[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
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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
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