive the bonus. USDA could be encouraged or
    forced to do something similar in terms of providing a more attractive
    grant/loan package to coordinated strategic projects. This model could
    also be adapted to USDA Rural Development's clientele by providing
    incentives for both multi-county planning and integrated planning among
    municipalities and unincorporated areas within a single county.
        In my County of Brookings, South Dakota, through regional planning
    and innovative partnerships we created the South Dakota State
    University Innovation Campus, the first research park developed in the
    state of South Dakota. Sited on 125 acres, the Innovation Campus is
    located next door to South Dakota State University (SDSU).
        The SDSU Innovation Campus provides a place where people and ideas
    come together in our region to combine the experience of university,
    business, industry and government in an environment that uses
    innovation and critical thinking to generate new ideas, promote
    research, entrepreneurialism and business mentoring--providing
    opportunities to keep our best and brightest in South Dakota.
        The SDSU Innovation Campus is the product of the SDSU Growth
    Partnership, a 501(c)(3) nonprofit corporation whose partners include
    Brookings County, the City of Brookings, Brookings Economic Development
    Corporation, South Dakota State University, the South Dakota State
    Foundation and a State Representative. The county and city put up-front
    money, and the First District Association of Local Governments helped
    develop a business plan and grant application for EDA funding. These
    planning investments provided vital gap funding that helped make our
    regional vision a reality. The First District serves 11 counties and 75
    communities within the counties of Brookings, Clark, Codington, Deuel,
    Grant, Hamlin, Kingsbury, Lake, Miner, Moody, and Roberts.
        The site includes retail and support services. Local private
    developers have developed a 120 unit housing complex, the Innovation
    Village, on property adjacent to the park. The campus has walking,
    jogging and biking trails, and open green spaces, and is also
    accessible via public transportation. All of the private development on
    the innovation campus becomes a part of our local tax base.
        The economic success story in Brookings County and our region,
    along with our innovation campus, clearly demonstrate that rural
    communities and institutions can make substantial progress by working
    regionally to achieve economies of scale, technical expertise,
    workforce pool and infrastructure financing to compete nationally and
    globally. The project has helped Brookings County and our region
    prosper. In fact, we enjoy one of the lowest unemployment rates in the
    country at around four percent. Most importantly, we are seeing spin
    off businesses from this innovation campus in the surrounding counties
    that are even more rural than Brookings County.
        However, rural unemployment in the nation has remained high
    overall, despite the strong performance of the agricultural sector.
    Other rural communities would like to start planning and implementing
    regional strategies but do not have the funding to get started.
    Reorienting USDA towards a regional approach would provide needed
    resources to assist rural communities with seed money for planning, or
    as in our case, additional funds to expand our regional development
    efforts. In our region, we could expand the principles of the
    innovation campus project to additional parts of our region. Our county
    could also link to other efforts such as our regional farmers' market
    initiative, our Seed Technology Laboratory, and our youth learning
    center.
        This new approach will save time and money for rural counties who
    have trouble navigating the array of stove piped programs at USDA. The
    vast majority of counties and municipalities in our nation lack the
    financial, human and technical resources individually that are required
    to compete with urban centers. These same rural communities lack the
    expertise needed to navigate and apply for the alphabet soup of
    excellent programs offered by USDA. These communities are not asking
    for a free lunch. However, they do need a jump start. Federal
    investments that encourage regional planning activities and provide
    seed funding for implementation can help provide rural business and
    community leaders with the leverage they need to begin something that
    creates wealth and jobs.

    Rural Stakeholders Are United in Support of Rural Development and Ideas
            for Improvement of This Critical Agency
        The Campaign for a Renewed Rural Development is a collaboration of
    35 national organizations with a strong interest in the future of small
    town and rural America. NACo chairs this campaign which works
    collectively to support rural development programs and strategies that
    promote rural prosperity. The members of the campaign represent a
    diverse cross-section of rural and small town America. The campaign is
    focused on advocating for a comprehensive rural development title, in
    which Rural America will gain increased access to important seed
    capital, infrastructure financing, professional expertise and support
    services. A majority of the campaign came together to recommend six key
    priorities that will strengthen USDA Rural Development investments. I
    have summarized these points below.
        Clarify Mission of USDA Rural Development--In addition to its
    traditional and vital role as a lender of last resort helping rural
    individuals and communities, the agency going forward should be viewed
    as a crucial partner in forging new economic opportunities that help
    rural people and places thrive.
        Provide Flexibility and Incentives for Regional Collaboration--
    Rural Development must be reoriented, through statutory language, to
    give its programs greater flexibility to encourage the local and
    regional partnerships that are currently encouraging innovation in
    rural regions across the country.
        Maintain Rural Development Investments--We recognize the extreme
    fiscal challenges under which the farm bill will be written and the
    pressure to cut mandatory funding. We urge Congress and the
    Administration to work to ensure that rural investments, such as USDA
    Rural Development, do not receive disproportionate cuts. Rather we urge
    you to maintain mandatory funding for Rural Development in the 2012
    Farm Bill.
        Maintain and Improve Technical Assistance--We support the
    reauthorization of technical assistance programs due to their success
    in leveraging outside resources, minimizing the risk of default on
    Rural Development loans, and developing the capacity of local leaders
    to manage large projects. In addition, we urge you to authorize a
    technical assistance set-aside for the Essential Community Facilities
    program. We also urge you to bolster Rural Development staff and TA
    providers' capacity to assist rural communities and regions with
    comprehensive economic development planning.
        Improve Metrics and Accountability--We urge Congress to require
    USDA to increase its use of outcome-based evaluation metrics and to
    evaluate the community and system wide impacts of its programs on the
    economy of rural communities and regions.
        Streamline Application and Reporting Processes--We urge Congress to
    provide authorizing language that demands a culture of continuous
    evaluation of current best practices that streamline application and
    reporting processes. These processes should be adjusted to meet the
    staffing and capacity challenges of all rural communities and
    businesses, especially the most rural communities and businesses.
        I'm excited to see this level of unity in rural America. We need it
    if we are to overcome the economic challenges that face us. All the
    panelists today represent stakeholders in rural America that are
    critical to rural counties. I've already mentioned our multi-county
    collaboration through the First District Association of Local
    Governments, which is a regional development organization. I also am
    proud of our work in eastern South Dakota to collaborate with our
    business community, our farmer and ranchers, our cooperatives, our
    nonprofits and churches, our colleges and universities and our
    foundations, among many others.
        In conclusion, it is clear that rural people and places are
    increasingly operating in dynamic regional economies and USDA Rural
    Development programs must be reshaped to promote and give greater
    flexibility to these successful regional approaches and local
    collaborations. Second, Congress and the Administration should work
    together in a bipartisan manner to make rural development programs a
    priority within farm bill reauthorization. NACo seeks to be your
    partner in this endeavor. We promise to work with you to streamline and
    improve existing programs so that investments in rural America pay even
    bigger dividends in the future.
        Thank you again, Chairman Johnson, Ranking Member Costa and Members
    of the Subcommittee for the opportunity to testify this afternoon on
    behalf of NACo on these critical rural development issues. I appreciate
    your time and interest. I look forward to answering any questions.

        The Chairman. Thank you, Mr. Larson.
        Ms. Mazer?

       STATEMENT OF LEANNE MAZER, EXECUTIVE DIRECTOR, TRI-COUNTY
       COUNCIL FOR WESTERN MARYLAND, FROSTBURG, MD; ON BEHALF OF
                        NATIONAL ASSOCIATION OF
                       DEVELOPMENT ORGANIZATIONS

        Ms. Mazer. Thank you, Chairman Johnson, Ranking Member
    Costa, and Members of the Subcommittee, for the opportunity to
    be here today. My name is Leanne Mazer, and I am the Executive
    Director of Tri-County Council for Western Maryland, located in
    Frostburg, Maryland. I would respectfully like to make three
    points.
        First, Mr. Chairman, the mission area of USDA Rural
    Development is critical to our nation's rural and most
    distressed areas as they work to develop the fundamental
    building blocks necessary to be economically viable and
    competitive. During challenging fiscal times, it is often easy
    to forget the real impact of these programs like USDA Rural
    Development. I would like to briefly tell you about a couple
    examples of the work we have accomplished with these programs
    in my region.
        With the financing package that included a USDA loan, one
    of our counties was able to construct a new water line that
    opened up a new business park for advanced manufacturing. Very
    soon thereafter, cabinet manufacturer American Woodmark moved
    in immediately creating 120 new quality manufacturing jobs. The
    company has continued to grow and now employs about 330 people.
        In 2005, our agency assumed the management of an IRP fund
    from another organization within our region. This offered us
    one other financing tool to provide access to capital for our
    business community. Recognizing that our region had a need for
    professional hands-on business counseling and technical
    assistance for our local entrepreneurs and businesses, we were
    also successful in securing two USDA Rural Business Enterprise
    Grants in the following 2 years. During the period of IRP
    investments, our Council assisted 196 businesses and resulted
    in $12.7 million in projects developed.
        Tri-County Council's business counselor assisted one of
    those companies in developing a business plan with financial
    projections to support a much-needed manufacturing facility
    expansion. The company's growth was limited by their existing
    plant size. We helped that company successfully put together a
    financing package that included $400,000 in gap financing from
    our agency with a total project cost of just over $2 million.
    The company continues to grow today and has been able to
    increase their annual sales substantially.
        Second, Mr. Chairman, our nation's rural communities are
    facing enormous pressure from global competitors. Therefore, it
    is imperative that USDA Rural Development has the policies,
    program tools, and flexibility to assist rural communities and
    regions. We believe that this can be achieved by USDA
    facilitating regional collaboration and strategic investments
    through existing regionally focused, locally driven frameworks
    like the U.S. Economic Development Administration's
    Comprehensive Economic Development Strategy, or CEDS, process.
        Just last week, our region was pleased to see the
    completion of a major project that could demonstrate how we use
    our CEDS locally. The City of Frostburg utilized a USDA water
    and waste disposal loan, along with other Federal, state, and
    local programs and partners to complete a major water
    distribution project that provides reliable clean water to over
    5,300 homes and businesses. The project also included a
    hydroelectric plant that now generates electric savings for the
    city.
        Because our region made this project a priority many years
    ago during our CEDS and planning processes, all three of our
    counties and all 24 municipalities were committed to its
    success. Therefore, I would urge a greater recognition and
    support of existing regional development strategies, including
    the EDA CEDS that could assist the Rural Development in making
    sound decisions with their investments.
        Finally, Mr. Chairman, USDA rural development applications,
    policies, and reporting requirements should be streamlined to
    reflect the scale of the rural investments, emerging needs, and
    opportunities in rural regions. Western Maryland is much like
    other rural regions across America. Communities and small
    businesses in our region often lack the staff capacity to apply
    for and manage USDA rural development programs. This is
    unfortunate since programs like USDA rural development were
    established specifically for these communities.
        Rural Development should consider a process to identify the
    current concerns felt by their customers and enter into a
    program of continuous evaluation and improvement for the
    purposes of maximizing program impact. Rural Development should
    also consider establishing stronger connections to entities
    like regional development organizations and counties to provide
    technical assistance to rural communities, small businesses and
    entrepreneurs.
        In closing, I urge your continued support of the USDA rural
    development programs and funding in the 2012 Farm Bill. Thank
    you again for the opportunity to be here today and I would
    welcome any questions.
        [The prepared statement of Ms. Mazer follows:]

          Prepared Statement of Leanne Mazer, Executive Director, Tri-
        County Council for Western Maryland, Frostburg, MD; on Behalf of
               National Association of Development Organizations

        Thank you, Chairman Johnson, Ranking Member Costa, and Members of
    the Subcommittee, for the opportunity to testify today on the 2012 Farm
    Bill's rural development title. Let me start by thanking you and the
    Members of the Subcommittee for your leadership and interest in the
    rural development mission area as part of the 2012 Farm Bill
    reauthorization process. The broad portfolio of USDA Rural Development
    programs for business development, infrastructure, housing, value-added
    agriculture production and marketing, regional strategic planning, and
    broadband deployment are essential to the long-term economic
    competitiveness and quality of our nation's rural communities.
        My name is Leanne Mazer. I am the Executive Director of the Tri-
    County Council for Western Maryland, headquartered in Cumberland, and a
    Past President and Board Member of the National Association of
    Development Organizations (NADO). My background includes nearly 2
    decades in regional and local economic development, including more than
    twelve years in my current position.
        The National Association of Development Organizations (NADO)
    represents the national network of 540 regional development
    organizations. As public-based organizations governed primarily by
    local elected officials and other community leaders, the members of
    NADO focus on improving the economic conditions and quality of life
    across America's local communities through regional strategies,
    partnerships and solutions. In addition, NADO is a member of the
    Campaign for Renewed Rural Development, a broad-based coalition led by
    our partners at the National Association of Counties.
        The Tri-County Council for Western Maryland is a regional economic
    development agency serving Allegany, Garrett, and Washington counties.
    We provide a variety of programs and services within our region, and
    serve as a regional planning and development organization under the
    guidelines of both the Appalachian Regional Commission (ARC) and the
    U.S. Economic Development Administration (EDA). In addition to our
    professional and technical assistance programs for local governments,
    businesses, and nonprofit entities, our organization operates several
    small business development loan funds, serves as the state data center
    affiliate for Western Maryland, and offers Geographic Information
    System (GIS) services for our local communities and partners.

        Mr. Chairman, I will focus my remarks today on three key areas
    related to USDA Rural Development and the future of our rural regions
    and communities:

        1. The mission area of USDA Rural Development is critical to our
            nation's rural and most distressed areas as they work to
            develop the fundamental building blocks necessary to be
            economically viable and competitive. This includes basic yet
            essential investments for infrastructure and utilities, housing
            and community facilities, and access to capital and technical
            expertise for our businesses and entrepreneurs.

        2. With rural regions now facing intense global competition, we
            need to ensure USDA Rural Development has the policies, program
            tools, and flexibility to assist rural communities with
            cutting-edge, asset-based regional development strategies and
            investments. This will take a new level of sophistication and
            capacity within our rural regions and at USDA Rural
            Development. Specifically, we need to foster stronger public-
            private-nonprofit partnerships, prepare our rural workforce
            with new skills, and develop modern infrastructure and
            community facilities, which can be achieved more efficiently
            and cost effectively by leveraging and investing in existing
            regional development strategy processes such as the U.S.
            Economic Development Administration's Comprehensive Economic
            Development Strategy (CEDS) framework.

        3. USDA Rural Development applications, policies, and reporting
            requirements should be streamlined and broadened to reflect the
            scale of rural investments, emerging needs and opportunities of
            rural regions, and capacity of local organizations. While
            retaining necessary financial and performance accountability
            standards, Congress should ensure USDA Rural Development has a
            modern set of policies, programs, and incentives to help rural
            communities pursue regionally-based, locally-driven community
            and economic development strategies.

        First, Mr. Chairman, the mission area of USDA Rural Development is
    critical to our nation's rural and most distressed areas as they work
    to develop the fundamental building blocks necessary to be economically
    viable and competitive. With USDA's assistance over the decades, rural
    communities across the nation are now better positioned to pursue
    regional asset-based and innovation-focused development strategies that
    are resulting in new job and local wealth retention opportunities.
        However, continued gains are increasingly at-risk due to Rural
    Development funding cuts in recent years. Since FY 2010, the Budget
    Authority for the USDA Rural Development mission area has been cut by
    nearly $733 million, including reductions of $102.46 million in the
    Rural Utilities Service, $333.93 million in the Rural Housing Service
    and $75.52 million in the Rural Business-Cooperative Service. Over the
    past 2 years, water and waste water grants have been cut $41.61
    million, community facility grants are down 44 percent, and support for
    rural microenterprise lending and technical assistance was eliminated
    for the current fiscal year.
        While some of these cuts have been masked by massive increases in
    USDA's direct loan and loan guarantee program levels (especially due to
    the historically low subsidy level for the community facilities
    program), the reality remains that the most distressed rural
    communities will struggle to make the improvements necessary to remain
    economically viable. In addition, the programs hit hardest by recent
    budget cuts include the agency's smaller, more flexible business and
    community assistance programs, such as Rural Business Enterprise Grants
    (RBEG), Rural Business Opportunity Grants (RBOG), and the Rural
    Community Development Initiative (RCDI). Combined, these three
    community and economic development programs have been cut more than $17
    million, or 37 percent, over the past 2 years. The program level for
    the Intermediary Relending Program (IRP), an important access to
    capital resource for rural businesses and entrepreneurs, is also down
    48 percent over the same period.
        Other key Federal economic development programs that specifically
    help small towns and rural communities are also facing substantial
    cuts. Compared to FY 2001 levels, project funding for the U.S. Economic
    Development Administration is down $181 million (42 percent reduction)
    and HUD's Community Development Block Grant (CDBG) program is down
    $1.46 billion (44 percent cut). This translates into nearly $620
    million in reduced grant investments for vital community and economic
    development infrastructure each year since half of EDA's investments
    are typically in rural areas and 30 percent of HUD's CDBG money is
    targeted, by law, to small cities and rural areas.
        In the current budget climate, we understand that most of these
    core programs for basic yet essential investments for infrastructure
    and utilities, housing and community facilities, and access to capital
    for rural communities are unlikely to be restored to their peak levels.
    This makes USDA Rural Development programs and policies even more
    essential. While we recognize this Committee is not directly
    responsible for the annual appropriations for USDA Rural Development,
    the Committee can ensure the remaining programs and resources are used
    in a more strategic and performance-driven manner.
        During challenging fiscal times, it is often easy to get caught up
    in the numbers and forget the real impact Federal programs like USDA
    Rural Development have on the communities and people across America. In
    one of my counties, we recently completed a significant project of
    regional importance that would have been impossible without assistance
    from USDA Rural Development. With a USDA loan, Allegany County, working
    with state and local partners, was able to construct a new water line
    to the new Barton Business Park for Advanced Manufacturing, which was
    developed to create manufacturing and technology jobs in an area where
    the unemployment rates are consistently higher and the per capita
    incomes are consistently lower than the national and state averages.
        This project was essential to ready the facility for tenants and
    soon thereafter, cabinet manufacturer American Woodmark moved in. The
    company, readily positioned to expand its operations to address rising
    product demand in the U.S. Northeast and Mid-Atlantic regions,
    immediately created 120 new quality manufacturing jobs. They continue
    to grow and now employ approximately 332 employees.
        In 2005, our agency assumed the management of an IRP fund from
    another organization within our region. While we are still working with
    USDA and our clients to clean up and close out previous loans, we are
    making progress in awarding newer loans and investments. Recognizing
    that a pressing need in our region was more professional, hands-on
    business counseling and technical assistance for our local
    entrepreneurs and businesses, we also secured two USDA Rural Business
    Enterprise Grants (RBEG) to assist our small business community,
    particularly those that were potential or existing loan clients. During
    the 2 year period with our RBEG investments, we assisted 196 businesses
    with business counseling and other technical assistance. Among the
    results, we invested more than $1.8 million in gap financing to help
    our partners secure approximately $12.7 million in new lending and
    investments. It is worth noting that we provided more than a 50 percent
    local match for both these USDA awards.
        One of the businesses that the Tri-County Council helped during
    this time period was M&W Ventures, LLC, a Washington County small
    business engaged in electric motor sales, repair, and installation,
    whose growth was limited by the size of their existing plant. Our
    organization assisted the company with a business plan to support the
    expansion of the plant facility that was needed for overall growth and
    increased sales. Our organization was able to provide $400,000 in gap
    financing to support a total package of $2.1 million. The company
    continues to grow, expanding their annual sales to $3.9 million.

        Second, Mr. Chairman, our nation's rural communities are facing
    enormous pressure from our global competitors. At the same time, our
    rural regions have the assets and drive to compete and take advantage
    of new opportunities. Therefore, it is imperative that USDA Rural
    Development has the policies, program tools, and flexibility to assist
    rural communities and regions with cutting-edge, asset-based regional
    innovation strategies and investments.

        To be successful in the modern economy, rural entrepreneurs and
    communities must be connected to global and domestic markets--
    digitally, institutionally, and physically. This will take a new level
    of sophistication and capacity within our rural regions and at USDA
    Rural Development. It will also mean improving Federal interagency
    collaboration, fostering stronger public-private-nonprofit
    partnerships, preparing our rural workforce for new challenges, and
    developing more modern infrastructure and community facilities. We
    believe this can be achieved more efficiently and cost effectively by
    facilitating regional collaboration and strategic investments through
    existing regionally focused, locally driven planning frameworks such as
    the U.S. Economic Development Administration's Comprehensive Economic
    Development Strategy (CEDS) process.
        One of the many specific ways the Tri-County Council supports
    regional development is through our long partnership with the U.S.
    Economic Development Administration (EDA) and the Appalachian Regional
    Commission. The EDA, through its national network of 380 economic
    development districts, provides vital seed capital and matching funds
    for local communities to craft and implement regional economic
    development strategies. As such, the vast majority of rural America is
    supported by a Comprehensive Economic Development Strategy (CEDS).
        The CEDS is an invaluable framework for identifying the economic
    conditions, shared development goals, and the regionally impactful
    investments that will enhance the competitiveness of rural America.
    Because they are regionally based, locally owned strategies, the CEDS
    would provide USDA with an established system to help make more
    strategic investments. In addition, USDA should be given additional
    resources and authority to assist rural counties and regions with more
    robust support for developing and implementing in-depth rural asset
    mapping, key industry analysis, and regional innovation readiness
    assessments that build upon the groundwork of the CEDS process.
        In Maryland, we have been embarking on several regional projects
    that demonstrate the importance and power of connecting often disparate
    issue areas for the purposes of regional development. Last week, we
    were pleased to see the completion of a major project that demonstrates
    how we used our CEDS to examine existing assets, identify and
    prioritize local needs, and successfully finish a project of regional
    significance. The City of Frostburg, in partnership with other Federal,
    state, and local partners, used a USDA Water and Waste Disposal loan
    (combined with funding from the Appalachian Regional Commission) to
    complete a major water distribution project that provides reliable,
    clean and abundant water to over 5,300 homes and businesses.
        The USDA loan was used for the replacement of raw water
    transmission mains, which enabled the City to pump enough water to meet
    the needs of the existing water service area. This allowed the
    hydroelectric plant, which generates electricity to offset energy used,
    to pump raw water from the Piney Dam source under the terms of a net
    metering agreement with Potomac Edison. The hydroelectric plant, which
    began production in December 2011, produces between 55 and 70 kW with a
    current estimated annual value of $29,000. The new and larger raw water
    transmission mains now provide the City with the capability to
    efficiently pump more water and generate additional electrical savings.
        This one water project was 30 years in the making and required
    extensive relationship building and consensus across a spectrum of
    often divergent stakeholders. Yet, because our region made this project
    a priority many years ago through our CEDS process, all three counties
    and 24 municipalities were committed to its success. Our hydroelectric
    plant is now a key part of our region's economic development
    infrastructure.
        Our organization is also involved in a major initiative to bring
    broadband to rural and under-served portions of the state through the
    Maryland Broadband Cooperative. We assisted in creating the first
    regional community foundation in our part of the state. In addition, we
    helped facilitate improved communications and coordination among
    various educational institutions within our region, with a major
    emphasis on preparing our youth and students for today's economy.
        With fewer Federal resources, including grant dollars and staffing,
    it is becoming more essential for USDA Rural Development to make more
    strategic and performance-based investments that are tied to regional
    and local plans and priorities. Instead of public, private and
    nonprofit sector leaders working together on our asset-based
    opportunities and needs, we are often forced to fit our community and
    economic development initiatives into USDA's program stovepipes and
    funding priorities. I would urge a greater recognition and support of
    existing regional development strategies, including the EDA CEDS, that
    could assist Rural Development in making sound decisions regarding
    their investments. This would also require making USDA's rural
    development programs more flexible and geared toward addressing
    regional and local priorities.
        Finally, Mr. Chairman, USDA Rural Development applications,
    policies, and reporting requirements should be streamlined and
    broadened to reflect the scale of the rural investments, emerging needs
    and opportunities of rural regions, and capacity of local
    organizations. While retaining necessary financial and performance
    accountability standards, Congress should ensure USDA Rural Development
    has a modern set of policies, programs, and incentives to help small
    towns and rural areas pursue community and economic development growth.
        Western Maryland is much like other rural regions across America.
    Communities and small businesses in this region often lack the staff
    capacity to apply for, and manage, USDA Rural Development programs.
    This is unfortunate since programs like USDA Rural Development were
    established specifically for the purpose of assisting rural
    communities, especially those with severe distress and poverty.
        Every Federal program should be adjusted to meet not only the
    needs, but the capacity of all rural communities and businesses. In
    order to maximize access to the services and programs that rural
    regions need to create conditions for job growth, Rural Development
    should strongly consider a process to identify the current concerns
    felt by their customers and enter into a program of continuous
    evaluation and improvement for the purposes of maximizing program
    impact. Rural Development should also strongly consider establishing
    stronger connections to entities, such as regional development
    organizations and counties, to provide technical assistance to rural
    communities, small businesses and entrepreneurs.
        In closing, I urge your continued support of USDA rural development
    programs and funding in the 2012 Farm Bill, especially those built
    around regional, asset-based development strategies and investments
    that create conditions for quality job growth. USDA Rural Development
    is an essential partner and funding source for rural people and places.
    It is also a vital tool for regional development organizations, such as
    the Tri-County Council, and our local government and community partners
    as we strive to position our communities for the future.
        Thank you again, Chairman Johnson, Ranking Member Costa, and
    Members of the Subcommittee, for the opportunity to testify today. I
    would welcome any questions.

        The Chairman. There will be questions. I call on the
    Ranking Member, Mr. Costa.
        Mr. Costa. Thank you very much, Mr. Chairman.
        Former-Secretary Conner, thank you for your service to our
    country. And you talked about the Value-Added Producer Grant.
    As I understand we have mandatory funding up until the Fiscal
    Year 2017 if I am correct. I think it has been successful not
    only in helping cooperatives overcome constraints on necessary
    capital to innovate and process new commodities and product
    packaging that we use to export around the world, but initially
    you mentioned that cooperatives are in the best position to
    efficiently spread the benefits to a larger number of
    producers. However, I was looking at some of the numbers since
    the 2008 Farm Bill and after 298 recipients of the Value-Added
    Producer Grants, only 26 of them went to cooperatives. Why did
    so few go to them if, according to your testimony, you are in
    the best position to do them?
        Mr. Conner. It is a great question, Mr. Costa, and let me
    just say I think your numbers are accurate and I would further
    add that I believe there was a period of time where 80 percent
    of the Value-Added Producer Grants were being used by
    cooperatives. So there is a substantial decline that has
    occurred there over time. And as I said in my oral testimony, I
    shared with you a firsthand experience we had where, when the
    program funds were available, we notified our membership of
    that process. And again, as I stated----
        Mr. Costa. I know but I am just trying to get a sense of
    why there has been the decline and what might be done because I
    am a big supporter of cooperatives.
        Mr. Conner. Yes.
        Mr. Costa. I have a number of cooperatives, dairy and food
    cooperatives that have been long--not only in California but
    throughout the country. And I think value-added is very
    important. That is why I would want to support the grants. I am
    just trying to figure out what is going on.
        Mr. Conner. Well, let me get right to the point, then. The
    response from many when these funds became available was that
    the application process required too many resources on their
    part for a relatively small benefit----
        Mr. Costa. All right----
        Mr. Conner.--and it was not worth it for them----
        Mr. Costa.--let me segue to the other comments I made in my
    opening statement, and that is for all three of you, my
    concerns about rural definitions. I wonder whether or not any
    of the three of you would speak to ideas that you could suggest
    to the USDA on how Congress could better define rural and
    provide the agency flexibility it needs to address needs
    throughout the nation in terms of rural communities because, as
    I said, I don't think one-size-fits-all.
        And in some areas, for example, again we all know our own
    situation best but in California we have tried to encourage
    smarter growth in our cities in part to protect our
    agricultural lands. We have asked cities not to spread on some
    of our prime ag land. And as a result of that, it has created
    population densities under the definition of rural that now
    then comes back and penalizes us. This has been something that
    is not new, wresting with the definition of rural. Does the
    gentleman from NACo and the other gentlelady have any comments
    that you would like to make as it relates to a rural
    definition?
        Mr. Larson. Well, Ranking Member, I think we share the same
    dilemma that you share. And we don't have at this moment a
    better idea for the definition of rural, albeit we understand
    and we appreciate fully the experience you have in your home
    county and that you are not the only situation like that across
    the country where you see some growth but rural areas are
    attached. But the best I can say is that I share the dilemma at
    this moment and I don't have the perfect answer because as we
    approach the regionalization of our efforts to better expend
    the Federal dollars that are available to us----
        Mr. Costa. Okay.
        Mr. Larson.--we take in more people----
        Mr. Costa. Ms. Mazer, do you a comment, suggestion?
        Ms. Mazer. Ranking Member Costa, NADO is a broad-based
    organization, too, so I really can't comment as far as I am not
    in a position to represent a definition, a population number to
    define rural but I can talk about my----
        Mr. Costa. I am just looking for ideas.
        Ms. Mazer. I can talk about my region for a little bit. We
    have three counties I mentioned, 24 municipalities and a total
    population of about 250,000. Our smallest community is about 80
    citizens and we have two cities that one is right at the
    threshold at 21,000 for Community Facilities Grants, and our
    other largest city is 37,000 in population. While we see the
    struggles of our small towns, we also see the struggles in our
    largest city. They are different struggles. And we use regional
    planning and the process of continuous regional planning where
    we bring our region's leaders together on a voluntary basis
    several times a year every year on a continuous basis to try to
    see how we can address those issues that they are all facing,
    those struggles they are all facing from both ends of the
    population spectrum.
        I will tell you that being said, when we put those leaders
    in the room, our elected officials, our chambers of commerce,
    our business people, our education leaders, they will come to
    consensus and they do look at how we can make the best progress
    and the most progress for the region.
        Mr. Costa. Yes, and I think your example is not unusual
    compared to all the districts we represent. Thanks. My time has
    expired but just for the Members' information, Fresno County is
    the largest agricultural county in the nation, over $6 billion
    a year. But the City of Fresno now has over half a million
    people in it, so we are the fifth-largest city in the state,
    and because of that fact, even though we are the number one
    agricultural county in the nation in terms of farm gate
    receipts, we are obviously very much handicapped by the 15
    cities that surround different parts of Fresno County and the
    small hamlets that are not incorporated. Anyway, that is part
    of the dilemma we are dealing with.
        The Chairman. Thank you, Mr. Costa.
        The gentleman from Georgia, Mr. Scott.
        Mr. Scott. Thank you, Mr. Chairman. And Commissioner
    Larson, I listened to what you said and, if we keep doing what
    we are doing, we are going to get what we got. I guess my fear
    is--and Members of Congress--if we keep doing what we are
    doing, we might lose what we have in America. And I have just a
    simple question. You are a county commissioner so you are out
    there where the rubber meets the road with the American
    citizen. Do you have to balance the budget in your county on an
    annual basis?
        Mr. Larson. Yes, we do.
        Mr. Scott. What would happen if you didn't balance it on an
    annual basis?
        Mr. Larson. Well, obviously the answer would be that over a
    continued time frame the ultimate route would be bankruptcy.
        Mr. Scott. Yes, sir. I tell you, I have found that local
    people like yourself do a much better job with managing tax
    dollars than we do up here in Washington, so I want to thank
    you for coming up here and testifying. And I do hope that, Mr.
    Chairman, we are able to get more of these decisions made at
    the local level where the rubber meets the road. Thank you for
    what you are doing.
        The Chairman. I thank you sincerely. Thank you.
        Mr. Scott. I yield back the remainder of my time.
        The Chairman. Thank you. The gentlelady from Alabama, Ms.
    Sewell.
        Ms. Sewell. Thank you, Mr. Chairman, Ranking Member Costa,
    and Members of the Committee. I thank you witnesses for your
    testimony.
        The idea of promoting a regional approach to rural
    development has been promoted by the USDA and encouraged by
    Secretary Vilsack in his Regional Innovation Initiative which
    sets aside significant funds across the rural development
    programs for regional projects. I have the pleasure of
    representing my home district, which includes a lot of rural
    areas of Alabama and we are a big benefactor of the Delta
    Regional Authority. I am very supportive of the regional
    approach to better leveraging limited resources to better
    impact both our rural communities directly as well as
    infrastructure development that really helps the whole
    communities as a whole.
        However, one concern that is shared by some is how a more
    regional approach will adversely impact those rural communities
    that are not a part of, or cannot, or do not have the ability
    to be a part of regional planning because of the dispersed
    nature of those communities. Please elaborate on some of the
    benefits and challenges associated with a more regional focus
    on rural development. And how would you work to overcome any of
    these identified challenges to a regional approach for
    communities that are more spread out? And I open that up to all
    three witnesses.
        Mr. Larson. Well, ma'am, I approach it in our discussions
    that the regional concept is a good way to go to involve
    communities. And regions are about as difficult to define as
    rural probably, but for a specific project you could have a
    large region, another project is a smaller region meaning a
    group of communities or citizens have to work together to
    create the project, that the project is designed to create a
    better quality of life for beyond just one small community
    always understanding that in rural America we have remote
    areas. And this type of cooperation and collaboration is
    probably impossible. And those people should then have the same
    opportunity to apply as a regional and be given the same type
    of preference.
        Ms. Sewell. Yes, sir. Any other comments?
        Ms. Mazer. No, I would agree with that.
        Ms. Sewell. When we are talking about limited resources,
    rural development--and I know it is spearheaded by Doug O'Brien
    for Secretary Vilsack and he does a remarkable job of being
    attentive to rural communities. But I would be interested in
    hearing your perspective as to what rural development programs
    have proven the most effective and which programs have proven
    least effective. In this kind of economic environment, it is
    always important to listen to those people who are directly
    impacted and actually try to use those programs directly. So I
    would be interested in knowing which rural development programs
    have been the most beneficial.
        Mr. Conner. Congresswoman, in the material that I submitted
    for the record I gave examples of three different co-ops that
    have used the Value-Added Producer Grant Program, which is a
    matching public-private program to bring about good things for
    their farmer-owners. Probably the best example that we put
    forward is one of Blue Diamond Almonds----
        Ms. Sewell. Yes.
        Mr. Conner.--where literally these funds are being used for
    market development and this is an enormous growth industry in
    the State of California. In a state where other industries are
    not necessarily growing, this is a remarkable growth story. A
    big part of it can be attributed to these value-added grants.
        Ms. Sewell. Any suggestions as to programs that have been
    less effective? And I would obviously love to hear from our
    commissioner since you are on the frontlines of programs that
    have been effective for rural development.
        Mr. Larson. Well, ma'am, the programs that are most
    effective and most needed in rural America--I speak
    nationwide--are always references to water, wastewater,
    broadband----
        Ms. Sewell. Infrastructure----
        Mr. Larson.--and, yes, infrastructure and then rural
    facilities and specifically those to accommodate healthcare. In
    rural areas we need a place that we can treat someone until the
    emergency facilities are there whether it be helicopter,
    ambulance, whatever----
        Ms. Sewell. Absolutely----
        Mr. Larson.--to--critical care.
        Ms. Sewell. Yes.
        Mr. Larson. And the broadband is going to have the impact
    on rural America just like electricity did.
        Ms. Sewell. Great. Well, thank you all. I yield back the
    rest of my time.
        The Chairman. Thank you. I might mention to the Members of
    the Subcommittee it is my hope, goal, to make sure we get both
    panels in and the Subcommittee hearing concluded before we go
    to the Floor so we don't have to truncate the process. I am not
    trying to speed anybody up. It is a lot more instructive I
    think when we can go straight through.
        With that, I call on the gentlelady from Missouri, Mrs.
    Hartzler.
        Mrs. Hartzler. Thank you, Mr. Chairman. And I would add my
    comments to the Ranking Member thanking you for your service
    and wishing you well and saying it has been an honor. It is an
    honor to serve with you here.
        I would like to start with Mr. Conner. Your testimony was
    very interesting how you pointed out that there are 88 programs
    administered by 16 different Federal agencies specifically
    targeted at rural development and that consolidation is
    warranted. I was just wondering do you have some examples of
    some specific agencies or departments or programs that you
    think would be a good thing to consolidate?
        Mr. Conner. Well, Congresswoman Hartzler, let me just
    answer your question this way. Obviously, we believe that the
    U.S. Department of Agriculture Rural Development is the right
    place and they are the people they have, if you will, boots on
    the ground out in the field to actually successfully administer
    these programs. And so in that process we would certainly
    strongly encourage a continued relationship with that agency
    that has the people out there who are in the rural communities,
    know the projects, know who is behind them, know the quality of
    those projects. And I am not sure that exists with all of the
    agencies that I mentioned but we would certainly encourage
    continued use of the people with boots on the ground.
        Mrs. Hartzler. Can you give me an example of a program that
    is in a different agency that is also in USDA that you think we
    could pull back totally under USDA's jurisdiction?
        Mr. Conner. Well, pulling back totally probably is farther
    than what I am prepared----
        Mrs. Hartzler. Consolidating.
        Mr. Conner.--to give some good advice for you, but, this
    Committee can explore a number of different opportunities in
    the housing programs that I have mentioned with the Value-Added
    Producer Grants. These are things that are occurring elsewhere
    as well and we have found these programs again, we have offered
    criticisms but yet, we want to continue to see them operated
    and funded through USDA Rural Development.
        Mrs. Hartzler. Great. Thank you very much.
        Mr. Larson, several of you have mentioned the importance of
    infrastructure grants and the loans to the rural communities.
    And certainly as I travel around my district that is something
    that is very important and is needed with wastewater and water
    treatment facilities, especially as it relates to the EPA's
    changing rules and specifications, older infrastructure,
    whether it be sewer lines or water lines in these small towns,
    and they rely on these loans.
        I was just wondering do you have an idea of the amount of
    need that is out there, dollar-wise, for this type of
    infrastructure versus how much money is available currently for
    these programs?
        Mr. Larson. No, ma'am, I do not have a dollar estimate for
    you but I can sympathize and agree with your comment, the fact
    that there is a great need out there in rural America and there
    is going to be a continuing need if we hope to grow and expand
    the rural economy with value-added projects and so forth
    because we need these other types of important infrastructure
    to facilitate those communities that are fortunate enough to
    have this type of economic development happen.
        Mrs. Hartzler. Yes. These small towns just don't have the
    money that it takes to upgrade their sewer plants or to do what
    needs to be done according to the regulations. It is putting
    them in a very difficult position. And so I was just wondering
    if you had any thoughts on that. So I will withhold further
    comments due to time, but thank you, Mr. Chairman. Thank you.
        The Chairman. Looking at the panel here, I always wonder
    what one-party rule would be like. Did you ever see the Woody
    Allen movie?
        I would then recognize the gentleman from Pennsylvania, Mr.
    Thompson.
        Mr. Thompson. Thank you, Mr. Chairman. And I join my
    colleagues on also saying thanks for your leadership.
        Ms. Mazer, you mentioned the importance of preparing our
    workforce with new skills in your testimony. What specific farm
    bill programs do you support and believe help with this?
        Ms. Mazer. I am not sure of a specific answer to that as
    far as workforce skills from actual Community Facilities. We
    have used Community Facilities loans and grants in building one
    of the first new high schools in our county in 50 years. We
    could talk about it from the bricks-and-mortar and
    infrastructure type of perspective but we could also talk about
    the impact of regional planning and truly looking regionally.
        And one of the examples that I can share from my region is,
    again, we are a regional entity made up--our board is made up
    of county commissioners, educators, chambers of commerce,
    business leaders. Our educational institutions had for a long
    time professional staff an association. There are 3 K-12
    schools. There are three community colleges, a state
    university, and then a University System of Maryland, and they
    approached us because we were the regional platform. They were
    struggling with maintaining staff so we took over the
    management of the consortium. We now have a virtual educational
    consortium where we can bring those leaders together to talk
    about the educational needs. They can work together, they can
    pursue joint opportunities, and it is also a direct link, then,
    between economic development and education.
        Mr. Thompson. So what is the tie then within your model
    between--obviously it sounds like you are blessed with, for a
    rural region you are blessed with different educational
    entities----
        Ms. Mazer. Yes.
        Mr. Thompson. Is there a good solid tie back to the rural
    employers so that their workforce needs are clearly understood,
    constantly monitored, and that is kind of that need is what
    drives what you do with that area?
        Ms. Mazer. Yes, absolutely. There is a very close
    connection. We work together very closely. We also have an
    organization made up of private sector CEOs and in Allegheny
    County in the center of our region it is called the Greater
    Cumberland Committee. We have the Greater Hagerstown Committee
    in Washington County. The Greater Cumberland Committee actually
    has a program where they bring businesses and our educational
    community together as well.
        Mr. Thompson. All right. Thank you.
        Now, Mr. Conner, can you discuss the success of the farm
    cooperatives and what kind of benefits that they tend to
    provide rural communities and American agriculture, how they
    differ from other businesses? And with those cooperatives, I am
    assuming these are strongly member-driven, and how do we make
    sure that--I have heard a lot of discussion especially on the
    dairy side of member concerns that are member-driven but they
    feel like they don't have a lot of input. So how does that work
    in terms of how can we assure that our farm cooperatives are
    strongly member-driven?
        Mr. Conner. Well, Congressman Thompson, let me just answer
    the question this way if I could. I do believe our farmer-owned
    cooperatives are member-driven because obviously those co-ops
    are managed by a board of directors that for the most part is
    elected by those farmer members of that cooperative. In my case
    I have never observed a circumstance where those farmer leaders
    were shy about making their views known if they thought the
    direction of the co-op was headed different than what they
    preferred. You know, things change pretty rapidly again because
    the people that own the co-op, the people that vote on the
    leadership, on the management of that co-op are indeed the very
    farmer members who make up that co-op and that creates a system
    that is very, very responsive to those farmer members.
        Mr. Thompson. Okay, thank you.
        Mr. Larson, which rural development program do you think in
    your opinion has the best return on investment in terms of
    putting Federal dollars through the farm bill into rural
    economic development program? Which one do you think has the
    best return on investment coming back for the taxpayers?
        Mr. Larson. Well, I am glad that you review them as
    investments because that is what they are.
        Mr. Thompson. Sure.
        Mr. Larson. They are an investment, not an expense. And I
    would have to say that in my opinion that good water and
    wastewater treatment facilities are very important to rural
    America. And I don't mean just small towns but our rural water
    systems that serve the rural areas.
        Mr. Thompson. Thank you, sir.
        Thank you, Mr. Chairman.
        The Chairman. Thank you. And thanks for your comments here
    on the panel. I really appreciated that.
        With that, I don't believe there is any second round of
    questions. I appreciate your being here, ladies and gentleman,
    and look forward to seeing you again.
        Mr. Larson. Thank you.
        Ms. Mazer. Thank you.
        The Chairman. Calling the second panel to come on forward,
    and while they are doing that, I want to indicate that along
    with the testimony that we are about to receive from the second
    panel, I have a letter submitted by the U.S. Telecom
    Association. Unless there is objection, I would ask that it be
    made part of the record. So ordered.
        [The information referred to is located on p. 1671.]
        The Chairman. And so the second panel, as they are
    assembling, is comprised of Frank Dunmire who is actually from
    my part of the state, was actually in Taylorville a week ago
    Saturday at the VFW. Mr. Dunmire is the Executive Director of
    the Illinois Rural Water Association on behalf of the National
    Rural Water Association; Mr. Robert Stewart, Executive Director
    of Rural Community Assistance Partnership; Mr. David Rozzelle,
    Executive Vice President of the Suddenlink Communications St.
    Louis on behalf of the National Cable Telecommunications
    Association; and Mark Bahnson, CEO and General Manager of
    Bloomingdale Communications, Bloomingdale, Michigan, on behalf
    of the National Telecommunications Cooperative Association.
        With that, then, we ask that the panelists speak in the
    order I recognized them. First, Mr. Dunmire.

            STATEMENT OF FRANK DUNMIRE, EXECUTIVE DIRECTOR,
    ILLINOIS RURAL WATER ASSOCIATION, TAYLORVILLE, IL; ON BEHALF OF
                    NATIONAL RURAL WATER ASSOCIATION

        Mr. Dunmire. Thank you. Chairman Johnson, Ranking Member
    Costa, and Members of the Subcommittee, thank you for holding
    today's hearing. Like Mr. Chairman said, I am Frank Dunmire,
    the Executive Director of Illinois Rural Water Association and
    in the interest of time I will summarize my written statement.
    But before I get too far along into my testimony, I would like
    to thank Chairman Johnson for his service to Illinois. Since
    the Chairman began his career in the public service in 1971, he
    has been a champion of the farmers and the rural communities in
    our state and we wish him well as he leaves the House of
    Representatives and returns home to his family in Illinois.
    Thank you, Tim.
        The Illinois Rural Water Association is a member of the
    National Rural Water Association on whose behalf I am
    testifying this afternoon. NRWA represents over 28,000 small
    rural water systems with which 1,100 of those are located in
    Illinois. Every day, rural water helps communities properly
    operate, maintain, and manage their water and wastewater
    systems, ensure compliance with the Safe Drinking Water Act,
    and when necessary, respond to natural disasters.
        Last year, rural water provided over 155,000 hours of
    onsite assistance to rural water and wastewater systems
    throughout the country. Everyone realizes the importance of
    water. It is not until you turn on the tap and nothing comes
    out that you begin to understand how complicated life becomes
    without easy access to water. Water quality and affordability
    are important factors for businesses wanting to locate or
    remain in a rural community. Many times, job creation is
    directly tied to the availability of a good supply of potable
    water.
        An excellent example of this is located in southwestern
    Illinois at the Prairie State Energy campus. This project
    created over 3,000 construction jobs and it will create 500
    permanent onsite jobs and 800 support sector jobs. But what
    most people don't know is that all of the potable water supply
    needs for this facility are being met by Washington County
    Water Company, a water cooperative funded through Rural
    Development.
        As a lender of last resort, USDA provides critical
    financing for water systems that are unable to secure
    commercial credit. In Fiscal Year 2011, USDA obligated over
    $1.3 billion in loans and grants to 695 water and wastewater
    projects. Eighty-two percent of those funds were used for
    projects in communities with populations of 5,000 or fewer. And
    even though over the last 72 years USDA has made over $30
    billion in water infrastructure loans to communities that
    others would not, the lifetime default rate for this program is
    a meager 1.02 percent.
        In addition to infrastructure financing, USDA's water
    programs also provides funding for technical assistance to
    rural communities. This onsite assistance provided by circuit
    riders and wastewater technicians is critical to ensuring that
    the rural communities have sustainable water and wastewater
    systems. We strongly encourage the Committee to reauthorize the
    Circuit Rider Program.
        We believe the farm bill should maintain the water programs
    current policies, funding should be limited to rural
    communities who are unable to find affordable credit elsewhere.
    Funding should be targeted to rural communities with the
    greatest economic need and environmental public health
    challenges. And grants should be awarded based in proportion to
    a community's economic need.
        We are aware of discussions to expand USDA loan and grant
    eligibility to more populous communities. We believe the water
    programs current focus on communities with populations of
    10,000 or less is working. Currently, 82 percent of USDA's
    water infrastructure funding goes to communities with
    populations of a few thousand or fewer. Even though funding has
    been awarded to smaller and poorer communities, the current
    backlog is still over $3 billion. We do not believe anything is
    to be gained by increasing the pool of eligible communities for
    water infrastructure loans and grants. In fact, we are
    concerned this could result in few loans and grants for truly
    needy rural communities and that the increase in applications
    could place a substantial burden on a shrinking Rural
    Development field staff, thereby delaying all loan and grant
    approvals.
        Mr. Chairman and Ranking Member Costa, this concludes my
    testimony and I will be happy to answer any questions at the
    appropriate time.
        [The prepared statement of Mr. Dunmire follows:]

    Prepared Statement of Frank Dunmire, Executive Director, Illinois Rural
     Water Association, Taylorville, IL; on Behalf of National Rural Water
                                  Association

        Chairman Johnson, Ranking Member Costa and Members of the
    Subcommittee, thank you for holding today's hearing. I am Frank
    Dunmire, the Executive Director of the Illinois Rural Water
    Association. Before I get too far along in my testimony, I would like
    to thank Chairman Johnson for his service to Illinois. As many of you
    know the Chairman, while still in law school, began his career in
    public service by winning a seat on the Urbana City Council in 1971. In
    1976 he was elected to the Illinois state legislature and served there
    until he was elected in 2000 to represent the 15th district here in
    Washington. He has been a champion of the farmers and rural communities
    in our state during his time in Congress and we wish him well as he
    leaves the House of Representatives and returns home to his family in
    Illinois.
        The Illinois Rural Water Association is a member of the National
    Rural Water Association (NRWA), on whose behalf I am testifying this
    afternoon. NRWA represents over 28,000 small rural water systems in all
    50 states through its 49 rural water association members. Of those
    28,000 member systems 1,100 are located in Illinois. Every day state
    rural water associations are helping rural communities throughout the
    country learn how to properly operate, maintain, and manage their water
    and wastewater systems; how to best ensure compliance with the Safe
    Drinking Water Act; how to protect their ground and surface water
    sources; and when necessary responding to natural disasters. Rural
    Water prides itself as being an organization that helps build capacity
    in rural America. When a community has a problem with its water and/or
    wastewater system, Rural Water assists the system operators in the
    identification and repair of the problem. We do not do the work for the
    community, but we help train their operators and teach them how to do
    it. Last year Rural Water provided over 155,000 hours (or the
    equivalent of over 17 years) of onsite assistance to rural water and
    wastewater systems. Rural Water also provided 3,500 hours of wastewater
    technician classroom training to nearly 15,000 individuals.
        The rural development title of the farm bill historically has not
    received as much focus as other policy matters such as: direct
    payments, crop insurance, conservation, or nutrition. However, the
    rural development programs authorized by this Subcommittee in the farm
    bill will meaningfully impact the lives of millions of people--take
    water for example. USDA's water infrastructure and technical assistance
    programs are authorized in the farm bill. Everyone realizes the
    importance of water, but it is very easy to take for granted. It is not
    until you turn on the tap and nothing comes out, or your community is
    under a boil order, that you begin to understand how complicated life
    becomes without easy access to water. But the importance of access to
    safe, affordable, and plentiful drinking water is not only important in
    rural homes but also to rural businesses. Water quality and
    affordability are important factors for businesses wanting to locate or
    remain in a rural community. Many of the businesses related to
    agriculture that are located in rural communities (think food
    processing, meat packing, biofuel production, farm services facilities)
    need high quality and affordable water supplies. Rural water is
    important to the rural economy. Many times job creation is directly
    tied to the availability of a good supply of potable water. An
    excellent example of this is located in Southwestern Illinois at the
    Prairie State Energy Campus. Chairman Johnson and possibly other
    Committee Members are aware that this project alone created in excess
    of 3000 construction jobs and will create approximately 500 permanent
    on-site jobs. High paying jobs I might add. In addition to those 500
    jobs it is estimated that an additional 800 support sector jobs will be
    created as well. BUT, what most people don't know is that all of the
    potable water supply needs for this facility are being met by
    Washington County Water Company, a not-for-profit water cooperative
    funded through Rural Development.
        Perhaps as a representative of NRWA I am a little biased, but I
    believe that USDA's water programs are the most important for rural
    communities that this Subcommittee will address in the farm bill. As a
    lender of last resort, USDA provides critical financing for water
    systems that are unable to secure commercial credit. In FY2011, USDA
    obligated $1.379 billion in loans and grants to 695 water and
    wastewater projects. Eighty-two percent of these funds were used for
    projects in communities with populations of 5,000 or fewer. And even
    though over the last 72 years USDA has made over $30 billion in water
    infrastructure loans to communities that others would not, the lifetime
    default rate for this program is 1.02%. The metrics for this program
    are impressive, as are the demands for its funds. According to USDA at
    the end of FY 2011 there were 415 completed applications for which no
    funding was then available. It would have required an additional $1.5
    billion in loans and grants to fund these projects. There were also an
    additional $3.3 billion in preliminary applications from rural
    communities. Many of the completed applications will be funded with FY
    2012 funding, but the fact remains that the backlog for loan and grant
    funds currently exceeds $3 billion.
        In addition to infrastructure financing, the USDA's water program
    also provides funding for technical assistance to rural communities
    that meet the eligibility requirements to be a borrower from Rural
    Development. As I mentioned previously, as one of USDA's technical
    assistance providers Rural Water provided over 155,000 hours of onsite
    assistance to rural communities last year. This onsite assistance,
    provided by circuit riders and wastewater technicians (and authorized
    in Section 306(a)(22) and 306 (a)(14) of the Consolidated Farm and
    Rural Development Act, respectively) is critical to ensuring that rural
    communities have safe, affordable, healthy drinking water and
    wastewater systems. The authority for the circuit rider program expires
    at the end of the fiscal year. We strongly encourage the
    reauthorization of the circuit rider program.
        As the Committee considers whether changes to the authorizations
    for the rural water programs are warranted, the NRWA would urge
    caution. We believe the farm bill should maintain the water program's
    current policies: funding should be limited to rural communities who
    are unable to find credit elsewhere; funding should be targeted to
    rural communities with the greatest economic need and environmental/
    public health challenges; and grants should be awarded based in
    proportion to a community's economic need.
        We are aware of discussions to expand USDA loan and grant
    eligibility to more populous communities. While there may be other
    issues within the Rural Development mission area, we believe the water
    program's current focus on communities with populations of 10,000 or
    less is working. Currently, 82% of USDA's water infrastructure funding
    goes to communities with populations of 5,000 or fewer, 64% goes to
    communities with populations of 2,500 or fewer, 51% goes to communities
    with populations of 1,500 or fewer, and 42% goes to communities with
    populations of 1,000 or fewer. Even though funding has been awarded to
    the smaller and poorer communities, as I mentioned earlier, there still
    is $3 billion backlog. We do not believe anything is to be gained by
    increasing the pool of eligible communities for water infrastructure
    loans and grants. In fact, we are concerned this could result in fewer
    loans and grants for truly needy rural communities and that the
    increase in applications could place a substantial burden on a
    shrinking Rural Development field office staff, thereby delaying all
    loan and grant approvals.
        We are also aware of proposals that would expand water
    infrastructure grant eligibility for more affluent communities. Again,
    we support the policies underlying the water program and believe the
    current grant limitations are working.
        Mr. Chairman, and Ranking Member Costa, this concludes my
    testimony. I appreciate the opportunity to appear before you this
    afternoon. I wish you luck in the days and weeks ahead as the Committee
    develops a new farm bill. I would be happy to answer any questions you
    may have. Thank you.

        The Chairman. Thank you, Mr. Dunmire.
        Mr. Stewart?

       STATEMENT OF ROBERT B. STEWART, EXECUTIVE DIRECTOR, RURAL
                   COMMUNITY ASSISTANCE PARTNERSHIP,
                            WASHINGTON, D.C.

