[Congressional Record Volume 140, Number 103 (Monday, August 1, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: August 1, 1994]


 
                         GRAZING FEE INCREASES

  Mr. JOHNSTON. Mr. President, on June 16, Senator Wallop and I wrote 
to Secretary Babbitt and Secretary Espy requesting their views 
concerning a news release issued by the Public Lands Council which 
raised questions about the potential effect of grazing fee increases of 
Farmers Home Administration [FmHA] direct loan borrowers.
  We have now received a replay to that letter which, I believe, 
responds to those questions in a very direct and satisfactory manner. I 
ask unanimous consent that a copy of the June 16 letter to Secretaries 
Babbitt and Espy appear in the Record at this point, along with their 
response.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
                                                      U.S. Senate,
     Committee on Energy and Natural Resources,
                                     Washington, DC June 16, 1994.
     Hon. Bruce Babbitt,
     Secretary, Department of the Interior, Washington, DC.
     Hon. Mike Espy,
     Secretary, Department of Agriculture, Washington, DC.
       Dear Secretary Babbitt and Secretary Espy: We understand 
     that the Department of Agriculture has recently released data 
     requested by the Public Lands Council relating to the 
     potential impact of higher grazing fees on ranchers with 
     Farmers Home Administration loans.
       In a news release dated June 13th, the Public Lands Council 
     alleges that this data contradicts earlier statements by 
     Secretary Babbitt and others that the fee increases contained 
     in the Administration's proposed grazing regulations would 
     not have a significant financial impact on large numbers of 
     ranchers who utilize the public lands for grazing.
       We are writing to request that you provide the committee 
     with a detailed response to these allegations, along with 
     your interpretation of the USDA data, as soon as possible.
       With kindest regards, we are
           Sincerely,
     Bennett Johnston,
       Chairman.
     Malcolm Wallop,
       Ranking Minority Member.
                                                                    ____

                                        Department of Agriculture,


      Office of the Secretary, Washington, DC., July 26, 1994.

     Hon. J. Bennett Johnston,
     Chairman, Committee on Energy and Natural Resources, U.S. 
         Senate, Washington, DC.
       Dear Mr. Chairman: Thank you for your letter dated June 16, 
     1994, in which you share your concerns regarding the recent 
     news release issued by the Public Lands Council (PLC). We are 
     familiar with the PLC's statement, and because it is critical 
     of the Administration's Rangeland Reform '94 proposed 
     regulations, we appreciate having the opportunity to address 
     these issues.
       The PLC statement, which focuses on the potential effect of 
     grazing fee increases on Farmers Home Administration (FmHA) 
     direct loan borrowers who graze public lands, was based upon 
     an informal survey conducted by the FmHA in New Mexico, 
     Wyoming, Montana and Colorado. It is important to keep in 
     mind that fewer than 7 percent of all federal grazing 
     permittees and lessees are FmHA borrowers--more than 93 
     percent of these permittees have found it unnecessary to rely 
     on FmHA financing. Before an applicant can qualify for a FmHA 
     loan, it must be shown that the applicant has been refused 
     financing by commercial lending institutions. FmHA estimates, 
     upon which the PLC analysis was based, indicate that only 357 
     FmHA borrowers who graze public lands in the four states 
     surveyed, out of a total of approximately 13,300 federal 
     permittees in those states, may have problems meeting their 
     cash-flow projections if grazing fees are increased as 
     proposed for the 1994 crop year and no other actions are 
     taken. This amounts to only 2.68 percent of all federal 
     grazing permittees in the four states.
       Accordingly, the results of the FmHA informal survey are 
     consistent with the Draft Environmental Impact Statement for 
     Rangeland Reform '94, which found that most federal grazing 
     permittees are not marginal operators. Similarly, a recent 
     study conducted by the Economic Research Service of the U.S. 
     Department of Agriculture (ERS), entitled Cow/Calf Ranching 
     in Ten Western States (May 1994), concluded that ``ranchers 
     with permits to graze cattle on federal land enjoyed higher 
     net earnings than ranchers without such permits, both per cow 
     and per hundredweight of cattle sold.''
       Nevertheless, it is important to understand the limitations 
     of the information generated by the FmHA survey. In contrast 
     to the ERS study, the FmHA survey was not scientific; its 
     conclusions were based upon informal telephone interviews 
     with FmHA district managers. FmHA methodology allowed for 
     subjective responses and, according to FmHA Administrator 
     Michael V. Dunn, could have an error rate of as high as 20 
     percent.
       FmHA did not take into consideration the planning and 
     budgeting process that each applicant/borrower undertakes 
     annually. Failure to do so may have resulted in negative cash 
     flow impacts being misstated. Each year an FmHA applicant 
     prepares a farm cash flow plan that projects the following 
     year's income. Plan projections are based on five years of 
     historical data, including the applicant's actual records of 
     production, marketing expenses, and income. The borrower may 
     make adjustments in the farm plan to conform to market or 
     other changes.
       Moreover, the district managers employed different 
     methodologies to identify borrowers who might be marginal--
     some district managers included permittees with small cash 
     flow margins in the negative cash flow category without 
     performing further analysis; other district managers 
     arbitrarily selected a number representing an estimated fee 
     increase and subtracted that amount from the borrowers' 1994 
     projected cash flow margins; and still others dropped from 
     their sample borrowers that held very small federal permits.
       Finally, even in the case of a FmHA borrower who confronts 
     potential cash flow problems, FmHA routinely provides 
     assistance in the form of primary loan servicing options, 
     which are designed to help farming families adjust to various 
     adverse economic impacts. These include, deferred payments, 
     rescheduling and reamoritization. FmHA local officials work 
     closely with direct loan borrowers to develop packages of 
     loan serving options that, in most cases, resolve problems 
     that emerge and avoid loan defaults.
       The proposed grazing regulations also provide that the 
     Department of Agriculture and the Department of the Interior 
     will continue to review and assess the impact upon federal 
     permittees of increased grazing fees. If, following 
     implementation of Rangeland Reform '94, we determine that 
     grazing permittees are suffering undue hardship as a result 
     of the higher fees, we can revisit the amount of the fee and 
     make adjustments as necessary.
       We hope that this information is helpful to you, and we 
     remain available to discuss these issues with you at any 
     time. An identical letter is being sent to Senator Wallop.
           Sincerely,
     Bruce Babbitt,
       Secretary of the Interior.
     Mike Espy,
       Secretary of Agriculture.

                          ____________________