        Mr. Stewart. Thank you, Chairman Johnson, Ranking Member
    Costa, and Members of the Subcommittee, for allowing me the
    opportunity today to discuss the importance of rural
    development programs and the upcoming farm bill
    reauthorization. My name is Robert Stewart and I am
    representing the Rural Community Assistance Partnership, a
    national nonprofit network of regional service providers that
    for over 40 years have provided onsite technical assistance and
    training services to rural communities in every state regarding
    water and wastewater facilities, waste disposal, affordable
    housing, and community economic development.
        The importance of RD infrastructure programs to current
    rural economies and for future economic development cannot be
    overstated. In particular, rural water and wastewater utilities
    are the critical foundation upon which rural communities and
    families depend for their health, their livelihoods and their
    prosperity. Virtually all economic activity in rural America,
    whether it is farming, ranching, value-added commodity
    processing, oil and gas production, mineral activities,
    alternative energy pursuits, or tourism depend on sustainable
    rural communities and utilities. It has been RD programs that
    have provided rural America with vital infrastructure, business
    development opportunities, and a range of technical assistance
    programs that promote productive and sustainable economies.
        RCAP works directly with RD staff in helping rural
    communities funding application requirements, implement proper
    management practices to ensure financial accountability and
    provide operational assistance. Due to a limited customer base
    and typically lower median income, many small rural communities
    are unable to finance major infrastructure improvements without
    some Federal assistance. Unlike larger communities that can
    access the municipal bond market or other private financing
    options, these small rural communities have turned to RD as a
    lender of last resort.
        RD has responded by providing over 18,000 active water and
    sewer loans serving more than 19 million rural residents as
    previously mentioned with basically a nonexistent default rate.
    Although challenged by reductions in every state, RD staff
    continue to provide services that respond to local needs.
    Whatever the situation, rural community leaders benefit from
    being able to turn to a local RD staffer, an RCAP technical
    assistance provider, or a Rural Water Association circuit rider
    that they know and trust who is familiar with their system.
        To build on these successes, the farm bill should
    reauthorize the Water and Wastewater Loan and Grant Programs,
    the Technical Assistance and Training Grant Program, the
    Essential Community Facilities Program, and the Water
    Infrastructure Revolving Loan Program at or near the levels in
    the current farm bill.
        Despite RD's many successes, a substantial number of small
    communities, towns, and counties have difficulty fully
    accessing and complying with RD regulations. The application
    process and eligibility requirements for each program are
    slightly different and each poses unique challenges. Local
    leaders, most often volunteers, find that meeting RD loan
    requirements can be a complex and time-consuming process.
    However, with help from an experienced technical assistance
    provider, even communities with no paid staff and limited
    planning resources can develop the local capacity to apply for
    and manage needed infrastructure projects.
        While there are many calls for reducing the requirements
    for accessing loans, RCAP's experience is that these
    requirements are for the most part necessary to ensure that the
    Federal Government is making financial support available only
    to the neediest communities while ensuring the security of the
    Federal investment. The extremely low default rate on these
    loans is a testament to the efficacy of existing requirements.
        One area for improvement might be to have common
    environmental review requirements among all Federally financed
    infrastructure programs. Oftentimes, projects have multiple
    funding sources with varying environmental review and
    assessment requirements. The existing Technical Assistance and
    Training Grant Program has been so successful that many state
    RD offices and local community officials have repeatedly asked
    RCAP to assist with other non-water-related RD-funded projects,
    in particular, the Essential Community Facilities Program.
    Community facilities constitute and important foundation for
    rural community growth and job creation. A CF Technical
    Assistance and Training Program can ensure that these
    facilities are planned for, constructed, operated, and managed
    in an efficient manner that benefits the entire community and
    promotes economic development opportunities.
        There has been an increasing emphasis on regionalization,
    as we have already heard today, which RCAP supports and we
    would propose that borrowers demonstrate to RD--this is
    particularly on the water and the wastewater side--their
    efforts towards regionalized service provision as part of the
    application process. In addition, higher priorities should be
    given to regional applications, especially those resulting in
    consolidations or collaborative service delivery.
        RCAP's experience, however, has been that regionalization
    is most often successful when a technical assistance provider
    is able to spend time with all the entities involved to offer
    alternative approaches, assist in the evaluation of costs and
    benefits, identify funding sources, prepare necessary
    documentation, and promote public education and outreach.
        There are some proposals being discussed, as we have heard
    today, to standardize the definition of rural in all RD
    programs. While this might seem reasonable, any effort to
    increase the size of eligible borrowers under the water and
    environment programs above a 10,000 population would severely
    jeopardize what is basically the only source of Federal funding
    for small community infrastructure needs. If the definition is
    expanded, many of our nation's smallest communities will be
    unable to compete for RD water infrastructure funds with much
    larger towns placing them at a competitive disadvantage for the
    one program that was designed especially for their unique
    needs.
        I will end my remarks here and hope that you will review my
    written statement for additional information and ideas on the
    RD title and the farm bill. And I appreciate the opportunity to
    be here and would be happy to answer any questions.
        [The prepared statement of Mr. Stewart follows:]

      Prepared Statement of Robert B. Stewart, Executive Director, Rural
               Community Assistance Partnership, Washington, D.C.

        Thank you, Chairman Johnson, Ranking Member Costa, and Members of
    the Subcommittee, for this opportunity to address the importance of
    USDA Rural Development (RD) programs to rural America. In my over 25
    years of work in the rural utility field, first in my home state of
    Texas, and now managing a nation-wide rural community development
    organization, I have experienced firsthand the vital role that RD's
    water and sewer and community facilities programs play in improving the
    quality of life in the rural communities that form the backbone of our
    heartland.
        My name is Robert Stewart, and I am the Executive Director of the
    Rural Community Assistance Partnership (RCAP). RCAP is a nonprofit
    national network of regional service providers that for nearly 40 years
    has helped small, low-income, rural communities address water,
    wastewater, and other community development needs in all 50 states,
    Puerto Rico, and the Virgin Islands. Our staff of assistance providers
    delivers onsite training and technical assistance to small water and
    wastewater systems to help them meet regulatory requirements, finance
    and manage capital improvement projects and to develop and sustain
    technical, managerial, and financial capacities.
        For many years, the RCAP network has partnered with USDA to bridge
    the gap between RD and the communities they serve. RCAP assists rural
    communities with funding applications and every phase of the project
    planning and development process, as well as providing training and
    technical assistance after construction is complete, helping
    communities understand how to properly manage and operate their system
    in a fiscally sustainable manner. We work to ensure that RD borrowers
    are able to meet the terms of their Letters of Condition and that they
    are able to repay their loans on time. Every year, the RCAP network
    helps roughly 2,000 rural communities address their water and
    wastewater needs.
        Providing these basic services is a challenge for many rural
    communities. Rural residents are three times more likely than their
    urban counterparts to lack water and sanitation; they also typically
    pay nearly three times the amount for water and sewer services. Due to
    their limited customer base, small utilities lack the economies of
    scale that reduce the costs of infrastructure construction, operation,
    and maintenance to levels that are affordable to low-income residents.
    Few rural communities can access the municipal bond market or find
    banks that are willing to invest in such long-term, low-yield
    transactions. So, many turn to RD as their lender of last resort.
    USDA-RD Water and Wastewater Programs Have Been Enormously Successful
        RD's water and wastewater programs are a key component of economic
    development in rural America. Every water and wastewater construction
    dollar generates nearly $15 of private investment and adds $14 to the
    local property tax base. Without the basic infrastructure funded by
    RD--clean drinking water for household needs, sufficient quantities of
    water to support local industry, and sanitary sewers to remove sewage
    and industrial byproducts to protect public health--local employers
    will relocate or close factories and small businesses will decline and
    eventually disappear. The entrepreneurs and small business owners who
    are the engines of our economy won't open new businesses, shops or
    restaurants on Main Street without basic services. Infrastructure is
    the foundation of economic development, and to promote economic growth
    in rural America, you need to ensure that businesses' and residents'
    basic needs--like water and sewer services--are met. Opportunities for
    continued economic growth in rural communities are substantial.
    Agricultural production, oil and gas development, mining operations,
    alternative energy pursuits, and tourism are all vibrant economic
    sectors that depend on sustainable rural communities. RD programs play
    a part in making available to rural communities water and wastewater
    utilities, essential community facilities, affordable housing, and
    broadband.
        The Water and Environment Programs at RD have enjoyed tremendous
    success over the past few decades. The agency boasts a portfolio of
    more than 18,000 active water/sewer loans, more than 19 million rural
    residents served, and a delinquency rate of just 0.18%.\1\ This success
    is partly attributable to the field presence RD has historically
    maintained in rural areas. With staff in field offices throughout the
    country, RD is uniquely positioned to evaluate the credit-worthiness of
    small utilities and can distribute Federal funds quickly and
    efficiently to areas of need. In drought years, or after natural
    disasters, community leaders benefit from being able to turn to a local
    RD staffer whom they know and trust and who is familiar with their
    system and its needs, though recent staff reductions in RD offices
    nationally have started to hinder the ability of RD to serve rural
    communities with these critical services. To build on the past
    successes of the Water and Environment Programs, the farm bill should
    reauthorize the water and wastewater loan and grant programs, the
    technical assistance and training grant program, and the water
    infrastructure revolving loan fund program at or near the levels in the
    previous farm bill.
    ---------------------------------------------------------------------------
        \1\ United States. Dept. of Agriculture. Rural Development. Water
    and Environmental Programs Annual Activity Report, Fiscal Year 2011.
    Washington, D.C.: USDA, 2012.
    ---------------------------------------------------------------------------
    Technical Assistance is Key to Ensuring RD's and Rural Communities'
            Success
        Despite RD's many successes, a substantial number of small, low-
    income towns and counties have difficulty accessing RD programs. The
    application process and eligibility requirements for each program are
    slightly different, and each poses unique challenges. Local leaders are
    most often volunteers who lack professional staff and the resources to
    find out what funding sources are available or the requirements for
    funding eligibility. Their first look at the Letter of Conditions on an
    RD loan can make the process seem overwhelming and discourage worthy
    applications. With help from an experienced technical assistance
    provider, however, even communities with no staff and limited planning
    resources can develop the local leadership capacity to manage needed
    infrastructure projects. Technical assistance plays a vital role in
    ensuring that the programs serve the communities they were designed to
    benefit in a cost-effective manner.
        While there are many calls for reducing the requirements associated
    with obtaining water and wastewater financing from RD, RCAP's opinion
    is that these requirements are for the most part necessary to ensure
    that the Federal Government is making financial support available to
    the neediest communities while ensuring the security of the Federal
    investment. The extremely low default rate on these loans is a
    testament to the efficacy of existing requirements. Common
    environmental review requirements among all Federal and state
    infrastructure programs would be one area for improvement. Oftentimes
    projects have multiple funding sources with varying environmental
    review/assessment requirements, and standardizing them across Federal
    programs would reduce the burden on applicants to conduct multiple
    separate reviews.
        Overall, the water and wastewater Technical Assistance and Training
    Grant Program has been so successful that many state RD offices and
    local community officials have asked the RCAP network to assist with
    other, non-water-related RD-funded projects. While we try to work with
    as many communities as we can by relying on non-Federal resources,
    Congress can help by authorizing changes to existing farm bill
    programs, specifically Rural Housing Service's Essential Community
    Facilities (CF) Program, to allow for set-asides to fund technical
    assistance. State RD Offices have repeatedly asked RCAP for assistance
    with borrowers under the CF program. A CF technical assistance and
    training program can provide much-needed support for the CF program as
    has been the case with the water and wastewater programs. Under current
    and projected economic environments, essential community facilities
    constitute an important foundation for rural community growth. Having a
    dedicated technical assistance program in this area will ensure that
    these facilities are planned for, constructed, operated and managed in
    an efficient manner that benefits the entire community and promotes
    economic development opportunities.
        As the success of the water and wastewater programs has shown,
    technical assistance benefits both rural communities and the agency by
    improving access to the programs and ensuring a positive return on
    Federal investments. By expanding technical assistance to other
    programs at RD, taxpayer dollars can go further while still providing
    necessary services to rural communities. In addition, a broader
    technical assistance program would help ensure a more coordinated
    approach to economic development in rural communities. Experienced
    planners who are familiar with the application processes for Federal
    and state programs could help communities better coordinate the timing
    of their development projects. This would help prevent communities from
    tearing up Main Street 1 year to replace sewer pipes, then tearing it
    up again the following year to install fiber optic cables, simply
    because that's when the funding was available. A comprehensive Federal
    approach to technical assistance among all RD programs would allow
    local leaders to better plan and coordinate their construction
    activities and eliminate such inefficiencies.

    Regionalization Issues
        Another way Congress can improve existing RD programs is to
    encourage applicants to look for opportunities to regionalize. In order
    to maximize limited resources, communities need to realistically
    examine whether operating their own facilities is cost effective. With
    respect to water and sewer infrastructure, at times clusters of small
    towns can better and more affordably be served by having one large
    treatment plant with pipes running to each town than by having a
    separate treatment facility in each town. In areas where communities
    are too far apart to run pipes, utilities could benefit from shared
    management, operations, purchasing and other similar joint service
    provisions. Regionalization may not be feasible in all cases,
    especially in areas with long distances between communities. However,
    RCAP recommends that potential borrowers demonstrate to RD their
    efforts to employ regionalized service provision as part of the
    application process.
        Most states now require that new or expanding utilities provide
    documentation regarding their efforts to regionalize prior to being
    granted a license or certificate to serve an area. Priority should be
    given to applications for regional service provision, especially in
    cases where smaller or non-compliant systems are being consolidated to
    more efficiently serve their customers. By giving a small priority to
    projects in which the applicants can demonstrate that they have weighed
    the costs and benefits of regionalization, RD can encourage regional
    projects where appropriate without disqualifying communities that are
    geographically isolated. Furthermore, RCAP's experience has been that
    regionalization is most often successful when a technical assistance
    provider is able to spend time with all entities involved to offer
    alternative approaches, assist in the evaluation of costs and benefits,
    identify funding sources, prepare necessary documentation, and assist
    with public education and outreach.
        Some consideration should also be paid to the current language
    contained in 7 U.S.C.  1926(b) ``Curtailment or limitation of service
    prohibited'' that allows water districts that are USDA borrowers to
    veto any activity that impacts service provision in their area. The
    need to protect the Federal investment is necessary and was the basis
    for this provision. However, should Congress decide that regionalized
    approaches to service delivery are appropriate in some cases, then a
    re-examination of this provision is necessary to allow for a more
    comprehensive and planned approach to regional development. As this
    currently stands, the Federal protection afforded under 1926(b) can
    prevent state and local governments from making their own decisions on
    how best to provide utility services in local areas.
    Reauthorize Revolving Funds for Financing Water and Wastewater Projects
        7 U.S.C.  1926(a)(2)(B) authorizes a program for nonprofit
    entities to capitalize revolving loan funds for the purposes of
    financing eligible borrowers with pre-development or other short-term
    capital costs (such as site acquisition or engineering costs or for
    equipment replacement, small service extensions or emergency repairs).
    RCAP would recommend that this program be maintained at currently
    authorized levels and the maximum for eligible loans to small-system
    borrowers be increased from $100,000 to $150,000, as costs for even the
    smallest repairs have increased significantly. Both RCAP and the
    National Rural Water Association have utilized this program to
    capitalize revolving loan fund programs that have assisted small
    communities to extend services, meet regulatory requirements, make
    emergency repairs and fund pre-development costs associated with major
    capital construction projects. These types of loans are typically not
    available from RD or the State Revolving Funds, nor do small
    communities have much hope of securing these loans from private
    sources. Demand for these loans far surpasses amounts authorized and
    appropriated for this purpose.

    Changing the Definition of ``Rural''
        There are some proposals being discussed to standardize the
    definition of ``rural'' in all RD programs. While it might seem
    reasonable to have a single definition of rural that encompasses the
    utility, community facilities and business programs, any effort to
    increase the size of eligible borrowers under the Water and
    Environmental Programs above 10,000 would severely jeopardize what is
    basically the only source of Federal funding for small, rural community
    infrastructure needs. If the definition is expanded to, say, 50,000 and
    under, many of our nation's smallest communities will be unable to
    compete for RD water and sewer infrastructure funds with much larger
    towns that have departments of full-time staff, engineers and grant
    writers. The sheer number of community water systems serving
    populations under 10,000--over 90% of the 53,000 community water
    systems in this country--requires that limited RD funded be targeted to
    those communities with the greatest need, and the greatest need is in
    these smaller, rural communities.
        Larger communities--even those in the 10,000-50,000 population
    range--have access to the bond market, other state-funded programs and/
    or bank financing at reasonable rates and terms. Larger communities
    also benefit from greater numbers of customers over which to apportion
    debt service costs. This allows larger systems to afford treatment and
    service options, and to keep costs to customers reasonable, while
    accessing non-Federal financing sources. If allowed access to RD
    funding, many of these larger communities will instead turn to lower-
    interest RD loans, which will leave the small communities that have no
    other options out of the mix. Smaller rural communities should not be
    placed at a competitive disadvantage for the one program that was
    designed specifically to meet their unique needs. Many smaller,
    economically distressed communities require the kind of grant/loan
    packages provided by RD in order to make customer costs reasonable,
    even if these costs are still typically much higher than what is found
    in their larger or more urbanized neighboring communities.
    Household Water Well Program: 7 U.S.C.  1926(E)
        This section allows RD to make grants to nonprofit organizations to
    loan money to individuals to finance the construction, refurbishing and
    servicing of individually owned household water well systems in rural
    areas. While this program, combined at times with state housing
    programs, has benefited low-income families in isolated rural areas
    that would otherwise be unable to obtain water except through a
    household well, the farm bill should require that none of these loans
    go to residences in areas where RD has funded or is considering funding
    a community water system. Funding individual homeowner loans can
    adversely impact small customer bases within areas funded by RD's
    community water loans by reducing the potential number of customers who
    are ultimately responsible for servicing the Federal debt. Furthermore,
    encouraging multiple wells into potentially sensitive and increasingly
    depleted aquifers can negatively impact other users from both a water
    quality and water quantity perspective.

    Conclusion
        Solving the challenges facing rural communities requires a multi-
    pronged approach that includes adequate funding, along with steps to
    ensure that funding is available to all communities that truly need it,
    and a comprehensive approach to technical assistance to maximize the
    efficiency and effectiveness of RD's programs. It also includes an
    emphasis on regional economic development and cost-effective
    investments in infrastructure that provide maximum return on scarce
    Federal, state, and local resources. The farm bill reauthorization is
    an opportunity to replicate the success of the water/wastewater
    technical assistance program and modify existing programs, such as
    Essential Community Facilities, to encourage a regional approach to
    rural development, while protecting taxpayer investment in our nation's
    water and sewer infrastructure.
        Thank you for considering my testimony on the importance of rural
    development as you prepare for your farm bill deliberations. I welcome
    any questions you may have at this time.

        The Chairman. Mr. Rozzelle?

             STATEMENT OF DAVID G. ROZZELLE, EXECUTIVE VICE
     PRESIDENT, SUDDENLINK COMMUNICATIONS; MEMBER, RURAL AND SMALL
                       SYSTEM OPERATOR COMMITTEE,
      NATIONAL CABLE TELECOMMUNICATIONS ASSOCIATION, ST. LOUIS, MO

        Mr. Rozzelle. Chairman Johnson, Ranking Member Costa, and
    Members of the Subcommittee, thank you for inviting me to
    testify today. My name is Dave Rozzelle, and I am an Executive
    Vice President with Suddenlink Communications. Suddenlink is a
    leading provider of cable video services, high-speed Internet
    access, wireless home networking, wireline phone, online video,
    home security services for hundreds of communities,
    approximately 1.4 million households and thousands of
    commercial customers across 11 states. Suddenlink primarily
    serves second-tier communities such as Lubbock, Texas;
    Charleston, West Virginia; Jonesboro, Arkansas; Lake Charles,
    Louisiana; and Greenville, North Carolina. However, we also
    serve dozens of small rural communities, some with populations
    below 500 people.
        Since 2009, we have invested $350 million above and beyond
    our normal capital spending levels to ensure that our customers
    can enjoy cutting-edge services, including high-speed Internet
    service, which we offer to substantially all of our customers.
    Moreover, our investment in industry-leading DOCSIS 3.0
    technology has enabled us to provide data transmission speeds
    up to 107 megabits to a growing number of our residential
    customers, some in small rural communities like Pomeroy, Ohio,
    and Ripley, West Virginia.
        I am also here today as a member of the Rural and Small
    System Operator Committee of the National Cable and
    Telecommunications Association. NCTA is the principal trade
    association of the cable industry in the United States. Since
    1996, the cable industry has invested over $185 billion to
    upgrade and expand its networks to provide broadband access and
    now offers high-speed Internet service to more than 93 percent
    of U.S. households.
        Suddenlink and NCTA strongly support the primary goals of
    rural broadband funding. Broadband is a crucial driver of
    economic recovery and global competitiveness and quality
    broadband services should be available to all regions of the
    country, including the least densely populated areas of the
    country. Unfortunately, over the past 10 years, the
    implementation of the rural broadband programs by the Rural
    Utilities Service has not maintained that focus. The USDA
    Inspector General issued critical reports in 2005 and 2009
    which found that ``the overwhelming majority of communities, 77
    percent, receiving service through the Broadband Program
    already have access to the technology without the RUS Loan
    Program.''
        Misdirecting scarce government funds to areas that are
    already being served means less support for areas without any
    broadband. It also puts existing private providers in the
    untenable position of having to compete against a government-
    subsidized competitor. Though the 2008 Farm Bill made some
    reforms, the RUS's new March 2011 rules still allow the RUS to
    approve applications that are complete overbuilds without
    reaching any new households which lack broadband service.
        We respectfully submit that the new farm bill should take
    strong steps to direct taxpayer dollars where they are most
    needed. Specifically, as this Subcommittee considers
    reauthorization of the legislation, we urge you to consider the
    following four proposals:
        First, limit funding to substantially unserved areas. To
    ensure available funds are used effectively, the RUS Broadband
    Support Loans, Loan Guarantees, or Grants should be limited to
    areas where at least 75 percent of residential households lack
    access to broadband service.
        Second, seek additional information. To ensure compliance
    with this proposed eligibility standards, the Secretary of
    Agriculture should be required to give existing providers an
    opportunity to voluntarily submit information about their
    service areas that may overlap areas proposed to be served by
    the applicant. This was done in the stimulus program.
        Third, prioritize support to areas most in need of it. The
    Secretary should continue to give priority to the RUS Broadband
    Loans or Grants that will extend broadband service to areas
    with the greatest proportion of unserved households.
        Finally, increase accountability. Each entity receiving RUS
    broadband support should be required to report quarterly on its
    use of the funds and its progress and those reports should be
    available online. That was done by the Department of Commerce
    in the stimulus program.
        Suddenlink and NCTA share your goal of bringing broadband
    to every rural household. A well administered Broadband Loan
    Program is an important part of reaching that goal. Including
    our four proposals will help ensure that the program stays
    focused and on track to do so.
        Thank you for the opportunity to speak here today and I
    appreciate your willingness to consider ways to ensure
    broadband funds are spent in the most effective way possible
    for all Americans. I look forward to taking your questions at
    the appropriate time.
        [The prepared statement of Mr. Rozzelle follows:]

      Prepared Statement of David G. Rozzelle, Executive Vice President,
      Suddenlink Communications; Member, Rural and Small System Operator
    Committee, National Cable Telecommunications Association, St. Louis, MO

        Good morning, and thank you for inviting me to testify today. My
    name is Dave Rozzelle, and I am an Executive Vice President with
    Suddenlink Communications. Suddenlink is a leading provider of cable
    video services, high-speed Internet access (also known as broadband
    access), wireless home networking, wireline phone, online video, and
    home security services for communities primarily located in Texas, West
    Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, Missouri and
    Arizona.
        Suddenlink provides service to hundreds of communities and
    approximately 1.4 million households. Suddenlink primarily serves
    second tier markets, such as Lubbock, TX; Charleston, WV; Jonesboro,
    AR; Lake Charles, LA; and Greenville, NC. However, we also serve dozens
    of small, rural communities, some with populations below 500 people.
        Since 2009, we have invested over $350 million--above and beyond
    our normal capital spending levels--to ensure that our customers can
    enjoy cutting-edge services, including high-speed Internet service,
    which we offer to substantially all of our subscribers. Moreover, our
    investment in industry-leading DOCSIS 3.0 technology has enabled us to
    provide data transmission speeds up to 107 Mbps to a growing number of
    our residential customers, some in small communities like Pomeroy,
    Ohio, and Ripley, West Virginia.
        I am also here today as a member of the Rural and Small System
    Operator Committee of the National Cable & Telecommunications
    Association (``NCTA''). NCTA is the principal trade association of the
    cable industry in the United States. NCTA represents cable operators
    serving more than 90 percent of the nation's cable television
    households and more than 200 cable program networks, as well as
    equipment suppliers and providers of other services to the cable
    industry. The cable industry has long been at the forefront of the
    growth and deployment of broadband service. Since 1996, the cable
    industry has invested over $185 billion to upgrade and expand its
    networks to provide broadband access. The result of this investment is
    that cable operators today offer high-speed Internet service to more
    than 93 percent of U.S. households.
        Suddenlink and NCTA strongly support the primary goals of rural
    broadband funding. Quality broadband services should be available to
    all regions of the country, including the least densely populated areas
    of the country. Broadband is a crucial driver of economic recovery and
    global competitiveness. Broadband links rural America to the rest of
    the country and the world, creates jobs, improves educational
    opportunities, and delivers health care more efficiently. While
    Suddenlink has invested an incremental $350 million in recent years to
    bring the most advanced services to its customers, we recognize that
    there are still some rural consumers who lack access to broadband.
    Rural broadband funding programs should focus on bringing broadband to
    those rural consumers.
        Unfortunately, over the past 10 years the implementation of the
    rural broadband programs by the Rural Utilities Service (``RUS'') has
    not maintained that focus. Time and again, the USDA's Inspector General
    has found that taxpayer dollars were used to underwrite broadband
    services in areas that already have broadband from providers that are
    funded wholly by risk capital. Likewise, a study by Navigant Economics
    concluded that RUS grants and loans were awarded to areas already
    served by multiple broadband providers--at the cost of tens of
    thousands of dollars or more for each unserved household. Misdirecting
    funds to areas that are already being served means less support for
    areas without any broadband--and it also puts existing providers in the
    untenable position of having to compete against a government-subsidized
    competitor.
        Unlike water or electricity, the broadband market is highly
    competitive in many areas, including in many rural areas of the
    country. In the broadband context, misallocated funds not only waste
    tax dollars, they undermine the goal of fair competition. Particularly
    in the current budget situation, neither of these outcomes is
    acceptable. As you consider whether and how to reauthorize the rural
    broadband program, it is essential that you include clear direction to
    the RUS to ensure that taxpayer dollars are put to work to extend
    broadband to unserved areas rather than subsidize competition in
    communities where service is already available, and that you include
    mechanisms to ensure transparency and accountability with respect to
    any projects that the RUS may fund.
        My testimony today will address these points in a little more
    detail, including some specific proposals for targeting rural broadband
    funds.

    Rural Broadband Support Programs Should Focus on Unserved Areas
        Bringing service to unserved areas is an important and appropriate
    objective for rural broadband programs. It is widely acknowledged that
    broadband is a crucial driver of economic recovery and global
    competitiveness. By facilitating economic development, broadband will
    add jobs to the economy. Broadband is also central to improving
    educational opportunities and delivering health care more efficiently,
    important benefits that also contribute to economic growth.
        As the Department of Agriculture has noted, ``broadband Internet
    access is becoming essential for both businesses and households'' and
    ``many compare its evolution to other technologies now considered
    common necessities . . .'' \1\ Broadband Internet access would benefit
    businesses as well as provide ``rural residents access to goods and
    services that may not otherwise be available locally or via dial-up
    Internet.'' \2\
    ---------------------------------------------------------------------------
        \1\ U.S. Dep't. Of Agriculture, Economic Research Service, Rural
    Broadband at a Glance, at 1 (Feb. 2009), available at http://
    www.ers.usda.gov/Publications/EIB47/EIB47_SinglePages.pdf.
        \2\ Id. at 4
    ---------------------------------------------------------------------------
        Unfortunately, these considerable benefits are still unavailable to
    some rural and remote areas of our nation where market forces have
    proved insufficient to encourage investment in broadband networks and
    service. These are the areas that should be the focus of the rural
    broadband loan program.
        In recognition of this priority, Congress has tried to focus rural
    broadband programs on unserved areas. For instance, in response to
    findings that the broadband loan program enacted in the 2002 Farm Bill
    included funding for suburban areas, Congress enacted reforms to the
    program in 2008. The 2008 Farm Bill prioritized funds for unserved
    areas and directed the Secretary of Agriculture to ``give the highest
    priority to applicants that offer to provide broadband service to the
    greatest proportion of households that, prior to the provision of the
    broadband service, had no incumbent service provider.'' \3\
    ---------------------------------------------------------------------------
        \3\ Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-
    246,  601(c)(2) (2008) (``2008 Farm Bill''); see also Conf. Rep. No.
    110-627, at 832 (2008). And the House Report indicated that eligibility
    requirements were tightened for the broadband loan program in order
    ``to refocus on both rural and unserved areas of the country and
    provide[] additional criteria to USDA to prevent entities from
    receiving loans to serve only markets already sufficiently served with
    high-speed and affordable broadband service.'' See House Rep. No. 110-
    256, at 232 (2008).
    ---------------------------------------------------------------------------
        The 2008 Farm Bill also established revised project eligibility
    standards, requiring, with certain exceptions, that at least 25% of the
    households in the proposed service territory be unserved or served by
    only one broadband provider, and that no portion of the proposed
    service territory be served by three or more providers in order for a
    project to be eligible for funding.\4\ The law also improved the
    transparency of the loan process by directing the Secretary of
    Agriculture to publish a notice for each loan or loan guarantee
    application describing the content of the application, including the
    identity of the applicant; each area proposed to be served by the
    applicant; and the estimated number of households without terrestrial-
    based broadband service in those areas.\5\
    ---------------------------------------------------------------------------
        \4\ 2008 Farm Bill,  601(d)(2)(A)(i)-(ii).
        \5\ Id.  601(d)(5).
    ---------------------------------------------------------------------------
        Likewise, the American Recovery and Reinvestment Act (the
    ``Recovery Act'')--which included $7.2 billion to subsidize broadband
    deployment, the largest Federal subsidies ever provided for broadband
    construction in the U.S.-targeted funding to areas ``without sufficient
    access to high speed broadband service to facilitate rural economic
    development'' and gave priority to projects that provide service to the
    highest proportion of rural residents that do not have access to
    broadband service.\6\
    ---------------------------------------------------------------------------
        \6\ American Recovery and Reinvestment Act of 2009, Pub. L. No.
    111-5, 123 Stat. 115, 118 (2009).
    ---------------------------------------------------------------------------
    RUS Has Consistently Failed To Keep Its Focus on Unserved Areas
        Despite some successes and prior efforts at reform, however, RUS's
    implementation of rural broadband programs has consistently fallen
    short. In two separate reports, the USDA's Office of Inspector General
    (``OIG'') criticized the RUS for failing to focus on unserved areas. In
    2005, the OIG found that the rural broadband program enacted as part of
    the 2002 Farm Bill had ``not maintained its focus on rural communities
    without preexisting service'' and was instead subsidizing competition
    in suburban areas and in communities already served by one or more
    existing broadband providers.\7\
    ---------------------------------------------------------------------------
        \7\ OIG Audit Report 09601-4-Te, Rural Utilities Service Broadband
    Grant and Loan Programs, U.S. Department of Agriculture, Office of
    Inspector General, Southwest Region, at ii (Sept. 2005) (``OIG 2005
    Report'').
    ---------------------------------------------------------------------------
        OIG ``question[ed] whether the government should be providing loans
    to competing rural providers when many small communities might be hard
    pressed to support even a single company. In these circumstances, the
    RUS may be setting its own loans up to fail by encouraging competitive
    service; it may also be creating an uneven playing field for
    preexisting providers operating without government assistance.'' \8\
    ---------------------------------------------------------------------------
        \8\ Id.
    ---------------------------------------------------------------------------
        In March 2009, OIG released a second report evaluating
    implementation of the 2002 Farm Bill, concluding that ``the key
    problems identified in our 2005 report--loans being issued to suburban
    and exurban communities and loans being issued where other providers
    already provide access--have not been resolved.'' \9\ It found that
    despite OIG's 2005 initial findings, ``RUS continued to make loans to
    providers in areas with preexisting service, sometimes in close
    proximity to urban areas.'' \10\ Of ``37 applications approved by RUS
    since September 2005, 34 were granted to applicants in areas where one
    or more private broadband providers already offered service.'' \11\
    ---------------------------------------------------------------------------
        \9\ OIG Audit Report No. 09601-8-Te, Rural Utilities Service
    Broadband Loan and Loan Guarantee Program, Audit Report, U.S.
    Department of Agriculture, Office of Inspector General, at 9 (Mar.
    2009) (``OIG 2009 Report'').
        \10\ Id. at 2.
        \11\ Id. at 5 (emphasis added).
    ---------------------------------------------------------------------------
        Although the 2008 Farm Bill did not explicitly prohibit granting
    loans to preexisting service areas, OIG expressed its concern that
    ``the overwhelming majority of communities (77 percent) receiving
    service through the broadband program already have access to the
    technology, without the RUS's loan program. Moreover, the legal
    ramifications of subsidizing some providers in a given area, but not
    others, have proved problematic.'' \12\
    ---------------------------------------------------------------------------
        \12\ Id. at 6.
    ---------------------------------------------------------------------------
        The Inspector General also voiced concerns about the RUS's ability
    to disburse Recovery Act funds going forward:

            We remain concerned with RUS' current direction of the
            Broadband program, particularly as they receive greater funding
            under the [Recovery Act], including its provisions for
            transparency and accountability. As structured, RUS' Broadband
            program may not meet the Recovery Act's objective of awarding
            funds to projects that provide service to the most rural
            residents that do not have access to broadband service.\13\
    ---------------------------------------------------------------------------
        \13\ Id. at 2.

    OIG concluded that ``[w]e remain concerned that the majority of RUS'
    program funds have not been utilized in expanding broadband service to
    rural areas where no prior service exists.'' \14\
    ---------------------------------------------------------------------------
        \14\ Id. at 10.
    ---------------------------------------------------------------------------
        At a February 2011 House Energy and Commerce Communications
    Subcommittee hearing, the Inspector General reiterated her concerns
    about the RUS Broadband Loan Program. In particular, she noted that:

       The RUS had a history of ``not maintain[ing] its focus on
            rural communities lacking preexisting service;''

       The RUS had devoted ``significant portions of its resources
            to funding competitive service in areas with preexisting
            broadband access rather than expanding service to communities
            without existing access;'' and

       ``RUS' decision to fund certain providers in rural
            communities, but not
            others . . . could create an unlevel playing field for
            providers already operating without government subsidies.''
            \15\
    ---------------------------------------------------------------------------
        \15\ See Statement of the Honorable Phyllis K. Fong, Inspector
    General, before the Subcommittee on Communications and Technology,
    Committee on Energy and Commerce, U.S. House of Representatives, at 2-3
    (Feb. 10, 2011), available at http://
    democrats.energycommerce.house.gov/sites/default/ files/image_uploads/
    Fong_Testimony.pdf.
    ---------------------------------------------------------------------------
    The RUS's New ``Interim Final'' Rules Perpetuate the Problems
            Identified by OIG
        Despite the RUS's persistent failure to focus on unserved areas,
    confirmed by OIG, we were hopeful that the RUS would address these
    problems through the adoption of rules to implement the reforms of the
    2008 Farm Bill. Unfortunately, the RUS's new ``interim final'' rules
    for the Broadband Loan Program, despite being 3 years in the making,
    perpetuate the problems that have plagued the program from the outset.
        The new rules still allow the agency to fund complete overbuilds
    without reaching any households with no broadband service. They also
    allow loans to be made in an area where two existing private providers
    are already offering competing service, as long as 25% of the
    households in the proposed service area are unserved or under-served
    (defined to mean an area where service is offered by zero or one
    incumbent providers). This means that a valid proposed service area
    could already have two competing private providers offering service to
    75% of the households and one provider offering service to 25% of the
    households and still get a loan. An award could be made even though the
    loan recipient would not be reaching a single household that lacked
    broadband service.
        In addition, the new rules allow the RUS to fund upgrades in areas
    that are served, without regard to the number of households that do not
    have service and without regard to whether the service area is already
    served by any number of providers. (Loans for upgrades are restricted
    in areas with multiple providers only if an applicant is eligible to
    receive funding through another Rural Electrification Act funding
    program.) This results in bringing new service to no new households
    and, again, has the government subsidizing a competitor and picking
    winners and losers in the market.

    The Failure to Prioritize Unserved Areas Imposes Substantial Costs on
            the Economy and Deters Private Investment
        The impact of funding duplicative broadband networks has resulted
    in an extremely high cost to reach a small number of unserved
    households, all at taxpayer expense. According to an economic analysis
    and three case studies of funding under the Recovery Act's Broadband
    Initiatives Program, commissioned by NCTA and prepared by Jeffrey A.
    Eisenach and Kevin W. Caves of Navigant Economics,\16\ that cost, if
    imposed nationwide, would nearly triple the price of extending
    broadband to every U.S. home.
    ---------------------------------------------------------------------------
        \16\ Jeffrey A. Eisenach and Kevin W. Caves, ``Evaluating The Cost-
    Effectiveness of RUS Broadband Subsidies: Three Case Studies'' (Apr.
    13, 2011), available at http://www.ncta.com/DocumentBinary.aspx?id=966.
    ---------------------------------------------------------------------------
        Among the key findings in the study are the following:

       Of the three projects analyzed, more than 85 percent of
            households were already passed by existing broadband providers,
            and in one project area, more than 98 percent of households
            were already passed by at least one provider.\17\
    ---------------------------------------------------------------------------
        \17\ Id. at 4.

       Based on the cost of the direct grants and subsidizing the
            loans, the study estimated that the cost per unserved household
            passed would be $30,104 if existing coverage by mobile
            broadband providers is ignored, and $349,234 if mobile
    ---------------------------------------------------------------------------
            broadband coverage is taken into account.

       The RUS approach of funding duplicative coverage is directly
            at odds with the National Broadband Plan's recommendations and
            would massively increase the cost of extending broadband to all
            unserved homes. The FCC's Omnibus Broadband Initiative
            estimated that the cost of extending broadband to every
            unserved household in the U.S. is approximately $23.5 billion,
            so long as duplicative service is not funded. But funding
            duplicative service--as the RUS did under BIP--increased the
            cost of a nationwide build-out by $63.7 billion, to $87.2
            billion.\18\
    ---------------------------------------------------------------------------
        \18\ Id. at 16.

        The Navigant study examined three large BIP subsidy awards which
    totaled $231.7 million, or about seven percent of the total BIP $3.5
    ---------------------------------------------------------------------------
    billion combined loan and grant program:

       $101.2 million in northwestern Kansas;

       $66.4 million for Lake and St. Louis counties in
            northeastern Minnesota;

       $64.1 million to cover a portion of Gallatin County in
            southwest Montana.

        In northwestern Kansas, the Rural Telephone Service Company
    (``RTS'') and its wholly-owned subsidiary NexTech were awarded $101.2
    million in loans and grants to deploy and upgrade broadband services.
    Although the project area covered 4,247 square miles and contained
    14,588 households, the majority of those households were in one city--
    Hays, Kansas--which covers less than 8 square miles. Hays, however, was
    already served by RTS, AT&T and Eagle Communications. Only 2,442
    households in the entire project area were unserved using the RUS's
    definition--and if 3G wireless broadband service was taken into
    account, all but 25 households--0.2%--were already served. Indeed, the
    majority of the unserved area was also uninhabited.
        On average, across all the principal counties that comprise the
    proposed service area, 95 percent of the households already had high-
    speed broadband service. The taxpayer cost per unserved household for
    this project--for which the RUS benchmark is $10,000 and the FCC
    benchmark is $6,350--was $30,329 based on the RUS's definition. If
    wireless 3G broadband was taken into account, the cost rose to
    $2,954,920 per unserved household.\19\
    ---------------------------------------------------------------------------
        \19\ Id. at 23-32.
    ---------------------------------------------------------------------------
        In northeastern Minnesota, the Lake County Fiber Network (``LCFN'')
    was awarded $66.4 million in loans and grants to develop last mile FTTP
    infrastructure in an area comprising Lake County and portions of
    eastern St. Louis County. The proposed service area covered 2,675
    square miles and included 11,637 households.\20\ Of those households,
    only 2,669--about 23%--were unserved using the RUS's definition, and
    only 421 households were unserved by any terrestrial broadband
    provider--meaning that only 3.6 percent of households were unserved
    when mobile broadband service is taken into account.
    ---------------------------------------------------------------------------
        \20\ LCFN's proposal asserts a substantially greater number of
    households passed, which appears to stem from its inclusion of
    unoccupied housing units within the total. Id. at 33-34 n. 72.
    ---------------------------------------------------------------------------
        As in Kansas, much of the area that was unserved was also
    uninhabited. In the served areas, there were at least eight facilities-
    based broadband providers, and the majority of households in the
    proposed service area had a choice among multiple providers and 68% of
    those households were served by three or more providers. The taxpayer
    cost per unserved household for this project--against the RUS's
    benchmark of $10,000 and the FCC benchmark of $6,250--was $13,746 based
    on the RUS's definition. If wireless 3G broadband was taken into
    account, the cost rose to $87,231 per unserved household.\21\
    ---------------------------------------------------------------------------
        \21\ Id. at 33-39.
    ---------------------------------------------------------------------------
        In southwest Montana, Montana Opticom, LLC received $64.1 million
    to deploy last mile FTTP infrastructure in Gallatin County, Montana.
    The proposed service area covered 154 square miles and included 9,035
    households--and was considered one of the most densely populated,
    rapidly growing and prosperous counties in Montana, with more extensive
    broadband coverage than most other areas of the state. Of the 9,035
    households covered by the project, only 136--1.5%--were unserved using
    the RUS's definition. Only 7 households--0.1%--were unserved when
    mobile broadband service is taken into account.
        As with the other two areas, much of the area that was unserved was
    also uninhabited. In fact, none of the census blocks in the areas the
    RUS claims were ``unserved'' contained more than a single occupied
    housing unit. In the served areas, there were at least nine facilities-
    based broadband providers, and 93% of those households already were
    served by five or more broadband providers. Ninety-eight percent of
    households had a choice among four or more broadband providers. The
    taxpayer cost per unserved household for this project was $346,032
    based on the RUS's definition. If wireless 3G broadband was taken into
    account, the cost rose to $7,112,422 per unserved household.\22\
    ---------------------------------------------------------------------------
        \22\ Id. at 17-23.
    ---------------------------------------------------------------------------
        Navigant concluded that ``[w]hile it may be too early for a
    comprehensive assessment of the [Recovery Act]'s broadband programs, it
    is not too early to conclude that, at least in some cases, millions of
    dollars in grants and loans have been made in areas where a significant
    majority of households already have broadband coverage, and the costs
    per incremental home passed are therefore far higher than existing
    evidence suggests should be necessary.'' \23\
    ---------------------------------------------------------------------------
        \23\ Id. at 6.
    ---------------------------------------------------------------------------
        This type of waste has a tremendous impact on broadband deployment
    throughout our nation. Facing a government-subsidized competitor
    creates tremendous difficulties for rural and smaller market companies,
    and creates a disincentive for companies like ours to invest. As I
    noted earlier, Suddenlink has invested over $350 million in private
    capital in the last 3 years alone to bring cutting-edge broadband to
    our communities. A robust broadband strategy inevitably depends on this
    continued private investment--government subsidies cannot fund all the
    broadband deployment needed for the country to become truly broadband-
    accessible. But using scarce Federal resources to skew the playing
    field will discourage and undermine this investment. It threatens the
    jobs of employees of the private enterprises who live in the very
    communities the awards are intended to benefit, offsetting new jobs
    created by the project, and undermining one or more broadband providers
    in the area to benefit another.\24\ Moreover, devoting funds to
    already-served areas creates a greater risk that loans may not be
    repaid because borrowers will face pre-existing competition.
    ---------------------------------------------------------------------------
        \24\ See also id. at 16-17.
    ---------------------------------------------------------------------------
        Rural and smaller market operators like Suddenlink are ready and
    willing to face competition from other providers. We have competed with
    large corporations like DISH Network, AT&T, Verizon, and DIRECTV for
    many years. That type of competition, however, differs from government-
    backed investment in particular companies. Companies that have taken
    the financial risk of serving a rural market, and serving it well,
    without government assistance cannot realistically be expected to
    continue to do so if they must face a government-subsidized competitor.
    Moreover, wasting valuable dollars to overbuild well-served communities
    at the expense of unserved residents does not make sense, particularly
    in the current economic environment.

    RUS Must Be Given Clear and Unambiguous Direction to Ensure That
            Broadband Loan Dollars Are Appropriately Directed to Unserved
            Areas
        The new farm bill should take strong steps to direct taxpayer
    dollars where they are most needed. Specifically, as this Subcommittee
    considers reauthorization of the legislation, we respectfully urge you
    to consider the following four proposals.
        First, limit funding to substantially unserved areas. To ensure
    available funds are used effectively, the RUS broadband support loans,
    loan guarantees, or grants should be limited to areas where at least
    75% of residential households lack access to broadband service of at
    least 4 Mbps downstream and 1 Mbps upstream--the target basic access
    speed defined in the Federal Communications Commission's National
    Broadband Plan.
        Second, seek additional information. To ensure compliance with this
    proposed eligibility requirement for the RUS broadband support loan,
    loan guarantees, or grant programs, the Secretary of Agriculture should
    be required to give existing providers an opportunity to voluntarily
    submit information about their service areas that may overlap areas
    proposed to be served by the applicant, for subsequent due diligence
    review by the RUS. Similar requirements were adopted by USDA and the
    Department of Commerce in connection with BIP and the Broadband
    Technology Opportunities Program (``BTOP'').
        Third, prioritize support to areas most in need of it. To ensure
    funds are used where they are most needed, the Secretary should
    continue to give priority to the RUS broadband loans, loan guarantees,
    or grants that will extend broadband service to areas with the greatest
    proportion of households that do not currently have broadband at basic
    access speeds available from any provider. This would simply extend a
    provision in current law.
        Finally, increase accountability. To ensure transparency and
    accountability, each entity receiving RUS broadband support loans, loan
    guarantees, or grants should be required to report quarterly on its use
    of the funds and its progress in fulfilling the objectives for which
    the funding was provided. The reports should be made available to the
    public on the RUS website, along with a database of information about
    each award made by an RUS broadband program. Congress adopted similar
    requirements when it established the BTOP program under the Recovery
    Act.
              * * * * *
        Suddenlink and NCTA share your goal of bringing broadband to every
    rural household. A well-administered broadband loan program is an
    important part of reaching that goal. Including our four proposals will
    help ensure that the program stays focused and on track to do so. Thank
    you for the opportunity to speak here today, and I appreciate your
    willingness to consider ways to ensure that broadband funds are spent
    in the most effective way possible for all Americans.

        The Chairman. Thank you.
        Mr. Bahnson?

    STATEMENT OF MARK BAHNSON, CHIEF EXECUTIVE OFFICER AND GENERAL
                         MANAGER, BLOOMINGDALE
             COMMUNICATIONS, BLOOMINGDALE, MI; ON BEHALF OF
                NATIONAL TELECOMMUNICATIONS COOPERATIVE
    ASSOCIATION; ORGANIZATION FOR THE PROMOTION AND ADVANCEMENT OF
                        SMALL TELECOMMUNICATIONS
             COMPANIES; WESTERN TELECOMMUNICATIONS ALLIANCE

        Mr. Bahnson. Thank you, Chairman Johnson, Ranking Member
    Costa, and the rest of the Committee. I appreciate the
    invitation to participate in today's discussion.
        For the past 4 years, I have served as CEO/General Manager
    of the Bloomingdale Telephone Company headquartered in
    Bloomingdale, Michigan. My remarks today are on behalf of
    Bloomingdale, as well as NTCA, OPASTCO, and WTA and their small
    community-based members who have provided a variety of
    communication services throughout the rural far reaches of the
    nation.
        America's 1,100 rural telecom providers serve only five
    percent of the U.S. population located in approximately 40
    percent of the nation's geographic landmass. Bloomingdale
    employs 25 people and our 2011 annual operating revenue was
    about $5.9 million. We offer 1.5 megabit broadband to 100
    percent of our area with much faster speeds available to the
    majority of our customers, currently up to 20 megabits.
        Rural providers are community-focused. Bloomingdale's
    partnership with RUS has produced countless opportunities
    whether it is the fiber that we laid in Paw Paw, Michigan, an
    exchange that can deliver 100 megabit Internet service to the
    local schools and the county courthouse or the customer who no
    longer has to travel over 8 hours a week to the University of
    Michigan Hospital in Ann Arbor for his heart condition. He can
    now have the tests over fiber done in his home.
        Ever since Bloomingdale began this operation in 1904, we
    have been proud to serve as the only provider to some of the
    most rural areas of Michigan while the larger carriers chose to
    serve only the most profitable and densely populated towns. The
    American economy runs on broadband. In an area moving from no
    broadband providers to three broadband providers during the
    years 1999 through 2006, they realized a 6.4 percent employment
    growth on average, yet only about \1/2\ of rural Americans
    currently subscribe to broadband at home and half of the small
    businesses are dissatisfied with their Internet speed.
        USDA's Economic Research Service reports that over the past
    decade, the rural population has grown at less than \1/2\ the
    rate of metropolitan population. RUS rural development
    programs, coupled with ongoing support, are essential to
    delivering the broadband that will empower rural America to
    reverse this trend.
        Our U.S. telecommunication programs have been a success
    story by providing reliable access to capital that helps
    carriers deliver affordable voice and broadband service to
    millions of Americans where it would not otherwise be
    available. Unfortunately, the momentum and economic development
    achieved in recent years with the help of RUS lending is being
    put at risk as a direct result of the regulatory uncertainty
    created by the FCC's ongoing Universal Service Fund and
    intercarrier compensation reform proposals. RUS financing works
    hand-in-hand with ongoing RUS support to meet the national
    statutory mandate of quality, reliable telecom service in high-
    cost rural areas where low customer density, vast distances,
    and rugged terrain deter even the most optimistic business
    cases. Removing or weakening one piece of that puzzle threatens
    the provision of telecom service area in rural America and puts
    millions of RUS loans at risk of default.
        For example, Bloomingdale completed a $4.4 million RUS
    broadband loan project in 2010. That project will net RUS
    nearly $2.5 million in interest when we have completed the
    repayment. RUS lending remains essential to broadband
    deployment. Indeed, 14 million Americans still do not have 4
    megabits broadband available. Only 79.2 percent of rural
    Americans have access to speeds greater than 6 megabit and 70.8
    percent are fortunate to have speeds greater than 10 megabits;
    10 megabits would be what is commonly considered necessary for
    rural areas to compete in a modern broadband world.
        NTCA and its partners representing the rural telecom
    industry welcome discussion about ways to improve RUS telecom
    programs. In short, we are concerned about making further
    changes to a broadband program that has been at a virtual
    standstill for 4 years, especially if reforms are designed to
    cut out lending to areas that still lack broadband. Further,
    technology and neutrality dictates that the same data
    transmission requirements must apply to wire and wireless
    networks. Priority should be given to applicants proposing
    scalable projects, meaning those that can be easily and
    relatively inexpensively upgraded over time to reflect the
    increased consumer demand for more bandwidth. We can't
    accomplish our broadband goals without granting some discretion
    to the Secretary who can then adjust based on the endless
    variety of circumstances presented by applicants.
        Serving every American is not a simple undertaking and RUS
    lending should be the focus on ensuring that everyone has
    access to robust, reliable broadband over the long term.
    Regardless of whether consumers are focused on voice, video, or
    data, they will require the underlying infrastructure to ensure
    that their communications get to its destination. The rural
    industry has long been a leader in deploying advanced
    telecommunication services to America's rural areas and that
    success is built upon a foundation of public-private
    partnership and that has worked for decades.
        Rural providers and their rural associations are eager to
    continue to work with you to make broadband universally
    available as envisioned by many and mandated by statute. Thank
    you for your attention to this matter.
        [The prepared statement of Mr. Bahnson follows:]

    Prepared Statement of Mark Bahnson, Chief Executive Officer and General
     Manager, Bloomingdale Communications, Bloomingdale, MI; on Behalf of
     National Telecommunications Cooperative Association; Organization for
     the Promotion and Advancement of Small Telecommunications Companies;
                      Western Telecommunications Alliance

    I. Introduction

        Thank you for the invitation to participate in today's discussion
    on the successes of Federal investments in rural broadband and the
    challenges that lie ahead. Broadband has quickly become an essential
    service that plays a key role in creating and keeping jobs in rural
    America. For the past 4 years I have served as CEO/General Manager of
    Bloomingdale Telephone Company, which is headquartered in Bloomingdale,
    MI. Prior to my current position, I served for 10 years as Office
    Manager for Alliance Communications in Garretson, SD. I regularly work
    with the National Telecommunications Cooperative Association (NTCA),
    which represents small, community-based telecommunications cooperatives
    and other small telecom providers in Washington, D.C. My remarks today
    are on behalf of Bloomingdale Telephone Company, as well as NTCA, the
    Organization for the Promotion and Advancement of Small
    Telecommunication Companies (OPASTCO), and the Western
    Telecommunications Alliance (WTA) and their collective several hundred
    small community-based members that provide a variety of communications
    services throughout the rural far reaches of the nation.
        We believe our industry is uniquely qualified to participate in
    today's discussion because we are consumer-centric small businesses
    leading the way in deploying high-speed, sustainable broadband to rural
    America. Bloomingdale, similar to about half of the nation's small,
    community-based rural providers, is a commercial company--privately
    held by 264 stockholders. Family or commercially-owned rural providers
    are consumer-centric because they are locally owned and operated.
    Likewise, in the cooperative structure that makes up the other half of
    small rural providers, the consumers are also the owners, so every
    choice is viewed from both an owner and a consumer perspective--the two
    are truly one and the same.
        Bloomingdale's top priority has always been to provide every one of
    our consumers with the very best communications and customer service
    possible at affordable rates that stimulate adoption. Bloomingdale has
    several lines of business, including ILEC, CLEC, ISP and Cable TV. Make
    no mistake--while our headquarters are in Bloomingdale, we in fact
    serve over 2,500 customer lines across our 125 square mile rural
    service area that is spread across the southwest corner of the State of
    Michigan. This constitutes about 20 customers per square mile. We
    employ a total of 25 people and in 2011 our annual operating revenue
    was about $5.9 million. Our service area is rural and sparsely
    populated, requiring great effort to get advanced services to our
    customers. In our industry's parlance, as a small rural provider of
    this size, Bloomingdale is a Tier 3 carrier.
        Let me give you a quick snapshot of how Bloomingdale compares with
    several other industry entities. Verizon, AT&T, and CenturyLink are
    classified as large, or Tier I carriers, and also operate in multiple
    states. Verizon has a workforce of nearly 194,000 and annual revenues
    of $110 billion. AT&T has a workforce of 256,420 and annual revenues of
    more than $126 billion. CenturyLink has a workforce of 47,500 and
    operates in 37 states. Clearly with operations of this size, the
    priorities, objectives, and sources of capital are generally far
    different from Bloomingdale's community-based limited-scale approach to
    doing business.
        The entrepreneurial spirit of Bloomingdale is representative of our
    approximately 1,100 small rural counterparts in the industry, who
    together serve 5% percent of the U.S. population across approximately
    40% of the nation's geographic land mass. Like the vast majority of our
    rural colleagues, Bloomingdale has been an early adopter of new
    technologies and services. In 2005, Bloomingdale upgraded its network
    to ADSL2+ (Fiber-to-the-node). Bloomingdale currently has 1.5 Megabit
    broadband service available to 100% of our ILEC service area, 3 Megabit
    broadband available to 95% of our service area, and up to 15 Megabit
    broadband available to 50% of our service area. We have many
    residential customers with 20 Megabit service. The CLEC exchanges are
    Fiber-to-the-Home. This fiber connection allows for nearly limitless
    amounts of bandwidth. We know our customers will require more and more
    bandwidth and have built a network that will supply it.
        Time would fail me to tell of every opportunity created thanks to
    our long partnership with RUS--whether it's the fiber we laid in the
    Paw Paw, MI exchange that delivers 100 Megabit Internet service to the
    local schools and county courthouse or the customer who no longer has
    to travel over 8 hours a week to the hospital for his heart condition
    because he can have his test done over the Internet via his fiber
    connection. One 10 year old young man from Paw Paw began chemotherapy
    last fall. To avoid falling behind in school he uses his new fiber
    connection to Skype into his classroom and communicate with peers by
    voice, video, and instant messaging. If only we could've completed a
    recent RUS project faster. One family was planning to relocate from New
    York to open a home-based business. At closing they discovered that
    there was no broadband available and cancelled the purchase.
        Bloomingdale is a carrier-of-last-resort and has always operated
    under the premise that if someone wants service in our service area,
    then we do whatever it takes to provide the would-be customer with that
    service. Ever since Bloomingdale began operating in 1904 we've been
    proud to serve as the only provider to some of the most rural areas of
    Michigan while larger carriers avoided investments in such areas and
    chose to serve only the most profitable and densely populated towns.
    Because of such commitment, and with the aid of key rural development
    programs and universal service support, rural Americans throughout
    Bloomingdale's service area, and indeed throughout the markets of NTCA,
    OPASTCO, and WTA members, are enjoying universal voice service, access
    to mobile, video, and broadband Internet services, and enhanced
    emergency preparedness.

    II. The Benefits of Rural Carrier Investments and Operations Flow to
            the Entire Economy
        The American economy runs on broadband. As the Federal
    Communications Commission (FCC) stated in its February 2011 Notice of
    Proposed Rulemaking for Universal Service Fund (USF) and intercarrier
    compensation (ICC) reform:

            Ubiquitous broadband infrastructure has become crucial to our
            nation's economic development and civic life. Businesses need
            broadband to start and grow; adults need broadband to find
            jobs; children need broadband to learn. Broadband enables
            people with disabilities to participate more fully in society
            and provides opportunity to Americans of all income levels.
            Broadband also helps lower the costs and improve the quality of
            health care. As important as these benefits are in America's
            cities--where more than \2/3\ of residents have come to rely on
            broadband--the distance--conquering benefits of broadband can
            be even more important in America's more remote small towns,
            rural and insular areas, and Tribal lands. Furthermore, the
            benefits of broadband grow when all areas of the country are
            connected. More users online means more information flowing,
            larger markets for goods and services, and more rapid
            innovation.\1\
    ---------------------------------------------------------------------------
        \1\ Connect America Fund, A National Broadband Plan for Our Future,
    Establishing Just and Reasonable Rates for Local Exchange Carriers,
    High-Cost Universal Service Support, Developing a Unified Intercarrier
    Compensation Regime, Federal-State Joint Board on Universal Service,
    Lifeline and Link-Up: Notice of Proposed Rulemaking and Further Notice
    of Proposed Rulemaking, WC Docket No. 10-90, GN Docket No. 09-51, WC
    Docket No. 07-135, WC Docket No. 05-337, CC Docket No. 01-92, CC Docket
    No. 96-45, WC Docket No. 03-109, FCC 11-13, at para. 3 (2011) (NPRM).

        The National Telecommunications and Information Administration's
    November 2010 report titled ``Exploring the Digital Nation: Home
    Broadband Adoption in the United States'' stated that home broadband
    usage went from 51% in 2007 to 64% in 2009.\2\ Sixty-six percent of
    urban (metropolitan) Americans subscribe to broadband at home, as
    compared with 51% of rural (non-metropolitan) Americans. The numbers
    demonstrate that broadband is being deployed to rural America. USDA's
    National Agricultural Statistics Service's August 2011 report on Farm
    Computer Usage and Ownership revealed that 62% of U.S. farms now have
    Internet access.\3\ Broadband DSL is now utilized on 38% of U.S. farms.
    Small, rural providers have made basic levels of broadband service
    available to over 90% of rural consumers in their sparsely populated
    service areas.
    ---------------------------------------------------------------------------
        \2\ (n.d.). Retrieved from website: http://www.esa.doc.gov/sites/
    default/files/reports/documents/report.pdf.
        \3\ (n.d.). Retrieved from website: http://
    usda01.library.cornell.edu/usda/current/FarmComp/FarmComp-08-12-
    2011_new_format.pdf.
    ---------------------------------------------------------------------------
        At the same time, USDA's Economic Research Service reports that
    over the course of the past decade the rural population has grown at
    less than half the rate of the metropolitan population. And as Chairman
    Johnson has stated in the past, many rural communities are experiencing
    ``more deaths than births.'' Broadband deployment and adoption in rural
    America must increase at a faster rate in order to reverse the trend of
    rural flight. As more and more commerce, government services, and
    education moves over broadband, it will only become more important to
    provide this service to rural areas to bolster economic activity that
    will be necessary to attract and retain more Americans.
        The job-creating benefits of broadband have been reported far and
    wide. Recent studies conclude that every one percentage point increase
    in broadband penetration in a state increases overall employment by
    0.2% to 0.3% a year.\4\ Further, an area moving from no broadband
    providers to one to three providers during the years 1999 through 2006
    realized 6.4% employment growth on average.\5\
    ---------------------------------------------------------------------------
        \4\ (n.d.). Retrieved from website: http://www.brookings.edu//
    media/Files/rc/papers/2007/06labor_crandall/06labor_crandall.pdf.
        \5\ (n.d.). Retrieved from website: http://www.ppic.org/content/
    pubs/report/R_110JKR.pdf.
    ---------------------------------------------------------------------------
        Small, rural community-based telecommunications providers alone
    contributed $14.5 billion to the economies of the states in which they
    operated in 2009.\6\ The rural telecommunications sector supported
    70,700 jobs in 2009, both through its own employment and the employment
    that its purchases of goods and services generated.
    ---------------------------------------------------------------------------
        \6\ Kuttner, H. Hudson Institute, (2011). The economic impact of
    universal telecommunications: The greater gains.
    ---------------------------------------------------------------------------
        So, we know that a robust broadband infrastructure is critical to
    economic development. We know from a technological standpoint that all
    broadband networks, whether wireless or wired, ultimately rely upon the
    wired network. And we know that wired networks provide the capacity to
    support the type of applications that this nation critically needs:
    telehealth, distance learning, civic participation, and interstate and
    global commerce. But delivering such capabilities in rural areas is not
    an easy task--the vast distance and sparse populations make the costs
    of building broadband-capable networks in rural areas quite high.
        This is why rural development programs, such as those administered
    by the RUS, are essential to promote broadband deployment. But even if
    such programs help promote the deployment of rural networks, those
    networks are of no use if they cannot be maintained and upgraded, or if
    the services offered over them are unaffordable to consumers because
    the underlying costs of operating in rural areas as so high. This is
    why it is so important to recognize the key role that other programs,
    such as the statutorily-mandated USF, play in allowing rural consumers
    to have access to reasonably comparable services at reasonably
    comparable prices. In short, it takes an ongoing and sustainable
    public-private partnership--one that recognizes the costs of both
    building and maintaining networks--to enable access to affordable,
    high-quality access in hard-to-serve corners of rural America.

    III. The Rural Utilities Service (RUS) Programs
        RUS telecommunication programs have been a great success story and
    have helped provide voice and broadband service to millions of
    Americans where it would not otherwise be available. These programs,
    which have been lending for broadband capable plant since the early
    1990s, have helped advance state-of-the-art networks to rural Americans
    left behind by providers unable or unwilling to serve low population
    density markets. Reliable access to capital helps rural carriers meet
    the broadband needs of rural consumers at affordable rates. RUS
    financing is often the only source of capital for our rural carriers
    now that marketplace uncertainty has forced lenders to drastically
    tighten their lending.
        Unfortunately, the success, momentum, and economic development
    achieved in recent years with the help of RUS telecommunication
    programs have been put at risk as a direct result of the regulatory
    uncertainty created by the FCC's ongoing USF and ICC reform proposals.
    RUS lending, USF support, and ICC are inextricably linked (99.2% of RUS
    Telecommunications Infrastructure borrowers receive high cost USF
    support) and unwise changes to USF could put billions of RUS loans at
    risk of default and in fact have already resulted in a dramatic
    reduction in program applications and rural investment.
        According to the FCC's National Broadband Plan, 14 million people
    in seven million housing units do not have access to terrestrial
    broadband capable of download speeds of 4 Mbps, and that such housing
    units are more common in rural areas. Using the National Broadband
    Map's Broadband Statistics Report, it has been pointed out that 98% of
    rural Americans (100% urban) have access to ``broadband'' download
    speeds greater than 786 kbps, and some claim the loan programs are
    therefore no longer needed. However, the same report shows that only
    79.2% of rural Americans (99% urban) have access to speeds greater than
    6 Mbps and only 70.8% rural (97.6% urban) have access to speeds greater
    than 10 Mbps, which are minimum download speeds more commonly
    considered necessary for rural areas to compete in the modern broadband
    world.\7\
    ---------------------------------------------------------------------------
        \7\ See Connect America Fund, WC Docket No. 10-90, A National
    Broadband Plan for Our Future, GN Docket No. 09-51, Establishing Just
    and Reasonable Rates for Local Exchange Carriers, WC Docket No. 07-135,
    High-Cost Universal Service Support, WC Docket No. 05-337, Developing
    an Unified Intercarrier Compensation Regime, CC Docket No. 01-92,
    Federal-State Joint Board on Universal Service, CC Docket No. 96-45,
    Lifeline and Link-Up, WC Docket No. 03-109, Universal Service--Mobility
    Fund, WT Docket No. 10-208, Report and Order and Further Notice of
    Proposed Rulemaking, FCC 11-161, at para. 108 (rel. Nov. 18, 2011)
    (Final Order) (establishing a benchmark of 6 Mbps downstream and 1.5
    Mbps upstream for broadband deployments in later years of CAF Phase
    II).
    ---------------------------------------------------------------------------
        There can be no question regarding the essential nature of the RUS
    Broadband Loan Program and the need to avoid reforms that might create
    unintended consequences. However, NTCA and its partners representing
    the rural telecom industry welcome discussion about ways to further
    improve the RUS Broadband Loan Program and offer several suggestions
    and observations below.

       Interim rules, which were required by programmatic changes
            to the Broadband Loan Program in the 2008 Farm Bill to better
            target resources, were not put in place until March 2011
            (during which time no new loans were approved). Since that
            time, the FCC's adoption and ongoing consideration of changes
            to USF have created regulatory uncertainty, dramatically
            reducing both the number of new Broadband Loan Program
            applications and RUS's ability to finalize rules and evaluate
            and approve new loans. As a result, the Broadband Loan Program
            has been at almost a complete standstill since 2008. With
            virtually no new loan projects available to assess the results
            of the 2008 Farm Bill's reforms, is now the time to place new
            restrictions on the Broadband Loan Program? Though some
            providers that don't typically serve rural areas want to
            dramatically restrict the program, it was inoperable for its
            first 3 years and has been frozen by regulatory uncertainty for
            the past year.

       Minimizing subsidized ``overbuilds'' in areas where
            broadband already exists should remain a top goal for RUS.
            However, the impact of certain reform proposals to further
            restrict the Broadband Loan Program must be carefully
            evaluated. One such proposal would encourage RUS to not provide
            a loan for any area where more than 25% of households already
            have access to broadband. Under such a scenario, a provider
            wishing to receive a loan to serve a rural area where 74 out of
            100 people do not have access to broadband would not qualify
            for a loan. It should also be noted that in rural areas, such a
            population could be spread over miles and miles. Is eliminating
            the Broadband Loan Program as an option to help provide service
            in such a situation the right answer for households and
            businesses that remain unserved year after year and have no
            prospect for broadband service in sight? The concerns expressed
            around this issue have been loudly heard, and the Secretary of
            Agriculture's discretion is an appropriate barometer for such
            decision-making.

       We support an efficient method by which existing providers
            can be notified of submitted applications that may affect the
            area(s) they serve without being required to check a website
            periodically. One method may be to encourage existing providers
            to register for an email alert system whereby they would
            receive an electronic notice whenever an applicant seeks a loan
            in the state or states that they serve.

       We oppose a lesser speed standard for would-be borrowers who
            seek to deploy wireless networks. In the interim rules, RUS
            established the minimum rate of data transmission as 3 Mbps for
            mobile broadband and 5 Mbps for fixed broadband. Attaching a
            value and setting a lower data transmission requirement to
            mobile service is contrary to the technology neutrality
            statutory directive.

       Priority should be given to applicants who are proposing
            projects that feature scalability--meaning those that can be
            easily and relatively inexpensively upgraded over time to
            reflect increased consumer demand for more bandwidth, and thus
            ensure optimal use of the network asset over the life of the
            applicable broadband loan.

        RUS programs are not duplicative of other Federal programs such as
    USF. RUS telecommunication programs provide up-front capital to build
    out to new customers and to upgrade networks. USF, by design, provides
    for cost recovery for the ongoing operation of the network and
    maintenance, and is at bottom intended to make sure that the prices
    consumers pay for service in rural areas are affordable--that is,
    ``reasonably comparable'' to those in urban areas. Put another way, USF
    helps make sure that consumers can afford to ``adopt'' service and make
    continuing use of the network over time. Finally, it is worth noting
    that RUS telecommunication loan program projects are paid back with
    interest--creating a win/win situation for rural broadband consumers
    and for taxpayers.
        Some opponents of the RUS telecommunication programs and USF point
    to their ability to provide broadband service without RUS loans or USF
    cost recovery. However, it's important to note that these providers
    often fail to provide service to the most high-cost ``last mile''
    households and businesses, focusing instead on the concentrated areas
    of a community or service area. On the other hand, rural telecom
    providers often have carrier-of-last-resort obligations that require
    them to serve all customers in their service territory--not just the
    more densely populated, profitable towns and cities.
        Without carriers-of-last-resort such as Bloomingdale reaching out
    into the ``country'' outside the towns with the help of this public-
    private partnership, we would have even more unserved consumers in
    rural America--and the challenge of achieving universal broadband would
    be greater than it already is. And if this public-private partnership
    is undermined, then small rural telcos may have no choice but to
    likewise abandon the ``countryside'' and retreat to serving just within
    the ``in-town'' boundaries too. Last year, during debate on the FY 2012
    Agriculture Appropriations Bill, the House of Representatives
    recognized the value and continued importance of RUS funding to the
    delivery of affordable communications throughout rural areas and voted
    in favor of a floor amendment to continue funding the RUS Broadband
    Loan Program.

    IV. The USF & ICC Mechanisms Are Essential to Broadband Availability,
            Service Quality, and Adoption in Rural Areas
        USF and ICC have long played a role in connecting all of America by
    supporting telecommunication services in rural areas. As Congress
    recognized in the Telecommunications Act of 1996, these areas need
    predictable, sufficient and specific support to ensure the availability
    of affordable, high-quality services for all consumers. High-cost USF
    is a program that enables providers to deploy and operate advanced
    networks in places where low customer density, vast distances and
    rugged terrain deter even the most optimistic business cases.
        Without USF support to supplement customer revenues, rural
    carriers, who serve an average of ten customers per square mile, would
    be forced to drastically reduce service, exit the outlying parts of
    rural markets, or charge retail prices that no consumer could
    realistically afford. Such outcomes would be inconsistent with long-
    standing national statutory policy. These networks connect rural
    communities and outlying farms and ranches with the rest of America and
    the world. Even if a wireless carrier were to operate in some portion
    of a rural area, it could not deliver high-quality broadband without
    the robust underlying capacity of the networks provided by these small
    entrepreneurial community-based carriers.
        With the help of USF and ICC, rural carriers provide near-universal
    voice service to all Americans and have increased broadband penetration
    to 92% of their consumers with only 3% growth per year in USF support
    over the past several years. But in the majority of cases, the
    broadband is only DSL speed and does not reach the speed--4 Mbps
    downstream/1 Mbps upstream--that the FCC has now identified as a target
    level of ``universal service.'' The time has come to update these
    important network support mechanisms to ensure that everyone can
    participate in the economy made possible by a nationwide integrated
    advanced communications network.
        The FCC released its USF/ICC reform order on November 18, 2011,
    with the aim of transitioning the program to explicitly support
    broadband service in rural America.\8\ At the urging of the FCC, the
    rural carriers and larger providers reached agreement on a Consensus
    Framework for reform last summer that would have kept the fund at its
    current level while supporting faster broadband to more Americans.\9\
    The parties to the Consensus Framework made many difficult compromises
    to reach an agreement in the hope of achieving universal broadband
    service and gaining some regulatory certainty. However, the FCC's
    order: (1) failed to adopt any provisions specifically promoting
    broadband service in rural carriers' service areas, (2) cut existing
    cost recovery mechanisms for rural carriers retroactively, and (3)
    proposed a further notice of rulemaking with the potential for more
    cuts.
    ---------------------------------------------------------------------------
        \8\ See Final Order.
        \9\ See Letter from Walter B. McCormick, Jr., United States Telecom
    Association, et al., to Chairman Genachowski, FCC, WC Docket No. 10-90,
    et al. (filed July 29, 2011).
    ---------------------------------------------------------------------------
        In sum, rural providers will be expected to do more in terms of
    broadband deployment and service offering with less opportunity for
    cost recovery, and we do not get regulatory certainty because the
    additional cuts proposed within the further notice hinder lending and
    investment. This ``regulatory overhang'' is undermining job creation,
    network investment and the sustainable quality of broadband services in
    wide swaths of rural America. By the FCC's own admission, three out of
    ten carriers will lose more than 10% of their existing USF support
    under the order, and more than half will lose some level of support.
    And this is only in Year 1--the picture does not improve as the cuts
    phase in and become deeper over time.
        We believed that with all of the facts before them, the FCC would
    have taken advantage of the opportunity to make bold recommendations,
    including a call for a national commitment to invest in and maintain
    state-of-the-art communications technologies throughout all of America.
    Unfortunately, the agency's narrow focus on delivering broadband to
    completely unserved areas fails to acknowledge that America's most
    rural areas can only continue to be served with the help of ongoing
    high cost support.
        Rural providers sincerely hope that the FCC will respond to the
    recent calls of more than 60 Members of Congress to expressly decline
    to act on several aspects of its further notice and instead signal to
    service providers, lenders, investors, and consumers that it will allow
    adequate time for adjustment to the changes already made in its order.
    Moreover, since carriers cannot ``undo'' loan commitments or ``tear
    out'' existing networks, the FCC should make clear that any caps or
    other limitations on cost recovery already adopted in its order will be
    applied prospectively. As it has done for consumers in other areas, the
    FCC should adopt a Connect America Fund that will provide additional
    funding for broadband-capable deployment in areas served by rural
    providers. Reforming USF and ICC properly is essential to achieving our
    national goal of universal broadband access and to the livelihood of
    thousands of job-creating small businesses that need broadband to
    compete in a global economy.

    V. Broadband Gains
        We can all be proud of our nation's broadband progress over the
    past decade and the opportunities that broadband creates for rural
    America to compete and thrive. This success has only been possible due
    to the unique cooperation that has existed between the industry, the
    American people, and policymakers. Together, through a spirit of
    entrepreneurship, a can-do attitude, and a deep national confidence,
    the appropriate mix of programs and policies have been cultivated and
    maintained to ensure widespread broadband deployment and adoption.
        This commitment and partnership will be essential to America's
    quest to secure and maintain a level of global broadband pre-eminence.
    To underscore this assessment I draw the Committee's attention to a May
    2009 U.S. Government Accountability Office (GAO) report that, among
    other things, considers the Federal Government's approach to broadband
    deployment.\10\ In the study's opening remarks it notes that according
    to government officials, ``the Federal approach to broadband deployment
    is focused on advancing universal access.''
    ---------------------------------------------------------------------------
        \10\ (n.d.). Retrieved from website: http://www.gao.gov/new.items/
    d09494.pdf.
    ---------------------------------------------------------------------------
        The GAO report goes on to state that historically the role of the
    government in carrying out a market-driven policy has been to create
    market incentives and remove barriers to competition, while the role of
    the private sector has been to fund broadband deployment. It continues
    that under this policy, broadband infrastructure has been deployed
    extensively, yet doing so in rural areas is more difficult and in some
    instances gaps remain, primarily due to the limited profit potential
    associated with such initiatives. Industry stakeholders credit RUS and
    USF with helping to increase broadband deployment and adoption, and
    that to achieve universal access, support of this nature will be
    essential in the future.
        Despite the long history of success associated with these programs,
    a small but vocal minority of voices exists that refuse to accept this
    reality. Throughout this debate over the government's role in broadband
    deployment, the rural sector of the industry has routinely been
    directed to ``think outside the box'' in a search for more economical
    solutions to communications infrastructure deployment. If I do nothing
    else here today, it is my overarching desire to ensure that everyone
    participating and listening to this discussion ultimately leaves with
    the recognition and understanding that rural carriers always have and
    always will ``think outside the box.'' Truly, they have no other
    choice.
        What segment of the industry was the first to completely convert to
    digital switched systems? What segment of the industry was a pioneer in
    providing wireless options to their hardest to reach customers? What
    segment of the industry produced the first company to deploy an all-
    fiber system? What segment of the industry was the first to offer
    distance learning and telehealth applications? What segment of the
    industry was an early leader in providing cable-based video, then
    satellite video, and now IP video to their markets? What segment of the
    industry quickly moved into Internet service provision in the early
    stages of the Internet's public evolution? And what segment of the
    industry continues to lead in the deployment of high-speed broadband
    capable infrastructure?
        In every instance the answer to those questions is the small rural
    segment of the communications industry. Rural carriers are small
    businesses dedicated to providing opportunities to other small
    businesses and individuals that might otherwise have to compete on an
    unlevel playing field. This is possible because cooperative and
    commercially-structured systems are owned and operated by members of
    the local community. Clearly, these are entrepreneurs who care about
    their communities and their nation and are continually ``thinking
    outside the box.''

    VI. Conclusion
        Regardless of whether consumers are focused on voice, video or data
    in tomorrow's world of communications, they will require the underlying
    infrastructure to ensure their communication gets to its destination.
    America stands at a crossroads between a narrowband and broadband
    world. The choice is clear. The rural industry has long been the leader
    in deploying advanced telecommunications services to America's rural
    areas, and that success is built upon a foundation of public-private
    partnership that has worked for decades. To make sure this progress is
    updated and remains relevant in a new era of communications, rural
    providers and the rural associations are eager to continue working with
    you to move forward aggressively to fulfill the national objective of
    making broadband universally available as is envisioned by so many and
    indeed mandated by statute. Thank you for your attention to this
    matter.

        The Chairman. Thank you. I am going to go out of order and
    allow the Ranking Member, who has other legislative
    commitments, to ask a couple questions and then we will take
    the rest in order. Mr. Costa?
        Mr. Costa. Thank you very much, Mr. Chairman.
        Mr. Bahnson, I think you confirmed what I said in my
    opening statement about the challenges of capacity for
    broadband and the availability of broadband in our rural
    communities. I have members here that said 95 percent of
    households, it is available, but their take rate is only 60
    percent. And instead of subsidizing competitors--because I
    appreciate the public-private partnership that you spoke of in
    your closing statement--in areas where broadband is already
    available, shouldn't the money be better focused on providing
    under-served areas, going forward, to provide access? And could
    you also talk about bandwidth and access for agriculture for
    blue technologies?
        Mr. Bahnson. Well, the area I serve is very agricultural, a
    lot of blueberry farmers, cherry farmers, peach farmers, apple
    farmers, and they use our technology everywhere now. We are
    talking about doing specific builds to packing plants for just
    those purposes. So I would absolutely agree with you that it is
    crucial for those areas. Getting that service to those areas is
    extremely expensive, and without help from outside sources, it
    is very difficult for us to do that. You just can't build a
    business case to take facility to a place where there just
    aren't a lot of people there to buy that service from you.
        Mr. Costa. Dave Rozzelle do you want to comment on this or
    not? You don't have to.
        Mr. Rozzelle. In that case I will pass given the time
    constraints.
        Mr. Costa. Okay. I appreciate that. Finally, my last
    question, Mr. Dunmire with NRWA, you talked about the
    importance--and the previous witness did--of safe drinking
    water and whether these grants and loans have provided a
    positive role. And I have a number of communities like that but
    I have a different question. And some of the communities in
    terms of compliance with Federal regulations or regulatory
    regimes under the Environmental Protection Agency not just with
    this Administration but with previous Administrations--I mean
    this has been a bipartisan problem--when you have naturally
    occurring contaminants like arsenic or benzene. Thirty years
    ago we could trace parts per million but now we developed an
    ability to trace parts per billion and now parts per trillion,
    it just seems to me that the amount of water you have to
    consume to be impacted by parts per trillion is rather
    unimaginable that it would impact your health.
        And instead of zero risk--and there is no zero risk in
    terms of protecting health and safety--I mean I have had
    communities that have had to drill new wells at a million and a
    half dollars--for a small community, that is a big price tag--
    when the water has been that way for millions of years. I mean
    in some cases we have contamination that we created with the
    likes of DDT and other kinds of things with past practices. But
    it just seems to be change in the regulatory regime would be
    more helpful than trying to create some sort of a zero
    tolerance.
        Mr. Dunmire. Ranking Member Costa, you are preaching to the
    choir. That has been our argument with primacy agency in
    Illinois, which is IEPA. For years and years and years, they
    approached it with a common-sense view and a number of years
    ago they went through an audit from U.S. EPA. It was not a
    pleasant audit. Our friends in Springfield at IEPA now are
    forced to enforce the U.S. EPA regulations without any waivers,
    no common sense to it. Like you have pointed out, there have
    been countless systems, predominantly in north central Illinois
    to northern Illinois that had the radon problems, arsenic
    problems that have been forced to put in added treatment, very,
    very expensive added treatment essentially doubling and
    tripling the water rates of their customers.
        Mr. Costa. Let me just close. And we, on a bipartisan
    basis, need to figure out how to work this. Common sense tells
    you that in any sort of risk assessment and risk management
    regime that you have to assess the management of the risk
    versus the assessment of how big of a risk that it is. And on a
    cost-comparative basis--and this is the common sense that gets
    lost--we never take into an evaluation the criteria on how do
    we get the best bang for our buck whether it be Federal, state,
    or local dollars on limiting the risk to our communities where
    we have a responsibility to minimize the risk.
        But certainly, we never look at it in a vacuum. When a
    person gets in a car and backs out of their driveway, they are
    much more likely to have a higher risk of an accident, God
    forbid, that would result in injury. And we accept that risk
    versus how much water you have to consume daily for 80 years on
    tracing parts per billion of naturally occurring arsenic that
    has been in the water forever.
        So I will get off my soapbox but it is a challenge that we
    have to address in some fashion.
        The Chairman. Thank you, Mr. Costa. I will defer my
    questions to the end.
        Mr. Scott?
        Mr. Scott. Thank you, Mr. Chairman.
        And Mr. Rozzelle, I live in a small community that is very
    close to a larger community, and you have been fairly critical
    of the RUS loan program and one of the words you continue to
    use is unserved. Would you give me the definition of unserved?
    And specifically what I am getting at here is unserved versus
    under-served.
        Mr. Rozzelle. Congressman Scott, the National Broadband
    Plan defined broadband as 4 megabits down, 1 megabit up.
        Mr. Scott. Okay.
        Mr. Rozzelle. If a household doesn't have that available to
    it, passing it, then it would not have broadband under the
    National Broadband plan definition.
        Mr. Scott. Okay. Would you agree that there is much more
    competition in metropolitan areas than there is in rural areas?
        Mr. Rozzelle. I would agree that generally in larger
    communities there are more carriers providing broadband service
    than there are in rural communities, yes, sir. I would agree
    with that.
        Mr. Scott. And would you agree that in those competitive
    markets that, because of the competition, the consumer pays
    less for the same service than they do in the more under-served
    areas of the state?
        Mr. Rozzelle. Congressman Scott, I would say this in
    relation to Suddenlink, with which I am obviously very
    familiar, and that is that we spent a great deal of money to
    bring very high-speed broadband as deeply as we could into our
    footprint in terms of densities----
        Mr. Scott. Yes.
        Mr. Rozzelle.--and in our smaller communities which have
    broadband some of those communities pay more on an equivalent
    service basis than our larger communities and some pay less.
        Mr. Scott. And I certainly believe you to be telling the
    truth, but my experience has been that in the rural parts, I
    paid significantly more than I paid at my business, for
    example, which was actually in a competitive market and my home
    was in the rural market. I did not have a choice in providers
    at my home but I had a choice at the business. I paid
    significantly less for the service.
        Mr. Rozzelle. In most of our markets on the broadband side
    we are competitive with the incumbent telephone company
    generally and in a number of them we are also competing with
    other providers who are present. And so with all due respect,
    it really depends on the community as to the level of
    competition that we face.
        Mr. Scott. Where I am from I have seen a very serious
    reluctance of major corporations to move into the more rural
    parts. It seems to me that they, if you will, cherry pick the
    more profitable areas and that may be part of their business
    strategy where your local rural telephone company, which is
    traditionally family-owned----
        Mr. Rozzelle. Yes.
        Mr. Scott.--is willing to serve in more community-
    oriented----
        Mr. Rozzelle. Suddenlink began life as a company that
    served entirely rural communities and grew to be the company
    that we are today. So I certainly understand what you are
    saying. And I represent here a group of operators at NCTA, some
    of which serve extremely small communities, and they are also
    family-owned.
        Mr. Scott. Thank you very much.
        Mr. Bahnson, would you like to comment on the loan program
    and the value it adds to bringing competition to the rural
    markets or to the rural consumer?
        Mr. Bahnson. To go back to your earlier question, I would
    just say yes, it is cheaper when there is competition. There is
    no doubt about it.
        We couldn't do the things that we have done in my company
    if we wouldn't have had RUS as a partner. It just wouldn't be
    possible. You just can't make the money work. I need that kind
    of help to serve the people we are trying to serve. And the
    area I am in is extremely small. I mean the towns that those
    others have talked about would be considered pretty good-sized
    towns to the town I serve in.
        Mr. Scott. Thank you, sir.
        Mr. Chairman, I don't have any time remaining but I will
    yield back to you.
        The Chairman. Thank you.
        Mrs. Hartzler?
        Mrs. Hartzler. Thank you, Mr. Chairman.
        I believe you were here with the first panel and heard my
    questions about the needs for rural infrastructure, the
    challenges we have there. In your testimony, Mr. Dunmire, I see
    that you outline a little bit some of the demand and the amount
    of money that was allocated for rural infrastructure projects
    and as well outlined that at the end of 2011 and 415 completed
    applications--which no funding was available--to address the
    backlog you think we need $3 billion. Is that correct?
        Mr. Dunmire. Yes, ma'am. That is the applications that were
    in process total up to that $3 billion.
        Mrs. Hartzler. Of those applications, could you give me a
    rough estimate, kind of break down the causes for the need for
    it? Some is just the aging of the infrastructure. The water
    lines, the sewer lines were put in place in the 1950s and
    1960s. Wouldn't you say part of it is just aging? I would
    really want to know how much you think is due to the EPA's
    ever-changing standards that are putting a new burden on our
    rural communities and forcing them to have to upgrade their
    sewer systems and their water systems. Could you give me some
    sort of a breakdown in the costs for the needs of these
    projects?
        Mr. Dunmire. I wish I could give you an answer here today,
    but unfortunately, I cannot. But I will promise you this: we
    will check into that and we will get the information to you as
    soon as possible. But it is a combination of all of the factors
    that you have just mentioned.
        Mrs. Hartzler. Yes. Certainly, we can't do anything about
    the aging but the projects in my district, the ones that
    frustrate the most is when you have a system that is working--
    and Ranking Member Costa alluded to it--it is safe, it is
    working, and then here the government comes in and says you
    need to upgrade your sewer plan or you need to do this or you
    need to do that, which costs millions of dollars which these
    small towns don't have and then is forcing a burden on us as
    the Federal Government to have to have the resources to help
    supply that. And so if you could help provide us with some of
    that information that gives us the tools we need to be able to
    fight that here and try to push for commonsense regulations
    that will ensure safety but yet also use our tax dollars
    wisely. So I really appreciate that. I appreciate what all of
    you are doing for rural America. As a farm girl from Archie,
    Missouri, I appreciate all of what we can do for rural America.
    Thank you.
        Mr. Dunmire. Okay. If you would allow just 1 second----
        Mrs. Hartzler. Well, sure.
        Mr. Dunmire.--to respond, the water operators and
    wastewater operators that I represent, there is nobody out
    there that would want to step up to the plate and make sure the
    water is more safe to drink----
        Mrs. Hartzler. Sure.
        Mr. Dunmire.--and the effluent of their wastewater plants
    is not damaging the environment than the operators that I
    represent. However, when it comes to the--and I use this term
    not lightly--frivolous----
        Mrs. Hartzler. Yes.
        Mr. Dunmire.--regulations that seem to be coming our way,
    it just gets to be too hard of a job for the small
    municipalities out there.
        Mrs. Hartzler. Absolutely. Thank you for your----
        Mr. Dunmire. Now I will get off my soapbox.
        The Chairman. Thank you, Mrs. Hartzler.
        Mrs. Hartzler. Thank you.
        The Chairman. And my friend from Illinois, Mr. Schilling.
        Mr. Schilling. Thank you, Mr. Chairman. And I also want to
    thank you for your great service not only to our state but also
    to our country and you have been a great leader on the
    Agriculture Committee.
        So I would first like to address Mr. Dunmire. First, it is
    great to see you again, sir, just want to thank you for the
    great work you do for our rural communities. And I know that we
    serve over 1,700 total is the amount throughout the state. So
    thank you for that.
        I think everyone in the room is aware of our fiscal
    situation. We have cut our own budgets here in the House by 12
    percent. I think the Agriculture Committee has really stepped
    up to the plate when it comes to spending and saving debates.
    So it is great.
        But with that in mind, with the limited resources we have,
    how would water applications fit into the regional concept
    discussed today, particularly in the light of what we have
    talked about is the $3 billion backlog?
        Mr. Dunmire. Was that directed towards me?
        Mr. Schilling. Yes, sir.
        Mr. Dunmire. Okay. Well, I believe a little bit of a Band-
    Aid approach has already been put in place. Back in August of
    last year, USDA and EPA--U.S. EPA I should say--signed a
    Memorandum of Agreement on improving sustainability of rural
    water and wastewater systems. And a key component of that is
    the promotion of system partnerships. As Mr. Costa pointed out
    earlier, this isn't a one-size-fits-all. And there are
    instances in the State of Illinois where we don't really call
    it regionalization, more as a consolidation.
        And sometimes it is more economically feasible to look at
    your neighbors. If they are experiencing the same problems,
    going to have to build a water treatment facility or a
    wastewater treatment plant, it makes all the sense in the world
    to build one a little bit bigger, more cost-effective. Not
    always do they see eye to eye. And this is where Mr. Stewart
    was alluding earlier that sometimes it takes somebody to take
    them by the hand, lead them from cradle to grave, get them in
    the same room together, get them talking. This isn't you
    against me, this is a common goal that is going to ultimately
    save both of our municipalities and our customers--if you
    will--money.
        Mr. Schilling. Very good. Thank you for that.
        Mr. Bahnson and Mr. Rozzelle, we have several cable and
    telephone cooperatives in our district, including McDonough
    Telephone Cooperative and then Mid-Century Telephone
    Cooperative that serve thousands of miles of rural area in
    western Illinois. I meet with them quite regularly and it seems
    every time I do, they constantly have a new rule or regulation
    coming from the FCC that could potentially prevent broadband
    expansion. This doesn't provide them for much certainty to
    invest in new technology or to expand their broadband access.
    How much of the reluctance for investment inferred by the
    studies you mentioned in your testimony is actually due to the
    FCC reforms?
        Mr. Bahnson. I think probably the best example I can give
    you is I was recently at a managers' meeting with small
    telephone companies. There was probably 100+ managers there. As
    we talked about what is going on, I think probably the common
    thread is we don't know what is going on right now. We just
    can't make investments. It is not a good idea for our company.
    And that is pretty scary because we were talking earlier about
    4 megs/1 megs in terms of those speeds. My consultants tell me
    by 2015 consumers are going to want 100 megs at their house. I
    don't know if that is true or not, but if it is, we have a huge
    challenge in front of us and we are afraid to make the
    investments to get there.
        Mr. Schilling. Very good. With that, I yield back my time.
        The Chairman. We thank you. I want to conclude I guess by
    thanking this panel and the other panel for their testimony. I
    would ask are there any members of the first panel still here?
    I don't believe there are. Okay. All right. You can even feel
    free, even though it is not in order, to respond to my
    concluding question if you desire.
        As I listen to the testimony today, first of all, I was
    impressed by your breadth of understanding, your commitment to
    the values that frankly most of the Members of this
    Subcommittee on both sides share, and I am grateful for your
    being here. What occurred to me is that we are here to talk
    about the formulation of the 2012 Farm Bill rural development
    programs, excellent testimony and I appreciate it, but we all
    recognize--I do, you do, and every Member of this Subcommittee
    does--that this Subcommittee and the other five Subcommittees
    of the Agriculture Committee, as well as every committee in the
    U.S. House and Senate is going to have to engage in what we
    individually call shared sacrifice. We are not going to balance
    the budget, we are not going to deal with the deficit and the
    debt unless we all recognize that every single component of
    what the Federal Government does has got to be reexamined.
        And so my question for you is, as articulate as you have
    been on advocating for programs that still cost money, if you
    were in my position or in the position of anybody in Congress
    or the President, where would you make cuts and save money to
    engage in this whole process of shared sacrifice that is going
    to be necessary in order for us to dig ourselves out of the
    $16.5 trillion hole? Any thoughts? Yes, sir.
        Mr. Larson. Well, Mr. Chairman, I am Mr. Larson of the
    National Association of Counties and our association has no
    specific policy on that so I speak personally to you as I think
    your question probably was. But I think that the issues that we
    have talked about today are so critical for the future of rural
    America, particularly the broadband, the water and the
    wastewater are the keys to our future success. And if we have
    to do without, in all due respect, sir, we now have
    profitability in American agriculture with commodity prices as
    they have been for the last couple years and for probably the
    near foreseeable future. I think we can take some of the
    funding that have been used in that portion of the farm
    subsidies and anything in those areas of the farm bill and
    redirect them into the rural development portfolio and probably
    have a much better impact and longer impact on rural America
    than a one-time check to an individual farmer. Thank you.
        The Chairman. Thank you for your thoughts. Anything else?
        Mr. Dunmire. Thank you, Mr. Chairman.
        Each of the individual panelists that presented up here, on
    their programs they were always asked how do you justify who
    gets money and who does not get money? You know, how do you
    weigh the need that is out there? I submit that maybe Congress
    should go back and look at what really is working and what does
    not work and to add to the agricultural that Mr. Larson has
    discussed, defense is another huge elephant in the room that
    could probably be cut as the wars wind down.
        Mr. Bahnson. I guess one thing I would just like to point
    out is that my company fully intends to pay those loans back
    and I am using your money right now but you are going to get it
    back and on the one loan I talked about earlier, you are going
    to get $2.5 million back. And to me that seems like a total
    win-win situation. The people who live in my rural area getting
    the services they need now and the government is going to get
    their money back plus interest. That just seems like a win-win
    to me.
        The Chairman. Okay. Well, I appreciate it. I appreciate the
    input. We have a tough task ahead of us. I think the Chairman
    of the Committee has an obligation to remain judiciously
    neutral in terms of what we are doing. I would only say,
    speaking on behalf of this Subcommittee I believe and the whole
    U.S. House, we are going to have to make some cuts, we are
    going to have to make some savings, none of which are going to
    be painless. We all need to engage in that process or we are
    never going to deal with the issue that we have.
        So with that I would thank the witnesses for their
    testimony, excellent testimony today. I appreciate the great
    job, as always, that our Majority staff--as well as the
    Minority staff--do. And I don't have any concluding statement
    to make. Mr. Costa is going into other let's say business and
    so I would simply say that under the rules of the Committee the
    record of today's hearing will remain open for 10 calendar days
    to receive additional material and supplementary responses from
    the witnesses to any question posed by a Member.
        This hearing of the Rural Development, Research,
    Biotechnology, and Foreign Agriculture Subcommittee is
    adjourned.
        [Whereupon, at 4:15 p.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]
     Supplementary Material Submitted by Hon. Charles F. Conner, President
      and Chief Executive Officer, National Council of Farmer Cooperatives

    ------------------------------------------------------------------------
                                  Grant Type
      Applicant Name    State    (Planning or     Applicant Type     Grant
                               Working Capital)                      Amount
    ------------------------------------------------------------------------
    Thompson Farm &        AL  Working Capital   ................    $40,050
     Trucking
    Ozan Vineyard and      AL  Working Capital   ................    $49,698
     Cellars
    Cody Hopkins           AR  Planning          ................    $98,500
    Caballos y             AZ  Working Capital   ................    $39,500
     Companaros, Inc
    Curds & Whey           CA  Working Capital   ................    $48,000
     Dairy
    Pacific Coast          CA  Working Capital   Farmer or          $300,000
     Producers                                    Rancher
                                                  Cooperative
    Farm Fresh             CA  Working Capital   ................    $21,192
     Solutions
    Delta Blue             CA  Working Capital   ................    $49,000
     Blueberries
    Rosa Brothers          CA  Working Capital   ................   $300,000
     Milk Company
    Blue Diamond           CA  Working Capital   Farmer or          $300,000
     Growers                                      Rancher
                                                  Cooperative
    Ingel Haven Ranch      CA  Planning          ................    $44,000
    California Dairy       CA  Planning          ................   $100,000
     Campaign
    Sonoma County          CA  Working Capital   ................   $300,000
     Vintners
    Hog Wild for           CA  Planning Capital  ................    $67,500
     Organic Pork
    Bohemian Creamery      CA  Working Capital   ................   $100,000
    Top O' the Morn        CA  Working Capital   ................   $300,000
     Farms
    Arburua                CA  Working Capital   ................    $35,000
     Enterprises, Inc
    Nishimori Family       CA  Working Capital   ................   $226,284
     Farms, LLC
    Sunsweet Growers       CA  Working Capital   Farmer or          $300,000
                                                  Rancher
                                                  Cooperative
    Livermore Valley       CA  Working Capital   ................   $208,504
     Wine Country
    Community              CA  Working Capital   ................    $45,475
     Alliance with
     Family Farmers
    Sweetgrass             CO  Working Capital   Farmer or          $226,000
     Cooperative                                  Rancher
                                                  Cooperative
    Table Mountain         CO  Planning Grant    ................    $41,550
     Farms, LLC
    Aaron Christopher      CO  Working Capital   ................    $26,890
     Rice
    Paradise Farms         FL  Working Capital   ................    $49,500
     Organic
    White Oak              GA  Working Capital   ................   $300,000
     Pastures, Inc.
    Lil Mog. LLC d/b/      GA  Working Capital   ................   $295,231
     a MSM Meats and
     Country Store

    Laurie-Jo's            GA  Working Capital   ................   $300,000
     Southern Style
     Canning, LLC
    Lane Packing, LLC      GA  Working Capital   ................   $300,000
    Hillside Orchard       GA  Working Capital   ................   $300,000
     Farms, Inc.
    Flint River            GA  Working Capital   Farmer or          $300,000
     Farmers                                      Rancher
     Cooperative                                  Cooperative
    Georgia Buffalo,       GA  Working Capital   ................   $117,500
     Inc.
    Jubilee Organic        GA  Working Capital   ................   $200,000
     Creamery, Inc.
    Cartecay               GA  Working Capital   ................    $46,500
     Vineyards--Lawre
     nce E. Lykins,
     owner
    Marie-Laure            HI  Working Capital   ................    $48,000
     Ankaoua
    Hawaii Cattle          HI  Working Capital   Farmer or           $58,180
     Producers                                    Rancher
     Cooperative                                  Cooperative
     Association
    Kimberly Ino           HI  Working Capital   ................    $27,750
    Kalapana               HI  Working Capital   ................    $12,000
     Organics, LLC
    MV Farms Inc. dba      HI  Working Capital   ................   $140,000
     Naked Cow Dairy
    Country View           IA  Working Capital   ................    $86,826
     Dairy, LLC
    Grass Run Farms        IA  Working Capital   ................    $49,847
    Unruh Greenhouses      IA  Working Capital   ................    $49,990
     LLC
    Iowa Hops Company      IA  Planning          ................    $35,340
    Farmer's All           IA  Working Capital   ................   $280,000
     Natural Creamery
    Mark Hulsebus          IA  Working Capital   ................    $13,000
    Joseph Schafer         IA  Working Capital   ................   $300,000
    Hafner, Inc.           IA  Planning          ................    $30,225
    Two Saints Winery      IA  Working Capital   ................    $26,680
    Iowa Choice            IA  Working Capital   ................   $255,284
     Harvest, LLC
    Joker's Wild           IA  Working Capital   ................    $49,120
     Value Added Beef
    Colter's Creek         ID  Working Capital   ................    $25,000
     Winery
    Moss Produce           ID  Working Capital   ................   $300,000
    3 Horse Ranch          ID  Planning          ................    $30,000
     Vineyards, LLC
    Clover Leaf            ID  Working Capital   ................   $300,000
     Creamery
    Idaho's Bounty         ID  Working Capital   Farmer or           $55,180
                                                  Rancher
                                                  Cooperative
    Fish Processors        ID  Working Capital   ................   $300,000
     Inc.
    Lime Rock Brown        IL  Working Capital   ................    $49,990
     Swiss Cheese,
     LLC
    Justin Kilgus          IL  Planning          ................    $10,595
    Living Water           IL  Working Capital   ................   $300,000
     Farms, Inc.
    Marcoot Jersey         IL  Working Capital   ................   $217,866
     Farm, Inc.
    Russell and            IN  Planning          ................    $10,000
     Elizabeth Kelsay
    The Feel Good          IN  Planning          ................    $11,295
     Farm, LLC
    Indiana Farmstead      IN  Planning          ................    $38,000
     Cheese
     (Steckler)
    Schmidt Farms,         KS  Working Capital   ................    $49,714
     Inc.
    McCarty Family         KS  Working Capital   ................   $300,000
     Farms, LLC
    Thayer Feed, LLC       KS  Working Capital   ................    $46,945
    Jerry Brown,           KS  Working Capital   ................   $300,000
     Brown Honey
     Farms, Inc.
    Johannes Farm          KS  Working Capital   ................     $9,400
    Stone Cross Farm       KY  Working Capital   ................    $55,114
     & Cloverdale
     Creamery
    KY Sheep and Goat      KY  Working Capital   ................    $36,400
     Development
     Office
    Horsehoe Bend          KY  Working Capital   ................   $297,675
     Vineyards
    Evans Orchard          KY  Working Capital   ................    $70,000
    Kenny's Farmhouse      KY  Working Capital   ................   $246,818
     Cheese, Inc.
    Kendal Clark           KY  Working Capital   ................    $49,950
     Farms
    Ky Hydro Farms,        KY  Working Capital   ................    $49,999
     LLC
    Kentucky               KY  Working Capital   ................   $300,000
     Freshwater Fish
     Inc.
    Meat Hook Butcher      KY  Planning          ................    $67,397
     Shop Steering
     Committee c/o
     Woodland Farm
    Cajun Central,         LA  Working Capital   ................   $298,054
     LLC
    Island Bee             MA  Working Capital   ................    $13,000
     Company
    The Vineyards at       MD  Working Capital   ................   $299,974
     Dodon, LLC
    Crow Vineyard and      MD  Working Capital   ................    $48,600
     Winery, LLC
    Chapel's Country       MD  Working Capital   ................   $187,000
     Creamery
    Boordy Vineyards       MD  Working Capital   ................   $239,200
    Chesapeake Bay         MD  Working Capital   ................   $286,398
     Dairy
    Nancy S. and           MD  Planning          ................    $40,455
     Kevin D Brandt
    Carole Morison,        MD  Planning          ................    $15,756
     Sole Proprietor
    Knob Hall Winery       MD  Working Capital   ................    $40,000
    Basignani Winery       MD  Planning          ................    $50,000
     Ltd
    David Lewis            MD  Working Capital   ................    $49,950
     Herbst
    SuriPaco, LLC          ME  Planning          ................    $27,450
    Angela Mary            MI  Working Capital   ................   $293,842
    Sandy Acres, LLC       MI  Planning          ................    $20,125
    Berglund Farms         MI  Working Capital   ................   $269,278
    Michigan Sugar         MI  Working Capital   Farmer or          $300,000
     Company                                      Rancher
                                                  Cooperative
    Uncle John's           MI  Working Capital   ................    $42,024
     Cider Mill
    VanDenBerg Farms       MI  Working Capital   ................   $298,788
    Royal Farms Inc.       MI  Working Capital   ................    $45,094
    American Ag            MN  Planning          ................   $100,000
     Energy
    Cedar Summit           MN  Working Capital   ................   $300,000
     Dairy, LLC
    Clearbrook             MN  Working Capital   Farmer or          $300,000
     Elevator                                     Rancher
     Association                                  Cooperative
    Duluth Farmers         MN  Planning          ................    $18,986
     Market
    Pastures A Plenty      MN  Working Capital   ................   $300,000
     Company
    Smude Enterprises      MN  Working Capital   ................   $298,500
     LLC
    TFC Poultry            MN  Working Capital   ................   $300,000
    1Soy, Inc              MO  Planning          Farmer or          $100,000
                                                  Rancher
                                                  Cooperative
    American Soy           MO  Working Capital   ................   $300,000
     Asia, LLC
    Boeckmann Family       MO  Working Capital   ................   $281,670
     Farm
    Janet Smith            MO  Planning          ................    $28,000
    Grove Dairy            MO  Planning          ................    $50,000
     Products, LLC
    Hampton                MO  Working Capital   ................   $210,000
     Alternative
     Energy Products,
     LLC
    Jowler Creek           MO  Working Capital   ................    $18,363
     Winery, Inc.
    Becky & Tim Lavy       MO  Planning          ................    $38,000
    McKaskle Farms         MO  Planning          ................    $40,000
    MOF2, LLC              MO  Planning          ................   $100,000
    Nature Friendly        MO  Planning          ................    $34,000
     Conservation
     Branded Beef
    Ortiz Farms            MO  Planning          ................    $78,795
    Show Me Energy         MO  Planning          Farmer or          $100,000
     Cooperative, LLC                             Rancher
                                                  Cooperative
    Soy Labs, LLC          MO  Planning          ................   $100,000
    Tuscolo Hill           MO  Planning          ................    $16,000
     Vineyards
    Brinson Farms,         MO  Planning          ................    $49,000
     LLC
    Wildwood Gin Inc.      MS  Working Capital   ................   $300,000
    Forest Free            MS  Working Capital   ................    $87,326
     Range, LLC
    Indian Springs         MS  Planning          Farmer or           $24,999
     Farmers                                      Rancher
     Association AAL                              Cooperative
    We Three Bees          MS  Working Capital   ................    $21,500
     Apiary
    William & Marilyn      MT  Working Capital   ................    $48,530
     Hedstrom dba
     Hedstrom Dairy
    Leonard Bernard        MT  Planning          ................    $55,000
     Desmul
    Little Red Hills,      MT  Working Capital   ................   $150,000
     LLC; Cooper
     Burchenal
    Sunburst Trout         NC  Working Capital   ................   $283,884
     Company LLC
    Chaple Hill            NC  Working Capital   ................   $180,000
     Creamery, LLC
    Nooherooka             NC  Working Capital   ................   $130,000
     Natural, LLC
    Honey Mountain         NC  Working Capital   ................   $120,000
     Farm LLC--Chuck
     Moore
    Marketing              NC  Working Capital   ................   $140,000
     Specialty Beef
     from Farm
    Cottle Strawberry      NC  Working Capital   ................   $300,000
     Nursery
    Sleepy Goat            NC  Planning          ................    $22,500
     Cheese LLC
    Smoky Mountain         NC  Planning          ................    $20,000
     Native Plant
     Association,
     Inc.
    Yamco LLC              NC  Planning          ................   $100,000
    Sullivan Estate        NC  Working Capital   ................    $37,148
     Vineyard &
     Winery, L.L.C.
    Dakota Pride           ND  Working Capital   Farmer or           $49,000
     Cooperative                                  Rancher
                                                  Cooperative
    Bowdon Meat            ND  Working Capital   Farmer or           $49,500
     Processing                                   Rancher
                                                  Cooperative
    Nebraska Waters,       NE  Working Capital   ................   $300,000
     LLC
    Robinette Farms,       NE  Working Capital   ................    $24,944
     LLC
    Feather River          NE  Working Capital   ................    $49,998
     Vineyards
    Hollenbeck Farms       NE  Working Capital   ................   $258,250
    Knotted Wood           NE  Working Capital   ................    $49,950
     Distillery
    Winery Ridge           NH  Working Capital   ................    $41,350
     Orchard
    Springdale Farms,      NH  Working Capital   ................   $105,750
     Landaff Creamery
    Miles Smith Farm,      NH  Working Capital   ................   $293,599
     Carole Soule and
     Bruce Dawson
    Salem Oak              NJ  Working Capital   ................    $20,000
     Vineyards LLC
    Landisville            NJ  Working Capital   Farmer or           $49,975
     Produce                                      Rancher
     Cooperative                                  Cooperative
     Association
    Garden State Goat      NJ  Working Capital   ................    $36,500
     Farm
    Outer Coastal          NJ  Planning          ................    $33,332
     Plain Vineyard
     Association
    First Field, LLC       NJ  Working Capital   ................    $32,000
    Peppadew Gold          NJ  Working Capital   ................   $259,625
     Peppers
    Red Mesa Meats         NM  Planning          ................    $12,500
    Preferred              NM  Working Capital   ................    $49,500
     Produce, Inc.
    Tracey Hamilton        NM  Working Capital   ................    $49,500
    B.W. Cox (Owner)       NM  Working Capital   ................    $49,999
     & Carl
     Livingston
     (Manager)
    Edgwick Farm           NY  Working Capital   ................   $120,000
    Catskill Dudukju       NY  Working Capital   ................    $49,000
     LLC
    New York Beef          NY  Planning          Farmer or           $36,500
     Farmer's                                     Rancher
     Cooperative                                  Cooperative
    King Brothers          NY  Working Capital   ................    $49,500
     Dairy
    Farmer Ground          NY  Working Capital   ................    $75,000
     Flour, LLC
    North Country          NY  Working Capital   ................   $180,638
     Farms
    Old Chautauqua         NY  Working Capital   ................   $299,999
     Vineyards, LLC
    Kilcoyne Farms         NY  Working Capital   ................   $261,077
    NYAG, LLC              NY  Working Capital   ................   $170,000
    CELK Distilling,       NY  Working Capital   ................   $150,000
     LLC
    Keuka Lake             NY  Working Capital   ................    $37,301
     Vineyards, LTD
    Red Jacket             NY  Working Capital   ................    $49,500
     Orchards
    Dagele Brothers        NY  Planning          ................    $79,425
     Produce;
     Christopher
     Dagele
    North Country          NY  Working Capital   ................    $59,950
     Landscape &
     Nursery, Inc.
     DBA Tug Hill
     Vineyards
    Food Gems, LTD         NY  Working Capital   ................    $35,004
    Hosmer, Inc.           NY  Working Capital   ................    $49,990
    Guppy's Berry          NY  Working Capital   ................     $3,650
     Farm
    Martin Sidor           NY  Working Capital   ................    $49,990
     Farms, Inc.
    Spring Lake            NY  Working Capital   ................    $49,500
     Winery
    Maple Shade Farm       NY  Working Capital   ................    $49,750
    Growers                NY  Working Capital   Farmer or           $45,000
     Cooperative                                  Rancher
     Grape Juice Co.,                             Cooperative
     Inc.
    Egg Tech Ltd.          OH  Working Capital   ................   $300,000
    Van Strohm Fiber       OH  Working Capital   ................    $60,500
     Processing Mill
    Auburn Twin Oaks,      OH  Working Capital   ................   $125,000
     LLC
    Commercialization      OH  Planning          ................    $71,551
     Roadmap for
     Alternative
     Aviation Fuel
    Mercer Landmark--      OH  Planning          Farmer or           $39,800
     Louis McIntire                               Rancher
                                                  Cooperative
    Tea Hills Gourmet      OH  Working Capital   ................   $178,062
     Chicken Products
    Holder Brothers        OK  Working Capital   ................   $300,000
     Beef
    Walnut Creek           OK  Working Capital   ................    $40,850
     Farms
    Bogdan Caceu           OR  Planning          ................    $12,125
    Wrigley Family         OR  Working Capital   ................    $49,999
     Ventures
    Fairview Farm LLC      OR  Working Capital   ................    $49,264
    Seely Family Farm      OR  Working Capital   ................   $163,013
    Zena Forest, LLC       OR  Working Capital   ................   $130,750
    Deadlus Cellars        OR  Working Capital   ................    $49,005
     Co.
    Sokol Blosser,         OR  Working Capital   ................    $49,999
     Ltd.
    Carman Ranch           OR  Planning          ................    $18,050
    Scott H.               OR  Working Capital   ................    $49,999
     McKenzie, et
     al.; Seaview
     Cranberries,
     Inc.
    Deck Family Farm       OR  Working Capital   ................   $300,000
    Coleman Vineyard       OR  Working Capital   ................    $49,824
     LLC
    Cherry Country         OR  Working Capital   ................    $49,999
    Goldin Artisan         OR  Working Capital   ................    $10,410
     Cheese, LLC
    Michael Steven         OR  Working Capital   ................    $49,992
     Mega
    Oregon Coastal         OR  Working Capital   ................   $100,000
     Flowers
    Champoeg Creek         OR  Working Capital   ................    $49,990
     Farm
    Morale Orchards,       OR  Planning          ................    $39,909
     LLC
    Stoller                OR  Working Capital   ................    $49,792
     Vineyards, Inc.
    Tad Buford &           OR  Working Capital   ................    $30,824
     Karen Finley,
     Queen Bee Honey
     Company
    Southern Oregon        OR  Planning Grant    ................    $22,550
     Winery
     Association
     (SOWA)
    Wild Wines, LLC        OR  Working Capital   ................    $93,572
    Rainshadow             OR  Working Capital   ................    $49,999
     Organics
    Wayne Hutchings        OR  Working Capital   ................    $24,400
    Brenda Carter          PA  Working Capital   ................     $3,000
    North Mountain         PA  Working Capital   ................    $26,860
     Pastures
    Wholesome Dairy        PA  Working Capital   ................    $49,990
     Veterinary
    Willow Brook           PA  Working Capital   ................     $3,730
     Farms, LLC
    Glenn R. Cauffman      PA  Working Capital   ................    $80,000
    Keystone Beef          PA  Planning          ................    $35,150
     Marketing
     Network
    Endless Mountains      PA  Planning          Farmer or           $37,450
     Farm Fresh                                   Rancher
     Cooperative                                  Cooperative
    Christian Klay         PA  Working Capital   ................    $24,888
     Winery
    Fertile Grounds        PA  Working Capital   ................   $300,000
    Shade Mountain         PA  Working Capital   ................    $49,999
     Winery (SMW)
    Roberto Atienza        PR  Working Capital   ................   $300,000
     DBA Hacienda San
     Pedro
    Carlos Gonzalez        PR  Working Capital   ................   $150,000
     dba Finca
     Gonzalez
    Apiarios               PR  Working Capital   ................   $100,000
     Caraballo, Corp.
    JJJ Ranch, Inc.        PR  Working Capital   ................   $300,000
    Bananera Hermanos      PR  Working Capital   ................   $250,000
     Marrero, Inc
    Esmerelda              SC  Planning          ................   $100,000
     Sandoval; Del
     Valle Fresh,
     Inc.
    Jimmy Forrest          SC  Working Capital   ................   $299,852
     Farm Inc.
    Hickory Bluff LLC      SC  Working Capital   ................    $42,907
    Jackson Winery         SD  Working Capital   ................   $300,000
     and Vineyards,
     LLC
    Wild Idea Buffalo      SD  Planning          ................    $17,500
     Company
    Sarah Bellos           TN  Planning Capital  ................    $39,600
    Cumberland             TN  Working Capital   ................    $43,276
     Farmer's Market
     (CFM)
    The Fullen             TN  Planning          ................    $95,000
     Brothers Farm
    Johnson Backyard       TX  Working Capital   ................    $49,950
     Garden
    San Angelo             TX  Planning          ................    $95,000
     Bioenergy
     Facility
    Rangeland              TX  Working Capital   ................   $300,000
     Restoration
    James Clinton          TX  Working Capital   ................   $120,900
     Hodges DBA
     Sterling Lamb
    Texas Daily            TX  Working Capital   ................   $200,000
     Harvest
    Panhandle              TX  Planning          ................    $62,630
     Agricultural
     Producers LLC
    Herber Valley          UT  Working Capital   ................   $300,000
     Artisan Cheese
    Scott G. Smith         UT  Working Capital   ................    $22,319
    Utah Pork              UT  Working Capital   ................   $300,000
     Producers
     Association
    Cornaby's LLC          UT  Working Capital   ................   $239,412
    Riley's Farm           UT  Working Capital   ................    $22,328
     Fresh LLC
    The Homeplace          VA  Working Capital   ................   $208,571
     Vineyard, Inc.
    Virginia Wineries      VA  Planning          Farmer or          $100,000
     Association                                  Rancher
     Cooperative                                  Cooperative
    Rosemont of            VA  Working Capital   ................   $300,000
     Virginia, LLC
    Virginia               VA  Working Capital   ................   $149,125
     Wineworks
    Messick's Farm         VA  Planning          ................    $60,000
     Market
    Dairy Energy Inc.      VA  Planning          ................   $100,000
    Springview Farm        VA  Working Capital   ................    $37,250
     LLC
    Baker, Inc.            VA  Working Capital   ................   $110,000
    AgriBerry, LLC         VA  Working Capital   ................   $300,000
    Grayson Natural        VA  Working Capital   ................   $280,735
     Foods
    Virginia Aqua-         VA  Working Capital   Farmer or          $300,000
     farmers Network,                             Rancher
     LLC                                          Cooperative
    Kingdom Creamery       VT  Working Capital   ................   $300,000
    Green Mountain         VT  Working Capital   ................   $300,000
     Organic
     Creamery, LLC
    The Success            VT  Planning          ................    $15,480
     Factor
    Paul Lisai             VT  Working Capital   ................    $47,869
    Tamarack Tunis         VT  Working Capital   ................    $49,999
    Louisa Conrad          VT  Working Capital   ................    $49,057
    Hall Home Place,       VT  Working Capital   ................    $24,389
     LLC
    Boston Post Dairy      VT  Working Capital   ................    $38,201
    Margorie and           VT  Working Capital   ................    $32,547
     Brett Urie
    Gateway Milling        WA  Planning          ................    $99,425
    Little Farms, LLC      WA  Working Capital   ................    $49,726
    BellWood Acres         WA  Working Capital   ................   $150,000
     Distilling
     Project
    Northwest              WA  Working Capital   ................   $300,000
     Agriculture
     Business Center
    Tachira, LLC           WA  Working Capital   ................   $300,000
    Melissa Moeller        WA  Working Capital   ................    $38,367
    Skagit Fresh           WA  Working Capital   ................    $49,900
     Natural Beverage
     Company
    Knutzen Farms, LP      WA  Planning          ................    $48,000
    Sheperd Song           WI  Working Capital   ................   $300,000
     Farms LLC
    Lost Lake Bound,       WI  Working Capital   ................    $34,700
     LLC
    Kelley Country         WI  Working Capital   ................   $300,000
     Creamery
    Richard L.             WI  Working Capital   ................    $49,999
     Walders
    Wisconsin Sheep        WI  Planning          Farmer or           $17,865
     Dairy                                        Rancher
     Cooperative                                  Cooperative
    Harmony Specialty      WI  Working Capital   ................   $300,000
     Dairy Foods, LLC
    LaClare Farms          WI  Working Capital   ................   $300,000
     Specialties, LLC
    Four Elements          WI  Working Capital   ................   $283,948
     Organic Herbals
     LLC
    Weber's Farm           WI  Working Capital   ................   $300,000
     Store, Inc.
    JFBHayLLC              WI  Working Capital   ................   $300,000
    Tony Koyen             WI  Working Capital   ................   $300,000
     Farming Inc.
    Wisconsin              WI  Working Capital   Farmer or          $300,000
     Cranberry                                    Rancher
     Cooperative                                  Cooperative
    Jolivette Family       WI  Working Capital   ................   $300,000
     Farms Inc.
    Gingerbread            WI  Working Capital   ................   $300,000
     Jersey LLC
    Community              WI  Working Capital   Farmer or          $200,000
     Farmers' Co-Op                               Rancher
     (AKA CFC)                                    Cooperative
    Ellsworth              WI  Working Capital   Farmer or          $300,000
     Cooperative                                  Rancher
     Creamery                                     Cooperative
    Marieke                WI  Working Capital   ................   $300,000
     Penterman,
     Holland's Family
     Cheese LLC
    Lakeshore Forest       WI  Working Capital   ................   $300,000
     Products, Inc.
    George R. Crave;       WI  Working Capital   ................   $300,000
     Crave Brothers
     Farmstead
     Cheese, LLC
    Gensing and Herb       WI  Working Capital   ................   $300,000
     Co-op
    Johnson Timber         WI  Working Capital   ................   $300,000
     Corporation
    Westby                 WI  Working Capital   Farmer or          $300,000
     Cooperative                                  Rancher
     Cooperative                                  Cooperative
    African-Style          WI  Working Capital   ................   $300,000
     Dried Fish
    Millet Supply,         WI  Working Capital   ................   $300,000
     LLC
    MacFarlane             WI  Working Capital   ................   $300,000
     Pheasants, Inc.
    Krueger Lumber         WI  Working Capital   ................   $300,000
     Company
    Hsu's Ginseng          WI  Working Capital   ................   $300,000
     Enterprises,
     Inc.
    Bloomery               WV  Working Capital   ................    $49,000
     Plantation
     Distillery, LLC
    ------------------------------------------------------------------------

                                     ______

       Submitted Letter by Walter B. McCormick, Jr., President and Chief
              Executive Officer, United States Telecom Association
    April 24, 2012

    Hon. Timothy V. Johnson,             Hon. Jim Costa,
    Chairman,                            Ranking Minority Member,
    Subcommittee on Rural Development,   Subcommittee on Rural Development,
     Research, Biotechnology, and         Research, Biotechnology, and
     Foreign Agriculture,                 Foreign Agriculture,
    House Committee on Agriculture,      House Committee on Agriculture,
    Washington, D.C.;                    Washington, D.C.

        Dear Chairman Johnson and Ranking Member Costa:

        Thank you for the opportunity to provide the views of the United
    States Telecom Association (USTelecom) in advance of the Subcommittee's
    upcoming hearing on the telecom and broadband loan programs
    administered by the Rural Utilities Service (RUS). As the Subcommittee
    begins to craft the rural development component of the upcoming
    reauthorization of farm programs, this is a particularly important and
    timely hearing that allows supporters of RUS loan programs to explain
    their continuing value to rural America and to dispel certain myths
    disseminated by detractors of these programs.
        USTelecom represents innovative broadband companies ranging from
    some of the smallest rural telecoms in the nation to some of the
    largest companies in the U.S. economy. Our members offer a wide range
    of advanced broadband services, including voice, Internet access,
    video, and data, on both a fixed and mobile basis. The vast majority of
    our member companies are rural providers. Many are small businesses
    serving small communities. They are proud members of these communities
    and deeply committed to their future development. What unites our
    diverse membership is our shared determination to deliver broadband
    services to all Americans--regardless of their location.
        USTelecom members appreciate the strong support the Agriculture
    Committee has provided for RUS telecommunications programs since their
    inception in 1949. RUS endures because it is a brilliantly conceived
    public-private partnership in which the borrowers are the conduits for
    the Federal benefits that flow to rural telecom customers--the true
    program beneficiaries. The targeted assistance offered by the RUS
    broadband and telecommunications loan programs remains essential to a
    healthy and growing rural economy and contributes to the provision of
    universal communications services comparable to those found in urban
    areas. In fact, the perfect repayment record of borrowers from the
    telecommunications loan program means these loans actually make money
    for the government and contribute to deficit reduction.
    RUS Broadband Loan Program
        Attention has focused in recent years on the implementation of the
    RUS Broadband Loan program. The program was created in the 2002 Farm
    Bill to provide loans specifically for broadband deployment in unserved
    areas. In May 2007, USTelecom appeared before this Subcommittee and
    raised concerns with the implementation of the original program,
    particularly about broadband loans being provided in urban areas and in
    areas with multiple existing broadband providers.
        USTelecom worked closely with this Subcommittee during development
    of the 2008 Farm Bill, and as a result, Congress improved the targeting
    of RUS Broadband Loan program funds by narrowing the definition of
    ``rural'' so that suburbs and subdivisions near cities no longer
    qualify for loans, and by prioritizing lending to areas with little or
    no existing broadband service. This means that top priority is given to
    loan applicants who offer to provide broadband service to the greatest
    proportion of households without service.
        Since passage of the last farm bill in May 2008, USTelecom, like
    many others, was distressed by the agency's delay in issuing the
    regulations required to implement the changes in the program. RUS did
    not release the interim-final rules implementing Congressional reforms
    to the program until March 2011. Shortly after the release of those
    interim-final rules it became clear that disbursements from the FCC's
    High-Cost Universal Service program were going to be dramatically
    reformed. As a result, RUS is now in the process of updating its
    financial models to account for these coming changes, and rural
    carriers are being asked to withhold applications until these financial
    models are updated. Others that have already submitted applications,
    but have not yet had their applications approved, are being asked by
    RUS to resubmit their applications in light of the current and pending
    changes in High-Cost Universal Service support. While we are certainly
    frustrated by these delays, there remains a continuing need for the
    Broadband Loan program, as we will explain in further detail below.
    Unjustified Criticisms
        We believe it is important for us to address head-on the
    distortions being propagated by the program's detractors--many of whom,
    we would hasten to add, typically have no desire to provide broadband
    service beyond the denser populations found in rural town centers.
        First, some detractors point to a 2009 Department of Agriculture
    Inspector General (IG) review of the program as justification for its
    termination. A closer reading of that report, though, shows it is a
    review of the broadband loan program as it existed before the program
    changes required by Congress in the 2008 Farm Bill. In fact, the IG
    report acknowledges that Congressional reforms contained in the 2008
    Farm Bill would have resulted in $862 million in loans issued by RUS
    between the IG's initial 2005 report on the program and the passage of
    the 2008 Farm Bill being ruled partially or completely ineligible for
    funding.
        Second, some critics have deliberately conflated entirely separate
    programs to make their assertions. They often point to examples of
    over-building of existing broadband networks funded from the $2.5
    billion Broadband Initiatives Program (BIP), administered by RUS, and
    created by the 2009 American Recovery and Reinvestment Act. A separate
    program, BIP was not required to follow the program modifications to
    the Broadband Loan program required by Congress in the 2008 Farm Bill.
    To be clear about this point, in the period between passage of the 2008
    Farm Bill and the release in March 2011 of the program's interim-final
    rules, no loans were issued under the Broadband Loan program.
        Third, certain detractors also suggest Congress failed in 2008 to
    limit providers from receiving support for building out broadband in
    areas where it is already available. To address this issue, they
    propose to prohibit loans to build out broadband or upgrade facilities
    in areas where it is already available at certain speeds to more than
    25 percent of existing residential households. Actually, Congress did
    address this issue and there is no evidence that the Congressional
    policy changes are insufficient. In fact, such a proposal discriminates
    against the hardest-to-serve households in rural areas and could
    prevent consumers and businesses located in areas outside of a town
    center from ever receiving broadband service.
        Finally, some have suggested the RUS Broadband Loan program and the
    High-Cost Universal Service program are duplicative. In fact, the two
    programs are complementary--each an important element in deploying
    cutting edge communications services to rural America. While the RUS
    Broadband Loan program supports only one-time capital investments to
    provide broadband in hard-to-serve rural areas, the Universal Service
    program provides support to ensure that affordable and reasonably
    comparable communications services are available to consumers and
    businesses in high-cost rural areas.
    Going Forward
        As this Subcommittee is well aware, there are areas of our nation
    that still lack access to broadband service. The recession that began
    subsequent to the passage of the last farm bill has made it
    increasingly difficult for small companies to obtain infrastructure
    improvement loans through the private sector.
        In addition, it would be premature to further amend the Broadband
    Loan program at this time. RUS only issued the interim-final
    regulations in March 2011 to account for the program changes required
    by Congress in the 2008 Farm Bill, before the program was suspended
    again due to pending changes in the FCC's High-Cost Universal Service
    regulations. A reasonable period of time is required to reconcile the
    changes brought about by both these developments.
        The investment in the most modern and sophisticated equipment
    available at the premises of businesses, schools, or clinics is wasted
    if the local communications provider cannot afford to build the
    facilities that quickly transport the large amounts of voice, video,
    and data these entities generate. Further, the government's
    contribution through these loan programs is leveraged by the equity,
    technical expertise, and dedication of local telecom companies, as well
    as the additional tax revenues generated by the jobs and economic
    development resulting from the provision and upgrading of broadband
    infrastructure via loans.
        Again, thank you for the opportunity to provide our views on these
    important programs. RUS telecom and broadband program participants take
    seriously their obligations to their government, their nation, and
    their subscribers. They will continue to invest in our rural
    communities, use government loan funds carefully and judiciously, and
    do their best to assure the continued affordability of advanced
    communications services in rural America.
                Sincerely,

    Walter B. McCormick, Jr.
                                     ______

                              Submitted Questions
    Response from Hon. Donald Larson, Commissioner, Brookings County, South
            Dakota; Chairman, National Association of Counties, Agriculture
            and Rural Affairs Steering Committee *
    ---------------------------------------------------------------------------
        * There was no response from the witness by the time this hearing
    went to press.
    ---------------------------------------------------------------------------
    Questions Submitted By Hon. Timothy V. Johnson, a Representative in
            Congress from Illinois
        Question 1. You have requested that we give priority to
    applications which are submitted through a regional plan. Why should
    Congress authorize a regional plan to move ahead of an application from
    an individual community which is just as much in need, but for a
    variety of reasons may not be able to participate in a regional
    collaboration?

        Question 2. In your testimony you highlighted the local and
    regional food programs. You also suggested that programs across the
    farm bill should be on equal footing. In your view, why should there be
    a specific program to devote funds to a narrow purpose, as opposed to
    ensuring it is a qualified activity under the general business grant
    and loan programs?

        Question 3. Many programs were designed in the past when funding
    was more available and the resources could be narrowly devoted to
    certain activities. In this current budget environment, which programs
    would you suggest should be cut or eliminated so the programs which
    provide the true core economic development assistance can be focused
    on?

        Question 4. Your testimony discusses a great need for access to
    healthy foods. But in the U.S. supply chains are among the strongest in
    the world and food is the most available and affordable in the world.
    Exactly what market failure are you suggesting needs to be addressed
    with local and regional food chains as it relates to healthy food
    access?

        Question 5. You mentioned technical assistance and its importance
    to ensuring the viability of projects over the life of the loan. Do you
    believe every program needs to devote scarce resources to technical
    assistance? What non-Federal resources could fill this need?

        Question 6. You called for expanded authority in the Community
    Facilities program to allow grants for technical assistance. How would
    those funds be used, and why should it come out of funds that would
    otherwise be available to fund additional critical community facilities
    such as first-responder equipment? Which eligible activity would you
    suggest be removed from the program to offset this new eligible
    purpose?

        Question 7. You call for a more locally-driven process at USDA. Is
    USDA adequately staffed for such a shift? How would the programs be
    overseen?

        Question 8. You mentioned that you want local governments included
    as eligible entities in the relending programs. How would conflicts of
    interest be managed when governments are both the lender and regulator?
    Are the same structures in place in every entity which would be made
    eligible under this proposal? How would internal controls be verified
    by USDA to prevent abuse?

        Question 9. Your testimony listed a number of organizations you
    feel should be eligible regional partners. Could you please clarify
    which partners MUST be included, and which SHOULD be included if they
    exist in the region?

        Question 10. Your third suggestion for regional cooperation
    mentions an additional priority for communities which demonstrate cost
    savings and reduced duplication. How would you envision these savings
    be demonstrated for USDA to evaluate?

        Question 11. What prevents USDA from working with their state
    partners each funding year to approve projects which fill in the gaps
    of regional plans?

        Question 12. How do you guarantee the strong urban and suburban
    voices in regional discussions do not drown out the needs of rural
    communities when regional plans are formed?

        Question 13. You mentioned that technical assistance providers'
    capacity needs to be strengthened; however, one of the qualifications
    should already be that those providers have the capacity to justify
    receiving Federal funds in the first place. Are you suggesting that
    USDA should train people so that they then are eligible to receive
    Federal funds?

    Response from Leanne Mazer, Executive Director, Tri-County Council for
            Western Maryland; on Behalf of National Association of
            Development Organizations

    Questions Submitted By Hon. Timothy V. Johnson, a Representative in
            Congress from Illinois

        Question 1. Regional plans are put in place for up to 5 years, yet
    sometimes adjustments must be made. What recourse do small communities
    have to adjust their priorities in a regional plan when leadership
    changes or other factors justify such a revision?
        Answer. As resources at the state and local level continue to
    diminish, local communities across rural America like ours are joining
    together to create comprehensive regional plans that examine their
    region's existing assets and needs across multiple sectors including
    comprehensive economic development, workforce, transportation,
    healthcare, and pre-disaster mitigation.
        These strategies are essential because they help rural regions to
    prioritize their needs, ensure that locals coordinate and are vested in
    the process and projects, and help leverage every possible asset and
    dollar to improve economic conditions in their communities. These
    regional strategies also encourage multiple rural communities to think
    more strategically and creatively about how they use Federal, state,
    and local dollars. Partnering regionally helps us to avoid duplication
    of effort and we are able to better share our resources and determine
    which projects will increase our communities' economic viability.
        This type of coordination does not happen overnight and can be a
    complex and arduous process to achieve agreement across multiple
    jurisdictions. But during a time of increase scrutiny on Federal
    investments, this type of vetting and coordinating process by local
    public, private and nonprofit sector leaders should be encouraged by
    USDA and across the Federal Government.
        Although some of the existing planning frameworks like the U.S.
    Economic Development Administration's Comprehensive Economic
    Development Strategies (CEDS) are 5 year plans, they can be updated
    annually based on changing needs and conditions. These strategies are
    not meant to be restrictive or static plans, but are intended to be
    living documents that help guide communities as they strive for growth.
    Just as the U.S. military prepares strategic plans and U.S. private
    companies create business plans, the regional economic development
    plans can serve as a roadmap for communities like ours to achieve
    shared goals. Routine plan updates can ensure that communities'
    priorities are addressed and allow for course corrections as strategic
    plans are implemented.
        If a community determines to shift their priorities in a regional
    plan, or if a community is not covered by a regional planning
    framework, they should still be able to submit proposed projects for
    consideration by USDA.
        Under current law, there is no incentive for rural communities to
    coordinate on USDA rural development projects. USDA should encourage
    communities to work together to best use Federal dollars.

        Question 2. If communities decide they would rather op-out of the
    regional plan where they would otherwise be included, how would their
    application be treated under what NADO has considered for regional
    priorities if they decide to change their local priorities?
        Answer. If a community decides to op-out of the regional plan, or
    is not covered by a regional plan, they should be allowed to submit
    their application for USDA consideration under the normal system. USDA
    already makes decisions on where and how to invest public dollars.
    Whether a community is part of a regional plan or not, they will still
    have to compete against other projects. Communities that opt-out of a
    regional plan or strategy should not be penalized, but at a time where
    Federal dollars are increasingly scarce, USDA should encourage
    communities to work together to determine how they can leverage
    existing assets with Federal dollars.
    E-Mail Submitted by Fitzhugh Elder, National Rural Water Association
    May 17, 2012

    Mike Dunlap,
    Staff Director,
    Subcommittee on Rural Development, Research, Biotechnology, and Foreign
                Agriculture,
    House Committee on Agriculture.

        Mike,

        I hope all is well. Frank's responses to the QFR's are attached.
    Please let me know if you need anything else.
        As you draft the farm bill, in addition to the circuit rider
    language we have discussed, I would like to also request that you keep
    7 U.S.C.  1926(b) as it is currently written. The purpose of 7 U.S.C.
     1926(b) is to protect the integrity of the Federal Government's
    outstanding loans by preventing any portion of a water system to be
    forcibly annexed or cherry picked by another system or municipality.
    Such annexation would result in the remaining customers being solely
    responsible for repayment of the loan, with fewer customers to share
    the burden--resulting in a higher cost per customer and greater risk of
    default. This dilemma is of special concern because USDA loans are only
    made available to low and moderate-income rural communities based on
    household per capita income that cannot obtain commercial credit. It is
    also important to remember that USDA provides both loan and grant to
    systems based on their financial situation and proposed rate structure
    at the time the application is processed. Any loss of projected revenue
    caused by loss of territory jeopardizes this carefully constructed
    financial arrangement. The 7 U.S.C.  1926(b) provision is an essential
    stabilizing element and is one of the reasons that the program works so
    well.
        Please let me know if you have any questions or concerns. Thank
    you.

    Fitzhugh Elder,
    National Rural Water Association.
    Attached Response from Frank Dunmire, Executive Director, Illinois
            Rural Water Association; on Behalf of the National Rural Water
            Association

    Questions Submitted By Hon. Timothy V. Johnson, a Representative in
            Congress from Illinois

        Question 1. Mr. Dunmire and Mr. Stewart, you both talked about the
    repayment rates of water loans, using the lifetime default rate of
    1.02% and a delinquency rate of 0.18% respectively. Just so we are
    comparing the same numbers, could you both clarify whether you mean to
    refer to the same rates, or if there is a reason you have described two
    different aspects of the programs?
        Answer. I believe Mr. Stewart and I were using two different
    measurements of the water and waste loan programs to make a similar
    point. The default rate is a measure of the nominal lifetime defaults
    as a percentage of disbursements, while the delinquency rate is a
    measure of the number of late payments as a percentage of the number of
    loans. I believe that both numbers are demonstrative of a very well-
    managed loan program. This is particularly true when considering that
    USDA is a lender of last resort.

        Question 2. If the current program limits require USDA focus on
    towns of less than 10,000, and in reality the program focuses on towns
    of less than 5,000; would there be any value in opening up the
    eligibility definitions to larger cities?
        Answer. No. In fact, I feel that it would have an adverse effect on
    the smaller systems. The current trend that shows funding ``focusing''
    on towns of less than 5,000 should be considered as an example of how
    well the current limits are working. As a general rule of thumb larger
    municipalities have larger project needs and consequently require
    larger amounts of funding. To include larger municipalities in this
    program, in my opinion, would only serve to dilute the RD funding pool.

        Question 3. What are some of the current regulatory issues faced by
    small towns as they work to provide clean water?
        Answer. Below are a few examples of the regulatory requirements
    small towns struggle with. Please note that this is not a comprehensive
    list.

        a. Reporting: For example, Consumer Confidence Reports--each year
            suppliers are to supply their customers with a consumer
            confidence report (CCR) that contains information about their
            drinking water. Currently there are several ways to meet this
            regulation (i.e., direct mail, publish in newspaper, or in the
            case of really small systems less than 500--notify them of its
            availability). What is not an acceptable means is posting on a
            website. There is discussions within USEPA and legislation
            introduced (H.R. 1340 & S. 1578) to repeal the mailing
            requirement of the CCR rule.

        b. Costly standards without flexible implementation for small
            communities: For example, Arsenic--This is one of the many
            ``contaminants'' that Ranking Member Costa referred to in his
            opening remarks. Here is a naturally occurring element that can
            be found in water supplies throughout the country. When USEPA
            lowered the allowable concentrations to 10 parts per billion it
            put many systems into a state of non-compliance and they were
            forced to put in treatment. The treatment that most opted for--
            reverse osmosis--was not only expensive to install but is
            expensive to run as well.

        c. Complexity of Federal Regulations: For example, the Lead and
            Copper rule--although the water system delivers lead/copper
            free water to the end-user they are still being asked (or
            forced) to take responsibility for what happens to the water
            once it leaves the systems pipes.

        Question 4. Can you offer any insight into the application process,
    and how USDA might be able to coordinate with the EPA to streamline
    applications and timing of engineering requirements in the process?
        Answer. The answer is quite simple--communication. In Illinois the
    predominant funding entities (Rural Development, IEPA, Department of
    Commerce and Economic Opportunity, and the Illinois Finance Authority)
    will meet on a quarterly basis. Also attending these meetings are
    Illinois Rural Water Association and RCAP. The sole purpose of these
    meetings is to coordinate project funding among the different agencies
    and identify those systems that might benefit from technical assistance
    visits.

        Question 5. With the limited funds available, how would water
    applications fit into the regional concept discussed at the hearing,
    particularly in light of the over $3 billion backlog?
        Answer. Obviously regionalization is a very good tool in lowering
    overall costs of supplying water to an area or treating wastewater
    generated in a region. However, getting municipalities or systems with
    their own separate identities to ``buy into'' a regionalized concept is
    very difficult. Illinois has met with some success in what we prefer to
    call consolidation. In recent years several water treatment plants have
    been constructed to serve a number of municipalities. In other words
    they are wholesalers of water and the individual municipalities, co-
    ops, etc. retain control over their distribution systems.
        We support consolidation and regionalization. It has been one of
    our core missions in expanding public drinking water systems to rural
    communities. This has been a great benefit to rural households and
    small communities. However the key principle in any successful
    consolidation, is local support for the consolidation--and local
    control on when and how they choose to consolidation. Rural Water has
    led or assisted in more communities consolidating their water supplies
    than any program, policy or organization. Again, when communities
    believe consolidation will benefit them, they eagerly agree. However,
    if communities are coerced to consolidate, one can almost guarantee
    future controversy.

    Question Submitted By Hon. Vicky Hartzler, a Representative in Congress
            from Missouri

        Question 1. With respect to the grant and loan applications for
    water and wastewater systems, what are the primary needs for
    communities which apply?
        Answer. I can only speak to what I see here in Illinois but the
    three top needs in Illinois are:

        a. There are still large areas of rural Illinois that experience
            either an inadequate supply of water or water of questionable
            quality. Residents in these areas are forced to conserve as
            much water as possible so the amount they have to haul from
            town is kept to a minimum. A picture is worth a thousand words
            and I would like to include this I downloaded from the Internet
            that as a true example of how some rural Americans get their
            drinking water--load it in a tank in the back of a pickup truck
            and haul it home. You will find these municipal fill stations,
            as they are called, are the busiest just before holidays and
            any major forecasted storm. No one wants to run out of water at
            those times.

        b. As more regulations are passed by regulatory agencies, systems
            that were once in compliance find they are no longer so and are
            forced to determine the most cost effective way of satisfying
            the new regulations. Some examples of this can be found above.

        c. Replacing outdated system components. This can be anything from
            a new water or wastewater treatment facility to any of the many
            subcategories. Again, in Illinois, I have seen many systems
            request funding that will replace water towers, water mains in
            problem areas, treatment facility equipment, lift stations,
            pump stations and the list goes on. Right now there seems to be
            quite a need for new water towers as the ones built back in the
            1930's begin to fail.

        Question 2. What percentage of applications are addressing outdated
    systems that are beyond their useful life?
        Answer. According to USDA approximately 25% of applications
    currently in the backlog are for renovation and replacement of water
    systems.

        Question 3. To what extent do new EPA regulations force communities
    to upgrade their systems?
        Answer. It has been my experience, that shortly after (and at times
    even before) a new regulation is put in place communities will make
    substantial requests for funding. Over the next few years that funding
    ``need'' is somewhat satisfied and then a whole new set of regulations
    come along--resetting the cycle.

        Question 4. Are new environmental challenges a factor?
        Answer. New environmental challenges are a factor. For example,
    current implementation of EPA nutrient reduction initiatives under the
    Clean Water Act are requiring many communities to install costly new
    treatment technologies.

        Question 5. To what degree is need driven by growth of the
    communities?
        Answer. Certainly there are some projects that are being driven by
    growth but for, the most part, they are the last to be funded through
    RD.

    Response from Robert B. Stewart, Executive Director, Rural Community
            Assistance Partnership

    Questions Submitted By Hon. Timothy V. Johnson, a Representative in
            Congress from Illinois

        Question 1. Your testimony seems to indicate that a small town very
    much in need of a water system would not be disadvantaged if a priority
    is given to a regional application. Could you please clarify how a
    priority can be given to a project, but that in doing so another
    project would not be disadvantaged?
        Answer. The priority point system used by Rural Development ensures
    that varying considerations are given weight when considering the merit
    of a project application. Funding decisions are decided by a
    combination of factors, any one of which can only influence the funding
    decision to a small extent. RCAP proposes that the agency give a small
    number of priority points for projects that can demonstrate that they
    have analyzed options for regionalization. Regionalization is not
    feasible for all water systems, so a system that awards points for
    projects that can demonstrate that they have weighed the costs and
    benefits of regionalization--even if they ultimately decide that a
    regional project is not feasible--will encourage small towns to
    consider all available options, including regionalization. The extent
    to which this would impact other applicants is limited because it is
    only one of many factors considered by the agency. Systems facing
    public health risks or in need of emergency repairs would still be
    getting priority points under the existing criteria and would therefore
    continue to offer competitive applications. Those that would score high
    under the existing criteria and consider regionalization as a solution,
    however, would be given higher priority than those that would score
    high under the existing criteria and do not consider regionalization as
    a potential solution.

        Question 2. USDA Rural Development has a strong track record
    regarding its effectiveness at providing rural areas with electricity,
    water, sewer, and community facilities. Would the Federal Government be
    equally as effective providing economic planning and development as
    versus infrastructure?
        Answer. RCAP does not view infrastructure and economic development
    as mutually exclusive. In order to support small businesses and
    industry, towns need to meet their basic infrastructure needs. Those
    infrastructure components form the foundation on which local economies
    are built, and are an integral part of rural economic development. As
    mentioned, Rural Development's programs have a strong track record in
    those fields, which has helped to foster economic growth by providing
    the foundational infrastructure necessary to support industry and
    entrepreneurs. USDA Rural Development currently operates a variety of
    economic development programs such the Business and Industry Guaranteed
    Loan (B&I) Program; the Intermediary Relending Program (IRP); the Rural
    Business Enterprise Grant (RBEG) Program; and the Rural Economic
    Development Loan and Grant (REDLG) to name just a few. These programs
    allow local, rural communities, nonprofit and for-profit organizations
    to obtain financial assistance (mainly loans along with very modest
    grant programs) to support development activities created by and for
    these local communities. RD business programs are not directive in
    regards to the initiatives selected by the local communities and
    businesses and have operated successfully for many years.

        Question 3. Your testimony suggested that a town of 10,000 or more
    could seek funding in the bond market. What rates would a town of that
    size expect to find in the bond market?
        Answer. The likely bond rate for any municipality depends on a
    variety of factors: population, property values, industrial customer
    base, indebtedness of the town, and credit history, among others. As
    such, the rates faced by towns from 10,000 to 50,000 in population
    would vary depending on the characteristics and history of the
    communities involved. Typically for these size communities that already
    have some infrastructure developed and are looking to make improvements
    or expansions to their services, the rates would be 4\1/2\% or less in
    the open market for communities without a current bond rating. Smaller
    communities and those without any current water and wastewater
    infrastructure have no real options other than financing through RD or
    SRFs. Also of note is the increased willingness of many local banks to
    finance infrastructure projects for these mid-sized communities at
    terms of up to 15 years with comparatively low rates and much reduced
    processes costs.

        Question 4. You mentioned the economic activity generated by each
    dollar of Federal investment. Could you elaborate on how that is
    calculated, and how the tax base is expanded after these investments?
        Answer. The figures cited in my testimony--that every water and
    wastewater construction dollar generates nearly $15 of private
    investment and adds $14 to the local property tax base--come in part
    from a study by Fagir S. Bagi, an economist from the Economic Research
    Service at USDA that was published in the Winter 2002 issue of ``Rural
    America'' (Vol. 17, Issue 4). Recent studies have reached similar
    conclusions, including a report by the Cadmus Group for the U.S.
    Conference of Mayors in 2008 that estimates that every $1 we invest in
    water/sewer infrastructure increases GDP by $6.35 in the long term and
    that every water utility construction dollar generates nearly $15 of
    private investment and adds $14 to the local property tax base. I am
    happy to provide copies of these reports at your request.

        Question 5. You suggested that the Community Facilities program
    should be opened up to planning grants. When budgets are already being
    strained and the funds available to the program for critical community
    investments are even more limited, how does it make sense to instead
    use the money for planning and writing grants?
        Answer. In my testimony, I suggested that the Community Facilities
    (CF) program be opened to Technical Assistance grants, not planning
    grants. Technical assistance (TA) involves helping both with the nuts
    and bolts of facility construction and operation, and also in
    developing local leadership capacity to handle the financial and
    managerial side of project development. Allowing TA for the CF program
    would enable nonprofit TA providers to work directly with communities
    receiving RD loans and grants to get their finances in order and ensure
    that the taxpayers' investment is repaid. Part of the technical
    assistance provided may include planning, but the funding would be
    available for a much broader slate of assistance, rather than simply
    planning.
        It makes sense to use a small portion of the limited funds for TA
    because it expands the pool of available resources for communities and
    ensures that taxpayer dollars that are loaned to communities are
    repaid. Over the nearly 40 years that RCAP has provided TA in the
    water/wastewater field, we have leveraged small amounts of Federal
    dollars into millions of dollars of investment directly into rural
    communities. Over the past 4 years (FY08-FY11), RCAP has helped Rural
    Development water/wastewater project communities obtain over $360
    million in project financing, a return of more than $15 for every
    dollar we receive from the agency. By replicating the success of the
    water/wastewater program, a CF TA program can stretch Federal dollars
    by attracting resources and investment directly to CF projects and
    developing the financial and managerial capacity of local officials to
    ensure that both Federal and non-Federal loans are repaid in full.

        Question 6. You talk about expanding technical assistance in
    several parts of your testimony. Can you offer any empirical evidence
    to substantiate your claim that diverting funds away from programs and
    into technical assistance makes scare resources go even farther?
        Answer. As mentioned in the answer to the previous question, over
    the past 4 years, RCAP has leveraged over $15 of investment directly in
    community projects for every dollar of funding we receive from Rural
    Development. We acknowledge that it is easier to attract investment to
    water infrastructure, because there are ratepayers, and thus a
    guaranteed revenue stream, but even if TA providers are able to help CF
    project communities attract only \1/2\ as much financing for every
    Federal dollar ($7.50:1), the increased resources will help stretch
    scarce Federal funds while providing critical community facilities that
    support economic development and job creation in rural areas. TA
    providers are able to foster relationships among small communities,
    private lenders, state and local governments, and Federal agencies to
    maximize the resources available to communities and attract non-Federal
    capital to these projects that help expand the reach of Federal
    programs.

        Question 7. Could you describe in greater detail the comprehensive
    Federal approach to Technical Assistance you mention in your testimony?
    What is the difference between what you are suggesting and simply
    ensuring USDA is doing their job?
        Answer. By comprehensive technical assistance, I mean using the
    success of the water/wastewater TA program as a model for TA programs
    for the rural development programs that don't currently have one, such
    as for Essential Community Facilities or the Broadband Initiatives
    Program. For rural communities across America, simply making financing
    programs available, whether its loans, loan guarantees or grants, is
    not sufficient to implement meaningful development programs that
    improve the quality of life and economic opportunities for rural
    Americans. Nonprofit technical assistance organizations such as RCAP
    have the on-the-ground experience and expertise to guide rural
    communities towards those development programs that most closely
    respond to their unique needs while ensuring that all Federal funding
    is used in areas of greatest need and to affect the greatest economic
    benefit for those communities.

        Question 8. You mentioned that you have used pre-development loans
    to assist communities. Of the over $3 billion in projects stuck in the
    backlog at USDA, how many of those pending applications were put
    together with pre-development loans?
        Answer. Absent a detailed review of each state's applications it
    would be difficult to accurately characterize the number of pending
    applications that used pre-development loans. Notably RD applications
    require a significant amount of work to be accomplished prior to a
    commitment of funds by RD. The communities and their engineers are
    therefore burdened with finding the funds for requirements such as the
    preliminary engineering report, environmental assessment or site
    acquisition. While some engineering firms can carry these costs
    (sometimes for a year or longer) until the project is funded, many or
    most cannot. For the smaller communities and for those that are
    planning for first-time water or wastewater systems, this places a
    major financial burden on the systems and can result in delays for
    critical projects or an outright inability to proceed with the
    application. For instance, in Texas the majority of current
    applications were made possible by accessing pre-development loans
    while in Mississippi the incidence of these loans is much smaller. The
    Revolving Loan Fund authorized by the farm bill assists with meeting
    this need, but only for a small percentage of applicants. Similar to
    the response earlier on the question regarding bond financing,
    communities without existing systems are unable to obtain pre-
    development loans from traditional financial institutions and few of
    these communities have the assets to pay for these costs up-front.

        Question 9. Mr. Dunmire and Mr. Stewart, you both talked about the
    repayment rates of water loans, using the lifetime default rate of
    1.02% and a delinquency rate of 0.18% respectively. Just so we are
    comparing the same numbers, could you both clarify whether you mean to
    refer to the same rates, or if there is a reason you have described two
    different aspects of the programs?
        Answer. The delinquency rate I referenced is the figure reported by
    USDA-RD Water and Environmental Programs at the release of their annual
    activity report for fiscal year 2011. In the Annual Activity Report
    itself, the agency writes that it ``[m]aintained a less than one
    percent delinquency rate on the portfolio of more than 18,000 loans.''
    In other words, of WEP's current portfolio, the agency reported that
    only 0.18% of borrowers are delinquent. The lifetime default rate, as
    cited by Mr. Dunmire, is a different statistic, though both show that
    the program has been enormously successful and provide an example of
    the efficacy of technical assistance programs.

    Response from David G. Rozzelle, Executive Vice President, Suddenlink
            Communications; Member, National Cable Telecommunications
            Association, Rural and Small System Operator Committee

    Questions Submitted By Hon. Timothy V. Johnson, a Representative in
            Congress from Illinois

        Question 1. Could you describe how many of your members have
    accepted the responsibility of being the carrier of last resort to
    ensure every American has access to phone service which is now shifting
    into access to broadband service? How many of your members participate
    in the RUS broadband loan program?
        Answer. State-imposed carrier of last resort obligations originated
    decades ago to ensure that telephone companies in rural areas would
    continue to offer basic voice connections to residents in those areas.
    Carrier of last resort generally is not an option that companies are
    free to accept or reject. Rather, it is a set of rights and obligations
    imposed by states. Most states imposed these obligations on telephone
    companies because they were monopoly providers and therefore were
    expected to serve all customers, in some cases with the aid of Federal
    subsidies. Conversely, most states have not imposed these obligations
    on new entrants, including cable companies. In addition, because cable
    operators generally do not receive Federal or state subsidies, there
    may be some extremely high cost areas that telephone companies alone
    are able to serve as a result of government subsidies.
        Cable broadband connections also enable consumers to access online
    voice-over-IP (VoIP) providers like Vonage--so consumers in areas
    served by cable also have voice connectivity in this way. It is worth
    noting that while many large and small cable operators have extended
    voice and broadband service to many rural areas without the help of
    government subsidies, the new FCC rules do not allow any opportunity
    for competitive providers to obtain USF support in areas served by
    rural telcos.
        To my knowledge, only one of NCTA's members participates in the RUS
    farm bill broadband loan program.

        Question 2. In your testimony you suggested that USDA should
    establish a speed threshold similar to that of the FCC. Do all your
    members meet the 4 mega-bits per second threshold you mention in your
    testimony at all times, even during times of peak usage, for all of
    your customers?
        Answer. On a customer specific basis, no provider, regardless of
    technology, can meet a specified speed threshold at ``all times''--the
    shared nature of mass market broadband services, and the Internet
    itself does not allow such precision. In a recent report, however, the
    FCC found that, on average, cable operators delivered 93 percent of
    advertised download speeds and 108 percent of advertised upload speeds
    during peak hours. Suddenlink monitors the performance of its network
    closely to make certain we provide our customers with the experience we
    have promised them.
        While I can't vouch for each and every NCTA member, my
    understanding is that NCTA's members as a group endorse the definition
    of broadband contained in the FCC's National Broadband Plan, which is 4
    Mbps downstream.

        Question 3. Is there a need for rural broadband investments? How
    are your members reaching the last, unserved portion of rural
    households?
        Answer. Suddenlink and NCTA strongly support the availability of
    broadband funding for unserved rural areas. Quality broadband services
    should be available to all regions of the country, including the least
    densely populated areas of the country. Broadband is a crucial driver
    of economic recovery and global competitiveness. Broadband links rural
    America to the rest of the country and the world, creates jobs,
    improves educational opportunities, and delivers health care more
    efficiently. Rural broadband funding programs should focus on bringing
    broadband to those rural consumers in areas where it is uneconomic to
    serve.
        Cable operators and other providers are investing millions of
    dollars to bring the most advanced services to rural customers, and to
    reach those unserved areas if they can with private investment dollars.
    As I said in my direct testimony, in the past 3 years, Suddenlink has
    invested $350 million above our normal capital spending levels to
    improve our network and our services. As a result, we provide speeds up
    to 107 Mbps to many of our customers, including customers in Ripley, WV
    (2010 population 3,252) and Pomeroy, OH (2010 population 1,852).
    Another cable operator, Sjoberg's Inc., has connected the schools in
    the Thief River Falls, MN area (pop. 8400) with fiber links operated at
    100 Mbps, as well as a 1 gb fiber-based network for the City of
    Warroad, MN (pop. 1300) that ties together the City Hall, Fire
    Department, Police Department and the Utility Department. Sjoberg's, in
    fact, is building out to many low density areas within its footprint
    (less than five homes per mile of plant) with fiber-to-the-home
    technology and is providing 5, 8 and 11 Mbps speeds.
        As noted above, we acknowledge that there are areas which remain
    unserved, and where Federal and state subsidies may be needed to help
    provide broadband service.

        Question 4. Were the three studies referenced in your testimony
    conducted by an independent group, or were they commissioned? How much
    of the reluctance for investment in broadband inferred by those studies
    is actually due to the uncertainties surrounding the FCC reform orders?
        Answer. As noted in my testimony, the studies were commissioned by
    NCTA but were conducted independently by Navigant Economics. The case
    studies demonstrate that millions of dollars in grants and loans have
    been directed to areas where a significant majority of households
    already have broadband coverage. According to the Navigant report, this
    has resulted in an exceedingly high cost of $30,104 per each
    incremental home passed in the studies
        The reluctance to serve remote areas is a function of economics,
    not regulatory policy. Unserved areas nearly always have a sparse
    population that is insufficient to support the costs of building and
    operating broadband facilities. Targeted and efficient government
    support is the most appropriate means of extending broadband to those
    areas. For example, the FCC is currently working on the Connect America
    Fund which targets USF support to help bring broadband to unserved
    households. USF reform and extending broadband service to unserved
    areas are fully compatible goals.

        Question 5. Your testimony focuses on the issue of `overbuilding.'
    Yet you do not distinguish whether the alleged existing service is
    directly comparable across examples, to the competing project, or even
    sufficient to meet the needs of the community. Could you please list
    for us each of the projects you feel were simply installing the exact
    type and speed of service on top of the same speed and area of service?
    What percentage would these be of all the broadband projects funded
    through RUS?
        Answer. By ``overbuilding,'' we mean government funding of an area
    where a wireline or terrestrial wireless provider already offers
    broadband service that meets or exceeds the FCC's definition. Scarce
    taxpayer dollars should be put to work to extend broadband to areas
    that lack broadband service at those speeds, rather than subsidizing
    the construction or upgrade of an additional provider in an area that
    is already served.
        Additionally, because of the lack of transparency in the RUS
    Broadband Loan Program, we have a hard time determining the exact
    details of any of the overbuild projects and, thus, cannot determine
    what percentage of the RUS broadband projects primarily serve areas
    already served. It should be noted, however, that the 2009 report by
    the Department of Agriculture Inspector General found that 34 of 37
    applications granted (95%) were for ``areas where one or more private
    broadband providers already offered service.''

        Question 6. This Committee also expressed reservations with the way
    that the ARRA was implemented, though we hoped that rural America would
    benefit in spite of the rushed process. In your testimony, do you mean
    to compare the BIP projects funded under the ARRA directly to the loan
    program authorized in the farm bill?
        Answer. While BIP funding is separate from the loan program
    authorized under the farm bill, they are both implemented by RUS. RUS's
    stewardship of BIP, like its implementation of the farm bill program,
    demonstrated a failure to target funding to unserved areas despite
    explicit direction to do so. Under both programs, many millions of
    dollars in grants and loans have been made in areas where a significant
    majority of households already have broadband coverage from one or more
    broadband providers. This ongoing failure across multiple programs is
    why we believe that RUS must be given clear and unambiguous direction
    to ensure that broadband loan dollars are appropriately directed to
    areas that lack broadband service.

        Question 7. You suggested that RUS borrowers post quarterly reports
    online. What information are you seeking through this concept?
        Answer. We believe that it is important to hold recipients of
    government support accountable for meeting the goals for which support
    was provided. There should be transparency after the RUS awards money
    to an applicant. Quarterly progress reports should detail the use of
    the funds (e.g., is the money actually being used to extend plant to
    unserved areas, or is it being directed at areas that already have a
    broadband provider; is the money being spent in the manner that was
    approved in the application?); status of the project; next steps; and
    timeframe of completion. If an entity accepts public funding, it should
    reasonably expect to have to provide full information about how those
    funds are being spent, even if such data would be considered
    proprietary by a privately-funded provider. Moreover, if support is
    targeted to unserved areas--as it should be--there should be few, if
    any, competitive concerns with respect to such disclosure.

    Response from Mark Bahnson, Chief Executive Officer and General
            Manager, Bloomingdale Communications; on Behalf of National
            Telecommunications Cooperative Association; Organization for
            the Promotion and Advancement of Small Telecommunications
            Companies; Western Telecommunications Alliance

    Questions Submitted By Hon. Timothy V. Johnson, a Representative in
            Congress from Illinois

        Question 1. You highlighted the fact that not all providers have
    the same focus, and in fact some cherry-pick the concentrated, easier
    to serve, and more lucrative areas. Does this approach fit into the
    model of ensuring broadband service is provided universally?
        Answer. No. Some opponents of the RUS telecommunication programs
    and USF point to their ability to provide broadband service without RUS
    loans or USF cost recovery. However, it's important to note that these
    providers often fail to provide service to the most high-cost ``last
    mile'' households and businesses, focusing instead on the concentrated
    areas of a community or service area. This method of service fails to
    provide broadband ``universally.'' On the other hand, rural telecom
    providers often have carrier-of-last-resort obligations that require
    them to serve all customers in their service territory--not just the
    more densely populated, profitable towns and cities.
        Without carriers-of-last-resort reaching outside the towns with the
    help of this public-private partnership, there would be even more
    unserved consumers in rural America--and the challenge of achieving
    universal broadband would be greater than it already is. And if this
    public-private partnership is undermined, then small rural telcos may
    have no choice but to likewise abandon the ``countryside'' and retreat
    to serving just within the ``in-town'' boundaries too.

        Question 2. There are several programs operated by USDA which can
    be used to deploy broadband and build community facilities to provide
    public access to the Internet. These include the Community Facilities
    Program and the Distance Learning and Telemedicine Program. Do you
    think that there is an opportunity in these programs to consolidate the
    authorities so that rural towns do not have to spend a great deal of
    time trying to sort through a maze of different programs? Are there
    other programs which could also be consolidated to reduce the confusion
    on where to apply?
        Answer. The presence of multiple USDA telecommunication programs--
    each offering unique features--ensures flexibility that might not
    otherwise be available under a more ``one-size-fits-all'' approach. For
    example, a remote, high-cost community with no broadband service might
    be best served with a Community Connect Program grant that makes
    available a community center with computer access points. However,
    another community without direct access to medical care may better
    benefit from Distance Learning and Telemedicine Program development
    funds to enhance their emergency service capabilities through
    telecommunications technology. For example, rural educational
    opportunities in Bloomingdale's service territory have been greatly
    expanded because of a RUS Distance Learning grant, a RUS loan that
    supported high-speed Internet deployment to the school, and the USF E-
    Rate program, which helps schools ensure students have access to the
    Internet.

        Question 3. Some of the testimony others presented seems to
    indicate that insufficient changes were made in the 2008 Farm Bill,
    although those assertions rely on older OIG reports from the previous,
    2002 Farm Bill. Given that the farm bill loan program has been stalled,
    do you believe there is sufficient information to make such a claim?
        Answer. No. Interim rules, which were required by programmatic
    changes to the Broadband Loan Program in the 2008 Farm Bill to better
    target resources, were not put in place until March 2011 (during which
    time no new loans were approved). Since that time, the FCC's adoption
    and ongoing consideration of changes to USF have created regulatory
    uncertainty, dramatically reducing both the number of new Broadband
    Loan Program applications and RUS's ability to finalize rules and
    evaluate and approve new loans. As a result, the Broadband Loan Program
    has been at almost a complete standstill since 2008. With virtually no
    new loan projects available to assess the results of the 2008 Farm
    Bill's reforms, now is not the time to place new restrictions on the
    Broadband Loan Program. Though some providers that don't typically
    serve rural areas want to dramatically restrict the program, it was
    inoperable for 3 years after the 2008 Farm Bill and has been frozen by
    regulatory uncertainty for the past year. Restoring regulatory
    certainty will enable this program to return to the successful track
    record it had as a public-private partnership.

        Question 4. Just to clarify one of the points in your testimony, is
    it your view that putting a 75% threshold for unserved households would
    completely eliminate RUS' ability to deploy broadband in our small,
    rural communities?
        Answer. Minimizing subsidized ``overbuilds'' in areas where
    broadband already exists should remain a top goal for RUS. However, the
    proposal to prevent RUS from loaning in any area where more than 25% of
    households already have access to broadband would likely dramatically
    reduce demand for the program and eliminate significant portions of the
    country from eligibility. Under such a scenario, a provider wishing to
    receive a loan to serve a rural area where 74 out of 100 people do not
    have access to broadband would not qualify for a loan. It should also
    be noted that in rural areas, such a population could be spread over
    miles and miles. Put another way, such a system could leave three rural
    residents ``unserved'' in near-perpetuity simply because one resident
    located miles away happens to be fortunate enough to receive some level
    of broadband.
        Eliminating the Broadband Loan Program, which provides loans that
    must be paid back to the Federal Government with interest, as an option
    to help provide service in such a situation is not the answer for
    households and businesses that remain unserved year after year and have
    no prospect for broadband service in sight. The concerns expressed
    around this issue have been loudly heard, and the Secretary of
    Agriculture's discretion is an appropriate barometer for such decision
    making.

        Question 5. Some of the testimony presented suggested that USDA
    adopt the FCC targets of 4 Mbps down and 1 Mbps up for broadband
    service speed. In your view, how would such a universal requirement
    affect USDA's ability to deploy broadband in rural America?
        Answer. According to the FCC's National Broadband Plan, 14 million
    people in seven million housing units do not have access to terrestrial
    broadband capable of download speeds of 4 Mbps, and that such housing
    units are more common in rural areas. Using the National Broadband
    Map's Broadband Statistics Report, it has been pointed out that 98% of
    rural Americans (100% urban) have access to ``broadband'' download
    speeds greater than 786 kbps, and some claim the loan programs are
    therefore no longer needed. However, the same report shows that only
    79.2% of rural Americans (99% urban) have access to speeds greater than
    6 Mbps and only 70.8% rural (97.6% urban) have access to speeds greater
    than 10 Mbps, which are minimum download speeds more commonly
    considered necessary for rural areas to compete in the modern broadband
    world. Indeed, the FCC established a benchmark of 6 Mbps downstream and
    1.5 Mbps upstream for broadband deployments in later years of CAF Phase
    II in the Final Order for USF reform released Nov. 18, 2011.
        RUS telecommunication programs provide up-front capital to build
    out to new customers and to upgrade networks. USF, by design, provides
    for cost recovery for the ongoing operation of the network and
    maintenance, and is at bottom intended to make sure that the prices
    consumers pay for service in rural areas are affordable--that is,
    ``reasonably comparable'' to those in urban areas. RUS programs are
    also aimed at the efficient practice of ``building it right the first
    time.'' Rather than dispatching construction crews multiple times over
    many years at higher costs to handle repeated upgrades, the RUS
    programs encourage an approach to minimize the need for repeat
    construction efforts. Instead, these programs aim at ensuring that each
    network deployed (which is collateral for the loans provided) will
    retain the maximum value over its useable life.
        USDA will play a crucial role in delivering faster broadband to
    more rural Americans, but the job will not be completed unless USF is
    targeted to provide the cost recovery essential to maintaining service.
    As of now, it does not appear that USF reform will result in the kind
    of support to small, rural providers that will be essential to
    delivering faster speeds. The FCC has decided to direct incremental
    support for broadband to the larger carriers that traditionally have
    not delivered broadband to their rural service areas. If the agency
    proceeds on this course and the gamble does not work, USDA lending
    alone will be insufficient for addressing the resultant gaps in
    service.

        Question 6. You mentioned the maintenance and upgrading of systems.
    To what extent do investments in upgrades allow you to expand your
    coverage and service to unserved areas?
        Answer. If broadband is worth deploying to high cost rural areas
    then it is worth investing in upgrades to ensure that recipients are
    able to fully utilize the Internet and participate in modern global
    economy. Smart broadband deployments can help keep the cost of upgrades
    down.
        In order to provide broadband at a reasonable cost, the networks
    deployed today must be easily scalable to meet the broadband needs of
    tomorrow without significant additional investment. Much of the
    infrastructure of a wireline broadband network is in buried or aerial
    cable plant that has a twenty-year life, or longer. If a service
    provider were to construct a network that fails to meet the customer's
    needs after only a few years, the cost to provide broadband would be
    considerably greater because a second network would have to be designed
    and built before the first network had reached the end of its economic
    life. In these instances, the network that appears to be the least
    expensive initially may be more expensive in the end because of
    upgrades or network replacements that must occur.
        Deploying broadband networks in areas of low customer density
    presents its own challenges, because the infrastructure cost per
    customer can be up to ten times greater than in urban areas. In rural
    areas it is especially important that the infrastructure deployed be
    easily scalable to meet the customer's future broadband needs because
    the replacement cost is so high.
        Michael Copps (when he was the Acting FCC Chairman) recognized this
    when he said, ``Bandwidth-intensive applications could very quickly
    become the norm in the U.S.--even in rural areas. Technologies that
    cannot be upgraded easily could make Internet applications less than 5
    years from now look like the dial-up downloads of today.'' (Federal
    Communications Commission, Bringing Broadband to Rural America: Report
    on a Rural Broadband Strategy, Michael J. Copps, Acting Chairman, May
    22, 2009)

        Question 7. You mentioned the disparity in speeds set by RUS and
    how that undermines the technology neutral responsibilities of RUS. Is
    it your view that there should be a universal goal for broadband speed,
    and should the actual speed match what providers advertise to
    customers, particularly during times of peak usage?
        Answer. We oppose a lesser speed standard for would-be borrowers
    who seek to deploy wireless networks. In the interim rules, RUS
    established the minimum rate of data transmission as 3 Mbps for mobile
    broadband and 5 Mbps for fixed broadband. Attaching a value and setting
    a lower data transmission requirement to mobile service is contrary to
    the technology neutrality statutory directive. As mentioned previously,
    if broadband is deployed in a scalable manner then the sky is the limit
    for speed, which is crucial given that it is hard to know what will be
    needed as more adopt broadband and use it for more complex applications
    and tasks. It is important that we don't put a false ceiling on
    broadband capability. It is difficult to predict what broadband speeds
    will be required in the near future, but if the past is any guide,
    speed requirements will continue to increase dramatically and support
    mechanisms should reflect such networks demands. It is also important
    that providers deliver what they advertise, especially at peak hours,
    because anchor institutions, businesses, and individuals rely on
    carriers advertised speeds and plan accordingly.

        Question 8. Could you describe how many of your members have
    accepted the responsibility of being the carrier of last resort to
    ensure every American has access to phone service which is now shifting
    into access to broadband service? How many of your members participate
    in the RUS broadband loan program?
        Answer. Nearly all of NTCA's 570 member cooperatives and commercial
    companies utilize the Universal Service Fund and adhere to carrier-of-
    last-resort responsibilities to serve every American who requests
    service. Small, rural providers will continue this tradition of
    deploying the most advanced services available to rural America as long
    as support is available to help them recover reasonable costs of
    service. The carrier-of-last-resort requirement has been successful and
    is an essential piece of the puzzle that ensures customers in rural
    telcos' service territories have advanced communication services.
    Without such obligations to serve all customers, some providers will
    continue to ``cherry-pick'' only the most profitable households and
    businesses and leave less profitable areas behind. Many NTCA members
    have participated in the RUS broadband loan program. The only Broadband
    Loan recipient since the 2008 Farm Bill was an NTCA member.

                       FORMULATION OF THE 2012 FARM BILL
                            (CONSERVATION PROGRAMS)

                                  ----------

                            THURSDAY, APRIL 26, 2012

                      House of Representatives,
            Subcommittee on Conservation, Energy, and Forestry,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Subcommittee met, pursuant to call, at 9:32 a.m., in
    Room 1300, Longworth House Office Building, Hon. Glenn Thompson
    [Chairman of the Subcommittee] presiding.
        Members present: Representatives Thompson, Goodlatte,
    Stutzman, Gibbs, Roby, Huelskamp, Hultgren, Ribble, Schrader,
    Owens, McIntyre, Costa, Walz, Pingree, Sablan, and Peterson (ex
    officio).
        Staff present: Brent Blevins, Tamara Hinton, Josh Maxwell,
    John Porter, Patricia Straughn, Lauren Sturgeon, Suzanne
    Watson, John Konya, Merrick Munday, Anne Simmons, Jamie
    Mitchell, and Caleb Crosswhite.

     OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN
                       CONGRESS FROM PENNSYLVANIA

        The Chairman. Good morning, everyone. This hearing of the
    Subcommittee on Conservation, Energy, and Forestry to discuss
    the conservation programs in advance of the 2012 Farm Bill will
    come to order. I will start out with my opening statement.
        Once again, good morning and welcome. I want to welcome
    everyone to this Conservation, Energy, and Forestry
    Subcommittee hearing to examine the conservation programs in
    the context of the 2012 Farm Bill. Now we began the information
    gathering process for the next farm bill 2 years ago, and since
    then, we have conducted 11 audit hearings, and four nationwide
    field hearings to look for ways to improve agriculture programs
    for farmers and increase efficiency.
        In the audit hearing conducted by this Subcommittee, we
    discussed more than 20 conservation programs administered by
    USDA, and identified areas of duplication and overlap. In our
    field hearings, we heard time and time again from farmers and
    ranchers across the nation about the importance of conservation
    programs to their livelihoods.
        Now this week we began the next series of hearings on the
    Subcommittee level to gather input from national agricultural
    leaders and stakeholders. We know that voluntary conservation
    programs are critical in assisting producers in land management
    decisions and implementing conservation practices, and in many
    cases, conservation programs are lifelines for farmers.
        Our farmers and ranchers, through the assistance and
    incentives provided by the farm bill conservation programs,
    have voluntarily worked to reduce soil erosion, increase
    wetlands, improve water quality, and preserve farmland and
    wildlife habitat. The environmental gains that they have
    achieved are a testament to our producers, who are truly the
    most dedicated conservationists.
        The conservation programs have grown significantly in size
    and scope since the 1985 Farm Bill. The 2002 Farm Bill raised
    conservation spending by $17 billion over 10 years, which was
    an 80 percent increase. Congress increased the commitment to
    important programs like the Conservation Reserve Program and
    the Environmental Quality Incentives Program, while also
    creating new programs like the Conservation Stewardship Program
    to increase participation in conservation practices. Then the
    2008 Farm Bill strengthened the conservation title with an
    additional commitment of $4 billion over 10 years. It includes
    new regional and cooperative partnership programs as well as
    the reauthorization and increased spending of current programs.
    Additionally, the 2008 Farm Bill created new conservation
    programs aimed at enhancing cooperation among producers and
    conservation organizations. Now these programs have helped
    support conservation initiatives in areas such as the
    Chesapeake Bay watershed, which has great importance to the
    farmers and ranchers in Pennsylvania and throughout the Mid-
    Atlantic region.
        We had an easier time improving conservation programs in
    our last two farm bills when we could afford to increase
    spending. Today, this Committee is faced with a very different
    budget situation. Last fall as a part of the proposed Deficit
    Reduction Agreement, the House and Senate Agriculture
    Committees worked together to develop a proposal for the Super
    Committee. We put forward a proposal that streamlined program
    delivery in many areas, and included the consolidation of
    numerous programs, including several under the conservation
    title. While the Super Committee failed to reach agreement, the
    Agriculture Committees showed that they could work together to
    do their part. I, for one, believe the agriculture community
    deserves a farm bill that develops--that is developed through
    regular order. Regular order provides a more thorough process
    to really get it right when it comes to prioritizing
    conservation programs that are working and streamlining any
    programs with overlapping missions and goals.
        Today, not only will the Agriculture Committee have to do
    our part within the overall deficit situation, but as all of us
    know, we have dozens of programs, including many under the
    conservation title, with no baseline past 2012.
        The Senate put forward its draft today, its proposal for
    the farm bill last week, which is slated to be marked up today,
    and it utilizes many of the ideas produced during the
    Subcommittee process. It would reduce spending by approximately
    $6.5 billion over 10 years. As we move forward, it is important
    that when we find these savings, we must maintain our ability
    to provide the same level of on the ground service to our
    farmers and ranchers, and that is why we are here today, to
    hear your perspective on various proposals being considered as
    we move forward on the House side with reauthorization.
        When it comes to the farm bill, which is really the most
    significant piece in defining public policy to guide
    agriculture, for me, it comes down to three principles that we
    have enjoyed in this country and we need to make sure we
    preserve into the future: that America always has the most
    affordable, highest quality, and safest food supply anywhere in
    the world.
        Now I would like to thank all of our witnesses for being
    here today. I want to extend a warm welcome to a resident of
    Pennsylvania's 5th District who is going to be on our second
    panel, Mr. Carl Homan, fifth generation dairy farmer from
    Centre County, and I really appreciate, Mr. Homan, your
    participation here today. He has extensive experience utilizing
    Title II programs and will--certainly will offer his thoughts
    on how we should move forward.
        I look forward to the testimony of all the witnesses. My
    sincere appreciation to each one of you coming and bringing
    your expertise and your experience to help us in developing a
    sound farm bill, going forward.
        [The prepared statement of Mr. Thompson follows:]

    Prepared Statement of Hon. Glenn Thompson, a Representative in Congress
                               from Pennsylvania

        Good morning. I want to welcome everyone to this Conservation,
    Energy, and Forestry Subcommittee hearing to examine farm bill
    conservation programs.
        We began the information gathering process for the next farm bill 2
    years ago. Since then, we have conducted 11 audits of farm programs and
    four nationwide field hearings.
        In the audit hearing conducted by this Subcommittee, we discussed
    more than 20 conservation programs administered by USDA and identified
    areas of duplication and overlap.
        In our field hearings, we heard time and again from farmers and
    ranchers across the country about the importance of conservation
    programs to their livelihoods.
        Today, we're here to discuss how to move forward. We are eager to
    hear your perspective on ways we can streamline and consolidate
    conservation programs to better serve you.
        We know that voluntary conservation programs work.
        Our farmers and ranchers, through the assistance and incentives
    provided by farm bill conservation programs, have voluntarily worked to
    help reduce soil erosion, increase wetlands, improve water quality, and
    preserve farmland and wildlife habitat.
        The environmental gains they have achieved are a testament to our
    producers, who truly are the most dedicated conservationists.
        Conservation programs have grown significantly in size and scope
    since the 1985 Farm Bill.
        The 2002 Farm Bill raised conservation spending by $17 billion over
    10 years, which was an 80% increase.
        Congress increased the commitment to important programs like CRP
    and EQIP while also creating new programs like CSP to increase
    participation in conserving practices.
        Then the 2008 Farm Bill strengthened the conservation title with an
    additional commitment of $4 billion over 10 years.
        It included new regional and cooperative partnership programs as
    well as the reauthorization and increased spending of current programs.
        Additionally, the 2008 Farm Bill created new conservation programs
    aimed at enhancing cooperation among producers and conservation
    organizations.
        That helps target conservation initiatives in areas such as the
    Chesapeake Bay watershed, which has great importance to the farmers and
    ranchers in Pennsylvania.
        We had an easier time improving conservation programs in our last
    two farm bills, when we could afford to increase spending.
        However, as we work towards the next bill, this Committee will be
    faced with a very different budget situation.
        Not only will the Agriculture Committee have to do our part within
    the overall deficit situation, but as all of us know, we have dozens of
    programs with no baselines, many under the umbrella of conservation.
        This farm bill gives the Committee an excellent opportunity to
    prioritize conservation programs that are working and streamline any
    programs with overlapping missions and goals.
        We, as a Committee, will examine how to consolidate the current
    conservation programs so that conservation dollars can be utilized more
    efficiently.
        We started that effort last fall, when the House and Senate
    Agriculture Committees worked together to develop a proposal for the
    Super Committee.
        Had the Super Committee succeeded, we would have put forward a
    proposal that included the consolidation of several programs and
    streamlined program delivery.
        The Senate put forward its draft proposal last week, and it
    utilizes many of the ideas produced during the Super Committee process.
    It would reduce spending by approximately $6.5 billion over 10 years.
        It's important that when we find these savings, we maintain our
    ability to provide the same level of on-the-ground-service to our
    farmers and ranchers.
        I believe we are up to that task.
        I'd like to thank all of our witnesses for being here today. I look
    forward to hearing your thoughts on streamlining programs today.
        I want to extend a warm welcome to a resident of Pennsylvania's 5th
    district on the second panel.
        Mr. Carl Homan is a fifth generation farmer from Centre County.
        He has extensive experience utilizing Title II programs and will
    offer his thoughts for how we should move forward.
        I look forward to your testimony and thank you for driving down
    here to share your experience.

        The Chairman. And with this, I now yield to the Ranking
    Member of the full Agriculture Committee, Mr. Peterson, for an
    opening statement.

    OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE
                       IN CONGRESS FROM MINNESOTA

        Mr. Peterson. Thank you, Mr. Chairman, and I want to also
    thank the witnesses and thank you for having this hearing
    today.
        The conservation provisions that we put in the Super
    Committee bill, in spite of the fact that we had to reduce
    spending, I think there is a general consensus that we did a
    pretty good job in putting that together. It appears to be the
    basis for what we are going to do here moving ahead. But I
    would like to focus, if I could, on some issues that are
    important to me, and that I think need to be focused on or
    understood in the context of what we are doing here. A lot of
    it revolves around the CRP program where I see a number of our
    witnesses have testimony today about some of them completely
    contrary to each other.
        But first of all, we recognize, given what is going on in
    the economics of agriculture and the way rental rates have gone
    up, land prices have gone up, that land is going to come out of
    CRP, and it is coming out of CRP. And I would argue that we are
    doing a pretty good job of sorting out what should be out and
    what should be in as we go through the process of these sign
    ups. We hope half the acres that are coming out are going back
    in. In other words, we are losing--6 million acres come out, we
    are probably going to get 3 million acres back. So we are going
    to end up at 25 million acres, which is what was in the Super
    Committee bill at some point, here in the next few years.
        You know, these land prices and rental rates, as Mr.
    Greenspan said, we have some kind of exuberance going on in
    agriculture. I don't think it is going to cause the kind of
    bubble that we had at other times when it burst, but clearly,
    these prices and rental rates are, in many cases you cannot
    justify what is going on. But the neighbors are looking at the
    people that are coming to them and offering them a lot of money
    to break up their CRP. And so I drive around my district and I
    cannot--I have never seen anything like what is going on right
    now. The land that is being broke up--land that should not be
    farmed is being broke up. All of the tree lines are being taken
    out, all of the old homesteads are being bulldozed down. If you
    don't think things are changing, they are, and this is going on
    all over the country.
        So I would argue that--and I have seen somebody in the
    testimony said that we should freeze rental rates. I think we
    should raise the rental rates. I think they are out of whack
    from what reality is today, and the rental rates in CRP are
    about 25 percent of what the rent is for farmland. Now the
    Secretary moved to raise the rental rates on continuous, which
    is fine, but you know, the pressure is on the big tract CRP.
    And I worked very hard to get wildlife benefits as one of the
    criteria for CRP, and I will guarantee you, if we lose this big
    tract CRP, we are going to lose the wildlife benefits that we
    have developed in this country. You know, you are not going to
    raise the kind of ducks and pheasants and deer and turkeys on
    just the filter strips. You need big tract CRP to spread out
    these predators, give the wildlife a chance to survive, and
    that has to be part of what we do, going forward.
        So we have to focus on this as and get this right. With the
    haying and grazing there have been some improvements there, but
    frankly, this land needs to be managed. You know, there is no
    reason that you can't run cattle on this land, and it does more
    good for the wildlife and for the land than not running cattle
    on it. You know, we still have penalties if you allow for
    haying and grazing, which I don't think makes any sense.
        Another thing that is still in the law that needs to be
    focused on is a holdover from 1985, and at that time it was not
    a conservation program. When CRP was started, it was to reduce
    production, to get lands out of production. We had too much
    production and the prices had collapsed, so it was about
    getting land out of production. So there is still a prohibition
    against being able to sign up CRP that it was not in the
    program. And so we have a lot of land in my district that
    should be in CRP that can't get in, that can't go into the
    general sign up because it doesn't have base acres. You know,
    that is something that needs to go away. It is no longer
    relevant to what is going on in this day and age, and we are
    keeping land out of CRP that should be in. I know of two tracts
    that have been broken up so that they can plant them into
    soybeans for 2 years so they can then get them into CRP. You
    know, this is--these things we need to fix in this bill this
    year.
        The other thing we need to fix is what we tried to do in
    2008, and that is the sod buster situation, and I am glad to
    see there is an amendment in the Senate, or I guess it is in
    the manager's amendment to include something very similar to
    what we put in in the 2008 bill in the House on sodsaver. You
    know, we need to get that done. We have land being broken up
    that has never been broken. They are dragging up rocks bigger
    than a house out of these things. This is land that should not
    be farmed, and we are allowing the crop insurance system to
    provide a backstop for these people to do this. They know they
    can break up this land and the crop insurance is going to cover
    them, even if they don't get a crop, and most of them know they
    aren't going to get a crop.
        So I hope that we can focus on some of these real issues
    and not get off on this ideology about well, we have to take
    every CRP acre in the country out so we can have cheap corn.
    You know, that is a short-sighted policy, and you know, I
    understand that people liked it when we had $2 corn. You know,
    it made it easier for the livestock industry, but, we never had
    $2 corn. There wasn't any farmer that could grow corn for $2.
    The reason we had $2 corn was because we subsidized it, and
    what really stuck out, is that we got blamed, our corn farmers,
    for the subsidies, but actually the livestock people got the
    benefit. So ethanol changed all that and now we have a more
    market-driven system, but we shouldn't throw the baby out with
    the bathwater. This thing is stabilizing. We are going to have
    corn coming down in price over the next number of years. We
    should not destroy this CRP system that we put together that
    brought back the wildlife in this country, just because of some
    short-term spike in corn prices.
        So now that I have vented, I will yield back. I am sure I
    don't have any time left. Thank you, Mr. Chairman.
        [The prepared statement of Mr. Peterson follows:]

      Prepared Statement of Hon. Collin C. Peterson, a Representative in
                            Congress from Minnesota

        Good morning. Thank you Chairman Thompson and Ranking Member Holden
    for holding today's hearing.
        The current farm bill expires in September and I am pleased that
    the Committee is continuing the reauthorization process with today's
    hearing.
        Conservation programs play an important role in preserving our
    natural resources and provide producers with the necessary tools to
    meet regulatory requirements. In this budget environment, it is
    especially important to ensure that current conservation programs are
    operating as efficiently as possible.
        I do believe that there are some areas of the conservation title
    that can be changed to both achieve savings and better reflect what's
    needed on the ground. One example is helping to ensure that CRP lands
    are available for grazing and other economic uses. This is what we
    tried to achieve last fall through the Super Committee process and I am
    pleased to see the Senate act in a similar fashion.
        One issue that has recently been brought up is conservation
    compliance. I think that simply re-linking compliance to crop insurance
    could potentially cause more problems than it would solve. I'm
    interested in hearing our witnesses' opinions on the issue,
    particularly how we would administer the program because, given the
    budget cuts the Department has been forced to take, I'm not sure RMA or
    FSA or NRCS have the resources that would be needed to handle the
    increased workload.
        An issue that is of particular importance to me, that I'm hopeful
    can be addressed in the next bill is regional flooding issues. I think
    that there are conservation programs currently in place both within the
    farm bill and outside of it that can be used to build up water
    retention sites and address flood control problems in areas of the
    country like the Red River Valley. Taking proactive steps now can save
    taxpayers money down the road after flood damage occurs.
        Again, I thank the Chair for holding today's hearing and look
    forward to hearing from our witnesses.

        The Chairman. I thank the Ranking Member. The chair would
    like to request that other Members submit their opening
    statements for the record so the witnesses may begin their
    testimony and to ensure that there is ample time for questions.

     Prepared Statement of Hon. Martha Roby, a Representative in Congress
                                  from Alabama

        Mr. Chairman. I want to first thank the witnesses for testifying
    here today on the importance of conservation and offering changes to
    the various programs. The conservation title of the farm bill has been
    vital in assisting our farmers in being better stewards of their land--
    helping with technical assistance and other financial assistance.
        As many of you know, going into the next farm bill, we are faced
    with extreme fiscal constraints. We on this Committee need to make very
    difficult decisions in finding billions of dollars in savings while
    ensuring the decisions we make are the most effective, efficient and
    allows farmers do what they do best--farm.
        Whether we are talking about nutrition, conservation or safety
    nets, this Committee will need to make decisions with as much
    information as possible and I thank all of the witnesses being here
    today to help us in this process.
        During my travels around my district and in meetings with my
    Agriculture Advisory Board, I have heard concerns over the Conservation
    Reserve Program. A significant portion of productive farmland in my
    district is land rented by farmers. Over the years, these farmers--many
    of them who themselves are or have enrolled in CRP and other
    conservation programs--have seen landowners decide to enter their land
    into CRP rather than continue renting the productive land to farmers.
    This has been making it more difficult for the farmers to maintain
    their farms, as well as, the ability for new and young farmers to find
    productive land to rent for production.
        Out of these conversations, last year I introduced H.R. 3454, the
    Preserving Marginal Land and Protecting Farming Act. This legislation
    would incrementally reduce the acres of land enrolled in CRP down from
    the authorized 32 million acres to 24 million acres by 2017.
    Additionally, it would make class I or class II land under the land
    capability classification system no longer eligible to be enter into
    CRP. Approximately 6.9 million acres of land enrolled in CRP is class
    II land.
        I am not up here to argue that CRP is not a valuable program. CRP
    is an important program to ensure that marginal and highly erodible
    land--some land that should probably never been farmed in the first
    place--is taken out of farming. However, the intent of the program was
    not to compete against a farmer for access to highly productive land.
    At time that the Federal Government is looking for savings, one way is
    to ensure that the land in CRP is the land that the program originally
    intended to target.
        My approach would save billions of dollars and ensure that the
    program is going after environmentally sensitive land. I appreciate
    that a number of the witnesses today have considered this and other
    changes to CRP that would save billions in taxpayer dollars, ensure
    that only the most sensitive land is protected, and that needed
    productive farmland is available to farmers.
        Chairman Thompson, thank you for holding this hearing and I look
    forward to working with you in the future on this and other issues as
    we move forward with drafting a farm bill.

        The Chairman. Welcome to our first panel of witnesses who
    are seated here. Before I do introductions and we get started,
    just a reminder, the lighting system in front of you, we ask
    you to limit your--we have your--be assured that each of us
    have had in hand your written testimony, and so for your verbal
    testimony please limit it to 5 minutes. The lights are meant as
    a reminder of that. When you hit the yellow light, you will
    have approximately 1 minute left. If you are like me, you need
    that cue, and when it hits red, 5 minutes is complete and we
    ask that you finish up at that point so we can leave lots of
    time for great exchange with questions as we go forward.
        I want to welcome our first panel. Joining us we have Mr.
    Gene Schmidt, President of the National Association of
    Conservation Districts. We have Mr. Jon Scholl, President of
    the American Farmland Trust; Mr. Patrick O'Toole, President of
    the Family Farm Alliance; Mr. David Nomsen, Vice President of
    Pheasants Forever; Mr. Garry Niemeyer, President of the
    National Corn Growers Association. Thank you all, and Mr.
    Schmidt, please begin when you are ready.

             STATEMENT OF GENE SCHMIDT, PRESIDENT, NATIONAL
        ASSOCIATION OF CONSERVATION DISTRICTS, WASHINGTON, D.C.

        Mr. Schmidt. Thank you, Chairman Thompson, Ranking Member
    Peterson, and Members of the Committee, and special thank you,
    Chairman Thompson, for your opening remarks on the benefits we
    have made in conservation, but also the needs that we have
    going into the future, and thank you for your perspective on
    that. On behalf of the National Association of Conservation
    Districts that has some 3,000 member districts across the
    country, I thank you for the opportunity to be here today and
    speak for them.
        As you stated, I do currently serve as the President of the
    National Association of Conservation Districts. My wife and I
    own and operate a commercial seed business in northwest
    Indiana, where we farm 1,500 acres of seed corn, beans, and
    wheat. We use a variety of conservation practices on our farm,
    including minimum till, strip till, no-till, cover crops,
    stream buffers and windbreaks, and I truly know the firsthand
    value of those conservation practices and necessity for strong
    conservation on the land.
        About 2 weeks ago, as you folks are aware, more than 100
    tornadoes swept across the Plains. Within the last year, we
    faced extreme flooding in the Mississippi and Missouri Rivers,
    among others, affecting thousands of producers and private
    landowners. We also, not so long ago, witnessed extreme
    wildfires in Arizona, New Mexico, and Texas. Last year, the
    Great Plains and the South suffered a record drought, requiring
    emergency haying and grazing, as you mentioned, on CRP lands.
    And although we experienced major weather conditions, extreme
    weather conditions, we did not see the reoccurrence of the Dust
    Bowl that we saw back in the 1930s. Why? Because we have
    implemented many conservation practices, programs that help
    mitigate the risks associated with these extreme weather
    events.
        Conservation programs provide a strong risk management
    tool, mitigating many times the risks that are put on
    producers, landowners, home owners, and local communities
    throughout this country.
        Conservation districts are the delivery system set up in
    the 1930s to be the gatekeepers of private working lands.
    Districts are the local authority to provide resource support
    for delivery, to bring partnerships and coalitions together,
    and in doing so, over the years we have helped to restore and
    maintain the most precious resources.
        While we understand the current economic climate, we must
    also acknowledge the investing and putting conservation on the
    ground. Investment in conservation simply makes sense.
    Producers are already faced with the challenge of doing more
    with less. Conservation is a tool that is available to every
    producer. Not only do farm bill conservation programs play a
    role in supporting clean air, clean water, and productive
    soils, they also help producers implement conservation
    practices through voluntary incentive-based methods, rather
    than through a top down regulatory approach, as well as support
    our nation's long-term economic and food security. These
    programs can include developing a strong conservation plan for
    better accountability for Federal dollars spent, and
    streamlining the conservation program participation processes
    to allow for quicker and easier accessibility for producers and
    landowners.
        That is why we support the Senate framework for Title II in
    the 2012 Farm Bill. We fully recognize the need to get our
    nation's financial house in order, and we understand that means
    cuts to farm bill programs. We are extremely pleased the
    Committee's leadership has come with a strong, balanced plan
    that fairly recognizes the critical value of locally led
    conservation on the landscape. We are in a situation where
    additional cuts to conservation programs above the $6 billion
    outlined in the Senate's version of Title II would put the very
    viability of these programs at risk. Congress needs to
    determine whether conservation and protection of our natural
    resources of today is more important than the escalated costs
    that we would receive as a repair of those conditions later. It
    is an old adage that goes like this, ``An ounce of prevention
    is worth a pound of cure.''
        In light of the budget situation, NACD supports
    consolidation of programs as an important goal of the
    conservation title, and Chief White's delivery streamlining
    system. Farm bill conservation programs should be resource
    driven and locally led. The program delivery must be tailored
    to the natural resource needs in the state and local areas.
    Local conservation districts, local boards, and state technical
    committees help provide for that asset.
        As we look into consolidation, we must be careful not to
    lose the critical functions that help complete the cycle of
    resource needs on the land.
        Further decreasing the funding, the implementation of the
    farm bill programs would be an additional challenge. The
    technical assistance is critical in ensuring farm bill programs
    and for the implementation and accountability.
        In conclusion, the farm bill programs show a track record
    of success. Every dollar spent has seen return. Because of the
    2008 Farm Bill and previous ones you stated, we have had
    successes. As a producer, I use many of these programs in my
    own operation and know firsthand the tremendous value and
    return on investment that they bring to producers across this
    country.
        Thank you for the opportunity to address the folks on the
    Committee.
        [The prepared statement of Mr. Schmidt follows:]

    Prepared Statement of Gene Schmidt, President, National Association of
                    Conservation Districts, Washington, D.C.

        Good morning, Chairman Thompson, Ranking Member Holden, and Members
    of the Subcommittee. On behalf of the National Association of
    Conservation Districts and our 3,000 member districts across the
    country, I thank you for the opportunity to be here today.
        As you know, I currently serve as President of NACD. My wife and I
    own a farm and seed business in Hanna, Indiana, where we farm 1,500
    acres of seed corn, seed beans, and wheat. We use a variety of
    conservation practices on our land, including minimum till, no-till,
    cover crops, stream buffers and windbreaks. I know firsthand the
    value--and the necessity--of strong conservation on the land.
        Two weeks ago, more than 100 tornadoes swept across the plains.
    Within the last year we have faced extreme flooding along the
    Mississippi and Missouri Rivers--among others--affecting thousands of
    producers and private landowners, and we also witnessed extreme
    wildfires in Arizona, New Mexico, and Texas. Last year, the Great
    Plains and South suffered a record drought, requiring emergency haying
    and grazing on CRP land; and although we experienced extreme weather
    conditions, we did not see a reoccurrence of the Dust Bowl. Why?
    Because we have implemented many conservation practices that mitigate
    the risks associated with extreme weather. Conservation programs
    provide a strong risk management tool--mitigating risk for producers,
    landowners, homeowners and local communities.
        Conservation Districts are the delivery system set up in the 1930's
    to be the gate keepers of private working lands. Districts are the
    local authority to set work priorities, help producers implement
    practices with accountability, provide resource support for delivery,
    and bring partnerships and coalitions together. In doing so, we have
    sustained our most precious resources.
        While we understand the current economic climate, we must also
    acknowledge the investment of putting conservation on the ground.
    Investing in conservation simply makes sense. Producers are already
    faced with the challenge of doing more with less, and conservation is a
    tool that is available to every producer. Not only do farm bill
    conservation programs play a key role in supporting clean air, clean
    water and productive soils, they also help producers implement
    conservation practices through voluntary, incentive-based methods--
    rather than through a top-down regulatory approach--as well as support
    our nation's long-term economic and food security. These programs can
    include developing a strong conservation plan for better accountability
    of Federal dollars spent and streamlining the conservation-program
    participation processes to allow for quicker and easier accessibility
    for producers and landowners.
        That is why we support the Senate Framework for Title II in the
    2012 Farm Bill. We fully recognize the need to get our nation's
    financial house in order, and we understand that means cuts to farm
    bill programs. We're extremely pleased that Committee leadership has
    come up with a strong, balanced plan that fairly recognizes the
    critical value of locally-led conservation at the landscape scale. We
    are in a situation where additional cuts to conservation programs,
    above the $6 billion outlined in the Senate's version of Title II, will
    put the very viability of these programs at risk. Congress needs to
    determine whether conservation and protection of natural resources
    today is more important than the escalated costs of repair in the
    future. It's as the old adage goes, an ounce of prevention is worth a
    pound of cure.
        In light of the budget situation, NACD supports consolidation of
    programs as an important goal of the conservation title, and Chief
    White's Conservation Delivery Streamlining Initiative in the field.
    Individual, private landowners will benefit from streamlining when
    programs are easier to access and manage. Farm bill conservation
    programs should be resource-driven and locally-led with sufficient
    flexibility to direct funding to local priorities and concerns. Program
    delivery must be tailored to the natural resource needs in the states
    and local areas. Local Conservation District Boards, Local Work Groups
    and State Technical Committees must help identify local needs, apply
    limited financial assistance, and maximize conservation benefits.
        As we look at consolidation, we must be careful not to lose any of
    the critical program functions that help complete the cycle of resource
    needs on the land. For example, consolidation includes farm bill
    easement programs. Easements retain working lands which over time
    include the operation and maintenance components that fee simple
    acquisitions do not. We must assure that the easement programs are
    maintained to provide for protection of our farmland, wetlands, and
    highly erodible soils. The easement programs provide a ``buffer
    effect'' to land use change, which occur on many fronts of our society
    as the population grows and more demand is put on our natural
    resources. Thus, easements effectively secure the natural resources,
    being protected by conservation practices, to achieve economic and
    environmental benefits for future generations.
        With any further decreases in funding, the implementation of farm
    bill programs would be an additional challenge. Technical assistance is
    critical to ensuring farm bill programs are implemented with
    accountability. Technical assistance dollars will be more important
    than ever to ensure we have adequate capabilities to get conservation
    delivered. For example, we have completed successful work achieving
    water quality in watersheds across the country, from the East in the
    Chesapeake to the North in Lake Erie to the West in Oregon. By using
    Technical Assistance, we help producers implement practices such as
    using cover crops and conservation tillage to reduce soil erosion and
    runoff. Having a conservation plan in place allows each producer to
    look at his resource needs in order to address the bigger picture of
    resource needs.
        In conclusion, these farm bill programs show a track record of
    success, and every dollar spent has seen a return. Because of the 2008
    Farm Bill, we are better prepared to meet future resource needs, and we
    must continue to fund these programs. As some have referenced, we think
    the conservation title may be the hallmark of the 2012 Farm Bill. As a
    producer, I have used many of these programs on my own operation and
    know first-hand the tremendous value and return on investment they
    bring to the producer and even more importantly, to society.
        This concludes my testimony. Thank you, again, for allowing me the
    opportunity to be here today. I am happy to answer any questions you
    may have.

        The Chairman. Thank you, Mr. Schmidt.
        Mr. Scholl, go ahead and proceed when you are ready for 5
    minutes.

     STATEMENT OF JON SCHOLL, PRESIDENT, AMERICAN FARMLAND TRUST,
                            WASHINGTON, D.C.

        Mr. Scholl. My name is Jon Scholl. I am the President of
    the American Farmland Trust. We spent the last 30 years working
    at the intersection of agriculture and the environment. We work
    to protect farmland from unsound farming practices, and keep
    farmers on the land. Before joining AFT, I had the privilege of
    serving 4 years as the ag counselor to the EPA Administrator in
    the last Bush Administration. Before that, I worked 25 years
    for the Illinois Farm Bureau in a variety of capacities, but
    throughout my entire career, I am very proud to say that I have
    lived on and been a partner in a family farming operation in
    McLean County, Illinois.
        Our farmers and ranchers face great pressure to produce
    food, fiber, and fuel while maintaining healthy soils,
    protecting water quality, and providing wildlife habitat.
    Rapidly rising world food demand creates incredible economic
    opportunity for agriculture, but it also makes it even more
    imperative for us to address the conservation challenges we
    face here at home.
        In light of these challenges, I offer five key points.
    First, funding for conservation is critical. The need and
    demand for assistance is so great that in any other situation,
    I would be asking for more money for these programs, as I am
    sure many of us would. Four out of every ten applications for
    EQIP are rejected for lack of funding. The Farm and Ranch Land
    Protection Program has a whole year of projects waiting to be
    funded. But in spite of this and in light of the critical
    budget challenges our nation faces, we believe effective
    conservation solutions can still be provided with the $6
    billion in cuts called for last fall by the Super Committee, as
    well as the recently released proposal from Senators Stabenow
    and Roberts.
        Second, we urge support for our Farm and Ranch Land
    Protection Easement Program. We have lost 23 million acres of
    farmland to development between 1982 and 2007, an area the size
    of Indiana, yet we are expected to produce more food than ever
    before. Permanent conservation easements protect agricultural
    land from development, safeguard local agriculture economies,
    and help farmers and ranchers transition their land to the next
    generation. We support the creation of a Consolidated Working
    Lands Easement Program to take over the functions of the Farm
    and Ranch Land Protection Program, and the Grasslands Reserve
    Program. However, it is important that the working lands
    easement option remain distinct from easements that seek to
    retire fragile land from production. The Agricultural
    Conservation Easement Program created in the Senate proposal is
    an excellent model for this.
        Third, we support the new Regional Conservation Partnership
    Program contained in the Senate proposal. This program gives
    local producers and conservationists a tool to come together to
    address natural resource concerns. It is also competitive and
    merit-based, which means that the resources will go where they
    can do the most good. This model represents a huge leap forward
    in how conservation is delivered, allowing us to be very
    strategic in spending our limited conservation dollars.
        Fourth, we believe that EQIP and CSP provide distinct
    benefits and must remain separate programs. EQIP assists with
    individual practices. CSP helps farmers and ranchers take
    additional steps needed to achieve a high level of conservation
    performance on the whole farm. We propose enhancing CSP by
    increasing its focus on local conservation priorities,
    tightening the eligibility requirements, and tying program
    benefits to measurable conservation performance.
        Fifth, we believe conservation compliance should continue
    to be attached to the centerpiece of the farm safety net as it
    has been in the past. Given the likely changes in the safety
    net, this means reattaching it to the crop insurance premiums
    support. The Economic Research Service has reported that in the
    last 25 years, conservation compliance has reduced annual soil
    erosion on our most vulnerable soils by 40 percent. Another ERS
    analysis shows that if we act now, very few additional farmers
    would come under the compliance provisions with their
    reattachment to crop insurance. RMA and crop insurance agents
    would not have new burdens. Compliance works. It needs to
    remain an important component of the new farm safety net.
        We must not lose ground, either on our farms and ranches,
    or our farm policy. I applaud your efforts to craft a
    conservation title that will help to assure our resource base
    is protected and meet the growing need for food, fiber, fuel,
    and in a time of tightening budget constraints. Your work is
    important. We are prepared to help you meet our common
    challenges.
        Thank you.
        [The prepared statement of Mr. Scholl follows:]

     Prepared Statement of Jon Scholl, President, American Farmland Trust,
                                Washington, D.C.

        Good morning,

        Chairman Thompson, Ranking Member Holden and other Members of the
    Committee, thank you for inviting me to testify today. My name is Jon
    Scholl. I am the President of American Farmland Trust, which is
    headquartered in Washington, DC. I am also a partner in a family farm
    in McLean County, Illinois.
        American Farmland Trust is an organization that has for the last
    thirty years worked at the intersection of agriculture and the
    environment. We work to protect farmland and promote sound stewardship
    while keeping farms and ranches economically viable. Before joining
    American Farmland Trust, I had the privilege of serving for 4 years as
    the Agricultural Policy Counselor to the Administrator of the United
    States Environmental Protection Agency during the Administration of
    George W. Bush. Before that, I worked at the Illinois Farm Bureau for
    25 years in a variety of capacities.
        I want to start by thanking Chairman Lucas and Ranking Member
    Peterson, as well as Subcommittee Chairman Thompson and Ranking Member
    Holden, for taking the initiative to work on the farm bill this year in
    the midst of all the partisanship and budget challenges here in
    Washington. I look forward to working with you to pass a farm bill this
    year, because we all know that the budget situation will likely be
    worse if we are forced to wait a year.
        As someone involved in my family's farm operation, a former EPA
    agricultural appointee, and the President of American Farmland Trust, I
    have seen the benefit of the farm bill conservation programs from many
    different angles. These programs are critically important tools for
    meeting the conservation challenges that we face.
        Having spent my life in agriculture, I know that farmers and
    ranchers across this country feel increasing environmental pressure as
    concerns mount over threats to soil, water quality, air quality, and
    wildlife. This pressure is coming not just from regulators, but from
    citizens and, increasingly, the corporations to whom we sell our
    products. At the same time, I know that farmers and ranchers have a
    deep regard for the land and take their responsibility as stewards very
    seriously. The farm bill conservation programs are the key bridge
    between this stewardship ethic and the pressures that farmers face.
    They are the ``fair deal'' between producers and the rest of society,
    where both parties contribute resources and both benefit, whether from
    greater resilience and efficiency on the farm or from abundant natural
    resources and a cleaner environment. In a world where we try to solve
    most environmental problems through regulations, these programs are
    voluntary and incentive-based. They work for farmers, which means that
    they also work for the environment.
        Between the conservation programs, conservation compliance, and
    independent efforts, farmers and ranchers have already made big
    conservation gains. They reduced soil erosion by 40 percent between
    1982 and 1997. They retired over 30 million of their most sensitive
    acres, turning them over to native plantings that provide wildlife
    habitat and build healthy soils. And they reduced losses of nitrogen
    and phosphorous by a fifth to a half in the Upper Mississippi River
    Basin and the Chesapeake Bay Region. Benefits in other areas of the
    country will be disclosed in future USDA reports.
        Nevertheless, there is much more work to be done. Indeed, the U.S.
    Department of Agriculture indicates that the agriculture sector is the
    largest source of nutrient loading in the country's impaired rivers and
    lakes and a major source of air pollutants like ammonia, nitrous oxide,
    and methane. Agriculture is also the source of seven percent of U.S.
    greenhouse gas emissions. According to USDA, 62 percent of the cropped
    acres in the Upper Mississippi River Basin require additional
    conservation treatment, and 15 percent are ``critically under-
    treated.'' In the Chesapeake Bay, 80 percent need treatment and 19
    percent are critically under-treated. These numbers are not just
    abstract figures; they are a threat to the strength and resilience of
    American agriculture. Farm and ranch production depends on natural
    resources like healthy soil and abundant, clean water.
        At the same time, world food demand is exploding. By 2050, the
    world will hold 2.3 billion more people. Incomes will rise, leading to
    more demand for meat and dairy products. World consumers will require
    over a billion more tons of grain and 200 million more tons of meat.
    Overall, food production will have to increase by 70%. This astonishing
    rise in demand represents an opportunity for agriculture as an
    industry, but it will also intensify pressure on natural resources.
        Clearly, if we are going to maintain a thriving agriculture sector,
    continue to protect our natural resources, and provide the food
    security that is so central to our national security, we must have a
    strong conservation title in the next farm bill. We cannot lose ground.
    This will be a challenge given the budget constraints that we face, but
    we at American Farmland Trust have some proposals that can help achieve
    that goal. We developed these proposals through workshops with farmers
    and ranchers from across the United States and extensive research.

    Funding
        Adequate funding is critical to the success of the conservation
    programs. However, given the budget environment, we believe that the
    funding level established in the Agriculture Committees'
    recommendations to the Super Committee is a fair deal. This proposal
    limited the conservation title cut to roughly $6 billion, or ten
    percent of the 10 year baseline, and the Senate's draft bill does the
    same. I urge the House Agriculture Committee to hold the line on this
    funding level.
        The need and demand for the conservation programs is so great that
    in any other situation I would be telling you that we need more money.
    We have a great suite of conservation programs in place to deliver that
    assistance, but the funding is never adequate to meet the demand.. For
    example, four out of every ten applications for EQIP assistance had to
    be rejected for lack of funding in FY 2010. The Farm and Ranch Land
    Protection Program has a backlog of a whole year of projects waiting
    for funding. Producers are waiting to enroll hundreds of thousands of
    acres in the Wetlands Reserve Program and Grassland Reserve Program,
    and millions of acres in the Conservation Stewardship Program. When
    farmers and ranchers are lined up to do the right thing for their
    operations and for the environment, and they are making a substantial
    investment of their own money, Congress should be willing to help. I
    know that you have difficult decisions to make, but I urge you to keep
    these important factors in mind when making your funding decisions.

    Farmland Protection
        One of the most important functions the conservation title plays is
    to protect farm and ranch land from development and ensure that it is
    available for productive agriculture. The need is great. Our country
    lost 23 million acres of farmland to development between 1982 and 2007,
    an area the size of Indiana, yet we are expected to produce more food,
    fiber and fuel than ever before. Every minute of every day, more than
    an acre of farm and ranch land is lost to agriculture forever.
        Luckily, there is a solution: the permanent protection of farm and
    ranch land. As of July 2011, state and local government farmland
    protection programs in 30 states had collectively protected over 2.5
    million acres of agricultural land, with help from Federal programs. In
    addition, this mechanism has been shown to help facilitate the transfer
    of farms to the next generation within farm families, to enable
    beginning farmers to access land at an affordable price, to support
    local economic development activity and to encourage investments by
    farm-based businesses in farm communities stabilized with protected
    farmland.
        Today, both the Farm and Ranch Land Protection Program (FRPP) and
    the Grassland Reserve Program (GRP) contribute to the permanent
    protection of farm and ranch land. Since its creation is 1996, FRPP has
    helped state and local governments and private partners in the land
    trust community protect over 810,000 acres of valuable agricultural
    lands. Since FRPP works through local partnerships that leverage state,
    local, and private funds, FRPP projects have leveraged nearly two non-
    Federal dollars for every Federal dollar spent. In addition, the local
    entities handle the lion's share of the administrative duties involved
    in completing projects.
        Given the budget situation and the call for simpler conservation
    programs, we support the creation of a consolidated working lands
    easement structure to take over the functions of FRPP and GRP. We
    believe this will reduce bureaucracy and make the system easier for
    farmers and ranchers to use. Both the Super Committee proposal and the
    Senate draft bill include an Agricultural Land Easement (ALE) option
    that would achieve this goal.
        Any new consolidated easement structure must reflect the core
    principles that American Farmland Trust has advocated for over many
    years. We call them the Three P's: purpose, permanence and
    partnerships. First, the purpose must be to protect working lands and
    keep them working. Second, all easements must be permanent. And
    finally, the easements must work through local partnerships that
    provide flexibility and leverage non-Federal funds. As part of the
    partnership structure, we feel it is important that local entities be
    required to contribute some cash matching funds to ensure that they
    have skin in the game. The draft Senate bill's ALE program embodies
    these principles and I urge this Committee to follow this tried-and-
    true formula as you put together your easement package.
        The Three P's are noteworthy in part because they distinguish
    working land easements from the other main easement program in the
    conservation title, the Wetlands Reserve Program (WRP). WRP retires
    land from production rather than protecting working lands, includes
    term easements as well as permanent easements, and operates in a top-
    down manner with the Natural Resources Conservation Service (NRCS)
    executing the transaction directly with the landowner, rather than
    through state and local partners. While we strongly support WRP and
    recognize that there is a desire to consolidate all of the easement
    options into one program, we believe that it is critical that any
    consolidation proposal reflect these key differences. The Senate's
    proposed Agricultural Conservation Easement Program achieves this
    differentiation nicely.
        Another feature that will help working land easements be efficient
    and effective is a certification process for partners. This will allow
    highly experienced partners to carry out farmland protection work with
    fewer bureaucratic requirements from NRCS, including less frequent
    updates of the partner's formal agreement with the agency. This process
    reflects the reality that some state and local entities have been
    engaged in farmland protection work longer than USDA and have
    sophisticated programs that are tailored to local needs. Certification
    ensures effective oversight with the minimum regulatory burden. Both
    current law and the Senate's draft bill include a provision for a
    certification process for partners, and I encourage the House to do the
    same.
        I urge the Committee to provide robust funding for a consolidated
    working lands easement option in your final bill. In addition, if you
    choose to consolidate working lands easements and wetlands easements
    under one umbrella, there must be a firewall between the funding for
    the two options. We support the structures in the Super Committee
    proposal and the draft Senate bill, which achieved this firewall while
    also allowing some level of flexibility within individual states.

    Strategic Conservation
        One of the best opportunities we have to advance conservation in
    spite of tight budgets is to adopt what we call ``strategic
    conservation.'' Historically, our conservation delivery system has been
    designed to provide assistance to anyone who signed up as a cooperator.
    This has done a great job getting a base of conservation on the land,
    but when you measure it against the significant challenges we face as
    an industry, it can amount to what NRCS Chief Dave White calls ``random
    acts of conservation.'' Prior farm bills have started a move to more
    strategic conservation through programs like the Cooperative
    Conservation and Partnership Initiative (CCPI) and the Agricultural
    Water Enhancement Program (AWEP). We need to continue that move in the
    coming farm bill.
        Strategic conservation is founded on the basic principle that all
    acres are not created equal. Conservation challenges are concentrated
    in particular parts of the landscape. For instance, some fields are
    more prone to runoff than others, some watersheds have more acute water
    quality problems, and some regions contain more threatened wildlife
    habitat. We need to have a mechanism to concentrate our efforts in
    these areas and get a critical mass of conservation on the ground. This
    strategic approach will help us to really move the needle on our most
    critical conservation challenges, which in turn will help stave off or
    beat back regulation and demonstrate to the public that agriculture is
    improving the environment.
        Past efforts to focus on critical areas have been derailed when it
    seemed that bureaucrats were making arbitrary decisions as to which
    areas were important and which were not. This is why we support a
    bottom-up model where local stakeholder partnerships identify a
    conservation challenge and apply through a merit-based system to
    receive NRCS assistance in addressing it.
        One of the most important benefits of strategic conservation is
    that producers can be involved in driving the effort. Farmers and
    ranchers know best what works on their land and, with technical
    assistance support, how to implement it most effectively. Involving
    them up-front in a strategic initiative with a clearly defined goal can
    help the initiative succeed by improving participation and developing
    win-win solutions. For instance, the success of the NRCS Sage Grouse
    Initiative is due in part to the leadership of local ranchers, who saw
    the production benefits of improving wildlife habitat.
        AFT has had success leading a CCPI project to reduce nitrogen
    losses in the Upper Salt Fork Watershed in Champaign County, Illinois.
    This project has significantly raised awareness of the issue and used
    targeted approaches to increase adoption of innovative practices that
    retain nitrogen fertilizer on farmland, including split fertilizer
    applications. Local farmers and conservationists alike have praised the
    partnership-based project structure.
        Strategic conservation can do a lot for the cost-effectiveness of
    conservation. For instance, according to USDA, conservation efforts in
    the Upper Mississippi River Basin would be four-to-five times more
    effective at stopping per-acre phosphorous, nitrogen and sediment
    losses, if they were applied to the right acres. This shows in stark
    terms just how effective it is to focus conservation efforts on
    ``critically under-treated acres.'' By conducting scientific
    assessments at the beginning of the effort, strategic conservation
    efforts can identify these critical acres and direct financial and
    technical assistance to the producers who manage them. This
    simultaneously helps the farmers who are most in need and maximizes
    environmental benefits from our limited conservation dollars.
        Finally, strategic conservation can strengthen the current
    conservation delivery model by enabling partnerships among diverse
    stakeholders. Partnerships are critical to the success of efforts that
    involve a wide variety of interests and that cross political
    jurisdictions, as many resource concerns do. They can improve outreach
    and engagement, bring additional resources to the table, break down
    administrative barriers that would otherwise exist, and extend the life
    of the project beyond the day when the Federal funding dries up.
        The 2012 Farm Bill must enshrine strategic conservation as an
    essential tool in the conservation toolbox and outline standards and
    procedures to ensure effectiveness and accountability. In order to be
    most effective, individual projects should be able to draw on each of
    the core conservation programs--working lands, easements, and land
    retirement--so that they always have access to the right tool for the
    job. To ensure that the strategic conservation model demonstrates its
    worth and maintains the support of agricultural producers and taxpayers
    alike, we propose that every project should be required to collect
    outcomes data and provide public reports on their achievements. The
    Super Committee proposal and the draft Senate bill both included a
    Regional Conservation Partnership Program that fits this model, and I
    urge this Committee to include a similar structure in your bill.
        The potential benefits of strategic conservation are so great that
    we would support devoting up to 20% of the mandatory funding for the
    core conservation programs to this approach. This would reserve the
    majority of conservation funding for producers across the landscape,
    while making a bold investment to help solve the most vexing
    conservation challenges that we face.

    Conservation Stewardship Program
        We strongly support the Conservation Stewardship Program (CSP)
    because we believe it plays a unique role in the suite of conservation
    programs. In light of budget constraints, CSP's distinctive aspects
    must be accentuated to ensure that it complements the Environmental
    Quality Incentives Program, and steps must be taken to ensure that CSP
    is delivering the maximum additional benefits with every contract.
        CSP's unique features include:

        (1) Whole-Farm Systems: CSP requires producers to enroll their
            entire operations and focuses on management-based conservation
            systems that apply to the entire production system, not single
            practices for individual areas of the farm.

        (2) Five-to-Ten-Year Contracts: CSP contracts last for 5 years with
            the possibility of renewal for another 5 years, as opposed to
            EQIP contracts, which finish when the conservation practice has
            been applied. This enables adoption of more complex
            conservation systems.

        (3) Baseline Performance: Producers must have attained a
            ``stewardship threshold'' of conservation for at least one
            resource concern prior to enrolling in the program, which gives
            producers an incentive to apply basic conservation, either
            through EQIP or independently, in order to gain acceptance into
            CSP.

        (4) Minimum Performance Requirement: Producers must attain the
            stewardship threshold for at least one priority resource
            concern by the end of their contract term. This focuses the
            program on the most important local problems and gives
            producers a target to shoot for.

        (5) Performance Measurement: Acceptance into the program and level
            of payments are based on the additional conservation
            performance that producers commit to achieve over the life of
            their contract. This represents the beginning of a much-needed
            paradigm shift in the conservation programs, from focusing on
            the ``outputs'' that program can achieve, such as acres of
            practices or miles of fence, to focusing on the actual
            conservation ``outcomes'' that deliver real benefits for the
            land.

        Given these unique benefits of CSP, we believe that EQIP and CSP
    must remain separate, rather than being merged. The distinctions
    between them are too great. However, it is imperative that EQIP and CSP
    be coordinated so that producers are not confused and each program can
    specialize and excel in its own objectives. We believe that the
    following proposed changes would make CSP both more distinct from EQIP
    and more complementary of it. Our three main program changes--
    strengthening the focus on priority micro-resource concerns, improving
    additionality, and continuing the move towards pay-for-performance
    conservation--make it clear that CSP is focused on helping farmers and
    ranchers take additional steps to achieve a high level of conservation
    performance on a whole-farm basis. EQIP remains the go-to program for
    addressing discrete conservation challenges on an operation and
    implementing a basic level of conservation.
        First, we propose that the program ranking criteria be modified to
    strengthen the focus on local conservation priorities. Currently, NRCS
    State Conservationists select 3-5 priority macro-resource concerns, out
    of a total of eight, to focus on in the different regions of their
    state. These macro-resource concerns are relatively blunt instruments:
    Soil Erosion, Soil Quality, Water Quantity, Water Quality, Air Quality,
    Plants, Animals, and Energy. We recommend that State Conservationists
    instead be required to select 5-6 priority micro-resource concerns out
    of a total of 28. Micro-resource concerns are much more detailed.
    Examples include gully erosion, soil salinity, insufficient water,
    nutrient loss, airborne soil particulates, and terrestrial wildlife.
    Prioritizing at this finer level would significantly strengthen the
    program's focus on the most pressing concerns, yet allow flexibility as
    priorities change from year to year. It would more precisely reflect
    the challenges in each CSP sub-state ranking area and provide a greater
    measure of local control.
        Second, steps must be taken to increase the amount of additional
    conservation performance producers are required to achieve during their
    contracts. Most importantly, the eligibility requirements should be
    modified. Currently, the eligibility requirements for initial contracts
    only require producers to address one priority macro-resource concern
    to the stewardship threshold by the end of the contract period. We
    recommend that producers be required to achieve the threshold level for
    two priority macro-resource concerns. In addition, the contract ranking
    factors should be tweaked to ensure that new conservation performance
    is weighted more highly than existing performance. Finally, eligibility
    requirements for CSP contract renewals must be increased to ensure that
    producers are providing significant additional conservation benefits
    through their renewed contracts.
        Finally, CSP must continue to advance toward measuring producers'
    actual conservation performance. This presents a technical challenge
    for NRCS, and must be balanced against concerns for user-friendliness,
    but it would greatly improve the program's cost-effectiveness, allow
    more sophisticated application ranking, and help demonstrate the
    program's public benefits.

    Conservation Reserve Program
        The Conservation Reserve Program (CRP) has been the subject of much
    debate recently, in light of high commodity and land prices. We do not
    presume to know the right number of total acres for this program.
    However, we do believe that it is possible to adapt the CRP for today's
    circumstances. In a nutshell, we believe that CRP must be focused on
    retiring the most fragile land. There are currently 6-7 million acres
    of highly productive land in the program, mostly as a result of the
    practice of enrolling whole fields. Going forward, we believe that
    whole field parcels in diverse landscapes should be split in order to
    enroll the more sensitive areas while allowing the productive areas to
    be farmed. This would increase the overall benefits per CRP acre while
    integrating it more seamlessly into the working agricultural landscape.

    Conservation Loan
        I want to briefly mention another powerful tool for stretching
    conservation dollars: the Conservation Loan Program that was included
    in the 2008 Farm Bill. While it is located in the credit title, this
    provision must be considered as part of the suite of conservation
    programs.
        The Conservation Loan Program offers a huge bang for the buck. Its
    budget cost is near zero yet it yields $150 million in loans for
    implementing conservation practices based on an approved conservation
    plan. These loans help producers access up-front capital for large
    conservation investments and allow them to amortize the cost.
    Conservation loans must be fully repaid.
        This program could be strengthened by revising the current statute
    to allow USDA to guarantee up to 90 percent of the loan principal
    amount, rather than 75 percent. This would bring conservation loans in
    line with other USDA loan programs. In addition, the program must
    maintain its current balance between direct loans and guaranteed loans.
    The vast majority of conservation loans currently are direct loans
    through the Farm Services Agency. However, the Office of Management and
    Budget is pushing to offer only guaranteed loans. We believe that
    producers should have the option to either seek a guaranteed loan
    through a private lending source or to apply for a direct loan through
    USDA.

    Technical assistance
        One method of improving the cost-effectiveness of the conservation
    programs that is often overlooked is to provide adequate technical
    assistance (TA). TA is the science-based process of assessing resource
    concerns, educating producers about options for addressing them, and
    designing conservation plans that fit smoothly within a farm operation.
    TA helps ensure that producers apply fully functioning conservation
    practices, reducing the likelihood that a buffer strip erodes or an
    animal waste lagoon leaks. Producers often cite TA as the most
    important factor influencing their adoption of conservation measures.
    In many cases, excellent TA can render financial assistance
    unnecessary.
        The growth of the conservation programs over the past few farm
    bills has severely stretched NRCS's TA resources. We have three
    proposals to address this concern:

        (1) Align Mandatory TA funding with Producer Needs: Currently, the
            funding for technical assistance from mandatory farm bill
            programs is only available after a contract is signed. This is
            too late in the planning process. The trigger for charging NRCS
            technical assistance to mandatory conservation programs should
            be earlier in the conservation planning process, if the
            producer's statement of objectives includes obtaining farm bill
            conservation program assistance.

        (2) Leverage Private Resources: The use of third party technical
            service providers can augment NRCS resources by providing
            certified soil and water conservation professionals to assist
            producers plan and implement conservation practices in
            locations where the workload exceeds the capacity of local
            field offices.

        (3) Focus TA Resources on Critical Areas: NRCS must be enabled to
            focus field staff to address high-priority resource concerns in
            order to achieve more intensive planning, outreach and
            implementation on those concerns.

    Conservation Compliance
        I have laid out a number of changes that we believe can strengthen
    the conservation title programs and make them more cost-effective.
    There is one additional conservation provision that is highly
    effective, voluntary, and doesn't add to the Federal budget:
    conservation compliance. Conservation compliance is an important good-
    government provision. It ensures that we are not paying producers out
    of one hand to take actions that will negatively impact natural
    resources, while also paying them out of the other hand to implement
    conservation practices. It only applies to producers who choose to
    accept certain USDA program payments. Under conservation compliance,
    these producers must agree to implement basic conservation measures
    that protect soil on highly erodible lands and must refrain from
    draining wetlands for crop production.
        Our modest proposal is that this system, which has applied to
    commodity support payments and other programs since 1985, and which
    applied to the crop insurance premium subsidies until 1996, be
    reattached to crop insurance premium subsidies going forward. This has
    recently become a contentious issue. To my mind the controversy is
    needless and shortsighted. I would like to offer three main points for
    consideration on the subject.
        First, conservation compliance is a highly effective tool in
    protecting soil and wetlands. The USDA Economic Research Service has
    reported that in the past 25 years, conservation compliance has reduced
    annual erosion on our most vulnerable soils by 40%. That comes out to
    295 million tons of soil saved annually--enough to cover the National
    Mall from the steps of the Lincoln Memorial to the steps of the
    Capitol, at twice the height of the Washington monument. In addition,
    in that same time period we've gone from losing tens of thousands of
    acres of wetlands on farms every year, to actually gaining wetlands.
    Conservation compliance has been a major factor in achieving the goal
    of no-net-loss of wetlands on farms. In short, compliance works.
        Second, we are at risk of losing ground on compliance. It appears
    that subsidized crop insurance is on track to become the centerpiece of
    the farm safety net as Direct Payments go away. Since crop insurance is
    not covered by conservation compliance, this may significantly reduce
    the incentive for farmers to continue following their conservation
    compliance plans--putting soil and wetlands in jeopardy. To be clear,
    compliance would still apply to the conservation programs, disaster
    payments, loans and the new Title I, but if it is not applied to the
    core of the safety net, its effectiveness will be greatly diminished.
        Third, conservation compliance should be integral to the new farm
    safety net, no matter how it's configured. Since 1985, compliance has
    been a successful part of farm policy, helping to justify spending
    taxpayer dollars on commodity programs and giving farmers an additional
    incentive to protect the long-term productive capacity of their land.
    This arrangement needs to continue into the future. As crop insurance
    becomes the focal point of the future safety net, we need to assure
    that it carries the same responsibility farmers have become accustomed
    to with farm programs of the past.
        I believe compliance represents a covenant between farmers and
    society. It is reasonable for society to expect a basic level of
    stewardship to be applied in exchange for programs that help provide
    some measure of economic stability on the farm. I know farmers know
    it's the right thing to do, despite the political debate this issue
    gets caught in here in Washington, D.C.
        The good news is that if we make this change today, we will spare
    farmers from difficult changes. They will not face new administrative
    headaches. They will still be able to purchase their crop insurance,
    get their bank loans, farm their land and receive crop insurance
    indemnities, just like they do now. If a farmer is found to be out of
    compliance at any point, and they exhaust the 1 year grace period
    without coming back into compliance, they would merely lose eligibility
    for the Federal crop insurance premium subsidy. Their crop insurance
    coverage would not go away--and neither would their loans or their
    indemnities--just the subsidy, and just until they come back into
    compliance. And just to be very clear, no farmer will ever be kicked
    out of compliance because of a big rainstorm--the program already has a
    clear exemption for extreme weather.
        If we act now, very few additional farmers would be subject to
    conservation compliance. The impact would be limited to, at most, five
    percent of wheat production, two percent of corn and soybean
    production, and less than one percent of cotton and rice production.
        The crop insurance industry also will not face major new headaches.
    With better than 80% participation and a significant reinvestment in
    the coming farm bill, crop insurance enrollments are not likely to be
    in jeopardy. Crop insurance agents would not do any enforcement. NRCS
    and FSA would spot-check and enforce just like they do now under farm
    commodity programs.
        Conservation compliance is a proven, effective conservation tool
    and a key accountability measure to help ensure taxpayer support for
    the farm safety net. It only makes sense that it should be attached to
    the primary safety net program, as it has been in the past.

    Conclusion
        As the Members of this Committee well know, our country is richly
    blessed with abundant natural resources, most of which are on private
    farms and ranches. When producers and the public cooperate, we can do a
    lot to safeguard the productive capacity of our farm and ranch land and
    ensure abundant natural resources for all. The farm bill conservation
    title is the opportunity for agricultural producers to come together
    with their fellow taxpayers to address the challenges ahead and lay a
    strong foundation for the future of agriculture. Again, we cannot
    afford to lose ground.
        The Agriculture Committees' recommendations to the Super Committee
    and the draft Senate bill both contain many excellent conservation
    provisions. I am confident that this Committee will be able to build on
    these efforts to craft a robust conservation title, despite the budget
    challenges.
        Thank you, Mr. Chairman, for the opportunity to share our views on
    these important issues. I would be happy to address any questions you
    have.
              * * * * *
        American Farmland Trust is the nation's leading conservation
    organization dedicated to saving America's farm and ranch land,
    promoting environmentally sound farming practices and supporting a
    sustainable future for farms. Since its founding in 1980 by a group of
    farmers and citizens concerned about the rapid loss of farmland to
    development, AFT has helped save millions of acres of farmland from
    development and led the way for the adoption of conservation practices
    on millions more.

        The Chairman. Thank you, Mr. Scholl.
        Mr. O'Toole, go ahead and proceed with your 5 minutes.

    STATEMENT OF PATRICK O'TOOLE, PRESIDENT, FAMILY FARM ALLIANCE,
                            WASHINGTON, D.C.

        Mr. O'Toole. Thank you, Mr. Chairman, Ranking Member
    Peterson, and Members of the Committee. It is a great
    opportunity for me to be here. I am President of the Family
    Farm Alliance. We represent farmers and ranchers that irrigate
    in the 16 western states.
        Water is the bottom line for us. We work with the Bureau of
    Reclamation. Bureau of Reclamation irrigators are our members.
        We think that the conservation title of the farm bill is a
    critical part of our future, and in the West, I appreciate the
    comments of Mr. Peterson on what is working in his district,
    and it is so interesting in this country how differentiated the
    100th Meridian where rainfall is more prodigious than other
    areas, but water is the bottom line for all of us. Whether it
    be climate-driven, changes in how rainfall comes--last year we
    had the wettest year in our history. In 1881 our ranch started.
    We have been there 130 years. Last year was the wettest year we
    ever had. This year is the driest.
        What I will tell you in this farm bill, we are moving in a
    future where there are clearly less dollars going to be
    available to implement programs. You all know that. We know
    that. What we need is flexibility. I use the word nimble. We
    have to be able to understand that farmers are the ultimate
    adjusters. We adjust ourselves, we--Family Farm Alliance wrote
    a paper 6 years ago about climate. We were some of the first
    ones to talk about the issue, and what we need is adaptability,
    and we need a Federal Government that understands that
    adaptability so that we can react to whatever that climate
    reality is.
        So I would tell you that Family Farm Alliance was involved
    in the last farm bill. We worked on a program called AWEP, the
    Agriculture Watershed Enhancement Program. There is magic going
    on, I can tell you specifically, in the West. I call it the
    Islands of Renaissance that are happening all over the western
    part of the United States, and it is because farmers, ranchers,
    conservationists have gotten together to understand the
    critical needs of working together. We have a directive from
    every part of the Federal Government, whether it be the State
    Department or whether it be international agencies telling us
    we have to produce more food. We have to do that in the context
    of conservation.
        Our ranch has sort of a motto that there is no intrinsic
    contradiction between conservation and production if we are
    smart enough to do both, yet it is going to be the programs
    that come through with--in our minds and in the Family Farm
    Alliance experience, much more on the ground relationships
    where devolvement of some of the responsibilities that come out
    of D.C. need be much more state-driven and much more local. So
    I think that is our message.
        One of the other messages that I was asked at a conference
    recently, what are the things that make you wake up in the
    middle of the night, and the number one priority for the Family
    Farm Alliance is the fact that we do not have enough young
    people in agriculture. I think this Committee is cognizant of
    that, and we have to make a real effort to realize that we have
    to have more young people. The numbers of eight percent of
    farmers are under 36 years of age, that just isn't, in our
    minds, sustainable.
        I come from a district in southern Wyoming and northern
    Colorado conservation district, and I don't know how Mr.
    Schmidt ranks his membership of conservation districts, but we
    think ours is one of the most successful. We have the largest
    river restoration in the United States within our CS. We have a
    project with Trout Unlimited on fish passage and endangered
    species issues that is phenomenally successful. The message
    that came to me as I came back here to talk to you was that it
    is that local component, that ability to leverage dollars. And
    what is happening in these Islands of Renaissance that I talk
    about is not just the Federal dollars. The Federal dollars are
    leveraged dollars for other dollars, and it is so critically
    important and why we emphasize the AWEP program and that it be
    done in a way so that entire irrigation districts, entire
    conservation districts, can participate, leveraging the dollars
    in a much more efficient way.
        I thought on one other thing that is very recent in terms
    of what wakes me up in the middle of the night, and we have had
    such success with our river restoration. I call it the
    integration of irrigation and fishery. I went out the other day
    to check on some cows that we are calving, and I looked up over
    this area that is filled with endangered fish, and there was a
    whole rookery of great blue herons. Those herons are now
    benefitting from the tremendous work we have done on the
    fishery, maybe to the expense of some of the fishery. So,
    everything is a balance, but what I would like to just express
    to you one more time is that--make these programs as local as
    possible and as flexible as possible, and give farmers the
    chance--farmers and ranchers the chance to improvise on the
    reality of the future that we are going to be looking at.
        Thank you so much for this opportunity.
        [The prepared statement of Mr. O'Toole follows:]

    Prepared Statement of Patrick O'Toole, President, Family Farm Alliance,
                                Washington, D.C.

        Good morning, Chairman Thompson, Ranking Member Holden, and Members
    of the Committee. My name is Patrick O'Toole, and I serve as President
    of the Family Farm Alliance (Alliance). I am honored to be here today
    to discuss farm bill conservation programs and the challenges and
    opportunities facing western farmers and ranchers who depend upon
    adequate water supplies that irrigate the arid West.
        The Alliance is a grassroots organization of family farmers,
    ranchers, irrigation districts and allied industries in 16 western
    states. The Alliance is focused on one mission: To ensure the
    availability of reliable, affordable irrigation water supplies to
    western farmers and ranchers. We are also committed to the fundamental
    proposition that western irrigated agriculture must be preserved and
    protected for a host of economic, sociological, environmental and
    national security reasons--many of which are often overlooked in the
    context of other Federal policy decisions.
        Today, irrigated agriculture in the American west faces some of the
    most vexing and complex challenges in addressing crucial water quantity
    and quality issues. Water is the lifeblood of irrigated agriculture in
    the West, and the ever growing competing demands for water many times
    outstrips the available supply, setting up conflict between farmers and
    cities, the environment and even between other farmers over limited and
    uncertain irrigation water supplies. Given the increasing importance of
    growing a safe, stable supply of abundant food for this nation and the
    world, we must continue to manage and protect these limited water
    supplies necessary to adequately and efficiently irrigate western crops
    so important to meeting this goal. And, through the conservation
    programs authorized by the farm bill, necessary water and natural
    resource conservation and management tools and partnerships are made
    available to farmers and ranchers that can help them to successfully
    meet these challenges.
        The future of American agriculture may very well hinge on policy
    decisions your Subcommittee and the Committee on Agriculture will
    address in the coming months. The Alliance believes that, by utilizing
    the examples of successful American food and fiber producers, private
    landowners, and on-the-ground conservation practitioners, your
    Subcommittee has a unique opportunity to make farm bill title II
    programs more effective, more efficient, and more user-friendly. This
    is especially important now, with the tough budget times we are facing
    and will continue to face in the near future.
        The Alliance supports incentive-driven conservation programs, more
    local and state control of the funding for those programs, increased
    emphasis on deteriorating forested watersheds, and streamlined
    implementation. We have specific recommendations on how to improve the
    Agricultural Watershed Enhancement Program (AWEP). And we are concerned
    that over half of today's active farmers and ranchers are between 45
    and 64 years old. We must find ways to encourage young farmers and
    ranchers to stay with agriculture, and farm bill conservation programs
    that can be tailored to help achieve that goal.
        We believe the practical experience of our membership, coupled with
    the many agricultural water and natural resource policy issues our
    organization has been involved with over the past several years gives
    us a unique perspective to provide specific ideas on how conservation
    programs can be delivered more efficiently and encourage more
    participation from western farmers and ranchers. On behalf of the
    Alliance, I urge you to consider the recommendations included in this
    testimony to achieve this goal.

    Introduction
        The most important policy for keeping farms and ranches intact and
    healthy, while providing the environmental protections sought by
    society is a strong economy. Farm bill conservation programs fill an
    essential niche in maintaining a strong quality of life in the rural
    West. For more than 75 years, American taxpayers have invested in
    conservation through the farm bill. These investments in private lands
    and waters have delivered cost-effective benefits far beyond the
    property lines of farmers and ranchers, extending robust returns for
    every taxpayer who buys food at the market, enjoys fresh air and clean
    water, and recreates in the great outdoors. These returns include
    significantly improved fish and wildlife habitat, improved air, soil
    and water quality, ensured long-term productivity of our agricultural
    lands, increased outdoor recreational opportunities, and increased
    financial returns for rural communities.
        Rural America faces unprecedented challenges to its competitiveness
    in crop production and its sustainability as a steward of natural
    resources and wildlife habitat. Funding provided by Natural Resource
    Conservation Service (NRCS) programs is leveraged many times over with
    a multitude of private, state and other Federal funding sources--a
    model of programmatic efficiency. Yet, the real power of farm bill
    conservation programs has proven to be the ``boots on the ground''
    ability to fully realize the potential for innovative and non-
    traditional partnerships. Such partnerships have yielded measurable and
    practical results shown to enhance competitiveness and bolster
    sustainability.

    ``Western Water Management Case Studies''
        The Family Farm Alliance played an active role in the development
    of the last farm bill's conservation title. In particular, working with
    a diverse coalition of commodity groups, conservation organizations,
    and urban water users, we helped develop the framework that ultimately
    became the Agricultural Water Enhancement Program (AWEP). In 2010, we
    released a report (Western Water Management Case Studies) that
    describes a dozen real-world examples of water conservation, water
    transfers and markets, aging water management infrastructure problems,
    and watershed restoration and enhancement projects. An important
    objective of this report was to demonstrate that water managers,
    ranchers and farmers are resourceful and creative individuals who
    should play an active role in resolving the water conflicts of the
    West. My testimony today incorporates some of the ``lessons learned''
    from that report and touches on other matters critical to the future of
    western farmers and ranchers' ability to provide food, fiber and energy
    to our nation and the world.

    Observations and Recommendations on Water Conservation Programs
        In the western U.S., we need policies that encourage agricultural
    producers to work together with each other and with many applicable
    Federal and state agencies in a strategic, coordinated fashion. This is
    especially true now more than ever before due to the limited financial
    resources of the Federal Government and the need to continue to
    effectively and efficiently protect our limited natural resources so
    important to this nation's food productivity. We have prepared the
    following observations and associated recommendations that we would
    like to see incorporated into the next farm bill.

    Concerns with AWEP
        AWEP is a newly-established part of the Environmental Quality
    Incentives Program (EQIP), a program administered by the Natural
    Resources Conservation Service (NRCS). The main difference between
    typical EQIP projects and AWEP projects is that applications for
    project funding are made directly to the U.S. Secretary of Agriculture
    from an organization on behalf of a group of agricultural producers who
    intend to make water conservation improvements in a geographic area.
        The Family Farm Alliance was part of a diverse coalition formed
    during the crafting of the last farm bill that focused exclusively on
    the development of the AWEP concept. Our primary motive for engaging in
    this process was to provide additional funding opportunities for
    irrigation districts and other agricultural water delivery and
    management organizations to solve aging infrastructure and water
    conservation challenges in a more coordinated and effective manner. The
    original concept behind AWEP was to focus on cooperative approaches to
    enhancing water quantity and/or quality on a regional scale. This new
    program--in tandem with multiple conservation tools (including farmland
    management practices, easement purchases, and ecosystem restoration
    assistance)--was intended to provide flexibility to cooperative
    nontraditional conservation partners to achieve improved water quantity
    and quality goals.
        Some of our members have witnessed firsthand the types of
    challenges that AWEP advocates were trying to address. For example, the
    2002 Farm Bill contained $50 million of EQIP funding to implement water
    conservation measures in the Klamath Basin of northern California and
    southern Oregon. These Federal funds were matched by $12.5 million of
    local money from individual landowners. While the water conservation
    measures undertaken undoubtedly contributed to improved water use
    efficiency on individual farms, the EQIP program was not designed to
    coordinate conservation benefits to meet specific regional goals, such
    as conserving water for storage and future use. Irrigation districts
    and other, larger conservation entities, which many times coordinate
    conservation projects to maximize benefits, were not eligible to
    compete for these funds to make the necessary improvements to the
    delivery system to effectively capture this conserved water to meet
    unmet demands. We believe this was an opportunity lost, one that could
    have provided regional water supply solutions to some of the complex
    problems experienced in Klamath.
        Our interest in implementing AWEP, in part, was intended to address
    these types of challenges. There is a need to fund projects that
    provide water quality and/or water quantity improvements at a scale
    that benefits more than just the individual participating producers. In
    many instances, coordinated regional water conservation efforts can
    lead to improved water quantities and quality that can only be
    physically captured and managed by the water delivery organizations to
    meet overall goals and objectives. We had hoped that AWEP would provide
    substantial matching grant funding to irrigation districts or other
    water agencies, which are already in a position to work with multiple
    producers to achieve locally-generated, measurable objectives and
    results. If consensus at a regional level can be reached on a
    coordinated and integrated approach to conserving water to meet unmet
    needs, there will be a better chance of positive community
    participation and ultimately, a much larger return on the Federal
    investment.
        In our view, the original AWEP proposal was solid from a conceptual
    standpoint, but by the time the concept made it through the legislative
    and administrative process, the program that is now in place is not
    being implemented in a manner consistent with the original vision. In
    Arizona, for example, state NRCS local working groups came up with a
    list of priorities and resource concerns at the request of NRCS
    headquarters in Washington, D.C. While irrigation efficiency was one of
    the highest priorities listed, local working groups noted that AWEP
    simply was not being applied in a way that could maximize its potential
    benefits. Rather than providing funds directly to irrigation districts,
    the districts instead have been put in situation where they essentially
    pass the phone number of the local NRCS office on to the individual
    landowner, and NRCS takes over from there. In essence, this AWEP has
    simply become an expansion of the existing EQIP program, which was
    definitely not the intent when this concept was crafted 4 years ago.
        We also have grave concerns regarding recent AWEP spending
    priorities. Almost 50% of the $4.7 million in AWEP programs funded in
    FY 2011 in seven western states emphasized ``focusing on the transition
    of irrigated cropland to dryland agriculture use'' or to ``permanently
    retire'' irrigated cropland. The original intent behind AWEP was to
    find ways to help farmers and ranchers improve water conservation,
    management, reuse and efficiency while keeping their operations viable.
    Using farm bill conservation programs to eliminate irrigated
    agricultural lands altogether at a time when worldwide demand for food
    is growing every day defies common sense.
    Recommendations to Improve AWEP
        We must create opportunities within the new farm bill to further
    improve upon AWEP's initial concept, such as:

       Provisions should allow AWEP to provide direct payments to
            irrigation districts to work directly with their landowner
            member farmers on NRCS-approved coordinated water conservation
            and management projects. While NRCS should still approve the
            contracts, we believe more efficient results that provide
            measurable, coordinated improvements on the ground will occur
            if the irrigation districts distribute the funds and work with
            the landowners directly. These districts can provide
            opportunities for innovative solutions to water management
            problems that currently cannot be achieved simply due to
            bureaucratic barriers and narrowly focused programs.
            Administrative expenses for such partners should be allowed,
            but capped;

       Irrigation districts and/or landowners should be allowed to
            implement water conservation or water quality projects outside
            of the normal projects funded under the EQIP program, given
            that they can show improvements to either water quantity or
            quality;

       Irrigation districts or similar entities should be allowed
            to be the basis for ``pooling'' arrangements, where the
            benefits of a project which affects multiple landowners is
            funded by ``pooling'' their individual AWEP interests into a
            larger, coordinated project;

       Direction must be provided to improve how NRCS program
            administrators deliver timely and accurate information, provide
            reliable and transparent processes, and set firm deadlines;

       Administrative costs associated with any work performed by
            the NRCS should be capped at a reasonable level;

       The role of the Bureau of Reclamation in coordinating with
            NRCS in the implementation of this program in western states
            must be well defined, and should compliment the collaborative
            philosophy (between the Departments of Agriculture and
            Interior) embedded in the ``Bridging the Headgates'' initiative
            endorsed by both the Bush and Clinton Administrations;

       The program should provide assurances that the intent is not
            to reallocate water away from agriculture, but to help stretch
            limited water supplies for future regional beneficial use. We
            do not believe AWEP monies should be used to retire farmland or
            convert irrigated ground to dryland crops. It must also
            recognize the traditional deference of Federal agencies to
            state water laws and allocation systems;

       The money obligated for these programs in the farm bill
            needs to be ``no year'' money, so that it doesn't have to all
            be obligated in the first year, with nothing left in later
            years. This has proven to be real hindrance for projects that
            take more than 1 year to build. Water managers have also
            noticed that the NRCS funding levels fluctuate, and so they are
            never sure what level of funding their farmers will receive.
            During the application process to secure funding, NRCS should
            agree how much a district is going to receive and ensure this
            money will be there. To minimize administrative complications,
            sharing some of the control over funds with the partnering
            irrigation districts would simplify the responsibilities of the
            NRCS. Districts could be held accountable through audits and
            reports delivered to the NRCS. We would be happy to sit down
            with Committee staff and NRCS leadership to help create a
            workable and efficient solution to this challenge; and

       We have previously shared proposed draft language with NRCS
            that could address the issues concerning NRCS entering into
            agreements with irrigation districts on AWEP activities in a
            manner similar to how NRCS enters into EQIP agreements with
            Tribes. We would be happy to share this with Committee staff to
            gain additional thoughts on this matter.

        We look forward to working with your Committee further to help
    improve this vital program.

    The Need to Support Local Efforts to Manage Western Watersheds: A Case
            Study
        We strongly believe that local, regional and state land managers
    should be encouraged and provided the tools to lead watershed
    enhancement efforts. The best decisions on natural resources issues
    happen at the state and local level. The 2010 Family Farm Alliance case
    study report includes one such example in the Little Snake River
    watershed of Wyoming, where my family operates a sheep and cattle
    ranch. Since 1991 numerous agencies, organizations, and NGO's have
    recognized landowners and the local governmental natural resource
    agency, the Little Snake River Conservation District (LSRCD), as
    leaders in natural resource conservation. Numerous articles featuring
    work conducted by the LSRCD, area land owners, and its partners have
    been featured in popular publications like the Farm Journal, Beef
    Today, Bugle Magazine, Wyoming Wildlife, and Range magazines as well as
    peer reviewed journal publication in the Journal of Soil and Water
    Conservation (2008) and the Journal of Rangeland Ecology (2009).
        These successful efforts have all been locally-led. Conservation of
    natural resources in the Little Snake River Basin integrated with
    agrarian life style and perpetuation of this culture is the highest
    priority for the local community in the Little Snake Basin. In Wyoming,
    the local residents have passed a conservation property tax to carry on
    this work. Since 1990 this tax has generated approximately $8 million
    in local revenues. These funds have leveraged over $40 million dollars
    in project money to implement conservation and development projects in
    the Little Snake River Basin.
        Today, the Little Snake River Basin hosts a myriad of wildlife and
    robust natural resources while sustaining compatible agricultural uses
    and natural resource-based recreation businesses. This was accomplished
    through local leadership and commitment of the Little Snake River
    Conservation District working collaboratively with over 30 different
    partner organizations and agencies that have assisted in the
    conservation of the Little Snake Basin, in a collaborative locally-led
    process.

    Innovation in Conservation Program Delivery
        Direct funding to large umbrella organizations to implement
    conservation on a landscape, district, or regional scale must be
    included in the new farm bill. Excessive administration, expensive, and
    time consuming delays are the norm under the current system, where
    numerous individual contracts are held with individual land owners.
    Significant administrative and financial savings could be realized
    through single contracts with umbrella organizations such as
    conservation districts, irrigation districts, watershed coalitions,
    grazing associations, and other nongovernmental organizations that
    could significantly decrease the cost of program delivery and increase
    efficiency.
        There are over fifty farm bill programs, including dozens under the
    conservation title--CRP, WRP, EQIP, AWEP, etc. Some of these programs
    should be consolidated. Also, under current policies, agency officials
    in Washington, D.C. allocate these funds--based on Federal, national
    priorities--and the states are handed down specific funding for each of
    the individual programs. So, for example, one state may receive from
    Washington, D.C. $6 million in WRP funds which may not even be needed
    in that state, whereas EQIP programs which are in high demand in that
    particular state are under-funded. Our members believe local farmers
    and ranchers who are interested in implementing conservation projects
    would be better served if the Federal NRCS puts all the conservation
    money for a given state into just a handful of funding programs. Then--
    let the states determine which programs get funded.
        The present priority system places too much emphasis on whatever
    national policy is driving current decision-making. In the past, the
    states local priorities drove 50% of the decision-making criteria. Now,
    it appears that projects are first evaluated on whether or not they
    meet national priority, which accounts between 10-25% of the total
    ranking. In essence, this ends up disqualifying meaningful local
    projects, and by default drives funding towards those river basins
    which have the most national political clout.
        Local and state priorities should be the drivers of conservation.
    One size does not fit all. Conservation needs of a rice farm in
    Arkansas are much different than those of a rancher in Wyoming or a
    coffee producer in Hawaii. Local control for identification of
    conservation needs and allocation of funding must be restored. We
    believe the national priority ranking criteria should be completely
    eliminated, and instead, a block of conservation funds should be
    provided to each state, where local and state priorities end up driving
    how funds are spent on the ground, consistent with each program's
    authorities and goals. States should be allowed to voluntarily assume
    primacy for implementation of the conservation title of the farm bill
    with block grants to the states. This would result in increased
    efficiency and delivery of conservation needs within each state. Most
    state have mirror agencies, Departments of Agriculture, Wildlife,
    Natural Resources, and Engineers that have the capacity to implement
    conservation programs. This type of approach is already in place for
    portions of the Clean Water Act. Significant cost saving to the Federal
    Government could be realized by reduction in duplicate effort with the
    states.

    Reorganization of USDA
        Another concern expressed by many of our farmers and ranchers is
    that, unlike the situation that occurred prior to the 2002 Farm Bill,
    Farm Services Agency (FSA) and NRCS are both now staffed to provide
    financial accounting services. Since inheriting the financial
    administration of the conservation title in the 2002 Farm Bill, NRCS
    has become increasingly a financial administrative agency, with the
    Government Accounting Office (GAO) continually redirecting the agency
    to move towards financial administrative compliance and accountability.
    This has resulted in shifts in expenditures away from providing
    conservation technical assistance to farmers and ranchers in addition
    to changes in personnel within the agency from soil scientist and
    agronomist to contract specialist and accountants. In a nutshell, this
    can lead to both agencies using precious conservation dollars on
    accounting duties, when those funds would be better served supporting
    on-the-ground conservation projects.
        We recommend that the next farm bill direct that accounting
    services be placed back into the hands of FSA, where those duties were
    competently performed prior to the 2002 Farm Bill. We want to see NRCS
    doing what it does best, which is providing conservation technical
    assistance to all producers. This could ultimately better position NRCS
    at the local level by putting more emphasis and funding in support of
    state and local conservation experts, instead of placing them in a
    position where they have to crack the whip on program accounting.
    Streamlining the functions of both agencies would also result in
    significant savings while having no impact of delivery of the farm
    bill. Savings would be realized in personnel, equipment, supplies,
    transportation, and overall overhead expenditures.

    Conservation Recommendations from Related Farm Bill Policy Forums
        The Family Farm Alliance continues to build coalitions and create
    alliances to advocate for constructive changes to the farm bill
    conservation title that benefit irrigated agriculture. We are lead
    partners in the Johnson Foundation national freshwater ``Call to
    Action'', the Western Agriculture and Conservation Coalition, and the
    2011 blue ribbon panel convened by the Natural Resources Conservation
    Service. I also serve on the advisory committee for AGree, a new
    national high-profile initiative to transform food and agriculture
    policy. All of these forums will likely have an influence on the
    emerging farm bill. I'd like to summarize below some of the key
    recommendations derived from two these forums, which I believe fortify
    the general philosophy contained in our above recommendations.

    Recommendations of the Western Agriculture and Conservation Coalition
        A western coalition of agricultural and conservation organizations
    has come together to urge that Congress pass the farm bill this year
    and maintain conservation program funding. As a member of the steering
    committee for the Western Agriculture and Conservation Coalition, we
    seek to advocate for balanced management of resources in the rural
    West. Following the 2012 Family Farm Alliance annual conference in Las
    Vegas last February, we met with representatives of the California Farm
    Bureau Federation, Trout Unlimited, Wyoming Stock Growers Association,
    The Nature Conservancy, Arizona Public Lands Council, Environmental
    Defense Fund, Public Lands Council and the Irrigation Association and
    announced the formation of this unique coalition, which seeks to
    advocate for balanced management of resources in the rural west. The
    goals of the Coalition are to support the common interests of
    agriculture and conservation through targeted education, advocacy, and
    outreach and to engage decision makers and resource managers in the
    spirit of collaboration to further a shared vision for a rural west
    that is economically and environmentally sustainable. For the 2012 Farm
    Bill, this Coalition believes:

       Priority Title II programs must receive sufficient funding
            so that on-farm operational, resource conservation, local
            economic, and rural sustainability goals are met;

       Enhanced programmatic efficiencies can be achieved, which
            will facilitate access to program funding, and lead to more
            effective project implementation and fewer obstacles for
            landowners and conservation partners. Improving the
            Agricultural Water Enhancement Program is one such example;

       Program delivery could be improved and yield broader
            positive impacts if inter-agency cooperation among and between
            resource management agencies and the USDA was better-defined;
            and

       Local, regional and state land managers should be encouraged
            and provided the tools to lead watershed enhancement efforts at
            the landscape level.

        From a personal standpoint, working with this coalition has been
    positive and rewarding, and a refreshing change from some of the tired
    and worn messaging we constantly hear from more agenda-driven activist
    groups who use the farm bill as a forum to actually denigrate farmers
    and ranchers. This is unfortunate, because this sort of negativity does
    not reflect what is truly happening on the ground. Our recent
    involvement with the Coalition leads us to believe that policy makers
    and the public appreciate the positive examples of how conservation
    groups and farmers and ranchers can work collaboratively with
    government agencies on ``win-win'' solutions that are good for
    agriculture and the environment. We should be thinking of ways to
    mobilize the public to act favorably on issues that are critical to
    maintaining economically viable ranching and conservation of resources
    and to demonstrate the important partnership between land stewards and
    conservation interests.
        The Coalition has emphasized that continued funding of Title II
    priority programs produces results that are timely, effective, more
    efficient and jobs-oriented. This coalition continues to urge Congress
    to preserve funding for USDA conservation programs and to take steps to
    provide farmers and ranchers with the resources necessary to continue
    enhancing soil, water quality and wildlife on agricultural land. For
    further detail on the Coalition's specific recommendations, please see
    the copy of the Coalition's March 2, 2012 letter to Congressional
    agriculture committees, which is attached to this testimony.

    Recommendations of the Resource Conservation Act Blue Ribbon Panel
        In late 2010, I was appointed to a Blue Ribbon Panel established to
    support the development of the NRCS Program and Policy Statement. The
    first meeting of the Panel occurred in early 2011 in Washington. Over
    the next several months, I helped organize and spoke at three western
    regional workshops and the National Agricultural Landscapes (NAL)
    Forum, held here in Washington, D.C. Several other Family Farm Alliance
    leaders were chosen to speak at the regional workshops, as well. In the
    end, we supported the following major recommendations that emerged from
    the NAL:

       Improve Jurisdictional Flexibility and Share
            Responsibility--Local state, tribal and regional directors must
            be allowed to make resource decisions and to innovate based on
            local conditions.

       Improve Program Efficiency and Inter-Agency Cooperation--
            Greater facilitation of inter-agency learning and cooperation
            is required to improve conservation outcomes.

       Target Regulations and Reduce Uncertainty--the U.S.
            Department of Agriculture (USDA) must harmonize regulations to
            avoid redundant requirements that do not enhance protection.

       Leverage Program Assistance to Maximize Program
            Effectiveness--Partnerships and leveraging state, local and
            private funding are essential to achieving resource
            conservation goals.

       Expand Market-Based Solutions--Government can play a
            supportive role in developing ecosystem market regulatory and
            environmental quality standards.

        We urge your Subcommittee to review the findings presented at the
    NAL Forum and seek to incorporate these recommendations and this type
    of philosophy to improve delivery of farm bill title II programs.
    The Critical Need to Incentivize and Encourage Young Farmers
        We are in danger of losing a generation of young farmers, and
    productive farmlands and western agriculture's traditional water
    supplies are transferred to other uses as multiple demands for water
    increase. This is all happening at a time when the United Nations
    projects that the world will need to produce 70 percent more food by
    2050 to keep pace with world population growth and hunger. Nationally,
    the median age of active farmers in America has never been higher, with
    the percentage of farmers under 50 years old continuing to plummet.
    More than half of today's farmers are between 45 and 64 years old, and
    only six percent of our farmers are younger than 35.
        While there is renewed interest among young people to enter farming
    today, unfortunately the larger trend is an increase in the average age
    of the American farmer. To reverse this course, our country must take
    bold action to ensure that aspiring farmers have access to land, health
    care, capital, education and training. Congress should invest now in a
    farm bill that helps young Americans enter into and succeed in farming,
    and that creates incentives for diversified and sustainable
    agriculture.
        The next farm bill should create policies that can attract and
    retain young farmers to benefit the future of American agriculture, as
    well as the stability of America's food supply. One specific action
    that would help would be for Congress to reauthorize adequate funding
    for the Beginning Farmer and Rancher Development Program (BFRDP). More
    generally, another means of bringing new faces into agriculture and
    keeping young people in the business is to create a more certain,
    relaxed and reasonable regulatory environment. Increasingly, we hear
    reports that level of Federal regulations affecting American
    agriculture has reached such a magnitude that family farmers and
    ranchers fear regulations more than most other stressors in their
    profession. These conversations are often about the frustration they
    feel over the amount of time they spend dealing with regulations and
    bureaucracy in managing their business. All of these regulations hit
    small family farmers the hardest, since they often do not have the
    resources at their disposal to deal with the maze of the required
    paperwork and regulatory record-keeping. These sometimes daunting
    requirements could be moving young people to choose careers other than
    farming, at a time when there aren't many young people left in this
    line of work.
        Today, our own western farmers and ranchers are being subjected to
    potentially restrictive and duplicative Federal regulations on many
    fronts. Many of these rules have cropped up in just the past 2 years.
    The related uncertainty that comes with all of this increased
    regulatory scrutiny will make it much harder for these farmers to
    survive in such a harsh economy. Eliminating just a few of these
    farmers could impart huge limitations on our future ability to feed our
    country and the world.
        Western family farmers and ranchers need to be shown--through
    leadership and development of common sense agriculture and water policy
    priorities--that what they do everyday really does matter to this
    country. The Family Farm Alliance has spent much of the past decade
    developing specific, common-sense recommendations for more effective
    regulations that would protect the environment, human health and safety
    in a more streamlined and effective manner. While we understand that
    the focus of today's hearing is on the conservation title of the farm
    bill, this issue is critically important to the future of western
    irrigated agriculture. At the appropriate time, we would be happy to
    share those recommendations with you and other Members of the Committee
    on Agriculture.

    Conclusion
        Throughout the western United States, family farms and ranches have
    facilitated the conservation and stewardship of the region's natural
    resources while anchoring our rich cultural heritage and identity. It
    is a landscape and a way of life that works for rural economies and
    resource conservation. Here, private land stewardship is the key to
    continued conservation innovation, resource and habitat enhancements,
    and sustainable working land partnerships. It is a region in which
    farmers and ranchers have been finding ways to successfully balance
    resource stewardship and their bottom line, thanks in part to the
    availability of farm bill conservation programs.
        We need Federal land and water policies that are based on sound
    science and that reward producers who care about the environment in
    providing affordable food and fiber and bringing economic health to our
    rural communities. We need to encourage young agricultural producers,
    rather than litigious, anti-agriculture activist groups. Properly
    managing watersheds and encouraging Federal agencies to work with the
    agricultural community to solve local water problems are imperative.
        Thousands of water and land conservation projects have been
    completed across the western United States, and these efforts should
    continue. We urge this Subcommittee and the Committee on Agriculture to
    continue to make farm bill conservation programs a priority and to fund
    these programs accordingly.
        We stand ready to further assist you in your efforts to more
    effectively utilize farm bill programs to the benefit of both
    agricultural production and natural resource conservation results.
        Thank you for this opportunity to provide testimony to you on this
    matter, which is very important to the family farmers and ranchers of
    our membership.
                                   Attachment
    March 2, 2012

    Hon. Debbie Stabenow,
    Chairwoman,
    Senate Committee on Agriculture, Nutrition, and Forestry,
    Washington, D.C.;

    Hon. Pat Roberts,
    Ranking Minority Member,
    Senate Committee on Agriculture, Nutrition, and Forestry,
    Washington, D.C.

        Re: Farm bill conservation priorities for coalition of western
        agriculture and conservation groups

        Dear Chairwoman Stabenow and Ranking Member Roberts:

        Throughout the western United States, family farms and ranches have
    facilitated the conservation and stewardship of the region's natural
    resources while anchoring the region's rich cultural heritage and
    identity. It is a landscape and a way of life that works for rural
    economies and resource conservation. Here, private land stewardship is
    the key to continued conservation innovation, resource and habitat
    enhancements, and sustainable working land partnerships. It is a region
    in which farmers and ranchers have been finding ways to successfully
    balance resource stewardship and their bottom line, thanks in part to
    the availability of farm bill conservation programs. Managing water
    quantity and quality is a key resource concern for the undersigned
    groups.
        Unfortunately, these constructive partnerships and the
    environmental benefits they generate will disappear if we cannot find
    ways to bring more farmers and ranchers into the fold and encourage
    young farmers to stay in the business. Nationally, the median age of
    active farmers and ranchers in America has never been higher, with the
    percentage of farmers under 50 years old continuing to plummet. More
    than \1/2\ of today's farmers are aged between 45 and 64, and only six
    percent of our farmers are younger than 35. The next farm bill needs to
    reflect a philosophy that can attract and retain young farmers for the
    future of American agriculture, and the stability of America's food
    supply.
        The most important policy for keeping farms and ranches intact and
    providing the environmental services sought by society is a strong
    economy. Farm bill conservation programs also fill an essential niche
    in maintaining a strong quality of life in the rural West. For more
    than 75 years, American taxpayers have invested in conservation through
    the farm bill. These investments in private lands and waters have
    delivered cost-effective benefits far beyond the property lines of
    farmers and ranchers, extending robust returns for every taxpayer.
    These returns include significantly improved fish and wildlife habitat,
    improved air, soil and water quality, ensured long-term productivity of
    our agricultural lands, increased outdoor recreational opportunities,
    reduced regulatory burdens on farmers and ranchers, and increased
    financial returns for rural communities. Farm bill activity should be
    enhanced by further encouraging the development of private markets that
    reward landowners for good actions on the ground while creating
    environmental benefit.

        For these reasons, a western coalition of agricultural and
    conservation organizations has come together to ask you to pass the
    farm bill this year and maintain funding for conservation programs
    important for the West.

        This coalition urges Congress to preserve funding for USDA
    conservation programs and to take steps necessary to provide farmers
    and ranchers with the resources necessary to continue enhancing soil,
    water quality and wildlife on agricultural land. With this letter, the
    coalition outlines a set of principles that lawmakers should observe as
    they seek ways to trim the Federal deficit and proceed with writing the
    conservation title of the 2012 Farm Bill. While many of the undersigned
    organizations have additional priorities for the 2012 Farm Bill, the
    following recommendations represent the priorities on which we have
    reached consensus.

        1. Agriculture Water Enhancement Program, Cooperative Conservation
            Partnership Initiative, Wildlife Habitat Incentive Program,
            Farm and Ranch Lands Protection Program, Grassland Reserve
            Program, Environmental Quality Incentive Program are
            particularly important to achieving conservation and rural
            economic and social goals in the West. These programs in Title
            II must receive sufficient funding so that on-farm and on-ranch
            operational, resource conservation, local economic, and rural
            sustainability goals are met. Some specific policy changes to
            consider:

         Strengthen conservation programs to increase accessibility
                and ensure they work better for more producers.

         Maintain current funding levels for the priority programs.

         Eliminate $50K payment limit for WHIP.

         Allow third parties to hold GRP easements directly after
                execution, without requiring the easements to first be held
                by USDA.

         Ensure that EQIP remains available for use across all land
                ownerships.

        2. Enhance programmatic efficiencies to facilitate easier access to
            program funding, more effective project implementation and
            fewer obstacles for landowners and conservation partners (for
            example, improving the Agricultural Water Enhancement Program).
            Specific recommendations include:

         Strengthen NRCS Technical Assistance capacity for both
                program implementation and non-farm bill conservation
                planning.

         Consolidation should enhance conservation outcomes.

         Consolidation of conservation programs must be structured
                appropriately so as to increase flexibility for USDA while
                maintaining purposes of priority programs like EQIP, GRP
                and WRP.

         In AWEP and CCPI, allow qualifying partners to help
                producers address resource issues in a more flexible and
                efficient manner so they can maintain profitability and
                avoid potential future environmental regulatory actions.

         Maintain current provisions in AWEP and CCPI requiring
                partners to commit resources to projects while providing
                USDA with discretion to prioritize proposals from partners
                who offer the most additional resources for project
                implementation.

         Continue and expand applicability of WRP Reserved Rights
                Pilot Program where determined by the USDA to be consistent
                with existing conservation plans and as a tool by which to
                achieve resource conservation objectives.

         Remove 7 year ownership requirement for WRP.

         Changes to CRP to provide more flexibility for adjusting
                grazing frequency so long as the ecological functions of
                the land and water are maintained. Additionally, allow wild
                horses owned by the Bureau of Land Management to graze CRP
                acres consistently with maintaining ecological integrity.
                BLM would make payments to landowners for this service.

         Changes to WRP, GRP, and FRPP to allow increased
                flexibility regarding third party involvement including
                management of easements and meeting non-Federal matching
                requirements.

        3. Program delivery could be improved and yield broader positive
            impacts if interagency cooperation is better defined.
            Additional recommendations:

         Throughout the conservation title, ensure that priority be
                given to projects that address the greatest resource
                concerns most effectively. Provide for greater interagency
                coordination at Federal, state and local levels in the
                development and delivery of conservation.

         Ensure that the long tradition of partnerships among USDA,
                private landowners, and conservation partners is continued,
                encouraged and expanded.

        4. Local, regional and state land managers should be encouraged and
            provided the tools to lead watershed enhancement efforts.

         NRCS at the state level should be encouraged and provided
                the resources to more effectively engage with partners in
                watershed planning, enhancement and restoration efforts.

         Strengthen partnership-driven programs such as AWEP and
                CCPI, which allow partners including local, regional and
                state land managers to lead watershed enhancement efforts.

         Provide for greater flexibility within such partnership
                programs, including making the funding approved for such
                projects ``no year'' money, thus enabling large and complex
                watershed-scale conservation initiatives to be leveraged to
                their greatest potential.

        5. Support Beginning Farmers and Ranchers.

        Reauthorize funding for the Beginning Farmer and Rancher
            Development Program (BFRDP).

        We appreciate your consideration of our interests and look forward
    to working with you to put together the strongest conservation title
    possible that is responsive to western as well as national interests.
                Signed,

    The Western Agriculture and Conservation Coalition Steering Committee:

        Trout Unlimited
        Family Farm Alliance
        The Nature Conservancy
        Public Lands Council
        Environmental Defense Fund
        California Farm Bureau
        Arizona Public Lands Council
        Wyoming Stock Growers Association
        Irrigation Association

    Affiliates:

        The Freshwater Trust
        Montana Stock Growers Association

    CC:

        Hon. Frank D. Lucas,
        Chairman,
        House Committee on Agriculture;

        Hon. Collin C. Peterson,
        Ranking Minority Member
        House Committee on Agriculture.

        The Chairman. Thank you, Mr. O'Toole. Now I yield to the
    Ranking Member for the purpose of the introduction of our next
    witness.
        Mr. Peterson. Thank you, Mr. Chairman. Mr. Nomsen is a
    constituent of mine, even though he works for a national
    organization which I would say is the premiere group in terms
    of providing wildlife habitat technical assistance and
    benefits. He and I were at a Pheasants Forever banquet in my
    district a couple of weeks ago, and that little chapter there
    in Otter Tail County raised $3 million of private money to work
    with what we are doing here in Congress. So Mr. Nomsen has been
    the lead guy on the conservation issues in the last couple farm
    bills for the wildlife interests, and we welcome him to the
    Committee.

            STATEMENT OF DAVID E. NOMSEN, VICE PRESIDENT OF
      GOVERNMENTAL AFFAIRS, PHEASANTS FOREVER, INC., ST. PAUL, MN

        Mr. Nomsen. Thank you, Mr. Chairman, Ranking Member
    Peterson. You know, that Otter Tail chapter banquet that we
    were at, Mr. Peterson, was Minnesota's leading chapter last
    year and as you mentioned, they did $3 million worth of work
    out there with our farmers and landowners in that area, a
    tremendous success story for the Otter Tail chapter.
        It is my pleasure to be here today also representing the
    views of the Association of Fish and Wildlife Agencies, Ducks
    Unlimited, the Izaak Walton League of America, Pheasants
    Forever, the Theodore Roosevelt Conservation Partnership, the
    Mule Deer Foundation, Masters of Foxhounds, the Campfire Club
    of America, Wildlife Forever, the Archery Trade Association,
    the Wildlife Management Institute, Hope and Young Club, Quail
    Unlimited, the Boone and Crockett Club, the Dallas Safari Club,
    the National Rifle Association, Orion the Hunter's Institute,
    the Wild Sheep Foundation, Delta Water Fowl, the Catch a Dream
    Foundation, and Whitetails Unlimited.
        Clearly, farm bill conservation programs are of importance
    to our nation's sportsmen and sportswomen, and of course,
    support our nation's hunting heritage.
        The farm bill conservation title is driven by proven
    successful programs, and we certainly support programs like
    Conservation Reserve and the Wetlands Reserve Program. The
    Voluntary Public Access Habitat Incentive Program, or ``Open
    Fields'' Program, was part of the 2008 Farm Bill, and while it
    is relatively new, it has been a tremendous success. Access to
    private lands is incredibly important to all of our members,
    and farmers and landowners benefit from reduced liability in
    these situations, so it has become a real win-win across the
    country to complement conservation and lands that are open to
    the public for hunting.
        I would like to caution the Committee, however, about the
    Conservation Reserve Program. I have lived in the prairie
    region of the country, the northern plains for my entire life
    and career. I have lived in Iowa, South Dakota, North Dakota,
    and now in Minnesota, of course, and I too have never seen the
    pressures that are on the landscape right now. You cannot drive
    anywhere without coming across new rock piles that are out
    there on native prairies, lands that have never, ever seen a
    plow before, very shallow, thin soils in some cases, on very
    steep slopes. Shelter belts being plowed up, CRP lands leaving
    the landscape, and in some cases, these decisions just aren't
    going to be sustainable, and I am very concerned about what is
    happening out there right now.
        I am glad we have the Conservation Reserve Program to help
    with these issues. CRP now has a 25+ year history, becoming one
    of USDA's flagship most successful conservation programs, and
    it has evolved and it needs to continue to evolve to fit that
    landscape and work with our nation's farmers and landowners.
    You hear a lot about the targeting of the CRP Program, and I
    would like to mention that in my view, when you talk about
    targeting, you also talk about that mix of large tracts of CRP,
    along with selective small areas. We cannot have a CRP that is
    just buffer strips and small odd areas here and there. While
    that may work for some species of wildlife that are edge
    species and don't need those types of habitats, if we want to
    have a CRP that works for the wildlife legacy that helped
    reauthorize that program in the 1990s, we are talking about a
    program that doubled and tripled pheasant populations, provided
    several million more water fowl annually to the fall flight.
    For those types of benefits to continue, we do need large
    tracts of lands in CRP, planted to good covers, and managed
    appropriately for wildlife and wildlife benefits.
        CRP has many other benefits, of course, as well. I recall
    testifying before this same Subcommittee a number of years ago.
    One of the points in my testimony in the mid-1990s was the fact
    that the CRP Program was providing the economic stability and
    security to the point that 28 percent of North Dakota's farmers
    were still on the farm because of CRP. Clearly, times have
    changed, but it is a point that really talks about the strength
    of that program over time, and it needs to continue as a
    flagship program.
        In 2007, commodity prices spiked somewhat and about 2\1/2\
    million acres mostly left the CRP Program. Right now we are in
    the middle of a general signup for CRP, and as others have
    indicated, probably about 3 million acres or so is going to be
    leaving the program as well, a majority of those lands likely
    coming back into commodity production. My point is that the
    farmers, the landowners, the contract holders are making those
    decisions, and the program is working and it needs to continue
    to work on a voluntary basis with those farmers and landowners
    making their best decisions about what to do with those lands.
        Last fall, as the leadership of the committees worked on
    the Super Committee process and worked up a framework for the
    farm bill, we were pleased that there was a lot of bipartisan
    support from both sides, and like others before me, I am going
    to support the Senate mark that is up this morning. I say that
    reluctantly. We are going to take $6 billion away from
    conservation programs. There are consequences to that in terms
    of soil, water, and wildlife resources, and clearly, I am
    concerned about the potential reductions, especially to the
    Conservation Reserve Program. However, we have to find ways to
    do more with less, and one of the things we are doing is
    through our Farm Bill Biologists Program at Pheasants Forever,
    helping farmers and landowners make good decisions about the
    suite of resource conservation programs that are available.
    Recently they helped with forums and workshops around the
    country to provide CRP signup. They are doing a great job in
    the West as sage grouse managers for the Sage Grouse Initiative
    through NRCS as well.
        Last, our groups support the continuation and the expansion
    of conservation compliance. We are especially proud to support
    the sodsaver provisions that were included in the Senate mark
    this morning. It is a strong policy that will help complement
    conservation programs that go forward at perhaps reduced
    levels.
        Thank you, Mr. Chairman, for the opportunity. I look
    forward to the questions.
        [The prepared statement of Mr. Nomsen follows:]

     Prepared Statement of David E. Nomsen, Vice President of Governmental
                 Affairs, Pheasants Forever, Inc., St. Paul, MN

        Mr. Chairman, Members of the Committee, my name is Dave Nomsen. I
    am the Vice President of Governmental Affairs with St. Paul, MN based
    Pheasants Forever and I reside in Garfield, MN. I am a professional
    wildlife biologist with expertise in wildlife and farm bill
    conservation policies and programs.
        I am here today representing the 700 nationwide chapters of
    Pheasants and Quail Forever and our 140,000 members. These chapters
    complete on average more than 30,000 individual projects annually with
    conservation minded farmers and ranchers on 300,000 acres. The vast
    majority of these projects is completed on private lands and involves
    grassland establishment and management. Projects involve the
    establishment of nesting, brood rearing, and winter cover for
    pheasants, quail, and a wide array of wildlife.
        Collectively, our members and supporters represent a sizable cross-
    section of our nations' citizenry, and we appreciate the increased role
    and importance of conservation in agriculture and its role in private
    land stewardship that has led to consensus and partnerships among
    government and private interests, farm and commodity groups, individual
    farmers and ranchers, and hunters and anglers.
        I am pleased today to not only offer our views but also those of
    the Association of Fish and Wildlife Agencies, Ducks Unlimited, Izaak
    Walton League of America, Pheasants Forever, and the Theodore Roosevelt
    Conservation Partnership.
        While we all know that conservation programs protect the soil,
    clean the water and create abundant wildlife habitat, what we often
    overlook is the economic activity generated through conservation. For
    example, hunters and anglers spend approximately $86.1 billion pursuing
    their passions every year. Wildlife watchers spend roughly $51.3
    billion each year. These expenditures include everything from rods and
    reels, guns, ammunition, boats, decoys, bows and arrows and tree
    stands, to hotel stays and dinners in small rural towns across the
    country. Jobs related to these expenditures are important, especially
    in the small, rural towns throughout America, and most importantly,
    these are jobs that stay at home and cannot be exportable to other
    countries. In South Dakota alone the total economic value of just
    pheasant hunting has been estimated at $253 million dollars per year.
    Adequately funded conservation title programs protect both the hunting
    and angling economy as well as our agricultural and rural economy. It's
    equally important to note that during these increasingly difficult
    times, sportsmen spending generates $406 million in Federal taxes per
    year and state and local taxes of $378 million per year. Conservation
    programs like CRP and WRP help provide the backbone to support the
    diversity of wildlife that drives this essential sector of our economy.
    So, when you are weighing how much and which programs to cut in the
    upcoming farm bill debate, and we all understand that that needs to be
    done, remember, when you save money from reducing conservation
    programs, there is a direct cost to the outdoor related sports industry
    through loss of opportunities and loss of jobs in addition to lessened
    levels of soil, water, and wildlife conservation on the landscape.
        It is our view that even with possible cuts to conservation title
    programs of up to nearly $6 billion as was outlined by Committee
    leadership in last falls super committee process, that completing a
    farm bill now is our top priority.
        Sportsmen and sportswomen support a farm bill conservation title
    that is driven by proven successful programs including the Conservation
    (CRP) and Wetlands Reserve (WRP) programs, working lands programs
    including the Environmental Quality Incentives Program (EQIP), the
    Conservation Stewardship Program (CSP) and others. The Voluntary Public
    Access Habitat Incentives Program (VPA-HIP) is a relatively new program
    as part of the 2008 Farm Bill; however, this program has quickly become
    a top priority program encouraging landowners to allow access to
    private lands for hunting. Landowners are encouraged to incorporate
    wildlife friendly management practices and landowners benefit from
    reduced levels of liability. VPA-HIP supported state access programs
    like the SD ``Open Fields'' or Nebraska's CRP-Managed Access Program
    support strong rural communities as well as our nation's hunting
    heritage. These are all examples of voluntary incentive-based programs
    that help our nation's farmer and rancher stewards with projects and
    practices that improve water quality, reduce soil erosion, and enhance
    and protect wildlife habitat. All Americans benefit from a strong suite
    of conservation programs.
        Given the likelihood the successful CRP program will be reduced
    further by several million acres, it's important to continue to target
    remaining and new CRP lands to maximize benefits. We strongly support
    continuation of the CRP-State Acres for Wildlife Enhancement (CRP-SAFE)
    practices that are now in 36 states and more than 900,000 acres. SAFE
    is an excellent example of CRP in harmony with existing farming and
    ranching operations. I would caution the Committee, however, that
    without continued efforts to keep CRP economically competitive and
    viable, the program will continue to decline in areas of the country
    like the northern plains. Additionally, we support language encouraging
    maintaining the soil, water, and wildlife benefits from expired CRP
    lands that exit the program. Some lands should be transferred to
    easement programs like WRP and GRP, other lands should become priority
    enrollment in working lands programs like EQIP and CSP. USDA should be
    directed to maintain all possible acreages in various CCRP and CREP
    programs to continue CRP's environmental and wildlife legacy.
        We are strong supporters of the successful Wetlands Reserve Program
    and urge the Committee to provide mandatory baseline funding for a WRP-
    like program in the 2012 Farm Bill. The Wetlands Reserve Program (WRP)
    has been instrumental in helping farmers find better uses for those
    extremely difficult places to farm. WRP has enabled farmers and
    ranchers to restore vital wetlands on their property, improving water
    quality and providing vital wildlife habitat for not only waterfowl,
    but threatened and endangered wildlife as well. Funds from WRP provides
    a great tool for producers to invest in more and better tillable acres,
    while deriving many other benefits from their WRP acres.
        The Wildlife Habitat Incentives Program (WHIP) has also been a
    proven successful program. As the Committee debates streamlining and
    improving efficiencies, consider language supporting waivers for
    certain participants and state lands that would benefit an agricultural
    producer.
        Farmers and ranchers, conservationists and sportsmen, and all
    citizens have much to gain from successful, sustainable farming that
    conserves soil, water and wildlife. The regional partnership program
    developed in the Super Committee report is a great idea that needs to
    find its way in this next farm bill. Regional partnerships fueled by
    local diverse interest groups and supported by Federal, state and
    private funders, are a key to accomplish watershed approaches and
    solutions that will yield a good farm economy and a healthy sustainable
    environment. I encourage the House Agricultural Committee to include
    the Regional Partnership Program in this next farm bill. Following is a
    current summary of the Pheasants Forever Farm Bill Biologist
    partnership program:

       Pheasants Forever (PF) and Quail Forever (QF) Farm Bill
            Biologist (FBB) Program started in South Dakota in 2003 with
            four positions; there are currently 98 partnership positions in
            17 states. Since inception, these biologists have made over
            70,000 landowner contacts impacting 2.2 Million acres.

       Funding sources are diverse, and the effort would not be
            possible without the financial support from State Fish and
            Wildlife Agencies, USDA-NRCS (contribution agreements or
            contracts), USFWS, Joint Ventures, Local PF/QF chapters,
            watershed groups, foundations, and various other state and
            local partners. FSA is also a key partner.

       With the increasing wildlife focus as part of the farm bill
            and various state initiatives (i.e., NRCS National Initiatives,
            State Wildlife Action Plans), FBB's add wildlife technical
            assistance capacity in USDA offices. They assist NRCS/FSA and
            other conservation partners maximize the benefits conservation
            practices provide on a landscape scale.

       Our biologists may become involved in other opportunities
            such as, expanding private land acres open to the public
            through the USDA Voluntary Public Access and Habitat Incentive
            Program (VPA-HIP), we currently host three positions in PA.

       In August 2011, PF entered into an agreement with the
            Intermountain West Joint Venture, USFWS, and NRCS to assist in
            the delivering the NRCS Sage Grouse Initiative (SGI). PF will
            host positions and provide administrative/financial assistance
            for all SGI positions in 11 states. PF is also assisting with
            the Lesser Prairie Chicken Initiative with three new positions
            in TX, and one in NM.

    ------------------------------------------------------------------------
              State              Year Implemented      Number of Biologists
    ------------------------------------------------------------------------
         South Dakota                      2003                       8
           Nebraska a                      2004                      16
            Minnesota                      2004                       9
                 Ohio                      2005                       8
            Wisconsin                      2007                       6
         North Dakota                      2008                       5
                 Iowa                      2009                      12
             Illinois                      2010                       2
               Kansas                      2010                       8
             Colorado                      2010                       3
                Idaho                      2010                       5
         Pennsylvania                      2011                       5
           Missouri b           2005-2008, 2011                       3
           Washington                      2011                       2
               Nevada                      2011                       2
                Texas                      2011                       3
           New Mexico                      2011                       1
                                                     -----------------------
      Total.................                                         98
    ------------------------------------------------------------------------
    a Nebraska also implemented a Coordinating Wildlife Biologist Program in
      2007 that utilizes different partnerships to coordinate conservation
      program delivery.
    b Three year position, 2005-2008 that completed partnership agreement,
      this became a permanent private lands position within the State
      Wildlife Agency. Partnership was renewed in 2011 for three new
      positions.

        Mr. Chairman, it is the combination of both programs and policies
    that is important as the overall funding levels from previous years are
    decreased. We support continuing policies for sodbuster, swampbuster,
    and conservation compliance. Conservation compliance provisions can
    provide reasonable levels of support for soil and water resources and
    we support tying these provisions to all forms of Federal support
    including crop insurance. Copied below is a recent letter in support of
    a strong sodsaver provision to help protect critical native prairie
    resources. We recognize and appreciate this Committee's past efforts in
    this area and hope that the 2012 Farm Bill will build upon those
    efforts and strengthen provisions to help landowners make sound land-
    use decisions.
        Mr. Chairman, that concludes my testimony. Thank you for the
    opportunity to appear before you today. I'd be happy to answer any
    questions.

                                   Attachment

        American Fisheries Society * American Fly Fishing Tackle
    Association * American Sportfishing Association * Archery Trade
    Association * Association of Fish & Wildlife Agencies * Berkley
    Conservation Institute * Boone & Crockett Club * Conservation Force *
    Delta Waterfowl Foundation * Ducks Unlimited Izaak Walton League of
    America * Mule Deer Foundation * National Shooting Sports Foundation *
    Orion the Hunter's Institute * Pheasants Forever * Public Lands
    Foundation * Quail Forever * Quality Deer Management Association * The
    Nature Conservancy * The Wildlife Society * Theodore Roosevelt
    Conservation Partnership * Trout Unlimited * Whitetails Unlimited *
    Wild Sheep Foundation Wildlife Forever * Wildlife Management Institute

    April 13, 2012

    Hon. Debbie Stabenow,
    Chairwoman,
    Senate Committee on Agriculture, Nutrition, and Forestry
    Washington, D.C.;

    Hon. Pat Roberts,
    Ranking Minority Member,
    Senate Committee on Agriculture, Nutrition, and Forestry
    Washington, D.C.

        Dear Senators Stabenow and Roberts:

        Our organizations represent millions of hunter and angler
    conservationists, scientists, and outdoor enthusiasts who are closely
    following the important debate over the upcoming farm bill
    reauthorization. We appreciate your bipartisan cooperation last summer
    in concluding draft farm bill recommendations for the so-called Super
    Committee, and urge you to continue in that vein to support strong
    conservation provisions robustly funded, as reauthorization proceeds
    through regular order. We write you today to respectfully request that
    you include a strong sodsaver provision in the next farm bill, modeled
    on the provisions of the Senate floor-passed version of the farm bill
    passed December 14, 2007, H.R. 2419, the Food and Energy Security Act
    of 2007.
        Farmers have long been some of the nation's foremost
    conservationists. As you move forward to write a new farm bill, it will
    be important to include effective economic support programs that will
    allow farmers to continue farming in uncertain times and ensure that
    farmland will not be developed for other uses that are incompatible
    with conservation. At the same time, it will be equally important to
    link those support programs to basic, sensible conservation provisions,
    such as sodsaver, to encourage responsible stewardship of agricultural
    land and direct program benefits to acreage that is most suited for
    crop production. With budget pressure on existing USDA conservation
    programs increasing, linking basic farm support programs to reasonable
    conservation requirements makes sense.
        In conclusion, we strongly believe it is vital that the farm bill
    include effective economic support programs and that those programs be
    coupled with a strong sodsaver provision. Doing so will promote
    continued excellent stewardship of America's farmlands and foster
    production of crops, clean water and abundant populations of fish and
    wildlife. Thank you for your sincere consideration of our request, and
    we look forward to working with you in the coming months to achieve
    that goal.

        The Chairman. Thank you, sir. I now recognize for 5 minutes
    Mr.--is it Niemeyer?
        Mr. Niemeyer. That is correct.
        The Chairman. Mr. Niemeyer. It is good to see you again. I
    think I saw you last in Springfield, Illinois----
        Mr. Niemeyer. Absolutely.
        The Chairman.--at a Subcommittee hearing there. So go
    ahead, sir.

     STATEMENT OF GARRY NIEMEYER, PRESIDENT, NATIONAL CORN GROWERS
                        ASSOCIATION, AUBURN, IL

        Mr. Niemeyer. Chairman Thompson, Ranking Member Holden, and
    Members of the House Agriculture Subcommittee on Conservation,
    Energy, and Forestry, I appreciate the opportunity to testify
    before you today on behalf of the National Corn Growers
    Association regarding farm bill conservation programs. My name
    is Garry Niemeyer. I currently serve as President of NCGA. My
    wife Cheryl and I have been farming in Auburn, Illinois, for
    the past 41 years, where we raise corn and soybeans. I am also
    pleased to report that my testimony today has the full support
    of American Farm Bureau Federation, American Soybean
    Association, National Association of Wheat Growers, National
    Cotton Council, National Farmers Union, and USA Rice
    Federation. This broad consensus amongst farms groups is a
    significant achievement and is the result of nearly a year of
    discussions about how to structure conservation programs that
    deliver environmental benefits, while also improving
    productivity and reducing costs on the farm.
        In light of the difficult fiscal and economic conditions
    that our nation faces today, our groups recognize the
    monumental task before this Committee to advance a new farm
    bill that addresses a broad range of nutrition and agriculture
    concerns across the country. Our growers also understand that
    they must be part of the solution to address our nation's
    budget deficits and are prepared to accept spending reductions
    in farm programs. However, the size and scope of these cuts
    must not jeopardize important program functions. We believe
    there are opportunities in the conservation title to
    consolidate or eliminate redundant programs in order to achieve
    savings, while also working more effectively for producers.
        Our organizations have expressed support for the Title II
    framework in the 2012 Farm Bill that the Senate and House
    Agriculture Committees began developing last fall. This
    consolidates 23 conservation programs into 13, while
    maintaining the same tools that were available to farmers in
    the past. Our growers are seeking simplification, flexibility,
    and consolidation in these programs, and we believe these goals
    are achieved in the Senate Agriculture Committee's recent draft
    language. As regulatory pressures on producers continue to
    increase, working lands programs have become essential to
    achieving environmental goals. The Environmental Quality
    Incentives Program delivers conservation dollars to assist
    landowners who face natural resources challenges on their land.
    We support the continuation of a 60 percent carve out for
    livestock producers and for the proposal to consolidate the
    Wildlife Habitat Incentives Program into EQIP with a five
    percent funding allocation.
        The Conservation Stewardship Program was modified and
    expanded in the 2008 Farm Bill, which has allowed a greater
    number of producers to participate in recent years. CSP
    prioritizes more complex management efforts by offering higher
    payments. NRCS should be given greater flexibility in
    determining the potential outcome of these practices for
    farmers wishing to enroll.
        The Conservation Reserve Program is the largest and one of
    the most important USDA conservation programs, providing many
    benefits, including wildlife habitat, water quality
    improvements, and outdoor recreation. Considering current
    budget constraints, our groups have been supportive of
    gradually decreasing the CRP cap to 25 million acres to achieve
    savings from Title II. However, environmentally sensitive or
    fragile lands should be the program's priority, with the focus
    on targeted enrollment and re-enrollment of field borders and
    filters and buffer strips. As acreage leaves CRP, we believe it
    is important that sound conservation practices be adopted for
    those acres with an opportunity for landowners to enroll them
    in the Working Lands Program. We also support conservation
    cost-share work to be undertaken in the final year of the CRP
    contract, as well as more flexibility on haying and grazing
    options.
        Farmers are exceptional stewards of the environment. Our
    livelihoods depend on preserving land and water resources.
    Voluntary conservation programs developed over the past 30
    years help farmers and ranchers play a major role in improving
    our environment, while also expanding their sources of income
    and keeping them on the land. We hope this Committee will
    choose to continue to invest in these programs through a robust
    and efficient conservation title in the new farm bill.
        Thank you for the opportunity to testify today on behalf of
    NCGA and a number of other agriculture organizations, and we
    hope--are hopeful that Congress can act swiftly to pass the
    farm bill before the end of 2012. Thank you.
        [The prepared statement of Mr. Niemeyer follows:]

    Prepared Statement of Garry Niemeyer, President, National Corn Growers
                            Association, Auburn, IL

        Chairman Thompson, Ranking Member Holden and Members of the House
    Agriculture Subcommittee on Conservation, Energy, and Forestry, I
    appreciate the opportunity to testify before you today on behalf of the
    National Corn Growers Association (NCGA) regarding farm bill
    conservation programs. My name is Garry Niemeyer, and I currently serve
    as President of NCGA. My wife Cheryl and I have been farming in Auburn,
    Illinois for the past 41 years where we raise corn and soybeans.
        The National Corn Growers Association represents more than 37,000
    corn farmers from 48 states. NCGA also represents more than 300,000
    corn growers who contribute to check off programs and 27 affiliated
    state corn organizations across the nation for the purpose of creating
    new opportunities and markets for corn growers.
        I am also pleased to report that my testimony today has the full
    support of the American Farm Bureau Federation, American Soybean
    Association, National Association of Wheat Growers, National Cotton
    Council, National Farmers Union, and USA Rice Federation. This broad
    consensus amongst farm groups is a significant achievement and is the
    result of nearly a year of detailed discussions about how to structure
    conservation programs that deliver environmental benefits while also
    improving productivity and reducing costs on the farm.
        As this Committee and the Congress consider legislation to
    authorize a new farm bill, American farmers are preparing to take on an
    even greater role in meeting the growing demands of world consumers.
    The harsh reality is that billions of people in the world today remain
    hungry and the numbers are rising, a trend the Food and Agriculture
    Organization (FAO) of the United Nations reports will continue for
    another 30 years. The FAO says this translates into needing to increase
    agricultural production by 70 percent over this period. Others place it
    at 100 percent. Many people cite these figures and discuss how
    important it is that we reach these goals, although very few are taking
    a critical and comprehensive look at our policy decisions today in
    light of this objective. However, we are confident that with the right
    mix of policies, U.S. agriculture will help the world to meet these
    growing demands in a sustainable way, while at the same time remaining
    a bright spot in our nation's economy and contributing to its recovery.
        Our confidence comes from agriculture's ability, led by advances
    here in the U.S., to generate and adopt technological innovations that
    increase productivity and efficiency. Seed technologies, for example,
    along with modern production and conservation practices have allowed us
    to use far fewer resources while substantially increasing productivity.
    We have become more sustainable, even while we help meet the pressing
    need for an expanding food supply. In fact, the average bushels per
    acre of corn increased from 114 in 1995 to 153 in 2010, a productivity
    increase greater than 30 percent. These remarkable numbers and the
    promise of new production technologies on the horizon translate into
    U.S. farmers' ability to meet all our needs for food, feed, fuel and
    fiber.
        It is important to acknowledge that farm bill conservation programs
    have had significant positive impacts over the past several decades,
    which have led to lasting environmental improvements on agricultural
    lands. The Field to Market initiative's 2009 report Environmental
    Resource Indicators for Measuring Outcomes of On-Farm Agricultural
    Production in the United States shows positive trends for all major
    commodities in the U.S. A combination of technology adoption, improved
    management practices, and voluntary conservation programs have resulted
    in dramatic conservation benefits in U.S. corn production. Over a 20
    year period from 1987-2007, soil erosion per bushel of corn decreased
    69 percent, energy use per bushel of corn decreased 37 percent,
    irrigation water per bushel of corn decreased 27 percent, greenhouse
    gas emissions per bushel of corn decreased 30 percent, and land use per
    bushel of corn decreased 37 percent.
        In light of the extremely difficult fiscal and economic conditions
    that our nation faces today, our groups recognize the monumental task
    before this Committee to advance a new farm bill that addresses a broad
    range of nutrition and agriculture concerns across the country. Our
    growers also understand they must be part of the solution to address
    our nation's budget deficits and are prepared to accept spending
    reductions in farm programs. However, the size and scope of these cuts
    must not jeopardize important program functions. Fortunately, we
    believe there are opportunities in the conservation title to
    consolidate or eliminate duplicative programs in order to achieve
    savings, while also working more effectively for producers.
        NCGA and the aforementioned agricultural organizations have
    expressed support for the Title II framework in the 2012 Farm Bill that
    the Senate and House Agriculture Committees began developing last fall,
    which consolidates 23 conservation programs into 13 while maintaining
    the same tools that were available to farmers in the past. Our growers
    are seeking simplification, flexibility, and consolidation in these
    programs, and we believe these goals are achieved in the Senate
    Agriculture Committee's recent draft language.
        As regulatory pressures on agricultural producers continue to
    increase, working lands programs have become essential to achieving
    environmental goals. The Environmental Quality Incentive Program (EQIP)
    remains a popular program that delivers effective conservation dollars
    to assist landowners who face natural resource challenges on their
    land. Between 2009 and 2011, EQIP helped farmers and ranchers implement
    conservation measures on more than 38 million acres. Above all, EQIP
    should preserve the full flexibility needed to adjust the program over
    time to focus on evolving issues and allow improvements to program
    features based on national, state and local needs. We support the
    continuation of a 60 percent carve-out for livestock producers, as well
    as the proposal to consolidate the Wildlife Habitat Incentive Program
    (WHIP) into EQIP with a five percent funding allocation.
        The Conservation Stewardship Program (CSP) was modified and
    expanded in the 2008 Farm Bill, which has allowed a greater number of
    producers to participate in recent years. It is now one of the largest
    USDA conservation programs, with nearly 38 million acres enrolled from
    2009-2011. CSP prioritizes more complex management efforts, such as
    advanced nutrient management, by offering higher payments. The Natural
    Resources Conservation Service (NRCS) should be given greater
    flexibility in determining the potential outcome of these practices for
    farmers wishing to enroll in the program.
        We support the creation of a consolidated easement program to
    encompass the Wetlands Reserve Program (WRP), Grasslands Reserve
    Program (GRP), and Farm and Ranch Lands Protection Program (FRPP). The
    proposed changes would establish a more secure, longer term funding
    source for these important programs rather than authorizing for the
    duration of only one farm bill at a time.
        The Conservation Reserve Program (CRP) is the largest and one of
    the most important USDA conservation programs, providing many benefits
    including wildlife habitat, water quality improvements, and outdoor
    recreation. Considering current budget constraints, our groups have
    been supportive of gradually decreasing the CRP cap to 25 million acres
    to achieve savings from Title II. However, environmentally sensitive or
    fragile lands should be the program's priority, with the focus on
    targeted enrollment and reenrollment of field borders and filter and
    buffer strips. As acreage leaves the CRP, we believe it is important
    that sound conservation practices be adopted for those exiting acres
    with an opportunity for landowners to enroll them in working lands
    programs. We also support conservation cost-share work to be undertaken
    in the final year of a CRP contract, as well as more flexibility for
    haying and grazing options on CRP land.
        Our groups support the creation of a Regional Conservation
    Partnership Program by consolidating the Agricultural Water Enhancement
    Program (AWEP), Cooperative Conservation Partnership Initiative (CCPI),
    Chesapeake Bay Watershed Initiative (CBWI), and Great Lakes Restoration
    Initiative (GLRI). This will allow USDA to leverage state, local, and
    non-governmental organization funds to address targeted conservation
    priorities.
        The demand for technical assistance continues to increase, yet
    funding for technical assistance has been relatively flat over the
    years. We recommend that Congress provides adequate funding and
    training for NRCS field staff to help address on-farm conservation
    challenges. We encourage the Committee to look at a long-term view of
    budgeting for technical assistance that balances national priorities
    with local needs. In addition, the consolidation of programs should
    result in the streamlining of the application processes to minimize
    paperwork and ease implementation.
        In certain regions of the country, weather patterns in recent years
    have resulted in excess water and an increased desire to install
    drainage management on fields. Farmers have requested certified
    wetlands determinations from NRCS at a record pace, and currently,
    there is a backlog of 13,000 requests over four states (North Dakota,
    South Dakota, Minnesota, and Iowa). NRCS is working to accelerate the
    process while also bringing more consistency to how the determinations
    are made and ensuring mitigation options. Congress should provide
    resources to ensure the backlog is dealt with as expeditiously as
    possible.
        One of the most important steps USDA took in the past decade was
    the establishment of the Conservation Effects Assessment Program (CEAP)
    in 2003 to develop a scientific understanding and method for estimating
    the environmental effects of conservation practices on agricultural
    landscapes at national, regional, and watershed scales. In the past 2
    years, CEAP assessments have been completed for the Upper Mississippi
    River Basin, Chesapeake Bay Region, Great Lakes Region, and Ohio-
    Tennessee Basin. Using the survey work conducted by the National
    Agricultural Statistics Service (NASS), CEAP is a highly efficient and
    cost effective way to demonstrate the outcomes of the conservation
    practices used by farmers and ranchers. CEAP also enhances NRCS's
    ability to ensure that farmers and ranchers are focusing on top
    resource challenges. Without the NASS-supplied survey data, CEAP would
    not be able to provide its statistically valid and science-based
    estimates of agriculture's conservation accomplishments and the
    associated benefits for natural resources and the environment. This
    Committee should ensure that CEAP and the underlying NASS survey
    collection receives continued funding into the future.
        Farmers are exceptional stewards of the environment because our
    livelihoods depend on preserving land and water resources. We are
    committed to leaving our environment in better shape than we found it
    so resources can be passed on to the next generation to farm. Most
    producers throughout America view protecting agricultural land as more
    than a worthwhile goal. It is a lifelong commitment. Voluntary
    conservation programs developed over the past 30 years help farmers and
    ranchers play a major role in improving our environment while also
    expanding their sources of income and keeping them on the land. We hope
    this Committee will choose to continue to invest in these programs
    through a robust and efficient conservation title in the new farm bill.
        Thank you for the opportunity to testify today on behalf of NCGA
    and a number of other agricultural organizations. We are hopeful that
    Congress can act swiftly in the coming weeks and months to pass the
    farm bill before the end of 2012.
                                   Attachment
    April 20, 2012

    Hon. Debbie Stabenow,
    Chairwoman,
    Senate Committee on Agriculture, Nutrition, and Forestry,
    Washington, D.C.

        Dear Sen. Stabenow:

        Farmers are exceptional stewards of their land and water resources.
    They have to be. Their livelihood depends on preserving those
    resources. Even more important for most producers is a desire to
    conserve so that the resource can be passed on to the next generation
    to farm. Most farmers throughout America view protecting agricultural
    land as more than a worthwhile goal. It is a lifelong commitment. These
    farmers not only lead by example on their own farms, but they actively
    work to promote land stewardship elsewhere. Voluntary conservation
    programs developed over the past 30 years help farmers and ranchers
    play a major role in improving our environment while also expanding
    their sources of income and keeping them on their land.
        The undersigned groups urge you to oppose attaching conservation
    compliance provisions to the crop insurance program. We fear this would
    cause numerous unintended consequences, including the potential loss of
    financing from our lenders, an undermining of the public-private
    partnership between the Federal Government and crop insurance
    companies, and a potentially unbalanced approach to a new mandate
    (depending on whether such a program covers only program crop
    commodities or is also applied to specialty crops).
        The 1985 Farm Bill included two compliance provisions--highly
    erodible land conservation (sodbuster) and wetland conservation
    (swampbuster). The two provisions, collectively referred to as
    conservation compliance, require that in exchange for certain U.S.
    Department of Agriculture (USDA) program benefits, a producer agrees to
    maintain a minimum level of conservation on highly erodible land and
    not to convert wetlands to crop production.
        Conservation compliance affects most USDA benefits administered by
    the Farm Service Agency (FSA) and the Natural Resources Conservation
    Service (NRCS). These benefits include commodity support payments,
    disaster payments, farm loans and conservation program payments. If a
    producer is found to be in violation of conservation compliance, a
    number of penalties are enforced.
        Some groups and individuals believe that crop insurance should be
    added to the list of benefits that could be lost if a producer is found
    to be out of compliance. Federal crop insurance premium assistance was
    originally included as a benefit that could be denied under the
    conservation compliance provisions; however, this was removed in the
    1996 Farm Bill. This was due largely to the fact that Congress wanted
    to encourage producers to purchase crop insurance and to do so at
    higher levels of buy-up coverage so that ad hoc disaster assistance
    became unnecessary.
        Since elimination of direct payments appears inevitable and high
    commodity prices have resulted in few or no countercyclical payments or
    marketing loans, some are concerned there is no motivation for producer
    compliance with conservation requirements. Such groups fail to
    recognize that producers are the original conservationists and they
    want to take care of their land. It will also still be required for
    commodity support payments, disaster payments, farm loans and other
    conservation benefits. Farm groups are willing to attach conservation
    compliance to any new commodity programs encompassed in this farm bill,
    but such linkage should not be required for crop insurance.
        It is critical to maintain a workable crop insurance program.
    Without it, many producers could not secure financing. In addition, if
    there was a severe weather occurrence and producers became out of
    compliance, serious issues could arise in their ability to secure
    financing.
        We believe it unwise to make any changes in this farm bill that
    would dissuade producers from purchasing crop insurance. With
    elimination of direct payments, crop insurance is an absolute necessity
    for producers. If we do not have a workable crop insurance program and
    a high level of participation in that program, we will invariably fall
    back into the cycle of annual ad hoc disaster assistance programs.
        It is also important to remember that implementing a crop
    insurance/conservation compliance provision would not be simple, nor
    are the details of such a proposal yet fleshed out. Who will enforce
    these compliance provisions? With the FSA furloughing staff and
    planning to close 130 offices, is there sufficient personnel? Will
    compliance provisions be applied to owners of land or operators? Will
    specialty crops be included under such a mandate or simply applied to
    program crop commodities?
        We appreciate your consideration of our views and urge you to
    reject the linkage of crop insurance with conservation compliance
    requirements.
                Sincerely,

    American Association of Crop Insurers

    American Farm Bureau Federation

    American Soybean Association

    American Sugar Alliance

    ARMtech Insurance Services, Inc.

    CGB Diversified Services

    Crop Insurance and Reinsurance Bureau

    Crop Insurance Professionals Association

    COUNTRY Mutual Insurance Company

    Farm Credit Council

    Farmers Mutual Hail Insurance Company of Iowa

    Great American Insurance Company

    Heartland Crop Insurance, Inc.

    Independent Community Bankers of America

    John Deere Insurance Company

    NAU Country Insurance Company

    National Association of Wheat Growers

    National Barley Growers Association

    National Corn Growers Association

    National Council of Farmer Cooperatives

    National Sorghum Producers

    National Sunflower Association

    Producers Ag Insurance Group, Inc.

    Rain and Hail, LLC

    Rural Community Insurance Services

    Southwest Council of Agribusiness

    United Fresh Produce Association

    U.S. Canola Association

    USA Dry Pea & Lentil Council

    Western Growers

    Western Peanut Growers Association

        The Chairman. Thank you, Mr. Niemeyer. Thank you to all the
    witnesses for your testimony.
        The chair would like to remind Members that they will be
    recognized for questioning in order of seniority from Members
    who were here at the start of the hearing, and after that,
    Members will be recognized in order of arrival. I appreciate
    Members understanding. I will proceed with the first 5 minutes
    of questions.
        I will start with Mr. Schmidt. Mr. Schmidt, you mentioned
    in your testimony the importance of technical assistance in
    administering conservation programs, and in fact, I couldn't
    agree more. I think that is boots on the ground. Technical
    assistance is incredibly important. In my opinion, the 2008
    Farm Bill put more emphasis on administrative activities and
    programs opposed to technical assistance and boots on the
    ground. So I will start with you, sir. Would you agree with
    this, and if so, how should we address this?
        Mr. Schmidt. Thank you, Chairman Thompson, and that is so
    critical. As Mr. Peterson spoke, we have dollars in agriculture
    and we hope that atmosphere continues. We don't always know
    that, but usually when there are dollars in agriculture, there
    are individuals--producers looking for things to do the right
    way. And that technical assistance, we know there are dollars
    are--those kinds of things happening. We want to make sure that
    those folks have the expertise to do whatever conservation
    practice that they have in mind is done the right way.
    Technical assistance is looked upon so strongly from that
    initiative to help those folks who want to do the right thing,
    how do they spend that money most wisely, most efficiently, and
    we get the best impact of that conservation practice. So that
    is why that TA is so important, that technical assistance is so
    important, to help those producers, landowners try to do the
    right thing with the right technical ability in their local
    communities.
        The Chairman. Thank you, sir.
        Mr. Niemeyer, you stated that the demand for technical
    assistance continues to increase, yet funding has remained
    flat. Why specifically do you believe that has been the trend,
    and what are your thoughts on the issue?
        Mr. Niemeyer. Congressman, one of the things that I have in
    my testimony is CEAP, Conservation Effects Assessment Program,
    and this is where NRCS does assessments. We think that they
    estimate the environmental benefits very effectively. We feel
    that CEAP has been particularly important in the Chesapeake Bay
    watershed and the Upper Mississippi River Basin to demonstrate
    how farmers are doing conservation to the land.
        As farmers face regulatory scrutiny, USDA needs a tool to
    demonstrate where progress has been achieved and where
    challenges still exist. It is always best to build on programs
    around sound science and data so we can better understand where
    to target future resources.
        The Chairman. Thank you.
        Mr. Scholl, you state in your testimony that in the
    Chesapeake Bay, 80 percent of the lands need treatment, and 19
    percent are critically under-treated. How can we help encourage
    more farmers to enroll in these programs, especially the most
    critically under-treated?
        Mr. Scholl. Well, there are a number of things we can do.
    One, a lot of the work that you are trying to do with this
    Subcommittee that we have seen in some of the proposals
    certainly help in terms of making sure that the programs we
    have are understandable, they are easily accessible, and
    relevant to the local needs of a local area, trying to direct
    more program resources to opportunities where local people have
    an opportunity to be able to develop partnerships and put
    forward plans and ideas in terms of how they can effectively
    deal with their local resource concerns are very important. And
    of course there are going to be a number of issues or number of
    opportunities as we see this bill continue to progress, to make
    sure that there is adequate funding that can be strategically
    placed in areas where we know we have significant challenges,
    and clearly, the Chesapeake Bay is one. It also can be very
    helpful in making sure the farmers, the producers have the
    tools they need to be making the progress we want them to make.
        The Chairman. Thank you. Mr. Scholl, you made it clear that
    you believe that strategic conservation is a cornerstone in the
    next farm bill. I want to get your opinion. Today the Senate is
    marking up--and obviously it sounds like you have looked at
    that. Do you believe that the Senate draft accomplishes this
    goal?
        Mr. Scholl. Yes, we do feel that it is a big step forward
    in terms of making sure that the limited dollars we have
    available will be put to strategic use. A number of the points
    that I have raised in terms of developing local partnerships,
    being able to target to local resource concerns, and frankly,
    be able to compete for dollars to incentivize people to put
    their best foot forward clearly is an approach that we think
    can be successful. We have seen things like through the
    Cooperative Conservation Partnership Initiative in the last
    farm bill, that that kind of approach works and we think it
    does probably hold the best promise in terms of making sure the
    limited dollars we have available are going to get to the areas
    where the greatest needs are.
        The Chairman. Thank you. At the request of the Ranking
    Member, I recognize Mr. Costa next, for 5 minutes.
        Mr. Costa. Thank you very much, Mr. Chairman, and the
    Ranking Member. I have another committee going on concurrently
    and I need to get over there, but I do want to touch upon the
    conservation title and its impact, because we have done a lot
    of good work as a result of the 2008 Farm Bill that we all
    worked on together that had terrific bipartisan support. It was
    the only bill in that session of Congress that passed both
    Houses, regular order, went through a Conference Committee, due
    to the good leadership of Congressman Peterson and Goodlatte,
    and hopefully we can repeat that.
        Mr. O'Toole, you talked in your testimony about government
    should be allowed to voluntary assume primacy on the
    conservation title by using block grants to states, I believe.
    Please walk me through how that would happen, and where would
    the oversight be?
        Mr. O'Toole. Well, our personal experience is that the
    programs as they are designed right now, Idaho and Wyoming and
    Colorado particularly, there is money turned back because it is
    not an appropriate program for the state. There isn't enough
    sign up, and it is our feeling that those decisions are much
    better made at local--at a local level and at a state level.
    Interestingly in Colorado and Wyoming, both states have
    different matching capabilities. In Wyoming it is a wildlife
    trust fund, and in Colorado it is----
        Mr. Costa. Who would do the oversight of the block grants?
        Mr. O'Toole. Who would do the oversight? I think that there
    is a Federal role, but our family has done conservation
    easements in both Colorado and Wyoming. There was an----
        Mr. Costa. Would this create more work for NRCS or FSA?
        Mr. O'Toole. Pardon?
        Mr. Costa. Would this create more work for NRCS or FSA?
        Mr. O'Toole. It is our perspective that it will create less
    and it will be much more efficient by being more local. We have
    had oversight, as I said, on the FRPP from D.C. and we found
    that that process was not as effective as what was happening
    locally with the various programs that occur within the states.
        Mr. Costa. Mr. Nomsen, the EQIP program has been one of the
    real highlights of the 2008 Farm Bill across the country, and
    certainly in a host of efforts to conserve and focus on both
    water and air resources efforts. It has been very successful in
    the agricultural region in the Silicon Valley.
        The focus on the Senate draft, I believe, incorporates, I
    have been told, the Wildlife Habitat Incentives Program into
    EQIP under wildlife habitat practices. I am wondering whether
    or not you think that is an appropriate way to dovetail that in
    and make it work. Frankly, our experience is probably true
    across the country. It is oversubscribed and if we get a farm
    bill out this year, we have to figure out ways to provide
    greater support for it. Could you comment?
        Mr. Nomsen. Thank you, Congressman. The EQIP program is a
    tremendous program to help farmers and ranchers with working
    lands, and I am very supportive of adding the element from the
    WHIP program so we have wildlife incentive practices within
    EQIP at at least five percent. You know, it is just a
    tremendous program and we can do much more with it.
        The current NRCS Sage Grouse Initiative is helping us put
    range conservationists on the ground in many of the western
    states, and it becomes a real win-win for ranchers and for
    wildlife. The ranchers are benefitting from improved range
    conditions, brush removal, prescribed burning, and some of
    those efforts that can provide better range land for their
    operations, and at the same time we are doing great things for
    the sage grouse. It is a tremendous success story.
        Mr. Costa. If you were ranking in terms of priorities
    within the various titles within the farm bill, and you had
    your druthers, what would you like to see in terms of us
    focusing--in terms of the current funding that we have provided
    for EQIP program? Would you like to see us increase it or what
    changes would you offer?
        Mr. Nomsen. Well, I would just offer that as difficult as
    the discussions have been, I am very pleased that they have
    been bipartisan on both sides. I mean, it has been a very
    difficult job to talk about removing $6 billion from
    conservation. If we didn't have to do that, it would be better,
    but I do think that some of the policies across many of this
    suite of programs will be beneficial into the future.
        Mr. Costa. All right. Thank you very much, Mr. Chairman. I
    thank the Ranking Member for your deference, and I will get to
    my next committee.
        The Chairman. I thank the gentleman, and I now recognize
    the gentleman from Ohio, Mr. Gibbs, for 5 minutes.
        Mr. Gibbs. Thank you, Mr. Chairman. First of all, I would
    like to say the EQIP program has been a great program and a lot
    of producers, including myself in the past, have taken
    advantage of it.
        I want to try to get a little handle--we talk about what
    Mr. Peterson was talking about, the land that has been set
    aside, and of course, back in the 1980s we actually had what,
    ten percent set aside in addition to this CRP ground because of
    the--what was happening with the surpluses of grain. But I
    would like to--maybe Mr. Schmidt might be the best one to
    answer this. The 32 million acres now capping at 25 million
    acres, does anybody really have a handle on--since we have to
    cut $6 billion, does anybody really have a handle of how many
    acres should absolutely be protected. Also, how many acres
    could be--should never be tilled but maybe should still be
    protected but could be pastured. Where are we? I am just trying
    to get a handle of what you think the acreage might be, or
    maybe it is 25 million acres. I don't know, I am just--I don't
    know. Mr. Schmidt might be the best one to----
        Mr. Schmidt. Thank you, Congressman, and we have taken a
    look at that aspect and in respect to Congressman Peterson's
    remarks earlier on, one of the biggest concerns we had in the
    acres coming out of CRP that we know back in the 1985 Farm Bill
    that we had somewhat of a production reduction part of that
    aspect. The acres that have come back out of the CRP, our
    concern is that we know under some full block acreages that
    went into CRP, there is probably some sensitive lands within
    those blocks. We look at that acreage cutback to the 25 million
    acres, we want to make sure that those sensitive lands are
    protected by some kind of a conservation practice. We know
    there are productive lands out there that are probably in a
    Conservation Reserve Program that probably need to be back in
    production, but we also realize that within that block, there
    are probably sensitive lands. We want to make sure that we
    maintain through a conservation plan or some mechanism that we
    maintain the sensitivity from the water quality aspect, the
    conservation aspect. Bringing some of those CRP acres back in
    probably today is a little bit less of a concern because of the
    cover crop activity you are seeing take over in the industry.
        You know, I was taught as a youngster that the best way to
    maintain soil health is have a live crop on a piece of land at
    all times. That is where the cover crop aspect comes in. So
    there are technologies that have changed, a lot of new
    expertise in agriculture today that we didn't have back in 1985
    that turn a tremendous aspect. But we see a pretty good
    balance, given, when you talk wildlife, the wildlife habitat,
    those kind of things. There are a lot of new conservation
    practices that help us maintain the sensitivity of those lands
    under the CRP acreage total that we think we can maintain a
    true environmental benefit, even if we have to look at that 25
    million.
        Mr. Gibbs. Okay, and I guess that goes a little bit back to
    Mr. Nomsen from Pheasants Forever. You made a comment about
    wildlife habitat, not the blocks. Did you want to expound a
    little bit further on that? If we have to actually cut some of
    those blocks up, the impact or can we actually do it and maybe
    pasture some of those non-sensitive areas and still protect
    water quality and----
        Mr. Nomsen. Congressman, that is a good point. You know,
    one of the challenges that we have had is as we have talked
    about reducing the overall size of the CRP is to make the
    program a much more dynamic program and move acres through this
    program. Let us help beginning farmers and ranchers with
    expired CRP lands that have improved plans by leaving buffers
    in place and moving into farming operations. Let us help
    grazing operations do the same thing. Let us take some of the
    sensitive lands and move them into more permanent and long-term
    easement protection, and let us be more aggressive about
    expiring CRP and buffers, leaving the buffers in place. Too
    much of the CRP is leaving right now and it is ending up fence
    row to fence row, ditch to ditch production, and that is just
    going to cause more soil erosion and water quality problems.
        So those are the types of policies that we are looking for
    in the next farm bill that will help with the potential
    reduction of the overall size of the program.
        Mr. Gibbs. Is that--going back to Mr. O'Toole, flexibility,
    that is what you were really asking for, the ability for the
    locals to--and the farmers, the stakeholders to be able to look
    at that and make some of those determinations, give them that
    flexibility when they have to decide what is sensitive and what
    can maybe be pasture and protected?
        Mr. O'Toole. Yes, sir, and I was part of a group--
    Congressionally mandated group that looked at the conservation
    part of the farm bill hearings last year. I attended hearings
    in Phoenix, Portland, and Ft. Collins, Colorado, and it was a
    very consistent message. We need to get people out of the
    offices and onto the ground. We need to make the system work
    faster. If we, in fact, are going to have the driest and then
    the wettest year behind each other, we have to be flexible
    enough to be able to adjust to whatever those realities are. If
    there is one message, it is that things are changing for a lot
    of different reasons, a lot of market changes, a lot of
    climatic realities that we are all dealing with, and I think
    that the role of NRCS--and I will just tell you personally, it
    is so frustrating to have good men in an office doing
    administrative work when they need to be on the ground.
        Mr. Gibbs. Thank you, Mr. Chairman.
        The Chairman. I thank the gentleman. I now recognize the
    gentleman from Oregon, Mr. Schrader, for 5 minutes of
    questioning.
        Mr. Schrader. Thank you very much, Mr. Chairman.
        I am very interested in Mr. O'Toole's ending comments
    there. I guess a question for each of the panelists, I would be
    interested in your perspective on how you judge the outcomes of
    the various programs that are out there. How do we as
    legislators, not experts in wildlife biology or soil erosion or
    in some cases, perhaps, some of us not being farmers--I am a
    farmer--but how do you--how are we to judge whether or not a
    particular CRP, CSP, EQIP easement program is actually working?
    What sort of data, actual data is collected by NRCS or whoever?
    Who are the boots on the ground actually collecting data out
    there? Mr. Schmidt, we start with you.
        Mr. Schmidt. Well thank you, Congressman. Just a little bit
    of that background--and I appreciate it. Accountability is so
    important, and as we experienced in a private project within
    NRCS and the Chesapeake Bay, we went out and did some one-on-
    one research with agriculture, making sure--the background
    right now and the model data we have is based on conservation
    practices. Somebody took some kind of monetary--a cost-share
    program, whatever, from that scenario. We know there is
    conservation on the land that would have been done voluntarily.
    You know, I am, as you said, a farmer. I am driving down the
    road, I look at my neighbor. It looks like he is doing a good
    job. Sometimes I just copy him. I didn't go for cost-share.
    Sometimes we don't have enough boots on the ground to get that
    job done.
        We want to make sure and we did that. We found that at the
    Chesapeake Bay there was roughly about 30 percent more
    conservation on the land than what is actually being accounted
    for in the model data we had. So some mechanism--through a
    conservation plan, some mechanism to truly get accountability
    of the actual conservation plans out there so we can address
    the needs as we see them, the flexibility to address that, but
    we truly need some mechanism to account for more of that
    conservation so we do have a mechanism, as you said, to measure
    truly what is out there and the benefits of the programs that
    you all provide and fund to help us maintain.
        Mr. Scholl. I am sure there are a lot of folks with a lot
    of degrees behind their name that would be very good at
    answering that question. I don't pretend to be able to give you
    a lot of specific details in terms of how you select the
    appropriate outcomes and exactly what those outcomes should be,
    but I do certainly concur with the intent of your question to
    say they are critically important. One of the things I would
    encourage this Committee to look at is efforts like the CEAP
    program that USDA has that I think really is making steps
    forward in terms of trying to identify what are the benefits in
    real concrete terms that we get from the investment we make in
    EQIP and all these other programs. Outcomes are in important,
    particularly in a day and age when the public is very concerned
    about accountability, and we want to make sure that dollars are
    being used effectively. It is great to know how many miles of
    terraces we have put in, but at the end of the day, we really
    need to know, did it have the desired impact on water quality
    or wildlife habitat or whatever the issue we are looking at.
        And so I would encourage you to especially look at those
    means that we can help empower those experts to be able to help
    us better understand those outcomes, what we are getting from
    the investment we are making, and if we are making progress
    towards that mark.
        Mr. O'Toole. If I were not here today I would be in Klamath
    Falls in a meeting of a group called the Intermountain Joint
    Venture, which is about migratory birds. You know, what I
    talked about earlier, these Islands of Renaissance that are
    happening all over, it is because coalitions of people are
    coming together. We are working with Family Farm Alliance, with
    Environmental Defense Fund, Nature Conservancy, Trout
    Unlimited, as well as Wyoming Stock Growers Association, Farm
    Bureau groups.
        In reference to how we understand how this balance of
    conservation and production happen, here is a number that
    really struck me. The largest duck count since 1955 is now, and
    one of the things that we are understanding from the
    conservation side is the value of flight irrigation in terms of
    habitat for migratory birds. We at NRCS and many people in
    agriculture were being asked to do more efficiency, more
    efficiency, more side rules, more pivots. That is good to a
    point, but the reality is when you look at a watershed, a
    watershed is a sponge that has all kinds of various benefits,
    and to understand the balance of those benefits for birds and
    wildlife and production is the future. And I would just tell
    you that the criteria are because we are now partnering with
    people that we were maybe considered adversaries a few years
    ago. We now have a new look on how you do the critical parts of
    production and maintain those other values.
        Mr. Nomsen. Congressman, each fall I try and personally
    measure the success of these conservation programs afield, and
    I measure it by the number of birds in the bag. But maybe to
    build on that a little bit, if you look, for example, at upland
    bird hunting, it is a billion-dollar industry in this country.
    Pheasant hunting in the State of South Dakota is averaged just
    short of a $\1/4\ billion each year. That is a tremendous
    economic driver for that small, rural state and a lot of those
    rural economies. Motels are full, restaurants are full.
    Conservation programs are a tremendous part of our hunting
    heritage and our rural economy.
        Mr. Niemeyer. Congressman, I have already spoke on the
    effects of CEAP, and I think that is the way you determine on
    sound science and data. However, I want to go back to something
    in a different format.
        You know, these voluntary programs do work. We have worked
    with Field to Market on a report--in a report that came out in
    2009. From 1987 to 2007, we found evidence of continuing
    environmental improvements for corn production over the past
    several years, and it has a lot to do with conservation
    programs. Soil erosion per bushel of corn decreased 69 percent
    in those 20 years. Energy use per bushel of corn decreased 37
    percent in those 20 years. Irrigation use per bushel of corn
    decreased 27 percent. Greenhouse gas emissions per bushel of
    corn decreased 37 percent. We do have data to prove that all
    these policies that we work with on a voluntary method have
    worked very proactively.
        Mr. Schrader. Just a final comment, Mr. Chairman. I know my
    time has expired, but I just want to make it clear to the
    Committee and to everyone out there, and hopefully to the--of
    our next farm bill, that with limited dollars, it would really
    be smart of us to use CEAP or some other program to decide
    which of these programs is giving the biggest bang for the
    buck. I know we all have favorites, but we cannot afford to do
    everything all the time anymore, so we have to really figure
    out which programs are giving us the biggest bang for the buck.
        Thank you.
        The Chairman. I thank the gentleman. I now recognize Mr.
    Ribble of Wisconsin, for 5 minutes of questioning.
        Mr. Ribble. Thank you, Mr. Chairman. I want to thank the
    panel for taking some time with us this morning. Actually, we
    will start and see how this goes time-wise with asking you all
    to respond to this question.
        Earlier in the year I had a town hall with about 130
    farmers and landowners in Wisconsin. We talked specifically
    about the farm bill, including the area of conservation. I am
    wondering if each of you would tell me, what is the number one
    guiding principle that this panel ought to be following as we
    draft the farm bill? And then what is your number one priority?
    Mr. Schmidt, we will start with you.
        Mr. Schmidt. Thank you, Congressman. I think going back to
    an earlier statement, probably the number one--when we look at
    limited dollars and how do we get the most impact for the
    dollars we have available, it is the flexibility that you folks
    can look at in a program process that gives us that ability at
    the local level to maximize either by matching funds, whatever,
    the flexibility to utilize those dollars. I think above all,
    even though we have a shrinking budget and the streamline
    aspect to me is a priority. How do we make it more efficient
    and easier for those farmers or producers to participate in,
    but more importantly, when you have some voluntary--and
    normally you do. People want to do the right thing. We don't
    always provide the ability for those folks to do the right
    thing, so that technical assistance aspect of helping those
    folks make the right choice, right decision with the dollars
    that are out there, whether it is Federal dollars or local
    dollars, to get the best impact of those dollars that are out
    there. I think that is key. That is a priority.
        Mr. Ribble. Thank you.
        Mr. Scholl. Number one principle, I would say engagement of
    producers. I do very strongly believe that it is in our own
    best interest as farmers to do the right thing by our natural
    resource protection. I know the public is demanding that. I
    think there is a lot of desire on the part of farmers to want
    to apply the kind of practices and the like. Oftentimes we are
    dealing with complex issues and the technical assistance and
    the like is very important. But really trying to engage people
    and have the tools and resources available is probably the
    number one principle I would offer.
        The number one priority, clearly, from my organization's
    standpoint I would say maintaining and building a viable Farm
    and Ranchland Protection Program. I cited statistics in terms
    of the amount of land we have lost, and one of the points I
    would make is that it is some of our best land that we have
    lost. And when you look at the growing demands and the
    pressures upon that land resource, there are many instances
    where we regret that we have lost that land and that is even
    going to become more acute into the future. So making sure we
    keep a viable program to help protect land and keep it in
    agricultural production would be our number one priority.
        Mr. Ribble. Thank you.
        Mr. O'Toole. Sir, a few years ago I had the opportunity to
    spend an afternoon with Wendell Barry, and he is a fellow that
    has written significant books on agriculture and farming. And
    he said something to me that really stuck, and it is that if
    you love the land, you have a responsibility to it. And in the
    context of this hearing and this question and the issue of
    conservation, farmers have to realize that just as much as when
    we as a country said we want you to produce fuel as well as
    food, we have to send the message out that conservation is an
    integral part of food production.
        My primary concern, number one concern, and I said it
    earlier was how do we recruit another generation of people into
    farming? And the message cannot be a negative message. The
    message to young people is we need you. We need you to be
    farmers to produce food, but we also want you to have that
    conservation ethic that I referred to. If we use those as
    guiding principles, it makes an awful lot of difference. The
    messaging to young people is very critical right now as it
    relates to how do we recruit new people into agriculture.
        Mr. Ribble. Thank you.
        Mr. Nomsen. Congressman, I would also talk about giving
    producers an adequate safety net so that they can invest in
    conservation programs, and the combination of conservation and
    having strong partnerships with producers out there on the
    landscape, that is the win-win for everybody. When we are doing
    good things for soil and water conservation and for wildlife
    and wildlife habitat--the mission of Pheasants Forever is all
    about habitat. You know, there isn't a farmer or rancher out
    there that isn't better off if they have some lands devoted to
    conservation. Conservation practices help protect America's
    production and our farm economy, and they have tremendous
    benefits like the rural recreation benefits from sportsmen,
    hunters, and fishers across the landscape and outdoor
    recreationalists as well. So those would--I would offer those
    as my principles to look at as you move forward on the farm
    bill.
        Mr. Niemeyer. I would agree with what Mr. Nomsen just said,
    and also add that the Senate bill was carefully crafted. We
    took 23 programs and took them down to 13, and it was a $6
    billion hit. Now we all realize we have a deficit in the budget
    we have to deal with, but no more, because we believe that any
    steeper cuts to these programs would jeopardize the basic
    functions and make them ineffective. And as a farmer and in
    this farm bill, hopefully it will pass the Senate and pass the
    House. We are very supportive of the proposal developed by
    Chairman Debbie Stabenow and Ranking Member Roberts. And we
    hope to have prompt action on this bill, and we urge the House
    to pass the legislation in 2012 as well. Thank you.
        Mr. Ribble. Thank you. Thank you, Mr. Chairman. I yield
    back.
        The Chairman. I thank the gentleman. I now recognize Mr.
    Walz for 5 minutes.
        Mr. Walz. Thank you, Mr. Chairman, and thank you for
    putting together such a great panel. I very much appreciate
    this.
        Before I start, I would like to make note for my colleague
    from Maine, Ms. Pingree had to leave, but she wanted me to note
    that Mr. Walt Whitcomb is here today. He is the Maine
    Agriculture Commissioner, and also a dairy farmer. So welcome,
    Mr. Whitcomb, today.
        Each of you, thank you. Thank you for clearly understanding
    and articulating that agricultural production and economic
    prosperity is not mutually exclusive from sound environmental
    stewardship, articulating that in a way that I think the public
    needs to hear us say more. Thanks also for understanding and
    for the opportunities you create in rural America, for
    understanding that our rural areas are not just undeveloped
    urban areas, that there is a distinct difference and a reason
    in the choice of lifestyle that is out there, and for
    protecting our outdoor heritage. It is not just a hobby to go
    out, it is a part of who we are, and understanding that that
    all intertwines together, making those areas the place where we
    choose to live. So I am very encouraged when I hear all of you.
    I think the thoughtful responses and an understanding, and
    trying to come with and deal with reality as it is with a
    tightening budget situation, each of you really hit on
    something very important. How do we measure and get the most
    bang for the buck of getting those things there? I would also
    say the interconnectedness of everything that we do--Mr.
    Niemeyer, you brought up an incredibly valuable point that it
    is hard to think about, because it takes a vision. There is
    going to be an increasingly crowded and hungry world out there,
    and for us to be able to fulfill the responsibility to our
    people and to the world to feed and to clothe and to power
    them--research dollars into ways that we can improve and get
    more. I mean, it is hard for me to imagine that you see people
    complaining about 180 bushel corn out there, that we can do
    better than that. And we can. And this is going to be a part of
    that, as we cut down, getting more off less land, getting more
    in a smart manner. So I am very, very appreciative of what all
    you are saying.
        Mr. O'Toole, I am going to narrow in here on something that
    struck at me on this, the Beginning Farmer and Rancher. It is a
    program that--thanks with Ranking Member Peterson's guidance
    for me, it is an issue that I came to understand how important
    it is in my district, and putting in provisions to make sure we
    are transitioning to our next generation, and making sure that
    this is not only a profitable industry, but it is one where
    they feel the same sense of pride and connection to the land.
        So what we tried to do was put in some provisions that
    targeted again, if you will, targeted and set aside for those
    beginning farmers and ranchers. And I would like some of you
    with any expertise or any interaction you have had with that
    program to maybe comment a little bit on this. One of the
    things was--and in the Senate bill I am glad to see includes
    $25 million for the TIP program, transitioning those CRP acres
    over to a beginning farmer and rancher. Is it a good start? Any
    insight from any of you, if you just go right down the line,
    and is this beginning farmer and rancher program working, and
    is it a smart use of taxpayer dollars to target it to them?
        With that, Mr. Niemeyer?
        Mr. Niemeyer. Absolutely. In our community, the average age
    of a farmer is 58 years of age. Unfortunately, my children do
    not want to farm, and I feel bad about that. But I really think
    that we need to get a new, younger generation involved in
    farming.
        In response to one of your other questions, a smaller CRP
    means more competitive enrollment so that USDA can target
    program dollars to the most sensitive lands, including buffer
    strips and filter strips where maximum environmental benefits
    can be achieved. But market forces often dictate planting
    decisions, so what is important is that USDA--is that we have
    an adequate Working Lands Program in place so the producers can
    grow crops while continuing to address the conservation
    concerns.
        Mr. Nomsen. Congressman, this is an incredibly important
    area because it does look to the future and the future land
    stewards out there that are going to protect and preserve and
    continue our strong ag economy in this country, and right now
    some place on the Senate side this morning, Senator Klobuchar
    is offering an amendment to CRP to talk about encouraging
    beginning ranchers to implement grazing operations. And we
    think that is also part of the future as CRP continues to
    evolve and work for farmers and landowners.
        Mr. O'Toole. Yes, sir. Actually my son and daughter are at
    the ranch. That is one of the reasons that I am able to be here
    today. They have both participated in purchase of livestock and
    purchase of land through that specific program. I think it is
    absolutely the right direction to be in, and critical, because
    it is not only the dollars and the low interest rates, it is
    the message. And the message is as important as anything. And I
    know this Committee deals with a lot of other issues, like
    forestry. Our operation is absolutely dependent on forest
    permits, and Federal land. That is the way the West works. I
    think that we need to be very aggressive, and when those
    permits are available, there are people that talk about
    retirement. That is absolutely the wrong direction. We should
    be bringing young people into integrating their opportunities.
    The same thing with water. There is a huge debate in the West
    right now, should water go to growth? Water needs to maintain
    itself on farms and ranches so that we can produce food. And
    that debate is ongoing and the pressures are fairly
    significant. But I can tell you that Mr. Vilsack has been very
    aggressive in his articulation of how important it is, and I
    can tell you that from our perspective at Family Farm Alliance,
    it is our absolute number one issue of importance.
        Mr. Walz. Well, I am very appreciative. Mr. Scholl, do you
    have a comment on this? I was just going to also mention, Mr.
    Schmidt, you brought up something good that is a portion of
    this beginning farm and rancher, it is providing that technical
    assistance that I can't--you have stressed it many times and I
    think that is wise advice.
        Mr. Scholl. Yes, I do have a comment. Clearly, the programs
    you have cited, as I have traveled around the country talking
    to folks, they are very popular and they do get a very critical
    need, the human resource issue in agriculture is something that
    we all are very concerned about and needs to be addressed.
    Providing options for folks. One that hasn't been mentioned is
    the Conservation Loan Program as another means by which
    somebody that needs to do something to address resource
    concerns has the ability to do that, especially the folks that
    are just getting started.
        But I would also take a step back and say that I am very
    proud of the fact that my farming operation that we have two of
    the next generation, even after my brother and I, involved in
    it, and what you do overall in terms of the economic viability
    of agriculture is so critical. The reasons those two from the
    next generation are involved in my operation is because they
    see a chance to have a good living, do something they really
    enjoy, compared to when I was in college, I am sorry to say,
    there was more of the attitude of, ``Gee, you can go to town
    and have a lot better life.'' I think that has turned. That is
    very positive and the decisions you make really helped
    influence that.
        Mr. Walz. Thank you. Thank you, Mr. Chairman.
        The Chairman. I thank the gentleman. Now I am pleased to
    recognize the full Committee Ranking Member, Mr. Peterson, for
    5 minutes.
        Mr. Peterson. Thank you, Mr. Chairman.
        Mr. O'Toole, you mentioned that NRCS and FSA are both
    writing checks, and this is something we talked about in the
    2008 bill and weren't able to get anything done. But I don't
    believe that Congress has actually ever picked a side in this
    discussion about whether both the agencies should be writing
    checks. And the staff tells me that the agency heads, during
    the second Bush Administration, made this decision. So it
    sounds to me like you feel the Committee should look into this
    issue. I don't know if that is the case, and maybe--have you
    discussed this with other groups or with Secretary Vilsack?
        You know, I have talked out there with some of my folks and
    if you want to get these NRCS people out on the ground, they
    should not be sitting in the office filling out forms and
    writing checks. I don't think, but----
        Mr. O'Toole. It isn't just the writing of the check part of
    it, Congressman. You know, my own personal experience--and we
    live right on the state line and so we have double the
    regulatory situation than most people do. You know, so we see
    offices in both states, and maybe--I don't think this is out of
    bounds, but I feel like there is almost a lack of trust of
    farmers, and so----
        Mr. Peterson. Lack of what?
        Mr. O'Toole. Lack of trust. And the paperwork--we have
    watched over a decade or 15 years. Guys that were out there
    when you made a call to NRCS, there were out there with
    measurement devices and getting their feet dirty and being with
    you. That doesn't happen anymore. It doesn't happen at that
    level anymore, and it is critically important as we go into a
    much more restricted budget situation, we all know the budget
    is going to be influential.
        If you trust farmers, you are not going to have to do the
    paperwork and the administrative stuff that has just--it just
    seems like it has increased and increased and increased. So I
    will tell you that it is based on my personal experience, it is
    based on hearings that I did last year. I was shocked at the
    number of farmers who participate in NRCS. It was not a big
    enough number to achieve our goals, and a lot of that was
    because the feeling that the process was just so unwieldy that
    it wasn't working for them.
        Mr. Peterson. Well, yes, I agree. We have been--as I said,
    we tried to address this somewhat in the last bill but we got
    pushed back from the time the conservation district supposedly
    making any streamlining of that.
        But, I would say a lot of that is actually caused by us, by
    what we have put on the Department, and they are so afraid to
    do anything anymore, and there are a lot of people in this
    country that do not trust farmers, that are hostile to farmers.
    They are suing people and driving up the cost of things and
    telling farmers how to do things. They have no idea what they
    are talking about. They want to interject themselves for
    ideological reasons, or some of these groups created a job for
    themselves by stirring up controversy. So there are a lot of
    problems, and we would like to simplify this but, it is that I
    just think that NRCS is not good at filling out forms and
    writing checks, and there is no reason for that. That could be
    done at FSA. They are better at that.
        Mr. O'Toole. I couldn't agree more.
        Mr. Peterson. If we get rid of direct payments, they are
    going to have less to do at FSA, so shift some of that stuff
    over there and get these NRCS people out there in the country.
        Which leads me to the next issue that I probably shouldn't
    even wade into, but this whole issue of the tying conservation
    compliance to crop insurance. I have had discussions about
    this, and I don't see how this can work without doing serious
    damage to the crop insurance system. We made a conscious
    decision in 1996 to separate these, and I, for the life of me,
    cannot see how you are going to be able to comply with this or
    make it work without damaging the system. Nobody has been able
    to explain that to me.
        The second thing, and some people advocate to have an all
    or nothing deal, so if you have an NRCS agent that finds you
    out of compliance, you are going to lose your entire subsidy.
    It is too severe, and that is never going to happen. The
    Congress is never going to support that. So if we are going to
    do anything, it has to be more graduated.
        Finally, I don't think there are people to do this. You
    know, the NRCS doesn't have the people to do this. They can't
    even file--get the 1026's. We have a backlog in our area of
    thousands of 1026's they can't get to. How in the world are
    they going to get out there, and who is going to make the crop
    insurance agents, the people that are going to do the
    conservation compliance? I don't think this is a realistic
    idea. I am not necessarily against the idea of trying to have
    some tie there, but nobody has been able to explain to me how
    this would work, and frankly, I don't think there has been a
    discussion between all the different groups to come to any kind
    of middle ground that people could live with. The end result is
    going to be it is not going to happen, but--I have gone over my
    time, but I see a couple people want to respond. Mr. Scholl?
        Mr. Scholl. Thank you for raising the issue. Obviously this
    is one of the big unresolved issues or controversial issues out
    there, and I do think it is important that we address it. You
    know, how we do it, I guess I would suggest we do it the same
    way we have been doing it with the commodity programs that we
    had. We----
        Mr. Peterson. If I could stop you right there. You know,
    one of the other problems I was going to mention is that you
    have completely different approach by NRCS in counties that are
    right next to each other, so you have a situation where you
    don't have the same kind of application of this situation. That
    is another problem.
        Mr. Scholl. And that is certainly an issue in some of the
    hearings and the meetings we have had that has been raised, and
    it needs to be addressed, but you don't need to have crop
    insurance agents enforcing this thing. It is a matter of if
    they have a subsidized policy that they are presenting, you
    sign an affidavit saying you have a conservation plan if you
    have highly erodible land, and then it goes into the system
    that is currently used in USDA of spot checks and the like,
    just like it is with other farm program payments. I think in
    terms of what was done in 1996, I mean, I wasn't here but crop
    insurance was certainly in a very different state at that point
    than it is today. A lot of progress has been made in terms of
    developing products.
        Mr. Peterson. One of the main reasons we did it was to get
    more people to take crop insurance. We still have a problem in
    the South where they are not in the crop insurance system, and
    that was why the decision was made was to make it more for
    people to get into crop insurance so we wouldn't have all these
    disaster problems and ad hoc disaster bills and all this other
    stuff. So I just think we have to be careful about this,
    because the way we are heading here there isn't going to be a
    safety net anymore for farmers. And I frankly think that what
    we are doing, what is going on in the Senate is a mistake
    because when these prices go down, and they will, there is not
    going to be any floor under them. And this happened in 1996
    when we did Freedom to Farm and it collapsed, and 2 years
    later, we spend more money than we ever spent in history
    bailing people out. Well I just want to tell people that this
    time when these prices go down, and they will, there isn't
    going to be any money to bail anybody out. So people better be
    careful about what they are doing here. It is all good to look
    at this when the prices are good and everybody has been making
    a lot of money, but I have been around long enough to know that
    is going to go the other way.
        Mr. Scholl. May I offer one more comment? I also want to
    compliment the work that you have done over the years in
    addressing the compliance issues, because you have put a lot of
    provisions in the law that I think have helped address a lot of
    the concerns you hear from producers as to why we may not want
    to do this. I mean, the idea of giving an exemption for extreme
    weather events is a good example, the idea of giving a person a
    year to be able to come into compliance if they are out of
    compliance. The goal of this is to get people in compliance to
    make sure we protect our natural resources. It is not to build
    a list of violators to play I got you, and you have really
    helped craft a program that does much more specifically get at
    if there is a problem, let us try to work with folks, give them
    the time and the effort--or the resources they need to address
    it. That program has evolved too, which makes a much more
    attractive option, particularly when you look at the fact that
    it has been pretty effective in terms of controlling erosion in
    particular, as you look at these policy decisions you are going
    to be making.
        Mr. Peterson. Mr. Niemeyer, if you could give a quick
    response and then we can go on to our second panel.
        Mr. Niemeyer. Again, we have a difference of opinion. NCGA
    supports title--compliance of all Title I programs, including
    any new program established in the 2012 Farm Bill. Compliance
    is already required for commodity support payments, disaster
    payment loans, and other conservation benefits. We should not
    create disincentives to purchase crop insurance, which is a
    critical risk tool for all farmers. If the farmers do have a
    more workable crop insurance program and a high level of
    participation, we will likely fall back into the cycle of an
    annual ad hoc disaster assistance program which you were
    talking about, Congressman Peterson.
        Linking conservation compliance to crop insurance could
    risk the potential loss of financing from our lenders, which
    would affect our very abilities to operate and compliance
    could--would disrupt the important public-private partnership
    between the crop insurance companies and USDA and create
    concerns more over who acts as the regulator.
        Thank you.
        Mr. Peterson. I yield back.
        The Chairman. I want to thank the witnesses in the first
    panel for your testimony. It is greatly appreciated.
        I would like to now welcome our second panel of witnesses
    to the table joining us, so please come up and take your place.
    We are joined on the second panel by Mr. David Bell, Executive
    Director of the Wild Blueberry Commission of Maine, on behalf
    of the Specialty Crop Farm Bill Alliance. We have Mr. Randall
    C. Gordon, Acting President of National Grain and Feed
    Association; Mr. Carl Homan, fifth generation dairy farmer,
    Homan Family Dairy Farms, on behalf of the National Sustainable
    Agriculture Coalition; Ms. Sara Hopper, Agricultural Policy
    Director, Environmental Defense Fund; and Mr. David Petty,
    cattle producer, representing the member--who is a member of
    the National Cattlemen's Beef Association from Eldora, Iowa,
    which is the new home of my oldest son and my daughter-in-law.
    So I am looking forward to come visit you sometime.
        All the witnesses are settled in. Let us begin. Mr. Bell,
    please begin when you are ready.

    STATEMENT OF DAVID K. BELL, EXECUTIVE DIRECTOR, WILD BLUEBERRY
                   COMMISSION OF MAINE, ORONO, ME; ON
              BEHALF OF SPECIALTY CROP FARM BILL ALLIANCE

        Mr. Bell. Thank you. Good morning, Chairman Thompson,
    distinguished Committee Members. Thank you for the opportunity
    to speak to farm bill conservation programs. I am David Bell,
    the Executive Director of the Wild Blueberry Commission of
    Maine, but today I come before you as a representative of the
    Specialty Crop Farm Bill Alliance, a broad coalition of
    specialty crop interests nationwide. We have over 300 different
    crops or commodities as part of the Alliance, over 120 members,
    and we were formed or got together to work specifically on the
    2008 Farm Bill. We are grateful for the specialty crop focus
    that did come out of the 2008 Farm Bill, and look forward to
    working with you on ways to ensure that our industry is able to
    continue to provide Americans with access to abundant,
    affordable supply of nutritious fruits and vegetables, and
    other specialty crops.
        American consumers want an agricultural production system
    that not only produces abundant, affordable, safe food and
    fiber, but also conserves and enhances the natural resource
    base and protects the environment. Unfortunately for producers,
    investments in natural resource management and conservation are
    rarely recouped in the global marketplace. Access to
    conservation programs such as EQIP, WHIP, and CSP, we all know
    the full names by now this morning, are critically important to
    specialty crop producers and our U.S. citizens.
        We do have some specific recommendations that we would like
    to offer to Congress, and specifically regarding the EQIP
    conservation practices. In certain parts of the country,
    producers feel that the NRCS and conservation districts don't
    necessarily market equitably to specialty crop producers. We
    would ask Congress to consider, since we are roughly 25 percent
    of the production value of the U.S. agriculture, that EQIP
    funding be looked at accordingly.
        Many specialty crop producers need irrigation water to meet
    demands for crop quality, and in many parts of the country,
    efforts to protect aquatic habitat will require producers to
    develop alternative water sources. As part of EQIP, we ask that
    you prioritize the sustainable use of ground and surface water
    for irrigation as a national priority.
        Regions of the country are also working to create air
    quality regulations that will affect farmers, and again, we ask
    you to consider creating an air quality program with dedicated
    funding within EQIP.
        We also face a lot of pest management challenges in
    specialty crops, and these are becoming more acute and
    complicated for a few key reasons. One, new invasive species,
    also knowledge-based pest management systems, Integrated Pest
    Management is becoming more complicated and we request that the
    time limitations on Integrated Pest Management cost-share
    programs be eliminated within EQIP. We also suggest that NRCS
    should work more closely with land-grant universities and other
    entities to develop models for using EQIP funds to enhance
    pesticide stewardship.
        Regarding WHIP, Congress should work directly--should
    direct the WHIP program to allow for organizations to work with
    multiple private landowners within a year. This would allow
    organizations familiar with regulatory requirements of law,
    such as the Endangered Species Act, to solve habitat
    conservation concerns of multiple private landowners
    efficiently.
        Regarding CSP: better tailor it to local and regional
    needs, and therefore make it more useful for specialty crop
    producers, we suggest adding pest management as a priority area
    that can qualify for participation in the CSP program.
        I thank you for the opportunity to testify, and I look
    forward to questions. Thank you.
        [The prepared statement of Mr. Bell follows:]

    Prepared Statement of David K. Bell, Executive Director, Wild Blueberry
     Commission of Maine, Orono, ME; on Behalf of Specialty Crop Farm Bill
                                    Alliance

    Introduction
        Thank you Chairman Thompson and Ranking Member Holden for holding
    this hearing on the conservation title of the farm bill. I appreciate
    the opportunity to speak to you today regarding the conservation
    priorities of the specialty crop industry. As we all are aware, sound
    conservation practices are of critical importance to the ability of
    farmers to succeed and continue to provide an abundant supply of
    healthy food, feed and fiber to America.
        My name is David Bell and I serve as Executive Director of the Wild
    Blueberry Commission of Maine, which is devoted to the mission of
    assisting wild blueberry growers in developing sustainable practices
    and competing in a global food market. However, today I am joining you
    as a representative of the Specialty Crop Farm Bill Alliance (SCFBA), a
    broad coalition of specialty crop interests nationwide. The Alliance,
    which represents close to 300 different commodities and has nearly 120
    members, was formed prior to the 2008 Farm Bill. As you know, with the
    support of Members of this Committee, that farm bill contained a solid
    investment in programs that are important to enhancing the
    competitiveness of U.S. specialty crop farmers. We are grateful for
    that focus on our sector and look forward to working with you on ways
    to ensure that our industry is able to continue providing Americans
    with access to an abundant, affordable supply of nutritious fruits and
    vegetables and other specialty crops.
        Today, United States consumers have affordable access to the most
    abundant and diverse food supply in the world. However, aside from
    market diversity and competitive prices, consumers demand that food be
    held to very high quality standards. Likewise, consumers want an
    agricultural production system that not only produces abundant,
    affordable, safe food and fiber, but also conserves and enhances the
    natural resource base and protects the environment.
        Unfortunately for producers, investments in natural resource
    management and conservation are rarely recouped in the global market
    place. The short-term economic value for the farmer does not compare to
    the long term ecological and fiscal benefits for the public and for
    future generations. The increased benefits for the public come in the
    form of a more stable and productive farm economy and an improved
    environment. Protecting the environment and productivity today will
    mean less cost for U.S. consumers in the future and will therefore
    assist in ensuring sustainability in the years ahead.
        Current conservation programs administered by the USDA Natural
    Resources Conservation Service (NRCS) assists specialty crop farmers in
    meeting the multiple challenges of addressing sustainability,
    increasing environmental regulations while meeting U.S. consumer demand
    for abundant, safe, and reasonably priced food all within the
    competitive pressures of a global economy. Because of these factors,
    access to conservation programs such as the Environmental Quality
    Incentives Program (EQIP), Wildlife Habitat Incentives Program (WHIP),
    Conservation Stewardship Program (CSP) are critically important to
    specialty crop producers and U.S. citizens. Farmers' natural affinity
    for the environment, coupled with technical assistance and the
    resources necessary to implement conservation practices, results in
    long term stability for the nation's food supply. Our specific concerns
    and recommendations to strengthen current conservation programs
    include:
    Environmental Quality Incentives Program (EQIP)
        Issue: For a variety of reasons, EQIP Conservation Practices are
    not marketed to specialty crop producers equitably across the country.
        Policy Recommendation: Since specialty crop producers account for
    approximately 25% of the production value of U.S. agriculture, Congress
    should apportion EQIP funding accordingly. This would set the
    expectation for NRCS to meet specialty crop producer conservation needs
    across the U.S.

        Issue: Specialty crop producers need irrigation water when it is
    dry to maintain quality standards of their crops. In many areas of the
    country natural water bodies have limited ability to supply irrigation
    water during dry periods and maintain necessary fish habitat. NRCS EQIP
    sustainable water use practices and programs should be available to
    specialty crop producers needing assistance to meet state or Federal
    environmental or habitat objectives.
        Policy Recommendation: As part of EQIP, prioritize the sustainable
    use of ground and surface water for irrigation as a separate national
    priority, rather than being included within the non-point pollution
    category.

        Issue: In many specialty crop growing areas, air quality concerns
    and regulations related to agriculture are increasing.
        Policy Recommendation: Congress should create an air quality
    program under EQIP with dedicated funding.

        Issue: Pest management challenges for specialty crop producers are
    becoming more acute and complicated due to invasive species, phase out
    of older effective control materials, new research on crop/pest
    interactions and knowledge based management systems such as Integrated
    Pest Management (IPM).
        Policy Recommendation: Time limitations on Integrated Pest
    Management (IPM) cost-share practices should be eliminated as pest
    populations are dynamic over time and innovative IPM programs are
    continually evolving to address ever changing pest complexes.
        Policy Recommendation: NRCS should work with land-grant
    universities and other entities to develop model programs for using
    EQIP funds to enhance pesticide stewardship.
    Wildlife Habitat Incentives Program (WHIP)
        Issue: Increasingly, specialty crop producers need to meet state
    and/or Federal habitat requirements as mandated by laws such as the
    Endangered Species Act (ESA). Often navigating the complex rules
    associated with these laws requires specific understanding and skills
    farmers do not have. Models have been developed whereby nongovernmental
    organizations assist private landowners such as farmers in meeting
    ``consultation requirements'' with agencies by serving as the landowner
    agent. This is an efficient approach as each farmer does not have to
    become an expert in the implementation of ESA policies. However, in the
    2008 Farm Bill a limitation on an entity accessing WHIP funding
    precludes an agent working with many landowners in a single year.
        Policy Recommendation: Congress should direct the WHIP program to
    allow for organizations to work with multiple private landowners within
    a year.
    Conservation Stewardship Program (CSP)
        Issue: regarding the Conservation Stewardship Program, we believe
    that this program is based on a sound premise, incentivizing producers
    who adopt or maintain a wide range of conservation management practices
    aimed at resources such as soil, water and wildlife management. As you
    know, the CSP program addresses seven resource concerns: soil quality,
    soil erosion, water quality, water quantity, air quality, plant
    resources and animal resources.
        Policy recommendation: In order to better tailor the program to
    local and regional needs and therefore, make it more useful for
    specialty crop producers, we suggest adding pest management as a
    priority area that can qualify for participation in the CSP program.
    This would add a resource concern to CSP's list of resource concerns. I
    know the Members of this Committee are aware that states can focus on
    three to five priority concerns.
    Closing
        Mr. Chairman and Ranking Member Holden, these are the highlights of
    the results of the farm bill review which the Specialty Crop Farm Bill
    Alliance (SCFBA) undertook over the course of the 18 months to assess
    the various titles of the farm bill to determine their impact on the
    specialty crop industry. As part of that review, I served as chair of
    the SCFBA working group that examined the conservation title. As you
    are well aware, the Senate Agriculture Committee has released their
    version of the farm bill and we appreciate the work of Chairwoman
    Stabenow and Ranking Member Roberts. We pledge to continue working with
    them and you on these policy recommendations to ensure that specialty
    crop producers can participate in meaningful and effective ways to
    conserve and maintain resources needed for environmentally sound
    agriculture production. Thank you again for this opportunity and I'll
    be happy to answer questions.

        The Chairman. Thank you, Mr. Bell.
        Mr. Gordon, when you are ready you can proceed with your 5
    minutes.

      STATEMENT OF RANDALL C. GORDON, ACTING PRESIDENT, NATIONAL
              GRAIN AND FEED ASSOCIATION, WASHINGTON, D.C.

        Mr. Gordon. Thank you, Chairman Thompson, and we appreciate
    you and commend you and this Subcommittee for holding this
    hearing on the conservation provisions of the 2012 Farm Bill. I
    am Randy Gordon, the acting President of the National Grain and
    Feed Association. Our membership consists of more than 1,000
    grain and feed, grain processing, biofuels, exporting, and
    other grain-related companies that operate more than 7,000
    facilities and handle more than 70 percent of the U.S. grain
    and oilseed crop. Most of members, though, are country grain
    elevators and feed manufacturers that are small businesses and
    operate in rural communities throughout the nation.
        The NGFA strongly supports efforts by this Congress and the
    Administration to reduce, streamline, and better rationalize
    the plethora of conservation programs that currently exist to
    make them more efficient, understandable, and cost effective.
    We in particular support conservation programs for working
    farmlands, and the idling of cropland that is truly
    environmentally sensitive, where it is necessary to protect
    water quality, as currently is accomplished through various
    components of the Conservation Reserve Program, particularly
    the continuous sign up provisions.
        But we do believe that the 2012 Farm Bill presents a
    tremendous opportunity for Congress to reset the CRP to reflect
    the reality of modern farming practices, including no-till and
    other agronomic practices, and to ensure that it no longer
    idles prime farmland. At the outset, we commend Congressman--
    Congresswoman Roby and Congressman Stutzman for introducing
    separate bills that we believe would move the CRP in decidedly
    the right direction. We also commend Chairman Lucas and Ranking
    Member Peterson for their efforts with the Super Committee to
    try and reshape the CRP.
        The 2007 Natural Resources Inventory Report prepared by
    USDA, the most recent data publicly available, indicates that
    more than 8.7 million acres enrolled in the CRP at that time
    consisted of prime farmland. Freeing up those acres and other
    non-environmentally sensitive acres will be essential if U.S.
    agriculture is going to continue to grow and be a generator of
    jobs to meet the strong demand for food, feed, biofuels, and
    exports necessary to meet what the United Nations projects will
    be a 70 percent increase in global demand for food by 2050. We
    do believe the CRP can be structured in a way that enhances and
    fosters U.S. agriculture's ability to supply competitively
    priced corn and proteins to meet domestic and export demand,
    particularly for our livestock and poultry producers, enhance
    opportunities for beginning and tenant farmers to enter the
    business, and further economic opportunity and the quality of
    life in rural America. In this regard, a November 2011 survey
    of farmers conducted by the National Young Farmers Coalition
    found that 68 percent said access to land is the biggest single
    challenge they face.
        Protecting environmentally sensitive land and enhancing the
    ability of U.S. farmers and ranchers to produce to meet growing
    demand are mutually compatible goals, but to achieve those twin
    goals, we respectfully recommend that Congress implement
    several statutory changes in the 2012 Farm Bill to reform the
    CRP and facilitate the return to production of idle land that
    can be farmed in environmentally sustainable ways.
        First and foremost, we do urge a significant reduction in
    the current 32 million acre CRP cap. At a minimum, we think
    land capability Classes I and II, which amount to about 7.1
    million acres, generally should be prohibited from future
    enrollments and reenrollments. Further, as mentioned
    previously, a total of as many as 8.7 million acres of prime
    farmland, inclusive of the 7.1 million acres I just mentioned,
    should be phased out as USDA transitions to a smaller, more
    targeted CRP. We also believe USDA should be directed to manage
    any reenrollments this year of acres expiring on September 30,
    2012, in a similar manner.
        Second, we recommend eliminating the current discretion for
    USDA to exceed this current 25 percent limit on CRP enrollments
    in individual counties, because of the economic damage that
    these heavy enrollments in certain states have caused to rural
    communities. We also recommend that Congress strongly considers
    requiring within that 25 percent cap a certain, say, five
    percent allowance for the most environmentally sensitive land
    eligible for continuous sign up enrollments.
        Third, we encourage Congress to consider whether to provide
    a specific percentage or acreage-based figure within the CRP
    that should reserve--be reserved for the enrollment of the most
    environmentally sensitive lands and wetlands. There are some
    conservationists that argue that about 8 million acres of the
    CRP potentially could be consumed by such truly environmentally
    sensitive enrollments, which we do believe belong in the
    program.
        Fourth, we encourage Congress to include language
    restricting enrollments of whole fields and whole farms by
    requiring such land to meet a higher EBI scoring mechanism than
    currently exists for partial field enrollments.
        And finally, we do support allocating scarce conservation
    funding for existing CRP Transition Incentive Programs, and
    programs like that that benefit young farmers and socially
    disadvantaged farmers. We also have some recommendations in our
    testimony that would enhance the transparency of how USDA is
    managing the CRP program which currently is fairly obscure and
    obtrusive in the databases that we have been able to access.
        Thanks for the opportunity and I look forward to your
    questions.
        [The prepared statement of Mr. Gordon follows:]

      Prepared Statement of Randall C. Gordon, Acting President, National
                  Grain and Feed Association, Washington, D.C.

        Chairman Thompson, Ranking Member Holden, and Members of the
    Subcommittee, the National Grain and Feed Association (NGFA) commends
    you for conducting this hearing on the conservation provisions of the
    2012 Farm Bill, and appreciates this opportunity to testify.
        I am Randy Gordon, Acting President of the NGFA. Our Association
    was established in 1896, and consists of more than 1,000 grain, feed,
    processing, exporting and other grain-related companies that operate
    more than 7,000 facilities and handle more than 70 percent of all U.S.
    grains and oilseeds. Our membership includes grain elevators, feed and
    feed ingredient manufacturers, biofuels companies, grain and oilseed
    processors and millers, exporters, livestock and poultry integrators,
    and associated firms that provide goods and services to the nation's
    grain, feed and processing industry. The NGFA also consists of 26
    affiliated State and Regional Grain and Feed Associations, and has
    strategic alliances with the North American Export Grain Association
    and Pet Food Institute.
        The United States is blessed to have the most abundant, most
    affordable and safest food supply in the world. Our nation also still
    is the engine that drives the production of key agricultural
    commodities and products to feed an expanding world population. That
    demand shows no sign of letting up. The United Nations currently
    projects that feeding a rapidly growing global population of more than
    nine billion in 2050 will require a 70 percent increase in global food
    production. And while U.S. producers have harvested near record crops
    in recent years, domestic demand also has increased--particularly for
    U.S. corn to meet fuel ethanol demand resulting from the Renewable
    Fuels Standard mandate and strong crude oil prices.
        The long-standing commitment by the United States to free
    enterprise, U.S. agricultural growth, and working lands conservation
    programs are essential and critical components to meeting this demand
    for food, feed, biofuels and exports--and doing so in an
    environmentally sustainable way.
        The NGFA strongly supports efforts by Congress and the
    Administration to reduce, streamline and better rationalize the
    plethora of existing conservation programs to make them more effective
    and efficient. We also strongly support including provisions in the
    2012 Farm Bill that encourage prudent conservation practices by
    agricultural producers, which serve in their best interest in
    protecting the viability of cropland for succeeding generations. The
    NGFA in particular supports conservation programs for working
    farmlands, and the continuation of programs that idle cropland that is
    truly environmentally sensitive or necessary to protect water quality,
    as is accomplished through such programs as the continuous signup
    provisions of the Conservation Reserve Program (CRP).
        However, we believe the 2012 Farm Bill presents a tremendous
    opportunity to bring long-needed reforms to the CRP, on which I wish to
    focus during the remainder of this testimony.
        Today's farming practices are dramatically different than what
    existed when the CRP was established a quarter century ago.
    Advancements in insect-resistant and herbicide-tolerant seed varieties,
    conservation and no-till farming, and other agronomic practices have
    made it possible to farm more U.S. acreage in environmentally
    sustainable ways. USDA's Economic Research Service, in a report issued
    in 2011, found that of the world's row crop production grown using
    conservation tillage practices to protect soil from wind and water
    erosion, the United States accounted for nearly 75 percent of soybeans,
    45 percent of corn and 40 percent of wheat. By contrast, as recently as
    1990, only 26 percent of planted acres in the United States were farmed
    using such conservation tillage practices. Further, because of the
    introduction of new biotechnology-enhanced crops, farmers no longer
    have to cultivate the soil several times a year to control weeds,
    thereby reducing soil disturbance and improving water infiltration. The
    NGFA strongly believes that current agronomic and technology practices
    employed by U.S. farmers should guide decisions made by Congress as it
    devises policies governing the size, scope and role of the CRP under
    the 2012 and future farm bills.
        But in fact, CRP policy under the farm bill and its implementation
    by USDA has not kept pace with these changes in improved farm
    production practices. There is strong evidence that millions of acres
    of productive land suitable for row-crop production that can be farmed
    in an environmentally sustainable way remain locked up in the CRP. The
    2007 Natural Resources Inventory prepared by USDA's Natural Resources
    Conservation Service (NRCS)--the most recent data publicly available--
    indicates that more than 8.7 million acres of ``prime farmland'' \1\
    were enrolled in the CRP at that time. Other considerations in
    determining prime farmland include land use, frequency of flooding,
    irrigation, the water table and wind ``erodibility.'' \2\ It includes
    all land in Land Capability Classes I and II, and some land considered
    to be Land Capability Class III.
    ---------------------------------------------------------------------------
        \1\ NRCS defines ``prime farmland'' as ``land that has the best
    combination of physical and chemical characteristics for producing food
    feed, forage, fiber, and oilseed crops and that is available for these
    uses. It has the combination of soil properties, growing season, and
    moisture supply needed to produce sustained high yields of crops in an
    economic manner if it is treated and managed according to acceptable
    farming methods. In general, prime farmland has an adequate and
    dependable water supply from precipitation or irrigation, a favorable
    temperature and growing season, an acceptable level of acidity or
    alkalinity, an acceptable content of salt or sodium, and few or no
    rocks. Its soils are permeable to water and air. Prime farmland is not
    excessively eroded or saturated with water for long periods of time,
    and it either does not flood frequently during the growing season or is
    protected from flooding.''
        \2\ National Soil Survey Handbook Part 622, Natural Resources
    Conservation Service website. Accessed 17.
    ---------------------------------------------------------------------------
        While the NGFA believes fragile land that cannot be farmed in an
    environmentally sustainable way belongs in the CRP, the idling of
    productive resources through land-idling conservation programs costs
    jobs, stymies growth and, in the case of land resources, has the
    potential to impact negatively the cost and availability of food.
        Further, the idling of these productive U.S. crop acres in the CRP
    is contrary to world environmental protection because it encourages
    shifts in agricultural production to South America and other countries
    that do not have the type of environmental policies, regulations and
    farming practices that encourage sustainable food production as exist
    in the United States. Indeed, in the last decade the United States has
    had zero growth in total planted acreage, while the rest of the world
    has increased planted acreage by 152 million acres--about 60 percent of
    the size of total U.S. plantings. Meanwhile, the CRP--in acreage
    terms--still represents the fourth largest U.S. ``crop.'' Trends like
    that not only undermine global environmental protection but also U.S.
    agricultural competitiveness in world markets.
        In short, we believe now is the opportune time for Congress to
    implement meaningful reforms of the CRP, and focus scarce conservation
    dollars on working farmlands and the idling of only truly
    environmentally sensitive acres.
    Damaging Impact of Idling Productive Farmland
        The CRP is currently capped at 32 million acres under the Food,
    Conservation and Energy Act of 2008. We hasten to add that this
    statutory provision is a hard cap, but historically has been treated by
    USDA in its implementation of CRP as a goal to attain. If, as we
    believe, the goal of the CRP should be to maximize environmental
    benefits of enrolled acreage, such an unconditional, over-arching
    commitment to enroll a specific number of acres at or near the cap is
    misguided. For instance, the rental rate associated with enrolling
    acres eligible for the continuous signup provisions of the CRP--such as
    filter strips along waterways--may be considerably more expensive on a
    per-acre basis. But the resulting environmental benefits far exceed
    those associated with enrolling flat land that can be farmed in
    environmentally sustainable ways.
        Continuation of the CRP at its current authorized level creates
    significant challenges to U.S. agriculture's ability to: (1) adequately
    meet growing domestic and export demand for grain, feed and grain
    products; (2) provide opportunities for young farmers, ranchers and
    tenant farmers to become involved in production agriculture; and (3)
    increase economic opportunity and quality of life in rural communities.
        Let me touch on each of these briefly:

      b Adequately Supply Domestic Demand at Competitive Prices: While U.S.
            producers have enhanced productive capacity for particularly
            corn and soybean production, increases in domestic demand
            continue--particularly for use as biofuels. Further, despite
            near-record crop production, grain stocks on a world basis
            remain comparatively tight. While U.S. corn yields have
            increased by about 2.5 bushels per acre per year since 1996,
            such yield growth generally has occurred during benign weather.
            Further, U.S. carryover stocks of corn and other feed grains
            are at historically low levels. Expansion of U.S. planted acres
            could help offset yield variability resulting from weather
            anomalies, particularly given tightening stocks-to-use ratios.

      b Producing and Competing in Global Markets: As noted previously,
            between now and 2050, the world's population is projected to
            grow by more than 30 percent, resulting in an estimated 2.3
            billion more consumers of food and agriculture products. Food
            security--both physical and economic access to sufficient
            food--is vital to helping preserve world peace and averting
            shortages that have led to protests and riots in several
            foreign countries, as witnessed a few short years ago.

        Export markets for grain and grain-based products continue to
            experience strong demand. In addition, export demand for beef,
            pork and poultry has been one of the most dynamic growth
            markets in the last 15 years. And new trade agreements being
            implemented now with South Korea, Colombia and Panama are
            projected to expand such demand even further. The United States
            has the comparative advantage to grow this export business--and
            do so in an environmentally sustainable way. But that will
            happen only if our livestock and poultry producers have access
            to competitively priced grain and protein supplies to fuel that
            growth. Some U.S. operations already have imported feed
            ingredients, and the economics of these businesses are shifting
            investment toward South America. It is imperative that the
            United States ensure that it has the capacity to meet the
            demand of these U.S.-based enterprises that create jobs and
            economic growth here, rather than overseas.

        Further, there are increasing indications that more volatile
            weather patterns may result in drier than normal conditions in
            important grain-producing regions of the world, including
            Russia, northern China, some portions of Canada and the U.S.
            upper plains states, as well as some portions of South America,
            particularly Argentina. Indeed, U.S. corn production dipped
            each of the past 2 years because of weather anomalies.
            Exacerbating this situation is the simple fact that there
            currently are not enough arable acres of farmland globally to
            satisfy the future demand for food. And where farmland is
            available, the competition for acres between crops is intense.
            The current size and management of the CRP run counter to both
            the need and the opportunity to meet increasing global demand
            for U.S. agricultural products.

      b Continue to Provide Opportunities to Enter Production Agriculture
            to Young Farmers, Ranchers and Tenant Farmers: Young and tenant
            farmers and ranchers face economic barriers to enter production
            agriculture, in part because they need to bid against the
            government for available cropland. Sixty-eight percent of
            farmers rank land access as the biggest challenge facing
            beginning farmers, according to a November 2011 study released
            by the National Young Farmer's Coalition. The same study found
            that farmers younger 30 were significantly more likely to rent
            land (70 percent) than those older than 30 (37 percent).

        Research currently underway for the National Grain and Feed
            Foundation has found that several states historically have
            operated the CRP in a way that statewide rental rates closely
            approximate average cropland rental rates as computed by USDA's
            National Agricultural Statistics Service. Rather than rent or
            sell, many landowners choose to harvest these CRP rental
            payments, which is detrimental to young and tenant farmers
            attempting to enter production agriculture or who are
            struggling to expand and build economic-sized units for their
            business operations. This is a particularly acute concern to
            the future of U.S. production agriculture, given the aging
            demographics of the nation's agricultural producers. A ``right-
            sized'' CRP and programs like the Transition Incentives Program
            (TIP) can help encourage future generations to enter the
            farming profession, particularly young and small-scale tenant
            farmers.

      b Increase Economic Opportunity and Quality of Life in Rural America:
            The negative impacts of idling productive farmland in the CRP
            also manifest themselves at the local rural level. As
            productive resources are idled, opportunities to make long-term
            livable wages are drained from rural communities. The CRP, if
            not right-sized and managed properly with a focus on the most
            environmentally sensitive lands, slams the door on economic
            activity that is the lifeblood of rural economies. Idle land
            reduces economic activity generated by seed sales, tractor
            sales and servicing, custom harvesting crews, fertilizer and
            chemical dealers, and hired help. Land-idling programs that pit
            the government against commercial farmers in bidding for land
            cause more people to lose jobs and encourage a continued
            population exodus from rural communities. And landowners who
            often move away from their rural communities take the money
            associated with CRP rental payments with them.

        A March 6, 2011 article from The Spokesman-Review in Spokane,
            Washington, is just one of many examples of this damaging
            impact. The newspaper quotes Greg Partch, a county commissioner
            in Washington State as saying: ``CRP is killing our towns. When
            farmers take a conservation payment rather than plant a crop,
            they don't buy fuel and fertilizer, they don't buy machinery
            and seed, and they don't hire help for the harvest. In short,
            the payments stifle the local economies by suppressing high
            production agriculture in an area that boasts some of the best
            wheat-growing conditions in the world.''

        This is but one example of the real-world impact that heavy
            acreage-idling in the CRP--in some cases exceeding 25 percent
            Congressionally mandated maximum cap of the county's cropland--
            is having on once-vibrant rural communities.
    Recommendations for Change to CRP
        The NGFA believes that the goals of protecting environmentally
    sensitive land and enhancing the ability of U.S. farmers and ranchers
    to produce to meet the world's growing demand for food, feed, biofuels
    and exports are mutually compatible. But to accomplish those twin
    goals, we believe it is necessary for Congress to reboot the CRP to
    make it more responsive and right for the times.
        As noted previously, the National Grain and Feed Foundation
    currently is in the midst of a research project that is evaluating the
    CRP. We anticipate that additional recommendations will flow from the
    results of that study, which is projected to be completed in late May.
        But based upon the findings thus far, the NGFA recommends that the
    following legislative changes be included in the 2012 Farm Bill to
    reform the CRP and facilitate the return to production idled land that
    can be farmed in an environmentally sustainable way:

      b First and foremost, we recommend that the current 32 million acre
            maximum CRP cap be reduced significantly. At a minimum, Land
            Capability Classes I and II (approximately 7.1 million acres)
            should be prohibited from future enrollments and re-
            enrollments. Further, as cited previously, a total of more than
            8.7 million farmland acres (including some Land Capability
            Class III acres) of ``prime farmland'' were enrolled in CRP as
            of 2007 (the most current data available from NRCS). In the 30
            states with the greatest CRP enrollments, approximately 8.5
            million acres are considered to be prime farmland. Such good
            quality land currently idled in the CRP is highly concentrated
            in several major grain-production states like Kansas, North
            Dakota, Minnesota, Missouri, Oklahoma and Texas. This land can
            be can be farmed in an environmentally sustainable way to meet
            growing food demand.

      b Second, eliminate the discretion for USDA to exceed the 25 percent
            limit on CRP enrollments in individual counties because of the
            economic damage such enrollments have had on rural communities.
            There are indications that USDA may be using outdated
            cultivated cropland data in some counties when determining the
            25 percent cap, which we believe Congress should require the
            Department to recalculate. Further, we recommend that USDA be
            required to reserve within the 25 percent county limit at least
            a five percent allowance for acres enrolled in the wetlands
            reserve and continuous sign-up process.

      b Third, the NGFA urges that Congress direct that USDA transition to
            a smaller CRP by reducing the number of ``prime farmland''
            acres enrolled. In managing this transition, we support
            requiring USDA to offer penalty-free early outs of Land
            Capability Classes I, II and III enrolled in CRP, with
            producers doing so required to implement prudent conservation
            practices on such lands. We also believe USDA should carefully
            manage any reenrollments of acres expiring on September 30,
            2012 in a similar manner.

      b Fourth, we encourage Congress to consider whether to provide a
            specific percentage- or acreage-based figure within the CRP
            reserved for the most environmentally sensitive lands. As of
            April 2011, the CRP included 5 million acres enrolled under
            continuous signup procedures. Some conservation leaders have
            expressed concern that adequate CRP acreage should be reserved
            each year to ensure that such environmentally sensitive lands
            can be enrolled, with some suggesting that as many as 8 million
            acres of the CRP should be reserved for such high-priority
            enrollments. We believe this is an issue what warrants
            Congress's attention as it considers the future of the CRP.

      b Fifth, we encourage Congress to include legislative language that
            would restrict whole-field and whole-farm enrollments in the
            CRP by requiring such land to meet a more stringent
            environmental benefits index (EBI) scoring threshold than
            partial-field enrollments. During the early years of CRP
            enrollments, whole farms and whole fields were enrolled, which
            brought in land of varying quality.

      b Sixth, the NGFA supports allocating additional available
            conservation funding for the Transition Incentives Program,
            currently authorized at $25 million, for transitioning expired
            CRP acreage from retired or retiring landowners to beginning or
            socially disadvantaged farmers. This program quickly reached
            its capacity after being authorized as part of the 2008 Farm
            Law, and needs additional resources.

        In addition, the NGFA encourages Congress to include, as part of
    the farm bill process, the following directives to USDA in its
    implementation and administration of the CRP in the future:

      b Direct USDA's Farm Service Agency and NRCS to compile a report
            within 1 year of enactment, and updated biannually thereafter,
            to bring increased transparency to how the CRP is being
            managed. Among other things, we believe such a report should
            include: (1) the quantity of acreage enrolled in CRP by Land
            Capability Class; (2) a compilation of such Land Capability
            Class acreage by county; and (3) the identity of counties that
            are at or near the 25 percent enrollment cap. We also recommend
            that USDA be required to post this report on its website. These
            data will increase transparency and enable USDA and
            stakeholders to better analyze the prudent management of the
            CRP going forward.

      b Consider either freezing CRP rental rates for 3 to 5 years or
            implementing a percentage-based limit on rental rates paid for
            CRP land compared to average county rental rates.

      b Limit the number of CRP general sign-ups offered.
    Conclusion
        The NGFA believes it is important for future conservation policies
    to focus on: (1) providing access to sufficient acres to meet demand
    growth, without shorting supplies necessary to grow important demand
    sectors, such as exports, feed, and domestic livestock and poultry
    markets; (2) working farmlands, minimizing reliance on idling of
    productive land resources and strengthening the economies of rural
    communities while still achieving environmental and other policy goals;
    (3) continuing to provide future opportunities for young farmers and
    ranchers, as well as tenant farmers, to be involved in U.S. production
    agriculture; and (4) minimizing the negative impacts of the CRP in
    undermining jobs, local rural economies and depopulating rural
    communities.
        The NGFA recognizes the importance of, and supports, strong
    conservation programs for working farmlands as part of any successful
    farm policy, and encourages Congress to designate such programs as a
    priority with scarce available funding.
        Thank you for the opportunity to testify, and we look forward to
    working with you as the Committee addresses these important issues in
    the farm bill. I would be pleased to respond to any questions you may
    have.

        The Chairman. Thank you, Mr. Gordon.
        I am pleased to once again welcome Mr. Homan. Mr. Homan, go
    ahead and proceed with your 5 minutes of testimony.

    STATEMENT OF CARL V. HOMAN, DAIRY PRODUCER, HOMAN FAMILY DAIRY
       FARMS, CENTRE HALL, PA; ON BEHALF OF NATIONAL SUSTAINABLE
                         AGRICULTURE COALITION

        Mr. Homan. Thank you, Chairman. I thank you, all the
    Members of this Committee, for your service to me as a citizen
    of the United States, and your government hours spent.
        As this Subcommittee considers conservation, energy, and
    forestry, thank you for the opportunity to speak to you how the
    farm bill conservation programs have helped my farm, and how
    important it is in the next farm bill to strengthen these
    programs so that other farmers in Pennsylvania and across this
    country also have the opportunity to improve their operations.
        My wife Diane, my son Justin, and myself operate a 75 cow
    dairy farm in Centre County near Centre Hall, Pennsylvania. We
    own 275 acres and rent additional acres to produce crops for
    our livestock. With our grandchildren on the property, this
    Pennsylvania Century Farm has provided a home for seven
    generations of families since 1906. Protecting and sustaining
    the farm for our family, the community, and the nation is an
    important value of my family, so I have been involved in
    farmland preservation and formed an ag security area in our
    township. I have served 6 years on the Centre County Ag Land
    Preservation Board. In 2008, I was honored to be named the
    year's Outstanding Farmer Conservationist by the Centre County,
    Pennsylvania, Conservation District, so I can directly speak to
    how the resources and technical assistance offered to farmers
    by the USDA conservation programs protects the natural
    resources of our community, improves the productivity and
    profitability of our farm.
        I would like to talk about the ways in which conservation
    programs have been used on our farm. The CSP program
    administered by the USDA Natural Resources Conservation
    Service, our farm is enrolled in CSP through 2016. The cost-
    share provided by the CSP has allowed us to incorporate what
    are called conservation enhancements to the farm. Three years
    ago, we started a pasture project in which increased grass
    cover and legumes--and this produces the nitrogen for the crops
    and produces a better crop, and more feed value in the pasture,
    while also keeping the fields in grass longer than a standard
    crop rotation. This improves the quality of our soil while also
    reducing nutrient sediment runoff.
        As for writing the next farm bill, I urge Members of this
    Committee to maintain a strong funding base for Conservation
    Stewardship Programs. That is one of my main concerns.
        The EQIP program has been very important in helping to
    protect the natural resources on our farm. For just one
    example, we use EQIP funding to establish sod waterway to
    prevent spring rains and snow melt from carrying sediment into
    the nearby streams. EQIP is a very important part of the USDA's
    conservation toolbox, providing cost-share payments for
    structure practices, as well as initial cost sharing support to
    farmers who want to begin to increase their level of
    stewardship through management change. There are things we can
    do to make the EQIP more useful to farmers, and I have included
    a few of my own recommendations in my written testimony.
        The CREP program is part of the larger program called CRP.
    It is one of the most cost effective programs in the
    Commonwealth of Pennsylvania for reducing pollution into our
    local streams and into the Chesapeake Bay. On my farm, we have
    enrolled 6.6 acres of wet pasture acreage along the stream in
    CREP and created a forestry buffer. CREP has provided rental
    payments to help offset the loss of this pasture acreage. These
    measures not only improve water quality, but also improves the
    health of our dairy herd and increases our ability to manage
    the movement of the cattle.
        I hope that I have given you some ideas of how important
    the farm bill conservation programs are to farmers like myself.
    We can and have implemented many improvements on our own, and
    these improvements need to be recognized, but there are certain
    improvements that will be out of reach economically for many
    farmers without solid conservation support in the next farm
    bill.
        I appreciate the opportunity to be here today and share
    with you my ideas, and I will be happy to try to answer any
    questions that you might have.
        [The prepared statement of Mr. Homan follows:]

    Prepared Statement of Carl V. Homan, Dairy Producer, Homan Family Dairy
     Farms, Centre Hall, PA; on Behalf of National Sustainable Agriculture
                                   Coalition

        Good morning, Chairman Thompson, Ranking Member Holden, and Members
    of the Subcommittee on Conservation, Energy and Forestry. Thank you for
    the opportunity to testify about the importance of the farm bill's
    conservation programs from a farmer's perspective.
        My wife Diane, my son Justin, and I operate a 75 cow dairy farm in
    Centre County near Centre Hall, Pennsylvania. We also have 275 acres
    and rent additional land on which we grow crops. With our grandchildren
    now on the property, the farm has provided a home for seven generations
    of our family. In 2007, the farm was designated a Pennsylvania Century
    Farm.
        Protecting and sustaining the farm for our family, the community,
    and the nation is an important value to my family. In addition, I
    helped form Centre County's first Agriculture Security Area in the
    1990's to protect farmland from a highway bypass. And I have served for
    6 years on the Centre County Agricultural Land Preservation Board.
        In 2008, I was honored to be named that year's Outstanding Farmer
    Conservationist by the Centre County Pennsylvania Conservation
    District, and I remain a firm believer in the value of conservation to
    our farm. The resources and technical assistance offered to farmers by
    USDA's conservation programs protect the natural resources of our local
    communities. Many conservation practices can also improve the
    operations' bottom line.
        In addition, our farm is in a watershed that ultimately drains into
    the Chesapeake Bay. We know that how we and our neighbors manage our
    farms affects water quality in Centre County and all the counties
    downstream clear down to Virginia. The farm bill's conservation
    programs serve a critically important role in controlling the loading
    of nutrients and sediment into Pennsylvania's streams, and the
    Chesapeake Bay itself.
        We have used a no-till system for the past 10 years to keep soil in
    place, reducing sediment and nutrient run off from our fields. We use a
    complex resource-conserving rotation of corn, oats, wheat, alfalfa,
    clover, timothy hay, soybeans, and rye cover crops that builds healthy
    soils. We incorporated cover crops in the rotation 5 years ago, using
    mostly rye and occasionally wheat But we also saw that we needed to
    improve the conservation performance of our farm and turned to the farm
    bill conservation programs for cost-share and technical assistance.
    Conservation Stewardship Program (CSP)
        The CSP is a whole farm and comprehensive working lands
    conservation program administered by USDA's Natural Resources
    Conservation Service (NRCS). CSP targets priority resource issues in
    specific states and watersheds, paying farmers to adopt new
    conservation enhancements and manage ongoing conservation activities to
    help solve priority resource concerns. CSP payments are directly linked
    to environmental benefits derived from particular practices and
    conservation systems.
        The program helps farmers use their management skills to maintain
    and enhance the land and the food, fiber, and fuel that it produces. In
    the first 3 enrollment years (2009, 2010, and 2011), CSP enrolled
    30,197 farmers and ranchers operating nearly 38 million acres of farm
    and ranchland that is now under 5 year, renewable CSP conservation
    contracts. In each of those years, demand for the program exceeded
    acreage available by about 2 to 1, resulting in very competitive
    enrollments.
        The 2012 sign-up for CSP is offering 37 conservation practices and
    68 conservation enhancements as well as supplemental payments for
    resource-conserving crop rotations. Conservation performance is tied to
    how effectively the activities and enhancements address the priority
    resource concerns for the state or region within a state, and payment
    rates are calibrated directly to expected environmental benefits.
        The enhancements are unique to CSP and help drive advanced
    conservation. For instance, for cropland, some of the top ranking
    enhancements include continuous cover cropping, using cover crops as
    nitrogen sources, resource-conserving crop rotation, continuous no-
    till, extension in the size and scope of riparian buffers and field
    borders, transition to organic cropping systems, and advanced high
    level integrated pest management. Top livestock enhancements include
    intensive managed rotational grazing, rotation of feeding and
    supplementation areas, and managing access to water bodies and streams.
        Our farm is enrolled in the CSP through 2016. The cost-share
    provided by CSP has allowed us to incorporate conservation enhancements
    to the farm. Three years ago, we started a pasture project in which
    increased grass cover and legumes are used to increase nitrogen value
    and feed value to our pastures, while also keeping the fields in grass
    longer than a standard crop rotation. This improves the quality of our
    soil, while also reducing nutrient and sediment runoff.
        As you write the next farm bill, I urge Members of this Committee
    to maintain a strong funding base for the Conservation Stewardship
    Program. That is my main recommendation.
        Beyond enough funds, there are other changes that could be made to
    increase the program's effectiveness and make it work better for
    farmers and ranchers. These improvements should be made to CSP in the
    next farm bill:

       Simplify the program by ranking proposals solely according
            to the environmental benefits score secured by the total
            conservation system, including the new enhancements to be
            adopted and the existing conservation baseline. Every aspect of
            the CSP design, including payment formulations and ranking,
            should keep the focus on conservation outcomes, adaptive
            management, and continual improvement, not on the timing of
            initial adoption.

       Allow producers to renew their CSP contracts so long as they
            have satisfied all previous contract obligations and increased
            their conservation score since the previous renewal. Currently,
            CSP contracts can only be renewed once. This creates a barrier
            to fulfilling the purpose of the program, to advance ongoing
            and adaptive land stewardship to maintain and improve
            environmental performance. We have major resource challenges
            and we need policy that sends the right long term signals to
            farmers.
    Environmental Quality Incentives Program (EQIP)
        EQIP has played a key role in helping to protect and enhance
    natural resources on the farm. We used EQIP funding to establish sod
    waterways that prevent spring rains and snow melt from carrying
    sediment to waterways. EQIP is an essential piece of USDA's
    conservation toolbox, providing one-time cost-share payments for
    structural practices as well as initial cost-share support to farmers
    who want to begin to increase their level of stewardship through
    management changes. But EQIP could be improved to make it more useful
    to farmers.
        First, EQIP, and in fact all the conservation programs, needs to
    focus more on reducing nutrient losses. All over the world there are
    streams, lakes and coastal areas that are suffering from low oxygen
    because of excess nutrients. In the Chesapeake Bay watershed, we are
    under a lot of pressure to put in more practices to reduce our nutrient
    losses quickly. EQIP and other farm bill conservation programs need to
    focus on that. The Chesapeake Bay Watershed Program that you created in
    the last farm bill has helped Pennsylvania farmers a lot, and you ought
    to continue that program.
        Second, in order to ensure the program is achieving results and the
    biggest bang for the buck, you should bring back progressive plannin